Replies to post #99317 on Biotech Values

[DewDiligence]

Do you see IDIX being acquired…in the next 5 years assuming their pipeline of HCV drugs continue to demonstrate significant efficacy?

First, I have a nitpick with your question. In the HCV arena, efficacy per se is not generally the reason a drug fails in clinical development. Rather, HCV drugs fail because of problems relating to safety/tolerability or viral resistance. That IDX184 and IDX320—IDIX’s two most important HCV drugs—have strong antiviral efficacy is already established, for all practical purposes. Whether they are safe, tolerable, and have acceptable resistance profiles remains to be proven.

To your main question on whether IDIX will be acquired in the next five years, my answer would be almost certainly if not for the complicating factor of NVS’ equity stake, which is now approximately 40% (#msg-51136305).

It’s unusual for a biotech company to have such a large minority shareholder, which makes it trickier to consummate a buyout than in cases where there’s either a majority shareholder or no large shareholder. I.e., NVS owns enough shares to make it difficult for a third party to acquire IDIX without NVS’ blessing, but NVS does not own enough shares to push through a deal of its own by brute force (as NVS plans to do with Alcon).

An additional complication is NVS’ right of first negotiation on every new compound in IDIX’s pipeline. Unless NVS were willing to waive this right in return for suitable compensation, other companies would presumably be reluctant to take on this encumbrance to pipeline development.

Notwithstanding all of the above, I think a buyout of IDIX in the next few years is quite likely. With the demise of HGSI’s Albuferon, NVS appears to have pulled back from the HCV arena. Where NVS once considered its IDIX stake a strategic investment, NVS now considers IDIX merely a monetary investment, and NVS has other things it could do with the money. I think NVS would acquiesce to an IDIX buyout by a third party as long as NVS received what it considers fair compensation for the first negotiation right on IDIX’s pipeline.

JMHO, FWIW

[DewDiligence]

IDIX—It doesn't seem to me that the IDX899 compound is considered and or appreciated by those covering IDIX when it comes to valuation.

I agree and I think there’s an explanation: Until recently, most investors thought GILD owned the HIV market lock, stock, and barrel. A corollary: these investors thought no company had a chance to gain any traction in HIV unless it was working directly with GILD. IDIX’s partner, GSK, was considered a hopeless also-ran in HIV.

These views appear to finally be softening to some degree. Most investors still think non-GILD HIV programs face long odds, but there’s a growing recognition, IMO, that other companies have a shot if they play their cards right. GSK’s program for the integrase inhibitor, ‘572, is case in point (#msg-52482079).