Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN) reported financial results for the three and six months ended June 30, 2017. For the second quarter of 2017, Achillion reported a net loss of $22.5 million or $0.16 per share, compared with a net loss of $18.5 million or $0.14 per share for the second quarter of 2016. Cash, cash equivalents, marketable securities, and interest receivable as of June 30, 2017 were $369.9 million.

“Our focus in early clinical development with ACH-4471 has been on achieving proof-of-concept via factor D inhibition, and we are pleased to report that we believe we have achieved this goal. The emerging interim results from our phase 2 PNH trial have demonstrated a dose response to treatment with what we believe to be meaningful improvements in LDH, hemoglobin, fatigue score and other markers of response. To date, orally administered ACH-4471 has been well tolerated in this PNH clinical trial with four patients enrolled and treated with ACH-4471, two of whom have now received more than four months of dosing,” commented Milind S. Deshpande, Ph.D., President and Chief Executive Officer of Achillion. “We believe that inhibition of factor D represents a highly innovative and differentiated mechanism of action with the potential to address multiple diseases of the alternative pathway, including PNH, C3G, IC-MPGN and geographic atrophy, an advanced form of dry age-related macular degeneration.”

“I am very excited by the clinical performance of ACH-4471 in the first patients to receive treatment, particularly the improvements in hemoglobin and self reported well-being that have been observed in my patients,” commented Peter Browett, M.D., Professor of Pathology, Haematologist, and principal investigator in the ACH-4471 phase 2 study. “The unique mechanism of action via factor D inhibition by ACH-4471 may also be able to control both intravascular breakdown of PNH red blood cells, as well as extravascular hemolysis, leading to improved patient outcomes.”

Second Quarter Financial Results

For the three months ended June 30, 2017, Achillion reported a net loss of $22.5 million compared with a net loss of $18.5 million during the same period of 2016. Research and development expenses were $18.3 million for the three months ended June 30, 2017, compared with $14.2 million for the same period of 2016. The increase was primarily due to increased clinical trial costs related to ACH-4471 combined with an increase in manufacturing costs for ACH-5228 and increased discovery research costs related to our ophthalmic factor D inhibitors, partially offset by decreased ACH-4471 manufacturing costs.

For the three months ended June 30, 2017, general and administrative expenses were $5.4 million, compared with $5.2 million incurred during the same period in 2016. The increase was primarily due to increased corporate legal fees and market related consulting fees. These amounts were partially offset by a decrease in corporate taxes.

Non-cash stock compensation expense totaled $2.8 million for the second quarter of 2017 as compared with $2.6 million for the second quarter of 2016 and is included in research and development expenses and general and administrative expenses.

Six Month Financial Results

For the six months ended June 30, 2017, Achillion reported a net loss of $42.7 million, compared to a net loss of $36.6 million in the same period in 2016. For the six months ended June 30, 2017, research and development expenses totaled $33.8 million, compared with $27.4 million during the same period in 2016. The increase was primarily due to increased clinical trial costs related to ACH-4471 combined with an increase in manufacturing costs for ACH-5228 and increased discovery research costs related to our ophthalmic factor D inhibitors, partially offset by decreased ACH-4471 manufacturing costs.

General and administrative expenses were $11.0 million for the six months ended June 30, 2017, increased from $10.6 million in the same period in 2016. The increase was primarily due to increased corporate legal fees and market related consulting fees. These amounts were partially offset by a decrease in corporate taxes.

Non-cash stock compensation expense totaled $6.0 million for the six months ended June 30, 2017 as compared with $5.6 million for the same period in 2016, and is included in both research and development and general and administrative expenses.

The Company expects that research and development expense during the second half of 2017 will increase somewhat, consistent with previous guidance. Annual total research and development expense is expected to be in the range of $75-78 million and annual total general and administrative expense in the range of $22-24 million.

Developing ACH-4471, Complement Factor D Inhibitor for Rare Diseases

  • Phase 2 clinical trials for untreated paroxysmal nocturnal hemoglobinuria (PNH)

    In April 2017, Achillion announced the initiation of a phase 2 three-month, dose-ranging trial with ACH-4471 for patients with untreated PNH. The primary objective of the trial is to assess the change-from-baseline in serum lactate dehydrogenase (LDH) levels, a sensitive biomarker for intravascular hemolysis, after dosing with ACH-4471. Secondary endpoints being assessed include changes in hemoglobin, PNH red blood cells, fatigue score (FACIT scale), changes in levels of complement pathway biomarkers such as Bb and factor D, pharmacokinetics, and safety. The protocol allows for intra-patient dose-escalation with patients initially receiving 100 mg or 150 mg of ACH-4471 three times daily with the ability to increase dosage during the treatment period. To date, 200 mg three times daily has been the highest dose administered. After completion of three months of treatment with ACH-4471 and following investigator assessment of safety and clinical benefit, patients may be enrolled into the long-term extension trial. The protocol is designed for enrollment of four to twelve patients.

    To date, Achillion has data for four patients with PNH, two of whom have completed the three-month trial and have entered the long-term extension trial. One additional patient continues to receive dosing in the three-month trial and a fourth patient voluntarily withdrew from the trial on day 41 for reasons unrelated to safety. In summary, interim data from these ongoing trials demonstrated that ACH-4471 achieved clinically meaningful complement inhibition and demonstrated a favorable tolerability profile with no reports of clinically meaningful increases in liver enzymes. In this emerging data set, ACH-4471 has improved LDH, hemoglobin, fatigue score and other measures of response including PNH clone size. These interim results support the Company’s global expansion plans for the PNH clinical program.

