What Does The JNJ/Achillion Deal Mean For HCV Competitors?

Yesterday, Johnson & Johnson JNJ and Achillion Pharmaceuticals Inc ACHN announced this week that they are entering into a collaboration agreement to develop one or more of Achillion’s lead hepatitis C virus (HCV) treatments, including ACH-3102, ACH-3422 and sovaprevir. After initially spiking more than 15 percent on Monday, shares of Achillion fell nearly 15 percent on Wednesday as shareholders were disappointed by the terms of the deal.
Deutsche Bank analysts released a report on Tuesday breaking down the deal and what it means for other players in the HCV space. Here’s what they had to say.
Impact on other HCV names
According to the report, Deutsche Bank is not making any changes to its forecasts for Gilead Sciences Inc GILD or AbbVie Inc ABBV based on the Johnson & Johnson/Achillion deal. Deutsche Bank already accounted for competition in their models for the two stocks, and stated that “this deal does not change our numbers.”
Market share projections
Deutsche Bank is projecting long-term market share in the HCV market of 60 percent for Gilead and 15 percent for AbbVie. The remaining 25 percent long-term market share is reserved for competition from the likes of Enanta Pharmaceuticals Inc ENTA, Regulus Therapeutics Inc RGLS, Merck & Co Inc MRK, Johnson & Johnson, Achillion and others.
While Deutsche Bank is not altering its current models for the HCV space, analysts note that each additional 5.0 percent drop in HCV market share for AbbVie results in about a $4 per share reduction to the company’s discounted cash flow.
Deutsche Bank currently has a Buy rating on Gilead and a $125 target for the stock.

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