An interesting HCV player that may be taken over

I guess everyone knows how hot the hepatitis C (HCV) area is. After a huge success of Gilead to launch the first HCV drug that can cure the disease, the gold hunting for other HCV drugs has never been so fierce and strong. You see, HCV affects 3.2 million people in the United States alone and the market for hepatitis C drugs hit $15 billion last year and it is estimated to increase 50% to $22 billion by the end of 2017. Needless to say, if you have a drug for HCV, you hold a gold mine, sort of speaking. Right now, Gilead, Abbott, and Merck are the leading companies that have HCV drugs approved in the market. But so far, these drugs require 12 weeks of treatment with a huge price tag. If new drugs can shorten the treatment duration with similar efficacy, I’m sure it will be a great advantage in terms of marketing. So here comes my today’s idea.

 Achillion Pharmaceuticals (ACHN) is a clinical stage biotech focusing on HCV. Its lead product, ACH-3102, has been tested in combo with Sovaldi from Gilead and it appears to be effective for a quick cure among a small group of hepatitis C patients. More excitingly, the combo regimen only required six weeks of treatment. With this kind of potentially big drug in hands, I figure ACHN is among one of the active targets for those companies looking for entering this hot area or enhancing their existing HCV franchise. Now the odds for ACHN becomes even bigger at the moment. Why? Well, ACHN is much cheaper now than a quarter ago. You see, as a small biotech still burning cash, ACHN requires money. One often used approach is to raise money from the stock market by selling additional shares. That is exactly what ACHN did in Feb by issuing additional shares in a secondary offering worth more than $132 million. This of course significantly diluted the value of the existing stocks and the stock fell almost 40%. This is bad news for the existing shareholders but great news for potential buyers. They can now buy it at a much affordable price tag as the company only has a market cap of $1.1 billion. Buying ACHN now around $9 is a good bet for a potential merger I think. If it happens, your shares may jump 50-100% overnight in values. Of course, I have no crystal ball and there is no guarantee as it is a pure speculation.