Guru Focus: Idenix Pharmaceuticals Lagging Behind In Breakthrough Hepatitis C Drug Development

Posted on 7/13/12 on www.gurufocus.com. The author is worried about Idenix's pan-genotype nuc, IDX184. I'm not as worried, but Idenix definitely needs other drugs beside it's own to pair IDX184 with - preferably those well into Phase IIb or Phase III studies.  Those are drugs that are most likely to make it to market first, barring any errant new safety signals that would gum up the works and put pinholes in the dreams of investors everywhere. A good example to follow is Medivr/Janssen's protease inhibitor TMC435. That partnership has done an outstanding job of partnering with every company with a drug that looks hopeful, expanding their status as the 'preferred partner' drug in every combination that looks effective and safe.  On the other hand, we've learned in HIV that a good, potent, well-tolerated nuc (preferably ones with a unique resistance profile) will always come in handy. A good drug never has to worry. Only the company developing it does. 

Idenix Pharmaceuticals Lagging Behind In Breakthrough Hepatitis C Drug Development
July 13, 2012

Idenix Pharmaceuticals (IDIX) is one of the biopharmaceutical companies focused on discovering, developing and commercializing drugs for the treatment of life-threatening human viral diseases such as Hepatitis C. Hepatitis C is a form of liver disease that is passed on from one person to another through contact of bodily fluids. The Hepatitis C virus can severely damage the liver as it is asymptomatic and therefore, the effects are slowly felt over a long period of time. Hepatitis C has the potential to kill if not detected early enough.

It is estimated that 75% to 85% of Hepatitis C infections become chronic, leading to serious liver disease such as cirrhosis and may even causing liver cancer. Researchers at the Centers for Disease Control and Prevention estimate that about 50% of the 3.2 million Americans who have chronic Hepatitis C do not know about it. This is frightening to say the least, given that Hepatitis C is now estimated to be killing more Americans than HIV, the virus that causes AIDS. The Hepatitis C virus has also been found to be more prevalent in the "baby boomer" generation born between 1945 and 1964. This was a time when casual sharing of needles and drug use was the norm. I was floored to discover that the current worldwide figure of persons considered to be living with chronic viral hepatitis stands at between 480 million and 540 million, with approximately 130 million to 170 million of them infected with the Hepatitis C virus.

IDX184 is a pan-genotypic oral nucleotide polymerase inhibitor and Idenix Pharmaceutical’s lead product for the treatment of Hepatitis C. It is Idenix’s belief that the Hepatitis C treatment paradigm will evolve rapidly within the next three to five years as various companies continue to develop direct-acting antivirals (DAAs) from different drug classes. The treatments would potentially reduce the duration of treatment from one year to six months or less, increase the sustained virologic response rates and improve drug tolerability. It would also be extremely convenient as patients would be able to take all the drugs orally. I believe this is significant as the side effects associated with the combination of Interferon and Ribaravin during treatment disqualify many Hepatitis C-infected candidates from undergoing the treatment. Therefore, a breakthrough in this area would be a huge stride for Idenix and has the potential to affect its share price positively. Idenix Pharmaceuticals has also co-developed a Hepatitis B drug candidate, telbivudine, with Norvatis Pharma AG (NVS). The product is commercially sold as Tyzeka®, and Idenix Pharmaceuticals earns royalties from the product sales.

Idenix Pharmaceuticals stock began trading on July 2004 with an initial public offering of 5.8 million shares at $14 per share. On 23 April, 2012 Idenix Pharmaceuticals gained 6.5% to even out at slightly below $9. Earlier in March 2012 the share price had traded at an average of $12. Idenix Pharmaceuticals released its fourth quarter and financial results for the year ending Dec. 31, 2011 in February. Its total revenue was $7 million compared to 10.2 million in the year ending Dec. 31, 2010. The company recorded a net loss of $52 million on Dec. 31, 2011 as compared to $61.6 million on Dec. 31, 2010. The share price seems to fluctuate a lot so if you’re looking to trade in stock it is probably advisable to consider day-trading or swing-trading as compared to making a long-term investment.

Another competitor, Gilead Sciences (GILD) made astronomical progress in April 2012, when a mid-stage clinical trial revealed that a combination of the GS-7977 drug and the antiviral Ribaravin cleared the virus in approximately 88% of the patients. The GS-7977 drug was administered together with Ribaravin, completely eliminating the need for the injectable interferon. Gilead Sciences is the world’s largest HIV drug maker, so this news comes as no surprise.

Gilead’s shares have evened out at an average of $51 after they jumped from about $47 to an average of $53. These developments have clearly placed Gilead Sciences ahead of the pack, and I would not hesitate to recommend trading its shares.

Vertex Pharmaceuticals (VRTX) is also in the process of carrying out a study to evaluate the effectiveness of a Hepatitis C treatment on patients who are not on antiretroviral therapy for HIV versus those who are on a Atripla- or Reyataz-based treatment for HIV. Vertex Pharmaceuticals is carrying out the study in collaboration with Janssen, one of Johnson & Johnson (JNJ)'s pharmaceutical companies. The study is intended to evaluate the safety and tolerability of the Incivek drug combination therapy in patients infected with both the Hepatitis C virus and HIV. The drug is marketed in the U.S. and Canada and is also available in the Far East and Japan.

Vertex Pharmaceuticals stock is trading at an average of $37. January 2012 was a terrible month for Vertex with their share price dipping to $34 after an analyst at Leerink Swann reduced the sales forecast for Incivek from $2.3 billion to $1.5 billion this year, citing recent developments of interferon-free regimens and the possibility of more aggressive developments. There is a great need for Hepatitis C treatment and more so amongst those infected with HIV. If Vertex Pharmaceuticals manages to develop a drug that can be safely used to treat those co-infected with Hepatitis C and HIV then it is safe to say that it will be worth your while to invest in Vertex Pharmaceuticals.

Victrelis, a product of Merck & Co. (MRK), was approved for the U.S. market by the Food and Drug Administration just last year for the treatment of Hepatitis C. It is surprising therefore when I learned from my research that the drug’s effectiveness is lowered when used in combination with some antiretroviral therapy drugs. It’s not all bad news though. Merck recently agreed to pay Endocyte (ECYT) up to $1 billion to develop and commercially market Vintafolide, an experimental cancer drug. Merck will own all the global rights meaning that a surge in sales will push its share price upwards. Merck is currently trading at an average of $28 and its future outlook does not look very promising at the moment.

Abbot Laboratories (ABT)'s main line of business is in the discovery, development, manufacture and sale of a wide range of health care products. Abbot Laboratories released data earlier in April 2012 from a mid-stage clinical trial that indicated combining ABT-450 boosted by an antiviral, Ritonavir, along with Ribaravin and a polymerase inhibitor achieved a 95% cure rate. Deutsche Bank consequently boosted Abbot Laboratories rating to “Buy” in March 2012 with a price target of $70. The share price is currently trading at slightly under $60. I’d say this is pretty close to what analysts at Deutsche Bank projected. Abbot Laboratories is in the process of separating into two healthcare companies by the end of the year, so it is advisable to carry out day trading and keep a close eye on the share price.