##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





Form 10-K


|                                                |  |                                                                                             
|----------------------------------------------- |  | --------------------------------------------------------------------------------------------
|(Mark One)                                      |  |                                                                                             
|þ                                               |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934    
|                                               
|For the fiscal year ended December 31, 2005    
|                                               
|or                                             
|                                               
|o                                               |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
|                                               
|For the transition period
    from           to

Commission file number 000-49839





Idenix Pharmaceuticals, Inc.


(Exact Name of Registrant as Specified in its Charter)


|                                                                                           |  |                                         
|------------------------------------------------------------------------------------------ |  | ----------------------------------------
|Delaware                                                                                   |  | 45-0478605                              
|(State or Other Jurisdiction of
    Incorporation or Organization)                         |  | (I.R.S. Employer
    Identification No.)
|60 Hampshire Street,
     Cambridge, Massachusetts(Address of Principal Executive Offices) |  | 02139(Zip Code)                         

(617) 995-9800


(Registrants telephone number, including area code)


Securities registered pursuant to Section 12(b) of the
Act:


NONE


Securities registered pursuant to Section 12(g) of the
Act:


|                              |  |                                       
|----------------------------- |  | --------------------------------------
|Common Stock, $.001 par value |  | NASDAQ                                
|(Title of class)              |  | (Name of exchange on which registered)




o þ


o þ


þ o


S-K 10-K 10-K. þ


12b-2


o þ o


12b-2 o þ






DOCUMENTS INCORPORATED BY REFERENCE


10-K.










---



##### 










Idenix Pharmaceuticals, Inc.


Form 10-K


TABLE OF CONTENTS


|                                                                            |  |                                                                                                       |  |   
|--------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------- |  | --
|PART I                                                                     
|Item 1.                                                                     |  | Business                                                                                              |  | 4 
|Item 1A.                                                                    |  | Risk Factors                                                                                          |  | 23
|Item 1B.                                                                    |  | Unresolved Staff Comments                                                                             |  | 49
|Item 2.                                                                     |  | Properties                                                                                            |  | 50
|Item 3.                                                                     |  | Legal Proceedings                                                                                     |  | 50
|Item 4.                                                                     |  | Submission of Matters to a Vote of Security
    Holders                                               |  | 50
|PART II                                                                    
|Item 5.                                                                     |  | Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity |  | 50
|Item 6.                                                                     |  | Selected Consolidated Financial Data                                                                  |  | 51
|Item 7.                                                                     |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations             |  | 53
|Item 7A.                                                                    |  | Quantitative and Qualitative Disclosure
    about Market Risk                                         |  | 66
|Item 8.                                                                     |  | Financial Statements and Supplementary
    Data                                                       |  | 66
|Item 9.                                                                     |  | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure              |  | 66
|Item 9A.                                                                    |  | Controls and Procedures                                                                               |  | 66
|Item 9B.                                                                    |  | Other Information                                                                                     |  | 67
|                                                                           
|PART III                                                                   
|Item 10.                                                                    |  | Directors and Executive Officers of Idenix
    Pharmaceuticals, Inc.                                  |  | 67
|Item 11.                                                                    |  | Executive Compensation                                                                                |  | 67
|Item 12.                                                                    |  | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder Matters    |  | 67
|Item 13.                                                                    |  | Certain Relationships and Related
    Transactions                                                    |  | 67
|Item 14.                                                                    |  | Principal Accountant Fees and Services                                                                |  | 67
|                                                                           
|PART IV                                                                    
|Item 15.                                                                    |  | Exhibits and Financial Statement
    Schedules                                                        |  | 68
|SIGNATURES                                                                  |  | 102                                                                                                  
|Exhibit Index                                                               |  | 103                                                                                                  
|Ex-3.3 Certificate of Amendment of Restated Certificate of Incorporation   
|EX-10.14 Amend No.3 to Development, License and Commercialization Agreement
|Ex-10.48 Summary of Relocation Adjustment                                  
|Ex-23.1 Consent of Pricewaterhouse Coopers LLP                             
|Ex-31.1 Section 302 Certification of C.E.O.                                
|Ex-31.2 Section 302 Certification of C.F.O.                                
|Ex-32.1 Section 906 Certification of C.E.O.                                
|Ex-32.2 Section 906 Certification of C.F.O.                                



2



---



##### Table of Contents



Cautionary Statement Regarding Forward-Looking Statements


10-K 10-K 10-K 10-K.


10-K


10-K 10-K 10-K


3



---



##### Table of Contents






PART I







|        |          
|------- | ---------
|Item 1. | Business.

The Company












4



---



##### Table of Contents







10-K. 10-K, 10-Q, 8-K www.sec.gov 1-800-SEC-0330.




Product Candidates




scale-up


Hepatitis B




| |            
| | -----------
| | Telbivudine



| |                                  
| | ---------------------------------
| | Phase III Clinical Trials and NDA



52-week


5



---



##### Table of Contents





240-patient




| |                           
| | --------------------------
| | Phase IIIb Clinical Trials

® e-antigen ®




| |               
| | --------------
| | Valtorcitabine



Hepatitis C




6



---



##### Table of Contents











HIV


scale-up


Antiviral Research




Our Scientists.


7



---



##### Table of Contents





Focused Compound Library.


Target Selection.


Screening and Lead Optimization.


Pharmacology and Preclinical Development. in vitro in vivo in vivo in vitro in vivo


Research and Development Expenses




Collaborations


Relationship with Novartis


Overview






| |   |                                                                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the development agreement, under which we will collaborate with
    Novartis to develop, manufacture and commercialize our lead HBV
    product candidates and, potentially, our HCV and other product
    candidates;

8



---



##### Table of Contents





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the supply agreement, under which Novartis will manufacture for
    us the active pharmaceutical ingredient, or API, for the
    clinical development supply and potentially the API for the
    commercial supply of product candidates it has licensed from us
    and will perform the finishing and packaging of licensed
    products for commercial sale;                                                 
|
| |  | the stockholders agreement, which was subsequently amended
    and restated in July 2004 in connection with the closing of our
    initial public offering; and                                                                                                                                                                                                                                                
|
| |  | the stock purchase transaction, under which Novartis purchased
    approximately 54% of our outstanding capital stock from our then
    existing stockholders for $255 million in cash, with an
    additional aggregate amount of up to $357 million
    contingently payable to these stockholders if we achieve
    predetermined milestones with respect to the development of an
    HCV product candidate.



Development, License and Commercialization Agreement




| |                        
| | -----------------------
| | Designation of Products





| |   |                                                                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | valopicitabine, the initial product candidate we are developing
    for the treatment of HCV infection;                                                                                                 
|
| |  | if Novartis exercises its option with respect to valopicitabine
    and if valopicitabine subsequently does not obtain regulatory
    approval in the U.S., a replacement HCV product
    candidate; and
|
| |  | other product candidates developed by us, or in some cases
    licensed to us, so long as Novartis maintains ownership of 51%
    of our voting stock and for a specified period of time
    thereafter.



30-day


9



---



##### Table of Contents







| |                                                  
| | -------------------------------------------------
| | Development of Products and Regulatory Activities









| |                          
| | -------------------------
| | Product Commercialization







| |                    
| | -------------------
| | Interferon Products



10



---



##### Table of Contents





| |            
| | -----------
| | Exclusivity





| |                
| | ---------------
| | Indemnification





| |            
| | -----------
| | Termination





| |   |                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------
| |  | with respect to the particular product, product candidate or
    country to which the breach relates; or         
|
| |  | in its entirety, if the material breach is not limited to a
    particular product, product candidate or country.



Master Manufacturing and Supply Agreement




11



---



##### Table of Contents







Stockholders Agreement






| |   |                                                                                                                                                                                                                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | granted Novartis, together with certain other holders of our
    common stock, rights to cause us to register, under the
    Securities Act, such shares of common stock;                                                                                                                                                                                       
|
| |  | agreed to use our reasonable best efforts to nominate for
    election as a director at least two designees of Novartis for so
    long as Novartis and its affiliates own at least 35% of our
    voting stock and at least one designee of Novartis for so long
    as Novartis and its affiliates own at least 19.4% of our voting
    stock;                
|
| |  | granted Novartis approval rights over a number of corporate
    actions that we or our subsidiaries may take as long as Novartis
    and its affiliates continue to own at least 19.4% of our voting
    stock; and                                                                                                                                             
|
| |  | required that, with certain limited exceptions, Novartis and its
    affiliates not acquire additional shares of our voting stock
    unless a majority of our independent directors approves or
    requests the acquisition. These restrictions will terminate on
    May 8, 2008, unless sooner terminated under the terms of
    the stockholders agreement.



| |                                
| | -------------------------------
| | Novartis Stock Purchase Rights



Stock Purchase Agreement






12



---



##### Table of Contents







Co-operative Laboratory Agreements




| |                                       
| | --------------------------------------
| | CNRS and the University of Montpellier





| |                       
| | ----------------------
| | University of Cagliari





Manufacturing




13



---



##### Table of Contents













Sales and Marketing


co-promote




Patents and Licenses






| |                                          
| | -----------------------------------------
| | Hepatitis B Patent Portfolio and Licenses



14



---



##### Table of Contents







| |   |                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------
| |  | U.S. Patent No. 6,395,716 entitled
    ß-L-2-Deoxy-Nucleosides for the Treatment of
    Hepatitis B;           
|
| |  | U.S. Patent No. 6,569,837 entitled
    ß-L-2-Deoxy Pyrimidine Nucleosides for the
    Treatment of Hepatitis B;
|
| |  | U.S. Patent No. 6,444,652 entitled
    ß-L-2-Deoxy-Nucleosides for the Treatment of
    Hepatitis B; and       
|
| |  | U.S. Patent No. 6,566,344, entitled
    ß-L-2-Deoxy-Nucleosides for the Treatment of
    Hepatitis B.          









15



---



##### Table of Contents







non-exclusive.








| |                             
| | ----------------------------
| | Hepatitis C Patent Portfolio



16



---



##### Table of Contents









| |                     
| | --------------------
| | HIV Patent Portfolio



non-U.S.


Competition






| |   |                                                
| | - | -----------------------------------------------
| |  | product effectiveness;                         
|
| |  | safety;                                        
|
| |  | timing and scope of regulatory approvals;      
|
| |  | price of products;                             
|
| |  | availability of supply;                        
|
| |  | patent protection; and                         
|
| |  | sales and marketing capabilities and resources.

17



---



##### Table of Contents







® ® ®




Pharmaceutical Pricing and Reimbursement




18



---



##### Table of Contents





Regulatory Matters


once-a-day






| |                                               
| | ----------------------------------------------
| | FDA Requirements for Approval of Drug Products





| |   |                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------
| |  | product seizures;                                                                                     
|
| |  | voluntary or mandatory recalls;                                                                       
|
| |  | voluntary or mandatory patient and physician notification;                                            
|
| |  | withdrawal of product approvals;                                                                      
|
| |  | restrictions on, or prohibitions against, marketing our
    products, if approved for commercial sale;
|
| |  | fines;                                                                                                
|
| |  | restrictions on importation of our products;                                                          
|
| |  | injunctions;                                                                                          
|
| |  | debarment;                                                                                            
|
| |  | civil and criminal penalties; and                                                                     
|
| |  | suspension of review, refusal to approve pending applications.                                        



19



---



##### Table of Contents





in vitro


30-day 30-day














20



---



##### Table of Contents



6-month








head-to








| |                                            
| | -------------------------------------------
| | Foreign Regulation of Drug Product Approval



21



---



##### Table of Contents





| |       
| | ------
| | Europe



Mutual Recognition Procedure and Decentralized Approval.




Centralized Procedure.






| |     
| | ----
| | Asia



22



---



##### Table of Contents







| |                              
| | -----------------------------
| | Marketing Applications Format

e-CTD,




| |                    
| | -------------------
| | Hazardous Materials





| |          
| | ---------
| | Employees








|         |             
|-------- | ------------
|Item 1A. | Risk Factors

Factors Related to Our Business




| |                                                                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We have a limited operating history and have incurred a
    cumulative loss since our inception. If we do not generate
    significant product revenues, we will not be profitable.



23



---



##### Table of Contents





| |                                                                                                                                                                                                                                                                                                            
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We will need additional capital to fund our operations,
    including product candidate development, manufacturing and
    commercialization. If we do not have or cannot raise additional
    capital when needed, we will be unable to develop and
    commercialize our product candidates successfully.







| |   |                                                                                                                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | with respect to our lead HBV product candidates, Novartis
    continues to reimburse us for development expenses and we
    achieve and receive from Novartis milestones payments relating
    to the development and regulatory approval of these product
    candidates; and                
|
| |  | with respect to valopicitabine and our other product candidates,
    Novartis exercises its option to license valopicitabine or any
    other product candidates and we receive related license fees,
    milestone payments and development expense reimbursement
    payments from Novartis.







| |   |                                                                                                                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the costs of launching telbivudine, and any of our other product
    candidates, if such product candidates are approved for
    commercial sale by regulatory authorities;                                                                            
|
| |  | the amount of revenue, if any, that we may be able to realize
    from commercialization and sale of telbivudine and any of our
    other product candidates if such product candidates are approved
    for commercial sale by regulatory authorities;
|
| |  | the scope and results of our preclinical studies and clinical
    trials;                                                                                                                                                                              
|
| |  | the progress of our current preclinical and clinical development
    programs for HCV, HBV and HIV;                                                                                                                                                    
|
| |  | the cost of obtaining, maintaining and defending patents on our
    product candidates and processes;                                                                                                                                                  
|
| |  | the arrangements we establish for manufacturing and the related
    cost of manufacturing commercial supply of products;                                                                                                                               
|
| |  | the cost, timing and outcome of regulatory reviews;                                                                                                                                                                                                    
|
| |  | the cost of establishing and maintaining sales and marketing
    functions;                                                                                                                                                                            
|
| |  | the commercial potential of our product candidates;                                                                                                                                                                                                    
|
| |  | the rate of technological advances in our markets;                                                                                                                                                                                                     
|
| |  | the cost of acquiring or in-licensing new discovery compounds,
    technologies, product candidates or other business assets;                                                                                                                          
|
| |  | the magnitude of our general and administrative
    expenses; and                                                                                                                                                                                      
|
| |  | any costs we may incur under current and future licensing
    arrangements.                                                                                                                                                                            

24



---



##### Table of Contents











| |                                                                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We will not be able to commercialize our drug products
    successfully if we are unable to hire, train, deploy and retain
    qualified sales personnel to develop a direct sales
    force.





| |                                                                                         
| | ----------------------------------------------------------------------------------------
| | We will incur significant expense to establish our
    marketing and sales capabilities.





| |                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our market is subject to intense competition. If we are
    unable to compete effectively, our product candidates may be
    rendered noncompetitive or obsolete.



25



---



##### Table of Contents









| |   |                                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | significantly greater financial, technical and human resources
    than we have and may be better equipped to discover, develop,
    manufacture and commercialize products;
|
| |  | more extensive experience in preclinical studies and clinical
    trials, obtaining regulatory approvals and manufacturing and
    marketing pharmaceutical products;       
|
| |  | products that have been approved or are in late stage
    development; and                                                                                                  
|
| |  | collaborative arrangements in our target markets with leading
    companies and research institutions.                                                                      













26



---



##### Table of Contents





| |                                                                                                                                                                                           
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we successfully develop and obtain regulatory approval
    for our products, but those products do not achieve and maintain
    market acceptance, our business will not be successful.





| |   |                                                                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our products being clinically useful and demonstrating similar
    or superior therapeutic effect with an acceptable side effect
    profile as compared to existing or future treatments;                  
|
| |  | the timing of our receipt of any marketing approvals, the terms
    of any approval (including labeling requirements and/or
    limitations), and the countries in which approvals are obtained,
    if any;
|
| |  | the perception of our products by physicians and other members
    of the healthcare community and the success of our physician and
    healthcare professional education programs; and                     
|
| |  | the availability and level of government and third-party payer
    reimbursement.                                                                                                                           







| |   |                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | new products, including lower price generic products or
    technologies are introduced that are more favorably received
    than our products or render our products obsolete;
|
| |  | there are changes in the regulatory environment affecting
    manufacture, marketing or use of these products;                                                                 
|
| |  | litigation or threatened litigation arises with respect to our
    products;                                                                                                   
|
| |  | we are not successful in our marketing and sales efforts;                                                                                                                      
|
| |  | we encounter unfavorable publicity regarding our products or
    similiar products; or                                                                                         
|
| |  | complications, such as unacceptable levels of viral resistance
    or adverse side effects, arise with respect to use of our
    products.                                     



| |                                                                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our research and development efforts may not result in
    additional product candidates being discovered on timelines
    anticipated, if at all, which could limit our ability to
    generate revenues.



27



---



##### Table of Contents





| |                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------
| | Our failure to successfully acquire, develop and market
    additional product candidates or approved drugs would impair our
    ability to grow.









| |                                                                                                                                                                                                                                   
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | As we evolve from a company primarily involved in
    discovery and development to one also involved in
    commercialization, we may encounter difficulties in managing our
    growth and expanding our operations successfully.







| |                                                                                                                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we are not able to attract and retain key management,
    scientific and commercial personnel and advisors, we may not
    successfully develop our product candidates, commercialize any
    products or achieve our other business objectives.



28



---



##### Table of Contents







| |                                                                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our business has a substantial risk of product liability
    claims. If we are unable to obtain appropriate levels of
    insurance, a product liability claim against us could adversely
    affect our business.





| |                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our insurance policies are expensive and protect us only
    from some business risks, which will leave us exposed to
    significant, uninsured liabilities.





| |                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If the estimates we make, and the assumptions on which we
    rely, in preparing our financial statements prove inaccurate,
    our actual results may vary from those reflected in our
    projections and accruals.



29



---



##### Table of Contents





| |                                                                                                                                                                                                                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we fail to design and maintain an effective system of
    internal controls, we may not be able to accurately report our
    financial results or prevent fraud. As a result, current and
    potential stockholders could lose confidence in our financial
    reporting, which could harm our business and the trading price
    of our common stock.

