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I am not sure if many of my readers are aware of the first time I wrote about Achillion (NASDAQ:ACHN). It was back in October of 2012, and the article opened up many investors' eyes to this stock. Of course, if you had purchased the stock back then, you would be underwater by maybe $.50/share or so. Since that time, I have been following the progress that this company has been making with its hepatitis C drugs.

ACHN has 3 drugs in its pipeline at various stages of clinical trials that could be considered potential hepatitis C oral, once per day, treatments.

Sovaprevir (ACH-1625) and ACH-3102 are nearing phase III trials, which will be the most significant, and ACH-2684 is nearing phase II trials. As of today, the company has stated that throughout the balance of 2013, more updates on success or the lack thereof will be given on each.

Milind Deshpande, Chief Scientific Officer and President of Research & Development, stated at today's Global Healthcare Conference, hosted by Barclays:

We will be reporting clinical trial results throughout 2013, and our goal is to rapidly advance optimal treatment regimens and to compete globally in this very important HCV market.

I consider this important because up to now, the news on the performance of the 2 drugs furthest along in clinical trials has been relatively quiet. Not that anything can be read into that, but for investors, regular updates gives us better insight into our investment.

What is notable in the remarks made by Deshpande at the conference are the regular references of these drugs not only to hepatitis C, but also to side by side studies on the HIV virus:

Aside from treating different genotypes, because of the high barrier that is provided by both 3102, as well as sovaprevir, we believe that this combination is also ideally suited to address different types of patient factors that we discussed earlier such as patients with cirrhosis, as well as patients that are co-infected with HIV.

I will not jump to any conclusions here, but the remarks seem to go hand in hand with some previous remarks made at earlier conferences, by independent researchers.

As noted in this report:

An investigational once-a-day protease inhibitor aimed at hepatitis C (HCV) yielded "enormously encouraging" results in patients also infected with HIV, a researcher said here.

If the dots are connected, then the potential for a newly developed treatment for HIV as well as hepatitis C could actually be at hand. The HCV worldwide market is estimated to be about $20 billion, PLUS the HIV drug potential of about $8-$10 billion. There are only a handful of other companies that have drugs advancing in clinical trials, most notably Giliead Sciences (NASDAQ:GILD), which is in phase III trials with its drug Sofosbuvir.

Recent Clinical Trial Successes

I would urge potential investors to take a look at ACHN's most recent positive findings on ACH-3102 during phase II trials:

"We are very pleased to see that the profile of ACH-3102 continues to exceed our expectations for providing a truly improved barrier to resistance. As the first-ever clinical trial to evaluate a NS5A inhibitor as a single direct-acting antiviral in combination with ribavirin, we are extremely encouraged by these initial results that demonstrate rapid suppression of the HCV GT1b virus and a well-tolerated safety profile through 12 weeks of therapy," commented Milind Deshpande, Ph.D., President of Research and Development and Chief Scientific Officer of Achillion. "As this data set continues to mature, we look forward to reporting initial SVR results at a medical meeting in the second quarter, and are planning to expand enrollment in the study to include non-CC GT 1b treatment-naïve patients later this quarter pending regulatory discussions."

ACH-1625 now known as Sovaprevir, has shown very positive results dating back to last August in phase II trials, alone and in combination with ACH-3102:

"We are very pleased to reach these important milestones in our HCV portfolio including positive SVR4 results with sovaprevir and the advancement of ACH-3102, our second-generation pan-genotypic NS5A inhibitor, through Phase 1 dose-escalation," commented Milind S. Deshpande, Ph.D., President of Research and Development and Chief Scientific Officer. "The safety and efficacy seen with sovaprevir across dose groups provides us with confidence that this next-generation protease inhibitor will play an important role in an all-oral treatment for HCV. The safety and tolerability seen to date with ACH-3102, for which we expect to report proof-of-concept next month, combined with the compound's in vitro profile, lead us to we believe we have an in-house portfolio of optimized compounds that can successfully create an all-oral, interferon-free regimen for the treatment of genotype 1 HCV. We look forward to beginning combination studies with sovaprevir and ACH-3102 by the end of the year."

The Field Is Not Huge, Could ACHN Go It Alone?

Other drug companies in the hunt are Abbvie Inc. (NYSE:ABBV), Bristol-Myers Squibb (NYSE:BMY), and Vertex Pharmaceuticals (NASDAQ:VRTX). This places Achillion in the mix with some very big players. It is no secret that Achillion is the tiniest of the group, and perhaps the most likely candidate for a buyout. Except something interesting happened on the way to a potential buyout: Achillion made a secondary stock offering, back in late February, and was sold out a few days later.

The company raised over $133 million at a share price of $8.40. Since the price was fairly close to the share price at the time, the extra 16.9 million shares outstanding did not push the stock down very much. As it were, one analyst, Piper Jaffray, did cut their price target from $16/share to $15/share, noting the dilution of existing shares. They did, however, re-iterate their "buy" and "overweight" ratings on the stock:

"Achillion now holds proforma cash of $211 million following a recent 16.9 million share offering. We are buyers of ACHN shares ahead of SVR-4 data from the 12-week trial of ACH-3102 + ribavarin in 8 HCV genotype 1b patients at EASL in April. … We continue to see Achillion as a likely take-out candidate for its promising HCV pipeline. We reiterate our Overweight rating, however are trimming our price target to $15 from $16 price target due to dilution from the equity offering." (Emphasis added by this author)

While I understand the action that Piper took, now that there could be some evidence that HIV can be treated using the same treatment regimen, another world of revenue and profit potential opens up.

It is estimated that the 2013 HIV drug market will be in the neighborhood of $8 billion. Perhaps it will climb to over $10 billion by 2014. The point is that we are now talking about a potential drug market for ACHN of about $30 billion. In light of the comments made at today's conference, and the research noted last week by independent studies, MAYBE Achillion has decided to "go it alone"!

Plenty Of Money And No Debt

With the secondary stock offering, the company now has over $200 million in cash to further all of the studies. As noted during today's conference, Deshpande stated:

In terms of capitalization, we are very well-funded. We have about $220 million in cash... We have a number of milestones that are coming up in 2013, which include data from 3102 and ribavirin, as well as data from sovaprevir and NS5A combination.

In addition to those comments, ACHN has virtually zero debt, and nearly 90% of all outstanding shares are held by institutions. With zero debt, plenty of cash, and 3 drugs doing quite well in each clinical trial thus far, I would say that there is a chance that ACHN could wind up bringing its drugs to market on its own, OR fetch an even higher price than the target price Piper Jaffray has placed on the stock.

As of today's market close, ACHN shares sold for $8.97 per share. Any way I look at this, there could be at least a double in the price if the drugs are successful, OR if the company is finally bought out.

My Opinion

This stock is by no means for the faint of heart. It is a speculative play with plenty of risks. Most notable are that the drugs fail in the clinical trial phase, or the FDA turns them down even after the drugs complete all phases.

If the drugs fail at any point, an investor could lose some, or all of their money. That being said, I cannot think of too many speculative stocks that have this much going for them.

Please do your own research and due diligence prior to making any investment decision. My opinions are not a recommendation to either buy or sell any stock written about here.

Source: Achillion: A Tiny Biopharmaceutical Stock With Tremendous Potential