Achillion shares crushed in a rout as hep C blockbuster hopes fade

Achillion CEO Milind Deshpande

A few weeks ago Achillion's new CEO, Milind Deshpande, pooh-poohed the idea of selling a drug or two. If anything, he told Bloomberg in an interview, the company--once a regularly featured player on analysts' lists of likely M&A targets--would do a deal for the whole portfolio, but meanwhile is staying focused on its development work, mindful of the "good things" to come for a company that did R&D the right way.

Friday, something arrived for New Haven-based Achillion ($ACHN), but it was anything but a good thing. After the market closed, the company spread the word that the FDA is maintaining its clinical hold related to its once-hot hepatitis C drug sovaprevir, while distributing some unimpressive data on its combination approach.

The stock was decimated with a 45% plunge in value.

Investors were responding to Achillion's statement that the agency had noted the biotech's full response to its questions on sovaprevir, an NS3 protease inhibitor, but concluded that the clinical hold will remain in place, leaving that program under a dark cloud as the leaders in the field--in particular Gilead's ($GILD) sofosbuvir--race to likely approvals.

New cocktail therapies are being rapidly advanced that promise to upend the entire hep C market, replacing drugs like Incivek that rely on a harsh regimen of interferon, which many patients can't tolerate. Two years ago, the frenzy over hep C spurred Deshpande's predecessor to publicly discuss a potential buyout. Now, Achillion is concentrating on make a case that it can still compete in this field.

"While we are disappointed that we were not able to resolve the clinical hold at this time despite having addressed all the issues, we believe the breadth of our portfolio allows us to quickly advance other all oral combination regimens for the treatment of HCV," said Deshpande. "With our Phase II NS5A inhibitor, ACH-3102, we are in a position to rapidly initiate combination studies with ACH-2684, our protease inhibitor, with results expected in 2014. Further, we continue to advance our uridine-analog nucleotide, ACH-3422, with which we anticipate initiating clinical trials in the first half of 2014."

A rapid virological response was seen in 79% of genotype 1 patients enrolled in a combination drug study. Investors didn't like the sound of any of it, though, with some hoots on the RVR rate registering on Twitter as the stock plunged.

Shares of Achillion skidded lower in July after the FDA hold followed a spike in liver enzymes--a classic sign of toxicity--among a group of patients taking sovaprevir in the combo treatment.

Achillion, which is trailing a pack of drug developers out to develop the first interferon-free therapeutic for hepatitis C, noted that the tox issue was raised during a Phase I drug-drug interaction study looking at combined use of sovaprevir and Bristol-Myers Squibb's ($BMY) antiretroviral drug atazanavir. At the time, Cowen analyst Phil Nadeau said that the reaction could be just an "idiosyncratic" response unique to that combination. 

- here's the press release

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