|New Threads Only:|
|New Threads & Replies:|
Forum List » Value Ideas and Strategies|
Share and discuss value investing ideas and investing strategies.
Idenix: Strong Pipeline Will Reward Investors
Posted by: Vatalyst.com (IP Logged)
Date: April 24, 2012 04:58PM
Idenix Pharmaceuticals (IDIX) is focused on developing treatment for viral infections and other infectious diseases. Its primary products focus on the treatment or prevention of hepatitis B, hepatitis C, and HIV. Treatments for HIV and hepatitis B have previously been marketed, and the main research of Idenix is currently on hepatitis C. The company is best known for its role in the development of telbivudine, a drug it discover and co-developed with Novartis AG (NVS), which is now marketed under the names Tyzeka and Sebivo.
The thing I like best about Idenix is its approach to developing new drugs. It has a healthy pipeline with a forward-looking approach. There are five drugs in its pipeline focused on treating hepatitis C. Two are in phase two trials and three are in preclinical stages. Though investors should be wary of making decisions based on preclinical stage drugs, it always makes me more comfortable when a company understands the importance of a backup plan. In addition to the hepatitis C pipeline, the company also has an HIV drug in late phase two trials.
The agreement with Novartis, which markets telbivudine, allows Indenix to collect royalty payments form the sale of the drug. This is another of my favorite things about Idenix, or any other company that has managed to create an alliance such as this. Earning passive income from an already marketed drug, especially one in which you are responsible for investing very little time and money, is a great way to stay solvent. Should a drug in the pipeline be a bust, your entire company is not going to go up in flames because there is something in the background sustaining keeping things afloat.
This is not to say there are no risks associated with investing in Idenix. As any biotech investor knows the market is volatile and few can expect to invest in lower priced biotech companies and enjoy nothing but a smooth ride. So much of the industry is based on government approval and medical trials, both of which can be relatively unpredictable. Idenix is currently priced at around $8, giving it plenty of room to grow.
There are plenty of other options in the industry, one of which is equally focused on hepatitis C treatment. Vertex (VRTX), one of Idenix’s main competitors, is priced higher around $36, but has a strong pipeline and two already marketed products. Kalydeco is a drug used in the treatment of cystic fibrosis. Like most drugs intended to treat, but not cure, chronic disease, it is an ongoing money-maker. Vertex also has a marketed hepatitis C drug, Incivek. It is intended to treat the disease in those who are suffering from liver problems. Vertex also has an extremely strong pipeline with three additional drugs focused on hepatitis C, two more on cystic fibrosis, one on epilepsy, one on influenza, and one on immune-mediated inflammatory disease. In addition to the defined pipeline, the company is also conducting a number of preclinical trial programs for cancer, multiple sclerosis, tuberculosis, and Huntington’s Disease.
A recent announcement from Abbott Laboratories (ABT) on its positive Phase II study results from two different interferon-free hepatitis C treatments were better than expected and the report spooked investors. Gilead Sciences (GILD), usually considered one of the hepatitis C giants stumbled, and other companies in the hepatitis C market followed suit. Unfortunately, it was Idenix that saw the biggest dip.
My advice? If you are interested in investing in a company focused on hepatitis C treatment, focus on some of the higher valued stocks. You will make a higher investment to begin with, but I believe you stand to make a steadier long-term profit. I have not completely written off Idenix, though. Sometimes you just do not have the money to go for the big guns and I think for a small investment in the hepatitis C game, Idenix is still a good choice. I also believe Idenix is a strong competitor in its price range.
I want to take a look at two other options in this range to show why Idenix is still a good bet. Dendreon (DNDN) is selling for around $9 and there is massive growth predicted. This was not the case a few weeks ago when its primary drug, Provenge, struggled. The drug is used to boost the body’s immune system in an effort to fight tumors. The treatment is considered to be a better alternative to chemotherapy, avoiding the cell damage chemotherapy does to healthy cells. In addition to causing collateral damage like anemia, chemotherapy can also be carcinogenic, reducing the size of a primary tumor, but promoting cell mutation in otherwise healthy parts of the body.
Medical experts hope Provenge will alleviate all of these problems by using the body’s immune system to fight tumors. Provenge has been shown in studies to prolong life. While not the cure for cancer, it is a better treatment option for many than traditional chemotherapy options. In addition to Provenge, Dendreon has another drug in the pipeline, also targeting various forms of cancer including ovarian, breast, and colorectal forms of the disease. Dendreon is an investment with strong potential, but I would still err on the side of Idenix, mostly because Provenge sales are still unpredictable.
Another option is Human Genome Sciences (HGSI). Its price is currently hovering around $7, but most believe it is one of the higher risks investments, not only in this price range, but in the entire biotech industry. Some experts believe the risk is worth it, but I am of the belief that it is still too soon to tell. I believe it could be a good long-term investment, but my hopes are pretty low in regard to making any kind of quick profit.
The company has several drugs in the pipeline, but its main drug is Benlysta, an already marketed treatment for lupus. It was the first lupus treatment approved by the FDA in more than five decades. Benlysta will continue to be a steady earner, but I do not believe one steadily successful drug is enough to take any kind of big risk.
If your goal is to find a steady earner, but one with potential to explode, I think Idenix is your best bet in this price range. There is a lot in the future for the company and if one opportunity misses, there are several in wait right behind it.
Stocks Discussed: IDIX, NVS, ABT, GILD, DNDN, HGSI, VRTX,
Disclaimers: GuruFocus.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on GuruFocus.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The gurus may buy and sell securities before and after any particular article and report and information herein is published, with respect to the securities discussed in any article and report posted herein. In no event shall GuruFocus.com be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on GuruFocus.com, or relating to the use of, or inability to use, GuruFocus.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. The gurus listed in this website are not affiliated with GuruFocus.com, LLC. Stock quotes provided by InterActive Data. Fundamental company data provided by Morningstar, updated daily.