Why Achillion Pharmaceuticals Inc. Shares Soared

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: Shares of Achillion Pharmaceuticals (NASDAQ: ACHN  ) , a clinical-stage biopharmaceutical company focused on researching therapies to treat hepatitis C, climbed as much as 44% on speculation that it could be a buyout target.

So what: The primary impetus for Achillion's spike is Merck's (NYSE: MRK  ) $3.85 billion purchase of Idenix Pharmaceuticals (NASDAQ: IDIX  ) , which was announced before the opening bell today. According to CNBC reporter David Faber, the 239% premium paid for Idenix resulted from a bidding war between Merck, Johnson & Johnson, and surprisingly AbbVie, which has its own direct-acting antiviral combo drug under review by the Food and Drug Administration. The thought here is that J&J, AbbVie, or some other suitor could be interested in Achillion's pipeline considering its focus on hepatitis C. The Centers for Disease Control and Prevention says more than 3 million people in the U.S. have hepatitis C (although most people are unaware they have the disease), with some 180 million people worldwide carrying the disease, per the World Health Organization.

Now what: The rumor mill is certainly working overtime today considering what I believe to be the insane price Merck paid to acquire a company that had four investigational therapies placed on clinical hold over the past four years.

Achillion is, unfortunately, in a somewhat similar boat. Although it has four investigational products in trials, its lead drug, sovaprevir, has been on clinical hold since last summer after investigators found elevated ALT liver enzyme levels in patients following a phase 1 study. Its future is as cloudy as ever with management expecting the clinical hold to have been lifted last year. Even with additional phase 1 and 2 studies under way, what value is there if Achillion, like Idenix, can't get any of its therapies safely past midstage studies? In addition, with hepatitis C patients already welcoming Gilead Sciences' Sovaldi with open arms, and maybe AbbVie's direct-acting antiviral combo later this year, what market share would Achillion be looking at when its drugs hit pharmacy shelves in two or three years? I would suggest investors ignore their urge to trade on emotion and stick to the sidelines here.

Achillion shares may have soared today, but it'll likely have a tough time keeping pace with this top stock over the long run
Give us five minutes and we'll show how you could own the best stock for 2014. Every year, The Motley Fool's chief investment officer hand-picks one stock with outstanding potential. But it's not just any run-of-the-mill company. It's a stock perfectly positioned to cash in on one of the upcoming year's most lucrative trends. Last year his pick skyrocketed 134%. And previous top picks have gained upwards of 908%, 1,252% and 1,303% over the subsequent years! Believe me, you don't want to miss what could be his biggest winner yet! Just click here to download your free copy of "The Motley Fool's Top Stock for 2014" today.


Read/Post Comments (0) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2987760, ~/Articles/ArticleHandler.aspx, 10/31/2014 3:20:45 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement