What happened
Shares of Achillion Pharmaceuticals (ACHN +0.00%) are rallying more than 15% at 1:30 p.m. EDT Thursday after analysts at Leerink slapped a $6 price target on the stock, citing attractive potential rewards associated with the company's collaboration deal with Johnson & Johnson (JNJ 0.06%).
So what
As a refresher, Achillion Pharmaceuticals licensed its hepatitis C drug pipeline to J&J in 2015, and ever since, J&J has been responsible for managing the two companies' research into a next-generation hepatitis C therapy that could reduce treatment duration while delivering near-100% functional cure rates.
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In April, J&J reported data from a phase 2 combination drug trial that includes Achllion's odalisvir. Unfortunately, those results failed to spark investor optimism. The data showed that a three-drug combination that includes Achillion's odalisvir missed its mark in genotype 3 patients, a historically hard-to-treat subset of hepatitis C patients.
The data did show, however, that the three-drug approach delivered 100% cure rates in genotype 1 patients without cirrhosis after six or eight weeks of therapy.
However, the genotype 1 market is crowded, with Gilead Sciences, AbbVie, and Merck all fighting for market share. Competition has caused prices for genotype 1 drugs to fall, shrinking the market opportunity for the indication.
Yet Leerink thinks Achillion shares could offer attractive an risk-reward proposition at current prices, especially since results from a phase 2b study involving odalisvir are on deck for later this year.
Now what
There's an important need for shorter-duration hepatitis C treatments, but six-week treatment regimens are already available to many genotype 1 patients, and more options could become available to these patients soon. Gilead Sciences' Harvoni is already used in about 40% of genotype 1 patients for six weeks, and the FDA is reviewing a new treatment from AbbVie that delivered high cure rates in as little as six weeks, too.
J&J's got the marketing muscle necessary to elbow for room in this indication, and if trials convince regulators to give it a green light, Achillion stands to benefit handsomely from milestones and royalties. However, there's a tremendous amount of risk here, and most investors are probably best off focusing on other intriguing investment ideas.
