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Executives

Teri Dahlman - IR

Ronald Renaud - President and Chief Executive Officer

Maria Stahl - Senior Vice President and General Counsel

Analysts

Matt Roden - UBS

Katherine Xu - William Blair

Alethia Young - Deutsche Bank

David Friedman - Morgan Stanley

Rachel McMinn - Bank of America Merrill Lynch

Idenix Pharmaceuticals Inc (IDIX) Idenix Provides Update on Patent Interference March 25, 2013 8:00 AM ET

Good day, ladies and gentlemen, and welcome to the, Idenix Provides Update on Patent Interference Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session and instructions will follow at that time. (Operator Instructions). As a reminder, this conference call may be recorded.

I would now like to introduce your host for today's conference, Teri Dahlman. Please begin.

Teri Dahlman

Thank you. Good morning and welcome to Idenix's conference call to provide an update on the recent decision and the first phase of the interference before the United States Patent Office Patent Trial and Appeal Board, or USPTO. With me today are Ron Renaud, President and Chief Executive Officer, and Maria Stahl, General Counsel.

Before we begin, I’ll review our Safe Harbor statement. Today’s discussion contains statements that are forward-looking under the Private Securities Litigation Reform Act of 1995. Such statements are based on current expectations and assumptions that are subject to risks and uncertainties and involve a number of factors that could cause actual results to differ materially.

Additional information concerning these factors is contained in our filings with the SEC, which are available on the Investor section of our website. While we may elect to update forward-looking statements in the future, we specifically disclaim any obligation to do so, even if our estimates or assumptions change. You should not rely on these forward-looking statements as representing our estimates as of any date subsequent to today.

On today’s call, Ron will provide an update on the recent decision on the first phase of the interference, and then we'll open the call for Q&A.

I’ll now turn the call over to Ron.

Ronald Renaud

Thanks, Teri. On Friday after market, Idenix announced that the USPTO issued a decision in the first phase of our ongoing patent interference. The interference was initiated between one of our patent applications and granted patent owned by Gilead Pharmasset LLC, because they both contained claims covers certain [two prime] 2'-methyl- 2'-fluoro nucleoside compounds useful in the treatment of the hepatitis C virus.

I want to note that the Idenix's patent application involved in the interference proceeding is not relevant to any of the drug candidates that we are currently developing, including IDX719 and our uridine nucleoside analog. I also stress that only one of our patent applications is at issue in its interference. We have a very broad patent portfolio covering 2'-methyl nucleosides, nucleotide generally.

As a reminder, an interference is an administrative proceeding declared by the USPTO to determine to determine who was the first to invent when one party have the patent application that could cover the same invention as another patent application or issue patent.

The interference process is divided into two stages. The first phase determines the patent application filing dates for each party as it relates specifically to the overlapping subject matter. The party with the earliest filing date is considered the senior party, and the party with the later filing date is considered the junior party. The second phase of the interference determines who was first to invent.

The motion's expert testimony and evidence each party can submit to the USPTO differs with each phase as does the burden of proof. This means that during the first phase of the interference, neither parties submitted evidence relevant to the question of who was first to invent. The party who is deemed first to invent ultimately prevails in the interference proceeding. The interference only establishes priority of invention and is not related to the question of infringement.

Initially, the USPTO declared Idenix as the senior party in the interference and Gilead as the junior party. However, as a result of deliberations in the first phase of the interference, the USPTO determined that with respect to the application dates, each party could rely on. Idenix could rely on later patent application filing dates than Gilead, and therefore Idenix is considered to be the junior party and Gilead, the senior party for the second phase of the interference.

The second phase of the interference is expected to begin in the second quarter of 2013, and as noted previously will require each party to provide evidence to the USPTO relevant to first to invent. The burden of proof will be high and we cannot assess if we'll be able to provide this to the USPTO, but we will submit all the information that is required. Following the second phase, the USPTO will determine which party was first to invent and the final decision is appealable following the completion of the process.

We are disappointed with the decision that Idenix is the junior party in the interference, but this first phase decision is not the final determination of priority and we will work to demonstrate that we were the first to invent in the second phase of the interference. As I mentioned, this final decision can be appealed once the interference process is complete.

