Some small-cap drug developers with large cash-burn rates realize too late that they need to rein in spending. Others cut their expenditures when sales of their lead product don't materialize in time. Idenix Pharmaceuticals
Idenix's lead drug is the already approved hepatitis B treatment Tyzeka. Following the failure earlier in the year of the lead hepatitis C virus (HCV) compound in its pipeline, Idenix decided to eliminate its Tyzeka sales force and let partner Novartis
This cost-cutting move is expected to cut Idenix's cash burn rate by 40% to 50% a year, or $40 million to $45 million on an annualized basis. For the third quarter, Idenix had a burn rate of approximately $24 million, and it is expected to start 2008 with $100 million to $110 million of cash and investments on its balance sheet.
While testing was halted on the lead HCV compound this quarter, Idenix has continued preclinical work on multiple polymerase and protease inhibitors for the treatment of HCV. Its next polymerase inhibitors are expected to produce patient data sometime next year.
At a market cap of less than $50 million more than its expected net cash level for the end of 2007, shares of Idenix are trading as if the drugmaker will produce no new viable HCV compounds.
As seen in a presentation from Novartis and Schering-Plough
That being said, with sales of Tyzeka off to a slow start, making an investment in Idenix today takes a healthy dose of faith that its preclinical work will lead to solid drug candidates. In fact, with so many drug developers having early stage anti-HCV targeting compounds in the works, I'd hold off on any potential investment in Idenix until we hear some more results for its pipeline candidates.