UPDATE 1-Idenix says Novartis not to license Hepatitis C drug

* Idenix says to seek new partner for the drug

* Idenix posts narrower-than-expected Q3 loss

* Shares sink 20 pct after the bell

Oct 29 (Reuters) - Idenix Pharmaceuticals Inc IDIX.O said Novartis Pharma AG NOVN.VX has decided not to exercise its option to license Idenix's hepatitis C drug, sending Idenix shares down 20 percent.

Idenix continue to develop the drug, IDX184, and will seek a new partner, it said.

Idenix also reported a narrower-than-expected third-quarter loss as it tightened operating expenses.

For the third quarter, the company posted net loss of $11.7 million, or 18 cents per share, compared with net loss of $16.9 million, or 30 cents a share, a year earlier.

Total revenue rose 48 percent to $3.1 million, while operating expenses fell 24 percent to $15.1 million.

Analysts on average had expected the company to post a loss of 24 cents a share, on revenue of $3.03 million, according to Thomson Reuters I/B/E/S.

Shares of the biopharmaceutical company fell 20 percent to $2.00 after the bell Thursday. They closed at $2.50 on Nasdaq. (Reporting by Anuradha Ramanathan in Bangalore; Editing by Gopakumar Warrier)