* 73 pct early virological response with Anadys's ANA598
* No serious adverse events seen in ANA598 patients
* CEO sees partnership talks heating up
* Shares fall 15 percent (Adds analyst comment, share move)
By Bill Berkrot
NEW YORK, Feb 24 (Reuters) - An experimental hepatitis C treatment being developed by Anadys Pharmaceuticals Inc ANDS.O demonstrated impressive early response rates with no serious safety issues, according to preliminary data from a small mid-stage clinical trial.
After 12 weeks of dosing, 73 percent of previously untreated patients who received 200 milligrams of Anadys's ANA598 twice daily in combination with standard treatments achieved undetectable levels of the virus. The 12-week results are known as a complete early virological response (cEVR).
Anadys shares fell 15 percent after the data were released as investors may have been disappointed by the unexpected similarity of response rates at 12 weeks between the Anadys drug arm and control group of the study.
Of the 14 patients who received the standard treatment of pegylated interferon and ribavirin, the cEVR rate was a much higher-than-expected 71 percent.
"It doesn't look like a differentiated product on top of standard of care. There was essentially no difference between 598 on top of standard of care and standard of care," said Thinkequity analyst Brian Skorney, calling the control group response "bizarre" and "confounding."
There was a much larger separation of response rates between the two treatment arms at weeks 4, 6, 8 and 10, when the ANA598 viral response was already at 73 percent, while the standard of care group response was 54 percent.
Anadys said the virtually identical 12-week response rate between the two arms of its Phase II trial may be due to the small number of patients, and were likely skewed by one patient from each group who was unavailable for measurement at week 12 of the study so were not included in the data.
"I can buy the explanation, but I have to see more data to accept the explanation," Skorney said.
"If we see a repeat in the next data slice, then it's not compelling," he added.
"We would expect the placebo group number to regress back to more typical historical norms as the numbers of patients became larger both in this trial and in subsequent trials," Anadys Chief Executive Steve Worland said in a telephone interview.
Analysts on a conference call with the company appeared to be generally impressed with the ANA598 data.
No one in the 26-patient ANA598 arm of the trial experienced viral rebound, or a return of the virus once it appeared to have been knocked out.
No serious adverse events were reported with ANA598, and the side effects that were observed, such as a rash, were comparable between the ANA598 patients and those that received the standard treatment plus a placebo, the company said.
"We're very encouraged. The cEVR number, good safety and lack of rebound are all very positive for 598," Worland said, noting that the response rate was "comparable to the most advanced protease inhibitors in development."
ANA598 belongs to a class of drugs called non-nucleoside inhibitors.
"There's a fair amount of skepticism that a non-nucleoside that even got a good number early could sustain that number between week 4 and week 12," Worland said.
"Everybody who experienced benefit from 598, all of that benefit is preserved through week 12," Worland said. "That's contrary to expectations and very positive for combining 558 with direct antivirals."
Patients will continue to be treated through 24 or 48 weeks, with the most important data, the sustained virologic response, or SVR rates, becoming available toward the end of the year, the company said.
SVR is considered tantamount to a cure for the serious liver disease. The cure rate for the current treatments is typically only between 45 percent and 60 percent.
The current standard treatments require 48 weeks of dosing and are difficult to tolerate with flu-like symptoms often persisting throughout. Patients not helped by those drugs often have no alternative but an eventual liver transplant.
Several companies, including Vertex Pharmaceuticals Inc(VRTX.O) and Merck & Co (MRK.N), are developing promising new antiviral medicines that have shown far higher cure rates, often with shorter treatment durations, when combined with standard drugs.
The early response rate for ANA598 is comparable to what has been seen for those other promising hepatitis C treatments in clinical trials, while the control group response was far higher than what has been seen in those other studies.
Discussions on a partnership deal for ANA598 are now expected to heat up.
"We're resuming an engaged level of dialogue with companies now that were waiting to see the 12-week data," Worland said.
Anadys shares fell to $1.95 in extended trading from their Nasdaq close at $2.31. (Reporting by Bill Berkrot)