Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
ACHN > SEC Filings for ACHN > Form 10-Q on 7-Aug-2013All Recent SEC Filings

Show all filings for ACHILLION PHARMACEUTICALS INC | Request a Trial to NEW EDGAR Online Pro

Form 10-Q for ACHILLION PHARMACEUTICALS INC


7-Aug-2013

Quarterly Report


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This quarterly report on Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, that involve risks and uncertainties. All statements other than statements relating to historical matters including statements to the effect that we "believe," "expect," "anticipate," "plan," "target," "intend" and similar expressions should be considered forward-looking statements. Our actual results could differ materially from those discussed in the forward-looking statements as a result of a number of important factors, including factors discussed in this section and elsewhere in this quarterly report on Form 10-Q, including those discussed in Item 1A of this report under the heading "Risk Factors," and the risks discussed in our other filings with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis, judgment, belief or expectation only as the date hereof. We assume no obligation to update these forward-looking statements to reflect events or circumstances that arise after the date hereof.

Overview

We are a biopharmaceutical company that was established to discover, develop and commercialize innovative treatments for infectious diseases. Within the anti-infective market, we are currently concentrating on the development of antivirals for the treatment of chronic hepatitis C viral infection, or HCV. We are currently focusing our efforts on developing the following four drug candidates which we intend to study in combination with each other and/or potentially in combination with compounds owned by others:

• Sovaprevir, a NS3 protease inhibitor being investigated for the treatment of HCV, currently in phase II clinical development;

• ACH-3102, a NS5A inhibitor being investigated for the treatment of HCV, currently in phase II clinical development;

• ACH-2684, a NS3 protease inhibitor being investigated for the treatment of HCV, which recently completed phase I clinical development.

• ACH-3422, a nucleotide NS5B polymerase inhibitor, currently being tested in investigational new drug, or IND, application- enabling preclinical studies.

We are currently conducting an international Phase II clinical trial with sovaprevir and ACH-3102 for the treatment of genotype 1 HCV. The trial will evaluate an all-oral 12-week interferon-free regimen consisting of sovaprevir, ACH-3102, and ribavirin in patients with chronic HCV who have not received prior therapy. We are also conducting IND-enabling preclinical studies for ACH-3422.

In June 2013, the U.S. Food and Drug Administration, or FDA, placed a clinical hold on sovaprevir after elevations in liver enzymes were noted in a phase I healthy subject drug-drug interaction (DDI) study evaluating the effects of concomitant administration of sovaprevir with ritonavir-boosted atazanavir. The FDA has allowed continued enrollment and treatment of patients in the phase II -007 clinical trial evaluating 12-weeks of sovaprevir in combination with ACH-3102 and ribavirin for patients with treatment-naive genotype 1 HCV. In order to resolve the clinical hold, the FDA has asked for study reports from two drug-drug interaction studies, an integrated safety analysis of on-going sovaprevir trials, and future development plans and protocols, each of which we expect to provide to the FDA in August 2013. For a further discussion of this clinical hold, see "Financial Operations Overview - Research and Development."


Table of Contents

In addition, we have established a pipeline of certain antibacterial product candidates for which we have or are seeking appropriate collaborative partners, but to which we are not devoting significant resources at this time. We have also developed and out licensed certain development and commercialization rights to elvucitabine, for the treatment of both Hepatitis B, or HBV, and human immunodeficiency virus, or HIV.

We have devoted and are continuing to devote substantially all of our efforts toward product research and development. We have incurred losses of $341 million from inception through June 30, 2013 and had an accumulated deficit of $354 million at June 30, 2013, which includes preferred stock dividends recognized until our initial public offering in 2006. Our net losses were $31.7 million and $20.7 million for the six months ended June 30, 2013 and 2012, respectively.

We have funded our operations primarily through proceeds from the sale of equity securities, including our initial public offering in October 2006, private placements of our common stock in August 2008 and August 2010 and registered offerings of our common stock in January 2010, June 2011, August 2012 and February 2013.

• In February 2013, we issued 16,894,410 shares of our common stock in an underwritten public offering, including the underwriter's exercise of an over-allotment option. We received net proceeds of $133.2 million.

• In August 2012, we issued 6,367,853 shares of our common stock in a registered direct offering with funds managed by QVT Financial LP. We received net proceeds of $41.7 million.

