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.

Medgenics developing new therapeutic therapy for anemia...

Article by Ray Dirks from Seeking Alpha.com. Although not directly related to Hepatitis C drug development, patients on the current treatments for Hepatitis C carry the risk of developing anemia. Sometimes this requires the administration of a medicines that increases red blood cell production, but is expensive and carries it's own risks, such as red cell aplasia or cardiac events. The Seeking Alpha investiment website covers a new treatment for anemia in development from a company called Medgenics. They have developed a mini-bio pump delivery system that results in sustained levels of erythropoietin naturally with very little side effects and at a fraction of the cost. They are entering phase 1 trials for Hepatitis C treatment-related animeia later this year.

Medgenics' Disruptive Biotechnology Is One To Watch
By Ray Dirks
Medgenics (AMEX:MDGN) has, what I believe to be, the most disruptive biotechnologies of the last 20 years. This company is poised to own the 90 billion plus protein therapy market. We are talking about an enormous indication. Nomura (the big investment bank) calls this one of the top 10 biotech companies to watch over the next 5 years.
Currently the only form of treatment for Anemia is Epogen. Epogen is a synthetic version of the Erythropoietin that increases your red blood cell production. It is a $12B a year product monopolized by Amgen (AMGN) and affects nearly 1-2 billion worldwide.
When you are diagnosed with anemia, you go to your doctor. Your doctor is going to tell you that you have an abnormally low hemoglobin count and he will prescribe an epogen shot to get your hemoglobin into check and into a 10-12 count range which is considered healthy.

These shots cost about $25K a patient per year and are very painfully administered. What is going to occur is a spike of your Epo level from very low up to a 100x, which can lead to high blood pressure, a percentage increase of fatal cardiac events (as per the FDA) and all sorts of side effects. Over the next 48 hours, your Epo will crash back to a low level after which you will be treated with another shot of epogen, and this happens over and over again for the rest of your existence.

It's a terrible way to live, costs the system billions and is one of the worst FDA procedures on the market. In fact, Amgen has already received a black box warning because of the side effects and increased risks and is under major scrutiny for reimbursements issues as well.

The holy grail of Anemia treatment is to treat the patient without the infections and without that "spike" in Epo which is deadly in nature and provides a terrible quality of life.

Medgenics has developed a therapeutic system that can provide a dosage of the sustained levels (no spikes) of Erythropoietin naturally with literally no side effects and only two primary clinic visits for a fraction of the money. Let me explain exactly what they do and how they do it:

Medgenics takes a small piece of your skin about the size of a one inch toothpick from your abdomen.

This piece of tissue is then processed in a lab by inserting a small piece of DNA that teaches it to continuously produce the missing protein; which in this case is Erythropoietin.

Once this engineered piece of tissue is making the protein you are missing and at the levels needed, it is injected back under your skin and the result is a mini biobump that produced natural Epogen without the spikes, without the shots, without the side effects or dropouts. And for a fraction of the cost of Amgen's Epogen shots.

The Phase I/II study was done with 20 patients, all people diagnosed with anemia obviously. In all 20 patients you have biopumps producing Erythropoietin safely for as long as 36 months without any follow up, within that 10-12 count and without the injections and their dangerous spikes.

The most compelling thing about this story is that this isn't just a treatment for only Anemia; it is a platform that can be used on ALL protein therapies. In fact the company is entering Phase 1 for Hep C (Interferon) in Q2 of this year. Hepatitis C/Interferon is a 3.5 billion dollar Market this year. Gilead (GILD) paid 11 billion for a HEP C company… Inhibitex (INHX) was taken over for 2.5 billion (another Hep C company).

Medgenics already has an active program for Hemophilia developed with Baxter (BAX), and they will also be starting programs for:

* Growth Failure/growth hormone
* Multiple Sclerosis/Interferon Beta
* Diabetes/Insulin
* many others

In summary you have a company that has:

* $50 million invested
* the most disruptive technology in biotech today
* a management team that is arguably from top to bottom the best I have ever seen. Former head of Stanford Medicine, and an entrepreneur who sold his last company for $600 million
* Baxter collaboration and the potential for many more collaborations on multiple indications
* already finished Phase I/II and entering Phase IIB, this is NOT pre Clinical; this is tested and proven in human
* a ridiculously low valuation relative to its competitors.
* the potential of two probably partnerships in the near term
* a science which is not a one trick pony, it is a platform that covers every protein therapy which is more than a 91 billion dollar market
* largest shareholders are Joel Kanter and Isaac Blech. Joel has just sold Clarisonic for $600 million. Isaac has founded over 35 billion in companies

Enough of the science. Let me walk you through the value proposition of the investment. There are two public companies and one collaboration that I will use as comparisons.

Protalix (PLX) has a platform technology and is at about the same stage of clinical as Medgenics, but is only for an indication of 25,000 patients and trades at a 520 million dollar market cap.

Prolor (PBTH), which has a treatment which only increases the half lives of protein therapies, trades at a 300mm market cap.

