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Idenix Pharmaceuticals (NASDAQ:IDIX)

Presentation at Morgan Stanley Global Healthcare Conference

September 10, 2012 1:15 p.m. ET

Executives

Ronald Renaud - President and CEO

Douglas Mayers - EVP and Chief Medical Officer

Analysts

David Friedman - Morgan Stanley

David Friedman - Morgan Stanley

Thanks everyone for joining. Dave Friedman, biotech analyst here at Morgan Stanley. And for disclosure purposes, Morgan Stanley as well as personal holdings disclosures are available at morganstanley.com/researchdisclosures.

And I’m happy to have the team from Idenix up here. On the far side, Doug Mayers, chief medical officer; and on the nearside, Ron Renaud, president and CEO. And we’d look for this to be interactive and so any questions, anyone feel free to raise their hand. We’ll make sure we get to you. If I don’t see you, just yell or something and we’ll make sure.

My guess is most people know the company, but maybe for the one or two that don’t, if you can just give a couple minute overview of who you guys are and what you guys have going on?

Ronald Renaud

First of all, thanks for having us. Idenix is a company focused on developing antivirals. Right now our singular focus is on direct-acting antivirals for the treatment of hepatitis C. We have taken a nucleoside across the finish line in hepatitis B, and that drug is now sold by Novartis. We did that in our previous collaboration with Novartis, and that drug is now on the market and sold in more than 60 countries worldwide.

We made the decision about five or six years ago to focus almost exclusively on HCV and direct-acting antivirals in HCV. And a lot of that came really out of our expertise and our core competencies in nucleoside chemistry. The company was really founded on its nucleoside chemistry base and we’ve continued to build upon that since the company’s inception back in 1998.

So right now our lead program is IDX184. I know we’ll talk a little bit about some of the things that have been going on with that program over the last four to six weeks. But this is a nucleotide prodrug that we’ve just completed enrollment in a Phase IIB study on, and patients are continuing on on the peg/riba part of that. We have a next generation nucleotide prodrug called IDX19368 that we have filed an IND on, and we’ll talk a little bit more about that in the way of the recent FDA clinical hold.

And then our other program right now, which we’re very excited about is IDX719, which is a next generation NS5A inhibitor that we recently completed a proof of concept study on across all four genotypes, genotypes 1, 2, 3, and 4. Had very nice data on that, and we look forward to moving that into the next stage of clinical development.

Question-and-Answer Session

David Friedman - Morgan Stanley

That’s great. So maybe if we can just start with a couple of broad questions quickly. Number one is, can you just update people on your cash position and whether you have any debt?

Ronald Renaud

Sure. Just purely from a housekeeping perspective, we just completed a financing in early August where we raised just under $200 million. We had, at the end of the second quarter, just under $80 million, so this leaves us in a very good cash position from a balance sheet perspective. We carry no debt. Our balance sheet is very, very straightforward.

The P&L, one of the things that we used to have on the top line was a royalty from Novartis related to our HBV compound, Tyzeka/Sebivo. In exchange for Novartis’ rights to compounds in our pipeline, we exchanged that royalty back to them as part of that transaction. And that was running at around a million a quarter, around $4 million a year. That’s pretty much it for the financials.

David Friedman - Morgan Stanley

And then you mentioned that you guys had previously been a sort of broader-focused antiviral company with an explicit focus in the last half a decade on HCV. Is there any intention to rebroaden? Or given that you guys have a number of HCV drugs in the clinic, is it your intention to focus exclusively on that part, carry that through? How are you thinking about that?

Ronald Renaud

It’s a great question. After Tyzeka/Sebivo, we clearly put our ambitions in HBV up on the shelf. And we were focused on HCV. And initially - I think some folks might remember - in HIV we had a non-nucleoside reverse transcriptase inhibitor called IDX899. That, preclinically, and even in the early proof of concept data, looked fantastic.

We ended up out-licensing that. HIV is obviously a big marketplace, and not one where we wanted to try to go alone with one compound. We out-licensed that to GSK, which became part of the ViiV Healthcare company, in a transaction that we did. I believe it was back in early 1999.

So after that, we used the financial resources gained from that transaction to really focus everything on HCV. And I think today we feel very strongly about making sure we get HCV right. We remain very, very confident in IDX184, IDX368. We have some additional nucleotide prodrugs that we’re going to bring forward, non G-based nucleotide prodrugs that will come forward during the span of the next 6 to 12 months.