• In June 2011, we issued 11,040,000 shares of our common stock in an underwritten public offering, including the underwriters' exercise of an over-allotment option. We received net proceeds of $60.9 million.

• In August 2010, we issued 19,775,101 shares of our common stock and warrants to purchase 6,921,286 shares of common stock in a private placement to institutional and other accredited investors. We received net proceeds of $49.9 million.

• In January 2010, we issued 10,275,000 shares of our common stock in an underwritten public offering. In February 2010, we issued an additional 1,541,250 shares of common stock in connection with the underwriters' exercise of an over-allotment option. We received net proceeds of $22.6 million.

We expect to incur substantial and increasing losses for at least the next several years as we seek to:

• continue clinical testing of sovaprevir, ACH-3102 and ACH-2684;

• continue IND-enabling preclinical studies and initiate clinical testing of ACH-3422; and

• identify and progress additional drug candidates.

We will need substantial additional financing to obtain regulatory approvals, fund operating losses, and, if deemed appropriate, establish manufacturing and sales and marketing capabilities, which we will seek to raise through public or private equity or debt financings, collaborative or other arrangements with third parties or through other sources of financing. There can be no assurance that such funds will be available on terms favorable to us, if at all.

In addition to the risks associated with early-stage companies, there can be no assurance that we will successfully complete our research and development, obtain adequate patent protection for our technology, obtain necessary government regulatory approval for drug candidates we develop, find and maintain appropriate collaboration partners or that any approved drug candidates will be commercially viable. In addition, we may not be profitable even if we succeed in commercializing any of our drug candidates.

Financial Operations Overview

Revenue

To date, we have not generated revenue from the sale of any drugs. The majority of our revenue recognized to date has been derived from our former collaboration with Gilead to develop compounds for use in treating HCV, which was terminated in February 2012.

During the six months ended June 30, 2013 and 2012 we recognized $0 and $2.5 million, respectively, under this collaboration agreement. Revenue recognized during the six months ended June 30, 2012 consisted of recognition of the remaining deferred revenue related to this former collaboration, as effective with the termination of the collaboration we no longer had any future obligations under the collaboration.


Table of Contents

Research and Development

Our research and development expenses reflect costs incurred for our proprietary research and development projects. These costs consist primarily of salaries and benefits for our research and development personnel, costs of services by clinical research organizations, other outsourced research, materials used during research and development activities, facility-related costs such as rent and utilities associated with our laboratory and clinical development space and operating supplies.

Within the anti-infective market, we are concentrating on the development of antivirals for the treatment of HCV. Currently, we are developing our lead clinical-stage drug candidates for the treatment of HCV, including sovaprevir and ACH-3102, each currently in phase II clinical development, and ACH-2684, which recently completed a phase I clinical trial and ACH-3422, which is currently in IND-enabling preclinical studies. In the near term, we intend to focus our efforts on (i) completing clinical development of a combination regimen including sovaprevir and ACH-3102, with and without ribavirin,
(ii) continuing non-therapeutic studies of sovaprevir and ACH-3102
(iii) continuing IND-enabling preclinical studies for ACH-3422 and
(iv) exploring potential development of our drug candidates with other drug developers under cooperative or other study arrangements.

In addition, we have established a pipeline of certain antibacterial product candidates for which we have or are seeking appropriate collaborative partners, but to which we are not devoting significant resources at this time. We have also developed and out- licensed certain development and commercialization rights to elvucitabine, for the treatment of both Hepatitis B, or HBV, and human immunodeficiency virus, or HIV.

We have established our current HCV drug candidate pipeline entirely through our internal discovery capabilities. Through these efforts we have identified and are developing the following portfolio of drug candidates which we intend to study in combination with each other and/or potentially in combination with compounds owned by others:

