Idenix Pharma (IDIX): New HCV Treatment Could Be A Game Changer

The company has co-launched telbivudine (Tyzeka/Sebivo) for the treatment of hepatitis B virus, for which Novartis Pharma AG now has worldwide commercialization rights.

Cambridge, Massachusetts-based Idenix's current focus is on the treatment of hepatitis C virus (HCV) infections due to the global unmet medical need for this viral disease. It is estimated that more than 170 million people worldwide are chronically infected with HCV, which affects people's liver when they are contacted with contaminated blood that carries the virus.

HCV companies have started to take priority among the biotech investors portfolio due to their potential market and issues with the current treatments. If any company develops a treatment that kills the virus, or even keep it from developing further, would be a big thing and would fetch enormous profits for the company as well as its investors.

As a result, Idenix is a worthy investment as it is developing direct-acting antiviral (DAA) agents for the burgeoning multi-billion dollar Hepatitis-C virus (HCV) market.

The company's candidate IDX184 is the principle value driver at this point. Although IDX184 is considered to be less potent than the leading HCV nuclear clinical candidate (Gilead Sciences' GS-7977), the available data suggest that IDX184 would be successfully developed, thereby unlocking significant value in Idenix shares.

"While the wholly-owned key asset IDX184 is not a best-in-class nucleotide ("nuc") polymerase inhibitor, we think its high barrier to resistance will confer value in alternative DAA combos, with data in 2013 driving estimates higher and solidifying its scarcity among late-stage nucs," UBS analyst Matthew Roden wrote in a note to clients.

Idenix has the only unencumbered nuc in late-stage clinical development, as well as IDX719, a potentially best-in-class pan-genotypic NS5a inhibitor in phase-1 trials as well. IDX719 targets the HCV non-structural 5A (NS5A) protein presents a second clinical stage asset, and could be differentiated among the NS5a class in terms of potency and pan-genotypic activity. The company has also planned to begin trials with a combination of IDX 719 and IDX 184 towards the end of this year.

"Given the potential for both classes to become backbone therapies in HCV (and potentially form an all-IDIX pan-genotypic combo), we believe the Idenix pipeline has considerable scarcity value, and will attract large pharma or biotech partners," the analyst noted.

In addition, Idenix holds significant intellectual property in nuc chemistry, and may have rights to other nucs in HCV. Idenix has a senior party position in the recent patent interference proceeding with Gilead. It also is likely to claim some royalties from Bristol Myers (NYSE:BMY) if BMS-094 reaches market.

"If IDX184 were to fail, Idenix's other HCV assets and its intellectual property estate would provide a significant valuation floor for IDIX shares," Roden added.

Roden sees HCV market to grow $17 billion in worldwide sales by 2018. Given relative competitiveness with GS-7977, he forecasts about $1.11 billion in risk-adjusted 2018 IDX184 sales, reflecting a modest 10 percent global market share.

Of course, Idenix is not alone in the market as several heavyweights such as Abbott Laboratories (NYSE:ABT), Gilead Sciences (NASDAQ:GILD) and smaller rival Vertex Pharmaceuticals (NASDAQ:VRTX) are also testing HCV drugs.

Meanwhile, IDX184 has basic characteristics of a good drug candidate including clinical safety and efficacy and should deliver 90 percent plus cure rates in DAA combinations and confer a high barrier of resistance, implying high value to potential DAA partners.

iStock recommends investors build positions in Idenix shares, which have increased 40 percent in the last one year, if they can afford to take a risk in biotech investments as the risk/reward ratio is attractive as potential return may outweigh the high risk and the FDA approval process.