Why Achillion Pharmaceuticals Tanked

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of hepatitis-focused biotech company Achillion Pharmaceuticals (NAS: ACHN) are diving yet again, currently down 18%, following an analyst downgrade and an update on a key experimental drug.

So what: This was not a pleasant past couple of days for Achillion shareholders, who've been hit with a triple-whammy. First, last week, Gilead Sciences (NAS: GILD) announced in a study that GS-7977, a treatment for hepatitis C that doesn't require the use of interferon, eliminated the virus in 88% of patients within 12 weeks. Second, while Achillion's phase 2 clinical data showed strong efficacy (you can't do better than 100%), it took 24 weeks for ACH-1625 to reach its endpoint. Time could be an issue here as Gilead's drug is proving effective in a much shorter time frame. Finally, JPMorgan Securities downgraded Achillion to market perform from outperform.

Now what: There's no question that the bounty placed on the hepatitis-C sector is huge, but investors have been reaching out for any positive news for months, whether it really existed or not. It's becoming clear that Gilead's experimental drug has the fast track to success and other hepatitis-C-drug hopefuls are going to be fighting an uphill battle. ACH-1625 still has a long way to go and I just don't see how it's going to unseat GS-7977, especially since GS-7977 will probably beat ACH-1625 to market, assuming that both are approved. Despite today's drop, I'll gladly pass on Achillion.

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At the time thisarticle was published Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.Motley Fool newsletter services have recommended buying shares of Gilead Sciences. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.

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