Early in the week, we saw Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN) stock soar. The reason for the climb was simple to spot. ACHN canceled an engagement at a big medical conference, but didn’t provide reason to investors. GILD also seemed to have missed the same conference. So, rumors started to fly that Gilead Sciences would be acquiring Achillion Pharmaceuticals; leading to massive gains. However, that rumor is debunked today as the real reason for the canceled engagement becomes apparent…
Janssen & Achillion Enter Into A Definitive Agreement
Johnson & Johnson
It seems as though the reason for the missed engagement for an entirely different reason. Janssen Pharmaceuticals, Inc. one of the subsidiary companies of Johnson & Johnson (NYSE:JNJ) made a big announcement today. Janssen Pharmaceuticals and Achillion Pharmaceuticals have entered into an exclusive worldwide license and collaboration agreement. Janssen will be in charge of the development and commercialization of Achillion’s lead hepatitis C virus assets including ACH-3102, ACH 3422 and sovaprevir. So essentially, Janssen Pharmaceuticals and Achillion Pharmaceuticals will be working together to develop and commercialize HCV treatments.
As a result of the agreement, Johnson & Johnson Innovation will invest $225 million into ACHN; receiving 18.4 million newly issued and unregistered shares of Ahillion at a price per share of $12.25.
How The Market Reacted To The News
The news was released yesterday after hours, and it seems as though ACHN investors aren’t too happy with what they’re seeing. So far today, the stock has given up all of the gains we’ve seen since Monday. The simple fact is that it seems as though investors were looking for an Acquisition, not a collaboration. Currently (12:01), ACHN is trading at $9.18 per share after a loss of 14.04% so far today.
What We Can Expect To See Moving Forward
Moving forward, I’m expecting to see overwhelmingly positive news from Achillion Pharmaceuticals stock. Now, there’s no doubt that investors didn’t seem to get what they wanted. However, Johnson & Johnson is a huge company; the type of company that several experts have been saying that Achillion will need to pair with in order to be successful in the HCV market. The reality is…that pairing is now a reality. I can see why investors could be a bit upset about the 18.4 million new shares that will be issued; however, in the long run, I expect this to be an overwhelmingly positive thing. It is important however, to keep in mind that when it comes to biotech in general, we tend to see quite a bit of volatility. Considering that ACHN is a small cap, volatility is all, but guaranteed. Nonetheless, if you’re not concerned with short-term price volatility, ACHN may be presenting quite the buying opportunity at the moment.