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12:00 AM
 | 
Mar 31, 2003
 |  BioCentury  |  Finance

Can Idenix be duplicated?

Capital Rationing

Can Idenix be duplicated?

Venture firms unable to exit their portfolio companies via an IPO are looking for novel ways to monetize their investments. Witness last week's deal in which Novartis AG obtained a 51% stake in Idenix Pharmaceuticals Inc. by paying $255 million in cash to existing Idenix shareholders, who could take in another $357 million if Idenix meets its milestones.

The deal puts a current value of $500 million on Idenix, which could rise to $1.2 billion if investors receive the second payment.

Those kinds of numbers are far better than VCs could hope to achieve via a public offering. Indeed, the company's erstwhile efforts to float an IPO last year would have raised only $115 million. But it's arguable whether the Idenix deal provides a template for others itching to cash out soon. Only a handful of companies can command those kinds of valuations. Nor is it clear that many senior management teams would want to hang around to run a subsidiary, even though big pharma has shown that it can be relatively hands-off with biotech companies.

In addition to payments to shareholders, Novartis (NVS; SWX:NOVN, Basel, Switzerland) will pay Idenix an upfront fee of $75 million to license two hepatitis B compounds: telbivudine (LdT), which is in Phase III trials, and valtorcitabine (val-LdC), which is in Phase I/II trials. Idenix (Cambridge, Mass.) also could receive $175 million if NVS exercises its option to jointly develop NM283, which is in Phase I/II trials for hepatitis C virus, and regulatory filings are accepted in the U.S. and EU (see B4).

Idenix...

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