J&J Deal Heats Up One of the Most Competitive Drug Markets

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Johnson & Johnson agreed to develop and market Achillion Pharmaceuticals Inc.’s drug for hepatitis C, thrusting the world’s biggest maker of health-care products back into the growing competition for patients of the liver disease.

J&J will work with Achillion on one or more of its top hepatitis C treatments, which may include ACH-3102, ACH-3422 and sovaprevir, in exchange for royalty payments, the companies said Tuesday in a statement. In a separate deal, J&J will pay $225 million for a stake in Achillion.

The companies will be competing with Gilead Sciences Inc. and AbbVie Inc., whose medications have transformed the treatment of hepatitis C by curing the disease in a matter of weeks for many patients. They’ve also set off a heated debate in the industry over drug prices by charging $1,000 a pill before rebates.

For J&J, the deal offers a way to regain lost ground. Gilead and AbbVie have been wresting away the hepatitis C market from the giant drugmaker’s former blockbuster Olysio over the past year. Olysio revenue fell 34 percent in the first quarter to $234 million, while Gilead’s hepatitis C drugs reaped $4.55 billion in sales. Merck & Co. also has a hepatitis C treatment in clinical trials.

By working with Achillion, J&J could “return to being an important player in the HCV space in the 2018 timeframe, even as Merck, Gilead and AbbVie bring a new generation of treatments to the market, Vamil Divan, an analyst at Credit Suisse Group AG, said in a note.

Yet another drugmaker, Bristol-Myers Squibb & Co., said Wednesday it has received a breakthrough therapy designation from the U.S. Food and Drug Administration for its hepatitis C drug daclatasvir combined with Gilead’s Sovaldi. The designation, which lets drugmakers work more closely with agency staff, is for the treatment of genotype 1 patients with advanced cirrhosis and with recurrent hepatitis C after a liver transplant.

To set themselves apart as the market grows more crowded, Achillion and its rivals are trying to reduce their treatment times to six weeks or fewer, a challenge that has proved difficult.

Shares of Achillion, a New Haven, Connecticut-based company with a market value of $1.3 billion as of Tuesday, fell 9.8 percent to $9.63 in early trading Wednesday. Even in the best-case scenario for milestone and royalty payments, the deal ‘‘makes for a relatively small valuation compared with what historically has been a prized asset class,’’ Asthika Goonewardene, an analyst at Bloomberg Intelligence, said in a note.

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