Here's the opinion of a biotech analyst, Andrew Fein, earlier this year on the 809/770 studies and the prospect for approval based on primary endpoints (FEV-1) and secondary endpoints.
'As forVertex, as we get closer to the 2014 data readout in the company's ongoing combination study of ivacaftor + VX-809 in cystic fibrosis (CF), investors will start to realize that Vertex's study is extraordinarily overpowered and that the product's probability of success is really high. Given that this will be the first corrector-potentiator combination available in the cystic fibrosis market, Vertex is going to define its own level of clinical significance.
What I do expect, though, is increased focus on the secondary endpoints (such as weight gain) as we get closer to the time of data readout. This could prove fodder for shorts, as we have not seen enough data to support secondary endpoint improvements. Nonetheless, it will simply be noise, as a statistically significant improvement in the study's primary endpoint (relative improvement in lung function; forced expiratory volume in one second [FEV1]) ought to lead to approval.
TLSR: What is overpowered about the Vertex study?
AF: Vertex is a rock star within the cystic fibrosis patient community. A simple perusing of the various cystic fibrosis patient blogs readily drives home this point. The VX-809 phase 3 studies are powered at 90% to detect a 5% difference in relative FEV1 improvement. Given that just about every cystic fibrosis patient wants to be involved with its state-of-the-art clinical study, the company is able to enroll the ideal patients, those with forced expiratory volume predicted in the range of 40–90%. Patients in that range at baseline are best suited to demonstrate small changes in lung capacity. The company's positive perception within the CF community should also yield "flash" over-enrollment in the study, shortening the study's timeline and padding its statistical buffer.
Thanks Third. All the best to you and yours. Looking forward to the exciting positive clinical data you have so accurately predicted in the coming months
That makes sense John. But with pivotal Phase 3 clinical results and NDA filings so close the market may also be anticipating future CF cash flow as well, and not just valuing the 150 million bonus from JNJ for upfront payoff on rights to Incivo. Happy Thanksgiving to you and all Vertex longs, and a special Thanksgiving wish to Verity (we have not heard from her in a long time and I miss her insights) and her family. She and the majority of the CF community are hopefully on the verge of getting effective treatment for their CF children in the coming year!
Reasons VRTX is recovering it's price per share:
R117 mutation Phase 3 clinical data expanding Kalydeco monotherapy label before year end, with expanded label filing for this group in the first quarter of 2014
March 2014 final readouts for clinical data for adult and pediatric Kalydeco monotherapy in non 551 gating mutations, and Phase 2 661 trials using 661/770 in 508/661 heterozygotes, with expanding label for Kalydeco monotherapy to treat over 7000 CF patients.
April 2014 interim readouts for one thousand 508 homozygous CF patients treated with 809/770 (TRAFFIC and TRANSPORT).
Midyear 2014 NDA filing for 809/770 treatment of 508 homozygous CF mutations to treat over half the thirty thousand CF patients in the US alone in the second half of 2014 (including the expanded monotherapy label for Kalydeco=patient available for treatment include more than 24,000 patients in the US alone).
It's logical for Vertex to reassign their personnel to the areas that have the best chance for near term commercial success. The company's reorganization is a necessary response to the market realities that have been evolving rapidly in the treatment hepatitis C. It makes the most sense for Vertex to focus it's resources on developing the CF drugs as a priority given it's need to generate increasing revenue next year to replace Incivek. The CF drugs will dramatically improve the quality and length of life in thousands of young people suffering with this otherwise fatal genetic disease. Vertex will have no competition for years given the safety and effectiveness of their drugs to treat CF, and help fund the R&D for other areas of research in the company to develop other potential treatments in CF cancer and chronic MS in the future. If VX 135, 509 and 787 have commercial potential, they will be realized by licensing arrangements with larger pharma interested in co-developing these drugs, to provide deeper pockets to complete clinical trials for regulatory approval on a timely basis and to market these drugs worldwide.
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.
Let's remember that the time frame for possible 'good news' starts next month with release of R117 CF trial results, and builds momentum as the analysts and wall street start factoring in the probability of increasing revenue from expanded label use of 770 and final approval of 809, by mid 2014., 509 and 787, and 135 licensing deals could be an 'unexpected' bonus for sentiment towards VRTX that could occur at any time going forward in the near future, since analysts have not given any value to them so far.
