What happened

Shares of Achillion Pharmaceuticals (NASDAQ:ACHN) were down 11.8% as of 3:01 p.m. EST on Wednesday. The biotech continued to feel the impact from its interim clinical update for lead candidate ACH-4771, provided after the market closed on Monday. Achillion's decision to not move forward with the drug as a monotherapy in treating paroxysmal nocturnal hemoglobinuria (PNH) disappointed investors.

So what

Between the big drop for Achillion stock prior to the interim update on Monday and the following two days of declines, the biotech has lost more than 40% of its market cap this week. With that kind of response from investors, you might think that Achillion's pipeline news was all bad. But that's not the case.

Gloved hand holding a beaker with test tubes, droppers and other lab glassware in view

Image source: Getty Images.

Although Achillion isn't planning to advance ACH-4771 to a late-stage study for treating PNH as a monotherapy, the company saw potential for the drug as part of a combination therapy. ACH-4771 in combination with Alexion Pharmaceuticals' Soliris appeared to increase hemoglobin, lower the number of immature red blood cells without a nucleus (known as reticulocytes), and resulted in no transfusions for patients on the combo therapy. 

Achillion also thinks that another pipeline candidate, ACH-5228, could prove to be a better monotherapy for treating PNH. The company plans to begin a phase 1 clinical trial of the experimental drug in the first quarter of 2019.

In addition, Achillion stated that the initial data from a phase 2 study of ACH-4771 in treating C3 glomerulopathy (C3G) were promising. C3G is a rare chronic kidney disease that currently has no approved treatments.

Now what

It's pretty much a wait-and-see game for Achillion. Clearly, investors had hoped the biotech would have overwhelmingly positive news for ACH-4771 in both PNH and C3G. That didn't happen, but there are more results to come.

In the meantime, Achillion remains a highly speculative stock with a significant amount of risk. There's no guarantee that ACH-4771 or ACH-5228 will prove successful. Investors can definitely find other biotech stocks with more attractive risk-reward propositions.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.