The Street's Adam Feuerstein takes a look at pharma stock picks post-EASL....

Nice scorecard from The Street's Adam Feuerstein on how the HCV drug development marketplace looks post-EASL. I think folks are a little to bullish on Pharmasset's all-oral combo. To the company's credit, no one has shown this sort of efficacy without the help of ribavirin and peg, but 14 days is long way from SVR. It will be interesting to see how this all sorts out.

Biotech Stock Mailbag: Hep C Stock Winners
Adam Feuerstein
04/08/11 - 07:00 AM EDT

BOSTON (TheStreet) -- Trying to make sense of the rapidly changing field of hepatitis C drug research kicks off this week's Biotech Stock Mailbag.

Evan R. emails, "It looks like Pharmasset(VRUS) was the big winner at the hepatitis C conference. What's your take on hepatitis C stocks now?"

I could easily devote this entire Mailbag to hepatitis C because so much of the data presented at the just-wrapped European Association for the Study of the Liver (EASL) meeting has the potential to radically improve the way hepatitis C is treated. It's never a great time to be a Hep C patient, obviously, but the prospect for better, faster and more well-tolerated cures coming relatively soon should be a real source of hope and optimism.

Investors have a tougher challenge trying to pick a winning stock or two (or three of four) from among the many that are racing to bring these new Hep C drugs to market.

Case in point: The buzz at this week's EASL meeting was about new, all-oral multi-drug combinations for Hep C treatment that won't likely be ready for approval or sale for four or five years. The Hep C treatment landscape is evolving quickly and investors are jumping so far ahead that the looming April/May advisory panels and approval decision dates for new drugs from Vertex Pharmaceuticals(VRTX) and Merck(MRK) seem like old news already.

It sounds incredibly weird to even conjure this thought, but from Wall Street's what-have-you-done-for-me-lately perspective, Vertex's telaprevir and Merck's boceprevir look a bit old in the tooth even before the two drugs are approved!

Pharmasset was the belle of the EASL ball after presenting early data (in a relatively small number of patients) demonstrating that two oral drugs -- PSI 7977 and PSI 938 -- could render the Hep C virus undetectable with no obvious signs of resistance or relapse. This still-experimental regimen is remarkable for the absence of interferon or ribavirin -- the former injected, the latter oral -- which make up the current standard of care for Hep C treatment.

A typical Hep C patient today is treated with interferon and ribavirin for one year, enduring side effects that include flu-like symptoms for a 40% to 50% chance of being cured.

By this spring or early summer, the addition of 12 weeks of treatment with Vertex's telaprevir to a shortened, six-month course of interferon and ribavirin will boost cure rates to 75% to 80%. Telaprevir+interferon+ribavirin will be the new standard of care for Hep C. [Merck's boceprevir plus standard of care should be in the mix, too.]

Look ahead a few more years. Pharmasset is dangling the prospect of an even simpler Hep C regimen: Two pills, taken once a day for six months providing odds of a cure as good as, perhaps even better, than what's achieved with the triple-drug telaprevir regimen.

As an encore of sorts, Pharmasset also wowed the EASL crowd with strong antiviral response data from studies combining PSI7977 with interferon and ribavirin. PSI7977 may be four or so years away from the market, but it's already looking like the next Hep C treatment standard bearer.

Little wonder Pharmasset shares continue to surge even after EASL ended. The stock closed Wednesday at $98.68 but was off 2% to $96 in mid-day trading Thursday. Still, remember Pharmasset shares were worth $50 one month ago.

Vertex emerged from EASL under more pressure to make the most of telaprevir commercially before competition arrives on the scene. Telaprevir is a major advance in Hep C treatment and the drug should pass easily through an April 28 FDA advisory panel and receive agency approval on or before May 23. As effective as the drug is for treatment-naive Hep C patients, the drug will have an even more beneficial effect for the hundreds of thousands of patients with Hep C virus that wasn't cured by the current standard of care.

Vertex's dilemma is that investors know this story well and have baked much of telaprevir's potential into the company's valuation already. What concerns investors today and perhaps even more post-EASL is that the slope of the expected telaprevir revenue tail may be steeper than previously appreciated. Investors are also raising questions about what Vertex is doing to sustain its Hep C franchise in 2015 and beyond when new drugs are expected to enter the market.

Looming largest in Vertex's rear-view mirror are Johnson & Johnson's(JNJ) TMC435 and perhaps Bristol-Myer Squibb's(BMY) BMS 052. [Worth noting, too, that Bristol-Myers and Pharmasset are already testing combinations of their respective Hep C drugs.]

Vertex is working on new combination therapies, too, but so far, the efforts haven't yielded much. A two-drug regimen of telaprevir plus VX-222 was shelved, leaving Vertex experimenting with a "quad" regimen of telaprevir, VX-222 plus standard of care.

VX-222 was highly touted as Vertex's next-generation Hep C drug candidate when it was picked up through the 2009 acquisition of privately held Virochem. Today, VX-222 isn't looking so hot, which means Vertex needs to license or buy something else if the company wants to stay in the Hep C game long term.

Roche is in desperate shape because Pegasys, the market-leading interferon, is going away. Roche bought InterMune's(ITMN) Hep C drug and licensed a first-generation drug from Pharmasset but neither of these compounds are working out as hoped.

Gilead Sciences(GILD) continues to make slow but steady progress. A late-starter to Hep C drug development, Gilead came out of EASL with progressively better data on multiple drug regimens although its programs are still early stage and lag the competition.

The smaller Hep C drug players -- Achillion Pharmaceuticals(ACHN), Inhibitex(INHX), Idenix Pharmaceuticals(IDIX) and Anadys(ANDS) -- emerge from EASL under more pressure to find partners or acquirers. Hep C is rapidly evolving into a market similar to HIV where winners have multiple drugs to play with and losers are the single-drug companies sitting alone on the sidelines. Roche, J&J, Merck and Vertex should all be motivated to make deals in the coming year.