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No Role For Serendipity In Vertex' achievements

Prohost Biotech - Saturday, February 26, 2011

Bad firms do not design and develop chains of breakthrough drugs. Serendipity exists, no doubt about it, but it has no role in Vertex’ (VRTX) accomplishments. Vertex’ products are backed by plenty of science and technologies that are highly appreciated by academia and by well regarded scientists. The time has come for the market analysts to let Vertex’ shareholders share the benefits this firm has offered AIDS patients, patients infected with hepatitis C virus (HCV), and now, as we have just learned from the news, cystic fibrosis patients.

In the news, Vertex’ investigational drug VX-770 has demonstrated in Phase III trials significant improvement in lung function of patients suffering from cystic fibrosis. The results showed VX-770 improved lung function by 10.5 percent compared with a placebo and achieved all secondary goals of the study. VX-770 appears to have actually modified the disease. Compared with placebo at 24 and 48 weeks, patients on VX-770 showed a mean improvement in lung function of about 17 percent from baseline measurements. The patients were 55 percent less likely to require antibiotics for infection, and had significant reductions in sweat chloride (salt in the sweat), another indication that the drug modified the disease.

Investors did not wait this time for articles that would mislead them about the value of the promising drug. They rushed on their own to buy VRTX, guided by their logic and natural instincts. The stock has been boxed for more than four years despite the many signs and symptoms of the successful outcome of its lead drug Telaprevir (VX-950) as a breakthrough cure for HCV infection and other products for other diseases. The news about the cystic fibrosis drug was accompanied by Vertex’s announcement that it has decided to file for U.S. and European approval of VX-770 in the second half of 2011.

This is, indeed, good news. Cystic fibrosis is a debilitating, life-threatening disease that causes chronic infection and progressive lung damage. The accumulation of abnormally thick, sticky mucus plugs in the lung bronchioles of cystic fibrosis patients results in chronic pulmonary obstruction, chronic cough, and severe difficulty breathing. The disease is caused by defective or missing CFTR proteins, which result in poor ion flow across cell membranes, including in the lung.

The positive results of VX-770 are not Vertex’ only good news. The very good news about this firm is its determination to look carefully at each aspect of the various pathological pathways of a single disease and design and develop drugs that manage the responses of the different aberrant pathways. In cystic fibrosis, for example, VX-770 is useful for patients with the G551D mutation, where CFTR proteins do not function normally at the cell surface. VX-770, known as a CFTR potentiator, increases the function of CFTR proteins by increasing the gating activity, i.e. the receptor’s ability to transport ions across the cell membrane. In another group of cystic fibrosis patients who carry the F508del mutation, the CFTR proteins do not reach the cell surface in normal amounts. For this group, Vertex developed VX-809, known as a CFTR corrector, which boosts CFTR function by increasing its movement to the cell surface.

Vertex is also conducting a Phase II safety and tolerability study that evaluates multiple combinations of VX-770 and VX-809 in people with two copies of the F508del mutation. Another goal of this study is to evaluate the effect of the drug combination on CFTR function as measured by sweat chloride. Elevated sweat chloride level is a diagnostic hallmark in CF patients and results directly from defective CFTR function in skin’s sweat glands.

As in the development of its cystic fibrosis drugs, Vertex has not stopped at developing only Telaprevir for HCV infection. The company’s scientists have designed and developed additional drugs that might enhance Telapravir’s efficacy, or be improvements over the first-generation product such as ease of use. In addition to Telaprevir, which will soon be approved for marketing, Vertex’ pipeline of HCV products comprises:

VX-222, a small molecule non-nucleoside inhibitor of HCV NS5B polymerase;
VX-985, another HCV protease inhibitor in Phase I clinical trials; and
VX-759, a small molecule non-nucleoside inhibitor of HCV NS5B polymerase; this drug has completed Phase 1b clinical trial.

The depth of Vertex’ vision, its strategy, determination, and capability to execute its plans lead us to believe this firm is on its way to becoming a successful full-fledged drug developer. In addition to the HCV and cystic fibrosis therapeutics, the pipeline includes:

VX-509 is a novel Janus kinase 3 (JAK3) inhibitor for multiple immune-mediated inflammatory diseases. In cell-based assays, it has demonstrated 1000-fold greater affinity for JAK3 than non-JAK kinases. It also showed approximately 25- to 150-fold greater affinity for JAK3 compared to other JAK isotypes.

VX-765 is a novel caspase-1 inhibitor for epilepsy.

Vertex is filled to the brim with other activities aimed at improving the treatment of many diseases that lack adequate therapies. For example, together with a global network of scientific and clinical tuberculosis (TB) experts, Vertex is exploring ways to apply expertise in cellular signaling to TB drug discovery and development. Vertex’ goal is to discover novel compounds that could potentially undermine the ability of Mycobacterium tuberculosis to survive within infected host cells, thus offering new treatment options for TB, including multidrug resistant TB.

We cannot write about all of Vertex activities in this short article. We remind you that the FDA independent committee will review Vertex’ protease inhibitor Telaprevir for HCV infection in April. We believe that the drug will be approved.

What do we expect?

We expect a NDA for VX-770 to be filed this year with approval in 2012, and to generate around $1 billion in revenues for Vertex. Also, we have hope that the combination of VX-770 and VX-809, which is aimed at a subgroup of patients, will prove beneficial for all cystic fibrosis patients, a possibility that would take the cystic fibrosis revenues to $3 billion annually. Added to the revenues coming from Telaprevir, Vertex could generate over $5 billion in revenues by 2013.

We also expect the firm to become a target for acquisition. The fact is, though, that , acquisition or no acquisition, we believe Vertex will become, as we keep saying, a full-fledged, first-class pharmaceutical company generating multibillions of dollars in revenues.

We long VRTX.

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