That all being said, I think with such a strong core competency in nucleosides, nucleotide prodrugs, liver targeting, we do spend some time thinking about where else we could apply this expertise. And clearly in the virology space there are, I think, some easy follow-ons. But we don’t have much bandwidth for thinking about that until we get HCV right.

David Friedman - Morgan Stanley

So maybe if we can just jump right in on 184. So you guys have had some news recently. Maybe if you could just talk a little bit about the news related to the clinical hold, what you have had interaction-wise with the FDA? And then you updated on where you are with the echocardiograms. Maybe you can just explain what’s going on there, and if you have any update as to where you’re at with that process.

Ronald Renaud

Sure. I’ll just kind of give a big picture overview, and then I’ll let Doug take you through the granularity there. As most everyone knows, in early August Bristol Myers had reported some toxicity and closing their program on the 094 nucleotide prodrug that they had in the clinic. And that was related to some cardiac toxicity that they had noted early on.

Subsequent to that, I think they did a little bit more work and clearly the program uncovered a lot more severe toxicity, which overlapped into what we were working on. And I think the comparison being that both of these compounds are [two trimethylguanosine]-based nucleotide prodrugs. So the FDA had initially asked us for some patient safety data, and then I think as the situation progressed on the Bristol Myers side, we were asked to go on a partial clinical hold.

And then, in the course of doing that, they’ve asked us to complete some work to help try to understand the safety around IDX184. And we’re right in the midst of that, and I think I’ll let Doug take you through exactly where we are.

Douglas Mayers

At this point, we’re waiting for the FDA’s letter to come in with the specific details that we’re going to have to address. But there’s a number of things going on. We had EKGs that were conducted at many time points. We’re going to do an expert analysis of the EKGs during treatment and off treatment.

We had [troponins] in the study, and we’ve added [proBNP] levels, which are sort of a measure for congestive heart failure. And those are all being conducted, and are going to be analyzed by outside experts.

Additionally, we committed to the FDA to get everybody and get echocardiograms done as quickly as possible. And we are submitting those EKGs on a rolling basis. So the FDA’s already seen about two-thirds of the patients’ echos. And we will have all the echos done that we’re going to get in the next week or so into the agency. That, again, is going to require us to then do some expert interpretation of that data as well.

I think something that’s unique is, because of the severity and the rapid onset that was seen in the BMS program, we in BMS and the FDA have set up a structure where we’re actually sharing our data so that they see our clinical data, we see their clinical data. We’ve shared preclinical data.

And so the FDA right now is getting extensive data sets from both us and BMS on a weekly basis, with all the echos we have, and any of the underlying analysis we’ve been able to do. And then obviously there’s going to be a lot of preclinical work that’s going to be done, some of it by BMS, some of it by us, to try and tease out what happened in this event. But it’s kind of unique that two companies are actually working jointly with the FDA to quickly get their hands around what’s going on, and sort out what’s happened.

I think the good news from a clinical perspective is we have not had any of these severe events that BMS has. So as you know, they had the one patient with acute heart failure and passed away. They’ve had additional cardiac cases, and some renal cases, in the mix.

At this point we’ve had only two SAEs on drug in our whole Phase IIB program. One patient had a rash that was treated with Benadryl and was felt to be due to peg/riba and continued treatment. One patient had acute diarrhea that was thought to be due to viral gastroenteritis. Came in and got rehydrated. Didn’t even know about that one for several months. They didn’t tell us about it. And stayed on treatment.

And that’s our total cases. So we’ve had no cardiac cases. We’ve had no renal cases. We’ve had no severe arrhythmias. We’ve had no severe angina or MIs. So at this point our program has been very clean clinically. We’re getting the echos in. These are not 23 year old people. They’re 60 year old people who have diabetes, hypertension. Some of them have used drugs. Some of them smoke. But we think it’s consistent with the population we’re treating.

As far as our adverse event profile, it’s consistent with the labeled adverse events of peg/riba. Our EKGs show the changes you would expect with peg/riba. And so we think we’ll be able to get most of the data in this month. And once we see the letter, we’ll be able to determine how long it’s going to take us to get a complete response into the agency.

