Achillion Pharmaceuticals (ACHN) shares have fallen 20% this year, dropping to $8.61 a share as of today and down from $10.79 on December 31, 2015. The company is developing next generation therapies for hepatitis C and is in partnership with Johnson & Johnson (JNJ), which is a co-developer.
The company’s stock surged in 2015 before topping off and seemingly falling for the first six months of the year.
Two reasons for the company’s stock slumping are:
1. Increased Competition
Investors flocked to developers of hepatitis C drugs in 2014 and 2015. The industry reached a high as a result and put many companies, included Achillion, on many investors’ radars. Increased competition has led to a plateau in the industry, with many stocks falling as a result.
2. Johnson & Johnson Licensed ACH-3102 Drug
Johnson & Johnson is a financial powerhouse and a good partner for most companies, but the company may not be a good fit for Achillion. Achillion licensed their hepatitis C franchise to Johnson & Johnson last May.
The issue is that Gilead Sciences’ (GILD) would have been a better fit.
Studies of Gilead’s Sovaldi and Achillion’s ACH-3102 provided nearly perfect cure rates for hepatitis C. Johnson and Johnson has failed to pursue any further clinical studies of Gilead’s and Achillion’s drugs.
Achillion’s stock did rebound 10% in May following a new phase for the company’s hepatitis C drug. Johnson & Johnson announced phase 2b that will evaluate the results of patients using the drug over an eight-week period.
Results are expected to be released in the third quarter.
A breakthrough in the company’s drug could lead to massive profits in a market where 170 million people suffer from hepatitis C, including 3 million people in the United States. Approximately $20 billion is spent on hepatitis C drugs per year.