Seth Klarman’s Baupost Group filed a 13D on Friday afternoon revealing a 27.55% stake in Idenix Pharmaceuticals Inc (NASDAQ:IDIX). The value oriented hedge fund now owns 36,910,868 shares of the company compared to $19.98 stake according to the firm’s 13F for the second quarter.

seth Klarman Baupost Group

The hedge fund is now the largest shareholder of the company, followed by Novartis with a 25% stake. According to the 13D nearly half the shares were acquired on Friday at a cost basis of of $3.98. Shares of the company soared over 40% on Friday, closing at $4.61.

Baupost Group’s timely bet

Baupost Group has bemoaned the lack of opportunity in equities and has been finding more investments in debt. However, at least in this case, Baupost made a timely good equity investment. Shares of IDIX have been on a rollercoaster ride, reaching as high as $5.70 a share before falling as low as $3.29 on October 31st. Baupost appears to have made a timely buy as pessimism grew over the company’s hepatitis drug. These concerns were somewhat alleviated when the company  announced clinical testing in Canada and Belgium on the Friday conference call.

Idenix’s “Nuke”(Nucleotide analogue inhibitors) called 437, designed to block a different enzyme the virus needs to copy itself could enter Phase 2b in the US sometime in 2015 according to Alethia Young and Robyn Karnauskas, Research analysts at Deutsche bank. However, Ying Huang, Ph.D. of Barclays remains more skeptical stating “it is uncertain at this point whether IDX21437 has a viable development path in the U.S.”


On the conference call, CEO had the following to say about the drug

We’re happy to tell you today that a novel, next-generation uridine nucleotide prodrug inhibitor, IDX21437, has received approval to enter clinical trials in both Canada and Belgium. Based on its promising early profile, IDX21437 was selected as one of our lead drug candidates resulting from our comprehensive nucleotide discover effort that we’ve been discussing over the past two years.

Extensive preclinical testing demonstrated a clean safety profile, including no cardiac or genotoxicity signals. This, along with favorable antiviral activity across genotypes 1 through 6, supported the advancement of this compound into the clinic.

We have initiated enrollment for the healthy volunteer portion of a Phase I/II study, which will evaluate the safety and pharmacokinetics of single doses of IDX21437, and we anticipate dosing to begin next week. In parallel, sequential single doses of IDX21437 will be administered to HCV-infected patients.

The single dose safety, PK, and anti-viral activity will confirm the selected doses for the seven-day proof of concept portion of the study, which will evaluate patients infected with genotypes 1 through 6 and cirrhotic HCV genotype 1-infected patients.

For IDX20963, an additional uridine nucleotide prodrug candidate, we are conducting further preclinical work in response to the FDA’s request related to the positive in vitro Ames test result observed in our IND-enabling studies, prior to the initiation of clinical trials.

A key objective for our development teams has been to commence a clinical trial for our nucleotide prodrug program this year. With the rapidly evolving HCV treatment landscape, we know the bar for safety is high, and, based on the differentiated and competitive profile we’ve seen in our preclinical research, we believe IDX21437 has strong potential to be a key component of a fixed-dose, all-oral, pan-genotypic regimen, specifically in combination with samatsvir, our NS5A inhibitor.