you have been following ACHN very closely. what is your opinion at the present time.
I am as bullish on it as I've ever been. ACHN represents about 17% of my biofolio at current market value and is one of my largest holdings. Despite the large percentage it represents, I am considering adding more if I don't deploy my existing cash into RIGL at the end of this month or early next month.
I think ACHN represents a compelling risk-reward at current levels. Sub-$50 million market cap with Phase 1b PoC data due for ACH-1625, the HCV PI, in 1Q2010 (the compound just passed the initial Phase 1a safety hurdle in healthy subjects). If, and I stress if they can show PoC (no guarantees of course), I don't see how the market cap can stay down at these miniscule levels. If you're a believer that telaprevir will not be the end-all-be-all in HCV PI therapy, and that there's room to improve upon it down the road (as I do), then ACH-1625 has the potential to be a legitimate competitor in this huge HCV market. I will predict a market cap of $150-200 million if ACHN demonstrates PoC in the ongoing Phase 1b trial. I think the stock could approach that level just upon the announcement of successful trial results but before any partnership is announced. Obviously, there should be even more upside if they both demonstrate PoC and sign a lucrative partnership with a major player (during a recent call, they indicated that they are in advanced/advancing discussions with 5 or 6 major players and expect to strike a deal shortly after demonstrating PoC).
As always, you have to look at the downside too. Although ACH-1625 is clearly the lead drug and value driver for the company, there are several other compounds in the pipeline. ACHN is still developing ACH-1095 as a novel drug for HCV and hopes to enter the clinic on its own soon. While one should rightfully be bearish on the compound given the fact that GILD dropped development of it and essentially has told ACHN to prove to them that the compound is safe in humans (there were some pre-clinical tox issues at high doses in animals) before getting back into the co-development of the compound, there is still the possibility that ACHN can demonstrate efficacy with the compound at doses that are not toxic in humans. And for that matter, the tox issue may have just been a species-specific tox issue that won't arise in humans at any reasonable dose level. For a somewhat similar situation, look at what VRUS is doing right now with RG7128. That compound caused tox issues in monkeys at high doses but, to date at least, they have demonstrated efficacy in humans without the tox signal that was seen in monkeys. (The big difference of course in this situation and ACHN's is that VRUS' partner did not run away as a result of the preclinical tox issues.) All told, I am bearish on this compound, but there is still hope here. I would also point out too that GILD has not entirely abandoned ACHN and is still apparently working on follow-on NS4A antagonists to ACH-1095.
ACHN also indicated that they expect to soon disclose an entirely new class of HCV compounds that they are working on. Finally, although not the focus of the company, ACHN has several non-HCV assets in the pipeline as well.
Bottom line: I think ACH-1625 all by itself has the potential to move the stock significantly upward by 1Q2010 if ACHN can demonstrate PoC. If not, the stock will get hammered (I'll predict 40-50% drop), but there is some cushion given that the company does at least have a pipeline. Also, I think an important point is that we're not talking about the need for a successful Phase 3 trial to move a biotech significantly higher; we're talking about a much lower threshold of showing success in a Phase 1b.
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