10-K 10-K




Factors Related to Development, Clinical Testing and
Regulatory Approval of Our Product Candidates




| |                                                                                                                                                                                                            
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | All of our product candidates are in development and
    remain subject to clinical testing and regulatory approval. If
    we are unable to develop our product candidates, we will not be
    successful.





| |   |                                                                                  
| | - | ---------------------------------------------------------------------------------
| |  | offer therapeutic or other improvements over existing comparable
    drugs;      
|
| |  | be proven safe and effective in clinical trials;                                 
|
| |  | meet applicable regulatory standards;                                            
|
| |  | be capable of being produced in commercial quantities at
    acceptable costs; or
|
| |  | be successfully commercialized.                                                  



30



---



##### Table of Contents







| |                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------
| | If our clinical trials are not successful, we will not
    obtain regulatory approval for commercial sale of our product
    candidates.













| |   |                                                                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | discussions with the FDA or comparable foreign authorities
    regarding the scope or design of our clinical trials;                                                                                                                
|
| |  | delays or the inability to obtain required approvals from, or
    suspensions or termination by institutional review boards or
    other governing entities at clinical sites selected for
    participation in our clinical trials;
|
| |  | delays enrolling participants into clinical trials;                                                                                                                                                                                 
|
| |  | lower than anticipated retention of participants in clinical
    trials;                                                                                                                                                            
|
| |  | insufficient supply or deficient quality of product candidate
    materials or other materials necessary to conduct our clinical
    trials;                                                                                        

31



---



##### Table of Contents





| |   |                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------
| |  | serious or unexpected drug-related side effects experienced by
    participants in our clinical trials; or
|
| |  | negative results of clinical trials.                                                                      





| |   |                                                                                                                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | we may be unable to complete phase III and phase IIIb
    clinical trials of telbivudine;                                                                                                                                        
|
| |  | we may be unable to complete phase IIb clinical trials of
    valtorcitabine and/or valopicitabine;                                                                                                                              
|
| |  | we may be unable to initiate phase III clinical trials of
    valtorcitabine and/or valopicitabine;                                                                                                                              
|
| |  | we may be unable to commence human clinical trials of any
    additional HCV, HIV or other product candidates;                                                                                                                   
|
| |  | Novartis may choose not to license our product candidates other
    than telbivudine and valtorcitabine and we may not be able to
    enter into other collaborative arrangements for any of our other
    product candidates; or
|
| |  | we may not have the financial resources to continue research and
    development of our product candidates.                                                                                                                      



| |                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If our product candidates fail to obtain U.S. and/or
    foreign regulatory approval, we and our collaborators will be
    unable to commercialize our product candidates.









32



---



##### Table of Contents







| |                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Even if we obtain regulatory approvals, our products will
    be subject to ongoing regulatory review. If we fail to comply
    with applicable U.S. and foreign regulations, we could lose
    those approvals and our business would be seriously
    harmed.







| |                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we are subject to unfavorable pricing regulations,
    third-party reimbursement practices or healthcare reform
    initiatives, our business may be harmed.







33



---



##### Table of Contents





| |                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we receive regulatory clearance or approval but fail to
    comply with ongoing regulatory requirements, we may be subject
    to significant FDA sanctions.





| |   |                                                                                                                                                                                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | warning letters and other regulatory authority communications
    objecting to matters such as promotional materials and requiring
    corrective action such as revised communications to healthcare
    practitioners;
|
| |  | civil penalties;                                                                                                                                                                                                        
|
| |  | criminal penalties;                                                                                                                                                                                                     
|
| |  | injunctions;                                                                                                                                                                                                            
|
| |  | product seizure or detention;                                                                                                                                                                                           
|
| |  | product recalls;                                                                                                                                                                                                        
|
| |  | total or partial suspension of manufacturing; and                                                                                                                                                                       
|
| |  | FDA refusal to review or approve pending NDAs or supplements to
    NDAs for previously approved products, and/or similar rejections
    of marketing applications or supplements by foreign regulatory
    authorities.





| |                                                                                                                                   
| | ----------------------------------------------------------------------------------------------------------------------------------
| | If we violate healthcare statutes such as fraud and abuse
    laws, we would be subject to significant penalties and
    expenses.







34



---



##### Table of Contents









| |                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we do not comply with laws regulating the protection of
    the environment and health and human safety, our business could
    be adversely affected.



Factors Related to Our Relationship with Novartis




| |                                                                                                       
| | ------------------------------------------------------------------------------------------------------
| | Novartis has substantial control over us and could delay
    or prevent a change in corporate control.





| |   |                                                                                                                                      
| | - | -------------------------------------------------------------------------------------------------------------------------------------
| |  | the election of directors;                                                                                                           
|
| |  | any amendment of our restated certificate of incorporation or
    amended and restated by-laws;                                      
|
| |  | the approval of mergers and other significant corporate
    transactions, including a sale of substantially all of our
    assets; or
|
| |  | the defeat of any non-negotiated takeover attempt that might
    otherwise benefit our other stockholders.                           



| |                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Novartis has the right to exercise control over certain
    corporate actions that may not otherwise require stockholder
    approval as long as it holds at least 19.4% of our voting
    stock.





| |   |                                                                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the authorization or issuance of additional shares of our
    capital stock or the capital stock of our subsidiaries, except
    for a limited number of specified issuances;

35



---



##### Table of Contents





| |   |                                                                                                                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | any change or modification to the structure of our Board of
    Directors or a similar governing body of any of our subsidiaries;                                                                             
|
| |  | any amendment or modification to any of our organizational
    documents or those of our subsidiaries;                                                                                                        
|
| |  | the adoption of a three-year strategic plan;                                                                                                                                                                  
|
| |  | the adoption of an annual operating plan and budget, if there is
    no approved strategic plan;                                                                                                              
|
| |  | any decision that would result in a variance of total annual
    expenditures, capital or expense, in excess of 20% from the
    approved three-year strategic plan;                                          
|
| |  | any decision that would result in a variance in excess of the
    greater of $10 million or 20% of our profit or loss target
    in the strategic plan or annual operating plan;                              
|
| |  | the acquisition of stock or assets of another entity that
    exceeds 10% of our consolidated net revenue, net income or net
    assets;                                                                      
|
| |  | the sale, lease, license or other disposition of any assets or
    business which exceeds 10% of our net revenue, net income or net
    assets;                                                               
|
| |  | the incurrence of any indebtedness by us or our subsidiaries for
    borrowed money in excess of $2 million;                                                                                                  
|
| |  | any material change in the nature of our business or that of any
    of our subsidiaries;                                                                                                                     
|
| |  | any change in control of Idenix or any subsidiary; and                                                                                                                                                        
|
| |  | any dissolution or liquidation of Idenix or any subsidiary, or
    the commencement by us or any subsidiary of any action under
    applicable bankruptcy, insolvency, reorganization or liquidation
    laws.











| |   |                                                                                                                                                                                                                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | securities issued in connection with our acquisition of all of
    the capital stock or all or substantially all of the assets of
    another entity; and                                                                                                                                                            
|
| |  | shares of common stock issued upon exercise of stock options or
    stock awards pursuant to compensation and equity incentive
    plans. Notwithstanding the foregoing, voting stock includes up
    to 1,399,106 shares that were reserved as of May 8,
    2003 for issuance under our 1998 Equity Incentive Plan.

36



---



##### Table of Contents







| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We currently depend on one collaboration partner,
    Novartis, for substantially all our revenues and for support in
    commercialization of our HBV product candidates, and we may
    depend on Novartis for commercialization of other product
    candidates, including valopicitabine, our HCV product candidate.
    If our development, license and commercialization agreement with
    Novartis terminates, our business and, in particular, the
    development of our product candidates and the commercialization
    of any products that we successfully develop would be
    significantly harmed.









| |                                                                                                                                                                                                                                                                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Novartis has the option to license from us valopicitabine,
    our lead product candidate for the treatment of
    hepatitis C, and other product candidates. If Novartis does
    not exercise its option with respect to a product candidate, our
    development, manufacture and/or commercialization of such
    product candidate may be substantially delayed or
    limited.







37



---



##### Table of Contents







| |                                                                                                                                                                                                                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we breach any of the numerous representations and
    warranties we made to Novartis under the development agreement
    or the stock purchase agreement, Novartis has the right to seek
    indemnification from us for damages it suffers as result of such
    breach. These amounts could be substantial.











| |                                                                                                                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we materially breach our obligations or covenants
    arising under the development agreement or our master
    manufacturing and supply agreement with Novartis, we may lose
    our right to develop or commercialize our product
    candidates.



38



---



##### Table of Contents







| |                                                                                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we issue capital stock, in certain situations Novartis
    will be able to purchase shares at par value to maintain its
    percentage ownership in Idenix and, if that occurs, this could
    cause dilution. In addition, Novartis has the right, under
    specified circumstances, to purchase a pro rata portion of other
    shares that we may issue.

24-month




| |   |                                                                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the date that Novartis and its affiliates own less than 19.4% of
    our voting stock; or                                                                                                                             
|
| |  | the date that Novartis becomes obligated under the stock
    purchase agreement to make the additional future contingent
    payments of $357 million to our stockholders who sold
    shares to Novartis in May 2003.





| |   |                                                                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | securities issuable in connection with any stock split, reverse
    stock split, stock dividend or recapitalization that we
    undertake that affects all holders of our common stock
    proportionately;
|
| |  | shares that Novartis has the right to purchase at par value, as
    described above;                                                                                                                       
|
| |  | shares of common stock issuable upon exercise of stock options
    and other awards pursuant to our 1998 Equity Incentive
    Plan; and                                                                    
|
| |  | securities issuable in connection with our acquisition of all
    the capital stock or all or substantially all of the assets of
    another entity.                                                       



39



---



##### Table of Contents





| |                                                                                                                                                                                                                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If Novartis terminates or fails to perform its obligations
    under the development agreement, we may not be able to
    successfully commercialize our drug products licensed to
    Novartis and the development and commercialization of our other
    product candidates could be delayed, curtailed or
    terminated.







| |                                                                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Novartis has the right under certain circumstances to
    market and sell products that compete with the product
    candidates and products that we license to it, and any
    competition by Novartis could have a material adverse effect on
    our business.





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | this agreement not to compete extends only until May 2008;                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| |  | as to any country, the agreement not to compete would terminate
    if Novartis terminates the development agreement with respect to
    that country; and                                                                                                                                                                                                                                                                                                                                                           
|
| |  | if Novartis wishes to market, sell, promote or license a
    competitive product, it is required to inform us of the
    competitive product opportunity and, at our election, enter into
    good faith negotiations with us concerning such opportunity. If
    we either do not elect to enter into negotiations with respect
    to such opportunity or are unable to reach agreement within a
    specified period, Novartis would be free to proceed with its
    plans with respect to such competing product.



Factors Related to Our Dependence on Third Parties




| |                                                                                                                                                                                                                                                                                       
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Because we have limited sales, marketing and distribution
    capabilities, we may seek to enter into additional arrangements
    with third parties. We may not be successful in establishing
    these relationships or, if established, the relationship may not
    be successful.



40



---



##### Table of Contents







| |                                                                                                                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we seek to enter into collaboration agreements for any
    product candidates other than those licensed to Novartis and we
    are not successful in establishing such collaborations, we may
    not be able to continue development of those product
    candidates.







| |   |                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------
| |  | we may be required to expend our own funds to advance the
    product candidate to commercialization;
|
| |  | revenue from product sales could be delayed; or                                                      
|
| |  | we may elect not to develop or commercialize the product
    candidate.                              



| |                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If any collaborative partner terminates or fails to
    perform its obligations under agreements with us, the
    development and commercialization of our product candidates
    could be delayed or terminated.





| |                                                                                         
| | ----------------------------------------------------------------------------------------
| | Our collaborations with outside scientists may be subject
    to restriction and change.



41



---



##### Table of Contents





| |                                                                                                                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We depend on third-party manufacturers to manufacture
    products for us. If in the future we manufacture any of our
    products, we will be required to incur significant costs and
    devote significant efforts to establish these
    capabilities.











Factors Related to Patents and Licenses




| |                                                                                                                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we are unable to adequately protect our patents and
    licenses related to our product candidates, or if we infringe
    the rights of others, we may not be able to successfully
    commercialize our product candidates.



42



---



##### Table of Contents











43



---



##### Table of Contents















44



---



##### Table of Contents













45



---



##### Table of Contents









| |   |                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------
| |  | ownership of patents and patent applications;                                                                     
|
| |  | the patentability of our inventions relating to our product
    candidates; and/or                                
|
| |  | the enforceability, validity or scope of protection offered by
    our patents relating to our product candidates.









| |   |                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------
| |  | incur substantial monetary damages;                                                                                                          
|
| |  | encounter significant delays in bringing our product candidates
    to market; and/or                                                        
|
| |  | be precluded from participating in the manufacture, use or sale
    of our product candidates or methods of treatment requiring
    licenses.

46



---



##### Table of Contents





| |                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------
| | Confidentiality agreements with employees and others may
    not adequately prevent disclosure of trade secrets and other
    proprietary information.





| |                                                                                                                                                                                                         
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If any of our agreements that grant us the exclusive right
    to make, use and sell our product candidates are terminated, we
    may be unable to develop or commercialize our product
    candidates.







47



---



##### Table of Contents





| |                                                                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If our cooperative research agreement with the University
    of Cagliari is terminated, we may be unable to develop research
    results arising out of that work prior to the
    termination.



Factors Related to Our Common Stock




| |                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Sales of additional shares of our common stock could
    result in dilution to existing stockholders and cause the price
    of our common stock to decline.







| |                                                                                                           
| | ----------------------------------------------------------------------------------------------------------
| | Fluctuation of our quarterly results may cause our stock
    price to decline, resulting in losses to you.





| |   |                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | realization of license fees and achievement of milestones under
    our development agreement with Novartis and, to the extent
    applicable, other licensing and collaborative agreements;
|
| |  | reductions in revenue associated with Novartis right to
    maintain its percentage ownership of our voting stock when we
    issue shares at a price below fair market value;             
|
| |  | adverse developments regarding the safety and efficacy of our
    product candidates;                                                                                                       
|
| |  | the results of ongoing and planned clinical trials of our
    product candidates;                                                                                                           
|
| |  | developments in the market with respect to competing products or
    more generally the treatment of HBV, HCV or HIV;                                                                       
|
| |  | the results of regulatory reviews relating to the approval of
    our product candidates;                                                                                                   
|
| |  | the timing and success of launches of any product we
    successfully develop;                                                                                                              
|
| |  | the initiation or conclusion of litigation to enforce or defend
    any of our assets; and                                                                                                  
|
| |  | general and industry-specific economic conditions that may
    affect our research and development expenditures.                                                                            

48



---



##### Table of Contents







| |                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------
| | An investment in our common stock may decline in value as
    a result of announcements of business developments by us or our
    competitors.





| |   |                                                                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our collaboration with Novartis;                                                                                                                                                           
|
| |  | the results of discovery, preclinical studies and clinical
    trials by us or our competitors;                                                                                            
|
| |  | the acquisition of technologies, product candidates or products
    by us or our competitors;                                                                                              
|
| |  | the development of new technologies, product candidates or
    products by us or our competitors;                                                                                          
|
| |  | regulatory actions with respect to our product candidates or
    products or those of our competitors, including those relating
    to marketing authorizations, pricing and reimbursement;
|
| |  | the timing and success of launches of any product we
    successfully develop;                                                                                                             
|
| |  | the market acceptance of any products we successfully develop;                                                                                                                             
|
| |  | the initiation or conclusion of litigation to enforce or defend
    any of our assets; and                                                                                                 
|
| |  | significant acquisitions, strategic partnerships, joint ventures
    or capital commitments by us or our competitors.                                                                      





| |                                                                                                                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We could be subject to class action litigation due to
    stock price volatility, which, if it occurs, will distract our
    management and could result in substantial costs or large
    judgments against us.








|         |                           
|-------- | --------------------------
|Item 1B. | Unresolved Staff Comments.



49



---



##### Table of Contents








|        |            
|------- | -----------
|Item 2. | Properties.



|                    |  |             |              |  |     |  |                       |                 |  |  |               | 
|------------------- |  | ----------- | ------------ |  | --- |  | --------------------- | --------------- |  |  | ------------- | 
|                    |  | Approximate |              |  |     |  | Lease                 |                
|Property Location   |  | Square Feet |              |  | Use |  |                       | Expiration Date | 
|                    |  |             |              |  |     |  |                       |                 | 
|Cambridge, MA       |  |             | 36,513 sq ft |  |     |  | Office Headquarters   |                 |  |  | March 2010    | 
|                    |  |             | 39,014 sq ft |  |     |  | Office and Laboratory |                 |  |  | December 2013 | 
|Montpellier, France |  |             | 1,851 sq ft  |  |     |  | Office                |                 |  |  | August 2009   | 
|                    |  |             | 35,000 sq ft |  |     |  | Laboratory            |                 |  |  | April 2017    | 






|        |                   
|------- | ------------------
|Item 3. | Legal Proceedings.








|        |                                                         
|------- | --------------------------------------------------------
|Item 4. | Submission of Matters to a Vote of Security
    Holders.






PART II







|        |                                                                                                                      
|------- | ---------------------------------------------------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity, Related
    Stockholder Matters and Issuer Purchases of Equity
    Securities.

