Achillion, Johnson & Johnson Hammer Out $1 Billion+ Hep C R&D Pact to Compete With Gilead and AbbVie

Published: May 21, 2015

Achillion, Johnson & Johnson Hammer Out $1 Billion+ Hep C R&D Pact to Compete With AbbVie and Gilead
May 20, 2015
By Riley McDermid, Breaking News Sr. Editor

Johnson & Johnson has signed a $1.1 billion pact with Achillion Pharmaceuticals, Inc. to develop and market its hepatitis C drugs, as the competition in the space becomes fierce and companies have been scrambling to combine forces to usher in a new era of treatment.

Under the terms of the deal, Achillion will get up to $1.1 billion in milestone payments if the company hits its marks in development, regulatory approval and sales. Achillion will also get $225 million from JNJ in return for 18.4 million unregistered shares at $12.25 per share.

The deal is a sign that Johnson and Johnson is looking to get ahead of the curve as “cure” treatments have begun appearing in the hepatitis C space, including the drugs Sovaldi and Harvoni from Gilead Sciences, Inc. , which have a 90 percent cure rate.

Achillion has three hepatitis C drugs at various stage of readiness: ACH-3102 and sovaprevir in mid-stage trials and ACH-3422 in early-stage trials.

The U.S. Food and Drug Administration (FDA) granted fast-track status to ACH-3102 in December and it quickly gained the attention of anyone trying to treat or cure the disease.

Market leader Gilead Sciences, Inc. (GILD) has been feeling pressured by ACH-3102, which has shown promising Phase II results when combined with Gilead’s own blockbuster near-cure Sovaldi. The shortened treatment duration could take a bite out of Gilead’s sales, as the drug continues to meet important milestones.

With a standard 12-week course of Sovaldi costing $84,000, a drug that can cut that timeline in half would be a significant threat to Gilead’s bottom line.

Achillion attracted a lot of notice last fall when it said a combo of ACH-3102 and Sovaldi had functionally cured 100 percent of the patients involved in a small, 8-week trial. Then in February, it released results that showed that the combo was able to replicate that 100 percent cure rate after only six weeks of treatment—a truncated timeline that could eventually cost Gilead millions of dollars in lost revenue.

“The success of ACH-3102 suggests that it could be a better drug than ledipasvir, and that opens up the potential for ACH-3102 to be paired up with other Sovaldi alternatives,” wrote Todd Campbell, a columnist at the Motley Fool. “Achillion Pharmaceuticals hopes that its own in-house option, ACH-3422, can prove to be just as potent as Sovaldi, and if it is, that it can achieve similar short-duration cure rates when paired up with ACH-3102.”

Sovaldi sells for approximately $1,000 per pill, while its sister medication, also from Gilead, Harvoni, sold about $2.1 billion in 2014. Similar competitor AbbVie (ABBV)’s HCV medication Humira recorded $12.5 billion in sales and is now gaining on the coattails of AbbVie’s new hepatitis C treatment, Viekira Pak.

AbbVie received fast-track designation for the Viekira Pak in December, but Wall Street analysts remained sanguine about the drug’s approval. So far they’ve expressed disappointment at the so far limited approved uses for it among a growing population of hepatitis C patients—particularly those in prison or covered under large benefits providers like Express Scripts Inc. or Medicaid and Medicare.

AbbVie's Viekira Pak was approved Friday afternoon as expected, with a label that failed to achieve the full advantage some had expected for the company's powerful but cumbersome 3d regimen. Viekira Pak requires ribavirin for all G1a and cirrhotics,” wrote analyst Geoffrey Porges for Sanford Bernstein in a note to investors at the time.

“Like Gilead (GILD)'s Harvoni, AbbVie's duration of treatment was extended to 24 weeks for genotype 1a with cirrhosis (approximately 10 percent of patients) and only in genotype 1b without cirrhosis (20 percent of g1 patients) did Abbvie escape Ribavirin,” he said.

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