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VERTEX (VRTX) A Historical Advancement In HCV Management

Prohost Biotech - Wednesday, May 26, 2010
Better than expected results are announced from phase 3 randomized, double-blind, placebo-controlled ADVANCE study with Vertex’ hepatitis C drug telaprevir. Around 1,095 patients suffering from the genotype 1 chronic hepatitis C virus took telaprevir, which has tremendously increased the cure rate at record treatment duration. Many liver experts considered this news a historical advancement in the management of progressive disabling, life-threatening and sometimes deadly chronic hepatitis C viral infection. First, the drug deals directly with the virus and, second, it wipes it out in a short limited time. The good news will be hailed by 3 millions people infected with the virus in the U.S. and by 170 million worldwide if they hear the news. 

Telaprevir’s trial results demonstrate that 75% of chronically infected patients with genotype 1 hepatitis C virus (HCV) who had not previously been treated achieved a sustained viral response (SVR or viral cure) after receiving 12-week telaprevir-based combination regimen followed by the conventional drugs pegylated-interferon and ribavirin. A slightly smaller number, 69%, of patients,  achieved the same results after a 8-week treatment with the same regimen. On the control arm, where the conventional treatments pegylated-interferon and ribavirin were given alone without telaprevir, only 44% achieved viral cure, but only after 48 weeks duration, i.e., four times the treatment duration with telaprevir. These results are better than scientists’ expectations, including those responsible for developing the drug.  

Considering the debilitating and life-threatening nature of HCV infection, one can imagine how precious telaprevir must be regarded by liver specialists who watch their HCV infected patients suffer progressive liver deterioration and general worsening of their general health. For years they witnessed patients horrified from the possibility of developing liver failure, liver cancer and from death. That’s what HCV causes. Escalating complications beginning with liver inflammation, liver scarring, liver cirrhosis, and, possible liver failure, and sometimes, liver cancer and death.

The trial results, no doubt, have increased our confidence that telaprevir will be the first protease inhibitor to reach the HCV market. Other large pharmaceutical and small biotechnology firms are also developing HCV drugs, yet, their investigational drugs are still in early and mid-term trials. A protease inhibitor, boceprevir, developed by Merck is in late phase trials. The results are expected to be unveiled before the end of the year. (For other small biotech firms developing HCV drugs go to Prohost Letter #302.)

Reaching the market earlier than other HCV products enables Vertex to capture a large part of the market and keep it. Some financial institutions believe that telaprevir could generate $3B in 2-3 years. Others expect larger revenues from the drug sales based on the fact that physicians would like to rid their patients from the virus as soon as possible. Many are convinced that the ideal regimen will be a combination of old drugs with the new protease inhibitor from beginning to end. For a more accurate speculation, however, we believe we should wait for the guidelines when issued to telaprevir’s providers. We must also wait for Vertex to put its price tag on the drug.

Vertex expects to file a New Drug Application (NDA) to the FDA for approval in the second half of 2010 for both treatment-naïve and treatment-failure patients. Vertex plans to launch the drug in the US in 2011. 

The results and the fact that telepravir combination will be given during a shorter time than the conventional drugs are big deal for HCV patients and their physicians. The short treatment duration encourages compliance, which is extremely important for halting the progression HCV complications into liver failure and cancer. Good news also is that we have witnessed a convincing increase in compliance during the numerous trials conducted with with telaprevir. The results represent a huge victory against the nasty HCV virus. 

VRTX is selling at less than $35 with a market value of around $7B. This amount is supposed to reflect the Vertex’ expected revenues from telaprevir (drug is partnered), the royalty payments of Vertex’ marketed HIV drug, and a pipeline that has several investigational drugs, which  include: A product for cystic fibrosis in phase 3 trials; three products in phase 2 trials (not partnered ) for HCV infection, inflammatory diseases, and epilepsy; two products for cystic fibrosis (partnered) in phase 2 trials; and 2 other HCV products (not partnered) in Phase 1 trials. The pipeline has another product in early development for cancer.  We believe the stock is worth much more than its current price. We hold a long position on VRTX with a near-term target $50.
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