As you may be aware, we are also involved in several legal disputes outside the U.S. with Gilead, regarding similar patents in the patent family involved in the interference. We do not believe the final decision in the U.S. Patent Interference will have any relevance to these other legal cases. This interference involves only one of Idenix's patent applications. We remain confident in our patent portfolio as we have several other patent families that provide us broad coverage of 2'-methyl nucleoside and nucleotide compounds.

We intend to vigorously defend and protect our intellectual property portfolio, units that means ultimately having to file infringement law suits against third parties. I want to reiterate that the patent application at issue in this interference is not relevant to any of the compounds we currently have under development including 719 and our ongoing uridine nucleotide prodrug, to which we expect to file and IND in the first half of 2013.

Our focus remains on developing a safe potent low-dose pan-genotypic regimen to treat as many HCV infected patients as possible. We will continue to leverage our core medicinal chemistry and specifically our nucleoside chemistry expertise as well as a strong intellectual property portfolio to maintain our presence in HCV for the foreseeable future.

With that, I will now open the call for Q&A. Operator, are there any questions?

Question-and-Answer Session

Operator

(Operator Instructions). Our first question comes from Matt Roden of UBS. Your line is now open.

Matt Roden - UBS

Great. Thanks for taking the questions. Good morning, everybody. First, I would like to understand maybe, Ron, if you can clarify why the USPTO initially assigned Idenix as the senior party and then having gone through the first phase it's reversed its position? Can you help us with what's changed and what's the right to think about that?

Ronald Renaud

Sure. I also have with me on the call, Maria Stahl, who is our General Counsel. I'll let her take that question.

Maria Stahl

So, the reason that we were initially deemed to be the senior party was based upon a 2002 application date, and following it to the [first] phase the specifics frankly of which we really can't get into, the patent board determined that we could not rely on that 2002 date and instead, we could rely on a date that was later than the Gilead application date which they could rely on, and so that was the reason for the reversal.

Ronald Renaud

So, Matt, generally at the outset, when the interference is declared it's basically looking at the two original patents. And on the face of both of those patents they have application and granted dates, so it really goes off of the pace of those dates. And then as Maria pointed out, through the deliberations that deliberation determines which dates you can get the benefit of.

Matt Roden - UBS

Okay. Thanks for that. Then just to understand the process a little bit better, will other claims be relevant to this proceeding. I understand you have other patents, like for example the 600 patent that may be useful in terms of the first to invent around 2-fluoro nucleotide, substitute nucleotide. So, if that priority is not relevant to this proceeding then how or when could they be brought to bear?

Maria Stahl

So, those are not relevant to this proceeding. This proceeding only applies to the specific application at issue. And, at this time, Matt, we really can't discuss how the 600 patent or other patents that we may have in our portfolio could be applied at a future date.

Ronald Renaud

Matt, it's important to bring this up, because I think there's a little bit of confusion. This is one application, right? If you look at the decision, you can see the specifics of the applications that it was forth by Idenix. It was one application that was declared this interference with one Gilead patent. This does not impact our other issued patents and the patents that we could use to assert our intellectual property as we move forward.

Matt Roden - UBS

Okay. Great. Thanks very much.

Operator

Thank you. Our next question comes from Geoff Meacham of JP Morgan. Your line is now open.

Unidentified Analyst

Hi. It's actually Mike in for Geoff. Thanks for taking our question. Just curious if maybe you can comment on precedence in other patent interference cases? Has there been an instance where the junior party in the first phase has kind of deemed the first to invent?

Ronald Renaud

Yes. I don't want to get too much into the specifics, because interference is on their own are pretty esoteric. They don't happen very often, but the answer is yes. There have been situations, where the junior party has prevailed in the second phase. And as I mentioned also, these at the end of the process, you can't appeal the outcome of an interference into the entire process has been fully completed, but in that case as well there have been appeals that have been filed where the decisions in interference has been overturned as well. So, there are a significant number of outcomes here.

Unidentified Analyst

Great. Thanks.

Operator

Thank you. Our next question comes from Katherine Xu of William Blair. Your line is now open.

Katherine Xu - William Blair

Good morning. Can you hear me?

Ronald Renaud

Yes, Katherine.

