Chronic hepatitis C is a disease of the liver caused by the hepatitis C virus (HCV). It is estimated that there are approximately 4 million Americans and 170 million people worldwide infected with HCV. Hepatitis C leads to chronic liver disease or cirrhosis, and can result in death in 1-5% of infected people. It is also the leading cause of liver transplant in the U.S.

Until May 2011, the standard of care treatment for HCV has been pegylated interferon combined with ribavirin, which was effective in curing approximately 50% and 75% of genotype 1 and genotype 2 or 3 patients, respectively. This course of treatment, which ranges from 6 to12 months depending on the HCV genotype of a patient, is associated with significant side effects. As a result of this limited efficacy and tolerability, historically less than 5% of people diagnosed with HCV actually receive treatment, and approximately one third of these experience a successful treatment outcome.

Recently, two protease inhibitors, a new class of direct acting antivirals, have been approved by the FDA for the treatment of patients with HCV genotype 1. While adding one of these protease inhibitors to standard of care therapy generally improves the probability of a shorter treatment period (24 weeks versus 48 weeks) and a successful treatment outcome in genotype 1 patients, the tolerability of the triple therapy remains sub-optimal and there are additional side effects associated with these protease inhibitors. Accordingly, we continue to see a significant opportunity to improve upon the treatment outcomes, duration and tolerability of therapy to treat chronic HCV.

We are developing a series of phosphoramidate nucleotide analogues, which we refer to as protides, which target the RNA-dependent RNA polymerase (NS5b) of HCV. We believe that our nucleotides possess several pharmacological advantages over other classes of antivirals approved or in development for the treatment of chronic HCV , which include potent antiviral activity against all HCV genotypes, a high barrier to resistance, and good pharmacokinetic properties such that they can be dosed once daily.

In April 2011, we reported favorable safety, tolerability and antiviral results from a Phase 1b clinical trial of INX-189 in genotype 1, treatment naïve HCV patients. The trial was a double-blind, placebo-controlled, dose escalation study designed to evaluate the safety, tolerability, pharmacokinetics and antiviral activity of INX-189, administered orally once-daily for seven days, in HCV genotype 1 treatment naïve patients. A total of 70 subjects were randomized into the trial among seven different dosing cohorts, including five monotherapy treatment arms and two arms of adjunctive treatment with ribavirin (RBV). Each treatment cohort in the study was comprised of 10 patients, eight of whom received INX-189 and two that received placebo. INX-189, dosed once-daily at 9, 25, 50 and 100 mg for seven days, demonstrated potent and dose-dependent antiviral activity with median HCV RNA reductions from baseline of -0.64, -1.00, -1.47, and -2.53 log10 IU/mL, respectively. The median HCV RNA decline from baseline observed in patients that received placebo was -0.20 log10 IU/mL. INX-189, dosed once-daily in combination with RBV for seven days at 9 mg and 25 mg, resulted in median HCV RNA reductions from baseline of -0.75 and -1.56 log10 IU/mL, respectively. The median HCV RNA decline from baseline observed in patients that received placebo and RBV was 0.04 log10 IU/mL.

In August 2011, we announced that we have initiated a Phase 2 clinical trial of INX-189 to evaluate its safety, tolerability and antiviral activity in combination with pegylated interferon and ribavirin in genotype 2 and 3 treatment naïve patients. The trial, which is being conducted under an investigational new drug application (IND) in the United States, is designed to enroll approximately 90 patients. The primary endpoint of the trial is a rapid virologic response (RVR), defined as HCV RNA below the level of detection after 28 days of dosing. Secondary endpoints include early virologic response (EVR), defined as HCV RNA below the level of detection after 12 weeks of dosing, extended early virologic response (eEVR), defined as HCV RNA below the level of detection after 28 days and 12 weeks of dosing, as well as sustained virologic response 12 (SVR12), and sustained virologic response 24 (SVR24) defined as HCV RNA below the level of detection 12 or 24 weeks after the completion of therapy, respectively. Patients will be randomized across four treatment arms as follows:

• INX-189 25mg QD with pegylated interferon and ribavirin for 12 weeks and up to 24 weeks (n=25)
• INX-189 50 mg QD with pegylated interferon and ribavirin for 12 weeks and up to 24 weeks (n=25)
• INX-189 100 mg QD with pegylated interferon and ribavirin for 12 weeks and up to 24 weeks (n=25)
• Placebo with pegylated interferon and ribavirin for 24 weeks (n=15)

Patients in the three treatment arms that include INX-189 with pegylated interferon and ribavirin and achieve a eEVR will terminate all therapy after 12 weeks. Patients in those treatment arms that do not achieve a eEVR will continue to receive pegylated interferon and ribavirin for an additional 12 weeks.

In September 2011, we announced the initiation of a Phase 1b extension trial, which includes planned cohorts of 100 mg INX-189 dosed once daily in combination with ribavirin, 100 mg INX-189 dosed twice daily as monotherapy, 100 mg INX-189 dosed with food, and possibly higher monotherapy doses of INX-189.

In early November 2011, we reported top-line safety and antiviral data from the first cohort of this ongoing clinical trial of INX-189, where 200 mg of INX-189, dosed once-daily for seven days, continued to demonstrate potent and dose-dependent antiviral activity with a median HCV RNA reduction from baseline of -4.25 log10 IU/mL. Further, 200 mg INX-189 was generally well tolerated, and there were no serious adverse events (SAE) or dose dependent adverse events (AE) observed. In late November 2011 of this ongoing trial, 100 mg INX-189, dosed once-daily for seven days in combination with RBV, continued to demonstrate potent and dose-dependent synergistic antiviral activity with a median HCV RNA reduction from baseline of -3.79 log10 IU/mL. Further, 100 mg INX-189 in combination with RBV was well tolerated and there were no serious adverse events.