Market Information




|                                         |  |      |       |  |     |   |       | 
|---------------------------------------- |  | ---- | ----- |  | --- | - | ----- | 
|                                         |  | High |       |  | Low |  
|                                         |  |      |       |  |     |  
|2004                                     |  |      |       |  |     |   |       | 
|Third quarter (commencing July 22, 2004) |  | $    | 16.50 |  |     | $ | 8.39  | 
|Fourth quarter                           |  | $    | 18.80 |  |     | $ | 14.45 | 
|2005                                     |  |      |       |  |     |   |       | 
|First quarter                            |  | $    | 23.01 |  |     | $ | 15.66 | 
|Second quarter                           |  | $    | 22.97 |  |     | $ | 17.27 | 
|Third quarter                            |  | $    | 27.22 |  |     | $ | 20.86 | 
|Fourth quarter                           |  | $    | 26.96 |  |     | $ | 16.86 | 

Stockholders




Dividends




50



---



##### Table of Contents



Initial Public Offering and Use of Proceeds from the Sale of
Registered Securities


S-1 333-111157)




Repurchase of Securities









|        |                                     
|------- | ------------------------------------
|Item 6. | Selected Consolidated Financial Data

10-K,


|                                                                         |                            |                                       |         |        |         |   |        |        |         |   |         |        |        |      |         |        |        |   |         |        |        | 
|------------------------------------------------------------------------ | -------------------------- | ------------------------------------- | ------- | ------ | ------- | - | ------ | ------ | ------- | - | ------- | ------ | ------ | ---- | ------- | ------ | ------ | - | ------- | ------ | ------ | 
|                                                                         |                            | Years Ended December 31,              |        
|                                                                         |                            |                                       |        
|                                                                         |                            | 2005                                  |         |        | 2004    |   |        | 2003   |         |   | 2002    |        |        | 2001 |        
|                                                                         |                            |                                       |         |        |         |   |        |        |         |   |         |        |        |      |        
|                                                                         |                            | (In thousands, except per share data) |        
|Consolidated Statement of Operations Data:                               |                            |                                       |         |        |         |   |        |        |         |   |         |        |        |      |         |        |        |   |         |       
|Revenues                                                                 |                            | $                                     | 64,718  |        |         | $ | 95,389 |        |         | $ | 29,570  |        |        | $    | 3,465   |        |        | $ | 1,299   |       
|Operating expenses(1)                                                    |                            |                                       |         |        |         |   |        |        |         |   |         |        |        |      |         |        |        |   |         |       
|                                                                         | Research and development   |                                       |         | 86,590 |         |   |        | 79,979 |         |   |         | 51,477 |        |      |         | 29,317 |        |   |         | 20,858 |       
|                                                                         | General and administrative |                                       |         | 20,278 |         |   |        | 17,080 |         |   |         | 18,152 |        |      |         | 11,737 |        |   |         | 7,287  |       
|                                                                         | Sales and marketing        |                                       |         | 13,379 |         |   |        | 6,523  |         |   |         | 2,041  |        |      |         | 984    |        |   |         | 998    |       
|                                                                         |                            |                                       |         |        |         |   |        |        |         |   |         |        |        |      |        
|                                                                         |                            | Total operating expenses              |         |        | 120,247 |   |        |        | 103,582 |   |         |        | 71,670 |      |         |        | 42,038 |   |         |        | 29,143 | 
|                                                                         |                            |                                       |         |        |         |   |        |        |         |   |         |        |        |      |        
|Loss from operations                                                     |                            |                                       | (55,529 | )      |         |   | (8,193 | )      |         |   | (42,100 | )      |        |      | (38,573 | )      |        |   | (27,844 | )     
|Investment income, net                                                   |                            |                                       | 4,044   |        |         |   | 1,379  |        |         |   | 430     |        |        |      | 297     |        |        |   | 931     |       
|Other, net(2)                                                            |                            |                                       | 708     |        |         |   | 570    |        |         |   | (210    | )      |        |      | (80     | )      |        |   | (422    | )     
|                                                                         |                            |                                       |         |        |         |   |        |        |         |   |         |        |        |      |        
|Net loss                                                                 |                            |                                       | (50,777 | )      |         |   | (6,244 | )      |         |   | (41,880 | )      |        |      | (38,356 | )      |        |   | (27,335 | )     
|Accretion of redeemable convertible preferred stock                      |                            |                                       |        |        |         |   |       |        |         |   | (29,074 | )      |        |      | (59,165 | )      |        |   | (33,835 | )     
|                                                                         |                            |                                       |         |        |         |   |        |        |         |   |         |        |        |      |        
|Net loss attributable to common stockholders                             |                            | $                                     | (50,777 | )      |         | $ | (6,244 | )      |         | $ | (70,954 | )      |        | $    | (97,521 | )      |        | $ | (61,170 | )     
|                                                                         |                            |                                       |         |        |         |   |        |        |         |   |         |        |        |      |        
|Basic and diluted net loss per common share                              |                            | $                                     | (1.03   | )      |         | $ | (0.15  | )      |         | $ | (2.70   | )      |        | $    | (15.19  | )      |        | $ | (12.98  | )     
|                                                                         |                            |                                       |         |        |         |   |        |        |         |   |         |        |        |      |        
|Shares used in computing basic and diluted net loss per common
    share |                            |                                       | 49,395  |        |         |   | 41,369 |        |         |   | 26,232  |        |        |      | 6,421   |        |        |   | 4,713   |       

51



---



##### Table of Contents



|                                                        |  |                    |          |   |      |   |          |      |  |   |          |   |  |      |          |   |  |   |         |  
|------------------------------------------------------- |  | ------------------ | -------- | - | ---- | - | -------- | ---- |  | - | -------- | - |  | ---- | -------- | - |  | - | ------- | -
|                                                        |  | As of December 31, |         
|                                                        |  |                    |         
|                                                        |  | 2005               |          |   | 2004 |   |          | 2003 |  |   | 2002     |   |  | 2001 |         
|                                                        |  |                    |          |   |      |   |          |      |  |   |          |   |  |      |         
|                                                        |  | (In thousands)     |         
|Consolidated Balance Sheet Data:                        |  |                    |          |   |      |   |          |      |  |   |          |   |  |      |          |   |  |   |         |  
|Cash and cash equivalents                               |  | $                  | 83,733   |   |      | $ | 42,083   |      |  | $ | 43,485   |   |  | $    | 8,548    |   |  | $ | 38,846  |  
|Working capital                                         |  |                    | 167,069  |   |      |   | 70,123   |      |  |   | 30,399   |   |  |      | 1,602    |   |  |   | 35,281  |  
|Total assets                                            |  |                    | 277,657  |   |      |   | 187,118  |      |  |   | 67,090   |   |  |      | 12,226   |   |  |   | 44,945  |  
|Deferred revenue, current                               |  |                    |         |   |      |   |         |      |  |   | 107      |   |  |      | 1,306    |   |  |   | 1,358   |  
|Deferred revenue, net of current portion                |  |                    | 4,272    |   |      |   | 4,272    |      |  |   | 4,272    |   |  |      | 3,345    |   |  |   | 4,526   |  
|Deferred revenue, related party, current                |  |                    | 9,695    |   |      |   | 9,695    |      |  |   | 10,756   |   |  |      |         |   |  |   |        |  
|Deferred revenue, related party, net of current portion |  |                    | 29,089   |   |      |   | 38,779   |      |  |   | 54,239   |   |  |      |         |   |  |   |        |  
|Long-term obligations                                   |  |                    | 2,792    |   |      |   | 3,691    |      |  |   | 4,849    |   |  |      | 732      |   |  |   |        |  
|Redeemable convertible preferred stock                  |  |                    |         |   |      |   |         |      |  |   |         |   |  |      | 160,982  |   |  |   | 101,817 |  
|Accumulated deficit                                     |  |                    | (280,854 | ) |      |   | (230,077 | )    |  |   | (223,833 | ) |  |      | (153,058 | ) |  |   | (66,574 | )
|Total stockholders equity (deficit)                    |  |                    | 206,887  |   |      |   | 109,058  |      |  |   | (27,731  | ) |  |      | (161,362 | ) |  |   | (68,975 | )






|    |                                                                                                
|--- | -----------------------------------------------------------------------------------------------
|(1) | Stock-based compensation expenses included in operating expenses
    amounted to approximately:

|                           |  |                          |       |  |      |   |       |      |  |   |       |  |  |      |       |  |  |   |       | 
|-------------------------- |  | ------------------------ | ----- |  | ---- | - | ----- | ---- |  | - | ----- |  |  | ---- | ----- |  |  | - | ----- | 
|                           |  | Years Ended December 31, |      
|                           |  |                          |      
|                           |  | 2005                     |       |  | 2004 |   |       | 2003 |  |   | 2002  |  |  | 2001 |      
|                           |  |                          |       |  |      |   |       |      |  |   |       |  |  |      |      
|                           |  | (In thousands)           |      
|Research and development   |  | $                        | 722   |  |      | $ | 1,191 |      |  | $ | 1,288 |  |  | $    | 1,716 |  |  | $ | 7,284 | 
|General and administrative |  |                          | 560   |  |      |   | 781   |      |  |   | 3,328 |  |  |      | 2,368 |  |  |   | 501   | 
|Sales and marketing        |  |                          | 106   |  |      |   | 128   |      |  |   | 129   |  |  |      | 99    |  |  |   | 20    | 
|                           |  |                          |       |  |      |   |       |      |  |   |       |  |  |      |      
|                           |  | $                        | 1,388 |  |      | $ | 2,100 |      |  | $ | 4,745 |  |  | $    | 4,183 |  |  | $ | 7,805 | 
|                           |  |                          |       |  |      |   |       |      |  |   |       |  |  |      |      



|    |                                                                                  
|--- | ---------------------------------------------------------------------------------
|(2) | Other, net includes gain (loss) on foreign exchange and income
    tax provision.

52



---



##### Table of Contents








|        |                                                                                           
|------- | ------------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations.

The following discussion and analysis of financial condition
and results of operations should be read together with
Selected Consolidated Financial Data, and our
consolidated financial statements and related notes appearing
elsewhere in this document. This discussion contains
forward-looking statements based on our current expectations
related to future events and future financial performance that
involve known and unknown risks, uncertainties and assumptions.
Our actual results may differ materially from those anticipated
in these forward-looking statements as a result of many
important factors, including those set forth under Risk
Factors and elsewhere in this document.


Overview






|           |  |                             |  |                                                                                                                                                                        
|---------- |  | --------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Indication |  | Product Candidates/Programs |  | Current Stage of Development                                                                                                                                           
|           |  |                             |  |                                                                                                                                                                        
|HBV        |  | telbivudine                 |  | applications seeking marketing authorization have been filed in
    the U.S. and submitted in the EU, China and certain other
    territories/ phase III and phase IIIb
|          
|           |  | valtorcitabine              |  | phase IIb                                                                                                                                                              
|          
|HCV        |  | valopicitabine              |  | phase IIb                                                                                                                                                              
|           |  | NV-08                       |  | preclinical                                                                                                                                                            
|          
|HIV        |  | NV-05                       |  | preclinical                                                                                                                                                            









53



---



##### Table of Contents















54



---



##### Table of Contents











|           |     |  |                   |                |              |   |                          |      |  |   |        |  |  |      |        |  |       |   |        |  |  |   |         | 
|---------- | --- |  | ----------------- | -------------- | ------------ | - | ------------------------ | ---- |  | - | ------ |  |  | ---- | ------ |  | ----- | - | ------ |  |  | - | ------- | 
|           |     |  |                   | Period from    |              |   |                          |      |  |   |        |  | 
|           |     |  |                   | May 1, 1998    |              |   |                          |      |  |   |        |  | 
|           |     |  |                   | (Inception)    |              |   |                          |      | 
|           |     |  |                   | Through        |              |   | Years Ended December 31, |      |  |  
|Disease    |     |  |                   |                | December 31, |   |                          |      |  |   |       
|Indication |     |  | Product Candidate |                | 2002         |   |                          | 2003 |  |   | 2004   |  |  | 2005 |        |  | Total |  
|           |     |  |                   |                |              |   |                          |      |  |   |        |  |  |      |        |  |       |  
|           |     |  |                   | (In thousands) |              |   |                          |      |  |   |       
|           | HBV |  |                   | telbivudine    |              | $ | 20,232                   |      |  | $ | 21,287 |  |  | $    | 43,483 |  |       | $ | 46,447 |  |  | $ | 131,449 | 
|           | HBV |  |                   | valtorcitabine |              |   | 6,557                    |      |  |   | 1,781  |  |  |      | 8,673  |  |       |   | 3,770  |  |  |   | 20,781  | 
|           | HCV |  |                   | valopicitabine |              |   | 2,516                    |      |  |   | 6,431  |  |  |      | 7,096  |  |       |   | 12,140 |  |  |   | 28,183  | 
|           |     |  |                   |                |              |   |                          |      |  |   |        |  |  |      |        |  |       |  
|           |     |  |                   |                |              | $ | 29,305                   |      |  | $ | 29,499 |  |  | $    | 59,252 |  |       | $ | 62,357 |  |  | $ | 180,413 | 
|           |     |  |                   |                |              |   |                          |      |  |   |        |  |  |      |        |  |       |  



|                  |  |                  |           |                                  |                                 |                     
|----------------- |  | ---------------- | --------- | -------------------------------- | ------------------------------- | --------------------
|                  |  |                  |           | Estimated Additional Amount of  
|                  |  |                  |           | Direct Third-Party Research and 
|                  |  |                  |           | Development Expenses Expected to
|                  |  | Current Stage of |           |                                  | be Incurred Prior to Commercial
|Product Candidate |  | Development      |           |                                  | Launch                         
|                  |  |                  |           |                                  |                                
|telbivudine       |  |                  | phase III |                                  |                                 | $25 million         
|valtorcitabine    |  |                  | phase IIb |                                  |                                 | $50 to $60 million  
|valopicitabine    |  |                  | phase IIb |                                  |                                 | $280 to $300 million



55



---



##### Table of Contents









Results of Operations


Comparison of Years Ended December 31, 2005 and 2004




| |         
| | --------
| | Revenues











| |                                  
| | ---------------------------------
| | Research and Development Expenses





56



---



##### Table of Contents





| |                                    
| | -----------------------------------
| | General and Administrative Expenses







| |                             
| | ----------------------------
| | Sales and Marketing Expenses







| |                       
| | ----------------------
| | Investment Income, Net





| |             
| | ------------
| | Income Taxes



Results of Operations


Comparison of Years Ended December 31, 2004 and 2003




| |         
| | --------
| | Revenues







57



---



##### Table of Contents









| |                                  
| | ---------------------------------
| | Research and Development Expenses





| |                                    
| | -----------------------------------
| | General and Administrative Expenses





| |                             
| | ----------------------------
| | Sales and Marketing Expenses





| |                       
| | ----------------------
| | Investment Income, Net





| |             
| | ------------
| | Income Taxes



58



---



##### Table of Contents





Liquidity and Capital Resources














59



---



##### Table of Contents









|                                   |  |                        |        |           |          |   |       |       |  |         |            |  |            |       |       |  |  |   |       | 
|---------------------------------- |  | ---------------------- | ------ | --------- | -------- | - | ----- | ----- |  | ------- | ---------- |  | ---------- | ----- | ----- |  |  | - | ----- | 
|                                   |  | Payments Due by Period |       
|                                   |  |                        |       
|                                   |  |                        |        | One to    |          |   |      
|                                   |  |                        |        | Less Than |          |   | Three |       |  | Four to |            |  | After Five |      
|Contractual Cash Obligations       |  | Total                  |        |           | One Year |   |       | Years |  |         | Five Years |  |            | Years |      
|                                   |  |                        |        |           |          |   |       |       |  |         |            |  |            |       |      
|                                   |  | (In thousands)         |       
|Operating leases                   |  | $                      | 20,549 |           |          | $ | 2,554 |       |  | $       | 5,575      |  |            | $     | 4,929 |  |  | $ | 7,491 | 
|Consulting and other agreements    |  |                        | 14,007 |           |          |   | 5,687 |       |  |         | 4,790      |  |            |       | 3,530 |  |  |   |      | 
|                                   |  |                        |        |           |          |   |       |       |  |         |            |  |            |       |      
|Total contractual cash obligations |  | $                      | 34,556 |           |          | $ | 8,241 |       |  | $       | 10,365     |  |            | $     | 8,459 |  |  | $ | 7,491 | 
|                                   |  |                        |        |           |          |   |       |       |  |         |            |  |            |       |      



48-month








60



---



##### Table of Contents

















Off-Balance Sheet Transactions




61



---



##### Table of Contents



Critical Accounting Policies and Estimates








| |                                               
| | ----------------------------------------------
| | Collaborative Research and Development Revenue

Revenue Recognition in Financial Statements.




24-month






62



---



##### Table of Contents

















| |   |                                                                                                 
| | - | ------------------------------------------------------------------------------------------------
| |  | the milestone is non-refundable;                                                                
|
| |  | achievement of the milestone was not reasonably assured at the
    inception of the arrangement;
|
| |  | substantive effort is involved to achieve the milestone; and                                    

63



---



##### Table of Contents





| |   |                                                                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the amount of the milestone appears reasonable in relation to
    the effort expended, the other milestones in the arrangement and
    the related risk associated with the achievement of the
    milestone.





00-21, Accounting for Revenue Arrangements with Multiple
Deliverables, 00-21. 00-21 00-21




| |                 
| | ----------------
| | Accrued Expenses





| |                         
| | ------------------------
| | Stock-Based Compensation

Accounting for Stock Issued to
Employees.


64



---



##### Table of Contents



Accounting for Stock
Compensation.


Share-Based Payment




Recent Accounting Pronouncements


The Meaning of Other-Than-Temporary Impairment and Its
Application to Certain Investments.


Accounting
Changes and Error Corrections, Accounting Changes, Reporting
Accounting Changes in Interim Financial Statements 
an amendment of APB Opinion No. 28.


Accounting for Uncertain Tax
Positions. Accounting for Income Taxes.


65



---



##### Table of Contents








|         |                                                               
|-------- | --------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosure about Market
    Risk.








|        |                                             
|------- | --------------------------------------------
|Item 8. | Financial Statements and Supplementary Data.

10-K.







|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements With Accountants on
    Accounting and Financial Disclosure.








|         |                         
|-------- | ------------------------
|Item 9A. | Controls and Procedures.

Disclosure Controls and Procedures


13a-15(e) 15d-15(e)


Managements Annual Report on Internal Control Over
Financial Reporting


13a-15(f) 15d-15(f)




| |   |                                                                                                                                                                                                                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | pertain to the maintenance of records that in reasonable detail
    accurately and fairly reflect the transactions and dispositions
    of Idenix assets;                                                                                                                                                                                          
|
| |  | provide reasonable assurance that transactions are recorded as
    necessary to permit preparation of financial statements in
    accordance with U.S. generally accepted accounting
    principles, and that receipts and expenditures of Idenix are
    being made only in accordance with authorizations of our
    management and directors; and
|
| |  | provide reasonable assurance regarding prevention or timely
    detection of unauthorized acquisition, use or disposition of
    Idenix assets that could have a material effect on the
    financial statements.                                                                                                                                  



66



---



##### Table of Contents





Internal
Control-Integrated Framework.




Changes in Internal Control Over Financial Reporting


13a-15(f) 15d-15(f)







|         |                   
|-------- | ------------------
|Item 9B. | Other Information.






PART III





Items 10-14.






67



---



##### Table of Contents






PART IV







|         |                                           
|-------- | ------------------------------------------
|Item 15. | Exhibits and Financial Statement Schedules

(a)(1) Financial Statements: 10-K


|                                                                                                                                              |  |      |    | 
|--------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                                                                                              |  | Page |   
|                                                                                                                                              |  |      |   
|Reports of Independent Registered Public
    Accounting Firm                                                                                  |  |      | 69 | 
|Consolidated Balance Sheets at
    December 31, 2005 and 2004                                                                                 |  |      | 71 | 
|Consolidated Statements of Operations for
    the Years Ended December 31, 2005, 2004 and 2003                                                |  |      | 72 | 
|Consolidated Statements of
    Stockholders Equity (Deficit) and Comprehensive Loss for
    the Years Ended December 31, 2005, 2004 and 2003 |  |      | 73 | 
|Consolidated Statements of Cash Flows for
    the Years Ended December 31, 2005, 2004 and 2003                                                |  |      | 74 | 
|Notes to the Consolidated Financial
    Statements                                                                                            |  |      | 75 | 

(a)(2) Financial Statement Schedules.


(a)(3) Exhibits. 10-K


68



---



##### Table of Contents






Report of Independent Registered Public Accounting Firm






Consolidated financial statements




Internal control over financial reporting


Internal Control  Integrated
Framework Internal Control  Integrated
Framework




69



---



##### Table of Contents













70



---



##### Table of Contents



IDENIX PHARMACEUTICALS, INC.





