Yesterday afternoon, I posed the following question about Achillion Pharmaceuticals (ACHN)  and its hepatitis C "nuc" ACH-3422 to the biotech Twitter-verse:

For those not obsessed with the clinical development of hepatitis C drugs (what's wrong with you?) -- My question refers to the imminent announcement of results from a phase I "proof of concept" study of '3422 in treatment-naive genotype 1 patients. The data from this study are a huge, stock-moving catalyst for Achillion. I wrote an in-depth backgrounder on the '3422 study last month, so please read it.

Bottom line: If '3422 demonstrates a 4-log reduction in viral load after seven days of dosing in genotype 1 patients, Achillon's stock price is moving higher. Much higher. Conversely, if '3422 fails significantly below the 4-log mark, Achillion shares will tank. 

My '3422 question sparked a robust Twitter debate, which I've reproduced below with some additional comments and explanatory notes.


Here's my thinking: If Merck spent almost $4 billion to buy Idenix for its hepatitis C nuc, then why shouldn't Achillion be worth at least $2 billion if it's nuc, '3422, delivers similar potency? 




Agreed. If '3422 comes out looking like the other potent nucs, Achillion can combine it with ACH-3102, it's wholly owned NS5A inhibitor, to create a two-drug combination therapy for hepatitis C. In other words, Achillion will have a therapy similar to Gilead Sciences' (GILD - Get Report) Harvoni. Yes, Achillion is behind its main competitors AbbVie (ABBV - Get Report) and Merck (MRK - Get Report) , but still, Achillion's current market value is only $1 billion. Small change. 


This is why I asked, "What am I missing?" Merck chose to buy Idenix. Merck could have bought Achillion but didn't. 

John Tucker is a professional chemist and a smart decipherer of arcane patent language. I looked back at his Tweeter feed to get his thoughts on '3422 patent situation.




Uh oh. Let me try to explain the issue more simply. A recent '3422 patent publication for the first time gave investors some insight into the drug's chemical structure. Tucker's point is that the chemical structure of '3422 may not be unique enough from existing hepatitis C nucs to afford it strong patent protection. In a worst case scenario, a competitor might sue Achillion for patent infringement. 

Tucker raises a legitimate concern. I've heard it from other investors, as well. My point is that patent issues should be secondary to the '3422 viral load data. 



It's great to speculate on whether Achillion's stock price will double or merely rise 50% on positive '3422 data, but let's not forget the drug may disappoint. If '3422 fails to produce a 4-log reduction in viral load and investors perceive the drug to have weak activity, Achillion shares are going to get hurt very badly. 


Ending on a positive note: The '3422 data should be coming soon. If not this month then early in November. Stay tuned. These sorts of boom-or-bust events are why investors love biotech stocks.


Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.