It's a good thing. I participated as a principal site investigator in numerous clinical drug trials in Phases 2 and 3 and 4 (post approval studies) and am well aware of the importance of proper screening of patients for selection in multi-year clinical trials. In such long term studies lasting multiple years like the rollover study, it is critical to enroll compliant patients committed to follow up appointments over the entire length of the trial. This requires screening those enrolled in the ongoing trials from which the rollover trials are receiving their patients, for those people most likely to res9de in geographic areas close to clinical trial sites for the duration of the study and are currently in sufficient good health to complete the trial lasting so many years. (In my experience the best compliance with long term trials tends to be in Europe where patients do not change geographic locations where they live as often as they do in the US.) Screening patients may afford some assessment of suitability for patients likelihood of finishing the trial, since drop outs lower the power of the statistical significance of the trial when final data is analyzed after trial completion.
But if they do work (highly likely based on Phase 2 data) it's an incredible value, with the rest of the pipeline thrown in basically for free at a 20 billion price. The headcount can be cut, the rents can be sublet if need be, but blockbuster revenues are nard to come by, and many large pharma need drugs like 770, 809, and 661 which will be likely successes for many years.
Given the share price weakness, the VRTX pipeline worth (according to S&P analysts) up to $7 billion a year for CF alone starting next year, could be bought out at a huge discount by a larger pharma needing new and growing stream of revenue and a strong R&D pipeline of other drugs in development.
Third, thank you for all of your analyses of the prior 809/770 Vertex data and the new emerging science using miRNA technologies to correct CFTR function disclosed at the NACF meeting last month. Regardless of the potency demonstrated using 809/770 in earlier clinical trials, analysts like Geoff Porges seem to believe 661 is superior to 809 in combination with 770, even when adjusting dosing of 770 to offset pK drug interactions between 809 and 770. Perhaps as most TRANSPORT AND TRAFFIC patients finish their six months of treatment in the first quarter of next year, investigators will be reporting that as their study patients go off 809/770 at the end of the 24 week treatment protocol, they will no longer have the benefit of the study drugs, and consequently, there will be having a noticeable decline in their health. This should prompt Vertex to report to the FDA the obvious benefit of the study drugs while the study is still underway. Under these circumstances, the FDA has in the past has allowed an earlier than scheduled unblinding of the data on a compassionate use basis, to allow study patients in the control group and those who went off treatment with study drugs after 24 weeks, the opportunity to resume study drugs in long term 'rollover' studies to maintain their health, and accelerate the approval process of these critically needed drugs by allowing earlier NDA submission.
Third, in addition to more than doubling mono-therapy revenue from the expanded label for using 770 in qualifying groups of non 551 CF patients in the first six months of 2014, we can anticipate the six month data from TRAFFIC and TRANSPORT trials will be available in May next year based on completion of enrollment of these Phase 3 trials last month. The third quarter conference call predicted NDA filing for 809 in mid 2014, and with breakthrough drug designation for 809 and 770, the FDA will rapidly approve their use for 508d homozygous CF patients before the end of the third quarter in 2014. Count on rapid growth of 809 sales to make the 2nd half of 2014 pivotal in terms of positive cash flow at Vertex, and with EU approval to follow, the growth in CF revenue will continue through 2015 and beyond, with the potential for additional revenues from 661, second gen CF correctors, 509 in autoimmune disease, and even 135 in treatment of hep C possible following NDA submissions for these drugs
I'm not sure what turned Geoff Porges, the Bernstein analyst, negatively toward Vertex since he had been a fervent bull in the past. He admits the restructuring of the company's Incivek franchise was expected. So why would he now have such a cautious opinion towards 809, when every analyst raised their estimation of success of 809 after the 661 data last spring validated the earlier phase 2 data with 809/770 treating 508d homozygotes? Is he, like the Goldman analyst, not seeing the validation demonstrated repeatedly using a CFTR corrector and potentiator in 508d homozygotes?
