Tuesday, September 8, 2009

Pharmasset (NASDAQ:VRUS): Positive Comments from Baird and ThinkEquity

Two firms are issuing positive notes on Pharmasset (NASDAQ:VRUS) this morning.

- Baird is upgrading shares to Outperform from Neutral and raising price tgt to $30 from $16:

Our checks increase confidence on R7128 safety. We spoke with three hepatology specialists and came away with high confidence that:
- There have been no concerning toxicities to date with R7128 in Phase 2b.
- Kidney safety monitoring in this trial is very sensitive and would pick up anythinggoing on.
- Enrollment has been rapid; we'd estimate perhaps half of the first 100 patients have already reached 12 weeks, with the rest 6+ weeks in.

No news is indeed good news. The highest level of scrutiny, conservativeness, communication, and transparency span all stakeholders in the trial. If a concerning toxicity had popped up somewhere, docs believe it would be known, which increases confidence beyond the sample captured by our checks.

Positive view in front of near-term catalyst. All eyes are on the Q4-09 DSMB review of the first 100 patients and green light to start the second cohort of 300patients. We think this could be tracking toward late October and now see attractive reward/risk here.

Exposure to subsequent data rollout should pay off. Physicians validated our belief that R7128’s exceptional four-week RVR of 85-88%, demonstrated in Phase 1b, should have positive predictive power for subsequent efficacy measures out to SVR/cure. Visibility here could begin in 2010.

Increasing target price for higher probability of success; continued upwardbias. Our target price goes to $30, reflecting a still-conservative 40% probability of success for R7128 and pushing our valuation year out to a steadier-state 2016. Meaningful upward bias exists near/intermediate term on additional safety/efficacy information for R7128.

- ThinkEquity is raising price target to $29 from $18 and reiterates Buy rating:

We visited the company and reviewed the fundamentals of the Pharmasset story. Our sense is that R-7128 trial logistics are moving forward nicely. We recognize the significance of the news that the first 100 patients in the current Phase II study have been enrolled. We theorize that some percentage of these patients have progressed beyond eight weeks. At this time, we are unaware of any serious AE issues, but it is still early. The viability of R-7128 as apan-genotype STAT-C therapy has extremely good potential, in our opinion. As such, we raise our price target to $29.

Action: I think both of these comments make great sense and are enough to keep the stock running. Expect the shares to trade above $21 today and keep climbing over the next few days.

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