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Biotech Stock Mailbag: Idenix vs. Pharmasset?

BOSTON ( TheStreet) -- Hepatitis C patent chatter leads off this week's Biotech Stock Mailbag.

@dsobek tweets, "I've missed the whole $VRUS owing royalties to $IDIX for nucs. Is there a background to this?"

During my Biotech Stock Live Chat Thursday, I mentioned that a less-discussed reason for investor interest in Idenix Pharmaceuticals (IDIX) is the speculation that it might (emphasize, might) be in a position to demand a royalty from Pharmasset (VRUS) based on intellectual property covering drugs known as nucleoside polymerase inhibitors (nucs) to treat hepatitis C.

Pharmasset'S PSI-7977 is an experimental nuc, still in mid-stage testing, that is generating a ton of excitement for its potency against the Hep C virus. The drug is the primary contributor to Pharmasset's $6 billion market value.

Idenix doesn't say much publicly about its patent estate around nucs in general and has not made any public statement specifically about Pharmasset's drugs. But the Wall Street biotech buzz is that if Pharmasset's PSI-7977 is ever approved, Idenix may be able to assert its IP rights to demand and receive a royalty on sales of PSI-7977. You can probably assume that Pharmasset would fight any efforts by Idenix to extract a piece of PSI-7977, which means it may end up the courts. Legal issues around patent rights can be enormously complicated.

That's about all I know for now, which isn't much, admittedly. What I do know for sure is that the Idenix's IP around nucs is a focus of interest and research for biotech investment pros who pay attention to the rapidly changing Hep C drug market.

Marc W. asks, "Do you believe the rumors that GlaxoSmithKline(GSK - Get Report) is going to buy Human Genome Sciences(HGSI)?"

Better than ask what I think, here's what biotech buyside investors believe, courtesy of a recent poll conducted by ISI Group biotech analyst Mark Schoenebaum.

He asked, "Do you think there is a greater than 50% chance someone will buy HGSI in the next 12 months?"

Twenty-four percent of respondents said yes. 76% said no.

During Thursday's Live Chat, I asked the same question to my viewers/readers, who I assume represent a more retail-oriented audience. The response: 68% said yes, 32% said no.

If you don't mind me interjecting my two cents into the debate, I favor the Schoenebaum buy-side position for two reasons: First, rumors like this rarely ever pan out, particularly frequently repeated rumors such as Glaxo buying Human Genome Sciences. Second, Glaxo has little incentive to buy Human Genome until it gains more confidence in the lupus drug Benlysta growing into a blockbuster drug.
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