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With Idenix gone, is Achillion next?

In the new generation of hepatitis C treatment regimens, drugs called nucleotide analogs, or "nucs," are the golden ticket.

Gilead Sciences' blockbuster drug Sovaldi, which it acquired in its $11 billion purchase of Pharmasset, is a nuc. Idenix, which agreed to be acquired by Merck Monday for $3.9 billion—more than three-times its closing market value Friday—is developing a nuc. Bristol-Myers bought Inhibitex in 2012 for $2.5 billion for its nuc, only to unwind the program later as safety issues arose.

Achillion Pharmaceuticals, a $411 million market cap company based in New Haven, Connecticut, has a nuc in development. And the market's recognizing its potential valueAchillion shares soared 48 percent Monday on speculation it would be the next target. It's up another 61 percent Tuesday after the company issued a clinical update, saying it's begun dosing a proof-of concept study of its nuc, called ACH-3422. Data are expected in the fall.

Achillion's been a takeover target for years. But as CNBC reported Monday, Merck's acquisition of Idenix came after a bidding war that included Johnson & Johnson and AbbVie. Both those companies and others, say analysts, may still be looking.

Achillion web page
Source: Achillion
Achillion web page

"Merck's planned acquisition of Idenix leaves Achillion as the only unencumbered, clinical-stage, HCV nucleotide-analog (nuc) company and with several potential acquirers in the wings, including Bristol-Myers, AbbVie, and J&J, we foresee forthcoming data as a potential catalyst for a transaction," JMP Securities' Liisa Bayko wrote in a research note Tuesday.

Bayko pegs Achillion's acquisition value at $13 a share, or $1.5 billion. The shares are currently trading just above $6, so Bayko's estimate implies a more than 100 percent premiumstill below what Merck is paying for Idenix, but Merck may have paid more for some intellectual property considerations.

Read MoreWhy Merck's Idenix deal is bad news for Gilead

While AbbVie, Bristol-Myers and J&J are in the race with Merck and Gilead to develop new treatments for hepatitis C, a market estimated to be worth more than $20 billion in 2018, those three companies are left without nucs, Bayko noted.

Nucs are considered to be a key backbone of hepatitis C treatments, which increasingly are being given in combination to improve outcomes and ease of use for patients. Previous regimens included injections of interferon, which often made patients feel ill and weren't able to cure the chronic liver infection in all patients.

Read MoreFirm rakes in nearly $1B profit on Idenix deal

The goal among drugmakers now is to develop a single pill that patients can take once a day, with fewer side effects, that will cure the virus for all patients in the shortest period of time—potentially in a matter of weeks.

Gilead's Sovaldi currently is taken for 12 weeks and costs $84,000. The $1,000-a-day price tag has been a lightning rod for criticism of pricing in the drug industry. More combinations are coming that could potentially shorten treatment times.

Read MoreWhy there's no end in sight for higher drug costs

Nucs are a key part of that and are seen as the most effective class at preventing resistance to drugs. They act to interrupt the viral replication process, so that the virus doesn't get reproduced and ultimately dies. The ultimate treatment for hepatitis C, analysts expect, will include nucs paired with other classes of medicines, such as protease inhibitors.

Those drugs and others also hamper the viral replication cycle, but they do it by binding to key proteins, Robert W. Baird analyst Brian Skorney said by telephone Tuesday. Nucs, instead, actually get integrated into the transcription process, making it much more difficult for the virus to find ways around them and develop resistance, he said.

So Achillion's nuc, though very early in testing, may be a draw. Skorney is looking to see more details emerge about the bidding process for Idenix to get a sense of demand for Achillion.

"Achillion will trade based on what these merger docs say in two weeks, and then will trade based on the outcome of the phase 1 trial," Skorney said. "If there were three bidders going to $3 billion in this process, and we come out and see [positive] seven-day data for Achillion's nucleotide analog, they probably get taken out."

—By CNBC's Meg Tirrell