Achillion shares skid lower after FDA puts a hold on hep C drug

Shares of Achillion ($ACHN) skidded down 20% as the news spread Monday evening that the FDA put a clinical hold on its hepatitis C drug sovaprevir after investigators flagged a spike in liver enzymes--a classic sign of toxicity--among a group of patients taking it in a 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, its NS3 protease, and Bristol-Myers Squibb's ($BMY) antiretroviral drug atazanavir (Reyataz). The FDA called for the hold on Friday, and Achillion says it will take the next 6 weeks to provide data from that trial and other studies.

The FDA, though, said that Achillion could continue enrollment and treatment of patients in the Phase II-007 clinical trial evaluating 12 weeks of sovaprevir in combination with ACH-3102 and ribavirin for patients with treatment-naive genotype 1 hepatitis C. And the company still plans to begin the Phase III program next year, which has helped to calm analysts.

"The broader implications of yesterday's news are unclear as it is quite possible, and even likely that this is just an idiosyncratic interaction between atazanavir and sovaprevir," noted Cowen's Phil Nadeau.

Achillion has been searching for combination drugs that can effectively quell hepatitis C without interferon injections, which can trigger a host of side effects and often prevent patients from taking standard therapies. Once widely touted as a likely takeover target after big buyouts in the field by Bristol-Myers and Gilead ($GILD), the biotech has since cooled down considerably as the subject of M&A speculation.

Some of that can be laid at the feet of Bristol-Myers, which raced ahead with BMS-094 after acquiring the "nuc" in a $2.5 billion deal to acquire Inhibitex only to watch it blow up in a midstage study, killing one patient and injuring others. The FDA subsequently grew much more vigilant about experimental "nucs," hitting Idenix ($IDIX) with a series of roadblocks, and investors grew more skittish as well.

But Achillion has also pushed ahead in the clinic, looking to stay in a competition that is currently led by Gilead and AbbVie ($ABBV). Achillion says it will release Phase II data on its hep C cocktail later this year. These new hepatitis C drugs are expected to claim most of the market share in the field, and many patients are already being warehoused in anticipation of some near-term approvals.

- here's the press release

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