Why Idenix is a Good Bet for Aggressive Investors

Jordo is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

We hear about life-threatening diseases almost every day. We hear about the serious illnesses caused by hepatitis and HIV viruses. Unfortunately, infections from these blood borne pathogens are one of the world's leading causes of death, which creates a serious global health problem.

Hepatitis, the inflammatory swelling of the liver, may lead to cirrhosis or to cancer. There are three types, each one named for the virus causing it: Hepatitis A, B or C. According to the Centers for Disease Control and Prevention (CDC), the most common chronic infection caused by a blood borne pathogen in the U.S. is hepatitis C, with about 3.2 million individuals infected. Approximately 60% to 70% of them have liver disease.

The hepatitis C virus is often transmitted through exposure to infected blood, during transfusion of blood or through injecting drugs with shared needles, but it may also be transmitted through sexual exposure.

The problem is that many infected individuals do not know about their infection as long as they are not clinically ill, but they can transmit the infection to others. In some cases, the disease develops only decades after infection.

Hepatitis B may vary from a short, mild illness to a long-term disease that may cause liver cancer. Almost 43,000 persons were supposed to be infected in the United States in 2007, but there were fewer reported cases as some people carrying the virus are asymptomatic. The number of total chronic cases is estimated to be somewhere between 800,000 and 1.4 million in the United States. Like hepatitis C, the infection is transmitted through contact with blood, semen, or sharing injection needles.

Still, maybe the most feared infectious disease is acquired immune deficiency syndrome (AIDS), caused by the HIV virus. This really does not need any introduction. According to the CDC there are approximately 1.2 million people in the United States infected with HIV.

The brighter news is that there are companies that are continuously working in order to make headway against the Hepatitis "miasma." Idenix Pharmaceuticals (NASDAQ: IDIX) is one of them.

Apart from its HBV-antiviral product, telbivudine (Tyzeka/Sebivo) -- commercialized by Novartis (NVS) and already available on the market -- Idenix focuses on the treatment of hepatitis C. Clinical trials for the company's protease inhibitor discovery program have been in the pipeline since 2009. The work of its laboratories in the U.S. and in France and its researchers' expertise in nucleoside chemistry may make the company one of the leaders in antiviral pharmaceuticals.

Discovering Hepatitis pathogenesis is an ongoing effort, and as a result drugs like Tyzeka reduce viral load and reinforce reduced T cell counts that are negatively affected and overwhelmed by the virus. Responsiveness is a key issue with antivirals, and the latest data shows that CD4+ T cells could be an improved marker for measuring the drug's responsiveness. With the patent for Tyzeka in physical form granted in 2006 (along with three other patents and also international protection through the ICT), with Novartis as assignee, the company still has approximately 14 years of exclusivity.

The company's competitors however, are also working on antiviral drug candidates. The biggest competitor is Bristol-Myers Squibb (NYSE: BMY) with a robust pipeline and the continued marketing deal with Gilead's Atriple HIV antiviral drug. It has sold off activities unrelated to pharmaceuticals and now holds a significant amount of cash to finance research and acquisitions. Besides, its revenue shows a steady growth. The pharmaceutical giant's chances to outperform the market are in line with those of Idenix.

Another strong candidate is Merck (NYSE: MRK), a producer of a wide range of pharmaceutical products like drugs to treat asthma, cardiovascular disease, various infections, and osteoporosis. It also offers vaccines to prevent hepatitis B, HPV, and pediatric diseases. Merck's Victrelis protease inhibitor targeting HCV is already approved by FDA but sales have been weaker than expected through 2011 in no small part due to competition from Vertex's Incivek (discussed further below). As far as its position in the pharmaceutical industry is concerned, after the acquisition of Schering-Plough, the company improved its chances to be one of the leaders.

Investors who want to buy stocks of antiviral pharmaceutical companies have other opportunities as well. Gilead Sciences (NASDAQ: GILD) is focusing its efforts toward HCV as well. The company has significant experience in antiviral discovery and production, having successfully bundled HIV antivirals through Atripla (which it continues to market with Bristol-Myers) and more recently Complera. Foster City announced that Gilead's experimental drug was successfully tested in combination with the antiviral ribavirin: The treatment cleared the virus in 1 out of 9 patients who had not responded previously. Thus far, the company's revenue growth is higher than industry average as its franchise ensures constant growth of sales and profit.

Vertex Pharmaceuticals (NASDAQ: VRTX) has also had good results in developing antiviral therapies for HCV and other diseases. The company discovered Incivek, a protease inhibitor that is approved by FDA. Its two HIV protease inhibitors are now commercialized by GlaxoSmithKline. Its newest product, Kalydeco, was approved for the treatment of cystic fibrosis. The company achieved extremely high sales growth that slowed recently. The company posted $356.9 million in revenues from Incivek in its fiscal first quarter.

In comparison to its competitors, Idenix is considered to be a small-cap company with a high risk. The company's stock is currently trading around $8 per share with a 52-week range of around $4 to $15. Its revenue equaled $7 million in 2011, 32% less than in 2010, and the annual losses were $0.57 per share.

Thus, the focus is on its pipeline. Recently, Idenix has reported positive results for its two leading drugs in HCV pipeline - IDX719 and IDX184. Idenix President and CEO Ron Renaud stated that the company is very satisfied with the interim results for IDX184 and with the progress made across other programs in 2011. I think the company has all right to be satisfied since the Phase IIb trial of IDX184 confirmed that this drug demonstrated antiviral activity and safety in preclinical and clinical studies. This means that the company is moving forward with the drugs still in pipeline, which is always a good sign.

With a good research team, proven track record and promising drug candidates, I must say Idenix looks promising. However, as its rivals are very strong and have more convincing financial results, I can recommend the stock only to those investors who are able to take more risk with the hope of receiving their reward from the successful product development in the future.


jordobivona has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.

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