It should be noted that while several rounds of analogue synthesis and testing were required to go from the hit VRT-532 to drug VX-770, compounds were strictly assessed for an effect on ion transport in mutant CFTR- expressing cells, rather than CFTR binding or other assays of isolated CFTR protein. While ivacaftor is unable to restore normal CFTR function to cells with the ΔF508 mutant CFTR, due to its dual defects in trafficking and gat- ing, it restores normal CFTR function in cells with G551D, as this mutation only affects gating.107 For this reason, iva- caftor was moved into clinical trials for the treatment of patients with cystic fibrosis with the G551D mutation and found to improve not only sweat chloride measurements, reflecting the improvement in CFTR function, but also lung function and nutritional status, both important clinical parameters, leading to its approval for the treatment of patients 6 years and older with this mutation in January 2012.103
This would represent a triumph for target-based drug discovery had ivacaftor been developed with the CFTR as a target, based on structural studies of the CFTR protein— developing a precise molecular mechanism of action to repair the defects in the mutant channel. Instead, ivacaftor represents the development of a genotype-specific person- alized therapeutic using phenotypic drug discovery meth- ods and, as such, provides a counterexample to the widely held assertion that personalized medicine is only possible using the target-based drug discovery approach. Indeed, the exact mechanism by which ivacaftor exerts its beneficial effects on CFTR gating is still unclear, and although recent work suggests direct action on CFTR itself,108 this was not by design. Phenotypic drug discovery can yield targeted, personalized therapeutics.
copied from "Clinical Relevance of Target Identity and Biology: Implications for Drug Discovery and Development" J Biomol Screen 2013 18: 1164
Recent advances in the treatment of cystic fibrosis provide an example of how personalized medicine can occur with- out knowing the precise target of a novel therapeutic and can be applied with limited provider understanding of the biology at work. Cystic fibrosis is a fatal genetic disease caused by mutations in the cystic fibrosis transmembrane conductance regulator (CFTR) gene, which encodes a mul- tifunctional protein whose primary role is as an adenosine triphosphate (ATP)–gated chloride channel essential for normal salt and fluid transport in multiple organs, including the lung.102 The discovery of the CFTR gene in 1989 prompted the development of therapeutic approaches to restore normal CFTR function, either through replacement of CFTR through gene therapy or by improving the function of the mutant CFTR.103 The latter is complicated by the fact that different mutations predictably affect the CFTR protein and its function in different ways.102,104,105 While the most common CFTR mutation, ΔF508, results in both impaired trafficking to the cell surface and problems with channel gating, other less common mutations, such as G551D, affect only channel gating.104–106
Using cells expressing mutant CFTR genes, Van Goor and colleagues106 at Vertex Pharmaceuticals screened 228,000 compounds for compounds that would enhance CFTR function using a cell-based fluorescence membrane potential assay. Specifically, they screened for two types of compounds: CFTR correctors, which improve ΔF508 CFTR trafficking, and CFTR potentiators, which improve ΔF508 CFTR gating at the cell surface. From the CFTR potentiator screen, hit selection and lead optimization yielded ivacaftor (VX-770).
in less than 6 months. I think they have been trying to avoid doing this by looking for a "partner". In the absence of finding a "partner" they will have to resort to raising equity.
I think that any institutional investor will want a 20% buffer and the the CF franchise is reasonably priced at 13 billion. This equates to about $47 per share. At 30% you get $41 per share. Hence the $40 to $50 per share range I have previously stated.
And I think that if they do this, they will dovetail it on some positive news such as the R117 data and / or the VX-135 data.
Thank you for the good response third, and always appreciate your feedback.
I am confident in the CF franchise... there is a very strong case for it as you have stated above.
And as strong as the case is for the CF franchise, at the end of the day, Vertex is a business. And considering the business, I am not confident in Vertex management's ability to bring it to market without running nigh short on cash. I am not confident in Vertex management's ability to strategically plan for reasons I have discussed... and thereby I infer that I strongly doubt they can pull a relocation of this magnitude off without a hitch and without impacting the delivery schedule of the CF franchise... which ties right back into their cash flow problem.
