Source: Achillion Pharmaceuticals.

What: After announcing 100% cure rates in hepatitis C patients during midstage trials earlier this year, hope ran high that Achillion Pharmaceuticals (ACHN) would get bought, lock, stock, and barrel.

However, because Johnson & Johnson (JNJ 0.62%) decided to ink a collaboration deal with the company in May instead, Achillion's shares have been tumbling, including a 13.3% drop in August. Achillion'w share-price descent could present an opportunity to buy, but only for risk-tolerant investors.

So what: Gilead Sciences' (GILD 0.42%) Sovaldi, a nucleotide NS5B inhibitor, and Harvoni, a mash-up of Sovaldi and the NS5A inhibitor ledipasvir, racked up sales totaling over $12 billion last year and that success has led to a flurry of hepatitis C drug research and development among competitors, including Johnson & Johnson.

Johnson & Johnson's hepatitis C research pipeline includes the once top-selling HCV drugs Incivek and Olysio, a protease inhibitor, as well as a nucleotide NS5B inhibitor, AL-335, that it acquired when it bought Alios for $1.75 billion in cash last November.

By acquiring the rights to Achillion's hepatitis C drugs, Johnson & Johnson adds Achillion's ACH-3102, a NS5A inhibitor, ACH-3422, another nucleotide NS5B inhibitor, and Sovaprevir, another protease inhibitor, to the mix.

In exchange for rights to those drugs, Johnson & Johnson agreed to pay Achillion up to $1.1 billion in potential milestones and royalties on eventual sales from the mid-teens to the low 20% range, depending on sales. Johnson & Johnson also purchased 18.4 million newly issued shares in Achillion for $12.25, a price that's a significant premium to where Achillion shares are trading today.

Now what: The next battle among hepatitis C drugs will be waged over treatment duration and efficacy across all hepatitis C genotypes.

Because combining Achillion's ACH-3102 with Sovaldi over six weeks cured 100% of patients and halved the current standard treatment duration, investors were hoping for a best-in-class solution, especially since Achillion was researching a four-week treatment cycle.

However, Johnson & Johnson appears to be abandoning a Sovaldi plus ACH-3102 short duration research program in favor of a combination that includes ACH-3102, AL-335, and Olysio.

A phase 1 trial of that triplet is expected to wrap up next month, and if results are positive, it could clear the way for midstage trials in 2016 and late-stage trials in 2017. However, that timeline may not be quick enough, given that Gilead Sciences is researching its own six-week duration therapy.

The hepatitis C market is unquestionably lucrative, but it's also highly competitive. Johnson & Johnson has the financial firepower and expertise necessary to succeed, but there's no guarantee their efforts will pan out, and for that reason Achillion pharmaceuticals shares are risky; especially since we've take a step back to phase 1 trials.

Regardless, I think there could be an opportunity for risk-tolerant investors willing to take the long view on Achillion; particularly given that its market cap is currently less than the potential milestone payments it could earn from Johnson & Johnson.