Small drug developer Idenix Pharmaceuticals (NASDAQ:IDIX) just got a little smaller. The company announced today that it's dropping its entire hepatitis B program.

Idenix will transfer future development of Tyzeka -- known as Sebivo in Europe -- to its partner Novartis (NYSE:NVS), which will conduct any additional clinical trials and regulatory filing for the drug. Idenix will receive royalties on worldwide sales.

The company is also dropping its development of valtorcitabine, another joint venture with Novartis to treat hepatitis B. These moves will allow the company to cut one-third of its workforce -- about 100 employees -- and save $40 million to $45 million per year.

After the disappointing results of its lead hepatitis C (HCV) drug, valopicitabine, and the resulting shutdown of future testing by the FDA, Idenix had to do something to shore up its burn rate. The company has decided to focus on its HCV and HIV drug development.

Idenix is left with one clinical-stage drug, a non-nucleoside reverse transcriptase inhibitor for treating HIV, that is in phase 1 trials. It also has a pipeline of HCV drugs still in development. With these drugs so early in their development, any future revenue streams, beyond royalties from Novartis, are years away.

The company expects to have about $100 million in the bank at the end of the year, giving the restructured company enough money to last about two more years. That might be enough time to get its lead drug through phase 2 clinical trials, where a pharmaceutical company -- Wyeth (NYSE:WYE), perhaps -- might be interested in picking it up. Still, I'd guess that there's a dilutive financing in the company's future. Idenix has a long road ahead, but the restructuring seems like its best chance to ensure its survival.

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