Achillion (ACHN) Shares Down As J&J Announces Stake Sale

Achillion Pharmaceuticals, Inc.’s (NASDAQ:ACHN) shares fell almost 7.9% in after-market trading on Tuesday, following the announcement that Johnson & Johnson’s (NYSE:JNJ) will sell its stake in the company.

We remind investors that J&J had terminated the global license and collaboration agreement with Achillion for developing hepatitis C treatments earlier in September. The decision was taken by J&J as part of its strategy to focus on areas of greatest unmet medical need.

The termination of the agreement is a major setback for Achillion, as it has no marketed drug and was dependent on J&J for funds. The company has lost out on future revenues in the form of milestone payments.

Achillion’s shares are down 10.7% so far this year, underperforming the industry which remained flat in that period.

In a separate press release, Achillion also announced promising preliminary data from group 1 of a phase II study on its factor D inhibitor, ACH-4471, in renal diseases. The candidate demonstrated potential in treating C3 glomerulopathy (C3G), a serious renal disease. The study is evaluating the candidate in patients with C3G or immune complex-mediated membranoproliferative glomerulonephritis (IC-MPGN).

The phase II study is evaluating the candidate in two separate groups in patients with C3G or IC-MPGN. Group 1 evaluated a dose of 100 mg of ACH-4471 thrice daily for 14 days in two patients. Along with proteinuria, the study also measured the ratio of C3 fragments to intact C3 in plasma, which also decreased rapidly compared to baseline during the course of the study. Higher C3 fragments are believed to be responsible for kidney damage and loss of function seen in this disease over time.

Presently, no FDA-approved therapies are available to treat C3G. However, the promise shown by the candidate is a boost for the company as it indicates a potential treatment under development.

Achillion is currently selecting patients for enrollment in group 2 of the study.

Moreover, the company has plans to initiate two separate phase II studies on ACH-4471 to evaluate it in C3G / IC-MPGN patients over six and twelve months during the first half of 2018.

Other than C3G and IC-MPGN, Achillion is also developing ACH-4471 in paroxysmal nocturnal hemoglobinuria (“PNH”), atypical hemolytic uremic syndrome, and dry age-related macular degeneration.

In August 2017, the company had announced positive data from a phase II study in PNH patients. Achillion has plans to initiate another phase II study on ACH-4471 to evaluate the candidate in combination with Alexion Pharmaceuticals, Inc.’s (NASDAQ:ALXN) Soliris for potential long-term treatment in PNH patients already being treated with Soliris.

Zacks Rank & Key Pick

Achillion carries a Zacks Rank #2 (Buy).

Sucampo Pharmaceuticals, Inc. (NASDAQ:SCMP) is a better-ranked health care stock, sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Sucampo’s earnings per share estimates have increased from $1.01 to $1.11 for 2017 and from $1.06 to $1.21 for 2018 over the last 30 days. The company delivered positive earnings surprises in three of the trailing four quarters with an average beat of 15.63%.

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