HCV Buyout Target Achillion Pads Coffers in $42M Offering

By Jennifer Boggs
Managing Editor

The recent spate of setbacks for competitors working in hepatitis C virus (HCV) has proved good news for Achillion Pharmaceuticals Inc., which took the opportunity to shore up its balance sheet with a $41.8 million offering.

New Haven, Conn.-based Achillion agreed to sell about 6.4 million shares of common stock to QVT Financial LB priced at Thursday's closing price of $6.57 per share. Net proceeds of $41.7 million will add to the $59.9 million in cash the firm reported at the end of the second quarter and strengthen Achillion's position ahead of potential takeover talks, as analysts predict further consolidation in the HCV space.

News of the financing sent shares of Achillion (NASDAQ:ACHN) up 46 cents, to close Friday at $7.03.

Achillion was left out of the flurry of M&A activity in HCV late last year and early this year – Roche AG's buyout of Anadys Pharmaceuticals Inc. for $230 million, Gilead Sciences Inc.'s $11 billion takeout of Pharmasset Inc. and Bristol-Myers Squibb Co.'s $2.5 billion deal for Inhibitex Inc. But the firm has continued to advance its HCV portfolio, recently reporting promising sustained virological response (SVR4) data from a Phase II study of NS3 protease inhibitor sovaprevir (ACH-1625) and encouraging pharmacokinetic data for Phase I-stage NS5A inhibitor ACH-3102. (See BioWorld Today, Oct. 18, 2011 , Nov. 22, 2011, and Jan. 10, 2012.)

Meanwhile, BMS' Inhibitex buy looks to be a bust. The New York-based big pharma halted development of BMS-986094, a nucleotide polymerase inhibitor that drove the acquisition, following a fatality and nine hospitalizations. (See BioWorld Today, Aug. 27, 2012.)

Concerns on the BMS nuc program spread to Idenix Pharmaceuticals Inc., which also is developing nucleotide polymerase inhibitors for HCV – IDX184 and next-generation compound IDX19368. Last month, the FDA placed a partial clinical hold on a Phase IIb study of IDX184 and a subsequent clinical hold on IDX19368. (See BioWorld Today, Aug. 17, 2012.)

That will hold off potential acquisition talks for Cambridge, Mass.-based Idenix, which only recently freed itself as a takeover candidate by ending its HCV partnership with Novartis AG. But it bodes well for Achillion's prospects. (See BioWorld Today, Aug. 1 , 2012.)

Gilead remains the clear frontrunner in the effort to develop an all-oral, interferon-free HCV regimen, but other large players will be looking to round out their pipelines to stay competitive with the Foster City, Calif.-based biotech, noted Piper Jaffray analyst Ted Tenthoff in a research report, adding that "Achillion has potentially best-in-class HCV protease and NS5A inhibitors, offering a counter play to the nuc-dominated regimens."

During its second-quarter earnings call last month, the company reported SVR4 results of 85 percent to 100 percent from its multidose Phase II trial testing sovaprevir in combination with pegylated interferon and ribavirin for 12 weeks followed by an additional 12 weeks of pegylated interferon/ribavirin. The drug also was well tolerated at all dose groups, including the 800-mg dose group that yielded the 100 percent SVR4.

Further data from that trial are anticipated in the first quarter of 2013.

ACH-3102, the second-generation NS5A inhibitor, is expected to report proof of concept this quarter, and Achillion is working on drug-drug interaction studies designed to enable it to move into the clinic with an all-oral, interferon-free regimen containing sovaprevir and ACH-3102 by the end of 2012. Initial data from the study are expected in early 2013.

Also in its pipeline, Achillion has ACH-2928, an NS5A inhibitor that recently completed Phase I testing.

Proceeds from the recent financing will be used to advance all three compounds in the clinic, as well as to support general corporate purposes.

At the conclusion of the offering, Achillion will have about 79 million shares outstanding.