Business Overview

9 Months Ended

Sep. 30, 2011

Business Overview and ViiV Healthcare Company and Glaxosmithkline Collaboration [Abstract]

BUSINESS OVERVIEW

1. BUSINESS OVERVIEW

Overview

Idenix Pharmaceuticals, Inc., which we refer to as Idenix, we, us or our, is a biopharmaceutical company engaged in the discovery and development of drugs for the treatment of human viral diseases with operations in the United States and Europe. Currently, our primary research and development focus is on the treatment of patients with hepatitis C virus, or HCV. In July 2011, we initiated enrollment of 100 HCV-infected patients into a 12-week phase IIb clinical trial of our most advanced drug candidate, IDX184, a nucleotide polymerase inhibitor. We will report an interim analysis from this study after the first 30 patients have completed 28 days of treatment. We have initiated dosing of the first 20 patients and are currently enrolling the remaining ten patients. There have been no safety signals to date. Based on the current rate of enrollment, we expect to complete one month dosing of the first 30 patients in December 2011.

In addition to our strategy of developing drugs for the treatment of HCV, we have also developed products and drug candidates for the treatment of patients with hepatitis B virus, or HBV, human immunodeficiency virus type-1, or HIV, and acquired immune deficiency syndrome, or AIDS. We successfully developed and received worldwide marketing approval for telbivudine (Tyzeka^®/Sebivo^®), a drug for the treatment of HBV that we licensed to Novartis Pharma AG, or Novartis. In 2007, we began receiving royalties from Novartis based on a percentage of net sales of Tyzeka^®/Sebivo^®. We also discovered and developed through proof-of-concept clinical testing IDX899, a drug candidate from the class of compounds known as non-nucleoside reverse transcriptase inhibitors, or NNRTIs, for the treatment of HIV/AIDS. We licensed our NNRTI compounds, including IDX899, now known as ‘761, to GlaxoSmithKline, or GSK, in February 2009. In October 2009, GSK assigned this license agreement to ViiV Healthcare Company, or ViiV, which is an affiliate of GSK. In February 2011, ViiV informed us that the U.S. Food and Drug Administration, or FDA, placed ‘761 on clinical hold. ViiV has full responsibility for the development of ‘761, including any regulatory interactions.

We are subject to risks common to companies in the biopharmaceutical industry including, but not limited to, the successful development of products, clinical trial uncertainty, regulatory approval, fluctuations in operating results and financial risks, potential need for additional funding, protection of proprietary technology and patent risks, compliance with government regulations, dependence on key personnel and collaboration partners, competition, technological and medical risks and management of growth.

We have incurred losses in each year since our inception and at September 30, 2011, we had an accumulated deficit of $657.6 million. We expect to incur losses over the next several years as we continue to expand our drug discovery and development efforts, specifically, our phase IIb clinical trial of IDX184 initiated in July 2011. As a result of continuing losses, we may seek additional funding through a combination of public or private financing, collaborative relationships or other arrangements and we may seek a partner who will assist in the future development and commercialization of IDX184. In October 2011, we filed a shelf registration statement with the Securities and Exchange Commission, or SEC, for an indeterminate amount of shares of common stock, up to the aggregate of $150.0 million, for future issuance. Any financing requiring the issuance of additional shares of capital stock must first be approved by Novartis so long as Novartis continues to own at least 19.4% of our voting stock. Additional funding may not be available to us or, if available, may not be on terms favorable to us. Further, any additional equity financing may be dilutive to stockholders, other than Novartis, which has the right to maintain its current ownership level. As of October 24, 2011, Novartis owned approximately 35% of our outstanding common stock.

We believe that our current cash, cash equivalents and the expected royalty payments associated with product sales of Tyzeka^®/Sebivo^® will be sufficient to sustain operations into at least the second quarter of 2012. If we are unable to obtain adequate financing on a timely basis, we could be required to delay, reduce or eliminate one or more of our drug development programs, enter into new collaborative, strategic alliances or licensing arrangements that may not be favorable to us and reduce the number of our employees. More generally, if we are unable to obtain adequate funding, we may be required to scale back, suspend or terminate our business operations.

Basis of Presentation

The condensed consolidated financial statements reflect the operations of Idenix Pharmaceuticals, Inc. and our wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

The accompanying condensed consolidated financial statements are unaudited and have been prepared by us in accordance with generally accepted accounting principles in the United States of America, or GAAP, for interim reporting. Accordingly, these interim financial statements do not include all the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2010, which are included in our Annual Report on Form 10-K filed with the SEC on March 7, 2011. These interim financial statements are unaudited, but in the opinion of management, reflect all adjustments (including normal recurring accruals) necessary for a fair statement of the financial position and results of operations for the interim periods presented. The year end consolidated balance sheet data presented for comparative purposes was derived from audited financial statements, but does not include all disclosures required by GAAP.

The preparation of condensed consolidated financial statements in accordance with GAAP requires management to make estimates and judgments that may affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, judgments and methodologies, including those related to revenue recognition, our collaborative relationships, clinical trial expenses, impairment and amortization of long-lived assets including intangible assets, share-based compensation, income taxes including the valuation allowance for deferred tax assets, contingencies, litigation and restructuring charges. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions.

The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for any future period or the fiscal year ending December 31, 2011.

Recent Accounting Pronouncements

In June, 2011, the Financial Accounting Standards Board, or FASB, issued Accounting Standard Update No. 2011-5, Presentation of Comprehensive Income. The objective of this amendment is to improve the comparability, consistency and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income. This guidance is effective for fiscal years beginning after December 15, 2011. We do not expect that this guidance will have any material effect on our consolidated financial statements.