Don't discount the strategy of waiting for a 'better deal' to partner 509 and 787. Remember a license or partnership is worth more if 509 proves to be even more effective with a clean safety profile at 24 weeks rather than at just 12 weeks, so waiting a couple of more months for that data might make potential partners more interested and willing to pay more for partnering in the drug's development. Similarly, if this years flu season is a bad one and Tamiflu resistance becomes a concern, 787 could become much more valuable asset by just waiting another couple of months before trying to close a deal with a potential partner.
Wells Fargo maintained an Outperform rating on Vertex (NASDAQ: VRTX). The stock declined early on Tuesday after the company announced workforce cuts. In the view of analyst Brian Abrahams, the news was not a major surprise and the decline appears to be an overreaction.
"We believe this morning's weakness in VRTX is inappropriate and represents a buying opportunity for a fundamentally solid long-term story with multiple upcoming potential catalysts," said Abrahams. "Overall we did not see any major surprises on the call; we believe the continuing Incivek decline and cuts to the commercial team were mostly expected and should help the company improve its future CF franchise leverage (though some may have hoped for a more extensive restructuring)."
"Though today's SVR data for '135 was difficult to interpret and does suggest the 200mg dose (which is closer to the less welltolerated 400mg dose) is more potent, we note that '135+RBV is not the goforward regimen and in GILD's ELECTRON study arm for sofosbuvir containing a more similar mix of IL28B genotypes as VRTX explored in its '135 Moldova study, the SVR rate for sofosbuvir+RBV was only 10% (albeit in nulls rather than naives). As such, we believe this ‘135 program remains viable, and still see a reasonable probability that expected Q1 2014 data in combo with daclatasvir will demonstrate competitive SVRs," he added
October 21, 2013
09:42 am ET ... S&P CAPITAL IQ KEEPS BUY OPINION ON SHARES OF VERTEX
PHARMACEUTICALS (VRTX 77.06****):We keep our $104 NPV-based target
price. VRTX reports positive Phase IIb data for pipeline candidate JAK3 inhibitor
VX-509 in rheumatoid arthritis.We see efficacy as promising, with statistically
significant response improvements over placebo. Despite a higher adverse event
rate over placebo, there were fewer discontinuations, and we think its safety is
consistent with peers.We expect VRTX to out-license VX-509 for late-stage study
and, despite an outlook for a competitive market, we view the rheumatoid arthritis
market as lucrative and likely to attract partnering interest. /S.Silver
Assuming Phase 3 clinical trials continue to show comparable efficacy compared to the competitors in this market, the preference to use this drug will be based on it's safety profile compared to the competition, and the formulary preference of group purchasers (often price driven all other things being equal), and the effectiveness of marketing by the pharmaceutical company to prescribers, health plan insurance purchasers and individual patients alike through company drug reps and the lay media respectively. One last thing that makes drugs like VX 509 likely to be successful commercially (once approved) is the fact that the diseases it is used to treat are chronic ones that have a high incidence of falling to respond to older treatments over time, creating the need to try newer treatments to replace older ones that are no longer working. This insures a steady and growing population of patients who benefit from the use of these newer agents over time. Dr Leiden knows this potential very well, having been the executive who brought Abbott the rights to develop injectable Humira to treat these diseases when he worked there as head of it's pharmaceutical division. Now he has the opportunity to develop a similarly effective drug at Vertex, (with the help of a larger partnering pharmaceutical company) and market it as an effective choice with perhaps a better safety profile, and of course the ease of once a day oral dosing as rojospan points out, Humira is one of Abbott's biggest commercial successes, and VX 509 could be a similar world wide commercial success for Vertex (even when shared with another pharmaceutical partner) in this evolving therapeutic market
As I recall, the intent of management was to announce the results of this trial, and then use the strength of these results to negotiate a better (more lucrative) licensing and development deal with a potential partner. That still may take some time..... maybe after the ARA meeting next week?
Listen to the investor conference tomorrow at the NACF meeting at 12:45 PM MST and decide for yourself. It's available on the Vertex website:
Events & Presentations
Vertex Pharmaceuticals Incorporated Investor Event at NACFC
Oct 18, 2013 at 12:45 PM MT
By mid 2014 data to treat 60% of CF population will be released with FDA approval likely very quickly, and sales ramping up in the second half of 2014. Great news for CF patients and Vertex investors.