• Sovaprevir, a NS3 Protease Inhibitor. During the second quarter of 2013, we initiated a randomized, double-blind phase II clinical trial that will evaluate a 12 week treatment consisting of sovaprevir and our NS5A inhibitor, ACH-3102, with ribavirin for the treatment of genotype 1 HCV (the -007 trial) and we expect initial RVR data to be available in the third quarter of 2013 and SVR data to be available in the fourth quarter of 2013. In prior clinical trials, we completed a phase IIa clinical trial conducted in both the United States and Europe to assess sovaprevir's safety, tolerability, pharmacokinetic properties and efficacy when dosed with pegylated interferon and ribavirin (P/R) in treatment-naοve, genotype 1 HCV-infected subjects. In this trial, sovaprevir was demonstrated to achieve a complete early virologic response, or cEVR, after twelve weeks of dosing, in 94% to 100% of patients. Mean viral load, a measurement of the amount of virus in the blood stream, was reduced in HCV-infected patients by 4.56 log10 to 5.08 log10, or reduction of over 99.9% of the virus. Sovaprevir continued to be safe and well-tolerated with no significant drug-related adverse events. Liver enzyme elevations were observed with higher doses of sovaprevir, were transient, and returned to baseline while on treatment. In addition, sustained virologic response twelve weeks (SVR12) after the completion of therapy was achieved in 77% to 85% of patients after completion of 24 weeks of therapy (12 weeks of sovaprevir plus P/R, followed by 12 weeks of P/R). Mutations commonly associated with protease inhibitor therapy including mutations at R155, A156 and D168 were not observed with sovaprevir treatment. Sovaprevir has been granted Fast Track status by the United States Food and Drug Administration, or FDA.

In June 2013, we received notice from the FDA that a clinical hold has been placed on sovaprevir after elevations in liver enzymes were noted in a Phase 1 healthy subject DDI study evaluating the effects of concomitant administration of sovaprevir with ritonavir-boosted atazanavir. The FDA has allowed continued enrollment and treatment of patients in the phase II -007 clinical trial evaluating 12-weeks of sovaprevir in combination with ACH-3102 and ribavirin for patients with treatment-naive genotype 1 HCV. In a Phase 1 drug-drug interaction study, we were evaluating the effects of concomitant administration of sovaprevir with ritonavir-boosted atazanavir. While conducting this study, we detected unanticipated elevations in ALT liver enzymes (grade 3 or 4) in multiple subjects, although none of these met the criteria for a serious adverse event (SAE). We voluntarily stopped further dosing in the DDI study and promptly notified the FDA of these findings. Preliminary pharmacokinetic results indicate a metabolic interaction whereby plasma concentrations of sovaprevir were substantially increased upon co-administration. Such ALT elevations have not been seen in the 12-week combination -007 trial, the 12-week combination -005 trial with ACH-3102 and ribavirin, or in any other drug-drug interaction studies completed with sovaprevir to date. With the preliminary draft data on hand at the time of notification, the FDA placed sovaprevir on clinical hold. In order to resolve the clinical hold, the FDA has asked for study reports from two drug-drug interaction studies, an integrated safety analysis of on-going sovaprevir trials, and future development plans and protocols, each of which we expect to provide to the FDA in August 2013.


Table of Contents
• ACH-3102, a NS5A Inhibitor. We have completed a proof-of-concept clinical trial of our second-generation, pan-genotypic NS5A inhibitor, ACH-3102, and we are currently studying the drug candidate in a blinded study in combination with sovaprevir, our protease inhibitor, and ribavirin. This trial was initiated in the second quarter of 2013 and we expect initial RVR data to be available in the third quarter of 2013. In phase Ia safety and pharmacokinetic studies, more than 70 healthy volunteers received either a single ascending dose of ACH-3102, or 14 days of once-daily ACH-3102. Data from both the single and multiple ascending dose groups demonstrated that ACH-3102 was well tolerated with no serious adverse events. In phase Ib, ACH-3102 demonstrated proof-of-concept efficacy results after a single dose of ACH-3102 in patients with genotype 1a HCV. In all, 12 patients were treated with a single dose of either 50 mg, 150 mg, or 300 mg of ACH-3102, with a mean maximum decline in HCV RNA of 3.78, 3.52, and 3.93 log10 achieved, respectively. In phase II, we studied ACH-3102 in an open-label phase IIa pilot trial evaluating 12-weeks of once-daily ACH-3102 in combination with ribavirin for the treatment of HCV genotype 1b. Results from that trial revealed that 75% of patients (6 of
8) who had completed 4 weeks of therapy achieved rapid virologic response, or RVR, meaning undetectable levels of virus at 4 weeks of therapy, and 75% of patients (6 of 8) achieved undetectable levels of virus at end of treatment, or ETR. Further, 63% of patients (5 of 8) receiving 12 weeks of therapy demonstrated undetectable levels of HCV 4 weeks after cessation of therapy, or SVR4. We expect that final data will be available at a future medical meeting. ACH-3102 has been granted Fast Track status by the FDA.

