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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Non-interferon-based hepatitis-C drug hopefuls Achillion Pharmaceuticals (Nasdaq: ACHN ) and Idenix Pharmaceuticals (Nasdaq: IDIX ) are heading in different directions today -- Achillion rose as much as 19%, while Idenix fell as much as 15% -- following analyst rating and price target changes for each company.
So what: Achillion rocketed higher from the onset of trading because of Bank of America Merrill Lynch raising its rating on Achillion to "buy" from "underperform," and boosting its price target to $13 from $7. Deutsche Bank also initiated Achillion with a "buy" rating and a $12 price target. Bank of America cited enthusiasm over Achillion's hepatitis-C pipeline as the reason behind the upgrade. Conversely, Bank of America Merrill Lynch lowered its rating on Idenix to "neutral" from "buy," as well as reducing its price target to $6 from $8, because of recent concerns over its lead drug candidate, IDX-184.
Now what: As usual, no matter how much we agree or disagree with analyst ratings, we can't allow them to sway our investment thesis as they have only a very short-term effect on a stocks' share price.
What's really going on here is that Achillion has had very few setbacks as compared to the nucleotide-based hepatitis-C drug hopefuls that have struggled with safety concerns since Bristol-Myers Squibb (NYSE: BMY ) discontinued its leading hepatitis-C candidate, BMS-986094 (the drug it acquired when it purchased Inhibited for $2.5 billion in January). Since then, Idenix has had two of its four hepatitis-C trials halted indefinitely as the safety of the compound is explored, and even Gilead Sciences (Nasdaq: GILD ) , whose GS7977 has breezed through clinical trials with flying colors, has received a discerning eye from investors despite zero safety issues thus far.
In my recent "CAPScall of the Week," I forecasted that Achillion would underperform the market. While I'm down on that call right now, I don't see a large enough piece of pie being left over for the company given that Vertex Pharmaceuticals' (Nasdaq: VRTX ) Incivek -- the fastest drug to reach $1 billion in total sales -- is unlikely to relinquish its crown as the premier FDA-approved hepatitis-C treatment anytime soon, and Gilead's drug is further along in clinical studies and performing marvelously.