Pharmasset Reports First Fiscal Quarter 2008 Financial Results

PRINCETON, N.J., Feb. 14 /PRNewswire-FirstCall/ -- Pharmasset, Inc. (NASDAQ: VRUS) , a clinical stage pharmaceutical company committed to discovering, developing and commercializing novel drugs to treat viral infections, reported unaudited financial results for the first fiscal quarter of 2008 ended December 31, 2007. Pharmasset reported a net loss attributable to common stockholders of $12.2 million, or ($0.57) per share for the first fiscal quarter of 2008, as compared to net income attributable to common stockholders of $3.6 million, or $0.33 per diluted share for the same period in fiscal 2007.

Revenues were $0.5 million during the first fiscal quarter of 2008, which consisted of the amortization of payments received from Roche from the hepatitis C virus (HCV) collaboration agreement that were previously recorded as deferred revenue. Revenues for the same period in fiscal 2007 were $8.1 million, which included a $7.5 million milestone payment received from Roche. Investment income was $0.9 million during the first fiscal quarter of 2008 compared to $0.4 million during the same period in 2007. The $0.5 million increase in the first fiscal quarter of 2008 was due to higher average invested cash balances.

Total costs and expenses for the first fiscal quarter of 2008 were $13.2 million as compared to $4.6 million for the same period in fiscal 2007. The $8.6 million increase in operating expenses for the first fiscal quarter of 2008 was primarily due to a $7.0 million increase in Phase 3 registration clinical trial expenses for clevudine for the treatment of chronic hepatitis B virus (HBV) infection, as well as approximately $1.6 million in drug discovery, compensation, insurance, audit and non-cash stock compensation expenses. Interest expense was $0.4 million during the first fiscal quarter of 2008 compared to $1,800 during the same period in fiscal 2007. The increase was primarily due to interest paid on the $10.0 million of long-term debt we incurred during October 2007.

At December 31, 2007, Pharmasset held $61.5 million in cash and cash equivalents and approximately $1.3 million of short-term investments.

"We collected preliminary results of the R7128 combination study for the treatment of HCV in the first fiscal quarter of 2008, and we look forward to orally presenting the final results of these two cohorts at the 43rd Annual Meeting of the European Association for the Study of the Liver (EASL) in April 2008," stated Schaefer Price, Pharmasset's Chief Executive Officer. "The rapid advancement of the R7128 program is a tribute to the productivity of our HCV collaboration with Roche and our communications with the FDA. We are currently focused on planning a 12-week Phase 2b combination study of R7128 with Pegasys plus Copegus, continuing clevudine HBV patient enrollment and nominating a lead preclinical candidate from our proprietary HCV discovery efforts."

    First Fiscal Quarter 2008 Highlights     -- Commenced and subsequently completed dosing two cohorts in 4-week        combination study of R7128 with Pegasys(R) plus Copegus(R) for the        treatment of HCV.     -- Received fast track designation from the FDA for R7128 for the        treatment of HCV.     -- Entered antiviral research collaboration with the University of        Cincinnati's Genome Research Institute.     -- Appointed Michael Rogers as Chief Development Officer and Patrick T.        Higgins as Executive Vice President, Marketing & Sales.     -- Presented R7128 Phase 1 single ascending dose and 14-day monotherapy        study results for the treatment of HCV.     -- Discovered a new series of proprietary nucleoside analogs that have        demonstrated potent anti-HCV activity.    Anticipated Highlights     -- Oral presentation of the final safety and efficacy data from two        cohorts from the third part of a Phase 1 study of R7128 following 4        weeks of combination therapy with Pegasys plus Copegus at the 43rd        Annual Meeting of the European Association for the Study of the Liver        (EASL) being held from April 23-27, 2008 in Milan, Italy.     -- Complete HBV patient enrollment for clevudine Phase 3 registration        clinical trials in the second calendar half of 2008.     -- Initiate HCV patient screening for a 12-week Phase 2b combination        study of R7128 with Pegasys plus Copegus in the fourth calendar        quarter of 2008, assuming the successful completion of the on-going        R7128 Phase 1 study, transfer of our IND for R7128 to Roche, consent        from the FDA and timely completion of all required Phase 2b study        preparation activities.     -- Conducting preclinical studies of a proprietary anti-HCV nucleoside        analog to support first-in-human clinical trials, once a lead compound        has been nominated from the series.

About Pharmasset

Pharmasset is a clinical-stage pharmaceutical company committed to discovering, developing and commercializing novel drugs to treat viral infections. Pharmasset's primary focus is on the development of oral therapeutics for the treatment of hepatitis B virus (HBV), hepatitis C virus (HCV) and human immunodeficiency virus (HIV).

Pharmasset is currently developing three product candidates. Clevudine, for the treatment of chronic HBV infection, is enrolling Phase 3 clinical trials for registration in North, Central and South America and Europe. Clevudine is already approved for HBV in South Korea and marketed by Bukwang Pharmaceuticals in South Korea under the brand name Levovir. R7128, an oral treatment for chronic HCV infection, is in a 4-week Phase 1 clinical trial in combination with Pegasys plus Copegus through a strategic collaboration with Roche. Racivir, which is being developed for the treatment of HIV in combination with other approved HIV drugs, has completed a Phase 2 clinical trial.

    Contact    Alan Roemer, Vice President    Investor Relations & Corporate Communications    alan.roemer@pharmasset.com    Office: (609) 613-4125    Pegasys(R) and Copegus(R) are registered trademarks of Roche.

