|Is Achillion Pharma Overextended?|
|By Brian Wilson - Lead Contributor|
|Wednesday, 11 June 2014 09:12|
Investors send shares of Achillion Pharmaceuticals (ACHN) ~167% higher since the start of the week after it was announced that the FDA removed the clinical hold on the HCV treatment sovaprevir.
At today’s open, Achillion moved about 5% lower from profit-taking.
Although Wall Street analysts are cheering the stock’s performance with high price targets 50% (or higher) than yesterday’s closing price of $7.79 per share, we remind investors that the company will be tempted to take advantage of the recent surge in share price by issuing common shares into the market. Achillion will sure need more money to finish its Phase 2 sovaprevir trial, and we assume that the company is starting to factor in Phase 2 expenses for another HCV treatment called ACH-3422. As of March 31 2014, Achillion was holding $34 M in cash, which should be enough to keep the company’s operations going for 2 or 3 more quarters.
While this may be a smart move for the future of this company, we see it as a good way to put a damper on the rally in ACHN. Investors interested in this company (or the HCV sector) may want to wait for a financing before buying ACHN in bulk. If the stock does not continue to move upward, more shareholders may be looking to lock in their gains.