Staff Writer

At the recent J.P. Morgan health care conference, investors told Pharmasset Inc. that one reason its stock was failing to respond to milestones like good data and new trial initiations was concern about the company's cash reserves and ability to replenish them in the current market.

As of Sept. 30, 2008, Princeton, N.J.-based Pharmasset reported $63.6 million in cash, equivalents and short-term investments, while its total expenses in the previous four quarters were $56.3 million.

"We saw that as an overhang that we needed to remove," Richard Smith, vice president of investor relations and corporate communications, told BioWorld Today.

The company decided to raise $45.5 million through the registered, direct sale of 4.68 million shares priced at $9.73 each. That represents a discount of about 7 percent to the company's Thursday closing price, but investors seemed pleased with the move - pushing the stock (NASDAQ:VRUS) up 94 cents to close at $11.40 Friday. Leerink Swann LLC served as the sole placement agent for the offering.

The funds will be used for general corporate purposes, which for now primarily means support of two ongoing Phase III trials of Clevudine for hepatitis B. Enrollment is expected to wrap up this quarter, and data should be available in the first half of 2010. (See BioWorld Today, Oct. 2, 2007.)

The HBV space is dominated by Gilead Sciences Inc.'s Hepsera (adefovir dipivoxil), which generated $341 million in 2008, and Bristol-Myers Squibb Co.'s Baraclude (entecavir), which sold $153 million. In August, Gilead also gained approval of its HIV drug Viread (tenofovir disoproxil fumarate) for HBV, and the drug raked in $621 million in both indications during 2008. (See BioWorld Today, Aug. 13, 2008.)

Yet Smith noted that while many existing HBV drugs are HIV drugs that have "found their way" into the space, Clevudine is a once-daily pyrimidine nucleoside analogue specifically designed to address HBV. The drug is approved in Korea, and Smith pointed to data indicating that it impacts reservoirs of virus production and results in sustained virologic response. In fact, one of its Phase III studies is seeking to establish superiority compared to Hepsera.

Behind Clevudine, Pharmasset has the HIV drug Racivir, a once-daily, cytidine nucleoside analogue that has completed Phase II trials. Smith noted that the front-line HIV market is "pretty much wrapped up" by Atripla, which combines Viread with Gilead's Truvada (emtricitabine) and BMS's Sustiva (efavirenz) - but he sees potential for Racivir in a second-line combination setting, and Pharmasset is seeking a partner to pursue that path. Also in Phase II is R7128, a polymerase inhibitor for hepatitis C. Partner F. Hoffmann-La Roche Ltd. is covering clinical development costs under a $300 million worldwide license the companies signed in 2004. (See BioWorld Today, Oct. 28, 2004.)

In January, Roche reached an agreement with the FDA on the design of a 400-patient Phase IIb trial, which is expected to start enrolling in the current quarter. Roche also is conducting a Phase I trial that combines R7128 with InterMune Inc.'s protease inhibitor R7227 (ITMN-191) - which also is partnered with Roche.

Protease and polymerase inhibitors are expected to be the next generation of HCV drugs, improving the 40 percent to 50 percent cure rates achievable with the standard of care, ribavirin plus pegylated interferon.

Smith predicted that while the new drugs will gain FDA approval for use in combination with the standard of care, eventually there is "potential to remove interferon and/or ribavirin and have an all-oral combination regimen, like in HIV." Such a treatment regimen would avoid the harsh side effects associated with the current treatments, but Smith noted the trick will be to find the optimal combination and dosing regimen.

Among the protease inhibitors, Vertex Pharmaceuticals Inc.'s telaprevir is the frontrunner, followed closely by Schering-Plough Corp.'s boceprevir. Both drugs are in Phase III trials in treatment-naïve and treatment-experienced HCV patients. Of the polymerase inhibitors, R7128 is the most-advanced nucleoside product in development.

But Anadys Pharmaceuticals Inc.'s ANA598 made quite a stir in January when initial Phase Ib data indicating the compound could have best-in-class potency sent the company's shares soaring 115 percent. Smith noted that while R7128 is a nucleoside polymerase inhibitor, ANA598 is a non-nucleoside polymerase inhibitor. The drugs have different mechanisms of action and may work well together, he said. He added that some HIV regimens combine nucleoside and non-nucleoside polymerase inhibitors, while some add in a protease inhibitor and others combine multiple nucleoside polymerase inhibitors.

Along those lines, Pharmasset has additional plans. The company plans to file an investigational new drug application this quarter for PSI-7851, a second-generation nucleotide polymerase inhibitor for HCV. Smith said the product could be the cornerstone of a combination regimen.

In other financing news:

• Arcxis Biotechnologies, of Pleasanton, Calif., raised an undisclosed amount of Series B financing from Claremont Creek Ventures, Kaiser Permanente Ventures and Alafi Capital. Funds will be used to advance the company's nucleic acid sample preparation platform and molecular diagnostics.

• AVI BioPharma Inc., of Portland, Ore., is raising $16.5 million through a registered direct offering of 14.22 million units consisting of one share priced at $1.16 and one five-year warrant to purchase an additional share at the same price. Proceeds will advance the company's RNA-based pipeline, including the Phase I drug AVI-4658 for Duchenne's muscular dystrophy. Rodman & Renshaw LLC served as the placement agent for the transaction. Shares of AVI (NASDAQ:AVII) fell 29 cents, or 25 percent, to close at 87 cents on Friday.

• Cytori Therapeutics Inc., of San Diego, filed a shelf registration statement with the SEC under which the company may raise up to $75 million through the issuance of stock, debt and/or warrants. Proceeds will be used for general corporate purposes, including support of the Celution System for processing, purification and treatment with a patient's adipose tissue-derived adult stem and regenerative cells.

• Pluristem Therapeutics Inc., of New York, is raising $1.2 million through the sale of 1.03 million units consisting of one restricted share of common stock priced at $1.16 and one five-year warrant to purchase a common share for $1.90. The company develops placental expanded (PLX) cells - placental-derived mesenchymal stromal cells that have been expanded in its PluriX 3D bioreactor.