Replies to post #77908 on Biotech Values

[mcbio]

Re: ACHN/GILD

This isn't exactly how I wanted to start my weekend. lol And it's clearly one of those times where I wish we had both been wrong. Sometimes it pays to trust your gut instincts. That said, it was only a 20% drop. I expected much worse given that ACH-1095 was the main value driver for ACHN.

The near-term focus now is going to be on ACH-1625, the protease inhibitor. Although the compound is clearly far behind the leading PIs in the clinic such as telaprevir, the potential for ACH-1625 to improve upon those compounds with once daily dosing and possibly better safety attributes leaves upside potential still for the shares given a $40 million market cap IMHO. The key now is going to be for ACHN to demonstrate PoC as quickly as possible with ACH-1625 and then outlicense the drug to raise some much needed cash. If they can do that, I don't think a $100 million market cap, at a minimum, is out of the question. However, there is much more risk in owning the stock now with so much of the value of the company contingent on essentially one compound.

Also, although it appears that ACH-1095 is pretty much dead now, it doesn't sound like the overriding partnership between the two companies targeting NS4A antagonists is dead. It sounds as if the companies are continuing to work on follow-on compounds. I think a big point is in what context we should take "therapeutic index" as this is what ACHN and GILD disagreed on with respect to ACH-1095. Is this simply a matter of GILD believing that they wouldn't be able to dose ACH-1095 once daily so they want to use a backup compound that will guarantee once-daily dosing? Or is it a safety concern? We just need much more specific information to determine the fate of the NS4A program.

Clearly though, the risk/reward is much worse for ACHN after today's news. I don't see this as a buying opportunity since the stock didn't exactly plunge. I'm debating whether I should hold on to my shares or exit my position entirely and move on to something with a better risk/reward. I will probably wait though to get a little granularity on what specifically caused GILD to pass on the compound.