A Bad News Buy for Gutsy, Patient Investors

It seems Achillion Pharmaceuticals' (Nasdaq: ACHN  ) management might have been better off keeping its mouth shut.

On Thursday, shares of the hepatitis C drugmaker fell more than 12% when Gilead Sciences (Nasdaq: GILD  ) , Bristol-Myers Squibb (NYSE: BMY  ) and Abbott Labs (NYSE: ABT  ) presented great data at European Association for the Study of Liver Disease for their respective hepatitis C drugs. Achillion didn't present until the weekend, and apparently "some of the data was not clear" on its poster presentation, so on Monday the company issued a press release explaining the data.

It didn't help; shares fell an additional 18%.

Taken alone, the data doesn't really look that bad. All 22 patients that completed the 24-week treatment with ACH-1625 had undetectable virus levels after the treatment. You can't get better than that.

The caveat comes back to why Achillion fell on Thursday; it's not developing a hepatitis C drug in a vacuum. In comparison to the other drugs, the ACH-1625 data isn't all that hot.

The 100% success rate isn't really a cure rate since the virus sometimes goes below the limits of detection, but then rebounds once the patient stops taking the drug. Gilead and Bristol's combination was measured four weeks after treatment ended, for instance. As Achillion continues following the patients, the rate could be reduced. The other problem with the 100% success rate is that it's measured for patients that saw their viral loads undetectable after the first 12 weeks of treatment. That's the correct way to run the trial -- there's no reason to continue treating if the drug isn't working -- but it means the cure rates of everyone treated will likely be lower.

More concerning is that ACH-1625 was tested in combination with a Roche's Pegasys (unlike the other hepatitis drug candidates). The future of hepatitis C treatment is an all-oral treatment that doesn't use Pegasys or Merck's (NYSE: MRK  ) related drug PegIntron, which have to be injected.

Of course, just because the drugs works in combination with Pegasys doesn't mean it won't work with other drugs. Achillion plans to combine ACH-1625 with one of its other hepatitis C drugs, ACH-3102. Unfortunately, ACH-3102 is further behind in the clinic and won't be ready for testing in combination until the fourth quarter.

Knocked down to a market cap less than $500 million, Achillion is cheap compared to the prices that Pharmasett and Inhibitex were taken out at. But any acquirer would likely want to see combination data, which is a year away and might be too late to the party. Achillion's best hope would be a stumble from the front runners, which would surely send its shares headed back up.

While you're waiting for the combination data, take a look at what Fool analysts believe is the next rule-breaking multibagger. Get the free report by clicking here.

Fool contributor Brian Orelli holds no position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Abbott Laboratories. Motley Fool newsletter services have recommended buying shares of Gilead Sciences. The Motley Fool has a disclosure policy.

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  • Report this Comment On April 24, 2012, at 6:42 PM, hainhan wrote:

    I am a retired physician and I am interested in the progress pf Biosciences.

    Why do many analysts show their fearfulness toward Interferon, which must be given by injections and can cause side effects like flu symptoms.

    We should recognize THE BENEFITS OF INTERFERON :

    Interferon has direct antitumor effect and several effects on other serious conditions. However, I am talking only about the benifits of Interferon relating to antiviral effects and stimulatory effects on the immune system.

    Interferon is produced by many different cell types in the body. It is a natural product that protects our body against several kinds of infections, especially viral infections.

    The HCV is a smart virus. It stays in our body for our lifetime until we die. It may be friendly if it doesn't cause life-threatninig liver damage which will be progressing to decompensation and/or cancer .

    The new drugs (Protase inhibitors,Polymerase nucs or non nucs are very good direct antivirals on different weakness areas on the virus. They can kill the virus right away like a atomic bomb dropping over a city. Some people can survive if they can go to a anti bomb shelter. Some HCvirus are very smart -their shelter are PERIPHERAL BLOOD MONONUCLEAR CELLS ..

    After we stop the treatment, the virus comes out victoriously...Ha, ha !!! But, Interferon is smart too! It may go inside mononuclear cells to kill the remaining virus.

    The word UNDETECTABLE is for what one looks for in the specal microscope but you can not see the virus inside the MNcell. The virus can have many other different shelters .

    Interferon can cause side effects which depend on the variety of race. For example, in Asia people don"t care: Painful shot is good shot!

    Not like the real flu , the flu symptoms caused by Interferon are benign : no fever, no cough, no pneumonia and no death. They can subside after 3 or 4 shots. Before 2003, one shot was needed every 3 days and now only one subcutaneous shot is needed every week .The total number of injections for HCV treatment are less than 12 . Not too bad !

    80% of HCV patients in US have contracted the virus between 1945 and 1965. We have waited too long ! It kills more than 15,000 each year, more than AIDS can kill and it causes many transplants of liver more than any other conditions combined.

    Studies show that even after you have cleared the virus, there is still a change of malignancy in the liver in some patients. This suggests that there is already a form of slow progression of cancer that is undetectable during the liver infection. Patients having a long chronic hepatitis associated with cirrhosis (not yet having liver decompensation) may have early malignant changes in the hepatitic cell. It is a misunderstanding that one is safe after the success of treatment with direct acting antiviral treatment.

    Interferon is known to show the ability to treat malignant tumor especially in the very early stages. Therefore, I believe in the future, during the treatment of Hepatitis C, it is advisable to add to the cocktail of therapy about 10 weekly injections to boost immunity to control the progression of the cancer cells, if any. This is a precaution proposal and it is not meant to be visionary.

    If a direct antiviral drug can't kill the all the genetic variant of CT or CTT ( IL28BCT/TT), then how can one call this a good drug? So, one should consider Interferon.

  • Report this Comment On April 24, 2012, at 10:18 PM, gudbound wrote:

    Hainhan, Very well said sir! Hope those analyst pretending they know everything may enlighten their minds before they made comments.

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