• ACH-2684, a NS3 Protease Inhibitor. ACH-2684 has most recently completed phase Ib proof-of-concept clinical studies, including three segments:
once-daily dosing in genotype 1, twice-daily dosing in patients with genotype 3 and once-daily dosing in patients with cirrhosis. Once-daily doses of 400mg of ACH-2684 reduced viral load by a mean maximum 3.73 log10 in patients with HCV genotype 1. In addition, twice daily doses of 400mg of ACH-2684 reduced viral load by a maximal 2.03 log10 in patients with HCV genotype 3. Lastly, once-daily doses of 400mg administered for three days to HCV patients with cirrhosis achieved a mean maximum 3.67 log10 reduction in HCV viral load, similar to the antiviral activity achieved in non-cirrhotic genotype 1 HCV patients receiving the same dose of ACH-2684. ACH-2684 demonstrated good safety and tolerability in these phase Ib clinical studies, as well as in phase Ia studies in healthy volunteers. Our current strategic plan includes the combination development of ACH-2684 with ACH-3102 in a 12-week combination clinical study. We also remain interested in combining ACH-2684 with other compounds under cooperative study arrangements.

• ACH-3422, a NS5B Nucleotide Polymerase Inhibitor. ACH-3422 is a small molecule, nucleotide prodrug inhibitor of HCV NS5B polymerase. In vitro, ACH-3422 has demonstrated excellent potency, with activity demonstrated across all genotypes of HCV and an EC50 of approximately 50 to 65 nanomolar against genotype 1 HCV. To date, we have completed 14-day safety studies in animals, where no significant findings were noted at the highest dose tested. ACH-3422 appears to have high oral bioavailability, rapid uptake and conversion of the prodrug into the monophosphate within the liver, and a pharmacokinetic profile supportive of once-daily dosing. We have initiated manufacturing and IND-enabling preclinical studies for ACH-3422 and plan to file an IND with the FDA in the first quarter of 2014.

We intend to continue to focus on the discovery and development of new drug candidates through our extensive expertise in virology, microbiology and synthetic chemistry. Although significant additional funding and research and development will be required to support these efforts, we believe our drug discovery capabilities will allow us to further expand our product candidate portfolio, providing us with strong growth potential and, over time, reducing our reliance on the success of any single drug candidate.

All costs associated with internal research and development, and research and development services for which we have externally contracted, are expensed as incurred. The costs of obtaining patents for our drug candidates are expensed as incurred as indirect costs.

                                                   Six Months Ended June 30,
                                                    2013                2012
                                                         (in thousands)
    Clinical candidate direct external costs:
    Sovaprevir (and related compounds)          $      4,503        $      4,846
    ACH-3102 (and related compounds)                   4,861               4,339
    Sovaprevir/ACH-3102 combination trials             7,431                  -
    ACH-2684 (and related compounds)                     629               1,417
    ACH-3422 (and related compounds)                     223                  -
    ACH-2928 (and related compounds)                       4                 522
    Other                                                270                 570

                                                      17,921              11,694
    Direct internal personnel costs                    5,620               4,723

    Sub-total direct costs                            23,541              16,417
    Indirect costs and overhead                        1,837               1,607
    Research and development tax credit                  (90 )              (103 )

    Total research and development              $     25,288        $     17,921


Table of Contents

We are currently conducting phase II clinical trials of sovaprevir and ACH-3102, as well as IND-enabling preclinical studies of ACH-3422.

The State of Connecticut provides companies with the opportunity to exchange certain research and development credit carryforwards for cash in exchange for foregoing the carryforward of the research and development credit. The program provides for such exchange of the research and development credits at a rate of 65% of the annual research and development credit, as defined. This benefit is recorded as a reduction of research and development expenditures.

We expect research and development expenses associated with the completion of these programs to be substantial and to increase over time. We do not believe, however, that it is possible at this time to know or accurately project the nature, timing or total amount of program-specific expenses through commercialization. There exist numerous factors associated with the successful commercialization of any of our drug candidates, including future trial design and various regulatory requirements, many of which cannot be determined with accuracy at this time based on our stage of development. Additionally, future commercial and regulatory factors beyond our control will evolve and therefore impact our clinical development programs and plans over time.

General and Administrative

Our general and administrative expenses consist primarily of salaries and benefits for management and administrative personnel, professional fees for legal, accounting and other services, travel costs and facility-related costs such as rent, utilities and other general office expenses for general and administrative personnel.

