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PSI-7977 The Most Advanced Hepatitis C Drug According To Dr. Duane Nash; Pharmasset (VRUS) Predicted To Play A Dominant Role In HCV Therapy

November 28, 2011 - The Wall Street Transcript has just published Biotechnology and Pharmaceuticals Report offering a timely review of the sector. This Special Report contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. Please find an excerpt below.

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Duane Nash, M.D., is a Senior Vice President in the equity research department of Wedbush Securities, which he joined in 2009 upon Wedbush's acquisition of Pacific Growth Equities, LLC. Before joining the sell side, Dr. Nash was employed with the law firm of Davis Polk & Wardwell LLP, where he practiced intellectual property litigation, as well as patent evaluation and strategy in the merger-and-acquisition context. Previously, Dr. Nash worked at two other Bay Area law firms, and also completed his internship in general surgery at the University of California, San Francisco. He received his B.A. in biology from Williams College, his M.D. from Dartmouth Medical School, his J.D. from the University of California, Berkeley, and his MBA from the University of Oxford. Dr. Nash is a California-licensed physician and also a Member of the The State Bar of California.

TWST: What is it about Endologix that you like?

Dr. Nash: Endologix has a best-in-class device for treating abdominal aortic aneurysms. The aorta is the largest artery that comes right off of the heart, and because it takes blood flow directly from the heart, blood is traveling at very high pressure. Over the course of decades, that pressure can cause a weakness in the wall of the artery called an aneurysm or AAA, abdominal aortic aneurysm. AAA is the 12th leading cause of death in the United States, because if that weakness ruptures, a patient exsanguinates very quickly. More recently, minimally invasive approaches have developed where you simply make small holes in the groin on both sides, the right and the left, and thread an internal buttress via the vascular system, which then supports the artery and prevents it from blowing out. There are four main players in the space.

TWST: Your third company is Cardica. Why do you like that company?

Dr. Nash: Once again, Cardica has a device which is best in class. They are a very small company, and they are going to be competing against very large players. This is a similar theme that we see with Endologix, where less-invasive surgery has become more popular. In the past two decades, we've seen tremendous growth in a field called laparoscopic surgery, where instead of making a big incision and then having the surgeon stick his hands in the patient's abdomen, the physician makes several tiny incisions and inserts mechanical arms in the abdomen, and then the surgeon operates through the mechanical arms. That is very popular because it's just as effective, if not more effective, than open surgery and there is far less scarring. Because the incisions are smaller, there is a quicker recovery.

TWST: What about on the liver side? Who are your favorites there?

Dr. Nash: The liver side is a different space, where all the companies tend to be affected by similar events because they are all on the same market. Here, these are companies that are developing drugs to treat the virus, hepatitis C. Fortunately, unlike hepatitis B and HIV, hepatitis C is curable. If you don't treat patients, it can lead to hepatocellular carcinoma as well as cirrhosis. But if you do treat them with the current regimens, you get about 75% cure rate, which is better than the 40% to 50% cure rate we saw last year before some new drugs came out. There are a whole host of new drugs coming out which are aspired to being able to cure hepatitis C without the use of interferon.

The most advanced one is a drug PSI-7977, which is being developed by a company I do not cover, Pharmasset (VRUS). Their market cap is about $6 billion. That drug keeps showing fairly astonishing data. There are four main classes of drugs that are directed to HCV, and this drug is in a class called nucleotides. Over the course of 2011, nucleotides have distinguished themselves as the single most promising class by far. At the moment, it is assumed that Pharmasset will play a very large role in therapy for HCV for the future.The market is very big. It's probably about 3 million people in the United States with a chronic HCV, cost of therapy is roughly $80,000. So for the full U.S. market, you are talking over $200 billion, although it's very unlikely we will get anywhere near full penetration.

Instead, the total revenues will probably be somewhere in the tens of billions of dollars. For every one American who has HCV, there are 40 foreigners who have HCV, although many of these foreign countries are very poor and don't have the ability to afford expensive drugs. But needless to say, this could be a very lucrative market. While Pharmasset is very well positioned, there are a host of other companies out there whose position and ability to capitalize on this market is far more tenuous.

The remainder of this 30 page Biotechnology and Pharmaceuticals Report can be immediately viewed by purchasing online.

The Wall Street Transcript is a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

The Wall Street Transcript does not endorse the views of any interviewees nor does it make stock recommendations.

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