August 29, 2007


When a biopharma company like ViroPharma takes a tumble, it's usually a safe guess that testing of a new drug went poorly. And this was the case with ViroPharma's early August dive.

On Aug. 10, ViroPharma's stock dropped as much as 27% before shoring up a bit and closing down 15% from the prior day. The reason was the announcement that the company was discontinuing the phase 2 trial of its hepatitis C drug, dubbed HCV-796, which ViroPharma had been working on in conjunction with Wyeth (NYSE: WYE). The drug trial revealed that patients being treated with HCV-796 had higher levels of liver enzymes -- typically a warning sign that something is going wrong in the liver.

Though a single drug can be the whole story in some young biopharma companies, this isn't the case with ViroPharma. The company is profitable thanks to the drug Vancocin, a treatment for pseudomembranous colitis that it acquired from Eli Lilly (NYSE: LLY). It also has another drug in phase 3 trials -- Maribavir, which treats cytomegalovirus. And let's not overlook the fact that ViroPharma is sitting on a combined $517 million of cash and short-term investments, and it has made it known that it will be looking at acquisitions.

Of 157 CAPS All-Stars -- players ranked in the top 20% of all 60,000-plus CAPS players -- to weigh in on ViroPharma, 155 expect the stock to outperform the market. One of those All-Stars, nickinglis, slapped on the thumbs-up a few days after the HCV-796 report came out, saying there had been a "market over-reaction on bad news" and that a correction is still on the way.

So, does the drop create a good buying opportunity? Or does the HCV-796 disappointment warrant the new, lower price? Let the community know what you think -- head over to CAPS and share your thoughts. Even if you'd prefer to pass on ViroPharma, you can check out a couple of the other stocks listed above or any of the 4,900 stocks that are rated on CAPS. (If you were waiting, consider this your engraved invitation to join CAPS.)

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