Idenix Falls Casualty to Gilead Hep C Hoopla

CAMBRIDGE, Calif. (TheStreet) -- Idenix Pharmaceuticals(IDIX) shares fell Friday on worries that its lead hepatitis C drug can't compete against a rival drug from Gilead Sciences(GILD).

U.S. regulators actually delivered good news to Idenix Friday: Lifting a clinical hold placed on IDX-184 which will allow the company to push the hepatitis C drug ahead into further studies.

Yet Idenix shares are off 10% to $11.91 because IDX-184's future is cloudier in light of Gilead's announcement last night of new data showing 100% of genotype 1 hepatitis C patients treated with the experimental pill GS-7977 plus ribavirin had no evidence of the virus after four weeks of treatment.

These new Gilead data further bolstered the most optimistic view that a simple two-pill combination of GS-7977 and ribavirin will be strong enough to cure hepatitis in a majority of infected patients in the U.S. and Europe.

And if Gilead can be first to grab the majority of future treatments for hepatitis C patients starting in 2014, that doesn't leave much left for Idenix and IDX184.

"If GS7977 plus ribavirin is all you need, then IDX-184 is in trouble because it's already seen as a weaker drug. It's more likely that to be effective, IDX184 will need to be combined with two other drugs," said one hedge fund manager who owns Gilead but doesn't own Idenix and is not short the stock.

Idenix has not yet started hepatitis C studies that combine IDX184 with other oral drugs although the company said Friday that these studies would start soon now that FDA has lifted its clinical hold. Still Idenix's efforts are lagging Gilead as well as other competitors like Bristol-Myers Squibb(BMY) and Abbott(ABT).

Even with Friday's sell off, Idenix shares are up about 60% since the beginning of the year on takeout speculation and the investor frenzy around hepatitis C drug development. With Pharmasset acquired for $11 billion by Gilead and Bristol buying Inhibitex(INHX) for $2.5 billion, it's not inconceivable that another drug maker desperate to stay relevant in the lucrative hepatitis C drug race decides to roll the dice and buy Idenix.

"I'm not a fan of IDX184 but I'm also not brave enough to short Idenix," said another hedge fund manager.