What: After reporting third quarter financial results and presenting an update on its progress in developing new therapies for hepatitis C, shares in Achillion Pharmaceuticals (NASDAQ:ACHN) sky-rocketed 30.2% last month.
So what: Thanks to payments from Johnson & Johnson (NYSE:JNJ) tied to its licensing of Achillion Pharmaceuticals hepatitis C pipeline, Achillion Pharmaceuticals reported third quarter net income of $26.3 million.
Overall, Achillion Pharmaceuticals recognized $33.8 million in revenue in the quarter, representing a portion of the $225 million paid by Johnson & Johnson to acquire shares in Achillion Pharmaceuticals at $12.25 per share.
For comparison, the company reported no revenue in the comparable quarter a year ago.
Achillion Pharmaceuticals also reported that its cash stockpile exiting the quarter had grown to $476 million and that it expects net operating cash used this year to total between $60 million and $65 million, down from prior expectations of between $100 million and $110 million.
The company also made a presentation at the Credit Suisse Healthcare Conference on November 11.
In that presentation, the company highlighted the potential for a best-in-class hepatitis C therapy that combines its NS5A inhibitor odalasvir with Johnson & Johnson's Olysio, a NS3/4A protease inhibitor, and ALS-335, a NS5B inhibitor. Odalasvir delivered 100% hepatitis C cure rates in as little as six weeks when used alongside Gilead Sciences Sovaldi in previous phase 2 trials, Olysio is already FDA approved, and ALS-335 targets the same mechanism as the massively successful Sovaldi.
Achillion Pharmaceuticals also used the presentation to talk up its pre-clinical oral complement factor D platform. The company hopes to initiate human trials to evaluate this platform as a therapy for paroxysmal nocturnal hemoglobinuria (PNH) next year.
Now what: In October, Johnson & Johnson announced its kicking-off a 3-pronged phase 2a study of the triplet hepatitis C cocktail that will evaluate efficacy over four, six, and eight week dosing periods.
If those results, which are expected in the first half of next year, are positive, then Johnson & Johnson could have an opportunity to significantly shorten treatment duration and reduce patient burden for hepatitis C patients.
If so, then Achillion Pharmaceuticals could benefit handsomely. As part of its licensing pact, Johnson & Johnson agreed to pay approximately $900 million to Achillion Pharmaceuticals in the form of development, regulatory, and commercial milestones. Achillion Pharmaceuticals can also receive royalties on global sales ranging from mid-teen percentages to the mid-twenties percentages if this triplet is eventually approved.
Because this trial could significantly move the needle for Achillion Pharmaceuticals (the market for hepatitis C therapy is between $10 billion and $20 billion annually) and Achillion Pharmaceuticals has plenty of cash on the books and a market cap of only $1.35 billion, it may be worth considering this stock for speculative portfolios.