And of course Zymogenetics which only has an interferon lasting slightly longer than the usual 5-6 hours for Hep C, was bought by Bristol-Myers Squibb (BMY) for $545 million.

Medgenics' market value is currently approximately $32 million and is clearly poised to be the leader in a multi billion dollar space, and I believe will far exceed the market value of the the companies mentioned in this article.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Top Hepatitis C Virus Biotech Picks By The World's Largest Fund Managers

Recently posted on the Seeking Alpha.com financial website on who fund managers like in the HCV drug development space. In general, fund managers are bullish like Idenix, Dynavax and Peregrine but the currently bears run wild for Vertex, Achillion and Merck. Good quick rundown of what each company specializes in and where they're HCV compounds are in terms of development and partnerships. 

The announcement by Bristol-Myers Squibb (BMY), just over two weeks ago, on January 7th, of an agreement to buy Inhibitex (INHX) for $2.5 billion at a massive buyout premium of over 160%, has ignited a rally among biotech companies that are currently active in developing products targeting hepatitis C virus (HCV). In this article, we examine based on our research of their latest available Q3 institutional 13-F filings, the investment activities of the world's largest funds or mega funds among a dozen pharmaceutical and biotech companies that are active in the HCV space.

These mega fund managers hold between $100 billion and over a trillion dollars in assets, such as Fidelity Investments, Goldman Sachs, and Vanguard Group, and together they control almost a third of the assets invested in the U.S. equity markets, but number just over 30 out of the tens of thousands of funds that invest in the U.S. equity markets. Individually, and collectively, they pack enough firepower to move stocks based on their trading activities.

Taken together, these mega managers were bullish on the group, adding a net $427 million in Q3 to their prior $178.84 billion prior quarter holdings in the group. However, taking out the big pharmaceutical companies, mega funds still added a net $530 million in Q3 to their $47.46 billion prior quarter position among the biotech companies that are active in the HCV field. (for more general information on these mega funds, please look at the end of the article).

The following are the HCV group companies that mega fund managers are bullish about (see Table):

Idenix Pharmaceuticals (IDIX): IDIX engages in the discovery and development of drugs for the treatment of human viral and other infectious diseases, including a focus on hepatitis C virus, hepatitis B virus (HBV), human immunodeficiency virus (HIV) type-1, and acquired immune deficiency syndrome (AIDS). Mega funds added a net $45 million in Q3 to their $380 million prior quarter position, and together they hold 29.7% of the outstanding shares, higher than their 26.3% weighting in the group. The top mega fund buyers in Q3 was by Fidelity Investments ($50 million), and the top holders were Fidelity Investments ($131 million), T Rowe Price ($114 million) and Vanguard Group ($50 million).

IDIX shares have mounted a strong rally recently, up more than 100% in the past twelve trading days, benefiting from both the January 9th announcement of the acquisition of rival INHX by BMY that has ignited a rally in the group, as well as positive interim phase 2b clinical trial data on its HCV Nucleotide Inhibitor, IDIX 184, that was released the same day by the company.

Dynavax Technologies (DVAX): DVAX is a clinical-stage biotech company that is engaged in the discovery and development of novel products to prevent and treat infectious and inflammatory diseases. Its lead clinical stage product candidate is HEPLISAV™, a phase 3 investigational adult hepatitis B vaccine designed to provide protection with fewer doses than current licensed vaccines. In addition it has early stage product candidates, including a universal flu vaccine in phase 1, TLR inhibitor for lupus in phase 1, and then hepatitis B and hepatitis C therapies, also in phase 1 development.

Mega funds added a net $7 million in Q3 to their $102 million prior quarter position, and taken together they hold 25.8% of outstanding shares. The top mega fund buyers were Fidelity Investments ($3.3 million) and Bank of America Corp. ($1.6 million), and the top holder by far was also Fidelity Investments ($64 million). DVAX is currently engaged in preparing to submit its first Biologics License Application (BLA) for HEPLISAV™ Hepatitis B Vaccine to the FDA in the first quarter of 2012, followed soon by a submission of Marketing Authorization Application (MAA) for European approval.

Peregrine Pharmaceuticals (PPHM): PPHM is a clinical-stage biotech company developing and manufacturing innovative monoclonal antibody therapeutics to treat cancers and viral infections such as hepatitis C virus. In the hepatitis C space, the company is evaluating bavituximab combined with ribavirin in a randomized phase 2 trials in treatment native patients with genotype-1 HCV infection. Earlier, the company released preliminary phase 2 trial results from this study on December 29th last year that showed antiviral activity and a positive safety profile, with patients reporting fewer side effects than in the interferon-containing arm. Mega funds added a net $1 million in Q3 to their $8 million prior quarter position, and taken together mega funds hold 11.4% of the outstanding shares, with the top holders at the end of Q3 being Barclays Global Investors ($2.7 million) and Blackrock ($1.7 million).

