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Achillion Pharmaceuticals, Inc. (ACHN - Snapshot Report) recently received a setback when the US Food and Drug Administration (FDA) placed a clinical hold on its hepatitis C viral infection (HCV) candidate, sovaprevir after observing elevations in ALT liver enzymes in a phase 1 healthy subject drug-drug interaction study.

The phase I study was being conducted to evaluate the effects of concomitant administration of sovaprevir with Norvir (ritonavir) boosted Reyataz (atazanavir).

Consequently, Achillion voluntarily stopped further dosing in the above mentioned study and notified the FDA about its observations.

Meanwhile, enrolment in a phase II study being conducted with sovaprevir continues. This study is evaluating 12-weeks of sovaprevir plus ACH-3102 and ribavirin in treatment-naive patients with genotype 1 HCV.

Since elevated levels of ALT liver enzymes were not observed in the phase II study of ACH-3102, the FDA has allowed continued enrollment and treatment of patients in this trial.

Achillion plans to release interim results on the phase II trial of ACH-3102, including rapid virologic response (RVR) during the third quarter and sustained viral response (SVR) during the fourth quarter.

The FDA has asked Achillion to submit reports from two drug-drug interaction studies along with an integrated safety analysis of on-going sovaprevir studies. Achillion expects to submit the FDA with the requested information within six weeks.

Shares were down 25.1% on the news.

We note that Achillion has three lead candidates for the treatment of HCV, namely, sovaprevir and ACH-3102 (both in phase II), and ACH-2684 (phase I). Sovaprevir and ACH-2684 are NS3 protease inhibitors while ACH-3102 is an NS5A inhibitor. We expect investor focus on updates on ACH-3102.

We note that Vertex Pharmaceuticals' (VRTX - Analyst Report) Incivek and Merck’s (MRK - Analyst Report) Victrelis are approved for the treatment of HCV among others. Moreover, many large cap companies are developing drugs for the treatment of HCV.

Achillion carries a Zacks Rank #2 (Buy). Right now, Aeterna Zentaris Inc. looks attractive with a Zacks Rank #1 (Strong Buy).

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