CONSOLIDATED BALANCE SHEETS


|                                                        |                                                                                                                                                                                                             |                            |                                            |          |         |         |        |          |         |         | 
|------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------------------------------------------ | -------- | ------- | ------- | ------ | -------- | ------- | ------- | 
|                                                        |                                                                                                                                                                                                             | December 31,               |                                           
|                                                        |                                                                                                                                                                                                             |                            |                                           
|                                                        |                                                                                                                                                                                                             | 2005                       |                                            |          | 2004    |        
|                                                        |                                                                                                                                                                                                             |                            |                                            |          |         |        
|                                                        |                                                                                                                                                                                                             | (In thousands,             |                                           
|                                                        |                                                                                                                                                                                                             | except share data)         |                                           
|ASSETS                                                 
|Current assets:                                         |                                                                                                                                                                                                             |                            |                                            |          |         |         |        |         
|                                                        | Cash and cash equivalents                                                                                                                                                                                   |                            | $                                          | 83,733   |         |         | $      | 42,083   |        
|                                                        | Restricted cash                                                                                                                                                                                             |                            |                                            | 411      |         |         |        |         |        
|                                                        | Marketable securities                                                                                                                                                                                       |                            |                                            | 95,579   |         |         |        | 38,429   |        
|                                                        | Receivables from related party                                                                                                                                                                              |                            |                                            | 13,723   |         |         |        | 16,243   |        
|                                                        | Prepaid expenses and other current assets                                                                                                                                                                   |                            |                                            | 6,139    |         |         |        | 3,231    |        
|                                                        |                                                                                                                                                                                                             |                            |                                            |          |         |        
|                                                        |                                                                                                                                                                                                             | Total current assets       |                                            |          | 199,585 |         |        |          | 99,986  |        
|Property and equipment, net                             |                                                                                                                                                                                                             |                            | 11,051                                     |          |         |         | 6,805  |         
|Restricted cash, non-current                            |                                                                                                                                                                                                             |                            | 750                                        |          |         |         | 750    |         
|Marketable securities, non-current                      |                                                                                                                                                                                                             |                            | 62,855                                     |          |         |         | 76,754 |         
|Income taxes receivable                                 |                                                                                                                                                                                                             |                            | 946                                        |          |         |         | 370    |         
|Investment                                              |                                                                                                                                                                                                             |                            | 500                                        |          |         |         | 500    |         
|Other assets                                            |                                                                                                                                                                                                             |                            | 1,970                                      |          |         |         | 1,953  |         
|                                                        |                                                                                                                                                                                                             |                            |                                            |          |         |        
|                                                        |                                                                                                                                                                                                             | Total assets               |                                            | $        | 277,657 |         |        | $        | 187,118 |        
|                                                        |                                                                                                                                                                                                             |                            |                                            |          |         |        
|                                                       
|LIABILITIES AND STOCKHOLDERS EQUITY                   
|Current liabilities:                                    |                                                                                                                                                                                                             |                            |                                            |          |         |         |        |         
|                                                        | Accounts payable                                                                                                                                                                                            |                            | $                                          | 5,665    |         |         | $      | 4,619    |        
|                                                        | Accrued expenses                                                                                                                                                                                            |                            |                                            | 16,685   |         |         |        | 15,300   |        
|                                                        | Deferred rent                                                                                                                                                                                               |                            |                                            | 265      |         |         |        | 50       |        
|                                                        | Deferred revenue, related party                                                                                                                                                                             |                            |                                            | 9,695    |         |         |        | 9,695    |        
|                                                        | Income taxes payable                                                                                                                                                                                        |                            |                                            | 206      |         |         |        | 199      |        
|                                                        |                                                                                                                                                                                                             |                            |                                            |          |         |        
|                                                        |                                                                                                                                                                                                             | Total current liabilities  |                                            |          | 32,516  |         |        |          | 29,863  |        
|Long-term obligations                                   |                                                                                                                                                                                                             |                            | 2,792                                      |          |         |         | 3,691  |         
|Deferred rent, net of current portion                   |                                                                                                                                                                                                             |                            | 2,101                                      |          |         |         | 1,455  |         
|Deferred revenue                                        |                                                                                                                                                                                                             |                            | 4,272                                      |          |         |         | 4,272  |         
|Deferred revenue, related party, net of current portion |                                                                                                                                                                                                             |                            | 29,089                                     |          |         |         | 38,779 |         
|                                                        |                                                                                                                                                                                                             |                            |                                            |          |         |        
|                                                        |                                                                                                                                                                                                             | Total liabilities          |                                            |          | 70,770  |         |        |          | 78,060  |        
|Commitments and contingencies (Note 15)                 |                                                                                                                                                                                                             |                            |                                            |          |         |         |        |         
|Stockholders equity:                                   |                                                                                                                                                                                                             |                            |                                            |          |         |         |        |         
|                                                        | Common stock, $0.001 par value; 60,000,000 shares
    authorized at December 31, 2005 and 2004; 55,813,275 and
    47,857,887 shares issued and outstanding at
    December 31, 2005 and 2004, respectively |                            |                                            | 56       |         |         |        | 48       |        
|                                                        | Additional paid-in capital                                                                                                                                                                                  |                            |                                            | 488,340  |         |         |        | 340,938  |        
|                                                        | Deferred compensation                                                                                                                                                                                       |                            |                                            | (320     | )       |         |        | (1,987   | )      
|                                                        | Accumulated other comprehensive (loss) income                                                                                                                                                               |                            |                                            | (335     | )       |         |        | 136      |        
|                                                        | Accumulated deficit                                                                                                                                                                                         |                            |                                            | (280,854 | )       |         |        | (230,077 | )      
|                                                        |                                                                                                                                                                                                             |                            |                                            |          |         |        
|                                                        |                                                                                                                                                                                                             | Total stockholders equity |                                            |          | 206,887 |         |        |          | 109,058 |        
|                                                        |                                                                                                                                                                                                             |                            |                                            |          |         |        
|                                                        |                                                                                                                                                                                                             |                            | Total liabilities and stockholders equity |          | $       | 277,657 |        |          | $       | 187,118 | 
|                                                        |                                                                                                                                                                                                             |                            |                                            |          |         |        



71



---



##### Table of Contents



IDENIX PHARMACEUTICALS, INC.





CONSOLIDATED STATEMENTS OF OPERATIONS


|                                                                         |                                                                             |                                       |         |        |      |   |         |        |  |   |         |        |  
|------------------------------------------------------------------------ | --------------------------------------------------------------------------- | ------------------------------------- | ------- | ------ | ---- | - | ------- | ------ |  | - | ------- | ------ | -
|                                                                         |                                                                             | Years Ended December 31,              |        
|                                                                         |                                                                             |                                       |        
|                                                                         |                                                                             | 2005                                  |         |        | 2004 |   |         | 2003   | 
|                                                                         |                                                                             |                                       |         |        |      |   |         |        | 
|                                                                         |                                                                             | (In thousands, except per share data) |        
|Revenues:                                                                |                                                                             |                                       |         |        |      |   |         |        |  |   |         |       
|                                                                         | License fees and collaborative research and
    development  related party |                                       | $       | 64,418 |      |   | $       | 95,004 |  |   | $       | 33,327 |  
|                                                                         | License fees and collaborative research and
    development  other         |                                       |         |       |      |   |         |       |  |   |         | (4,165 | )
|                                                                         | Government research grants                                                  |                                       |         | 300    |      |   |         | 385    |  |   |         | 408    |  
|                                                                         |                                                                             |                                       |         |        |      |   |         |        | 
|Total revenues                                                           |                                                                             |                                       | 64,718  |        |      |   | 95,389  |        |  |   | 29,570  |       
|Operating expenses(1):                                                   |                                                                             |                                       |         |        |      |   |         |        |  |   |         |       
|                                                                         | Research and development                                                    |                                       |         | 86,590 |      |   |         | 79,979 |  |   |         | 51,477 |  
|                                                                         | General and administrative                                                  |                                       |         | 20,278 |      |   |         | 17,080 |  |   |         | 18,152 |  
|                                                                         | Sales and marketing                                                         |                                       |         | 13,379 |      |   |         | 6,523  |  |   |         | 2,041  |  
|                                                                         |                                                                             |                                       |         |        |      |   |         |        | 
|Total operating expenses                                                 |                                                                             |                                       | 120,247 |        |      |   | 103,582 |        |  |   | 71,670  |       
|                                                                         |                                                                             |                                       |         |        |      |   |         |        | 
|Loss from operations                                                     |                                                                             |                                       | (55,529 | )      |      |   | (8,193  | )      |  |   | (42,100 | )     
|Investment income, net                                                   |                                                                             |                                       | 4,044   |        |      |   | 1,379   |        |  |   | 430     |       
|Other (expense) income                                                   |                                                                             |                                       | (6      | )      |      |   | 4       |        |  |   | (26     | )     
|                                                                         |                                                                             |                                       |         |        |      |   |         |        | 
|Loss before income taxes                                                 |                                                                             |                                       | (51,491 | )      |      |   | (6,810  | )      |  |   | (41,696 | )     
|Income tax benefit (provision)                                           |                                                                             |                                       | 714     |        |      |   | 566     |        |  |   | (184    | )     
|                                                                         |                                                                             |                                       |         |        |      |   |         |        | 
|Net loss                                                                 |                                                                             |                                       | (50,777 | )      |      |   | (6,244  | )      |  |   | (41,880 | )     
|                                                                         |                                                                             |                                       |         |        |      |   |         |        | 
|Accretion of redeemable convertible preferred stock                      |                                                                             |                                       |        |        |      |   |        |        |  |   | (29,074 | )     
|                                                                         |                                                                             |                                       |         |        |      |   |         |        | 
|Net loss attributable to common stockholders                             |                                                                             | $                                     | (50,777 | )      |      | $ | (6,244  | )      |  | $ | (70,954 | )     
|                                                                         |                                                                             |                                       |         |        |      |   |         |        | 
|Basic and diluted net loss per common share                              |                                                                             | $                                     | (1.03   | )      |      | $ | (0.15   | )      |  | $ | (2.70   | )     
|                                                                         |                                                                             |                                       |         |        |      |   |         |        | 
|Shares used in computing basic and diluted net loss per common
    share |                                                                             |                                       | 49,395  |        |      |   | 41,369  |        |  |   | 26,232  |       






|    |                                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | In the years ended December 31, 2005, 2004 and 2003,
    stock-based compensation expenses included in operating expenses
    amounted to approximately:

|                           |  |      |       |  |      |   |       |      |  |   |       | 
|-------------------------- |  | ---- | ----- |  | ---- | - | ----- | ---- |  | - | ----- | 
|                           |  | 2005 |       |  | 2004 |   |       | 2003 | 
|                           |  |      |       |  |      |   |       |      | 
|Research and development   |  | $    | 722   |  |      | $ | 1,191 |      |  | $ | 1,288 | 
|General and administrative |  |      | 560   |  |      |   | 781   |      |  |   | 3,328 | 
|Sales and marketing        |  |      | 106   |  |      |   | 128   |      |  |   | 129   | 
|                           |  |      |       |  |      |   |       |      | 
|                           |  | $    | 1,388 |  |      | $ | 2,100 |      |  | $ | 4,745 | 
|                           |  |      |       |  |      |   |       |      | 



72



---



##### Table of Contents





IDENIX PHARMACEUTICALS, INC.





CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
(DEFICIT) AND COMPREHENSIVE LOSS


For the Years Ended December 31, 2003, 2004, 2005


|                             |                                                                                                                            |                                   |            |            |            |   |    |          |  |               |              |         |   |             |        |       |               |   |      |                  |   |   |          |         |   |   |          |         |   |  |   |         |  
|---------------------------- | -------------------------------------------------------------------------------------------------------------------------- | --------------------------------- | ---------- | ---------- | ---------- | - | -- | -------- |  | ------------- | ------------ | ------- | - | ----------- | ------ | ----- | ------------- | - | ---- | ---------------- | - | - | -------- | ------- | - | - | -------- | ------- | - |  | - | ------- | -
|                             |                                                                                                                            |                                   |            |            |            |   |    |          |  | Accumulated   |              |         |   |             |        |       |              
|                             |                                                                                                                            |                                   |            |            |            |   |    | Other    |  |               |              |         |   |             |       
|                             |                                                                                                                            | Common Stock                      |            |            | Additional |   |    |          |  | Comprehensive |              |         |   |             | Total  |       |               |  
|                             |                                                                                                                            |                                   |            |            | Paid-In    |   |    | Deferred |  |               | Income       |         |   | Accumulated |        |       | Stockholders |   |      | Comprehensive    |  
|                             |                                                                                                                            | Shares                            |            |            | Amount     |   |    | Capital  |  |               | Compensation |         |   | (Loss)      |        |       | Deficit       |   |      | Equity (Deficit) |   |   | Loss     |        
|                             |                                                                                                                            |                                   |            |            |            |   |    |          |  |               |              |         |   |             |        |       |               |   |      |                  |   |   |          |        
|                             |                                                                                                                            | (In thousands, except share data) |           
|Balance at December 31, 2002 |                                                                                                                            |                                   | 7,266,744  |            |            | $ | 7  |          |  | $             |             |         |   | $           | (8,461 | )     |               | $ | 150  |                  |   | $ | (153,058 | )       |   | $ | (161,362 | )       |   |  |   |        
|                             | Vesting of restricted stock                                                                                                |                                   |            | 33,600     |            |   |    |         |  |               |              |        |   |             |        |      |               |   |      |                 |   |   |          |        |   |   |          |        |   |  |   |         |  
|                             | Accretion of redeemable preferred stock to redemption value                                                                |                                   |            |           |            |   |    |         |  |               |              | (179    | ) |             |        |      |               |   |      |                 |   |   |          | (17,018 | ) |   |          | (17,197 | ) |  |   |         |  
|                             | Accretion of Series B and C preferred stock cumulative
    dividends                                                       |                                   |            |           |            |   |    |         |  |               |              |        |   |             |        |      |               |   |      |                 |   |   |          | (1,805  | ) |   |          | (1,805  | ) |  |   |         |  
|                             | Common stock dividend to Series C preferred stockholders                                                                   |                                   |            | 1,537,725  |            |   |    | 1        |  |               |              | 17,683  |   |             |        |      |               |   |      |                 |   |   |          | (10,072 | ) |   |          | 7,612   |   |  |   |         |  
|                             | Conversion of Series A, B and C preferred stock to common
    stock                                                        |                                   |            | 26,858,239 |            |   |    | 27       |  |               |              | 172,344 |   |             |        |      |               |   |      |                 |   |   |          |        |   |   |          | 172,371 |   |  |   |         |  
|                             | Issuance of common stock upon exercise of employee stock options                                                           |                                   |            | 654,742    |            |   |    | 1        |  |               |              | 1,129   |   |             |        |      |               |   |      |                 |   |   |          |        |   |   |          | 1,130   |   |  |   |         |  
|                             | Issuance of common stock upon vesting of restricted stock options                                                          |                                   |            | 99,333     |            |   |    |         |  |               |              | 282     |   |             |        |      |               |   |      |                 |   |   |          |        |   |   |          | 282     |   |  |   |         |  
|                             | Income tax benefit associated with the exercise of employee
    stock options                                              |                                   |            |           |            |   |    |         |  |               |              | 136     |   |             |        |      |               |   |      |                 |   |   |          |        |   |   |          | 136     |   |  |   |         |  
|                             | Compensation related to modification of employee stock options                                                             |                                   |            |           |            |   |    |         |  |               |              | 82      |   |             |        |      |               |   |      |                 |   |   |          |        |   |   |          | 82      |   |  |   |         |  
|                             | Deferred compensation related to stock option grants                                                                       |                                   |            |           |            |   |    |         |  |               |              | 91      |   |             |        | (91   | )             |   |      |                 |   |   |          |        |   |   |          |        |   |  |   |         |  
|                             | Amortization of deferred compensation                                                                                      |                                   |            |           |            |   |    |         |  |               |              |        |   |             |        | 4,663 |               |   |      |                 |   |   |          |        |   |   |          | 4,663   |   |  |   |         |  
|                             | Antidilution shares contingently issuable to related party                                                                 |                                   |            |           |            |   |    |         |  |               |              | 8,041   |   |             |        |      |               |   |      |                 |   |   |          |        |   |   |          | 8,041   |   |  |   |         |  
|                             | Net loss                                                                                                                   |                                   |            |           |            |   |    |         |  |               |              |        |   |             |        |      |               |   |      |                 |   |   |          | (41,880 | ) |   |          | (41,880 | ) |  | $ | (41,880 | )
|                             | Cumulative translation adjustment                                                                                          |                                   |            |           |            |   |    |         |  |               |              |        |   |             |        |      |               |   |      | 196              |   |   |          |        |   |   |          | 196     |   |  |   | 196     |  
|                             |                                                                                                                            |                                   |            |            |            |   |    |          |  |               |              |         |   |             |        |       |               |   |      |                  |   |   |          |        
|                             | Comprehensive loss                                                                                                         |                                   |            |           |            |   |    |         |  |               |              |        |   |             |        |      |               |   |      |                 |   |   |          |        |   |   |          |        |   |  | $ | (41,684 | )
|                             |                                                                                                                            |                                   |            |            |            |   |    |          |  |               |              |         |   |             |        |       |               |   |      |                  |   |   |          |        
|Balance at December 31, 2003 |                                                                                                                            |                                   | 36,450,383 |            |            |   | 36 |          |  |               | 199,609      |         |   |             | (3,889 | )     |               |   | 346  |                  |   |   | (223,833 | )       |   |   | (27,731  | )       |   |  |   |        
|                             | Issuance of common stock to related party                                                                                  |                                   |            | 108        |            |   |    |         |  |               |              |        |   |             |        |      |               |   |      |                 |   |   |          |        |   |   |          |        |   |  |   |         |  
|                             | Issuance of common stock upon initial public offering, net of
    offering expenses and underwriting discounts of $7,425   |                                   |            | 4,600,000  |            |   |    | 5        |  |               |              | 56,970  |   |             |        |      |               |   |      |                 |   |   |          |        |   |   |          | 56,975  |   |  |   |         |  
|                             | Issuance of common stock upon private placement with related
    party                                                     |                                   |            | 5,400,000  |            |   |    | 5        |  |               |              | 75,595  |   |             |        |      |               |   |      |                 |   |   |          |        |   |   |          | 75,600  |   |  |   |         |  
|                             | Issuance of common stock upon exercise of employee stock options                                                           |                                   |            | 210,646    |            |   |    | 1        |  |               |              | 885     |   |             |        |      |               |   |      |                 |   |   |          |        |   |   |          | 886     |   |  |   |         |  
|                             | Issuance of common stock upon vesting of restricted stock options                                                          |                                   |            | 96,750     |            |   |    |         |  |               |              | 286     |   |             |        |      |               |   |      |                 |   |   |          |        |   |   |          | 286     |   |  |   |         |  
|                             | Deferred compensation related to employee stock option grants                                                              |                                   |            |           |            |   |    |         |  |               |              | 198     |   |             |        | (198  | )             |   |      |                 |   |   |          |        |   |   |          |        |   |  |   |         |  
|                             | Amortization of deferred compensation                                                                                      |                                   |            |           |            |   |    |         |  |               |              |        |   |             |        | 2,100 |               |   |      |                 |   |   |          |        |   |   |          | 2,100   |   |  |   |         |  
|                             | Issuance of common stock for settlement of antidilution shares
    contingently issuable to related party                  |                                   |            | 1,100,000  |            |   |    | 1        |  |               |              |        |   |             |        |      |               |   |      |                 |   |   |          |        |   |   |          | 1       |   |  |   |         |  
|                             | Antidilution shares contingently issuable to related party                                                                 |                                   |            |           |            |   |    |         |  |               |              | 7,395   |   |             |        |      |               |   |      |                 |   |   |          |        |   |   |          | 7,395   |   |  |   |         |  
|                             | Net loss                                                                                                                   |                                   |            |           |            |   |    |         |  |               |              |        |   |             |        |      |               |   |      |                 |   |   |          | (6,244  | ) |   |          | (6,244  | ) |  | $ | (6,244  | )
|                             | Net change in unrealized holding losses on marketable securities                                                           |                                   |            |           |            |   |    |         |  |               |              |        |   |             |        |      |               |   |      | (343             | ) |   |          |        |   |   |          | (343    | ) |  |   | (343    | )
|                             | Cumulative translation adjustment                                                                                          |                                   |            |           |            |   |    |         |  |               |              |        |   |             |        |      |               |   |      | 133              |   |   |          |        |   |   |          | 133     |   |  |   | 133     |  
|                             |                                                                                                                            |                                   |            |            |            |   |    |          |  |               |              |         |   |             |        |       |               |   |      |                  |   |   |          |        
|                             | Comprehensive loss                                                                                                         |                                   |            |           |            |   |    |         |  |               |              |        |   |             |        |      |               |   |      |                 |   |   |          |        |   |   |          |        |   |  | $ | (6,454  | )
|                             |                                                                                                                            |                                   |            |            |            |   |    |          |  |               |              |         |   |             |        |       |               |   |      |                  |   |   |          |        
|Balance at December 31, 2004 |                                                                                                                            |                                   | 47,857,887 |            |            |   | 48 |          |  |               | 340,938      |         |   |             | (1,987 | )     |               |   | 136  |                  |   |   | (230,077 | )       |   |   | 109,058  |         |   |  |   |        
|                             | Issuance of common stock upon follow on public offering, net of
    offering expenses and underwriting discounts of $4,567 |                                   |            | 3,338,889  |            |   |    | 3        |  |               |              | 64,245  |   |             |        |      |               |   |      |                 |   |   |          |        |   |   |          | 64,248  |   |  |   |         |  
|                             | Issuance of common stock upon follow on public offering, with
    related party                                            |                                   |            | 3,939,131  |            |   |    | 4        |  |               |              | 81,181  |   |             |        |      |               |   |      |                 |   |   |          |        |   |   |          | 81,185  |   |  |   |         |  
|                             | Compensation related to modification of employee stock options                                                             |                                   |            |           |            |   |    |         |  |               |              | 98      |   |             |        |      |               |   |      |                 |   |   |          |        |   |   |          | 98      |   |  |   |         |  
|                             | Issuance of common stock upon exercise of stock options                                                                    |                                   |            | 590,618    |            |   |    | 1        |  |               |              | 2,017   |   |             |        |      |               |   |      |                 |   |   |          |        |   |   |          | 2,018   |   |  |   |         |  
|                             | Issuance of common stock upon vesting of stock options                                                                     |                                   |            | 86,750     |            |   |    |         |  |               |              | 255     |   |             |        |      |               |   |      |                 |   |   |          |        |   |   |          | 255     |   |  |   |         |  
|                             | Forfeiture of common stock under stock option plans                                                                        |                                   |            |           |            |   |    |         |  |               |              | (385    | ) |             |        | 385   |               |   |      |                 |   |   |          |        |   |   |          |        |   |  |   |         |  
|                             | Amortization of deferred compensation                                                                                      |                                   |            |           |            |   |    |         |  |               |              |        |   |             |        | 1,282 |               |   |      |                 |   |   |          |        |   |   |          | 1,282   |   |  |   |         |  
|                             | Antidilution shares contingently issuable to related party                                                                 |                                   |            |           |            |   |    |         |  |               |              | (9      | ) |             |        |      |               |   |      |                 |   |   |          |        |   |   |          | (9      | ) |  |   |         |  
|                             | Net loss                                                                                                                   |                                   |            |           |            |   |    |         |  |               |              |        |   |             |        |      |               |   |      |                 |   |   |          | (50,777 | ) |   |          | (50,777 | ) |  | $ | (50,777 | )
|                             | Net change in unrealized holding gains on marketable securities                                                            |                                   |            |           |            |   |    |         |  |               |              |        |   |             |        |      |               |   |      | 119              |   |   |          |        |   |   |          | 119     |   |  |   | 119     |  
|                             | Cumulative translation adjustment                                                                                          |                                   |            |           |            |   |    |         |  |               |              |        |   |             |        |      |               |   |      | (590             | ) |   |          |        |   |   |          | (590    | ) |  |   | (590    | )
|                             |                                                                                                                            |                                   |            |            |            |   |    |          |  |               |              |         |   |             |        |       |               |   |      |                  |   |   |          |        
|                             | Comprehensive loss                                                                                                         |                                   |            |           |            |   |    |         |  |               |              |        |   |             |        |      |               |   |      |                 |   |   |          |        |   |   |          |        |   |  | $ | (51,248 | )
|                             |                                                                                                                            |                                   |            |            |            |   |    |          |  |               |              |         |   |             |        |       |               |   |      |                  |   |   |          |        
|Balance at December 31, 2005 |                                                                                                                            |                                   | 55,813,275 |            |            | $ | 56 |          |  | $             | 488,340      |         |   | $           | (320   | )     |               | $ | (335 | )                |   | $ | (280,854 | )       |   | $ | 206,887  |         |   |  |   |        
|                             |                                                                                                                            |                                   |            |            |            |   |    |          |  |               |              |         |   |             |        |       |               |   |      |                  |   |   |          |        



