Shares of Achillion Pharmaceuticals (NASDAQ:ACHN) are crashing 25% today after the company reported mixed early stage drug trial results yesterday and following Express Scripts' decision to remove Gilead Sciences' Harvoni from its preferred drug formulary, a decision that may suggest future a future price war among hepatitis C drug developers.
Why it's happening
Achillion reported that its promising hepatitis C drug, ACH-3102, cured 100% of patients when dosed alongside Sovaldi for six weeks in a phase 2 trial, but that its Sovaldi alternative, ACH-3422, posted a lower log reduction in viral clearance during phase 1 studies than some had hoped.
The company is developing ACH-3102 as an alternative to Gilead Sciences' ledipasvir, which is paired up with Sovaldi in Gilead Sciences latest generation hepatitis C drug, Harvoni. In November, Achillion reported that 100% of patients taking ACH-3102 with Sovaldi for eight weeks were free of the virus 12 weeks later, which is known as a functional cure. The recent release demonstrating similar cure rates four weeks after receiving the two drugs over a six week period may suggest that ACH-3102 plus Sovaldi works as well as Harvoni with the advantage of fewer weeks of treatment.
That seemingly good news, however, was offset by investor worries over ACH-3422, a drug that Achillion is developing to replace Sovaldi in its trials. In phase 1, ACH-3422 posted a 4.8 log reduction in viral load over 14 days, which was lower than some investors had hoped and may mean that ACH-3422 may not match Sovaldi's efficacy. If so, those results could diminish the likelihood of Achillion having an in-house combination of ACH-3102 and ACH-3422 that can put up similar results to ACH-3102 plus Sovaldi.
Additionally, investors are also likely spooked by pricing uncertainty following Express Scripts' decision to ink a deal with AbbVie to make AbbVie's Viekira Pak, the company's newly approved hepatitis C drug, its exclusive hepatitis C treatment for genotype 1 patients, which account for roughly 70% of hepatitis C patients in the United States. In order to get that exclusivity deal, AbbVie reportedly offered Express Scripts a steep price cut that came in far south of Harvoni's $94,500 list price.
What may happen next
A 25% haircut can't be ignored and it serves as an important reminder to investors of the risks associated with clinical stage companies like Achillion. The results from the ACH-3102 study remain impressive, and while ACH-3422 may have been disappointing, it's far from a failure. As a result, Achillion is likely to continue pursuing an ACH-3102 combination with ACH-3422, which, if successful, could pose a longer term threat to both Gilead Sciences and AbbVie. Regardless, Achillion remains an emerging biotech without any approved products, which means that most investors are best served watching and waiting on this one.