Biotechnology company Achillion Pharmaceuticals (NASDAQ: ACHN) fell about 10% in trading on Wednesday, May 20 following the company’s announcement that it licensed its hepatitis C drug pipeline to Johnson & Johnson (NYSE: JNJ) for $1.1 billion.

In the terms of the deal, Johnson & Johnson will pay Achillion Pharmaceuticals milestone payments totaling $1.1 billion throughout the development of its hepatitis C drug. Johnson & Johnson will also purchase 18.4 million new shares in Achillion Pharmaceuticals for $12.25 a share, totaling $224 million. Additionally, Johnson & Johnson will have exclusive rights to develop and commercialize the hepatitis C pipeline and will have to pay Achillion royalties on any future sales worldwide. The royalty percentages will range from the mid-teens to low-twenties.

Investors did not react too kindly to this news as they were expecting a distributor to buy Achillion’s hepatitis C drug pipeline outright.

Achillion CEO Milind Deshpande, Ph.D., said of the deal, “We believe that [Johnson & Johnson’s pharmaceutical R&D department] renowned expertise in HCV development and commercialization enables a synergistic opportunity to rapidly advance our combined HCV assets toward the market while simultaneously achieving an optimized treatment regimen for all HCV patients…Furthermore, we believe that their investment in Achillion through Johnson & Johnson Innovation – JJDC allows us to maximize the value from our HCV portfolio and also positions us to become a leader in complement factor D inhibition, applying our broad platform to a wide number of complement-related diseases. We believe this strategy provides an ideal scenario to create further value for our shareholders.”

UBS analyst Andrew Peters weighed in on Achillion Pharmaceuticals on May 20, downgrading his rating from Buy to Neutral and cutting his price target from $19 to $11.50. The analyst attributed his downgrade to the limited potential upside the Achillion and Johnson & Johnson collaboration has for the stock.