Biotech Values

[DewDiligence]

Wedbush 1/19/10 IDIX Report by Katherine Xu
(emphasis added by me):

›Running on All Cylinders in 2010; Reiterate OUTPERFORM

Price Target: $5

• On lead Nuke candidate IDX184: encouraging 14-day viral kinetic data. Idenix reported interim 14-day viral kinetic data from the Phase IIa study of IDX184+P/R. At 14 days the viral load drop was 3.66 logs for IDX184 (50 mg QD)+P/R vs. 1.70 logs for placebo+P/R. Safety was satisfactory and reduction in ALT and AST levels was observed, consistent with observations from the previous 3-day monotherapy study. We note that this data compares favorably with the 2.7 log drop demonstrated by R7128 (1500 mg BID), Pharmasset’s lead Nuke candidate, at 14 days. The Phase IIa study is continuing with sequential escalating IDX184 doses (100 mg QD&BID, 150 mg QD, 200 mg QD&BID) and we expect further data at ESAL [sic—this means EASL, of course] and AASLD.

• On Non-Nuke IDX375. A Phase I SAD study is ongoing in healthy volunteers (25 mg QD, 50 mg QD, 100 mg QD, 200 mg QD&BID); the most common adverse event was mild diarrhea (3/30 subjects) potentially due to the excipient. Half life is determined to be 32-40 hours, supporting QD or BID dosing. Based on PK studies, management believes that doses at 500-600mg BID or 800 mg QD would be potentially optimal, resulting in plasma concentrations above EC90 for both genotype 1a and 1b polymerases.

• On PI IDX320: IND filed in December 2009. IDX320 has an EC50 of 0.5 nM in the genotype 1b replicon, the most potent reported for a PI, to our knowledge. The candidate is also active against genotypes 1, 2, 3 and 4, broader than most other PIs in the clinic.

• On IDX899 in HIV: moving into combination trials in 2010. Recall that Idenix licensed ww rights of its NNRTI IDX899 to GSK in Feb 2009. We expect GSK to initiate multiple Phase IIb studies during 2010, and milestone payments of $15-$30 million to Idenix [see #msg-45620605 for my estimates of the milestone payments due from GSK].

• Our relative OUTPERFORM thesis was based on our belief that there is a high probability for an IDX184 partnership to happen, and the 14-day viral kinetic data increases our confidence. Judged from its 3-day viral kinetic data released in July 2009, IDX184 appeared to be less potent than Pharmasset’s lead Nuke candidate R7128. However, the newly released 14-day data for the lowest dose (50 mg QD) appears to be better than R7128 (1500 mg BID) as discussed above. While this is preliminary, such data together with a clean safety profile demonstrated so far increases competitiveness of IDX184 as a partnering candidate, in our opinion.

• Reiterate OUTPERFORM ahead of potential key catalysts in 2010. (1) potential partnership deal signing on IDX184; (2) cash infusion from GSK on IDX899 Phase IIb initiations to improve financial conditions (current cash runway till Q4:10); (3) multiple classes of STAT-C candidates in development providing upside in innovative combination strategies and further partnering opportunities. We note that Idenix has a Nuke, a Non- Nuke and a PI in the clinic, as well as an NS5a inhibitor to enter the clinic in 2011, representing the broadest STAT-C pipeline in the industry.

Company Description

• The key risk to our relative OUTPERFORM thesis and attainment of our price target is the company not being able to establish any partnership for IDX184. The key clinical development risk is emergence of significant safety concerns from the 14-day Phase IIa study. There is financing risk as well, as the company has a cash runway only through Q4:10. Without a partnership, it would be difficult for the company to come up with the finances to support further development of IDX184 or other pipeline candidates.

Summary of Data on IDX184

IDX184 is a second generation Nuke molecule (nucleotide NS5b polymerase inhibitor) approximately at the same stage of development as Pharmasset’s second Nuke candidate PSI-7851; we estimate both are roughly 1-1.5 years behind the lead Nuke molecule R7128 of Pharmasset and Roche. IDX184 is a novel liver-targeted prodrug of 2'-methyl guanosine monophosphate (2’- methyl GMP). Like other Nuke molecules, IDX-184 has pan-genotypic activity against genotypes 1-4 in vitro, and its PK profile supports QD dosing. In addition, over 95% of IDX184 is extracted by the liver, greatly limiting its systemic exposure, which may improve its safety profile. Further, a synergistic relationship has been proposed for IDX184 and ribavirin (R) based on observations in vitro [#msg-39720566, bottom]. The rationale is that as R is known to deplete cellular GTP, leading to a smaller GTP pool for IDX184 to compete for the polymerase, thereby boosting its potency. It remains to be seen whether such liver targeting property and synergistic relationship with R can be translated into better safety and efficacy in the clinical setting.

