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Idenix Pharmaceuticals, Inc. climbed more than 17% to close the trading session on Jan 28, 2014 at $8.04 per share. The jump followed the news that Idenix would raise $106.7 million (net) through a registered direct offering.
In a move aimed at strengthening its balance sheet, Idenix agreed to sell 16,420,241 shares of its common stock to a hedge fund, the Baupost group, at $6.50 per share. Idenix said that the move will take care of its cash related worries until the second half of 2015.
The Baupost group, which owned 27% of Idenix, prior to the transaction, will have a 35% stake in the biopharmaceutical company following the closure of the sale expected shortly.
Idenix intends to utilize the funds to develop its struggling pipeline which includes candidates like IDX21437 and samatasvir, being developed to treat patients with hepatitis C virus (HCV) infection. The lucrative market already has big players like Gilead Sciences Inc. ( GILD - Analyst Report) with biopharma companies such as Bristol-Myers Squibb Company ( BMY - Analyst Report) developing candidates targeting the space. Idenix’s HCV candidates, which are some way away from approval, will jostle for market share in a crowded market in the event of clearance from regulatory authorities.
Idenix also intends to make use of the funds to cover its legal costs. We note that Idenix filed a patent infringement and interference lawsuits in the U.S. late last year against Gilead related to the latter’s HCV treatment Sovaldi, which has blockbuster potential.
We believe that the impending 8% rise in Baupost group stake in Idenix highlights the hedge funds’ faith in the latter’s pipeline. The possibility of Idenix being ultimately acquired by the group also cannot be ruled out.
Idenix carries a Zacks Rank #3 (Hold). A better-ranked stock in the biopharma space is Actelion Ltd. ( ALIOF - Snapshot Report) with a Zacks Rank #1 (Strong Buy).