What happened

Shares of the clinical-stage biotech Achillion Pharmaceuticals (NASDAQ:ACHN) dropped by as much as 20.8% today on more than seven times the average daily volume. Interestingly enough, today's plunge comes on top of yesterday's 22.8% decline. What's causing investors to hit the exits this week?

Yesterday, Achillion released an interim peek at its oral factor D inhibitor, ACH-4471, as a treatment for both paroxysmal nocturnal hemoglobinuria (PNH) and C3 glomerulopathy (C3G), as well as early-stage pharmacokinetics and efficacy data for its follow-on drug candidates, ACH-5228 and ACH-5548. While these results were overall positive across the board, Achillion noted that it has decided to shelve ACH-4471 as a monotherapy in PNH.

Man with a look of surprise on his face holding his forehead. A downward pointing chart sits in the background.

Image Source: Getty Images.

So what

At present, the standard of care for PNH -- a rare blood disorder caused by the destruction of red blood cells by the complement system -- is Alexion Pharmaceuticals' (NASDAQ:ALXN) Soliris. So Achillion and other potential competitors are charged with developing drugs that are either more convenient but as efficient and safe as or flat-out superior to Alexion's market share-leading medicine. From the look of things, ACH-4471 didn't appear to meet these criteria as a monotherapy, leading to Achillion's decision to pivot to its earlier-stage PNH assets for the future.

Now what

There is a silver lining from yesterday's clinical update, however. Achillion is staying the course with ACH-4471's program for C3G, a serious kidney ailment that currently lacks any approved treatments in the United States. The problem, however, is that the company has only released a smattering of data for the drug in this indication, making it next to impossible to gauge its chances at successfully completing a full-blown clinical program in C3G. As such, this small-cap biotech stock probably doesn't belong in your portfolio unless you are comfortable with high levels of risk and are willing to wait while its pipeline continues to slowly mature.