Second-generation drugs are, by definition, behind their first-generation counterparts. Coming late to the party can make it difficult to break into the market, unless they offer some distinct advantage.

Achillion Pharmaceuticals (Nasdaq: ACHN) hopes it has that something extra in its second-generation NS5A inhibitor to treat hepatitis C, because Bristol-Myers Squibb's (NYSE: BMY) BMS-790052, Gilead Sciences(Nasdaq: GILD) GS-5885, and Abbott Labs(NYSE: ABT) ABT-267 are all ahead of its ACH-3102.

The advantage that ACH-3102 might have is that it seems to work well on viruses with mutations that are known to confer resistance to first-generation NS5A inhibitors. Of the 12 patients the drug was tested on in a phase 1 trial, one had a L31M mutation, and another had a Y93C mutation, but the drug seemed to knock down the virus just as well as it did in patients with virus that didn't contain mutations.

Keep in mind that this is very early data from just a single dose of the drug. The ability to reduce viral levels generally translates well to permanent cure rates, but it's possible that the virus will rebound, perhaps with some other mutation.

We'll know more once Achillion finishes its phase 2 trial testing ACH-3102 in combination with generic antiviral ribavirin. That trial is expected to be completed in the fourth quarter.

Based on the initial date, it seems likely that the drug works well, but probably not so well that it can get on the market in combination with ribavirin alone. This will leave Achillion in an interesting position. The companies with drugs currently being tested in cocktails with first-generation NS5A inhibitors aren't going to want to wait for ACH-3102 to catch up.

Achillion's best move might be to team up with a company like Vertex Pharmaceuticals (Nasdaq: VRTX), which has a nuc at about the same stage. Nucs and NS5A inhibitors seem to work well together; hopefully, the second-generation versions will follow suit.

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