Is This Hepatitis-C Company a Bargain or a Bust?

Shares of Idenix Pharmaceuticals (NAS: IDIX) hit a 52-week low on Tuesday. Let's take a look at how it got there and see if cloudy skies are still in the forecast.

How it got here
The year actually began with a lot of promise for Idenix. The stock doubled in short-order following a wave of consolidation that saw Bristol-Myers Squibb (NYS: BMY) purchase Inhibitex for $2.5 billion and Gilead Sciences (NAS: GILD) nab Pharmasset for $11 billion. A suitor, however, never came for Idenix, and the company quickly backed off its highs.

The real trouble for Idenix began in August, and it has Bristol-Myers to blame. Bristol's lead hepatitis-C candidate, BMS-986094, acquired with its purchase of Inhibitex, was directly linked in a cardiac event that resulted in a patient's death and discontinued the study altogether. The Food and Drug Administration took notice of Bristol-Myers' nucleotide-based mishap and, within weeks, also placed clinical holds on two other nucleotide-based hepatitis-C drugs, both from Idenix's pipeline. The two drugs -- IDX184, which is in mid-stage trials, and IDX19368, which was about to begin early stage trials -- are both on clinical hold by the FDA while it researches the safety profile of each drug hopeful. In IDX184's defense, it is just a partial clinical hold.

This is bad news for a company that's already behind the ball on many aspects. The clinical hold is a boon to Vertex Pharmaceuticals (NAS: VRTX) , whose interferon-based Incivek is likely to remain the dominant therapy of choice for at least the immediate future. It's also a boost to Gilead Sciences, which has had incredible success with GS7977 that it acquired with its purchase of Pharmasset. Currently in late-stage trials, it looks like a lock (at least to me, personally) for FDA approval assuming it passes safety protocol. Achillion Pharmaceuticals (NAS: ACHN) is another beneficiary of Idenix's woes, as its pipeline is non-nucleotide-based and thus not under the added scrutiny of the FDA.

How it stacks up
Let's take a look at how Idenix stacks up next to its peers.

IDIX Chart
IDIX Chart

IDIX data by YCharts.

Although each hepatitis-C company is higher over the past five years, nearly every move higher has been met with heavy selling just a few months later.

Under normal circumstances, this is where I'd compare Idenix versus its peers from a financial perspective, but as a clinical-stage company, that would be rather pointless. Instead, let's take a look at how Idenix's clinical results stack up next to its peers.

IDX184 demonstrated 100% efficacy after 12 weeks in eliminating the virus in a grouping of five patients in mid-stage trials with high dosing, and 80% efficacy in a slightly lower dose with similar side effects to existing treatments. Gilead's GS7977 when combined with Bristol-Myers' daclatasvir showed even more promise, though, with 100% efficacy with its phase 3 results. Achillion's ACH-1625 also demonstrated a statistically strong 94%-100% complete early virologic response in mid-stage trials for genotype-1 hepatitis C.

What's next
Now for the $64,000 question: What's next for Idenix Pharmaceuticals? That question depends on how quickly the company can get its two drugs off clinical hold with the FDA, whether it can provide enough statistical evidence to show IDX184 or any of its other drug hopefuls are more effective than Gilead's drugs, and whether it can penetrate an already crowded market.

Our very own CAPS community gives the company a two-star rating (out of five), with 85.8% of members expecting it outperform. I've had an underperform CAPScall on Idenix for many months and currently find myself up a whopping 52 points on that selection, with no intention of closing it out.

Until Idenix has the clinical hold removed from IDX184, I consider it a sitting duck. Every day that passes Idenix is falling further behind GS7977 and Achillion, as well as countless other hepatitis-C hopefuls that are in the works. Not to mention that interferon-based treatments, like those offered by Vertex and Merck, aren't going to go by the wayside immediately. Idenix's slice of the hepatitis-C market is shrinking quickly and there's little to me that differentiates IDX184 as any better than its peers. For now we watch and wait for the clinical hold to be removed and if you're an Idenix shareholder, you hope that your company isn't too far behind the field already.

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Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.Motley Fool newsletter services have recommended buying shares of Gilead Sciences and Vertex Pharmaceuticals. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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