Lucrative hepatitis C market in sharp relief again with deal between Achillion and Janssen

In total, the deal could put as much as $1.1 billion into Achillion’s coffers; Janssen would be taking on development and commercialization costs

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NEW HAVEN, Conn.—Achillion Pharmaceuticals Inc. announced recently that it has entered into a worldwide license and collaboration arrangement with Janssen Pharmaceuticals Inc., one of the subsidiary companies of Johnson & Johnson (JNJ), to develop and commercialize one or more of Achillion’s lead hepatitis C virus (HCV) assets, which include ACH-3102, ACH-3422, and sovaprevir.
The deal terms call for Achillion to give to Janssen an exclusive, worldwide license to develop and—upon regulatory approval—commercialize HCV products and regimens containing one or more of Achillion’s HCV assets. The collaboration is aimed at developing a short-duration, highly effective, pan-genotypic, oral regimen for the treatment of HCV. An initial regimen that will be explored will feature Achillion’s ACH-3102, a second-generation NS5A inhibitor currently in Phase 2 clinical studies that has been granted Fast Track designation by the U.S. Food and Drug Administration, in combination with an NS3/4A HCV protease inhibitor plus an NS5B HCV polymerase inhibitor from the collaboration.
Achillion is eligible to receive a number of payments based upon achievement of specified development, regulatory and sales milestones. Achillion is also eligible to receive tiered royalty percentages between mid-teens and low-twenties based upon future worldwide sales. Janssen will be responsible for all of the development costs within the collaboration and all subsequent costs related to commercialization of the HCV assets. Additionally, in an equity transaction separate to the exclusive license and collaboration arrangement, Johnson & Johnson Innovation—JJDC Inc. will invest $225 million in Achillion and, in return, receive approximately 18.4 million newly issued, unregistered shares of Achillion at a price of $12.25 per share.
The transactions, including the equity sale, are subject to customary closing conditions, including termination or expiration of any applicable waiting periods under the Hart-Scott-Rodino Act, and the transitional clinical development and technology transfer activities under the collaboration are expected to take place over the next several months. All told, though, the deal could be worth about $1.1 billion to Achillion in the long run if all the pieces fall into place.
As one market-watcher wrote at Seeking Alpha on May 20, “With the deal with JNJ, Achillion is set to progress as a possible major player in the HCV market. The company can progress significantly faster towards developing and testing its triplet regimen as they now work with additional assets of JNJ.”
The author also commented, “While many investors were trumped by the fact that a buyout never occurred, Achillion still stands as a prudent investment in a lucrative market. The collaboration will allow the company to progress with more speed in possibly achieving the best regimen in the space and securing a significant market share” and added that the deal may be a case of JNJ testing the waters and thus could be a prelude to an eventual buyout of Achillion.
As Zacks Investment Research noted May 20, “The highly lucrative and competitive hepatitis C virus market is back in focus” thanks to this deal. Zacks was positive about the collaboration, writing, “The deal provides Achillion with a strong partner as well as funds. On the other hand, Johnson & Johnson, which has been struggling with its HCV drug Olysio, will look to recover its market share.”
Achillion, not surprisingly, was very positive in its news release about its deal with Janssen.
“We are excited to collaborate with Janssen for the worldwide development of our HCV assets in combination with their HCV portfolio,” said Dr. Milind Deshpande, president and CEO of Achillion. “We believe that Janssen’s renowned expertise in HCV development and commercialization enables a synergistic opportunity to rapidly advance our combined HCV assets toward the market while simultaneously achieving an optimized treatment regimen for all HCV patients. Furthermore, we believe that their investment in Achillion through Johnson & Johnson Innovation—JJDC allows us to maximize the value from our HCV portfolio and also positions us to become a leader in complement factor D inhibition, applying our broad platform to a wide number of complement-related diseases. We believe this strategy provides an ideal scenario to create further value for our shareholders.”

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