73



---



##### Table of Contents



IDENIX PHARMACEUTICALS, INC.





CONSOLIDATED STATEMENTS OF CASH FLOWS


|                                                                           |                                                                                                              |                                                     |                                           |                                                     |       |        |         |          |       |         |          |         |       |         |        |  
|-------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------ | --------------------------------------------------- | ----------------------------------------- | --------------------------------------------------- | ----- | ------ | ------- | -------- | ----- | ------- | -------- | ------- | ----- | ------- | ------ | -
|                                                                           |                                                                                                              | Years Ended December 31,                            |                                          
|                                                                           |                                                                                                              |                                                     |                                          
|                                                                           |                                                                                                              | 2005                                                |                                           |                                                     | 2004  |        |         | 2003     |      
|                                                                           |                                                                                                              |                                                     |                                           |                                                     |       |        |         |          |      
|                                                                           |                                                                                                              | (In thousands)                                      |                                          
|Cash flows from operating activities:                                      |                                                                                                              |                                                     |                                           |                                                     |       |        |         |          |       |         |          |        
|                                                                           | Net loss                                                                                                     |                                                     | $                                         | (50,777                                             | )     |        | $       | (6,244   | )     |         | $        | (41,880 | )    
|                                                                           | Adjustments to reconcile net loss to net cash (used in) provided
    by operating activities:                |                                                     |                                           |                                                     |       |        |         |          |       |         |          |         |      
|                                                                           |                                                                                                              | Depreciation and amortization                       |                                           |                                                     | 2,066 |        |         |          | 1,304 |         |          |         | 632   |        
|                                                                           |                                                                                                              | Stock-based compensation expense                    |                                           |                                                     | 1,388 |        |         |          | 2,100 |         |          |         | 4,745 |        
|                                                                           |                                                                                                              | Gain on sale of marketable securities               |                                           |                                                     | (991  | )      |         |          | (70   | )       |          |         |      |        
|                                                                           |                                                                                                              | Revenue adjustment for contingently issuable shares |                                           |                                                     | 3     |        |         |          | 1,859 |         |          |         | 804   |        
|                                                                           |                                                                                                              | Changes in operating assets and liabilities:        |                                           |                                                     |       |        |         |          |       |         |          |         |       |        
|                                                                           |                                                                                                              |                                                     | Accounts receivable                       |                                                     |       |       |         |          |       |        |          |         |       | 19      |       
|                                                                           |                                                                                                              |                                                     | Receivable from related party             |                                                     |       | 2,520  |         |          |       | (5,091  | )        |         |       | (11,151 | )     
|                                                                           |                                                                                                              |                                                     | Prepaid expenses and other current assets |                                                     |       | (2,992 | )       |          |       | 1,639   |          |         |       | (1,738  | )     
|                                                                           |                                                                                                              |                                                     | Income taxes receivable                   |                                                     |       | (576   | )       |          |       | (370    | )        |         |       |        |       
|                                                                           |                                                                                                              |                                                     | Other assets                              |                                                     |       | (26    | )       |          |       | (532    | )        |         |       | (1,293  | )     
|                                                                           |                                                                                                              |                                                     | Accounts payable                          |                                                     |       | 1,154  |         |          |       | (1,629  | )        |         |       | 1,602   |       
|                                                                           |                                                                                                              |                                                     | Accrued expenses                          |                                                     |       | 1,718  |         |          |       | 2,975   |          |         |       | 10,004  |       
|                                                                           |                                                                                                              |                                                     | Deferred rent                             |                                                     |       | 860    |         |          |       | (51     | )        |         |       |        |       
|                                                                           |                                                                                                              |                                                     | Deferred revenue                          |                                                     |       |       |         |          |       | (107    | )        |         |       | (284    | )     
|                                                                           |                                                                                                              |                                                     | Deferred revenue, related party           |                                                     |       | (9,697 | )       |          |       | (10,986 | )        |         |       | 72,232  |       
|                                                                           |                                                                                                              |                                                     | Income taxes payable                      |                                                     |       | (104   | )       |          |       | (277    | )        |         |       | 344     |       
|                                                                           |                                                                                                              |                                                     | Long-term obligations                     |                                                     |       | (865   | )       |          |       | (902    | )        |         |       | 4,364   |       
|                                                                           |                                                                                                              |                                                     |                                           |                                                     |       |        |         |          |      
|                                                                           |                                                                                                              |                                                     |                                           | Net cash (used in) provided by operating activities |       |        | (56,319 | )        |       |         | (16,382  | )       |       |         | 38,400 |  
|Cash flows from investing activities:                                      |                                                                                                              |                                                     |                                           |                                                     |       |        |         |          |       |         |          |        
|                                                                           | Purchase of property and equipment                                                                           |                                                     |                                           | (6,586                                              | )     |        |         | (3,931   | )     |         |          | (3,145  | )    
|                                                                           | Purchases of marketable securities                                                                           |                                                     |                                           | (155,963                                            | )     |        |         | (189,831 | )     |         |          |        |      
|                                                                           | Sales of marketable securities                                                                               |                                                     |                                           | 113,824                                             |       |        |         | 74,375   |       |         |          |        |      
|                                                                           | Restricted deposits                                                                                          |                                                     |                                           | (411                                                | )     |        |         | 20       |       |         |          | (727    | )    
|                                                                           |                                                                                                              |                                                     |                                           |                                                     |       |        |         |          |      
|                                                                           |                                                                                                              |                                                     |                                           | Net cash used in investing activities               |       |        | (49,136 | )        |       |         | (119,367 | )       |       |         | (3,872 | )
|Cash flows from financing activities:                                      |                                                                                                              |                                                     |                                           |                                                     |       |        |         |          |       |         |          |        
|                                                                           | Net proceeds from sale of common stock in public offerings and
    private placements, net of offering costs |                                                     |                                           | 145,433                                             |       |        |         | 133,409  |       |         |          |        |      
|                                                                           | Proceeds from exercise of common stock options                                                               |                                                     |                                           | 2,018                                               |       |        |         | 897      |       |         |          | 1,137   |      
|                                                                           | Deferred offering costs                                                                                      |                                                     |                                           |                                                    |       |        |         |         |       |         |          | (843    | )    
|                                                                           | Repayment of capital lease obligations                                                                       |                                                     |                                           |                                                    |       |        |         | (2       | )     |         |          | (15     | )    
|                                                                           |                                                                                                              |                                                     |                                           |                                                     |       |        |         |          |      
|                                                                           |                                                                                                              |                                                     |                                           | Net cash provided by financing activities           |       |        | 147,451 |          |       |         | 134,304  |         |       |         | 279    |  
|Effect of changes in exchange rates on cash and cash equivalents           |                                                                                                              |                                                     | (346                                      | )                                                   |       |        | 43      |          |       |         | 130      |        
|                                                                           |                                                                                                              |                                                     |                                           |                                                     |       |        |         |          |      
|Net increase (decrease) in cash and cash equivalents                       |                                                                                                              |                                                     | 41,650                                    |                                                     |       |        | (1,402  | )        |       |         | 34,937   |        
|Cash and cash equivalents at beginning of year                             |                                                                                                              |                                                     | 42,083                                    |                                                     |       |        | 43,485  |          |       |         | 8,548    |        
|                                                                           |                                                                                                              |                                                     |                                           |                                                     |       |        |         |          |      
|Cash and cash equivalents at end of year                                   |                                                                                                              | $                                                   | 83,733                                    |                                                     |       | $      | 42,083  |          |       | $       | 43,485   |        
|                                                                           |                                                                                                              |                                                     |                                           |                                                     |       |        |         |          |      
|Supplemental disclosure of cash flow information:                          |                                                                                                              |                                                     |                                           |                                                     |       |        |         |          |       |         |          |        
|                                                                           | Interest paid                                                                                                |                                                     | $                                         |                                                    |       |        | $       |         |       |         | $        | 76      |      
|                                                                           | Taxes paid                                                                                                   |                                                     |                                           | 53                                                  |       |        |         | 178      |       |         |          | 50      |      
|Supplemental disclosure of noncash investing and financing
    activities: |                                                                                                              |                                                     |                                           |                                                     |       |        |         |          |       |         |          |        
|                                                                           | Accretion of redeemable convertible preferred stock                                                          |                                                     | $                                         |                                                    |       |        | $       |         |       |         | $        | 29,074  |      
|                                                                           | Value of shares of common stock contingently issuable or issued
    to related party                         |                                                     |                                           | (9                                                  | )     |        |         | 7,395    |       |         |          | 8,041   |      
|                                                                           | Common stock dividend paid on Series C preferred stock                                                       |                                                     |                                           |                                                    |       |        |         |         |       |         |          | 17,684  |      
|                                                                           | Conversion of preferred stock into common stock                                                              |                                                     |                                           |                                                    |       |        |         |         |       |         |          | 172,371 |      



74



---



##### Table of Contents



IDENIX PHARMACEUTICALS, INC.





NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS




|   |                          
|-- | -------------------------
|1. | Organization and Business









|   |                                           
|-- | ------------------------------------------
|2. | Summary of Significant Accounting Policies





| |                            
| | ---------------------------
| | Principles of Consolidation





| |                                 
| | --------------------------------
| | Use of Estimates and Assumptions





| |                          
| | -------------------------
| | Cash and Cash Equivalents





75



---



##### Table of Contents



IDENIX PHARMACEUTICALS, INC.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                             
| | ----------------------------
| | Concentration of Credit Risk







| |                      
| | ---------------------
| | Marketable Securities





| |                                    
| | -----------------------------------
| | Fair Value of Financial Instruments





| |           
| | ----------
| | Investment



76



---



##### Table of Contents



IDENIX PHARMACEUTICALS, INC.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                       
| | ----------------------
| | Property and Equipment





| |                                
| | -------------------------------
| | Impairment of Long-Lived Assets

Accounting for the Impairment of Disposal of Long-Lived
Assets




| |                    
| | -------------------
| | Revenue Recognition



Collaborative Research and Development
Revenue




77



---



##### Table of Contents



IDENIX PHARMACEUTICALS, INC.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




00-21, Accounting for Revenue Arrangements with Multiple
Deliverables 00-21). 00-21


Government Research Grant Revenue




| |                                  
| | ---------------------------------
| | Research and Development Expenses





| |        
| | -------
| | Patents





| |                         
| | ------------------------
| | Stock-Based Compensation

Accounting for
Stock-Based Compensation Accounting for Stock Issued to Employees, Accounting for Equity Instruments that
Are Issued to Other than Employees for Acquiring, or in
Conjunction with Selling, Goods or Services


78



---



##### Table of Contents



IDENIX PHARMACEUTICALS, INC.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




Share-Based
Payment.




|                                              |                                                                                |                                 |   |         |       |   |   |        |       |   |   |         |       |  
|--------------------------------------------- | ------------------------------------------------------------------------------ | ------------------------------- | - | ------- | ----- | - | - | ------ | ----- | - | - | ------- | ----- | -
|                                              |                                                                                | Years Ended December 31,        |  
|                                              |                                                                                |                                 |  
|                                              |                                                                                | 2005                            |   |         | 2004  |   |   | 2003   |      
|                                              |                                                                                |                                 |   |         |       |   |   |        |      
|                                              |                                                                                | (In thousands, except per share |  
|                                              |                                                                                | data)                           |  
|Net loss attributable to common stockholders: |                                                                                |                                 |   |         |       |   |   |        |       |   |   |        
|                                              | Net loss attributable to common stockholders  as
    reported                 |                                 | $ | (50,777 | )     |   | $ | (6,244 | )     |   | $ | (70,954 | )    
|                                              | Add stock-based compensation expense included in reported net
    loss         |                                 |   | 1,388   |       |   |   | 2,091  |       |   |   | 4,745   |      
|                                              | Deduct stock-based compensation expense determined under fair
    value method |                                 |   | (7,216  | )     |   |   | (3,058 | )     |   |   | (5,867  | )    
|                                              |                                                                                |                                 |   |         |       |   |   |        |      
|                                              | Net loss attributable to common stockholders  pro
    forma                   |                                 | $ | (56,605 | )     |   | $ | (7,211 | )     |   | $ | (72,076 | )    
|                                              |                                                                                |                                 |   |         |       |   |   |        |      
|Net loss per common share (basic and diluted) |                                                                                |                                 |   |         |       |   |   |        |       |   |   |        
|                                              |                                                                                | As reported                     |   | $       | (1.03 | ) |   | $      | (0.15 | ) |   | $       | (2.70 | )
|                                              |                                                                                | Pro forma                       |   | $       | (1.15 | ) |   | $      | (0.17 | ) |   | $       | (2.75 | )



|                                |  |              |      |   |      |  |      |      |  |  |      |  
|------------------------------- |  | ------------ | ---- | - | ---- |  | ---- | ---- |  |  | ---- | -
|                                |  | Years Ended  |     
|                                |  | December 31, |     
|                                |  |              |     
|                                |  | 2005         |      |   | 2004 |  |      | 2003 | 
|                                |  |              |      |   |      |  |      |      | 
|Expected dividend yield         |  |              |     |   |      |  |     |      |  |  |     |  
|Risk-free interest rate         |  |              | 3.94 | % |      |  | 3.26 | %    |  |  | 3.35 | %
|Expected option term (in years) |  |              | 5    |   |      |  | 5    |      |  |  | 5    |  
|Expected volatility             |  |              | 83   | % |      |  | 28   | %    |  |  | 0    | %

79



---



##### Table of Contents



IDENIX PHARMACEUTICALS, INC.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                 
| | ----------------
| | Foreign Currency





| |             
| | ------------
| | Income Taxes





| |                   
| | ------------------
| | Comprehensive Loss





| |                                   
| | ----------------------------------
| | Net Income (Loss) per Common Share

Earnings Per Share


80



---



##### Table of Contents



IDENIX PHARMACEUTICALS, INC.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                  
| | -----------------
| | Segment Reporting

Disclosures About Segments of
an Enterprise and Related Information




|   |                      
|-- | ---------------------
|3. | Novartis Relationship

Overview














81



---



##### Table of Contents



IDENIX PHARMACEUTICALS, INC.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






Stockholders Agreement






Novartis Stock Purchase Rights


24-month


82



---



##### Table of Contents



IDENIX PHARMACEUTICALS, INC.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)












|   |                                 
|-- | --------------------------------
|4. | Public Offerings of Common Stock

Initial Public Offering of
Common Stock






| |   |                                                                    
| | - | -------------------------------------------------------------------
| |  | 4,600,000 shares offered by the Company; and                       
|
| |  | 1,200,000 shares offered by the Companys selling
    stockholders.

