What happened

Shares of Achillion Pharmaceuticals (NASDAQ:ACHN) were soaring 24.9% higher as of 11:16 a.m. EDT on Tuesday. This big move came after the biotech stock jumped more than 13% on Monday following Achillion's announcement of positive results from a phase 1 clinical study of experimental oral factor D inhibitor ACH-5228.

So what

The general rule of thumb for clinical-stage biotechs is that the better the news, the longer the momentum generated for the stock. That appears to be applicable for Achillion. The company's news yesterday was really good -- and it's translating into continued momentum for the stock.

Businessman with chalk drawing of wings on him next to a blue line with an arrow pointing upward

Image source: Getty Images.

Achillion's report of the results from the phase 1 study of ACH-5228 demonstrated near-complete and sustained inhibition of the alternative pathway (AP) that's important in battling immune diseases. Even though it was an early-stage study, the data looked so promising that Achillion's executives were predicting that ACH-5228 could become the best-in-class AP inhibitor.

Sure, it's going to be a while before we'll know if that optimism pans out. However, Achillion also has another Factor D program, danicopan (also known as ACH-4471), which also relies on inhibiting the AP pathway. The wait for this drug won't be as long: Achillion plans to start a pivotal phase 3 clinical study for danicopan early next year.

Now what

Investors will definitely want to watch Achillion's progress in advancing ACH-5228 to phase 2 and in initiating studies of the drug in the U.S. The promising phase 1 study was conducted outside of the U.S.

Some clinical-stage biotechs opt to take advantage of a big spike in their stock to issue more shares to raise additional cash. Achillion might take this route but it certainly doesn't have to. The company reported cash, cash equivalents, and marketable securities totaling $254 million as of the end of March. This should be enough to fund operations for several years based on Achillion's current spending levels.

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