Achillion Tanks on Dreary Outlook for Hep C Drug

Shares in Achillion Pharmaceuticals (ACHN) were off over 50 percent at market open on Monday after the FDA maintained a hold on the company’s hepatitis C drug sovaprevir after market close on Friday. Losses continued into the afternoon with shares dropping close to 60 percent after a slew of downgrades followed in the wake of the FDA decision.

Liver Drug Could be Harmful

The initial clinical hold on sovaprevir came three months ago after the drug showed higher-than-expected enzyme levels in patients participating in an early-stage drug-to-drug interaction trial combining the drug with atazanavir. High enzyme levels can be a sign of liver damage. The FDA opted to maintain the hold despite the fact that Achillion despite the company responding to all of the issues cited in the agency’s initial letter placing the drug on hold.

“It would appear there is a good chance sovaprevir will not be able to progress further in development,” said Cowen & Co.’s Phil Nadeau in a research note today.

Achillion President and CEO Milind S. Deshpande voiced a belief that the company would be able to move forward in time, stating: “We remain highly optimistic we can work with the agency to address their concerns in a timely fashion.”

Competition Making Progress

Achillion had hoped that sovaprevir would help them gain entrance to a market estimated to be worth some $20 billion. However, the setback for sovaprevir is coming as drugs from competitors Gilead Science (GILD) and AbbVie (ABBV) appear to be progressing well. Gilead’s sofosbuvir and AbbVie’s direct-acting combo are both intended to treat hepatitis C and haven’t suffered setbacks like those hitting sovaprevir.

"Achillion still has new ground to break, which again lowers our confidence in the eventual success of the double combo," wrote William Blair analyst Katharine Xu.

Among analysts downgrading Achillion’s stock were Bank of America (BAC) , Piper Jaffray (PJC) , and JMP Securities (JMP) .