Idenix Pharmaceuticals (IDIX) Takes Off Depite Q3 Loss in Potential Short Squeeze

Joel Anderson  |

In a year that's already seen some major peaks and valleys for small-cap pharma Idenix Pharmaceuticals (IDIX) , the drama doesn't show signs of letting up. Idenix has jumped almost 45 percent in early trading with the only apparent explanation for the new strength being an upcoming meeting on Hepatitis C in the nation's capital this weekend. This comes after a Q3 earnings report after market close on Wednesday that showed wider-than-expected losses that prompted a 1.5 percent drop. This comes during a 2013 that has seen the company's stock hit $5.35 a share or better three times and plunge from there to $3.65 a share or lower all three times. Taking into account Idenix's short float of over 17 percent, today's heavy trading volume, and the stock's recent volatility, it seems possible that the gains, which steadily increased as the morning went on, could be a short squeeze driving out the bears with short positions.

Q3 Earnings Show Loss

Idenix didn't have a strong earnings call, but the losses didn't greatly exceed expectations. Idenix reported losses of $0.22 a share, which was larger than the $0.21 a share loss reported as the Zacks consensus estimate. The company also reported revenues of just $0.1 million, well below the Zacks consensus estimate of $2 million. 

"The change in net loss was mainly due to additional revenue as a result of the recognition of $36.1 million of deferred revenue in the first quarter of 2012 related to the termination of the license agreement with ViiV Healthcare Company," said Senior Vice President and CFO Daniella Beckman. "Additionally, there were increases of $12.9 million in R&D expenses mainly due to the advancement of our drug candidates and a $0.5 million in G&A mainly due to patent interference and litigation costs."

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A Short Squeeze or Anticipation of Weekend Conference?

While the massive spike for Idenix has all the makings of a short squeeze, others believe that the sudden strength is in anticipation of a Hepatitis C Meeting in Washington, D.C. this weekend.

"As a reminder, key HCV meeting AASLD will begin this weekend in Washington, DC," said Deutsche Bank's (DB) Alethia Young. "So far, sofosbuvir - Gilead's (GILD)  nuke - is close to potential approval. Vertex (VRTX)  has a nuke in development that is on hold at higher doses. At the lower dose not on hold 100mg, the SVR12 with Riba alone was 10% (vs. 200mg SVR that was 50%). Achillion (ACHN)  expects their nuke to enter the clinic by 1Q14. Idenix has noted that they are not interested in an exclusive arrangement with Johnson & Johnson (JNJ)  or anyone."

Young continued: "We have not spoken to these companies recently about their development strategy. However, we would assume that any HCV developer would be interested in a nuke. J&J has a PI and non-nuke but needs another asset in our opinion. Abbvie (ABBV)  and Merck (MRK)  both have PI & NS5A combos, but a nuke could be additive to any HCV arsenal in our opinion."

However, without any specific news as to what will be revealed this weekend, it's hard to ascribe such a major move to the weekend meeting alone. It's also possible that investor confidence over the conference started a move that evolved into a short squeeze that drove shares even higher.

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