Unidentified Audience Member

How does an echo help when you’ve got no baseline echo? I guess there must be something very specific. Otherwise, I’m just not sure how that’s going to help there.

Douglas Mayers

It’s more challenging when you don’t have any baseline echos and you have people on peg/riba, which is cardiotoxic. I do agree with that. The initial response from the agency to me was, if you see it, you’ll recognize it. And I can tell you I haven’t recognized it. So I’m not sure that’s going to help you.

The bottom line is we are under confidentiality, so I can’t give explicit details. But we have seen the echos that BMS has. We have seen their data set. And I can tell you we do not have any patients who have echos like these significant cases that BMS had in their program.

Ronald Renaud

I think for what we’re comparing to, you don’t need to have baselines to understand what the differences are.

Unidentified Audience Member

[unintelligible]

Douglas Mayers

The FDA, by statute, has a phone call with you, and they have 30 days to give you the written document that gives you all the things you need to do. That 30 days is up in the next week or so. And then for 368, remember that came two weeks later. So for 368 we may not receive our letter until the end of the month. So we have two letters, one at the middle of the month, one at the end of the month, that we will get from them with the explicit details of how we have to respond.

Ronald Renaud

Just to be clear, because I think just in the course of the conversations we’ve had with folks today, when you get the verbal notification from the FDA, they let you know that you’re on a partial hold, or you’re on a clinical hold. And then what falls 30 days later from that verbal notice is some clarity around what their specific concerns are, their detailed concerns. And that is what we then, in turn, have to respond to. So that 30 day clock from the verbal will happen over the span of the next week.

Unidentified Audience Member

From the verbal, do you have a sense of how long this might all take?

Ronald Renaud

We’ll have to wait and see exactly what the details are. You try to guess, and you try to anticipate what they might be expecting, and I can tell you, just even right from the get go, we’re making sure we have all hands on deck. We’re pulling out all of, you know, the preclinical tox, the clinical tox that we’re pulling to make sure we have all the data sets pulled together.

What’s also important is that as Doug has been getting the patients back to do the echocardiograms, all the renal stuff had been done proactively. There’s not really a lot of data gathering that has to be done there, because that was done proactively.

On the cardiac side, as those echos come in, we’ve been [unintelligible] them up once a week and then sending them by ERoom into the FDA. So they’re getting those - I don’t want to say in real time, but they’re getting them on a weekly basis. So we’ll pull all the stuff together pretty quick.

David Friedman - Morgan Stanley

Maybe it might help also if people understood what your exposure level has been. So how many patients have been exposed to 184 at the dose that you’re interested in bringing forward, both short term and 12 weeks or longer exposure? And then how that compares to what we know about the Inhibitex Bristol drug.

Douglas Mayers

We’ve had, basically, about 65 patients who have had two weeks of exposure at doses that range from 25 mg to 200 mg, once a day. Subsequently, in our next study, we have 67 patients enrolled. About 60 of them actually made it to 12 weeks, who have received 50 mg or 100 mg once a day. That’s our whole data set. We plan to go ahead to 100 mg once a day. So that’s what we have.

For BMS, they had had 113 patients in their Phase II program, including the original patients who got peg/riba, in 25 mg, 50 mg, and 100 mg doses. And then the additional patients, the 34 patients who got 100 mg or 200 mg, [unintelligible] riba or daclatasvir. So they have about 119 patients. And at the 200 mg dose, they don’t have that many patients, obviously.

David Friedman - Morgan Stanley

So it seems like, given their number of issues seen versus exposures, in theory you guys should have seen something in terms of your exposures, at this point. I mean, that’s obviously a rough calculation.

Douglas Mayers

If anything had happened like they saw in their program, we would have seen it months and months ago. Remember, all of our patients completed 12 weeks of dosing several months ago, so all of our patients are on peg/riba [extension] now. And I told you the two SAEs we had in our program. We think if we had anything that was even close to what they had, we would have had a very clear signal a long time ago.

Ronald Renaud

It would have been reported back whenever it would have happened. And I think, again, just to reiterate, the fact is we’ve got better than two-thirds of these echos now in, and we haven’t seen anything that even comes close to what they’re seeing. So we feel pretty good about it.

