Gene Marcial's Inside Wall StreetBiotechnology investors are always hungry for news that could keep them abreast of what's new and what the latest hot stocks are in this arcane industry. So, a conference that opens today in Boston, sponsored by the American Association of the Study of Liver Diseases, may provide some exciting updates. Usually attended by hundreds of scientists, researchers, physicians and executives of biotech companies, it's considered the premier gathering on the science and practice of hepatology because it provides a glimpse into the latest findings on new and novel liver drugs.

A number of companies, big and small, are developing new treatments for liver diseases, including Merck (MRK), Bristol-Myers Squibb (BMY), Vertex Pharmaceuticals (VRTX), Gilead (GILD) and Pharmasset (VRUS). "But the best approach for investors is to look for the undervalued, small biotech stock with advanced compounds that show strong promise," advises biotech analyst Jason Kolbert of National Securities.

He believes Achillion Pharmaceuticals (ACHN) is one of them. One of the reasons: Achillion will present a significant amount of clinical data in support of its expanding HCV (hepatitis C virus) product pipeline. One positive report is about Achillion's chief product, ACH-1625, a one-dose treatment (as opposed to two to three doses in current drugs) for hepatitis C, which Kolbert argues will support the compound's potential to be "the best-in-class therapy" based on the efficacy and safety data seen thus far. ACHN-1625 just started Phase II clinical trials in September.

"Just Getting Warmed Up"

Moreover, the buzz is that Achillion is likely to attract a buyout offer from one of the major pharmaceutical companies because it seems interest in the search for better liver disease treatments is high. Achillion is known to be searching for partners to help develop ACH-1625, but Michael Kisbauch, Achillion's president and CEO, declines to comment on the buyout speculation.

In the meantime, "Achillion is just getting warmed up" and should be filing a new-drug application in the fourth quarter for one of its HCV compounds, plus two more in 2011 for two additional drugs, says Edward Nash, senior research analyst at Roth Capital Partners. "We believe this will place Achillion in the enviable position of being an HCV clinical development powerhouse," he adds. Nash rates the stock, currently trading at $2.83 a share, a buy with a 12-month target of $12.

The Phase II clinical studies will evaluate ACH-1625's efficacy and safety over 28 days of dosing, followed by 12 weeks of dosing in about 120 patients infected with "hepatitis C genotype 1" in the U.S. and in Europe. Achillion also expects to advance studies on three other liver compounds.

Still Undervalued


The company's "growing pipeline positions it as a strong player in treating hepatitis C patients and the potential to offer first-in-class compounds based on the dosing regime, safety and efficacy demonstrated in Phase I human clinical trials for ACH-1625," says Raghuram Selvaraju, analyst at Noble Financial Capital Markets.

Rating Achillion's stock a buy, Selvaraju says its current price doesn't adequately account for the potential advancement of the company's clinical programs, possible partnerships and royalty revenue generation. Data from the Phase II studies that are expected to be released in the first half of 2011 could drive Achillion's stock upward, says the analyst.

Positive results from the trials would also enable Achillion to sign a lucrative partnership for its ACH-1625, says Selvaraju, "Recent partnering deals on early-stage clinical compounds in the hepatitis C space have been relatively rich," he notes. A recent example was Bristol-Myers' acquisition of ZymoGenetics (ZGEN) for $885 million, which gave Bristol-Myers exclusive access to the smaller company's proprietary treatment of hepatitis C. So the likelihood is high that Achillion will soon sign a partnership deal -- unless it gets an attractive buyout offer first.

Achillion CEO Kishbauch says the company is in talks with several large pharmaceutical companies in the U.S and overseas, but he won't elaborate on their progress. He says part of the interest in the company is due to ACH-1625, which he acknowledges "is being eyed as a potentially best-in-class protease inhibitor."

In sum, although biotech investing always entails great risks, it also has potential winners with promising compounds for major diseases. Achillion is just one of them.


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