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What: Following the release of quarterly filings showing that healthcare hedge fund RA Capital Management boosted its stake in the company last quarter, shares in Achillion Pharmaceuticals (NASDAQ:ACHN) soared by 10% earlier today.

So what: The massive success of Gilead Sciences' Sovaldi launched a speculative frenzy last year among drugmakers wanting to develop their own hepatitis C therapies.

That frenzy led to Achillion's shares tripling between last spring and fall and ultimately to its biggest investor, RA Capital, beginning to unwind what, at its peak, was a massive 20 million plus share stake in the company. By the end of last year, RA Capital's position in Achillion had fallen to below 7 million shares.

RA Capital's decision to begin buying back shares last quarter; therefore, could be significant because it shows the the hedge fund manager may be done selling and that the firm believes that the recent sell-off in Achillion's shares to less than $8 is overdone. Exiting the second quarter, RA Capital owns 9.9 million shares in Achillion, up 21% from the first quarter.

Now what: Achillion's share drop was tied to disappointment a suitor didn't show up and buy the company lock, stock, and barrel, but investors might not want to discount the importance of the collaboration deal Achillion inked with Johnson & Johnson in May.

J&J has one of the deepest portfolios of hepatitis C therapies, including Invicek -- the prior generation's top seller -- and Olysio, a drug that was commonly used last year alongside Sovaldi prior to the approval of Harvoni last October.

Additionally, J&J bulked up its hepatitis C R&D program last fall with the acquisition of Alios, a company developing nucleotide inhibitors that could conceivably be paired up with Achillion's ACH-3102, an NS5A inhibitor Achillion hopes is better than Gilead's ledipasvir, which is the drug used alongside Sovaldi in Gilead's Harvoni. In small mid stage trials, pairing up ACH-3102 with Sovaldi delivered 100% functional cure rates in six and eight weeks, so there could be significant potential associated with Achillion's pipeline that isn't being fully appreciated by investors.  

Todd Campbell and The Motley Fool own shares of Gilead Sciences, which The Motley Fool also recommends. Todd owns shares of Achillion. The Motley Fool recommends Johnson & Johnson. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may have positions in the companies mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.