On November 6, 2009, Inhibitex (INHX) reported financial results for the third quarter period ending September 30, 2009. Total revenues for the quarter were $0.29 million and consisted of $0.25 million in collaborative research and development payments and $0.04 million in licenses fees.

Net loss for the third quarter totaled $4.5 million, or $0.10 per share. This was in-line with our forecast. The company exited the third quarter with $21.1 million in cash, equivalents and short-term investments.

This amount does not include the approximately $23 million in gross procedures raised in late October through the private placement of common stock and warrants to new and existing shareholders. We forecast that Inhibitex will exit 2009 with approximately $37 million in cash and investments. This should be enough to fund operations, including completing the ongoing phase II FV-100 program and completing a phase Ia and phase Ib program on INX-189, through the end of 2011.
The current market capitalization of roughly $60 million significantly undervalues Inhibitex, in our view. As noted above, the company should exit 2009 with roughly $37 million in cash still on the books. This leaves the technology value for FV-100, a potential $500 million drug in phase II trials, and INX-189 at only $20 to $25 million.

With positive phase II data on FV-100 during the summer of 2010, Inhibitex should begin to entertain partnership discussions with large-cap pharma that could bring about an upfront payment far above this level. In fact, a large-cap pharmaceutical company interested in FV-100 next year would probably save money in the long-run in terms of milestones and royalty payments by just acquiring all of the outstanding shares.

Under this scenario we could see fair-value above $2, and that does not factor in any value for INX-189 or the rest of the preclinical pipeline.

Unfortunately, however, we struggle to see what moves the shares higher until the phase II data comes out during the middle of next year. This is still six to eight months away. We like the story and believe the stock is cheap, but investors can be patient at this time.

Our advice is to look to establish or add to positions on a pull-back, or buy in the second quarter of 2010 a few months ahead of the phase II FV-100 data.
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