Idenix Sees Early Surge Fade

The shares turn lower after rising in the premarket.
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The air quickly went out of



on Tuesday as two analysts downgraded the stock.

Before the market opened, Idenix issued a press release touting the results of a midstage clinical trial for its hepatitis C drug valopicitabine. In premarket trading, the stock climbed as high as $9.25, or about 28% above Monday's closing price.

However, once analysts digested the data and talked to Idenix executives, the mood soured. By late afternoon, the stock was off 46 cents, or 6.4%, to $6.77. Trading volume was more than 30 times greater than the daily average for the past three months.

Both Bear Stearns and Susquehanna Financial lowered their ratings after Idenix management revealed the drug would need another phase II, or midstage, clinical trial before moving to the larger phase III setting.

"We expect timelines to be pushed back by at least one year and a phase III trial

will begin in the second half of 2008," says Jason Kolbert, of Susquehanna, in a report to clients. He doesn't own shares. His firm says it seeks to do business with companies mentioned in research reports.

Kolbert cut his rating to neutral from positive, saying that he had been expecting the results to be enough to advance to phase III. Idenix will be at a disadvantage to competitors,

Vertex Pharmaceuticals

(VRTX) - Get Report




, which are expected to begin phase III testing later this year on their hepatitis C compounds, Kolbert says.

Mark Schoenebaum of Bear Stearns lowered his rating to peer perform from outperform, telling clients that his prediction of a 2009 launch will be delayed by at least six months. He's concerned about the drug's gastrointestinal side effects and wants to see better efficacy data. Schoenebaum doesn't own shares, but his firm has had a noninvestment banking relationship.

Idenix is working on the drug with


(NVS) - Get Report

, which owns 56% of the Cambridge, Mass.-based company.

Some investors initially jumped at the news that valopicitabine met its phase II research goals. The clinical trial compared a combination of the Idenix compound plus two marketed hepatitis C drugs -- pegylated interferon and ribavirin -- to the two other drugs.

Pegylated interferon and ribavirin are the standards of care for hepatitis C, a blood-borne disease linked primarily to needle-sharing among drug users. The disease also can be caused by unprotected sex, transfusions of infected blood or transplants of infected organs. Hepatitis C can lead to liver cancer or necessitate a liver transplant.

Idenix said it met the primary goal of showing no interactions between its drug and ribavirin among patients with a certain type of hepatitis C. Among 39 patients receiving a triple-drug combination, 72.2% achieved a significant reduction in the virus compared with 61.5% among 39 patients receiving the dual-drug standard of care. However, three patients quit the Idenix-group test due to side effects.

The dropouts prompted the Bear Stearns and Susquehanna analysts to remark that the comparison between the Idenix group and the standard-of-care groups is weaker than the official numbers in the clinical trial.