83



---



##### Table of Contents



IDENIX PHARMACEUTICALS, INC.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |   |                                                                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 5,400,000 shares of the Companys common stock at a
    purchase price per share equal to the public selling price of
    the Companys common stock in the initial public
    offering; and                      
|
| |  | 1,100,000 shares of the Companys common stock at a
    purchase price per share equal to $0.001, the par value of the
    Companys common stock in settlement of certain stock
    subscription rights (Note 3).



Subsequent Public Offering
of Common Stock






| |   |                                                                            
| | - | ---------------------------------------------------------------------------
| |  | the Company issued and sold 7,278,020 shares of its common
    stock; and  
|
| |  | certain stockholders sold 942,507 shares of the
    Companys common stock.







|   |                          
|-- | -------------------------
|5. | Net Loss Per Common Share



|                                             |                                                                            |                                       |   |         |      |  |   |        |   |  |   |         |  
|-------------------------------------------- | -------------------------------------------------------------------------- | ------------------------------------- | - | ------- | ---- |  | - | ------ | - |  | - | ------- | -
|                                             |                                                                            | Years Ended December 31,              |  
|                                             |                                                                            |                                       |  
|                                             |                                                                            | 2005                                  |   |         | 2004 |  |   | 2003   |  
|                                             |                                                                            |                                       |   |         |      |  |   |        |  
|                                             |                                                                            | (In thousands, except per share data) |  
|Basic and diluted net loss per common share: |                                                                            |                                       |   |         |      |  |   |        |   |  |   |        
|                                             | Net loss attributable to common stockholders                               |                                       | $ | (50,777 | )    |  | $ | (6,244 | ) |  | $ | (70,954 | )
|                                             | Basic and diluted weighted average number of common shares
    outstanding |                                       |   | 49,395  |      |  |   | 41,369 |   |  |   | 26,232  |  
|                                             | Basic and diluted net loss per common share                                |                                       | $ | (1.03   | )    |  | $ | (0.15  | ) |  | $ | (2.70   | )

84



---



##### Table of Contents



IDENIX PHARMACEUTICALS, INC.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                              |  |                          |       |  |      |  |       |      |  |  |       | 
|--------------------------------------------- |  | ------------------------ | ----- |  | ---- |  | ----- | ---- |  |  | ----- | 
|                                              |  | Years Ended December 31, |      
|                                              |  |                          |      
|                                              |  | 2005                     |       |  | 2004 |  |       | 2003 | 
|                                              |  |                          |       |  |      |  |       |      | 
|                                              |  | (In thousands)           |      
|Options                                       |  |                          | 3,584 |  |      |  | 3,162 |      |  |  | 2,495 | 
|Contingently issuable shares to related party |  |                          | 26    |  |      |  | 30    |      |  |  | 667   | 
|Restricted stock                              |  |                          | 11    |  |      |  | 98    |      |  |  | 198   | 



|   |                      
|-- | ---------------------
|6. | Marketable Securities

Accounting for Certain
Investments in Debt and Equity Securities.


|                  |                                             |                          |         |         |            |   |       |            |   |   |        |      |     |   |         |         |        | 
|----------------- | ------------------------------------------- | ------------------------ | ------- | ------- | ---------- | - | ----- | ---------- | - | - | ------ | ---- | --- | - | ------- | ------- | ------ | 
|                  |                                             | December 31, 2005        |        
|                  |                                             |                          |        
|                  |                                             |                          |         | Gross   |            |   | Gross |            |   |  
|                  |                                             | Amortized                |         |         | Unrealized |   |       | Unrealized |   |   | Market |     
|                  |                                             | Cost                     |         |         | Gains      |   |       | Losses     |   |   | Value  |     
|                  |                                             |                          |         |         |            |   |       |            |   |   |        |     
|                  |                                             | (In thousands)           |        
|Type of security: |                                             |                          |         |         |            |   |       |            |   |   |        |      |     |   |         |        
|                  | Money market funds                          |                          | $       | 11,580  |            |   | $     |           |   |   | $      |     |     |   | $       | 11,580  |       
|                  | Corporate debt securities                   |                          |         | 108,559 |            |   |       | 2          |   |   |        | (132 | )   |   |         | 108,429 |       
|                  | U.S. Treasury securities and obligations of |                          |         |         |            |   |       |            |   |   |        |      |     |   |         |         |       
|                  |                                             | U.S. government agencies |         |         | 23,469     |   |       |            |  |   |        |      | (90 | ) |         |         | 23,379 | 
|                  | Taxable auction rate securities             |                          |         | 51,311  |            |   |       |           |   |   |        | (4   | )   |   |         | 51,307  |       
|                  | Accrued interest                            |                          |         | 1,427   |            |   |       |           |   |   |        |     |     |   |         | 1,427   |       
|                  |                                             |                          |         |         |            |   |       |            |   |   |        |     
|                  |                                             | $                        | 196,346 |         |            | $ | 2     |            |   | $ | (226   | )    |     | $ | 196,122 |        
|                  |                                             |                          |         |         |            |   |       |            |   |   |        |     

85



---



##### Table of Contents



IDENIX PHARMACEUTICALS, INC.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


|                  |                                             |                          |         |        |            |   |       |            |   |   |        |      |      |   |         |        |        | 
|----------------- | ------------------------------------------- | ------------------------ | ------- | ------ | ---------- | - | ----- | ---------- | - | - | ------ | ---- | ---- | - | ------- | ------ | ------ | 
|                  |                                             | December 31, 2004        |        
|                  |                                             |                          |        
|                  |                                             |                          |         | Gross  |            |   | Gross |            |   |  
|                  |                                             | Amortized                |         |        | Unrealized |   |       | Unrealized |   |   | Market |     
|                  |                                             | Cost                     |         |        | Gains      |   |       | Losses     |   |   | Value  |     
|                  |                                             |                          |         |        |            |   |       |            |   |   |        |     
|                  |                                             | (In thousands)           |        
|Type of security: |                                             |                          |         |        |            |   |       |            |   |   |        |      |      |   |         |       
|                  | Money market funds                          |                          | $       | 13,040 |            |   | $     |           |   |   | $      |     |      |   | $       | 13,040 |       
|                  | Corporate debt securities                   |                          |         | 40,102 |            |   |       | 26         |   |   |        | (232 | )    |   |         | 39,896 |       
|                  | U.S. Treasury securities and obligations of |                          |         |        |            |   |       |            |   |   |        |      |      |   |         |        |       
|                  |                                             | U.S. government agencies |         |        | 34,252     |   |       |            |  |   |        |      | (137 | ) |         |        | 34,115 | 
|                  | Taxable auction rate securities             |                          |         | 48,570 |            |   |       |           |   |   |        |     |      |   |         | 48,570 |       
|                  | Accrued interest                            |                          |         | 638    |            |   |       |           |   |   |        |     |      |   |         | 638    |       
|                  |                                             |                          |         |        |            |   |       |            |   |   |        |     
|                  |                                             | $                        | 136,602 |        |            | $ | 26    |            |   | $ | (369   | )    |      | $ | 136,259 |       
|                  |                                             |                          |         |        |            |   |       |            |   |   |        |     

|                      |                                            |                |         |         |              |   |         |        | 
|--------------------- | ------------------------------------------ | -------------- | ------- | ------- | ------------ | - | ------- | ------ | 
|                      |                                            | December 31,   |         |         | December 31, |  
|                      |                                            | 2005           |         |         | 2004         |  
|                      |                                            |                |         |         |              |  
|                      |                                            | (In thousands) |        
|Contractual maturity: |                                            |                |         |         |              |   |         |       
|                      | Maturing in one year or less               |                | $       | 133,267 |              |   | $       | 59,505 | 
|                      | Maturing after one year through two years  |                |         |        |              |   |         | 40,679 | 
|                      | Maturing after two years through ten years |                |         | 26,030  |              |   |         | 15,500 | 
|                      | Maturing after ten years                   |                |         | 36,825  |              |   |         | 20,575 | 
|                      |                                            |                |         |         |              |  
|                      |                                            | $              | 196,122 |         |              | $ | 136,259 |       
|                      |                                            |                |         |         |              |  



|                                  |                                    |                |         |        |              |   |         |        | 
|--------------------------------- | ---------------------------------- | -------------- | ------- | ------ | ------------ | - | ------- | ------ | 
|                                  |                                    | December 31,   |         |        | December 31, |  
|                                  |                                    | 2005           |         |        | 2004         |  
|                                  |                                    |                |         |        |              |  
|                                  |                                    | (In thousands) |        
|Classification in balance sheets: |                                    |                |         |        |              |   |         |       
|                                  | Cash equivalents                   |                | $       | 37,688 |              |   | $       | 21,076 | 
|                                  | Marketable securities              |                |         | 95,579 |              |   |         | 38,429 | 
|                                  | Marketable securities, non-current |                |         | 62,855 |              |   |         | 76,754 | 
|                                  |                                    |                |         |        |              |  
|                                  |                                    | $              | 196,122 |        |              | $ | 136,259 |       
|                                  |                                    |                |         |        |              |  



86



---



##### Table of Contents



IDENIX PHARMACEUTICALS, INC.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|   |                               
|-- | ------------------------------
|7. | Receivables from Related Party



|                                        |  |                |        |  |      |   |        | 
|--------------------------------------- |  | -------------- | ------ |  | ---- | - | ------ | 
|                                        |  | December 31,   |       
|                                        |  |                |       
|                                        |  | 2005           |        |  | 2004 |  
|                                        |  |                |        |  |      |  
|                                        |  | (In thousands) |       
|Unbilled receivables from related party |  | $              | 13,723 |  |      | $ | 16,243 | 
|                                        |  |                |        |  |      |  
|                                        |  | $              | 13,723 |  |      | $ | 16,243 | 
|                                        |  |                |        |  |      |  





|   |                       
|-- | ----------------------
|8. | Property and Equipment



|                                                  |  |             |   |                |              |   |        |      |  |   |        |  
|------------------------------------------------- |  | ----------- | - | -------------- | ------------ | - | ------ | ---- |  | - | ------ | -
|                                                  |  | Estimated   |   |                | December 31, |  
|                                                  |  | Useful Life |   |                |              |  
|                                                  |  | (Years)     |   |                | 2005         |   |        | 2004 | 
|                                                  |  |             |   |                |              |   |        |      | 
|                                                  |  |             |   | (In thousands) |             
|Office equipment                                  |  |             | 5 |                |              | $ | 266    |      |  | $ | 217    |  
|Scientific equipment                              |  |             | 7 |                |              |   | 3,869  |      |  |   | 3,175  |  
|Computer equipment and software                   |  |             | 2 |                |              |   | 2,752  |      |  |   | 1,367  |  
|Office furniture                                  |  |             | 7 |                |              |   | 1,303  |      |  |   | 805    |  
|Trade show booths                                 |  |             | 2 |                |              |   | 49     |      |  |   | 49     |  
|Equipment under capital lease                     |  |             | * |                |              |   | 30     |      |  |   | 30     |  
|Leasehold improvements                            |  |             | * |                |              |   | 6,027  |      |  |   | 3,736  |  
|Construction-in-progress                          |  |             |   |                |              |   | 1,378  |      |  |   | 591    |  
|                                                  |  |             |   |                |              |   |        |      | 
|                                                  |  |             |   |                |              |   | 15,674 |      |  |   | 9,970  |  
|Less   accumulated depreciation and amortization |  |             |   |                |              |   | (4,623 | )    |  |   | (3,165 | )
|                                                  |  |             |   |                |              |   |        |      | 
|                                                  |  |             |   |                |              | $ | 11,051 |      |  | $ | 6,805  |  
|                                                  |  |             |   |                |              |   |        |      | 






|  |                                     
|- | ------------------------------------
|* | Shorter of asset life or lease term.

Construction-in




|   |           
|-- | ----------
|9. | Investment



87



---



##### Table of Contents



IDENIX PHARMACEUTICALS, INC.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                 
|--- | ----------------
|10. | Accrued Expenses



|                                        |  |                |        |  |      |   |        | 
|--------------------------------------- |  | -------------- | ------ |  | ---- | - | ------ | 
|                                        |  | December 31,   |       
|                                        |  |                |       
|                                        |  | 2005           |        |  | 2004 |  
|                                        |  |                |        |  |      |  
|                                        |  | (In thousands) |       
|Research and development contract costs |  | $              | 8,018  |  |      | $ | 8,064  | 
|Payroll and benefits                    |  |                | 4,916  |  |      |   | 2,649  | 
|License fees                            |  |                | 1,000  |  |      |   | 1,000  | 
|Professional fees                       |  |                | 884    |  |      |   | 2,412  | 
|Other                                   |  |                | 1,867  |  |      |   | 1,175  | 
|                                        |  |                |        |  |      |  
|                                        |  | $              | 16,685 |  |      | $ | 15,300 | 
|                                        |  |                |        |  |      |  





|    |                                       
|--- | --------------------------------------
|11. | Redeemable Convertible Preferred Stock







88



---



##### Table of Contents



IDENIX PHARMACEUTICALS, INC.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |             
|--- | ------------
|12. | Common Stock









|    |                        
|--- | -----------------------
|13. | Stockholders Agreement





|    |                       
|--- | ----------------------
|14. | Equity Incentive Plans









89



---



##### Table of Contents



IDENIX PHARMACEUTICALS, INC.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








|                               |           |                   |           |  |             |  |           |                |   |   |       |       | 
|------------------------------ | --------- | ----------------- | --------- |  | ----------- |  | --------- | -------------- | - | - | ----- | ----- | 
|                               |           | Number of         |           |  | Number of   |  |           | Weighted       |  
|                               |           | Options Available |           |  | Options     |  |           | Average        |  
|                               |           | for Future Grant  |           |  | Outstanding |  |           | Exercise Price |  
|                               |           |                   |           |  |             |  |           |                |  
|Outstanding, December 31, 2002 |           |                   | 1,424,831 |  |             |  | 2,564,938 |                |   | $ | 2.81  |      
|                               | Granted   |                   |           |  |             |  |           | 610,890        |   |   |       | 11.33 | 
|                               | Exercised |                   |           |  |             |  |           | (668,075       | ) |   |       | 1.75  | 
|                               | Cancelled |                   |           |  |             |  |           | (12,299        | ) |   |       | 5.25  | 
|                               |           |                   |           |  |             |  |           |                |  
|Outstanding, December 31, 2003 |           |                   | 826,240   |  |             |  | 2,495,454 |                |   |   | 5.17  |      
|                               | Granted   |                   |           |  |             |  |           | 930,900        |   |   |       | 12.95 | 
|                               | Exercised |                   |           |  |             |  |           | (210,646       | ) |   |       | 4.20  | 
|                               | Cancelled |                   |           |  |             |  |           | (53,918        | ) |   |       | 4.68  | 
|                               |           |                   |           |  |             |  |           |                |  
|Outstanding, December 31, 2004 |           |                   | 749,258   |  |             |  | 3,161,790 |                |   |   | 7.50  |      
|                               | Granted   |                   |           |  |             |  |           | 1,167,750      |   |   |       | 20.27 | 
|                               | Exercised |                   |           |  |             |  |           | (590,618       | ) |   |       | 3.42  | 
|                               | Cancelled |                   |           |  |             |  |           | (154,600       | ) |   |       | 10.67 | 
|                               |           |                   |           |  |             |  |           |                |  
|Outstanding, December 31, 2005 |           |                   | 338,608   |  |             |  | 3,584,322 |                |   |   | 12.20 |      
|                               |           |                   |           |  |             |  |           |                |  
|                              
|Exercisable, December 31, 2003 |           |                   |           |  |             |  | 947,068   |                |   | $ | 2.96  |      
|Exercisable, December 31, 2004 |           |                   |           |  |             |  | 1,509,531 |                |   |   | 4.82  |      
|Exercisable, December 31, 2005 |           |                   |           |  |             |  | 1,841,858 |                |   |   | 8.33  |      



90



---



##### Table of Contents



IDENIX PHARMACEUTICALS, INC.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|               |  |                     |           |           |                     |  |          |          |  |   |             |          |  |          |           |  |  |   |       | 
|-------------- |  | ------------------- | --------- | --------- | ------------------- |  | -------- | -------- |  | - | ----------- | -------- |  | -------- | --------- |  |  | - | ----- | 
|               |  | Options Outstanding |           |           | Options Exercisable | 
|               |  |                     |           |           |                     | 
|               |  |                     |           | Weighted  |                     |  |          |          | 
|               |  |                     |           | Average   |                     |  | Weighted |          |  |   |             | Weighted | 
|               |  |                     |           | Remaining |                     |  | Average  |          |  |   |             | Average  | 
|               |  | Number              |           |           | Contractual         |  |          | Exercise |  |   | Number      |          |  | Exercise |          
|Exercise price |  | Outstanding         |           |           | Life (In Years)     |  |          | Price    |  |   | Exercisable |          |  | Price    |          
|               |  |                     |           |           |                     |  |          |          |  |   |             |          |  |          |          
|$ 0.10- 3.00   |  |                     | 830,162   |           |                     |  | 5.2      |          |  | $ | 2.08        |          |  |          | 782,287   |  |  | $ | 1.98  | 
|4.00-11.50     |  |                     | 781,935   |           |                     |  | 7.5      |          |  |   | 10.37       |          |  |          | 492,540   |  |  |   | 10.21 | 
|12.05          |  |                     | 573,642   |           |                     |  | 8.1      |          |  |   | 12.05       |          |  |          | 271,004   |  |  |   | 12.05 | 
|13.00-19.39    |  |                     | 948,843   |           |                     |  | 9.1      |          |  |   | 17.88       |          |  |          | 224,100   |  |  |   | 17.55 | 
|19.40-26.89    |  |                     | 449,740   |           |                     |  | 9.5      |          |  |   | 22.14       |          |  |          | 71,927    |  |  |   | 21.75 | 
|               |  |                     |           |           |                     |  |          |          |  |   |             |          |  |          |          
|               |  |                     | 3,584,322 |           |                     |  | 7.7      |          |  | $ | 12.20       |          |  |          | 1,841,858 |  |  | $ | 8.33  | 
|               |  |                     |           |           |                     |  |          |          |  |   |             |          |  |          |          











|    |                              
|--- | -----------------------------
|15. | Commitments and Contingencies