The following are the HCV group companies that mega fund manager are most bearish about (see Table):

Vertex Pharmaceuticals (VRTX): VRTX engages in the discovery, development, and commercialization of small molecule drugs for the treatment of hepatitis C, cystic fibrosis, epilepsy and other life-threatening diseases. It has two FDA-approved drugs, INCIVEKTM for treat chronic hepatitis C genotype-1 infection in adults with stable liver problems, who have not been treated before or who have failed previous treatments, and Lexiva for HIV that it co-discovered with GlaxoSmithKline (GSK).

It has five other drugs in clinical development, including VX-222 in phase 2 development for hepatitis C, VX-765 in phase 2 development for epilepsy, VX-509 in phase 2 development for immune-mediated inflammatory disease, and VX-770 and VX-809 in phase 3 and phase 2 development respectively for Cystic Fibrosis. Mega funds cut a net $110 million in Q3 form their $3.89 billion prior quarter position. The top sellers were Fidelity Investments ($91 million) and T Rowe Price ($34 million), and the top holders were Fidelity Investments ($966 million) and Capital World Investors ($653 million).

Achillion Pharmaceutical (ACHN): ACHN is a clinical-stage biotech focused on developing new treatments to patients with infectious diseases, including HCV and resistant bacterial infections. It currently has five compounds in various stages of clinical development targeting HCV, including one in phase 2, two in phase 1 and two others in pre-clinical development. Mega funds cut a net $6 million from their $280 million prior quarter position, with the top seller being Bank of New York Mellon Corp. ($18 million), and the top holder being Fidelity Investments ($111 million). ACHN shares rallied strongly after the announcement of the INHX acquisition by BMY, up over 50% in the five trading days after the January 7th announcement; while they have given back part of their gains, they are still up over 35% on the news.

Inhibitex Inc. and Bristol-Myers Squibb Co.: INHX, a developer of differentiated anti-infective products to prevent and treat serious viral and bacterial infections, including primarily shingles and chronic infections caused by hepatitis C virus, is under agreement to be acquired by BMY, a developer of branded pharmaceuticals for the treatment of cardiovascular, virological and other infectious diseases. Mega funds cut $28 million in Q3 from a $512 million prior quarter position in INHX, and they added a net $711 million to their $20.51 billion prior quarter position in BMY.

Other pharmaceutical and biotech companies that are players in the HCV space that mega funds are bearish on (see Table) include Gilead Sciences Inc. (GILD), that has multiple product candidates in phase 1 and phase 2 trials targeting hepatitis C, in which mega funds cut a net $306 million in Q3 from their $17.68 billion prior quarter position, and Abbott Laboratories (ABT), that has a product candidate in phase 2 clinical trials for HCV in collaboration with Enanta Pharmaceuticals, in which mega funds cut a net $16 million in Q3 from their $26.63 billion prior quarter position.

Also, additional HCV players that mega funds are bullish about include Merck & Co. (MRK), that has an FDA-approved product Victrelis for HCV in the market, and several in phase 2 and 3 development for hepatitis B and C, in which mega funds added a net $530 million to their $47.46 billion prior quarter position; and Pfizer Inc. (PFE), that has a compound in phase 2 development for HCV, in which mega funds added a net $60 million to their $54.03 billion prior quarter position. Furthermore, mega funds have a $1 million position, unchanged in Q3, in Inovio Pharmaceuticals (INO), that has compounds in phase 2 and preclinical development targeting HCV.

General Methodology and Background Information: The latest available institutional 13-F filings of over 30+ mega hedge fund and mutual fund managers were analyzed to determine their capital allocation among different industry groupings, and to determine their favorite picks and pans in each group. These mega fund managers number less than one percent of all funds and yet they control almost half of the U.S. equity discretionary fund assets. The argument is that mega institutional investors have the resources and the access to information, knowledge and expertise to conduct extensive due diligence in informing their investment decisions. When mega Institutional Investors invest and maybe even converge on a specific investment idea, the idea deserves consideration for further investigation. The savvy investor may then leverage this information either as a starting point to conduct his own due diligence.

Credit: Historical fundamentals including operating metrics and stock ownership information were derived using SEC filings data, I-Metrix® by Edgar Online®, Zacks Investment Research, Thomson Reuters and Briefing.com. The information and data is believed to be accurate, but no guarantees or representations are made.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Disclaimer: Material presented here is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion. Further, these are our 'opinions' and we may be wrong. We may have positions in securities mentioned in this article. You should take this into consideration before acting on any advice given in this article. If this makes you uncomfortable, then do not listen to our thoughts and opinions. The contents of this article do not take into consideration your individual investment objectives so consult with your own financial adviser before making an investment decision. Investing includes certain risks including loss of principal.

Seeking Alpha's Robert Weinstein on Pharmasset's nuc-nuc press release...

Good read. Weinstein is my new 'don't believe the hype' role model... http://seekingalpha.com/article/257743-pharmasset-the-real-numbers-behind-the-hype