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Vertex Pharmaceuticals Incorporated Message Board

  • emserm emserm Feb 28, 2009 8:05 AM Flag

    Vertex Exec Change May Be One Of Many


    Chemist Joshua Boger founded Vertex Pharmaceuticals (VRTX) 20 years ago. For months, he was its only employee.

    Now he's letting go of his baby just as it's coming of age. Vertex has a potential blockbuster drug close to market, and Wall Street has noticed. The company's stock price is up 45% over the past four months and touched a 52-week high Feb. 6.

    Boger will leave his chief executive's post on May 23. He'll hand over the reins to Matthew Emmens, who took over as Vertex president last month.

    Emmens has a strong marketing background and is a former CEO of UK drugmaker Shire. (SHPGY) He'll remain Shire's board chairman after he leaves his CEO post.

    It's not unusual for a scientist-founder to cede the top job as product commercialization approaches. The skills needed to create new drugs are different than the skills needed to market them.

    Still, some observers wonder what message the company is sending with the changing of the guard.

    Is it positioning itself for acquisition by putting an experienced manager at the top?

    Or is it signaling it intends to use its new drug and pipeline to grow into a biopharma powerhouse?

    The new drug, telaprevir, is aimed at hepatitis C. It's shown good results in phase two clinical trials, killing the virus in 61% to 69% of previously untreated patients.

    Boger expects phase three trials to confirm or even improve on those results. The big hope is that telaprevir will help "that most desperate population of patients for whom the current interferon treatment has failed," he said.

    The Food and Drug Administration should receive Vertex's application for approval in about a year. If the agency gives the okay, telaprevir could be on the market in 2011.

    Mixed Message?

    You can read the tea leaves about management's intentions either way, says analyst Adam Cutler of Canaccord Adams, which seeks Vertex's business.

    He figures a founder-CEO would be less likely to sell off his company, or could demand too high a price for a deal. "Bringing in somebody else as CEO could argue for the possibility of selling the company."

    On the other hand, bringing in someone with commercialization and operating experience could send the opposite signal, Cutler says.

    With its lead product approaching approval, Vertex could be preparing to become a commercial company. To do that, the board would want a chief executive with greater business experience.

    The leadership change probably signals the company intends to remain independent, says analyst Howard Liang, of Leerink Swann, which has done business with Vertex.

    On the other hand, Emmens was on an "acquisitive track" as CEO of Shire, Liang says. That precedent might have implications for Vertex's future.

    Shire made two major buys under Emmens: one was in 2005 for $1.6 billion, the other took place in 2007 for $2.6 billion.

    Emmens took over as Shire's CEO in March 2003. The stock traded in the teens back then, rose to a high of 81 four-and-a-half years later, and currently trades near 36. Emmens and Boger first worked together at Merck (MRK) in the early 1970s.

    Meanwhile, Vertex's stock has been on a fairly steady climb since late October, though it did sell off hard early Friday.

    Valuable Franchise

    Wall Street's recent embrace of the stock likely has much to do with Vertex's value as a potential takeover target, experts say.

    Big Pharma wants new products — and Vertex could have a big one in telaprevir.

    Cutler estimates peak yearly U.S. sales of telaprevir will be $2 billion after five years. The rest of the world could be worth another $1.5 billion a year.

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