Lease Arrangements




91



---



##### Table of Contents



IDENIX PHARMACEUTICALS, INC.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                         |       |                |       |        | 
|------------------------ | ----- | -------------- | ----- | ------ | 
|                         |       | Operating      |      
|Year Ending December 31, |       | Leases         |      
|                         |       |                |      
|                         |       | (In thousands) |      
|2006                     |       | $              | 2,554 |       
|2007                     |       |                | 2,821 |       
|2008                     |       |                | 2,754 |       
|2009                     |       |                | 2,834 |       
|2010 and thereafter      |       |                | 9,586 |       
|                         |       |                |      
|                         | Total |                | $     | 20,549 | 
|                         |       |                |      





54-months 48-month 54-month


Legal Contingencies




| |                               
| | ------------------------------
| | Hepatitis C Product Candidates



92



---



##### Table of Contents



IDENIX PHARMACEUTICALS, INC.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








| |                               
| | ------------------------------
| | Hepatitis B Product Candidates







93



---



##### Table of Contents



IDENIX PHARMACEUTICALS, INC.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




Indemnification




94



---



##### Table of Contents



IDENIX PHARMACEUTICALS, INC.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |             
|--- | ------------
|16. | Income Taxes



|                                  |          |                |                                    |   |         |      |        |      |         |      |         |   |         |     | 
|--------------------------------- | -------- | -------------- | ---------------------------------- | - | ------- | ---- | ------ | ---- | ------- | ---- | ------- | - | ------- | --- | 
|                                  |          | 2005           |                                    |   | 2004    |      |        | 2003 |        
|                                  |          |                |                                    |   |         |      |        |      |        
|                                  |          | (In thousands) |                                   
|Income (loss) before income taxes |          |                |                                    |   |         |      |        |      |         |      |         |  
|                                  |          | U.S.           |                                    | $ | (26,400 | )    |        | $    | (14,054 | )    |         | $ | (26,306 | )  
|                                  |          | Foreign        |                                    |   | (25,091 | )    |        |      | 7,244   |      |         |   | (15,390 | )  
|                                  |          |                |                                    |   |         |      |        |      |        
|                                  |          | $              | (51,491                            | ) |         | $    | (6,810 | )    |         | $    | (41,696 | )
|                                  |          |                |                                    |   |         |      |        |      |        
|Income tax (benefit) expense      |          |                |                                    |   |         |      |        |      |         |      |         |  
|                                  | Current  |                |                                    |   |         |      |        |      |         |      |         |   |        
|                                  |          | Federal  U.S. |                                    | $ |        |      |        | $    | (5      | )    |         | $ | 242     |    
|                                  |          | State  U.S.   |                                    |   | 51      |      |        |      | (1      | )    |         |   | 9       |    
|                                  |          | Foreign        |                                    |   | (765    | )    |        |      | (560    | )    |         |   | (67     | )  
|                                  |          |                |                                    |   |         |      |        |      |        
|                                  |          |                | (714                               | ) |         |      | (566   | )    |         |      | 184     |  
|                                  | Deferred |                |                                    |   |         |      |        |      |         |      |         |   |        
|                                  |          | Federal  U.S. |                                    | $ |        |      |        | $    |        |      |         | $ |        |    
|                                  |          | State  U.S.   |                                    |   |        |      |        |      |        |      |         |   |        |    
|                                  |          | Foreign        |                                    |   |        |      |        |      |        |      |         |   |        |    
|                                  |          |                |                                    |   |         |      |        |      |        
|                                  |          |                | Total income tax (benefit) expense |   | $       | (714 | )      |      | $       | (566 | )       |   | $       | 184 | 
|                                  |          |                |                                    |   |         |      |        |      |        



95



---



##### Table of Contents



IDENIX PHARMACEUTICALS, INC.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                 |  |                |         |   |      |   |         |  
|-------------------------------- |  | -------------- | ------- | - | ---- | - | ------- | -
|                                 |  | 2005           |         |   | 2004 |  
|                                 |  |                |         |   |      |  
|                                 |  | (In thousands) |        
|Depreciation                     |  | $              | (8      | ) |      | $ | (153    | )
|Deferred licensing income        |  |                | 5,799   |   |      |   | 7,360   |  
|Accrued expenses and other       |  |                | 1,719   |   |      |   | 2,528   |  
|Capitalized research costs       |  |                | 3,069   |   |      |   |        |  
|Research and development credits |  |                | 3,515   |   |      |   | 1,609   |  
|Alternative minimum tax credit   |  |                | 98      |   |      |   | 98      |  
|Net operating carryforwards      |  |                | 27,589  |   |      |   | 11,043  |  
|Valuation allowance              |  |                | (41,781 | ) |      |   | (22,485 | )
|                                 |  |                |         |   |      |  
|Deferred tax asset               |  | $              |        |   |      | $ |        |  
|                                 |  |                |         |   |      |  



|                                          |  |      |     |    |      |  |     |      |  |  |     |   
|----------------------------------------- |  | ---- | --- | -- | ---- |  | --- | ---- |  |  | --- | --
|                                          |  | 2005 |     |    | 2004 |  |     | 2003 | 
|                                          |  |      |     |    |      |  |     |      | 
|Federal statutory rate benefit            |  |      | (34 | )% |      |  | (34 | )%   |  |  | (34 | )%
|French research tax credits               |  |      | (2  | )  |      |  | (8  | )    |  |  | 0   |   
|State tax benefit, net of federal benefit |  |      | (6  | )  |      |  | 0   |      |  |  | 0   |   
|Permanent items                           |  |      | (13 | )  |      |  | 27  |      |  |  | 9   |   
|Foreign rate differentials                |  |      | 17  |    |      |  | (34 | )    |  |  | 9   |   
|Valuation allowance                       |  |      | 37  |    |      |  | 41  |      |  |  | 17  |   
|                                          |  |      |     |    |      |  |     |      | 
|Effective income tax rate                 |  |      | (1  | )% |      |  | (8  | )%   |  |  | 1   | % 
|                                          |  |      |     |    |      |  |     |      | 







96



---



##### Table of Contents



IDENIX PHARMACEUTICALS, INC.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)












|    |                    
|--- | -------------------
|17. | 401(k) Savings Plan







|    |                           
|--- | --------------------------
|18. | Related Party Transactions





97



---



##### Table of Contents



IDENIX PHARMACEUTICALS, INC.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                  
|--- | -----------------
|19. | Segment Reporting



|              |  |                |        |  |      |   |       | 
|------------- |  | -------------- | ------ |  | ---- | - | ----- | 
|              |  | 2005           |        |  | 2004 |  
|              |  |                |        |  |      |  
|              |  | (In thousands) |       
|United States |  | $              | 8,678  |  |      | $ | 4,823 | 
|Europe        |  |                | 2,373  |  |      |   | 1,982 | 
|              |  |                |        |  |      |  
|              |  | $              | 11,051 |  |      | $ | 6,805 | 
|              |  |                |        |  |      |  



|    |                     
|--- | --------------------
|20. | Licensing Agreements



| |                        
| | -----------------------
| | UAB Research Foundation







|    |                                       
|--- | --------------------------------------
|21. | Collaborative Agreements and Contracts



| |                                                                                    
| | -----------------------------------------------------------------------------------
| | Le Centre National de la Recherche Scientifique and
    LUniversite Montpellier II



98



---



##### Table of Contents



IDENIX PHARMACEUTICALS, INC.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








| |                       
| | ----------------------
| | Universita di Cagliari







| |                                   
| | ----------------------------------
| | Sumitomo Pharmaceuticals Co., Ltd.





99



---



##### Table of Contents



IDENIX PHARMACEUTICALS, INC.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                                           
| | ------------------------------------------
| | Microbiologica Quimica E Farmaceutica Ltda





|    |                                     
|--- | ------------------------------------
|22. | Quarterly Financial Data (Unaudited)

|                                            |  |                                          |        |   |         |   |         |         |  |   |         |   |  |       |         |   |  |   |         |  
|------------------------------------------- |  | ---------------------------------------- | ------ | - | ------- | - | ------- | ------- |  | - | ------- | - |  | ----- | ------- | - |  | - | ------- | -
|                                            |  | First                                    |        |   | Second  |   |         | Third   |  |   | Fourth  |   |  | Total |        
|                                            |  | Quarter                                  |        |   | Quarter |   |         | Quarter |  |   | Quarter |   |  | Year  |        
|                                            |  |                                          |        |   |         |   |         |         |  |   |         |   |  |       |        
|                                            |  | (In thousands, except per share amounts) |       
|2005                                        |  |                                          |        |   |         |   |         |         |  |   |         |   |  |       |         |   |  |   |         |  
|Total revenues                              |  | $                                        | 14,903 |   |         | $ | 16,082  |         |  | $ | 15,630  |   |  | $     | 18,103  |   |  | $ | 64,718  |  
|Total operating expenses                    |  |                                          | 25,077 |   |         |   | 30,353  |         |  |   | 30,510  |   |  |       | 34,307  |   |  |   | 120,247 |  
|Net loss                                    |  |                                          | (9,266 | ) |         |   | (13,433 | )       |  |   | (13,698 | ) |  |       | (14,380 | ) |  |   | (50,777 | )
|Basic and diluted net loss per common share |  |                                          | (0.19  | ) |         |   | (0.28   | )       |  |   | (0.28   | ) |  |       | (0.27   | ) |  |   | (1.03   | )
|                                           
|2004                                        |  |                                          |        |   |         |   |         |         |  |   |         |   |  |       |         |   |  |   |         |  
|Total revenues                              |  | $                                        | 16,695 |   |         | $ | 42,756  |         |  | $ | 17,179  |   |  | $     | 18,759  |   |  | $ | 95,389  |  
|Total operating expenses                    |  |                                          | 22,773 |   |         |   | 21,871  |         |  |   | 25,093  |   |  |       | 33,845  |   |  |   | 103,582 |  
|Net income (loss)                           |  |                                          | (5,887 | ) |         |   | 20,950  |         |  |   | (7,353  | ) |  |       | (13,954 | ) |  |   | (6,244  | )
|Basic net income (loss) per common share    |  |                                          | (0.16  | ) |         |   | 0.57    |         |  |   | (0.17   | ) |  |       | (0.29   | ) |  |   | (0.15   | )
|Diluted net income (loss) per common share  |  |                                          | (0.16  | ) |         |   | 0.53    |         |  |   | (0.17   | ) |  |       | (0.29   | ) |  |   | (0.15   | )

100



---



##### Table of Contents



IDENIX PHARMACEUTICALS, INC.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                                 
|--- | --------------------------------
|23. | Recent Accounting Pronouncements

The Meaning of Other-Than-Temporary Impairment and Its
Application to Certain Investments.


Accounting
Changes and Error Corrections, Accounting Changes, Reporting
Accounting Changes in Interim Financial Statements 
an amendment of APB Opinion No. 28.


Accounting for Uncertain Tax
Positions. Accounting for Income Taxes.


101



---



##### Table of Contents






SIGNATURES






| |                                     
| | ------------------------------------
| | IDENIX PHARMACEUTICALS, INC.        
|
| | /s/ Jean-Pierre Sommadossi          
| |                                     
| | Jean-Pierre Sommadossi              
| | Chairman and Chief Executive Officer





|                                                     |  |                                                                                            |  |                |  | 
|---------------------------------------------------- |  | ------------------------------------------------------------------------------------------ |  | -------------- |  | 
|Name                                                 |  | Title                                                                                      |  | Date          
|                                                     |  |                                                                                            |  |               
|                                                    
|/s/ Jean-Pierre
    SommadossiJean-Pierre Sommadossi |  | Chairman, Chief Executive
    Officer and Director
    (Principal Executive Officer)       |  | March 16, 2006
|                                                    
|/s/ David A. ArkowitzDavid A. Arkowitz               |  | Chief Financial Officer and Treasurer (Principal Financial
    and
    Accounting Officer) |  | March 16, 2006
|                                                    
|/s/ Charles CrambCharles Cramb                       |  | Director                                                                                   |  | March 16, 2006
|                                                    
|/s/ Thomas EbelingThomas Ebeling                     |  | Director                                                                                   |  | March 16, 2006
|                                                    
|/s/ Wayne HockmeyerWayne Hockmeyer                   |  | Director                                                                                   |  | March 16, 2006
|                                                    
|/s/ Thomas HodgsonThomas Hodgson                     |  | Director                                                                                   |  | March 16, 2006
|                                                    
|/s/ Robert PelzerRobert Pelzer                       |  | Director                                                                                   |  | March 16, 2006
|                                                    
|/s/ Denise
    Pollard-KnightDenise Pollard-Knight   |  | Director                                                                                   |  | March 16, 2006
|                                                    
|/s/ Pamela
    Thomas-GrahamPamela Thomas-Graham     |  | Director                                                                                   |  | March 16, 2006

102



---



##### Table of Contents



EXHIBIT INDEX


|        |    |     |             |                                                                                                                                                                                                                                       |      |                    |         |  |    |             |  |          |            |  |  |  |            | 
|------- | -- | --- | ----------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---- | ------------------ | ------- |  | -- | ----------- |  | -------- | ---------- |  |  |  | ---------- | 
|        |    |     |             | Incorporated by Reference to                                                                                                                                                                                                          |     
|        |    |     |             |                                                                                                                                                                                                                                       |     
|Exhibit |    |     |             |                                                                                                                                                                                                                                       |      |                    | Exhibit |  |    |             |  | SEC File |           
|Number  |    |     | Description |                                                                                                                                                                                                                                       | Form |                    | No.     |  |    | Filing Date |  |          | Number     | 
|        |    |     |             |                                                                                                                                                                                                                                       |      |                    |         |  |    |             |  |          |            | 
|        |    |     |             | Articles of Incorporation and By-Laws                                                                                                                                                                                                 |      |                    |         |  |    |             |  |          |            |  |  |  |            | 
|        | 3  | .1  |             | Restated Certificate of Incorporation of the Registrant                                                                                                                                                                               |      | S-1                |         |  | 3  | .1          |  |          | 12/15/2003 |  |  |  | 333-111157 | 
|       
|        | 3  | .2  |             | Certificate of Amendment of Restated Certificate of Incorporation                                                                                                                                                                     |      | 10-Q for 6/30/2004 |         |  | 3  | .1          |  |          | 8/26/2004  |  |  |  | 000-49839  | 
|       
|        | 3  | .3  |             | Certificate of Amendment of Restated Certificate of Incorporation                                                                                                                                                                     |      | *                  |         |  |    |             |  |          |            |  |  |  |            | 
|       
|        | 3  | .4  |             | Amended and Restated By-Laws                                                                                                                                                                                                          |      | 10-Q for 6/30/2004 |         |  | 3  | .2          |  |          | 8/26/2004  |  |  |  | 000-49839  | 
|       
|        | 4  | .1  |             | Specimen Certificate evidencing the Common Stock, $.001 par
    value                                                                                                                                                                 |      | S-1 Amendment 2    |         |  | 4  | .1          |  |          | 1/27/2004  |  |  |  | 333-111157 | 
|       
|        |    |     |             | Material contracts  real estate                                                                                                                                                                                                      |      |                    |         |  |    |             |  |          |            |  |  |  |            | 
|       
|        | 10 | .1  |             | Lease Agreement, dated as of October 15, 1998, by and
    between Idenix (Massachusetts) Inc. and CambridgePark One
    Limited Partnership, as amended by the First Amendment to Lease
    dated as of September 1, 2001             |      | S-1                |         |  | 10 | .2          |  |          | 12/15/2003 |  |  |  | 333-111157 | 
|       
|        | 10 | .2  |             | Lease Agreement, dated as of August 22, 2001, by and
    between Idenix (Massachusetts) Inc. and West Cambridge Sciences
    Park                                                                                                     |      | S-1                |         |  | 10 | .3          |  |          | 12/15/2003 |  |  |  | 333-111157 | 
|       
|        | 10 | .3  |             | Amended and Restated Lease of Premises at 60 Hampshire Street,
    Cambridge, Massachusetts, dated as of October 28, 2003, by
    and between Idenix (Massachusetts) Inc. and BHX, LLC, as trustee
    of 205 Broadway Realty Trust   |      | S-1                |         |  | 10 | .4          |  |          | 12/15/2003 |  |  |  | 333-111157 | 
|       
|        | 10 | .4  |             | Administrative Lease Hotel DEnterprises Cap Gamma dated
    April 18, 2005 by and among Idenix SARL, Societe
    DEquipment de la Region Montpellieraine and the Communate
    DAgglomeration de Montpellier (English Translation) |      | 8-K                |         |  | 10 | .1          |  |          | 4/20/2005  |  |  |  | 000-49839  | 
|       
|        | 10 | .5+ |             | Offer of Sale Hotel DEnterprises Cap Gamma dated
    December 17, 2004 by and among Idenix SARL, and Societe
    DEquipment de la Region Montpellieraine (English
    Translation)                                                  |      | 8-K                |         |  | 10 | .2          |  |          | 4/20/2005  |  |  |  | 000-49839  | 
|       
|        | 10 | .6  |             | Joint Guarantee made as of December 15, 2005 between the
    Registrant and Societe DEquipment de la Region
    Montpellieraine                                                                                                      |      | 8-K                |         |  | 10 | .3          |  |          | 4/20/2005  |  |  |  | 000-49839  | 

