Be Greedy on Achillion After Its Selloff

Tickers in this article: ABBV ABT ACHN JNJ
NEW YORK (TheStreet) -- The love affair that investors had with biotech company Achillion seems to have run its course, as shares recently plummeted 25% in their biggest one-day loss in six years.

It's worth a detailed look at why the stock fell.

The company is developing what it calls Sovaprevir, which is also known as ACH-1625. The drug is a once-a-day NS3 protease inhibitor and is currently in Phase II clinical development. It is considered highly potent.

Protease inhibitors are antiviral drugs used to treat diseases such HIV/AIDS and hepatitis C.

On Tuesday, Achillion announced that U.S. regulators had put trials of the drug on hold after some patients experienced elevated liver enzymes. The increased enzymes were found in healthy patients when sovaprevir was combined with two medicines used to treat HIV infections in order to test for possible drug interactions.

It was not immediately known what produced the higher-than-expected levels, but Achillion says it might have been the combination of the drugs.

For what it's worth, it was Achillion that decided to suspend further testing of Sovaprevir and immediately notified the Food and Drug Administration of the test results.

I don't deny that Achillion brings considerably more risk than a much improved Abbott Labs or a powerhouse like Johnson & Johnson . But after this recent 25% decline, Achillion's stock has become a bit more interesting, if not significantly undervalued.

Before you disagree, understand that the biotech sector is all about the future. And the key to the future of these companies is their product pipelines.

In that regard, I would argue that Achillion's pipeline, which includes treatment of chronic hepatitis-C infection, is as good as any in this space.

This recent setback notwithstanding, there are still reasons to be optimistic, because the company is also working on advancing what it calls ACH-3102, a second-generation inhibitor of hepatitis-C that is considered to have enhanced resistance capabilities compared with first-generation inhibitors.