Seeking Alpha - Achillion Will Soar Higher On New Hepatitis C Drug In 2013

Posted on 4/16/2012 on Seeking Alpha.com. I'm trying to figure this guy out. He makes some valid points on Achillion's PI ACH-1625, but says nothing about their NS5A inhibitors. Then he mentions GSK's Promacta (Eltrombobag) as a 'competitor' and a 'Hepatitis C drug', which doesn't do much for this particular person's street cred. Anyway, I like to root for Achillion and I like it when people say nice things about the company, so I'm including it here for your reading pleasure. 

Achillion Will Soar Higher On New Hepatitis C Drug In 2013

By Vatalyst - Seeking Alpha.com

April 12, 2012

Achillion Pharmaceuticals (ACHN) has risen 51% since last year, which is a surprising number for a development stage pharmaceutical industry with no FDA approved drugs on the market. The news has been hyping up Achillion's hepatitis C drug ACH-1625, which is only just now ending Phase 2 clinical trials. Along with ACH-1625, are four other hepatitis C drugs and one bacterial infection antibiotic, ACH-702. The hepatitis C drug pipeline is composed of some very unique drugs and mechanisms for treating hepatitis C.

Should these drugs gain FDA approval, there would be a major upside for the company to sell ACH-1625 state side and worldwide to nearly corner the market. However, ACH-1625 is only just finishing Phase 2 and releasing results. I always highly advise against investing in any company with promising drugs that have not been FDA approved.

The first reason is that Achillion is getting great news hype about ACH-1625, which is causing the stock price to increase very well. But, Achillion is now starting Phase 3 clinical trials and will not have any more news reports that would cause a stock rise in the next year. The second reason is that more often than not, drugs fail to gain FDA approval for hundreds of different reasons, including toxicity, efficacy, and potency. It is never safe to bet on a drug before it is FDA approved so do not invest until there are conclusive and positive phase 3 trial results released.

Finally, due to the fact that ACH-1625 is starting phase 3 trials in the beginning of 2012, we cannot expect to see the drug on the market until at least late 2013 or early 2014.

Phase 3 trials can take a year or longer, plus new drug application for the FDA takes a substantial amount of time. Therefore, I do not expect stock price to do much of anything until late 2013 at the earliest. If you are a long-term investor and already own stock with Achillion, sit tight until late 2013 when share price will see a major upside if the clinical results are positive. If you are short term, keep a close eye on the company until late 2013 and if the phase 3 results are positive then it is time to invest.

Achillion has a market cap of $773 million and a 52 week range of $4-$13. Achillion has a competitor in the hepatitis C drug Promacta by GlaxoSmithKline (GSK), which has a market capitalization of $223 billion, a 52-week range of $39-$47 and a price to earnings ratio of 27.45. Achillion's next competitor is a hepatitis C drug, TMC435, by Johnson & Johnson (JNJ) with a 52 week range of $59-$68, a price to earnings ratio of 18.74 and a market cap of $179 billion. The last competitor of Achillion are three hepatitis C drugs by Roche Holding AG (RHHBY.PK) with a price to earnings ratio of 14.3, a market cap of $145 billion and a 52-week range of $42-$43. For a company that has no FDA approved products on the market, Achillion seems to be in pretty good standing with its competitors.

Johnson & Johnson is set to be Achillion's biggest competitor. It currently has a hepatitis C drug, TMC435, entering Phase 3 trials. The results of the Phase 2 trials showed that the drug was effective, safe, and 83% of patients were able to discontinue treatment with TMC435 after 24 weeks. With the release of this positive clinical trial news, Johnson & Johnson is receiving equal amounts of positive hype over this hepatitis C drug as Achillion. It is possibly receiving even more hype when considering the other drugs currently in Phase 3 of the Johnson & Johnson pipeline. Share has stayed relatively the same over the past year with a nearly 10% increase. I feel that right now Achillion and Johnson & Johnson are going to mirror one another until the Phase 3 data is released. I recommend keeping an eye on both companies until then; once the data is released we will know which company has the better drug and which is worth investing in.

Roche Holding AG is currently developing three hepatitis C drugs in its pipeline. These drugs are all in Phase 2 testing and will not be ready for the market until late 2014 at the very earliest, most likely by 2016. This is assuming that the drugs even pass FDA regulation in the coming years. I see no real competition from Roche Holding AG in the next few years to hurt share price of Achillion, but Roche Holding AG would be a good company to keep an eye on and possibly invest in if ACH-1625 ends up failing FDA approval.

GlaxoSmithKline has developed an FDA approved drug, Promacta, used for the treatment of hepatitis C in compound with other treatments. I feel that this drug wont provide much competition for ACH-1625 should it become FDA approved. Promacta's main function is to increase blood platelet count in patients with hepatitis C while other drugs attack the hepatitis virus, whereas ACH-1625 directly treats hepatitis C with no need for compounding with other drugs. I feel that ACH-1625 would out-compete Promacta relatively easily and no reason to be wary of GlaxoSmithKline.

To sum up Achillion's stance on the market, it is too soon to be investing in ACH-1625. There is no current upside to raise share price substantially for at least the next year while the trials carry on. Considering Johnson & Johnson's position currently mirrors that of Achillion, it would be smart to let the research data of both company's respective drugs decide which is going to be the best bet in 2013. Lastly, I believe ACH-1625 will beat out GlaxoSmithKline's Promacta if it becomes FDA approved, so expect little competition on the market from GlaxoSmithKline.