Good News for This Anti-Viral Giant

Mohsin is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

The HCV (Hepatitis C) drug market is extremely lucrative. According to estimates, the HCV drug market will exceed $20 billion by 2020. Gilead (NASDAQ: GILD) is expected to lead the market with estimated sales of around $4 billion or 20% HCV market share. A number of companies working on their own HCV treatments threaten the market leadership of Gilead. These small biopharmaceutical companies are the wild cards is this industry. Any one of these treatments, if successful, can change the entire industry and ruin valuations of key players like Gilead. Therefore, it is crucial for the HCV treatment investors to keep an eye on FDA developments on these compounds.

Sovaprevir

Achillion Pharmaceuticals (NASDAQ: ACHN) is a biotechnology company involved in the discovery and development of HCV treatments. Its primary product candidate is the compound ACH-1625, also called Sovaprevir. The compound targets the protease enzymes, which are essential for the HCV virus to replicate. The drug inhibits HCV NS3 protease. The research on HCV’s dependence on NS3 is still ongoing, and ACH-1625 is still undergoing clinical trials.

Achillion has a total of four compounds in its HCV pipeline. ACH-2684, ACH-3102 and ACH 3422 also adopt a mechanism similar to Sovaprevir. ACH-3012 is also mid-way into Phase 2 Trials while ACH-3422 is still in pre-clinical stages. ACH-2684 is a broader protease inhibitor which has shown some effectiveness against standard genotypes of HCV. The compound is near the end of the Phase 1 of clinical trials.

To the dismay of Achillion investors, the FDA has placed a clinical hold on Sovaprevir. The action came after the authority discovered elevated liver enzyme levels in patients enrolled in Phase 1 DDI study. The study was studying the interaction of atazanavir and Sovaprevir in patients with HIV and HCV. According to the company, almost five from a total of 31 subjects had elevated ATL levels. The hold is only limited to this DDI study and doesn’t extend to other Sovaprevir’s Phase II-007 clinical trial which evaluated 12-weeks of Sovaprevir in combination with ACH-3102 and ribavirin. Shares of Achillion Pharmaceuticals have slid approximately 25% since the FDA hold. It is still not clear which of the two drugs was responsible for the elevated ATL levels. Achillion will provide FDA with a detailed response which will include Sovaprevir data from other ongoing trials. FDA’s response to this data will determine the long-term value of Achillion and if the drug will be allowed to continue with its HCV pipeline. 

Holds and Holds and Holds

Idenix Pharmaceuticals (NASDAQ: IDIX) is a biotechnology company focused on the discovery and development of human viral treatments. The primary focus of the company is developing treatments for HCV. The company's valuations fell almost 35% late last month after the FDA announced a ‘hold’ on its primary HCV candidate, IDX-20963. The authority has asked for additional preclinical safety data before the drug can proceed further.

This is not the first hold imposed on Idenix by FDA. The authority earlier placed the company’s IDX-184 and IDX-19368 after a similar molecule, developed by BMY, resulted in the death of a clinical subject. Idenix decided to shelf the entire project, rather playing the waiting game. Idenix is now relying primarily on its inhibitor, IDX-719, for a share of the HCV market.

After the shelving of IDX-184 and IDX19368, the company shares plunged approximately 70% before the IDX-20963 NDA pushed them beyond $5. After the latest FDA ‘hold,’ the valuations are back to pre IDX-20963 NDA filing levels. This shows that the market has fully discounted IDX-20963 when the compound is still pretty far away from shelving. Any positive news on this compound can push the stock above $5 again, offering a highly profitable short-term opportunity for prospective investors.

Foolish Bottom-line

The HCV treatment market has an enormous potential for biotechnology companies. This potential has attracted a number of small biotech players looking for HCV cures. Recent developments reveal that the FDA has adopted a pretty strict stance on the safety of these candidates. The authority has already placed two promising candidates on hold during the last couple of weeks and rejected an HCV candidate of BMY. This is nothing but fantastic news for established players like Gilead, Abbott and BMY. High barriers to entry would ensure their continued domination of the HCV market. Investors are well advised to stay from Achillion, but Idenix has bottomed out and can provide a short-term profit taking opportunity if hold on IDX-20963 is removed. 

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Mohsin Saeed has no position in any stocks mentioned. The Motley Fool recommends Gilead Sciences. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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