Katherine Xu - William Blair

So, as a quick question, I am just wondering from this interference, first phase, it looks like lack of enablement was the key reason that they cited for exchanging of the side as reversal. I am just curious is this generalizable to the whole sort of the scheme or a theme of you versus Gilead? You have earlier priority days, you have their broad claims on a structure, but then I guess lack of enablement is a weakness there. So, the decision here from this interference case, does that have any implications in future potential fights between and Gilead?

Maria Stahl

So, Katherine, this is Maria. No. The decision in this inference will not have implications in other litigation that we have ongoing with Gilead potentially litigation, and the reason for that is because different jurisdictions have different legal standards, and so the legal standard that's being applied at the patent office is not necessarily the same legal standard that would be applied in other cases. And again, we have to remember that this is just one application that we have. We have a very broad portfolio that cover generally two times 2'-methyl nucleoside.

Katherine Xu - William Blair

Thanks.

Operator

Thank you. Our next question comes from Ying Huang of Barclays. Your line is now open.

Unidentified Analyst

Hi. This is Christina speaking on behalf of Ying Huang. I have two questions. The first one is if you expect any further interference cases in the pipeline with Gilead, and when can we expect those to read out?

And, the second one is, you mentioned that you already have a broad patent portfolio that's already granted by the USPTO, what gives you confidence that there isn't read through on USPTO decision on validity of those patents?

Maria Stahl

So, on the interference, the interference is a administrative proceeding that's actually instigated by the U.S. Patent Office, so we really have no color as to whether or not other interferences could be declared by the Patent Office, so that is the answer to your first question.

And the answer to your second question, each of our patent applications in our granted patents are different, they have different claims. They have different claim sets, and so I don't think that you can read through the claims in this application to any of the claims that have been previously granted.

Ronald Renaud

You have to remember that this was an application. This was an application that had overlapping claims within existing patent. Our other patents that had been granted have been prosecuted keeping in mind all of the other patents that are out there, so we remain confident in our ability to assert our intellectual property portfolio based on what we have in hand.

Operator

Thank you. Our next question comes from Alethia Young of Deutsche Bank. Your line is now open.

Alethia Young - Deutsche Bank

Great. Thanks for taking my question, guys. Two questions. One, just going back to the background of this patent kind of interference like, you said that this claim had overlapping. Are there other patents in your, I am just trying to understand like how this particular filing was the one that became a focus here when you have so many. Just want to have some on that. And the second question is, based on kind of the additional kind of burden of proof, is there any kind of impact to your cash guidance for the second quarter of 2014?

Ronald Renaud

Yes. So, Alethia, I think on the first question, existing patents. Remember when patents are granted, the patent examiner grants those patents with the other prior art and other granted patents and applications in mind, so just generically speaking when you follow the prosecution of a patent application, you will note that certain claims are relied, certain claims get thrown out and they get for various reasons they are allowed, for various reasons they are thrown out. But either way, all of this comes with all the other intellectual property that's out there in mind generally speaking mistaking that maybe there can be oversights and those things can be rectified down the path, but in the course of prosecuting our intellectual property, prosecuting anybody else in the fields intellectual property, we believe a lot of this has been captured in the prosecution of the patents. We'll have to wait and see if that's ultimately the case, but we do trust the system and trust that the system will take care of it.

I think, with regard to the financial guidance, yes, our financial guidance that have put out that our cash balance will take us through into the second half of next year, assumes the legal strategy that we have been contemplating.

Alethia Young - Deutsche Bank

Great. Thanks.

Operator

Thank you. Our next question comes from David Friedman of Morgan Stanley. Your line is now open.

David Friedman - Morgan Stanley

Thanks for taking the question. I just wondered if you could lay out some of the next step timelines from now until the resolution of the interference case.

Maria Stahl

So, the second phase will begin in Q2, and I don't believe the way the schedule is currently set out now that we'll have a decision until early next year.

David Friedman - Morgan Stanley

Okay. Thank you.

Operator

Thank you. Our next question comes from Tanya Joseph of Bank of America Merrill Lynch. Your line is now open.

Rachel McMinn - Bank of America Merrill Lynch

Yes. It's actually Rachel McMinn for Tanya. I wanted to just get, Ron, here big picture view. You've got obviously like actual fundamental products in development and how we think about legal strategy versus your new going into clinical versus 719 trial getting started. Even I understand they are separate things, but I am just trying to understand from a management time perspective how you prioritize.