Forward-Looking Statements

Pharmasset "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements in this press release regarding our business that are not historical facts are "forward-looking statements" that involve risks and uncertainties, including without limitation the risk that adverse events could cause the cessation or delay of any of the ongoing or planned clinical trials and/or our development of our product candidates, the risk that we will fail to present final safety and efficacy data from a Phase 1, Part 3 multiple ascending dose study, the risk that we cannot enroll enough patients for the Phase 3 registration clinical trial for clevudine, the risk that we will fail to initiate a Phase 2b combination study of R7128 with Pegasys plus Copegus in the fourth calendar quarter of 2008, the risk that our collaboration with Roche will not continue or will not be successful and the risk that any one or more of our product candidates will not be successfully developed and commercialized. For a discussion of these risks and uncertainties, any of which could cause our actual results to differ from those contained in the forward-looking statements, see the section of our Annual Report on Form 10-K for the fiscal year ended September 30, 2007 filed with the Securities and Exchange Commission entitled "Risk Factors" and discussions of potential risks and uncertainties in our subsequent filings with the Securities and Exchange Commission.

                               PHARMASSET, INC.         STATEMENTS OF OPERATIONS AND COMPREHENSIVE NET INCOME (LOSS)                                 (UNAUDITED)                                                     Three Months Ended                                                        December 31,                                               ------------------------------                                                    2007              2006                                               ------------------------------         REVENUES                                  $464,291       $8,116,584                                               ------------------------------         COSTS AND EXPENSES:           Research and development              10,550,371        2,561,485           General and administrative             2,619,745        2,055,038                                               ------------------------------               Total costs and expenses          13,170,116        4,616,523                                               ------------------------------         OPERATING INCOME (LOSS)                (12,705,825)       3,500,061         INVESTMENT INCOME                          896,402          408,986         INTEREST EXPENSE                          (363,176)          (1,841)                                               ------------------------------         INCOME (LOSS) BEFORE INCOME TAXES      (12,172,599)       3,907,206         PROVISION FOR INCOME TAXES                     -                -                                               ------------------------------         NET INCOME (LOSS)                      (12,172,599)       3,907,206         REDEEMABLE PREFERRED STOCK          ACCRETION                                     -            284,197                                               ------------------------------         NET INCOME (LOSS) ATTRIBUTABLE          TO COMMON STOCKHOLDERS               $(12,172,599)      $3,623,009                                               ==============================         COMPREHENSIVE NET INCOME (LOSS):         NET INCOME (LOSS)                     $(12,172,599)      $3,907,206         UNREALIZED GAIN (LOSS) ON          AVAILABLE-FOR-SALE INVESTMENTS                -              2,195                                               ------------------------------         COMPREHENSIVE NET INCOME (LOSS):      $(12,172,599)      $3,909,401                                               ==============================         NET INCOME (LOSS) ATTRIBUTABLE          TO COMMON STOCKHOLDERS PER SHARE:           BASIC                                     $(0.57)           $0.35           DILUTED                                   $(0.57)           $0.33         WEIGHTED AVERAGE SHARES          OUTSTANDING:           BASIC                                 21,263,668       10,504,693           DILUTED                               21,263,668       11,009,257                               PHARMASSET, INC.                                BALANCE SHEETS                                                  As of                                               December 31,         As of                                                   2007         September 30,                                               (unaudited)           2007                                               ------------------------------    ASSETS    CURRENT ASSETS:      Cash and cash equivalents                $61,464,961       $68,745,694      Short-term investments                     1,252,113         1,252,113      Amounts due under collaborative       agreements                                1,764,828           919,110      Prepaid expenses and other assets          1,700,240           783,311                                               ------------------------------               Total current assets             66,182,142        71,700,228                                               ------------------------------    EQUIPMENT AND LEASEHOLD IMPROVEMENTS:      Laboratory, office furniture and       equipment                                 2,863,244         2,462,647      Leasehold improvements                     1,836,553         1,836,553                                               ------------------------------                                                 4,699,797         4,299,200      Less accumulated depreciation and       amortization                             (1,674,095)       (1,437,080)                                               ------------------------------               Total equipment and                leasehold improvements, net      3,025,702         2,862,120    OTHER ASSETS                                   487,793         1,282,051                                               ------------------------------    TOTAL                                      $69,695,637       $75,844,399                                               ==============================    LIABILITIES AND STOCKHOLDERS' EQUITY    CURRENT LIABILITIES:      Accounts payable                          $1,709,847        $3,281,600      Accrued expenses                           3,007,366         5,513,407      Deferred rent                                124,462           124,462      Current portion of capital lease       obligation                                  162,265           159,440      Deferred revenue                           1,857,136         1,857,136                                               ------------------------------               Total current liabilities         6,861,076        10,936,045    DEFERRED RENT                                  172,883           204,256    NON CURRENT PORTION OF CAPITAL LEASE     OBLIGATION                                        -              41,641    DEFERRED REVENUE                             5,261,840         5,726,131    LONG-TERM DEBT                               9,520,800               -                                               ------------------------------               Total liabilities                21,816,599        16,908,073                                               ------------------------------    COMMITMENTS    STOCKHOLDER'S EQUITY    Common Stock, $0.001 par value,     100,000,000 shares authorized,     21,288,614 and 21,232,991 shares     issued and outstanding at     December 31, 2007 and     September 30, 2007, respectively               21,289            21,233    Warrants to purchase 66,390 shares of     common stock for $12.05 per share,     exercisable starting     September 30, 2007                            526,720           526,720    Additional paid-in capital                 116,633,456       115,518,201    Accumulated other comprehensive     income                                          4,405             4,405    Accumulated deficit                        (69,306,832)      (57,134,233)                                               ------------------------------               Total stockholders' equity       47,879,038        58,936,326                                               ------------------------------    TOTAL                                      $69,695,637       $75,844,399                                               ==============================