103



---



##### Table of Contents



|        |    |      |             |                                                                                                                                                                                                                                     |      |                     |         |  |    |             |  |          |            |  |  |  |            | 
|------- | -- | ---- | ----------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---- | ------------------- | ------- |  | -- | ----------- |  | -------- | ---------- |  |  |  | ---------- | 
|        |    |      |             | Incorporated by Reference to                                                                                                                                                                                                        |     
|        |    |      |             |                                                                                                                                                                                                                                     |     
|Exhibit |    |      |             |                                                                                                                                                                                                                                     |      |                     | Exhibit |  |    |             |  | SEC File |           
|Number  |    |      | Description |                                                                                                                                                                                                                                     | Form |                     | No.     |  |    | Filing Date |  |          | Number     | 
|        |    |      |             |                                                                                                                                                                                                                                     |      |                     |         |  |    |             |  |          |            | 
|       
|        | 10 | .7   |             | Indenture of Lease, dated June 8, 2005, by and between the
    Registrant and One Kendall Square Associates LLC                                                                                                                     |      | 8-K                 |         |  | 10 | .1          |  |          | 6/13/2005  |  |  |  | 000-49839  | 
|       
|        |    |      |             | Material contracts                                                                                                                                                                                                                  |      |                     |         |  |    |             |  |          |            |  |  |  |            | 
|       
|        |    |      |             | Novartis                                                                                                                                                                                                                            |      |                     |         |  |    |             |  |          |            |  |  |  |            | 
|       
|        | 10 | .8   |             | Letter Agreement, dated as of March 21, 2003, by and
    between the Registrant and Novartis Pharma AG                                                                                                                              |      | S-1 Amendment 3     |         |  | 10 | .28         |  |          | 7/6/2004   |  |  |  | 333-111157 | 
|       
|        | 10 | .9+  |             | Restated and Amended Cooperative Agreement dated as of
    May 8, 2003, by and among Idenix SARL and Le Centre
    National de la Recherche Scientifique, LUniversite
    Montpellier II and Novartis Pharma AG                    |      | S-1                 |         |  | 10 | .14         |  |          | 12/15/2003 |  |  |  | 333-111157 | 
|       
|        | 10 | .10+ |             | Letter Agreement, dated May 8, 2003, by and among the
    Registrant, Idenix SARL, Novartis Pharma AG and the University
    of Cagliari, amending the Cooperative Agreement and License
    Agreement                              |      | S-1                 |         |  | 10 | .18         |  |          | 12/15/2003 |  |  |  | 333-111157 | 
|       
|        | 10 | .11+ |             | Development, License and Commercialization Agreement, dated as
    of May 8, 2003, by and among the Registrant, Idenix
    (Cayman) Limited and Novartis Pharma AG, as amended on
    April 30, 2004                                |      | S-1                 |         |  | 10 | .24         |  |          | 12/15/2003 |  |  |  | 333-111157 | 
|       
|        | 10 | .12+ |             | Master Manufacturing and Supply Agreement, dated as of
    May 8, 2003, by and between Idenix (Cayman) Limited and
    Novartis Pharma AG                                                                                           |      | S-1                 |         |  | 10 | .25         |  |          | 12/15/2003 |  |  |  | 333-111157 | 
|       
|        | 10 | .13+ |             | Second Amendment, dated as of December 21, 2004, to the
    Development, License and Commercialization Agreement, by and
    among the Registrant, Idenix (Cayman) Limited and Novartis
    Pharma AG, as amended on April 30, 2004 |      | 10-K for 12/31/2004 |         |  | 10 | .16         |  |          | 3/17/2005  |  |  |  | 000-49839  | 
|       
|        | 10 | .14+ |             | Amendment No. 3 to the Development, License and
    Commercialization Agreement, effective as of February 27,
    2006, by and among the Registrant, Idenix (Cayman) Limited and
    Novartis Pharma AG                             |      | *                   |         |  |    |             |  |          |            |  |  |  |            | 

104



---



##### Table of Contents



|        |    |      |             |                                                                                                                                                                                 |      |                     |         |  |    |             |  |          |            |  |  |  |            | 
|------- | -- | ---- | ----------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---- | ------------------- | ------- |  | -- | ----------- |  | -------- | ---------- |  |  |  | ---------- | 
|        |    |      |             | Incorporated by Reference to                                                                                                                                                    |     
|        |    |      |             |                                                                                                                                                                                 |     
|Exhibit |    |      |             |                                                                                                                                                                                 |      |                     | Exhibit |  |    |             |  | SEC File |           
|Number  |    |      | Description |                                                                                                                                                                                 | Form |                     | No.     |  |    | Filing Date |  |          | Number     | 
|        |    |      |             |                                                                                                                                                                                 |      |                     |         |  |    |             |  |          |            | 
|       
|        | 10 | .15  |             | Amended and Restated Stockholders Agreement, dated
    July 27, 2004, by and among the Registrant, Novartis and
    the stockholders identified on the signature pages thereto |      | 10-K for 12/31/2004 |         |  | 10 | .20         |  |          | 3/17/2005  |  |  |  | 000-49839  | 
|       
|        | 10 | .16  |             | Par Value Stock Purchase Agreement, dated July 27, 2004, by
    and between the Registrant and Novartis Pharma AG                                                               |      | 10-K for 12/31/2004 |         |  | 10 | .21         |  |          | 3/17/2005  |  |  |  | 000-49839  | 
|       
|        | 10 | .17+ |             | Stock Purchase Agreement, dated as of March 21, 2003, by
    and among the Registrant, Novartis and the stockholders
    identified on the signature pages                      |      | S-1 Amendment 3     |         |  | 10 | .27         |  |          | 7/6/2004   |  |  |  | 333-11115  | 
|       
|        | 10 | .18  |             | Concurrent Private Placement Stock Purchase Agreement, dated
    July 27, 2004, by and between the Registrant and Novartis
    Pharma AG                                        |      | 10-K for 12/31/2004 |         |  | 10 | .22         |  |          | 3/17/2005  |  |  |  | 000-49839  | 
|       
|        |    |      |             | University of Cagliari                                                                                                                                                          |      |                     |         |  |    |             |  |          |            |  |  |  |            | 
|       
|        | 10 | .19+ |             | Cooperative Antiviral Research Activity Agreement (the
    Cooperative Agreement), dated January 4, 1999,
    by and between Idenix SARL and the University of Cagliari       |      | S-1                 |         |  | 10 | .16         |  |          | 12/15/2003 |  |  |  | 333-111157 | 
|       
|        | 10 | .20+ |             | License Agreement, dated as of December 14, 2000, between
    the Registrant and the University of Cagliari                                                                     |      | S-1                 |         |  | 10 | .17         |  |          | 12/15/2003 |  |  |  | 333-111157 | 
|       
|        | 10 | .21+ |             | Letter Agreement, dated April 10, 2002, by and between
    Idenix SARL and the University of Cagliari, amending the
    Cooperative Agreement and License Agreement             |      | S-1                 |         |  | 10 | .18         |  |          | 12/15/2003 |  |  |  | 333-111157 | 
|       
|        | 10 | .22+ |             | Agreement, dated June 30, 2004, by and among the
    Registrant, Idenix SARL and the University of Cagliari                                                                     |      | S-1 Amendment 3     |         |  | 10 | .18.1       |  |          | 7/6/2004   |  |  |  | 333-111157 | 
|       
|        | 10 | .23  |             | Collaborative Activities Agreement, dated March 22, 2004,
    by and between the Registrant and the University of Cagliari, as
    amended June 30, 2004 (English translation)  |      | S-1 Amendment 3     |         |  | 10 | .18.2       |  |          | 7/6/2004   |  |  |  | 333-111157 | 
|       
|        | 10 | .24+ |             | Agreement, dated October 24, 2005, by and among the
    Registrant, Idenix SARL and the Universita delgi Studi Cagliari,                                                        |      | 10-Q for 9/30/2005  |         |  | 10 | .1          |  |          | 11/08/2005 |  |  |  | 000-49839  | 

105



---



##### Table of Contents



|        |    |      |             |                                                                                                                                                                                                                                                                       |      |                     |         |  |    |             |  |          |            |  |  |  |            | 
|------- | -- | ---- | ----------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---- | ------------------- | ------- |  | -- | ----------- |  | -------- | ---------- |  |  |  | ---------- | 
|        |    |      |             | Incorporated by Reference to                                                                                                                                                                                                                                          |     
|        |    |      |             |                                                                                                                                                                                                                                                                       |     
|Exhibit |    |      |             |                                                                                                                                                                                                                                                                       |      |                     | Exhibit |  |    |             |  | SEC File |           
|Number  |    |      | Description |                                                                                                                                                                                                                                                                       | Form |                     | No.     |  |    | Filing Date |  |          | Number     | 
|        |    |      |             |                                                                                                                                                                                                                                                                       |      |                     |         |  |    |             |  |          |            | 
|       
|        |    |      |             | Miscellaneous                                                                                                                                                                                                                                                         |      |                     |         |  |    |             |  |          |            |  |  |  |            | 
|        | 10 | .25+ |             | License Agreement dated as of June 20, 1998 by and between
    the Registrant and the UAB Research Foundation, as amended by
    that First Amendment Agreement, dated as of June 20, 1998,
    and by that Second Amendment Agreement, dated as of
    July 16, 1999 |      | S-1 Amendment 2     |         |  | 10 | .31         |  |          | 1/27/2004  |  |  |  | 333-111157 | 
|       
|        | 10 | .26  |             | Master Services Agreement, dated February 25, 2003, by and
    between the Registrant and Quintiles, Inc.                                                                                                                                                             |      | S-1                 |         |  | 10 | .20         |  |          | 12/15/2003 |  |  |  | 333-111157 | 
|       
|        | 10 | .27+ |             | Master Services Agreement, dated May 27, 1999, between
    Idenix (Massachusetts), Inc. and Quintiles Scotland Ltd                                                                                                                                                    |      | S-1                 |         |  | 10 | .21         |  |          | 12/15/2003 |  |  |  | 333-111157 | 
|       
|        | 10 | .28+ |             | License Agreement, dated as of June 20, 1998, by and among
    the Registrant, TherapX Pharmaceuticals, L.L.C. and Raymond
    Schinazi                                                                                                                               |      | S-1                 |         |  | 10 | .15         |  |          | 12/15/2003 |  |  |  | 333-111157 | 
|       
|        | 10 | .29  |             | Multiproject Development and Supply Agreement, dated as of
    December 20, 2001, by and among the Registrant, Idenix SARL
    and Clariant Life Science Molecules (Missouri) Inc.                                                                                    |      | S-1                 |         |  | 10 | .22         |  |          | 12/15/2003 |  |  |  | 333-111157 | 
|       
|        | 10 | .30+ |             | Agreement, dated as of May 1, 2003, between Idenix (Cayman
    Limited and Microbiologica Quimica E Farmaceutica Ltda.                                                                                                                                                |      | S-1 Amendment 3     |         |  | 10 | .23         |  |          | 7/6/2004   |  |  |  | 333-111157 | 
|       
|        | 10 | .31  |             | Final Settlement Agreement, dated March 26, 2003, by and
    between the Registrant and Sumitomo Pharmaceuticals Co.,
    Ltd.                                                                                                                                        |      | S-1                 |         |  | 10 | .13         |  |          | 12/15/2003 |  |  |  | 333-111157 | 
|       
|        | 10 | .32  |             | Settlement Agreement, dated as of May 28, 2004, by and
    between the Registrant, Jean-Pierre Sommadossi, the University
    of Alabama at Birmingham and the University of Alabama Research
    Foundation                                                          |      | S-1 Amendment 2     |         |  | 10 | .34         |  |          | 5/28/2004  |  |  |  | 333-111157 | 
|       
|        |    |      |             | Material contracts  management contracts and
    compensatory plans                                                                                                                                                                                                  |      |                     |         |  |    |             |  |          |            |  |  | 
|       
|        | 10 | .33# |             | Form of Incentive Stock Option Agreement                                                                                                                                                                                                                              |      | 8-K                 |         |  | 10 | .2          |  |          | 6/13/2005  |  |  |  | 000-49839  | 
|       
|        | 10 | .34# |             | Form of Non-Statutory Stock Option Agreement                                                                                                                                                                                                                          |      | 8-K                 |         |  | 10 | .3          |  |          | 6/13/2005  |  |  |  | 000-49839  | 
|       
|        | 10 | .35# |             | Form of Incentive Stock Option Agreement for awards granted
    pursuant to the 2004 Stock Incentive Plan                                                                                                                                                             |      | 10-K for 12/31/2004 |         |  | 10 | .28         |  |          | 3/17/2005  |  |  |  | 000-49839  | 

106



---



##### Table of Contents



|        |    |      |             |                                                                                                                                                 |      |                     |         |  |    |             |  |          |            |  |  |  |            | 
|------- | -- | ---- | ----------- | ----------------------------------------------------------------------------------------------------------------------------------------------- | ---- | ------------------- | ------- |  | -- | ----------- |  | -------- | ---------- |  |  |  | ---------- | 
|        |    |      |             | Incorporated by Reference to                                                                                                                    |     
|        |    |      |             |                                                                                                                                                 |     
|Exhibit |    |      |             |                                                                                                                                                 |      |                     | Exhibit |  |    |             |  | SEC File |           
|Number  |    |      | Description |                                                                                                                                                 | Form |                     | No.     |  |    | Filing Date |  |          | Number     | 
|        |    |      |             |                                                                                                                                                 |      |                     |         |  |    |             |  |          |            | 
|       
|        | 10 | .36# |             | Form of Non-Statutory Stock Option Agreement for awards granted
    pursuant to the 2004 Stock Incentive Plan                                   |      | 10-K for 12/31/2004 |         |  | 10 | .29         |  |          | 3/17/2005  |  |  |  | 000-49839  | 
|       
|        | 10 | .37# |             | 2005 Stock Incentive Plan                                                                                                                       |      | 8-K                 |         |  | 10 | .4          |  |          | 6/13/2005  |  |  |  | 000-49839  | 
|       
|        | 10 | .38# |             | 2004 Stock Incentive Plan                                                                                                                       |      | S-1 Amendment 2     |         |  | 10 | .32         |  |          | 5/28/2004  |  |  |  | 333-111157 | 
|       
|        | 10 | .39# |             | Amended and Restated 1998 Equity Incentive Plan                                                                                                 |      | S-1 Amendment 2     |         |  | 10 | .1          |  |          | 5/28/2004  |  |  |  | 333-111157 | 
|       
|        | 10 | .40# |             | Summary of Non-Employee Directors Compensation Plan                                                                                             |      | 10-K for 12/31/2004 |         |  | 10 | .27         |  |          | 3/17/2005  |  |  |  | 000-49839  | 
|       
|        | 10 | .41# |             | Employment Agreement, dated as of May 6, 2003, by and
    between the Registrant and Jean-Pierre Sommadossi                                     |      | S-1                 |         |  | 10 | .5          |  |          | 12/15/2003 |  |  |  | 333-111157 | 
|       
|        | 10 | .42# |             | Employment Agreement, dated May 8, 2003, by and between the
    Registrant and Andrea Corcoran                                                  |      | S-1                 |         |  | 10 | .6          |  |          | 12/15/2003 |  |  |  | 333-111157 | 
|       
|        | 10 | .43# |             | Employment Agreement, dated May 8, 2003, by and between the
    Registrant and James Egan                                                       |      | S-1                 |         |  | 10 | .7          |  |          | 12/15/2003 |  |  |  | 333-111157 | 
|       
|        | 10 | .44# |             | Letter Agreement, dated January 4, 2006, by and between the
    Registrant and James Egan                                                       |      | 8-K                 |         |  | 10 | .1          |  |          | 1/9/2006   |  |  |  | 000-49839  | 
|       
|        | 10 | .45# |             | Employment Agreement, dated May 8, 2003, by and between the
    Registrant and Nathaniel Brown                                                  |      | S-1                 |         |  | 10 | .8          |  |          | 12/15/2003 |  |  |  | 333-111157 | 
|       
|        | 10 | .46# |             | Employment Agreement, dated July 28, 2003, by and between
    the Registrant and Guy Macdonald                                                  |      | S-1                 |         |  | 10 | .10         |  |          | 12/15/2003 |  |  |  | 333-111157 | 
|       
|        | 10 | .47# |             | Employment Agreement, dated December 1, 2003, by and
    between The Registrant and David Arkowitz                                              |      | S-1                 |         |  | 10 | .11         |  |          | 12/15/2003 |  |  |  | 333-111157 | 
|       
|        | 10 | .48# |             | Summary of Relocation Adjustment, effective as of
    December 8, 2005, between the Registrant and each of David
    Arkowitz and Guy Macdonald |      | *                   |         |  |    |             |  |          |            |  |  |  |            | 
|       
|        | 10 | .49# |             | Separation Agreement dated as of July 16, 2003 by and
    between the Registrant John Dunphy                                                    |      | S-1                 |         |  | 10 | .12         |  |          | 12/15/2003 |  |  |  | 333-111157 | 
|       
|        | 10 | .50# |             | Employment Agreement dated November 2, 2004 by and between
    the Registrant and David Shlaes                                                  |      | S-1                 |         |  | 10 | .20         |  |          | 12/15/2003 |  |  |  | 333-111157 | 
|       
|        |    |      |             | Additional Exhibits                                                                                                                             |      |                     |         |  |    |             |  |          |            |  |  |  |            | 
|       
|        | 21 | .1   |             | Subsidiaries of the Company                                                                                                                     |      | S-1                 |         |  | 21 | .1          |  |          | 12/15/2003 |  |  |  | 333-111157 | 
|       
|        | 23 | .1   |             | Consent of PricewaterhouseCoopers LLP, an independent registered
    public accounting firm                                                     |      | *                   |         |  |    |             |  |          |            |  |  |  |            | 

107



---



##### Table of Contents



|        |    |    |             |                                                                                                                                                    |      |   |         |  |  |             |  |          |        |  |  |  |  | 
|------- | -- | -- | ----------- | -------------------------------------------------------------------------------------------------------------------------------------------------- | ---- | - | ------- |  |  | ----------- |  | -------- | ------ |  |  |  |  | 
|        |    |    |             | Incorporated by Reference to                                                                                                                       |     
|        |    |    |             |                                                                                                                                                    |     
|Exhibit |    |    |             |                                                                                                                                                    |      |   | Exhibit |  |  |             |  | SEC File |       
|Number  |    |    | Description |                                                                                                                                                    | Form |   | No.     |  |  | Filing Date |  |          | Number | 
|        |    |    |             |                                                                                                                                                    |      |   |         |  |  |             |  |          |        | 
|       
|        | 31 | .1 |             | Certification of Chief Executive Officer pursuant to
    Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of
    1934, as amended           |      | * |         |  |  |             |  |          |        |  |  |  |  | 
|       
|        | 31 | .2 |             | Certification of Chief Financial Officer pursuant to
    Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of
    1934, as amended           |      | * |         |  |  |             |  |          |        |  |  |  |  | 
|       
|        | 32 | .1 |             | Certification of Chief Executive Officer pursuant to
    18 U.S.C. §1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002 |      | * |         |  |  |             |  |          |        |  |  |  |  | 
|       
|        | 32 | .2 |             | Certification of Chief Financial Officer pursuant to
    18 U.S.C. §1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002 |      | * |         |  |  |             |  |          |        |  |  |  |  | 






|  |              
|- | -------------
|* | File herewith



|  |                                                                                                                                                       
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------
|# | Management contract or compensatory plan or arrangement filed as
    an exhibit to this report pursuant to Items 15(a) and 15(c)
    of Form 10-K     
| 
|+ | Confidential treatment requested as to certain portions, which
    portions have been separately filed with the Securities and
    Exchange Commission

108



---



##### Table of Contents



IDE-10K-06