Baupost Group raises stake in Idenix Pharmaceuticals

Cambridge biotech is tackling hepatitis C

Baupost Group, the largest hedge fund firm in Boston, has bought up more than one-quarter of the stock of a Cambridge biotech firm working on drugs to treat hepatitis C.

The hedge fund firm run by Seth Klarman now owns 27.6 percent of Idenix Pharmaceuticals Inc., according to a Nov. 1 filing with securities regulators, up from 18.5 percent in April. Baupost became the company’s largest shareholder with a series of newly reported purchases since mid-September. It edged ahead of drug giant Novartis Pharma AG, which several years ago owned more than half the company.


Shares of Idenix soared 40 percent on Friday, two days after the company said one of its antiviral drugs was going into clinical trials in Belgium and Canada. Idenix is trying to join the competition for drugs to treat the blood-borne virus that affects an estimated 150 million people globally, according to the World Health Organization.

Hepatitis C is spread primarily by sharing needles with others who have the virus. It can be transmitted sexually, similar to HIV, and also can be passed from mothers to newborns.

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Despite the crowd pursuing hepatitis C remedies, biotech analyst Howard Liang from Leerink Swann in Boston reiterated his “outperform” rating on Idenix last Thursday, saying the drugs it is pursuing could prove valuable.

“We see interferon-free combinations of direct antiviral agents for hepatitis C virus as the next frontier for drug development for the large hepatitis C market,” the report said.

Currently, Vertex Pharmaceuticals Inc. of Cambridge and Merck & Co. offer competing oral drugs, both taken in combination with a protease inhibitor, for the treatment of hepatitis C.


Vertex and other companies, notably Gilead Sciences Inc. of Foster City, Calif., are racing to develop and market improved, next-generation treatments.

Baupost, which manages $28 billion, is a value-oriented investment firm known for bargain hunting and for placing relatively little of its clients’ money in stocks. But when the firm’s executives like a stock, they have been known to make large bets.

Large holdings for Baupost in its latest disclosure document include mainstream companies like American International Group and Citgroup Inc. The firm also owns shares in a number of drug developers, including some tackling difficult cancers.

Idenix, like other young drug developers, is losing money and has a stock that’s considered speculative, trading under $5 a share. The company reported just $1 million in revenue for the nine months ended Sept. 30, and a loss of $93.6 million, or 70 cents a share.

Idenix stock closed Monday at $4.29 per share, giving the company a market value of $574 million.

Idenix, which was founded in 1998 and went public in 2004, has brought a drug to market once before. The company licensed a hepatitis B drug to Novartis as part of a 2003 agreement and was receiving royalties from the pharmaceutical giant.

But the companies have since restructured their relationship. Novartis has cut its holdings in Idenix down from a majority position to 25 percent. It no longer pays Idenix royalties and also does not have rights to the company’s pipelines of drugs.

A spokeswoman for Idenix said there was no indication Baupost intended to try to influence the company with its investment. “They’ve been a large holder of ours for a while,’’ said Teri Dahlman, the spokeswoman.

Baupost executives declined to comment.

Beth Healy can be reached at
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