West Coast Editor

Gilead Sciences Inc.'s HIV franchise and strong pipeline protected the firm from a serious hit on Wall Street as a result of the setback, but Achillion Pharmaceuticals Inc.'s stock lost half its value when the partners disclosed they are stopping development of GS 9132 for hepatitis C and will try a backup compound next.

Achillion's stock (NASDAQ:ACHN) closed Friday at $8.80, down $9.19. Gilead's shares (NASDAQ:GILD) ended the day at $70.93, down $1.23.

"Frankly, we're in a catch-up mode here and would like to get back to where we were just as quickly as humanly possible," said Michael Kishbauch, president and CEO of New Haven, Conn.-based Achillion during a conference call. He acknowledged that switching to a backup could delay the program a year, but said the companies are "smarter and better at moving faster from here on out."

John Pottage, Achillion's chief medical officer, said six of eight patients in the Phase Ib/II trial's first cohort showed slightly elevated levels of creatinine, a marker of kidney function, so investigators decided to back off GS 9132 and try another, though "really only two of the patients had findings that we thought really pointed to the problem of potential for renal tubular dysfunction."

GS 9132, also known as ACH-806, showed enough activity to endorse the new approach to HCV, which involves inhibiting NS4A, a protein that binds to a portion of the HCV protease. Kishbauch said researchers found reductions in viral load "even at the lowest entry dose studied, right at the cusp of where we expected to see activity." Pottage said he was "at a loss to explain why we didn't see any of this [creatinine trouble] in preclinical work" ahead of the multiple-dose study.

"The findings that we have point to [the drug] causing some damage to the proximal renal tubule. We don't see signs of interstitial nephritis and we don't have evidence that the drug is affecting renal blood flow," he added. Research is ongoing to determine the exact mechanism causing the rise in creatinine.

GS 9132 apparently is mainly metabolized in the liver, but caused problems when it passes through the kidney. "We're not able to develop an assay at this time measuring the drug itself for metabolites in the urine," Pottage said.

Milind Deshpande, Achillion's chief scientific officer, said the creatinine hike is "most likely related to the structure of [GS 9132], rather than the mechanism for antiviral activity."

Investor eyes are on the lead backup ACH-1095, which could be the subject of an investigational new drug application as early as the first quarter of next year. Kishbauch said a solid decision had not been made, and he could not provide "hard and fast" guidance regarding when a backup might enter the clinic. Though the other candidates in Achillion's arsenal target (like the spurned ACH-806/GS 9132) the HCV replicase complex, their chemical structure is different. Several, like the first compound tried, are believed to be orally bioavailable.

Achillion entered the HCV deal with Foster City, Calif.-based Gilead in late 2004, and stands to gain up to $110 million if a product reaches the market. The idea is to come up with a candidate that could work in combination with protease and polymerase inhibitors, as well as interferon therapies. (See BioWorld Today, Nov. 30, 2004.)

Officially, the deal calls for Achillion to develop an HCV candidate through proof of concept, but "these are not two companies that tend to wave their contracts in front of one another," Kishbauch said. The work ahead will not involve Achillion by itself, but will consist of a "far more collaborative effort, more than likely with Gilead in the driver's seat," he said. "These guys are as good as it gets, as partners."

Overall, "the competitive impact of this change in focus will not be pronounced," Kishbauch said. He noted that "development of direct-acting inhibitors will produce its share of challenges" since the regulatory path for HCV drugs "is still in something of a fluid state."

He called Achillion and Gilead "well positioned in the commercial sense," with no other company known to be as far advanced with research against the NS4A target. Achillion went public last fall, raising almost $52 million through the sale of 4.5 million shares at $11.50 per share. (See BioWorld Today, Oct. 27, 2006.)

Bret Holley, analyst with CIBC World Markets in New York, lowered his price target for Achillion from $24 to $15 because of the delay, but kept his "sector outperformer" rating based on the HCV program's potential and the remainder of Achillion's pipeline.