Biotech Values

[DewDiligence]

Idenix Well-Poised Exiting EASL—Increasing Target to $9

[I entered this text manually from Thomas Weisel's 4/23/10 printed report, so there is no link. Please see #msg-49003061, #msg-49096739, #msg-49732533, #msg-49731578, and the IDIX ReadMeFirst for background info.]


›23-Apr-2010
Rating: Overweight
Price target: $9 (raised from $6)
Analyst: Stephen Willey ([e-mail])


What’s New: We are increasing our price target from $6 to $9 following what proved to be a highly productive EASL conference for the company. We believe the incremental dose cohort from the phase-2a trial of IDX184 in combination with SoC quickly resolved any lingering concerns about the drug’s potency, while preliminary PK data from the protease inhibitor, IDX320, has increased excitement around the pipeline.

Feedback from physicians and key opinion leaders appears to be mixed on many current questions in HCV—including the future role of interferon , the impact of IL28b genotyping, and the degree to which certain side effects will be tolerated by patients and physicians. However, our [positive] feedback on nucleoside inhibitors remains near unanimous—the high barrier to resistance and pan-genotypic nature of these drugs will likely ensure their place in future treatment regimens.

IDX184 is one of just two clinically validated, second-generation NI’s [the other one is VRUS’ PSI-7977—see below], and we continue to believe this scarcity value, as well as IDIX’s wholly-owned access to assets from each antiviral class—including NS5A inhibitors—is not appropriately reflected in the current valuation. [This report was penned when the share price was $4.54, so the above statement on valuation is even more true today than it was when written.]


Incremental IDX184 data impresses: At EASL, IDIX reported two additional cohorts of data from the phase-2a trial of IDx184 dosed in combination with SoC for 14 days. Data from the 50mg BID and 100mg qD cohorts generated viral-load reductions of 4.0 and 4.2 logs, respectively, with 50% of patients (n=8) in each cohort achieving undetectable levels of virus at day 14 vs 0% for placebo [see #msg-49003061, where I grouped these two arms into a single row in the table ].

While the dose-dependent activity id impressive, what’s more encouraging is that these results in patients with baseline characteristics such as race (25-38% black) and BMI (median=29 kg/m2) that would historically characterize these patients as poor responders.

In addition, all doses of IDX184 demonstrated improvements in markers of liver injury (ALT, AST) through day 14 (and were still declining). Safety and tolerability of through day 14 was consistent with what should be expected from the SoC alone. We also believe PK data demonstrating minimal systemic exposure of the IDX184 pro-drug with no apparent time- or doe-dependent accumulation of nucleoside metabolite increase visibility into long-term safety. Data from the remaining 150 mg qD, 200mg qD, and 100mg BID cohorts are expected by midyear.


How does IDX184 measure up? Our only proxy for comparable NI data through day 14 is phase-2 data from Roche/VRUS’s RG7128, which achieved similar potency but with dosing regiments utilizing 20-30x more drug (1000-1500mg BID). The RG7128 14-day data eventually translated into an 88% RVR—a fact that should bode quite well for IDX184. VRUS also recently announced interim 28-day phase-2a data from its second-generation NI (PSI=7977) does with SoC that demonstrated RVR’s of 80%, 100%, and 91% at qD doses of 100mg, 200mg, and 400mg, respectively. [Since the Weisel report was written, VRUS updated these RVR rates to 88%, 94%, and 93%, respectively—see the table in #msg-49886718.]. While these headline response rates are impressive, it is difficult to draw comparisons to the IDX184 data given that [IDX184] was 14-day data and baseline patient characteristics for PSI-7977 have yet to be disclosed.


IDX320 looks differentiated and creates interesting options: IDIX also presented clinical and preclinical data on IDX320 that suggests the company will likely be able to differentiate themselves from a crowded development landscape of protease inhibitors (PI’s) with a once-daily, pan-genotypic candidate. Additional in vitro data suggests strongly synergistic effects can be achieved with IDX320 dosed in combination with IDX184 and either IDX375 or a preclinical NS5A candidate.

As multiple HCV companies continue to pursue combination antiviral trials, we note IDIX has a number of interesting wholly-owned combinations to explore in the clinic and believe the promising data we’ve seen from the INFORM-1 trial, which uses a PI and NI while omitting the Soc, would serve as an interesting template for IDIX or a prospective partner to follow. [Since the Weisel report was written, IDIX announced exactly such a combination trial: #msg-49731578, #msg-49732533.]


Valuation – Increasing price target from $6 to $9: We are not changing any of our forward-year estimates; we are merely lowering the discount rate we apply to our base-year EPS from 50% to 45% as a result of the recent EASL data which has us more comfortable with the safety and efficacy of IDX184 [LOL]. Our 12-month price target of $9 is based on a P/E ratio of 30-35x our FY2015 fully taxed and diluted non-GAAP EPS estimate of $1.51, discounted at 45% per year. [LOL again—this is simply hand-waving to try to make the very reasonable $9 price target seem analytically generated; after all, professional analysts are expected to be analytical.] The stock also continues to trade at more than a 3-fold discount to its closest comparable (VRUS) in the HCV space. [mcbio and I have noted this disparity on several occasions.]


Recommendation: We continue to believe there exists a number of catalysts for the stock through at least 2010, and IDIX remains our favorite name in the HCV space.‹