Achillion riding hepatitis C wave as data approaches


The hepatitis C space is certainly alight with anticipation at the moment, ignited by the approvals of the first protease inhibitors Victrelis and Incivek and excitement about other new, direct acting anti-virals moving through the clinic. Proud owner of three such experimental agents, Achillion Pharmaceuticals has not been immune to the heat – its shares closed at a four-and-half-year high yesterday, valuing the Connecticut company at $566m.

This is a respectable sum considering the early stage of Achillion’s pipeline. The most advanced candidate has only reported phase IIa data and hopes for a lucrative licensing deal over one or more compound are driving interest in the stock. Data due over the coming months will help determine whether a deal really is on the way. With the hepatitis C field looking increasingly competitive new agents are increasingly going to have to show something pretty special to keep interest alive.

No hurry

Achillion raised $61m through a share sale last month, indicating the company is no immediate hurry to bring a partner onboard. The shares were sold at $5.90, a slight discount to the price at the time and which now look like a bargain. The stock was trading at $7.90 this morning.

Analysts broadly believe the company is worth more – analysts at Credit Suisse initiated coverage of the company earlier this month with a share price target of $10, Brean Murray Carret has a $9 target. Bank of America Merrill Lynch, one of the banks that underwrote the fundraising, has an $11 target.

However it seems likely that further data will be needed before the stock moves towards these levels – and before a partner will be prepared to bite.

Data due

On the horizon is 12 week data from the second part of a phase II study of Achillion’s lead drug, ACH-1625, a protease inhibitor like Incivek and Victrelis.

Four week data was released at this year’s European Association for the Study of Liver Diseases – rapid viral response rates and potency compared favourably with Vertex’s Incivek (telaprevir), and the drug looked better on safety. It also appeared as effective as TMC435, a phase III protease inhibitor in development by J&J which is widely tipped as the successor to Vertex’s flagship drug.

Due towards the end of the year, the longer term data will be important to confirm potential. Analysts at Credit Suisse wrote recently that given that many regimens are based on 12-week anti-viral dosing, 12-week safety data are viewed to be a “significant risk-reduction milestone”. So with these data in hand, partners could well be prepared to sign on the dotted line.

Other compounds in Achillion’s pipeline which are attracting attention include ACH-2684, another protease inhibitor which the company believes will be effective across all hep C genotypes. The company recently started a trial evaluating it in genotype 3 patients and if these data - due by year end - are positive the compound will start to look very attractive. None of the more advanced protease inhibitors have demonstrated activity beyond genotype 1.

The company also has ACH-2928, one of the few NS5A inhibitors in development. Interest has been growing in these compounds, which destroy virus RNA quickly, in the wake of Bristol-Myers Squibb’s progress with its first-in-class compound, BMS790052 or daclatasvir, which is about to enter phase III studies.

Not all winners

Hopes are growing that these new classes of direct acting anti-virals will work so effectively in combination with each other, the need for current standard-of-care interferons and ribavirin will be eliminated. This is driving interest in all companies with compounds showing combination potential – Inhibitex, Idenix and Pharmasset in particular have all performed spectacularly this year on the stock market (Pharmasset's soaring valuation prompts pressure to deliver, July 6, 2011).

The potential for the hepatitis C space to be transformed like the HIV field was a decade ago is clear. But despite the excitement and the significant valuations being attached to very early stage compounds, progress is only going to get harder.

Victrelis and Incivek might not be perfect but they have set the efficacy bar high. These agents coming behind are going to have to demonstrate something pretty special to not look like “me-toos”.

For Achillion, ACH-2684 would seem to have the potential for important differentiation, if it can demonstrate potency across genotypes. But the path for ACH-1625 will be tough – at least six other protease inhibitors are ahead of it in the clinic, and trials are about to get a lot more expensive. As the protease inhibitor class becomes standard of care alongside interferon and ribivarin, companies are going to have to include a marketed incumbent in control arms, and that will not come cheap.

Not all these companies, generating excitement today, will be winners. By the end of the year, signs will start to emerge to show which camp Achillion belongs in.

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