Brean Murray, Carret on Achillion Pharmaceuticals - $ACHN

Brian Skorney of Brean Murray put out the following on Achillion Pharmaceuticals (ACHN, $7.92, Buy, $20 Target Price):

"Defending ACHN - GS-7977 Data Is Great but ACH-1625 Can Be Head-to-Head Competitive With 7977 or Be the Best Option To Combine With 7977

We believe the sharp decline in ACHN shares is being driven from a superficial read-through from the GILD/BMS data. We believe that a protease inhibitor is not a necessary component of an all-oral regimen. However, we believe that the valuation assumes that a protease inhibitor is also not sufficient in an oral combination that does not include a nuc. Abbott (ABT, $59.27, Hold) has already demonstrated that a potent PI with a differentiated resistance profile can be an anchor for an all-oral regimen. We believe the upcoming oral presentations of Abbott's PILOT (today) and COPILOT (Saturday) studies will reaffirm this thesis.

7977/052 Combo Data Actually Supports ACH-1625 Potential. We believe the high SVR rates seen in the 7977/052 combo, particularly in Gt 2/3 patients, actually supports the potential of ACH-1625 as it indicates that if you have one potent antiviral with a high barrier to resistance, you can get by with a weaker agent with a low barrier to resistance. BMS052 readily selects for resistance and is 10-15x less potent in Gt. 2/3 compared to Gt. 1b. We believe ACH-1625 is one of only four drugs in clinical development that could be effectively substituted for GS-7977 in this combo and show similar results – the others being INX-189, MK-5172, and ABT-450/r. We believe Achillion will successfully run this experiment with its own NS5a inhibitor, ACH-3102, later this year."