Like is the legal strategy in terms of asserting your IP, important enough to the company's long-term value that you feel like it's going to take priority over those other programs? I guess, ongoing references, if you are really set on sticking to your cash guidance and things kind of get more complicated whether you would just continue like maybe this would be something thing that would kind of take over management's team or get de-prioritized and how we should think about that? Thanks.

Ronald Renaud

Yes. Rachel. It's a really good question, but let me be crystal clear. Our charter here as a company is to develop drugs, and to that end we are exclusively focused on bringing forth our nucleotide prodrugs IDX719, making sure Doug and his team run the best trials that we do, the collaborations we need to do to give ourselves the best chance to succeed here. That will always be the driving. No matter what, that's going to be the driving initiative here at Idenix.

The legal side, it is a distraction. There's no two ways of sugar coating it. This is certainly a distraction, but it's one that's very, very manageable. Between Maria and her role as a General Counsel, managing the outside law firms that are handling this, we believe we have the best people focused on this on the outside, we have the right financial resources to make sure we put ourselves also in the best chance to succeed on the legal front as well. So, yes, I think as a management team, we are keeping an eye on this, but I can tell you a significant majority of the time is still focused on developing drugs and the right amount of attention is being given to making sure that the intellectual property and all other legal matters are appropriately resourced.

Rachel McMinn - Bank of America Merrill Lynch

And then just following up to that, can you just give us any updates to timelines on the uridine going into the clinic? Do you have any additional thoughts there? And, 719 combination study, any updated thoughts to that as well.

Ronald Renaud

Yes. Guidance there, Rachel, remains the same for the uridine nuc. Our plan has been all along to file the IND on that before the end of the first half, so that remains on schedule. And then for, IDX719, the drug-drug interaction study is ongoing. I think that's up on claim trials and getting that combination study up and running soon is still on track. So, no change to the clinical development timelines.

Rachel McMinn - Bank of America Merrill Lynch

Thank you.

Ronald Renaud

Yes. I would also add that we have additional IND enabling studies for additional nucleotide prodrugs that are underway as well and those are moving along quite well.

Operator

Thank you. Our next question comes from Ravi Mehrotra of Credit Suisse. Your line is now open.

Unidentified Analyst

Hi. This is John asking a question on behalf of Ravi. I guess I have two questions for you. The first is, how much of your legal strategy hinges on being the senior party opposed to junior party, and then the second question I had is, I know you guys mentioned something about I guess I want to know in determining first to file, what are the aspects does the USPTO look at in addition obviously to the patent application filing dates. Thanks.

Ronald Renaud

Yes. I'll take the first part of that and then I'll turn it over to Maria, but I would say certainly in an interference, you like to be the senior party just because I think the burden of proof is always greater for the junior party, but again I think in this situation where it's one application against one patent. We still remain very confident in our ability as we go into the second phase to, we intend to approve that we were the first to invent. So, we'd like to be doing this as a senior party? Absolutely. We are very surprised we are not, but that's the decision and we'll move forward based on that. In terms of the first to file, I'll let Maria take a crack at that one.

Maria Stahl

Sure. So, in terms of the evidence that we need to provide to prove that we were to invent, the burden of proof is high. The onus is on us to meet that burden of proof? And the kinds of evidence that the patent office will expect to see are things like lab notebook pages and so forth, internal documentation really. And so, and again, the burden of proof is high and the onus is on us as the junior party.

Unidentified Analyst

Okay. Thank you. Then also, when determining first to file, what are the documents that the USPTO look at besides the patent application filing dates?

Maria Stahl

They will look at internal documents, so we will submit internal documentation.

Unidentified Analyst

Was that also for the first to file as well to determine first to file?

Ronald Renaud

John, on the first of file number, you can go back. Everything that you would want to know that the USPTO looks at is up on the PTO website. Everything we submitted and everything that Gilead submitted is up there, so there's expert testimony, there's a lot of information up there. You can go to PTO website and see it.

Unidentified Analyst

Okay. Thank you.

Operator

Thank you. At this time, I am not showing any further questions.

Ronald Renaud

Okay. Great. Thanks, everyone for joining us this morning. We'll be around all day for questions if anyone has any.

Operator

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Everyone, have a great day.

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