Narrower-than-Expected Loss at Achillion, Shares Down - Analyst Blog

The share price of Achillion Pharmaceuticals, Inc. ACHN fell 0.6% after the company announced its fourth quarter results on Mar 7. Since then, share prices have fallen 3.5%.

Achillion reported a fourth quarter 2013 loss of 14 cents per share, narrower than the Zacks Consensus Estimate of a loss of 16 cents and in line with the year-ago loss.

Achillion did not record any revenues in the fourth quarter 2013 as compared to $118,000 recorded in the fourth quarter of 2012.

The company recorded a full year loss of 63 cents per share, narrower than the prior-year loss of 64 cents as well as the Zacks Consensus Estimate of a loss of 65 cents. The company did not record any revenues in 2013 as compared to $2.6 million in 2012. We note that 2012 revenues came from Achillion's former collaboration with Gilead Sciences, Inc. GILD.

Quarter in Detail

In the fourth quarter of 2013, general and administrative expenses increased 15.4% to $3.4 million due to higher non-cash stock based compensation and increased insurance costs. Research and development (R&D) expenses increased 19.8% year over year to $10.1 million, reflecting higher investment in pipeline.

Achillion primarily focuses on developing therapies for hepatitis C virus (HCV) infection. The company plans to initiate several studies on its HCV candidates including ACH-3102 (in combination with ACH-2684) and ACH-3422.

The U.S. Food and Drug Administration (FDA) decided to retain the clinical hold on sovaprevir. The FDA had placed a clinical hold on sovaprevir after observing elevations in liver enzymes in a phase I study. The company expects to receive a response from the FDA on sovaprevir during the first half of 2014.

Outlook

Achillion expects loss to widen in 2014 to 70 cents per share. The Zacks Consensus Estimate currently stands at a loss of 81 cents per share. The company expects that R&D expenses during 2014 will be in the range of $55–60 million as compared to $46.7 million recorded in 2013.

We believe that in the near term investor focus will be on Achillion's HCV pipeline candidates. However, we note that HCV represents a highly crowded market. Moreover, many large cap companies including Bristol-Myers Squibb Company BMY, AbbVie Inc. ABBV and Gilead are developing drugs for the treatment of HCV.

Achillion carries a Zacks Rank #3 (Hold). Investors looking for better-ranked stocks may consider companies like Gilead carrying a Zacks Rank #1 (Strong Buy).