Why Achillion Pharmaceuticals Popped and Idenix Pharmaceuticals Dropped

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.

Craving more input? Start by adding Achillion Pharmaceuticals and Idenix Pharmaceuticals to your free and personalized watchlist so you can keep up on the latest news with the each company.