Why Achillion Pharmaceuticals Stock Is Falling Today

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What happened

Shares of Achillion Pharmaceuticals (NASDAQ: ACHN) are falling hard today after the company announced that Johnson & Johnson (NYSE: JNJ) has decided to sell 18.4 million of the drugmaker's shares. This public offering represents all of J&J's holdings in the small-cap drugmaker, and it will reportedly not yield any proceeds for Achillion. As of 11:48 a.m. EST, Achillion stock is down by 11.92% on heavy volume on this news.

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So what

The timing of J&J's decision to dump its entire stake in Achillion is somewhat perplexing. Achillion, after all, just released positive early-stage data for its experimental kidney-disease treatment, ACH-4471, that could eventually be a big winner from a sales standpoint down the road. Apparently, J&J felt it was time to completely cut the cord after its hepatitis C development deal with Achillion fell apart due to the rapidly changing dynamics surrounding this shrinking market.

Now what

With J&J calling it quits on its hepatitis C partnership with Achillion roughly two months ago, the drugmaker's core value proposition now revolves squarely around ACH-4471. While ACH-4471 is targeting a big market, the downside is that Achillion's lead drug candidate remains a few years away from producing results that could provide the basis for a regulatory filing. So, for now, investors may want to shy away from this falling knife.

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George Budwell has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Johnson & Johnson. The Motley Fool has a disclosure policy.