Critical Accounting Standards and Estimates

Preparation of our financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. A summary of our critical accounting estimates is included in Management's Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 31, 2012. We continually review these estimates and their underlying assumptions to ensure they are appropriate for the circumstances. Changes in the estimates and assumptions we use could have a significant impact on our financial results. During the first six months of 2013, there were no significant changes in our estimates and critical accounting policies.

Results of Operations

Preparation of our financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. A summary of our critical accounting estimates is included in Management's Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 31, 2012. We continually review these estimates and their underlying assumptions to ensure they are appropriate for the circumstances. Changes in the estimates and assumptions we use could have a significant impact on our financial results. During the first six months of 2013, there were no significant changes in our estimates and critical accounting policies.


Table of Contents

Comparison of Three and Six Months Ended June 30, 2013 and 2012

Revenue. We recognized no revenue for the three months ended June 30, 2013 or 2012, and $0 and $2.5 million for the six months ended June 30, 2013 and 2012, respectively. Revenue recognized during the six months ended June 30, 2012 consisted of amounts derived from our former collaboration with Gilead. During this period, effective with the termination of the collaboration, we recognized the remaining $2.5 million of deferred revenue as we no longer had any future obligations under the collaboration.

Research and Development Expenses. Research and development expenses were $16.6 million and $9.0 million for the three months ended June 30, 2013 and 2012, respectively, and $25.3 million and $17.9 million for the six months ended June 30, 2013 and 2012, respectively. The increase for the three and six months ended June 30, 2013 was primarily due to increased costs related to combination clinical trials and drug interaction studies of sovaprevir and ACH-3102 as well as increased consulting fees. Personnel costs and non-cash charges related to stock based compensation also increased primarily due to the addition of personnel in our development group. These amounts were partially offset by decreased clinical trial expenses related to ACH-2684 and ACH-2928. We expect research and development expenses to increase moderately during the remainder of the year, as we continue clinical testing of sovaprevir and ACH-3102 and complete IND-enabling studies of ACH-3422. Research and development expenses for the three and six months ended June 30, 2013 and 2012 are comprised as follows:

                                                 Three Months Ended June 30,                             Six Months Ended June 30,
                                                                                  %                                                      %
                                         2013         2012        Change        Change          2013          2012        Change       Change
Personnel costs                        $  2,300      $ 2,160      $   140             6 %     $  4,580      $  4,105      $   475           12 %
Stock based compensation                    481          233          248           106 %        1,040           618          422           68 %
Outsourced research and supplies         12,488        5,636        6,852           122 %       17,148        11,071        6,077           55 %
Professional and consulting fees            707          382          325            85 %        1,405         1,093          312           29 %
Facilities costs                            484          513          (29 )          (6 %)       1,007         1,005            2           -
Travel and other costs                      153           88           65            74 %          198           132           66           50 %
Research and development tax credit         (45 )        (33 )        (12 )          36 %          (90 )        (103 )         13          (13 %)

Total                                  $ 16,568      $ 8,979      $ 7,589            85 %     $ 25,288      $ 17,921        7,367           41 %

General and Administrative Expenses. General and administrative expenses were $3.5 million and $2.6 million for the three months ended June 30, 2013 and 2012, respectively, and $6.6 million and $5.3 million for the six months ended June 30, 2013 and 2012, respectively. The increase for the three and six months ended June 30, 2013 was primarily due to an increase in non-cash charges related to stock based compensation as a result of option grants made at 2012 year end. We expect that general and administrative expenses will be consistent for the remainder of the year. General and administrative expenses for the three and six months ended June 30, 2013 and 2012 are comprised as follows:

                                             Three Months Ended June 30,                           Six Months Ended June 30,
                                                                             %                                                     %
                                      2013        2012       Change        Change          2013         2012       Change       Change
Personnel costs                     $    908     $   708     $   200            28 %     $  1,808     $  1,549     $   259           17 %
Stock based compensation               1,183         582         601           103 %        2,047        1,117         930           83 %
. . .
  Add ACHN to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for ACHN - All Recent SEC Filings
Sign Up for a Free Trial to the NEW EDGAR Online Pro
Detailed SEC, Financial, Ownership and Offering Data on over 12,000 U.S. Public Companies.
Actionable and easy-to-use with searching, alerting, downloading and more.
Request a Trial      Sign Up Now


Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.