Hard to be optimistic about the fact that the results promised by the end of 2012 haven't been announced. I assume no news = bad news. Can anyone think of a realistic scenario (preferably with a comparable example at another biotech) which could see this delay followed by good news?
"True but the company was started many many years ago. Those who invested in vrtx at its inception, like yours truely, are holding the bag due to management's incompetency/mistakes/miscalculations. Investments elsewhere would have been much more productive."
Look at a chart of the VRTX stock price since its inception and compare it to the Nasdaq. Nasdaq is up 513% while VRTX is up 1369%. Most people sitting on those kind of gains don't feel they are "holding the bag", unless you're just referring to your bag of cash...
Amgen and Pfizer just published really good results in heterozygous familial hypercholesterolemia yesterday and it doesn't come up in the CC at all?
They're a few years off, but it still looks like pretty strong competition coming down the road. Is there some reason we shouldn't be worried about those?
From what Ian Smith said at the UBS conference, this is an "N of 1" study, as described in the CF slide presentation that's been posted here a couple of times. I think the idea is that each patient serves as their own control. They take pills for some period of time, say a year. And the pills alternate between placebo and kalydeco, maybe 3 months at a time. (I'm guessing at the details) If patients have improved measurements while on Kalydeco relative to placebo periods, you have proof of efficacy on that mutation. Then maybe Vertex gets labeling approval for that mutation. I don't know if literally one patient would be enough to get approval, but I think this is the general idea for getting approval for rare mutations.
It's been posted here before, but I thought it might be worth a re-post given the new CF results.
Thanks to whoever posted it originally. I found it very interesting.
Swhite is right on this one. There's no cure in this market. These patients will be paying (for the sake of argument) $200k/year for the rest of their lives. $4 billion a year is pretty conservative-- remember, Kalydeco has had incredibly fast uptake at almost $300k/year.
And this is a small molecule in a small market, so cost of goods and marketing costs will be very low. Profits on the CF franchise will probably approach 90%, let's say $3.5 billion/year. Put a 10X multiple on that and you're at $167/share.
You might get out of your short intact. That was a pretty big gap up today, and Europe could always take the market down, but you're unlikely to make a profit that's worth your time. And I do think there's a significant risk of your short going very wrong. There's potentially transformational HepC news coming in the next month or so.
This is even more interesting.
This person is getting good results with a class of mutation (1 or 6) that I certainly wouldn't have expected VX-770 to work for. This is where I got the info on mutation type:
It's true. CF is a genetic disease that "evolved" in Europe and occurs basically exclusively in people of European descent. Its markets will be US, EU, Canada, Australia/NZ-- that's about it. It's a big opportunity, but nothing remotely close to 19X US.
Also not reflected in the press release but in the conference call: 7% price increase for Incivek as of April 1. Between the $22 million destocking and the 7% price increase, Incivek run rate should be $405 million per quarter going forward. (they state that Incivek prescriptions have been very steady lately, so revenue drop-off appears to be done.)
Also, they expect Incivo European revenues to rise rapidly, going pretty much straight to the bottom line.
So in Q4, after European Kalydeco approval, revenue should be around $405 million (Incivek) + $60 million(or more?,Incivo) + $90 million (Kalydeco) = $555 million. Above estimates and should push earnings pretty close to $1/share for the quarter. Solid results with high confidence of getting there.
If Alios nucs work out, and/or Kalydeco/809, and/or Kalydeco/661 and/or VX-787 for flu all provide upside from there.
Again, I only have educated guesses.
"Would the FDA really approve a drug in that situation where the Phase 3 study is really stacked, i.e., you pick only those you know will benefit and then they benefit. . . how do you lable b/c you only know who benefits after?"
I don't think they'd do it for 770 alone, since they want to get a corrector for better results. And for 770/corrector combinations, they will probably look for a statistically significant result in the total population even if there are some patients who don't benefit. So this probably won't happen, even if it could happen. (I know of no precedent.) Why might the fda approve a drug based on a trial that looks like it was "gamed"? Partially because it's a very serious condition with poor treatment options. But also because it would still be a double-blind trial. Patients chosen based on a short-term sweat chloride result would be followed long term for meaningful (FEV) results. If the long term meaningful results are there for patients on treatment but not for placebo patients, that looks like definitive proof of efficacy, I think. What would the label look like? That's harder to say, but I think they'd figure something out if the results are good enough.
"Could Vertex really do a study where they give free of charge to all double deltas to see who benefits? (They wouldn't need 6 months--only one month!) But that would seem illegal under FDA rules." Your instincts are right here. This is not an option. There would have to be a proper trial.
