UPDATE 2-Pharmasset's hepatitis C drug gets fast-track status

(Adds details, background, share movement, analyst comments)

By Aradhana Aravindan

BANGALORE, Oct 24 (Reuters) - Pharmaceutical company Pharmasset Inc (VRUS.O) said its chronic hepatitis C treatment, R7128, received fast-track status from U.S. health regulators, sending shares up as much as 6 percent.

R7128, which is being developed in collaboration with Roche (ROG.VX), is a chemically modified form of PSI-6130. It is designed to enhance the absorption, distribution and metabolic properties of PSI-6130, which inhibits the hepatitis C virus from replicating.

Shares of Pharmasset have jumped more than 50 percent since their market debut in late April, as analysts closely watch the progress of drugs in the company's pipeline with optimism.

Pharmasset is currently enrolling an early-stage trial to evaluate R7128 in combination with Roche's current hepatitis C therapies, Pegasys and Copegus.

Princeton, New Jersey-based Pharmasset is also developing Clevudine, which targets the hepatitis B virus, and Racivir, an HIV therapy for use in combination with other approved HIV drugs.

Stifel Nicolaus analyst Edward Nash said he does not expect R7128 to be approved till 2012, projecting the first amount of revenue for the drug at $65.4 million in 2012. He has a "buy" rating and a price target of $15.00 on the stock.

Experimental drugs seeking approval from the U.S. Food and Drug Administration are granted fast track designation when they are intended for treatment of a serious or life-threatening disease and demonstrate the potential to address unmet needs for such a condition.

Hepatitis C is a blood-borne infectious disease affecting the liver. An estimated four million people in the United States have been infected with hepatitis C, of whom 2.7 million are chronically infected.

DRUG RACE

Pharmasset faces competition from Schering-Plough Corp SGP.N and Vertex Pharmaceuticals Inc (VRTX.O), both of which have hepatitis C drugs in development, Stifel Nicolaus' Nash said.

Last week, Schering said its hepatitis C drug, boceprevir, showed promising results in a recent mid-stage trial and the company expects to market it by 2010.

Vertex is developing telaprevir, a treatment for hepatitis C, which has shown impressive effectiveness in clinical trials among patients who have not been previously treated for the virus.

Attempts to develop a hepatitis C drug by other companies have been thwarted by several hurdles. Idenix Pharmaceuticals (IDIX.O), ViroPharma (VPHM.O), Anadys Pharmaceuticals (ANDS.O) have all stopped development of their respective drugs targeted at hepatitis C, after being plagued with safety concerns.

Shares of Pharmasset rose to an intraday high of $13.80, before falling back to trade up 3 cents at $13.06 in afternoon trade on the Nasdaq. (Additional reporting by Niveditha Ravi)