David Friedman - Morgan Stanley

And then in terms of - assuming that the drug ultimately is released from clinical hold - previously you had discussed a plan of trying to run collaborative studies with either late-stage or marketed DAAs to build up the 184 safety [unintelligible] then work on internal combinations, either with 719 or theoretically [nuke-nuke] as well. Is that still the plan? Or are there changes given anything that’s happened internally? And then anything that you’re seeing externally in the landscape?

Ronald Renaud

That’s still the intention, and whether it’s still the plan, the agency will have some input there. I think we have to wait and see exactly what the details in the letter are. And we can propose a plan forward. And the proposal we would make is exactly what we were going to do. And that is to combine 184 with another direct-acting antiviral, whether that means adding on one or more than one method of cardiac monitoring, we’re clearly willing to do that as they pass forward here.

What that other direct-acting antiviral may look like, we certainly still have every intention of putting 184 with 719. And whether or not we can do that with another sponsor’s direct-acting antiviral, or protease inhibitor perhaps, remains to be seen. But it certainly would be very much our intention.

What we’re in a good position on is, as I have been talking about throughout the summer, we’ve been in a number of conversations, very advanced discussions, with folks around 184 and 719, in terms of collaborations. And so earlier in the year we were focused specifically on 184 in these collaboration discussions. 719 then became part of the discussion as that proof of concept data came forward.

And then now, with this situation, we’re back now to the other side of it, and we’re talking with potential collaborators around 719. So we still have every intention of getting 12 weeks of data, both antiviral data and safety data, with 719. Chances are, it will be with a collaborator. And then when we’re ready with 184, we’ll have that 12 weeks of 719. So hopefully we don’t miss a beat with 719 on that front.

David Friedman - Morgan Stanley

And it seems like there’s a push and pull now with the early-stage development of 719 and 184 where previously the path was Phase IIB with peg and riba, and then figure it out from there. And now that peg and riba based regimens are seeming less and less appealing, is there still value in running that, given that you’re running it with a backbone that has issues, but is at least very well understood and well-documented, versus…?

Ronald Renaud

So the question is would we run a 719 peg/riba study?

David Friedman - Morgan Stanley

Yeah, is there value in doing that as a means of mostly clearing the safety rather than validating efficacy?

Ronald Renaud

Yeah. I mean, look, to get the 12 weeks of safety, that’s certainly not something we would 100% rule out. It’s clearly not a preferred route by any stretch, but if we were unable to find a collaborator that would want to do a 12-week study with 719, we would certainly have that at our disposal. And, in fact, a number of the large pivotal trials, be it for NS5A inhibitors or protease inhibitors, are currently being run with peg/riba. So they may be winding down, but they’re not over yet.

Douglas Mayers

I think the issue from a clinical perspective is yes we can do it. Yes, it will give us a path, but this has become a race. So the pivotal studies that are opening up with Gilead, it’s very clear that getting all orals out there quickly is important. And so if we can get good data with a protease inhibitor that’s a partnership arrangement, if it looks good enough, you can then roll that into a fairly aggressive path toward approval. If we knew that peg/riba, we’re probably not ever going to take the drug to market, the peg/riba combo… If you can get the partner drug, it’s a faster path and a cleaner path. If you can’t, peg/riba is a viable alternative.

David Friedman - Morgan Stanley

And so maybe since we’ve brought up 719 a couple of times, maybe if you can just describe what you’ve generated to date datawise with 719, and how you feel it separates itself given that the NS5A landscape, there’s a number of them out there? How do you guys set yours apart?

Douglas Mayers

I think the thing that we did that was very different was we planned to go into the other genotypes from the beginning. So if you noticed, even in our single dose program, we were giving two [unintelligible] with genotype 1, one with 2, and one with 3. Each dose range of the drug, we purposely did genotypes 1 through 4 in our proof of concept program, and showed the drug has very good activity in all the genotypes.

There are some selected patients in genotype 2 that have a baseline polymorphism that exists in genotype 2 that causes problems. We’ve already developed a screening assay to put genotype 2 patients in. We’ll screen them when we get the viral load. We’ll also do one other test.

For all the other genotypes, 1 through 6, we can just treat them. So its unique property is that it covers all the genotypes. It complements the nuke in covering all the genotypes. And it’s the only NS5A in the clinic that actually can do that. As you know, daclatasvir has become a genotype 1B drug. 5885 is genotype 1. It does not cover 2 and 3 explicitly.

