Seth Klarman
Baupost Group has boosted its stake in Idenix Pharmaceuticals, Inc. (NASDAQ:IDIX), according to a recent filing with the SEC. Seth Klarman’s value oriented hedge fund now owns 24,740,200 shares of the biotech company, or 18.48% of outstanding shares. As we reported in November 2012, Baupost Group bought 12.34% of Idenix Pharmaceuticals.  Baupost Group, which will be releasing its fourth quarter 13F in a few days, recently released its 2012 letter to shareholders. The hedge fund closed its position in Hewlett-Packard Company (NYSE:HPQ).

Baupost Group is the largest shareholder after Novartis AG (NYSE:NVS), which holds a 25% stake in Idenix Pharmaceuticals, Inc. (NASDAQ:IDIX). Recently, IDIX announced that it has discontinued both IDX184 and IDX368 development programs in HCV following a recent update from the FDA that both programs remain on clinical hold.

Many analysts believe that this announcement is not a big surprise to the Street given recent management comments that emphasize the new nucleotides (nucs) in development. Given IDX184’s relative weak potency, some believe the real loss is the discontinuation of IDX368 since this could have provided an option for a nuc-nuc combination with IDIX’s uridine analog or other leading nucs in development (both GILD’s [OP] sofosbuvir and VRTX’s [OP] VX-135 are also uridine-based).

Nevertheless, some investors believe the nucleotides remain a class of scarcity and the potential for nuc-nuc
combination with IDIX’s agents in early development remains attractive. IDIX’s recent collaboration with JNJ (OP) allows IDX719 (NS5A inhibitor) to move forward and may enable an internal all oral regimen with IDIX’s own nucs.

Both IDX184 and IDX368 as well as BMS-094 (BMY [MP]) are 2’-methyl guanosine nucleotide prodrugs. Although details of its discussion with the FDA were not disclosed, IDIX indicated that since the cause for cardiac toxicity is unknown and no direct mechanism could be linked to the guanidine analog, it is challenging for the programs to move forward, particularly when there are no easily identifiable biomarkers (ECHO measurement is not sufficient).

IDIX commented that the prodrug technology is not the same for uridine analog vs. guanidine analogs, and a series of cardiac tests are planned for both the pre-clinical and clinical settings. IDIX has received some feedback from the FDA, and an IND filing is anticipated in 1H:13 as planned. The company has other nucs in development including one that could be combined with the uridine analog, which is expected to advance to clinic in early 2014.

The company recently formed a non-exclusive partnership with JNJ to develop an all oral IFN-free combination regimen with IDX719/simeprevir (protease inhibitor)/ribavirin as well as IDX719/simeprevir/TMC’055 (non-nuc inhibitor) with or without ribavirin. The drug-drug interaction studies are on track to initiate in 1Q:13 and trials are expected to initiate in 1H:13.

For the nine months ended 30 September 2012, Idenix Pharmaceuticals, Inc. revenues increased from $7.7M to $69.3M. Net loss decreased 71% to $9.7M. Revenues reflect License Fees increase from $2.4M to $22.9M, Reimbursement of royalties increase from $0K to $7.4M. Basic Earnings per Share excluding Extraordinary Items increased from -$0.39 to -$0.09.