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Why Achillion Pharmaceuticals Inc. Shares Soured

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 aimed at developing therapies to treat hepatitis C, gained as much as 6% following an upgrade from R.W. Baird, but ultimately gave up those gains and sank as much as 12%.

So what: Before the opening bell this morning, R.W. Baird upgraded Achillion from neutral to outperform while boosting its price target on the company from $4 per share to $12. Based on yesterday's closing price this would imply up to 54% upside potential to Achillion's share price. The upgrade also follows an announcement from Achillion yesterday that its lead clinical compound, sovaprevir, had been removed from clinical hold by the Food and Drug Administration, and that it was cleared to begin once-daily dosing at 200 mg once again.

Now what: Normally I suggest that investors ignore analyst ratings as they usually have a very short-term effect on a company's share price and often have little bearing on our long-term investing thesis. R.W. Baird has provided the perfect case in point why this is a good idea given that Achillion shares nearly tripled this week, and only following this move does Baird boost shares to an outperform. Need more evidence? Following Idenix Pharmaceuticals 229% spike higher on Monday after Merck agreed to buy the company Baird also upgraded it to outperform. These are two great examples of why you alone are accountable for your own investments and why you shouldn't put much credence in Wall Street's ratings of your holdings.

What investors should really be focused on is the development of sovaprevir now that it's off clinical hold. Achillion has had a difficult time trying to advance its investigational drugs beyond midstage trials, and until such time as this does happen it's probably not in investors' best interest to speculate in this highly volatile and wholly clinical-stage stock.

Achillion nearly tripled this week, and that still may not be enough to keep pace with the potential of this top stock over the long termThe best biotech investors consistently reap gigantic profits by recognizing true potential earlier and more accurately than anyone else. Let me cut right to the chase. There is a product in development that will revolutionize not how we treat a common chronic illness, but potentially the entire health industry. Analysts are already licking their chops at the sales potential. In order to outsmart Wall Street and realize multi-bagger returns you will need to Motley Fool’s new free report on the dream-team responsible for this game-changing blockbuster, CLICK HERE NOW.

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Sean Williams

A Fool since 2010, and a graduate from UC San Diego with a B.A. in Economics, Sean specializes in the healthcare sector and in investment planning topics. You'll usually find him writing about Obamacare, marijuana, developing drugs, diagnostics, and medical devices, Social Security, taxes, or any number of other macroeconomic issues.

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