Shares of Achillion Pharmaceuticals ACHN are trading higher after Deutsche Bank upgraded the stock from hold to buy and raised the price target from $6 to $17.
In the past, key concerns surrounded clinical and management execution. However, analyst Alethia Young writes that execution is improving and the appointment of a new CMO increases management prowess.
“Every 10% POS [probability of success for the nuke] is worth $5-6/sh. We currently assume Achillion peak sales of $3B (10% peak share) launching in ‘18 and a 5% lower price point vs. GILD,” says Young.
Deutsche Bank’s base case assumes a 40 percent chance of success.
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The report briefly touches on Achillion as a takeover target. “We have always believed that having a nuke will be essential to a competitive long-term regimen in HCV. Currently only GILD, Merck, and ACHN have nukes that are in development or on market… [acquisition speculation] occurred after Idenix was acquired by Merck for ~$4B at similar stage as ACHN’s fall data readout.”
The $17 price target is based on a DCF with a 12 percent discount rate. Shares of Achillion were last up seven percent in premarket trading to $9.90.
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