Company Overview
Achillion Pharmaceuticals, Inc. (NASDAQ: ACHN) is a biopharmaceutical company engaged in the discovery, development, and commercialization of small molecule therapeutics for the treatment of infectious and complement-mediated diseases. The company’s primary area of investigation is the alternative pathway of the complement system (part of the body’s immune system), which is thought to play a critical role in several conditions, including the blood disorder hemoglobinuria (PNH) and C3 glomerulopathy (C3G), a kidney disease. Achillion is developing small molecules that target Factor D, an essential protein within the amplification loop of the alternative pathway. The company has created a platform of orally-administered compounds that have shown the potential to bind to Factor D, resulting in alternative pathway inhibition.
In addition to its complement inhibitor platform, Achillion has a portfolio of antiviral drug candidates for the treatment of chronic Hepatitis C virus (HCV), which is being developed in collaboration with Janssen Pharmaceuticals, Inc., the pharmaceutical subsidiary of Johnson & Johnson. Achillion is headquartered in New Haven, Connecticut.
Pipeline and Products
As noted above, Achillion’s primary focus is developing its complement inhibitor platform. However, the company’s most advanced product candidate is JNJ-4178, an oral treatment for HCV. The company’s product pipeline is detailed in the table below:
Source: Company Website
JNJ-4178: In May 2015, Achillion licensed certain drug candidates for the treatment of HCV to Janssen. These included odalasvir, ACH-3422, and sovaprevir. Janssen is currently conducting a Phase IIb clinical study of JNJ-4178, a once daily oral regimen of odalasvir, AL-335, and simeprevir for the treatment of HCV. Results from the study are expected in the second half of 2017.
In exchange for global development and commercialization rights, Achillion is eligible to received more than $900 million from Janssen based on milestones related to clinical study enrollments, regulatory approvals, and worldwide sales targets. The company is also eligible to receive royalty payments on annual net sales of licensed products. Achillion recognized revenue of $15 million in December 2016 from the Janssen agreement.
ACH-4417: The first clinical compound from the company’s complement inhibitor platform is ACH-4417, which entered Phase I clinical trials in February 2016. Achillion is currently conducting a Phase II clinical trial of ACH-4417 in patients with PNH, and expects to initiate a clinical trial with C3G patients in the second half of 2017. The company noted during its first quarter earnings release that it plans to release interim results from the PNH study at a major medical conference in the second quarter.
Next-Generation Factor D Inhibitors: The company has synthesized nearly 2,000 Factor D inhibitor compounds, several of which were selected for further development. These compounds could have applications in a variety therapeutic areas, including the treatment of age-related macular degeneration (AMD).
Market Overview
PNH is a life-threatening, ultra-rare genetic blood disorder that affects an estimated 10,000 people in North America and Western Europe. The only approved therapy for PNH is eculizumab (Soliris), which originally received regulatory approval in 2007. The reported sales of Soliris in 2016 were $2.8 billion.
C3G is an equally rare kidney disorder characterized by over-activation of the alternative pathway that affects an estimated 6,000 people in North America and Western Europe. Approximately 50 percent of patients progress to end-stage renal disease (ESRD) within 10 years of diagnosis. Dialysis and transplantation are the only options available for patients who reach ESRD.
AMD is the leading cause of irreversible blindness in elderly people, and the company estimates there are 10 million intermediate or advanced stage patients with AMD globally. Dry AMD, one of two advanced stages of AMD which affects approximately 1.5 million patients, does not currently have an approved therapy.
Recent Developments
As noted above, Achillion was expected to present interim data from its PNH study in the second quarter of 2017. However, after speaking with the company, Leerink analyst Joseph Schwartz believes that the PNH patient data will be delivered as a press release in July or August.
First Quarter Earnings Review
The company has yet to generate revenue from the sale of drugs, although we note that the company did record $15 million in revenue in 2016 from its licensing agreement with Janssen. In the first quarter of 2017, as in the first quarter of 2016, Achillion did not report any revenue.
Research and development expenses were $15.5 million compared to $13.3 million for the same period one year ago. The increase was primarily attributable to costs associated with ACH-4471 clinical trials. General and administrative costs totaled $5.7 million, roughly flat from the same period one year ago. Accordingly, the company reported a net loss of $20.2 million, or $0.15 per share.
At March 31, 2017, Achillion reported cash, cash equivalents, marketable securities, and interest receivable with an aggregate value of $387 million. The company’s marketable securities consist of commercial paper, corporate debt securities, and government securities. Achillion does not have material long-term debt obligations, and the company expects that the current cash and other reserves are sufficient to meet operating requirements for the next 12 months.
Stock Influences
- Clinical trial results from the company’s PNH study;
- Progress in the development of JNJ-4178;
- Progress in the development of next-generation Factor D inhibitors; and
- Further licensing agreements.
Risk Factors
- The company’s complement inhibitor platform is still unproven and may not yield products of commercial value;
- Any products developed by the company must receive approval from the FDA;
- The company’s existing product pipeline could experience significant delays; and
- The company does not currently have sales, marketing, or distribution capabilities.
Stock Performance
As of June 21, 2017, shares of Achillion opened at $4.55, yielding a market capitalization of approximately $616 million. The stock hit a 12-month high of $9.50 in August 2016, but has fallen significantly since then. After Achillon reported third quarter results, the shares dropped nearly 30 percent. However, the stock has recovered somewhat from a recent low of $3.15 in April.
Following are selected analyst ratings and price targets:
| Analyst | Firm | Rating | Price Target | Date |
| Joseph Schwartz | Leerink | Outperform | $6.00 | 6/8/2017 |
| Liisa Bayko | JMP Securities | Outperform | $13.00 | 5/17/2017 |
| Christopher James | Ladenburg Thalmann | Buy | $9.00 | 5/8/2017 |
Summary
Achillion has a promising pipeline of product candidates related to its complement inhibitor platform. The company’s current studies are focused on rare diseases, but it is possible that Factor D inhibitors could be used in a wider therapeutic context.
While Achillion’s technology is still very much under development, the company has a strong balance sheet, and its licensing agreement with Janssen will hopefully generate additional cash to fund ongoing research.
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