Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



No Partner = Better Buyout Candidate?

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

Novartis (NYSE: NVS  ) and Idenix Pharmaceuticals (Nasdaq: IDIX  ) have decided to part ways on their partnership, which caused shares of the biotech to slip 8% yesterday. Oh the irony.

It's not ironic that Idenix fell on the news, that's par for the course when a pharmaceutical company decides it's not interested. Exelixis (Nasdaq: EXEL  ) fell 16% when Bristol-Myers Squibb handed back cabozantinib; Idenix should count itself lucky.

The irony is that Novartis owns 31% of Idenix, so in making a deal to benefit itself, Novartis also reduced the value of its investment.

Under the previous agreement, Novartis had the option to license any of Idenix's compounds, which goes away under the revised edition. In exchange for the full rights, Idenix will owe a royalty to Novartis if the drugs are commercialized. As part of the deal, Idenix gave up a royalty on Tyzeka/Sebivo that it helped develop, but that was only bringing in about $4 million a year, so it isn't that big of a deal.

It seems clear Novartis wasn't interested in what Idenix had to offer -- at least not under the terms of the previous agreement; it had already passed on one hepatitis C drug. But the pharma giant hasn't given up all rights to the drugs. Novartis can still run clinical trials combining its hepatitis C drugs with Idenix's drugs for the next seven years, although the potential combo won't be exclusive and Idenix has the right to license the drug out to other companies as well.

Despite Idenix's decline yesterday -- and it's down more today after saying it plans to raise capital -- changing the deal structure will likely benefit the biotech in the long term. Now Idenix won't have to wait for Novartis to make a decision on every drug before it can start partnering discussions. With other companies, Gilead Sciences (Nasdaq: GILD  ) and Abbott Labs (NYSE: ABT  ) in particular, working feverishly to get their all-oral hepatitis C combinations onto the market, the flexibility could help Idenix avoid getting left behind.

And, who knows, maybe not being as tied to Novartis makes Idenix a better takeout target like Pharmasset and Inhibitex.

These three Dow stocks don't need a buyout to capture their value; they've got an X factor that makes them stand out from their illustrious Dow peers. Find out what it is in the Fool's new free report, "The 3 Dow Stocks Dividend Investors Need."

Fool contributor Brian Orelli holds no position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Exelixis and Abbott Laboratories. Motley Fool newsletter services have recommended buying shares of Exelixis and Gilead Sciences. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1967904, ~/Articles/ArticleHandler.aspx, 10/21/2016 1:32:39 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,114.59 -47.76 -0.26%
S&P 500 2,138.10 -3.24 -0.15%
NASD 5,251.73 9.90 0.19%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

12/31/1969 7:00 PM
IDIX.DL $0.00 Down +0.00 +0.00%
Idenix Pharmaceuti… CAPS Rating: **
NVS $75.24 Down -0.68 -0.90%
Novartis CAPS Rating: ****
ABT $40.37 Down -0.37 -0.91%
Abbott Laboratorie… CAPS Rating: *****
EXEL $11.63 Down -0.11 -0.94%
Exelixis CAPS Rating: ****
GILD $73.88 Down -0.43 -0.58%
Gilead Sciences CAPS Rating: *****