U.S. Markets closed

Why Achillion Pharmaceuticals Is Cratering Again Today

George Budwell, The Motley Fool

What happened

Shares of the clinical-stage biotech Achillion Pharmaceuticals (NASDAQ: ACHN) dropped by as much as 20.8% today on more than seven times the average daily volume. Interestingly enough, today's plunge comes on top of yesterday's 22.8% decline. What's causing investors to hit the exits this week?

Yesterday, Achillion released an interim peek at its oral factor D inhibitor, ACH-4471, as a treatment for both paroxysmal nocturnal hemoglobinuria (PNH) and C3 glomerulopathy (C3G), as well as early-stage pharmacokinetics and efficacy data for its follow-on drug candidates, ACH-5228 and ACH-5548. While these results were overall positive across the board, Achillion noted that it has decided to shelve ACH-4471 as a monotherapy in PNH.

Man with a look of surprise on his face holding his forehead. A downward pointing chart sits in the background.

Image Source: Getty Images.

So what

At present, the standard of care for PNH -- a rare blood disorder caused by the destruction of red blood cells by the complement system -- is Alexion Pharmaceuticals' (NASDAQ: ALXN) Soliris. So Achillion and other potential competitors are charged with developing drugs that are either more convenient but as efficient and safe as or flat-out superior to Alexion's market share-leading medicine. From the look of things, ACH-4471 didn't appear to meet these criteria as a monotherapy, leading to Achillion's decision to pivot to its earlier-stage PNH assets for the future.

Now what

There is a silver lining from yesterday's clinical update, however. Achillion is staying the course with ACH-4471's program for C3G, a serious kidney ailment that currently lacks any approved treatments in the United States. The problem, however, is that the company has only released a smattering of data for the drug in this indication, making it next to impossible to gauge its chances at successfully completing a full-blown clinical program in C3G. As such, this small-cap biotech stock probably doesn't belong in your portfolio unless you are comfortable with high levels of risk and are willing to wait while its pipeline continues to slowly mature.

More From The Motley Fool

George Budwell has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.