Achillion… Rational Behavior Over Euphoria (ACHN)

Achillion Pharmaceuticals, Inc. (NASDAQ: ACHN) was an impressive run while it lasted.  When rival deals in the Hepatitis C sector came at super-premiums, the initial and obvious reaction was to bid up anything and everything that was tied to the disease that has not yet gone parabolic.  That sent traders flocking to Achillion Pharmaceuticals.

The problem is that the stock has no products yet, as was mostly true in other deals too, but it has a promising Hep-C candidate.  It is also valued under $800 million.  Before the mergers in Hep-C started coming it was valued under $500 million.

In just the last few sessions we saw a 50% rise from trough to peak Achillion’s stock.  Even if other deals came at premiums of over 100%, investors will start to ask themselves about risk versus reward scenario.  If a stock gains 50% just as a tertiary trade, what happens if it has a delay or an issue arises in its drug testing?

Shares are currently down 4.5% at $11.36 and the stock hit a high this week of $12.24 against a 52-week low of $3.81.  At some point euphoria gets replaced by rational behavior.