Phase Ia SAD Study in Healthy Volunteers

In a Phase I study in healthy volunteers evaluating doses ranging from 5 to 100 mg/day, IDX184 was safe and well tolerated; the most common adverse event reported was dizziness and it was more frequently reported in subjects receiving placebo.

Phase Ib 3-day MAD Data in July 2009

The double-blind, placebo-controlled, dose-escalation Phase Ib study was initiated in December 2008 and topline data was released in July 2009. 41 treatment-naive genotype-1 patients were randomized to receive either IDX184 at 25 mg, 50 mg, 75 mg or100 mg, or placebo once daily for three days.

Viral load declines were observed in 30 of the 31 IDX184-treated patients, with no response in one patient in the 25 mg cohort. More significant viral load reductions were observed in the three higher dose cohorts (50, 75 and 100 mg/day), with the highest reduction at 0.74 log. We note that both R7128 and PSI-7851 achieved 1 log drop at 3 days in the monotherapy setting, although it is not clear in this case whether IDX184 has explored the optimal dose. Post-treatment viral load data suggest no evidence of drug accumulation.

IDX184 was well tolerated in this study with no SAEs reported and no discontinuations from the study. Patterns of AEs were similar between IDX184- and placebo-treated patients.

In the 75 and 100 mg/day cohorts, patients receiving IDX184 experienced improvements in two key markers of liver injury, with mean AST and ALT levels decreasing to below the upper limit of normal. These improvements were sustained for up to 6 days post-dosing, and most levels returned to baseline 14 days post-treatment. We note that such ALT normalization was seen with R7128 as well in its 28-day study.

14-Day Phase IIa Study Initiated November 09; Partnership Talks Ongoing

The Phase II study is a 14-day, sequential cohort, dose escalating study in combination with P/R, and followed by 14 days of P/R. Four dosing cohorts of IDX184 are being evaluated: 50 mg QD, 100 mg QD & BID, 150 mg, and 200 mg QD & BID. Each cohort includes 20 patients randomized 4:1 (IDX184:placebo). The study is being conducted at multiple centers in the US and Argentina.

The company reported the 14-day viral kinetic data in January 2010 for the lowest 50 mg QD cohort. At 14 days the viral load drop was 3.66 logs for IDX184 (50 mg QD)+P/R vs. 1.70 logs for placebo+P/R. Safety was satisfactory and reduction in ALT and AST levels was observed, consistent with the previous 3-day monotherapy study. The Phase IIa study is continuing with sequential escalating IDX184 doses (100 mg QD&BID, 150 mg QD, 200 mg QD&BID), and we expect more interim data at ESAL and full data at AASLD. We note that this data compares favorably with the 2.7 log drop demonstrated by R7128 (1500 mg BID), Pharmasset’s lead Nuke candidate, at 14 days;

We note that so far the company only generated toxicology data from 2-week studies in 2 species to support a 14-day clinical study. The company initiated 3-month toxicology studies concurrently with the Phase IIa study.

IDX375, a Non-Nuke Program in Phase Ia

IDX375 is a Non-Nuke compound targeting the palm site of the HCV NS5b polymerase. IDX375 demonstrated an EC50 of 2.3 nM against genotype 1b polymerase in replicon assays and 7nM against genotype 1a polymerase. Additionally, cellular cytotoxicity testing in Huh-7 cells demonstrated that IDX375 is not cytotoxic (CC50 >100 µM), representing a selectivity index >33,000 for IDX375. PK studies suggest potential QD or BID dosing for IDX375. Idenix filed IND for IDX375 during Q3:09 and initiated and Phase I SAD study in healthy volunteers with doses ranging from 25 mg QD, 50 mg QD, 100 mg QD, 200 mg QD to 100 mg BID.

The company expects that 500-600 mg BID or 800 mg QD would be sufficient for the drug concentration to be consistently above EC90.

IDX320, a Protease Inhibitor for Which IND was Filed During Q4:09

IDX320 demonstrated lowest potency against HCV genotype 1b proteases (EC50 of 0.5nM) in replicon assays among all the PIs, to our knowledge. The compound has a half life of 8-10 hours, and 100% oral bioavailability. Additionally, IDX320 appears to have broader genotypic coverage than most other PIs as well: 1a, 1b, 2a, 4a (IC50 0.8 to 1.9nM) and 3a (IC50 23 nM).

An IND was filed for IDX320 in December 2009, and the company intends to study doses at 50-400 mg QD.‹