I made this call before the 20% plus drop... the last conference call was terrible. Considering other factors, macro included, I am sitting on the sidelines waiting for an opportunity to enter back in. I know "know one" can call a bottom... but I don't believe this is it. As I stated earlier this week, options expiration can do some funny things and I wouldn't put any weight on the market psychology until after mid next week.
I think they are going to need another 2Q-3Q of cash to stay fat and happy. I don't believe mgmt will run this off a cliff and will prudently raise cash to avoid running even remotely close to that line. I think this cash will be in the neighborhood of 500-700 m. I think this will happen
JF, they are confident that both VX-809 and VX-661 will improve FEV1 greatly as shown in Ph II trials. CFO Smith said in the last CC that the Ph III trial is going really well. There are a few reasons why analyst like Porges thought that the 809 Ph II data are not as good as the 661 Ph II data. (1) The 809 data were noisy; the numbers of patients were around 20+ and individual variations are large, (2) Because of (1), the dose-response is not obvious. However, the trend lines for 600 mg qd and 400 mg bid groups are ascending lines are parallel to each other AND clearly above the lower dose trend lines. I don't think Porges has seen the slide comparing 600 mg dose group and 400 mg bid group (Cohort 3). To confirm this, sign in to InvestorVillage site and look at the data again. (3) Many people would think that 5 % change in FEV1 is a small improvement. One should remember that Kalydeco improves FEV1 only by 10%. However, the quality of life change is transformational as you have seen in the video and read stories about the physiological changes.
While they are on Kalydeco, they don't have to take pancreatic enzymes to digest food, they don't have to take multiple antibiotics as often, and they can concentrate on daily lives like other people do.
Even if Van Goor has never invented VX-809 or -661, Vertex can be profitable. If you add all Kalydeco-monotherapy-responsive mutations you come up with 15%: all gating mutation incl. 551 = 5%, R117H = 3%, residual function mutation = 7%. 15% of 70,000 is 10500 CF persons. Subtracting those who cannot be reached, Vertex says Kalydeco responsive group size is 7000. This means that annual revenue can be more than 1.4 B. Vertex' annual expenditure will be below 1 B per year. There will be 400 M profit.
So considering the cost of rent, it would only cost Vertex 35 million (pay the rent, leave the building vacant) to take this risk off the table. As a decision maker, that would be worth it for me because the alternatives in a negative CF results scenario are apocalyptic to the company no matter what location they are in.
35 million is peanuts compared to the risk.
Q - you make some good points. Of consideration to those points regarding the R&D. It is my experience from a management perspective that innovation works better in a cell or cluster environment. You obtain the benefits of diversity by churning the HR but still retain the physical cell or cluster environment. Island / Ocean environments are not helpful. So I can agree that administrative efficiency will be improved, unless this dynamic has been thought of, and it rarely is, the innovation and moral will be affected.
My perspective is based on when I was younger I managed a warehouse and delivery fleet and shipped merchandise all over the Western half of the United States. When my facility was moved (a building was bought), decisions were made by executive management that caused customer service and delivery disruptions during the entire process which took about 6 months. Overall, the facility I moved was 300,000 SF and roughly 150 employees... so a smaller endeavor than Vertex's head count, square footage, and the dynamic that Vertex is consolidating 10 different offices.
At the same time I moved, the economy cooled off and the business environment become much more competitive... a lot of these dynamics I can foresee are going to be comparable to Vertex. Based on these experiences and Vertex's current internal and external situation, I think it is a bad idea to move... If I had any counsel to provide Vertex management I would suggest waiting until 3Q:14 to move.
Secure the CF franchise and get the fiscal house in order. The probability that a 6 month potential delay on account of moving offices is just too high and the cost / benefit is not worth it when you consider the consequences of becoming insolvent.
Add these issues to the historical lack of management planning (operational and strategic) and foresight, I think that the risk is too great. Hence my earlier statements that current shareholders are at high risk of liquidation.