    “We believe these interim data in four patients are compelling. They confirm the mechanism of action of factor D inhibition, and fully support development of ACH-4471 and our other factor D inhibitors. We look forward to continuing our investigation of ACH-4471 for treatment of PNH,” commented Dr. Deshpande.

    PNH is a rare, acquired, life-threatening disease characterized by destruction of red blood cells (hemolytic anemia), blood clots (thrombosis), impaired bone marrow function, and a risk of developing leukemia. Preclinical studies suggest ACH-4471 has a distinct mechanism of action inhibiting factor D within the alternative pathway of the complement cascade leading to blockade of C3 convertase production. Furthermore, unlike C5 inhibitors, ACH-4471 is also thought to prevent C3 fragment deposition on PNH cells and may confer a pharmacological advantage by protecting PNH cells from both intravascular and extravascular hemolysis.

  • C3 glomerulopathy (C3G)

    Achillion has an on-going agreement with Imperial College London to conduct a natural history study of C3G, a rare renal disorder which includes dense deposit disease (DDD) and C3 glomerulonephritis (C3GN). This study, conducted by a team of researchers led by Dr. Matthew Pickering and Dr. H. Terry Cook, both of Imperial College, tracks the course of this disease over time. The aim of this study is to collect data on disease progression. Data from this study, which began earlier this year and will run in parallel with other C3G clinical studies, will inform and support product development and approval.

    During the second half of 2017, Achillion anticipates initiating patient dosing in a phase 2 open-label trial of ACH-4471 for patients with low C3 levels due to C3G or immune-complex membranoproliferative glomerulonephritis (IC-MPGN). This 14-day trial is expected to enroll approximately 10 patients.

    “We believe alternative pathway complement inhibition via factor D uniquely may be able to prevent the formation of C3 fragments, the deposition of which appears to be the underlying cause of this devastating disease,” said Dr. Deshpande. “Having just sponsored an externally-led, patient-focused drug development meeting in this disease led by the National Kidney Foundation in which the goal was to gain the C3G patient’s perspective on their disease, we are keenly aware that our compounds may have an opportunity to meaningfully benefit patients who suffer from this disease for which there are no currently approved treatments.”

Developing ACH-5228, Complement Factor D Inhibitor for Rare Diseases

ACH-5228 is one of Achillion’s next-generation factor D inhibitors being developed for oral administration. The compound has demonstrated complete inhibition of the complement alternative pathway after repeat, twice-daily dosing in non-human primates over a seven-day period. The compound also has the following preclinical characteristics based on the Company’s research to date:

  • Potency. ACH-5228 is also specific for factor D inhibition, and had a two to three-fold greater potency than ACH-4471 in preclinical studies, delivering similar inhibition of the complement alternative pathway at inhibitory concentrations of approximately half that of ACH-4471.
  • Pharmacokinetics and Metabolism. Pharmacokinetic characteristics for ACH-5228 suggest the possibility of once or twice daily dosing frequency.
  • Safety. Achillion has completed short-term non-clinical studies in rats and dogs in which ACH-5228 demonstrated tolerability and safety margins supportive of progressing into clinical development.

Achillion anticipates initiating a first-in-human phase 1 clinical trial with ACH-5228 by year-end 2017.

Next-generation Factor D Inhibitors for Geographic Atrophy (GA), an Advanced Form of Dry Age-related Macular Degeneration

To date, Achillion has selected several compounds from its factor D inhibitor platform with physicochemical properties that may be advantageous for delivery to the back of the eye for the treatment of GA, a disease with no currently approved therapies, with the goal of achieving treatment intervals of 3 months or longer. Achillion is advancing a number of these compounds in preclinical studies as well as a number of delivery technologies to optimize treatment duration. The Company anticipates selecting one or more lead compounds and delivery technologies by year-end 2017.

Update on World-wide Collaboration with Janssen for Chronic Hepatitis C Viral Infection (HCV)

In May 2015, Achillion announced an exclusive worldwide collaboration with Janssen Pharmaceuticals, Inc. (Janssen), one of the Janssen Pharmaceutical Companies of Johnson & Johnson, for the treatment of HCV. Janssen is currently completing OMEGA-1, a phase 2b, multicenter, randomized, open-label study to investigate the efficacy, safety and pharmacokinetics of different treatment regimens of JNJ-4178, a once-daily combination of AL-335, odalasvir, a compound licensed from Achillion, and simeprevir, in treatment-naive and treatment-experienced subjects with HCV genotype 1, 2, 4, 5, and 6 infection, with and without cirrhosis.

In April 2017, Achillion reported that Janssen’s OMEGA-1 global phase 2b clinical trial was fully enrolled with a total of 365 subjects. Results from this trial are anticipated during the second half of 2017.

Shares of Achillion Pharmaceuticals skyrocketed over 30% to $5.35 in after-hours trading Tuesday. ACHN has a 1-year high of $9.50 and a 1-year low of $3.15. The stock’s 50-day moving average is $4.37 and its 200-day moving average is $4.12.

On the ratings front, Achillion has been the subject of a number of recent research reports. In a report issued on May 18, Leerink Swann analyst Joseph Schwartz upgraded ACHN to Buy, with a price target of $6.00, which implies an upside of 50% from current levels. Separately, on April 26, Jefferies’ Eun Yang reiterated a Hold rating on the stock and has a price target of $4.50.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Joseph Schwartz and Eun Yang have a yearly average return of 15.6% and 3.3% respectively. Schwartz has a success rate of 54% and is ranked #230 out of 4628 analysts, while Yang has a success rate of 47% and is ranked #1115.

Achillion Pharmaceuticals, Inc. engages in the research and development of small molecule drug therapies for infectious diseases and immune system disorders. It intends to commercialize its anti-viral medicines for the treatment of hepatitis C and resistant bacterial infections.