UPDATED: Achillion shares surge as hep C combo scores a quick 6-week cure

Shares of Achillion surged Monday morning after the biotech reported that its NS5A drug combined with Gilead's ($GILD) Sovaldi scored a quick cure among a small group of hepatitis C patients after only 6 weeks of treatment. Meanwhile, its nucleotide inhibitor ACH-3422 was declared a success in a tiny proof-of-concept Phase I study, raising the possibility that Achillion ($ACHN) has its own in-house combo that can compete with the heavyweights on the market. And the news is likely to renew speculation of a possible buyout as a second wave of drug developers looks to compete with Gilead and new arrival AbbVie ($ABBV).

Achillion shares rocketed up more than 50% this morning as company execs touted their "best-in-disease" potential and analysts continued to assess the implications of AbbVie's FDA approval on Friday for its cocktail, Viekira Pak. But the biotech couldn't hold onto the big gain. Shortly after the market opened this morning, Achillion's gains were pared to only 7% as analysts pondered the impact of AbbVie's decision to offer Express Scripts a big discount on its hep C drug price and analysts considered the data about the biotech's companion nucleotide inhibitor.

Now that Gilead and AbbVie have arrived on the market, analysts have begun focusing more on the next wave of therapies looking to compete on price and duration of treatment. Achillion attracted considerable attention with its 100% cure rate in a small 8-week study involving treatment naïve genotype 1 patients with ACH-3102 and Sovaldi last summer. In this new study a combination of the two therapies achieved a 100% cure rate among 12 patients after only 6 weeks of therapy, where signs of the virus disappeared within 4 weeks of completing treatment. And that helps raise market expectations even further.

The plan now is to launch new Phase II studies examining the effectiveness of the in-house combo at Achillion.

The problem for Achillion, and one of the likely reasons for the mixed response this morning, dealt with ACH-3422. After 7 days of therapy investigators tracked a 3.4 log10 IU/ml drop in patients' viral load. After 14 days treatment there was a mean maximal reduction in HCV viral RNA load of 4.8 log10 IU/ml in the 700 mg dose group. That's both a higher dose and a longer treatment time than some analysts needed to get excited about, including Adam Feuerstein at TheStreet, who noted that both Sovaldi and Merck's MK-3682 work better. And that difference can reduce the likelihood of a buyout offer.

Achillion had to deal with a clinical hold earlier, which temporarily chilled the earlier red-hot rumors of a potential takeover. The hold, though, was lifted ahead of the initial early-stage data, and Merck helped to reignite the speculation of a possible takeover after paying $3.9 billion for the rival Idenix. Currently drugs are available for 8 and 12-week regimens. 

Few biotechs loved to flirt with investors about the prospect of a buyout more than the hepatitis C specialist Achillion. Former CEO Michael Kishbauch made a habit of it. And not long after Milind Deshpande took the helm, he quickly reignited talk of a sale, only to watch the stock tank days later when the FDA put its NS3/4A protease inhibitor, sovaprevir, on clinical hold. 

Dr. David Apelian

"The safety profile, potent antiviral activity, and high barrier to resistance observed with ACH-3422 in this Phase I trial exhibit the important characteristics a nucleotide inhibitor provides in HCV treatment regimens," commented Dr. David Apelian, the chief medical officer at Achillion. "The data, combined with the Phase II proxy study results, lead us to believe that the doublet regimen of ACH-3102 and ACH-3422 can be a highly competitive, regimen to cure HCV. Furthermore, the ability to explore a triplet regimen with sovaprevir, our protease inhibitor, may allow for shorter treatment durations especially in harder-to-treat patient populations."

- here's the release