Actelion is starting to bring one into the clinic. Merck has one that they may or may not have in the clinic. So there are some second generations. But this is the first one that has proven that it can do it. It’s 50 mg or 100 mg once a day to be pan-genotypic, and we think aligning that with a 50 mg or 100 mg nuke once a day means we can go fix those combinations to once a day to cover all genotypes [unintelligible].

Ronald Renaud

I think that’s the lynchpin of our whole overall strategy. Gilead clearly has a significant lead here, and will be very likely to generate significant first mover advantage in the HCV space. But it’s also clear that their genotype 1 strategy is somewhat different than their genotype 2/3 strategy.

And so for us it’s not going to be about trying to catch Gilead, or trying to pass Gilead. I think if you’re the second or the third to market, what is going to disrupt that first mover advantage. And in our view, it’s coming in with a very potent, convenient, safe, pangenotypic regimen.

And I know this generates a fair amount of discussion, and not everybody agrees with this, but I’m not saying that we won’t genotype all the patients. Patients will continue to get genotyped. But if you have the ability to go into a provider or a payer and say that, you know, we have a regimen that is sub-300 or even 200 mgs, and basically if you have HCV you can get on this regimen, that’s a lot easier than trying to tease out, okay, if I’m a genotype 1 patient I’ve got to treat the patient that way, and if I have a genotype 2/3 patient, I’ve got to treat the patient somewhat differently. I think the easier you can make it for the average prescriber, I think that’s where the opportunity to grab market share is going to come from.

David Friedman - Morgan Stanley

And so maybe, just in the last couple minutes, we can touch on 368. It sort of got some corollary damage by having some shared characteristics. And you guys have not really discussed the structure or a lot of the qualities of the drug for proprietary reasons. But is there anything you can talk about in terms of how that drug, on a high level, may be different than 184? Better? Worse? Or just characteristics that would differentiate it and make it worth bringing forward as a second generation molecule?

Ronald Renaud

One of the things that we started about about 18 months ago - maybe closer to almost two years ago - was a very significant campaign to generate or synthesize as many novel nucleotide prodrugs as possible. And it wasn’t just to synthesize them for the sake of making them. We wanted to understand what makes the best prodrug, what makes the best sugar, what makes the best base.

And this will actually benefit us in this clinical hold process, because we’ve been able to do a lot of SAR work and see, okay, if you put this constituent here, what does it do to the toxicity, what does it do to the antiviral activity? And so as I mentioned, we synthesized well over 2,000 of these compounds. And 368 really represents one of the best compounds to come out of this program. It’s a different prodrug technology, and what we saw preclinically is different.

I’m not saying it’s better or worse, it’s just different, than IDX184, from a preclinical toxicity perspective. And you would expect that. You can make one change to one atom on a compound and it completely alters the toxicity profile of these compound. That’s no different here for 368 versus 184 or any of the other compounds.

You know, people ask, why did you go after G? Why another [2 prime methyl G]? This was the best compound to come out of that. Now, we’ve got other compounds that we have since continued to synthesize, and they’re non-G. But outside of this situation with Bristol Myers, I don’t think anybody would really be focused on [2 prime methyl guanosine triphosphate] as a toxic compound.

I mean, this is just something that is a phenomenon of what’s happened here in the last couple of weeks. We’re going to have to prove that now, and the FDA is definitely right to explore this. And we have to answer that question. But 368 was clearly something we were holding with high promise.

David Friedman - Morgan Stanley

And so just the last question as we run out of time. The plan with that molecule is it has characteristics that you think will be different. Ultimately it should provide something that 184 is not providing, if it’s worth investing in, and it being earlier. So what do you think…?

Ronald Renaud

We expected this drug would be given at doses much lower than 100 mg, somewhere on the order of 25-50 mg. So exposures that are much lower, with antiviral activity that rivals [that dense of a] viral activity that we’ve seen, with any HCV compound out there. So that would also help us with the whole combinability - as we thought about 719. And even as we generate some of these newer nukes with different prodrugs, different sugars, different bases, [curines versus permadines] - really maybe being the first part of the foundation of our nuke-nuke strategy. So 368 is the compound we believe will do that for us.

David Friedman - Morgan Stanley

Great. Well, I think we’re out of time. Thank you both very much for joining us here.

Ronald Renaud

Thanks for having us.

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