Replies to post #92154 on Biotech Values

[mcbio]

Re: ACHN

I looked at the slides for the presentation outlining their goals for the rest of the year and I don't see any clinical trials for compounds other than 1625. I'm curious what they will spend their money on (other than 1625) assuming they partner and get a decent upfront payment. Or are those objectives based on no partnerships?

1625 is the only HCV compound in the clinic right now, but behind that is ACH-2684, the quasi-PI, and ACH-1095, the NS4A antagonist, that GILD has an option to opt back in to. ACHN expects to file the IND for ACH-1095 towards the end of this year and file an IND and initiate clinical studies for ACH-2684 at some point in 2011. So, while 1095 and 2684 may not necessarily be in the clinic this year, ACHN is actively moving those two compounds forward. In particular, 2684 appears to be the next highest priority behind 1625 and ACHN anticipates advancing that compound through PoC studies before partnering the compound (if successful). So, ACHN clearly has priority projects to spend their cash on should 1625 be partnered before Phase 2.

Any thoughts on ACHN valuation compared to IDIX? Based on todays price the EV for ACHN is about 75 M while IDIX is around 150 M. IDIX is slightly further along in its HCV pipeline though.

As I said before, I own both and really like both at current levels. I tend to think of IDIX as the relatively safer play, just because they have a deeper pipeline, but you could argue that is accounted for in the valuation difference. IDIX is slightly further along in its HCV pipeline, but you have to keep in mind that IDIX's lead HCV compound is a nuke whereas ACHN's lead HCV compound is a PI. ACHN is further ahead on the HCV PI front. Of course, IDIX gives you more HCV shots on goal, if you will, with compounds across all HCV classes. So, they're both similar in some ways and different in others, but I like both.

Regarding partnership, i was surprised to see (thanks to Dew's list of hcv partnerships) that zgen had landed a partnership with a pretty significant upfront payment considering the development stage of its compound, as well as other similar partnerships. I was already aware of ITMN's deal and assumed ACHN would receive a deal that would not be as good as ITMN's considering that there is a lot of competition since the ITMN deal was struck, but after seeing the ZGEN deal I'm not sure.

And keep in mind that ZGEN's deal was for a HCV class (interferons) that may eventually be phased out if/when HCV treatment moves to an all-oral cocktail regimen. I am by no means suggesting ACHN will get a deal anywhere near the size of ZGEN, but I think it's at least something worth considering.

[iwfal]

HCV Partnership deals:

I was already aware of ITMN's deal and assumed ACHN would receive a deal that would not be as good as ITMN's considering that there is a lot of competition since the ITMN deal was struck, but after seeing the ZGEN deal I'm not sure.

1) The ZGEN deal wasn't quite as good as that number makes it look - since ZGEN also committed to spend most of it on trials before BMY would pick up most of on-going dev costs. But OTOH they got essentially a fait accompli additional 70+M for getting to ph ii.

2) The reason that ZGEN got such a good deal is that have a compound that probably has no effective competion. There is risk it will be obsolete - but if it is needed in the future market it will have it to itself.

Bottom line - I wouldn't count on that kind of payment for 'another' PI or ... without something really significantly different.