Interesting observations on risks regarding the leases at Fan Pier, but remember that a big part of the reason for the move was the elimination of operating inefficiencies of having the company's offices and labs separated at both Kendall Square and the Waverly locations, Also of course, the inducement in terms of city tax concessions that the city of Boston gave to Vertex saving many millions to defray the costs of the relocation from Cambridge. As I recall the Kendall Square leases for Vertex were very high rent for the times as well. Finally, if 809/770 Phase 3 studies deliver revenue in the second half of 2014, the positive growth trajectory of Vertex will resume, making the current contraction of the company a temporary one. The R&D division of this company has been the most productive and innovative part of it's history and will be the key to it's future growth. Consolidating the location of it's labs and offices will increase productivity and efficiency in the R&D process.
809 ph3 will be stronger than ph2 where combo was used for only 28 days. Care to elaborate y u think ph3 won't be as good as ph2?
Previous CEO spent 350 M for Virochem followed by wasting money on the development of VCH 222, VCH 759 and many others. VRTX 765 for seizure was a joke. Also he owns over 200, 000 shares as stock options of VRTX ($63 X 200, 000), for doing what?. Incivek is a failure and net loss. Current CEO is same way with over 193, 000 shares option reward. He was advertised as Adalimumab developer from ABT and he is openly resisting VX 509 development. They wasted time and money on VX 702 for oral rheumatoid drug development. CF program is not VRTX discovery, it was Aroura Bioscience which VRTX bought out for 500 Millions ( Wall Street money) in 2003. There is a u tube video where the company founder says that we are doing VRTX share offering not that we need to raise funds, people want to give us their money. I doubt VX 809 phase III will be as strong as phase II. If FEV 1 target is missed, this stock will be burn to death. I love it when stock is down, because it makes insiders not to gain from their poor job performances.
They are renters'. But here is the down low...
Vertex Pharmaceuticals signed agreements in May 2011 to lease two buildings at Fan Pier for a period of 15-years. It is the largest commercial lease in Boston, amounting to $1.1bn or 74 million per year.
Construction of the new headquarters was started in June 2011 and is scheduled for completion in December 2013. The total cost of construction of the project is estimated at $800m, making it one of the largest private-sector projects in the US.
At a price tag of 800 million dollars, this headquarters is roughly $727 per square foot. Most buildings I have built top out at, at the extremely high end office / residential $500 per square foot. Albeit not Boston waterfront, and not biochemistry R&D MEP items which I am presuming constitute the silver price tag.
Most buildings run roughly 45% in operating expenses, sans the 60,000 sf of retail (assuming it has struggled like all retail has for the last 5 years), the building is running about 4.1%. It could go as high as 8.2% depending on the contractual obligations for building maintenance and operation with Vertex footing the bill.
The range of 4% to 8% seems very realistic to me considering it is a long term lease. However with recent developments, if I was the developer looking at still owing 720 million dollars if Vertex failed, I would be very nervous. It would be nigh impossible to cannibalize AAA office space without taking some serious concessions (losing money).
In May of 2011, everyone was hopeful regarding the HCV franchise... oh how the market has changed.
Of particular concern for me with Vertex is what impact if any will the move, assuming a two quarter transition will have on the delivery of expected 'results'.
That said, nice rally today. For the sake of longs, I hope it keeps up. I still think there is too much risk to put money on the table. Sitting on the sidelines watching... and waiting.
I do not know about the ivory tower. Maybe people in the know can comment. However, so far I am not very impressed with his performance at all. In a particular I think he erred greatly by allowing Alios go on with the 400mg of 135. Some may say that was Alios' s decision. I can not buy that. If VRTX was collaborating with Alios in that trial he should have set his foot down and not gone along allowing Alios to push the envelop to the extreme (400 mg)causing delays in the US trials.
Leiden might be incompetent....but not that incompetent that he has to do another layoff already! Joking aside, the board Need to start asking tough questions. cf was in place long before he got there so he's riding those coat tails. His proclamations around flu, RA and HCV.....plus promised other therapies have gone nowhere. Also heard he is building an ivory tower in their new headquarters......vertex has lost it's humility. Spending like sailors in port while the ship sinks.
The company was not nice to the scientists that got laid off last time (10%). Actually, they were mean. Very mean and rude.
That's the word from scientist friends I have inside the labs. I'm not sure if that will bump up the stock or bump it down. I don't care. I just have had a scientific relationship with this company for 15 years. used to own stock at $7 a long time ago. good luck. I am still finding jobs for scientists and salespeople that got laid off.