Large Pharma May Get Involved as ACHN Hep C Pipeline Advances

Achillion Pharmaceuticals (ACHN) reported positive clinical trial results for ACH-3102, the company’s NS5A inhibitor for hepatitis C (HCV). Achillion remains a leading independent mid-stage biotech company with a robust pipeline of drugs to treat HCV. This positions ACHN as a prime acquisition target, given large cap pharmaceutical company interest in the HCV treatment area. In January 2012, Gilead Sciences (GILD) acquired Pharmasset for an eye popping $11B, for an all oral HCV treatment that only had Phase II results. This indicates just how valuable early-stage assets for this disease can be to large pharma if safety and efficacy data look good. Achillion will be presenting at the Leerink Swan Global Healthcare conference today at 3:30pm today, and will update investors on advancement of its drug pipeline, fueling momentum in the stock. Expect shares of ACHN to continue to trade higher as the pipeline advances and becomes more valuable, and take-out potential exists. For reference, ACHN’s enterprise value (market cap less net cash) is just $680M, and even with a lofty take out premium, a big pharma company acquiring this broad pipeline of HCV candidates could be getting a great deal.

Favorable Phase IIa results for ACH-3102 and ribavirin combination therapy. ACH-3102 is a second generation NS5A inhibitor that has very high potency (pico-molar concentrations meaningfully reduce HCV viral replication) and targets the key genotypes and mutations of the HCV virus (pan-genotypic), hence the drug has potential to treat most HCV strains. The company announced that it completed enrollment in a pilot Phase IIa trial evaluating a combination of ACH-3102 and ribavirin, both orally available treatments, in patients with chronic genotype 1B HCV. Genotype 1B is a common and hard-to-treat HCV strain. Eight patients were enrolled in the initial cohort, and are receiving twelve weeks of ACH-3102 once daily in combination with ribavirin. To date, 5 patients completed at least 4 weeks of treatment, 3 of which completed the full 12 weeks. Data thus far demonstrate that ACH-3102 was well-tolerated by all patients with no serious adverse events, subject withdrawals, or on-treatment viral breakthroughs. Importantly, treatment with ACH-3102 resulted in rapid reduction in HCV RNA levels, with normalization of liver enzymes. In the trial, patients received 225mg of ACH-3102 on day 1 followed by 75mg of the compound once daily on subsequent days in combination with 1000-1200 mg doses of ribavirin. The primary objective of the trial is to determine the safety of this dosing regimen, and the sustained virologic response 12 weeks after the completion of treatment (SVR12) with secondary endpoints assessing pharmacokinetics, pharmacodynamics, and other virologic endpoints including rapid virologic response (RVR) and end of treatment response (ETR).

While data are early, the Phase IIa data are compelling and could attract potential partners or suitors. Most importantly, when it comes to safety and tolerability, up to 12 weeks of treatment with ACH-3102 in combination with ribavirin showed no reported serious adverse events, no treatment discontinuations and no clinically significant changes in vital signs, electrocardiograms (ECGs), or laboratory evaluations with the exception of one subject with an anemia requiring a ribavirin dose reduction. From an efficacy standpoint, the study thus far demonstrated sustained antiviral activity even in subjects with multiple baseline mutations in the NS5A protein known to be highly resistant to first-generation NS5A inhibitors. We would expect ACHN to share these data with potential partners or those major drug companies eyeing the company for potential take-out. ACHN’s pipeline continues to advance and become more valuable. In fact, the company also announced this morning that it recently received regulatory clearance from the FDA to proceed with a Phase II clinical trial evaluating 12-week treatment of soveprevir (the company’s potent NS3 protease inhibitor) and ACH-3102 in the treatment of genotype 1 HCV. This combination regimen, featuring 2 distinct mechanisms, could rival the Gilead/Pharmasset HCV treatments, as a potent, all oral, pan-genotypic therapy. Given that Pharmasset was taken out on Phase II data, we would not be surprised to see a big pharma deal for ACHN, perhaps an acquisition of the entire company, in the coming months.