By all indications, it looks as if Idenix Pharmaceuticals Inc. has caught the eye of its new neighbor, Novartis Pharma AG, which is taking a controlling interest in Idenix and its viral drug programs through a deal that could be worth up to at least $862 million.
A trio of late-stage hepatitis drug candidates developed by Cambridge, Mass.-based Idenix appears to be of prime interest to Novartis, which recently moved its research facilities to Cambridge. In exchange for $255 million, Novartis is acquiring 51 percent of privately held Idenix's stock on a fully diluted basis. Upon consummation of the deal, Novartis also will provide $75 million in an up-front payment for licensing rights to Idenix's hepatitis B drug candidates - a portfolio that includes telbivudine (LdT), which entered Phase III trials in January, and valtorcitabine (val-LdC), currently in Phase Ib/IIa trials.
Novartis, which will assume global clinical development costs of the initially licensed hepatitis B drug candidates, will be responsible for regulatory filings outside the U.S. Idenix will be responsible for filings within the U.S.
"Today we are able to deliver a $500 million value, so I think we are returning to our shareholders for the trust they have put in our company over the last five years," Idenix Chairman and CEO Jean-Pierre Sommadossi told BioWorld Today. "Since every round, including this latest transaction, we have been able to deliver a three-times return to every shareholder that has invested in us."
Founded in May 1998 by Sommadossi and others, Idenix's investors include Boston-based MPM Capital; Munich, Germany-based TVM Techno Venture Management; New York-based Credit Suisse First Boston Equity Partners LP; and London-based Nomura International plc. MPM led its $12 million initial institutional investment round in December of that year. To date, Idenix has raised a total of $70 million, with its last round of funding a year and a half ago. (See BioWorld Today, May 8, 2001.)
Down the road, Idenix could receive up to an additional $357 million from the unit of Basel, Switzerland-based Novartis AG, funding contingent upon acceptance of regulatory filing for Idenix's hepatitis C drug candidate, NM283. The additional money assumes a potential valuation for Idenix of about $1.2 billion.
Novartis has an option to jointly develop NM283, which began Phase Ib/IIa trials in January. Should Novartis exercise its option, which must be done before a Phase III program begins, total licensing and milestone payments through acceptance of regulatory filings may equal up to an additional $175 million for Idenix. If it licenses the compound, Novartis would assume all additional global clinical development costs. Further undisclosed payments for the licensed hepatitis B and C drug candidates would be made upon regulatory approvals and achievement of sales milestones.
"This deal provides Idenix access to Novartis' global resources, while providing Novartis with a very rapid entry into the antiviral arena," Sommadossi said. "This is a market that is growing in the double digits on a yearly basis, and it is a major unmet medical need. We are talking about potential blockbusters."
The 1,200-patient telbivudine trial, which includes 120 sites in Asia, Europe and North America, is designed to compare telbivudine with lamivudine, the standard treatment in patients with HbeAg+ and HbeAg- compensated liver disease. Sommadossi said Idenix expects trial results to eventually position it to file a new drug application in the second half of 2005. (See BioWorld Today, Jan. 10, 2003.)
"We feel cautiously optimistic that we will have a major edge on the standard of care," he said. "These are the type of drugs big pharma is looking for, especially those that are global leaders in pharmaceuticals."
Sommadossi said data from a six-month, double-blind, randomized Phase IIb trial of telbivudine demonstrated a 100-fold difference over lamivudine. Studies of the company's valtorcitabine product, currently in dose-escalation trials to evaluate its use as a fixed-dose combination therapy with telbivudine, are expected to end this fall.
The dose-escalation, randomized, multicenter, 60-patient study of NM283 is designed to evaluate safety and short-term antiviral activity of the oral, small-molecule, once-daily treatment in adults with chronic hepatitis C infection and to assess optimal dosing levels for future large-scale trials. Participants include previously untreated patients with genotype 1 HCV infection, which has a low response rate to existing treatments, and patients who have failed prior interferon-based therapy. Data are expected to be released this fall.
Idenix said preclinical studies demonstrated NM283's potent and consistent suppression of genotype 1 human-derived HCV. Sommadossi said Idenix moved the compound into clinical studies just two years after its discovery of the first-in-class drug, due in part to its preclinical safety and antiviral efficacy profiles.
"We have only been interested in developing first- or best-in-class drugs," he said. "We were not interested in going after niche markets, and I think that this type of transaction validates the business strategy we took five years ago."
Novartis also gains rights to all other subsequently developed Idenix drug candidates upon completion of Phase II studies, though the latter may have the opportunity to co-develop unspecified antiviral drug candidates from Novartis. With its HIV program, Idenix continues to evaluate through late-stage preclinical studies a third-generation non-nucleoside reverse transcriptase inhibitor (NNRTI). The company, which said its candidate lacks resistance associated with currently marketed NNRTIs, added that it expects to submit an investigational new drug application next year.
The companies would co-promote the licensed products in the U.S. and each of five major European markets. Idenix said it would build a focused specialty sales force for the co-promotion of its products in the U.S. and Europe. Novartis would commercialize the products in the rest of the world and make payments to Idenix based upon product sales.
Idenix has collaborated with Tokyo-based Sumitomo Pharmaceuticals Co. Ltd., to develop telbivudine for Japanese and Asian markets in a deal valued at $46 million. (See BioWorld Today, June 29, 2001.)
Banc of America Securities LLC acted as Idenix's sole financial adviser, while Hale and Dorr LLP acted as legal counsel. The transaction, subject to antitrust regulatory approval and other conditions, is expected to close during the second quarter. Novartis will gain seats on the Idenix board, which will retain its own management and facilities.
Formerly known as Novirio Pharmaceuticals Ltd., unfavorable market conditions forced the company to withdraw its proposed initial public offering in December. Idenix filed the IPO nearly a year ago, estimating a $115 million offering. A month later, in May, it changed its name, citing the desire to carry a name reflective of its knowledge in the areas of hepatitis B, hepatitis C and HIV. (See BioWorld Today, April 16, 2002.)
"For the field, hopefully, this will change the mood a little bit for the feelings in biotech and on Wall Street in general," Sommadossi said. "I think this still shows that if you have potential blockbusters being developed in biotech, big pharmas are definitely willing to put together some very innovative deals that will lead to a win-win situation where the deal is beneficial to everybody."