Assistant Managing Editor

Citing an unfavorable risk-benefit ratio, Pharmasset Inc. said it was dropping late-stage hepatitis B candidate clevudine and refocusing resources to its earlier-stage pipeline aimed at the increasingly crowded hepatitis C virus space.

That decision followed reports of a number of spontaneous serious adverse events in patients receiving clevudine in South Korea, where the drug is approved and marketed for HBV by Pharmasset's licensor Bukwang Pharm Co. Ltd. While only a handful of patients in Pharmasset's ongoing pivotal studies - one enrolling chronic HBV e-antigen-positive patients and the other enrolling chronic HBV e-antigen-negative patients - have reported signs of mild to moderate myopathy, patients in South Korea have reported serious cases, likely due to longer exposure to the drug.

The postmarketing South Korean studies have indicated that about 80 patients have suffered myopathy, or muscle or muscle weakness caused by elevated levels of creatine kinase, and those concerns prompted Pharmasset to send a team to South Korea to examine the data, Michelle Berrey, Pharmasset's chief medical officer, told analysts on a conference call.

From its own trials to date, Pharmasset has reported about nine cases of myopathy out of 770 patients, but only 140 trial patients enrolled have received the drug for more than 48 weeks. Instances of myopathy primarily have been reported after 48 weeks of treatment, Berrey said.

That determination "resulted in a less favorable risk-benefit ratio for continued development" of clevudine, she said, later adding that the company has "no plans for submitting data from" the Phase III studies for regulatory review.

Pharmasset CEO Schaefer Price called the move "disappointing," but said the decision to terminate the ongoing Phase III clevudine studies means the company will be able to reduce costs, extend its cash runway and has "the opportunity to refocus" investments on its HCV portfolio, which has yielded some promising data to date.

And, given the fact that Pharmasset's stock (NASDAQ:VRUS) dropped only 10 percent, or 92 cents, to close at $8.33 on Monday's news, even though clevudine marked its lead and only Phase III-stage product, it's clear many investors have placed more value on the firm's HCV programs.

In fact, analyst Phil Nadeau, of Cowen and Co., maintained an "outperform" rating on the stock and wrote in a research note that Cowen's "enthusiasm for Pharmasset is based on its promising HCV pipeline."

Nadeau added that dropping clevudine is "not all bad," since the company will be able to start saving about $9 million per quarter after the pivotal clevudine studies have finished winding down, a process Pharmasset expects will take about four or five months.

In the meantime, the firm plans to move ahead in HCV, starting with its two nucleoside programs. The first of those, R7128, is a polymerase inhibitor partnered with F. Hoffmann-La Roche Ltd. in a potential $300 million license deal signed in 2004. That product is set to move into a 400-patient Phase IIb trial in treatment-naïve HCV patients, and the Swiss pharma firm has said it also plans to conduct a combination study involving R7128 with R7727, a protease inhibitor licensed from Brisbane, Calif.-based InterMune Inc.

Protease and polymerase inhibitors are expected to become the new standard in HCV treatment, besting the existing 40 percent to 50 percent cure rates of standard-of-care treatment ribavirin and pegylated interferon. Vertex Pharmaceuticals Inc.'s telaprevir and Schering-Plough Corp.'s boceprevir are the front-runners in the protease class, with both in ongoing pivotal studies.

But Pharmasset's and Roche's R7128 has been one of the most talked-about polymerase inhibitors, though it faces potential competition from earlier-stage programs, including ANA598 from San Diego-based Anadys Pharmaceuticals Inc., as well as drugs from big pharma firms Pfizer Inc. and Bristol-Myers Squibb Co.

Beyond R7128, Pharmasset has unpartnered HCV program PSI-7851, a nucleotide analogue polymerase inhibitor that entered clinical testing earlier this year, and "three dose cohorts already have been safely dosed," Price said.

Pharmasset also has a purine nucleotide program in late-stage preclinical testing, he said.

As of Dec. 31, 2008, when the firm posted a net loss of $18.3 million, or 78 cents per share for the fourth quarter, it had about $52 million in cash, equivalents and short-term investments. It pulled in another $44 million in net proceeds through a registered direct offering in February. (See BioWorld Today, Feb. 2, 2009.)

Going forward, resources will be "almost entirely devoted to hepatitis C," Price said, assuring investors and analysts that there is no "glimmer of hope for clevudine," in the wake of the recent safety data.

Pharmasset in-licensed rights to clevudine, a pyrimidine nucleoside analogue, from Seoul, South Korea-based Bukwang in 2004. At that time, the HBV market was dominated by Foster City, Calif.-based Gilead Sciences Inc.'s Hepsera (adefovir dipovoxil) and new approval Baraclude (entecavir) from New York-based BMS.

Since then, the HBV market has become more crowded. In 2006, Tyzeka (telbivudine), a nucleoside analogue from Cambridge, Mass.-based Idenix Pharmaceuticals Inc. and partner Basel, Switzerland-based Novartis gained approval. And last year, Gilead's HIV drug Viread (tenofovir disoproxil) was cleared by the FDA for use in HBV. (See BioWorld Today, Oct. 27, 2006, and Aug. 13, 2008.)