And as far as off-label goes, it's entirely up to the physician's best judgment. The evidence is very limited and some will be more conservative than others. Also different patients will have different risk/benefit scenarios.
The leading “venture philanthropist” is the Cystic Fibrosis Foundation. It has supported early research and clinical trials, small biotech firms and the biggest of Big Pharma companies, Pfizer. The foundation spent $75m on early research for Kalydeco, which in January became the first approved drug to target the mutated gene that causes cystic fibrosis. Kalydeco is owned by Vertex, a firm based in Massachusetts, but the foundation will get royalties from the drug’s sales, which will then support further research.
I've seen the references to that Chest paper but don't have access myself. Are there any interesting quotes worth sharing?
As for your questions, here's my impression of how things could work. With the subpopulations, Vertex will have to show efficacy in a prospective clinical trial to get approval. To do that they're going to need to identify the subpopulation at the beginning of the trial. Normally it would be defined ahead of time (by CFTR expression, sweat chloride levels, whatever). But possibly they could take all comers and dose them for 8 weeks. Patients who don't respond (on whatever measure they decide) get dropped. Those who did respond are then divided into drug/placebo groups and the trial goes forward.
As to how doctors handle off-label usage, probably they just use their judgement based on: 1) how likely is it that the drug will work for this patient?, 2) how much would it help if it did work? and 3) what are the risks of harmful side effects from taking the drug off-label?
If the answer to '3' is "minimal" and the answer to '2' is "a whole lot", then '1' probably becomes irrelevant and most doctors will try it on most patients. If '2' and '3' are less obviously favorable, then the risk/benefit calculation gets more complicated. Given the gravity of CF, and the safety profile of Kalydeco (so far), I would think most doctors will be willing to try if the patient understands the situation and wants to try. I had always assumed insurers were going to be the major barrier, but it seems they're mostly going along too.
I disagree on the HCV results. Good results, which are already in the bag (rather than great) mean they have to compete on price and they end up with $300 million of HCV revenue in a few years instead of $1.5 B. Kalydeco revenues are ~$1.2 billion by then. COGS and clinical trial expenses drop a lot, getting expenses to ~$750 million, leaving $750 million of annual profit for a currently $7.5 billion company. Looks like a good deal to me, considering it's a worst case scenario. And if things don't go worst-case, the potential for gains is very large indeed.
If you're frustrated with the stock price performance so far, I sympathize. But remember, past performance is no guarantee of future results.
I will bet you any sum you want that Kalydeco market penetration is >100% at the end of this year (i.e., more than 1000 patients are treating with it in the US). Without treatment, most infants die of CF within a year. The only reason there are 5-, 10- or 40-year old CF patients is because they are aggressively managing their disease. Inhaled drugs and shake-vests to help clear their lungs, frequent antibiotics and hospitalizations for lung infections, extreme diets to keep their weight up, etc. These patients are *highly motivated*. Now they have the first treatment *ever* that will actually address the cause of their disease, prevent its progression, rather than just treat the symptoms, and you think only half of them are going to start taking it? That's crazy talk.
I'll admit that Vertex's burn rate is scary, but going forward, one of two things will happen. Either one or more of their phase 2 trials (RA, CF, HCV, epilipsy, flu) gets proof of concept, putting another blockbuster drug into phase III. Or they all fail (unlikely but possible) and Vertex can cut their burn rate a lot, increasing profits.
For comparison, Credit Suisse has a $42 price target for Vertex. That's based on total revenues of $1.83 B in 2012 and $1.73 B in 2013. They estimate Kalydeco revenues of $92 million in 2012 and $400 million in 2013. Unbelievably, they estimate 50% market penetration for Kalydeco in the US and 37.5% penetration in Europe for 2013. I think those numbers are going to have to be adjusted up a lot. And I would guess that most other analyst have significant upward adjustments to make too.
I just going to take some guesses and do some very rough calculations to try to get an idea of what Kalydeco revenues might be this year and next. (I expect Verity will have some knowledgeable adjustments for my guesses.)
If I remember right, Vertex estimated 1000 US patients treatable according to the FDA approved label. Given the extraordinary medical treatment (and physician contact) required to survive with CF, I estimate all patients will be treating, with an average start date 2 months after approval. This happens to coincide with the start of Q1. Assuming Vertex gets $270,000 per patient-year after discounts, these patients generate $202 million this year. (1000 * 270,000 * 3/4)
Then I think Vertex estimated another ~1000 patients with other gating defects (plus R117H?) should be treatable by Kalydeco. I assume these are strong contenders for off-label treatment, with 200 (conservative guess) using Kalydeco 200 treating this year. Then I'm guessing there are another 100 G551D patients under age 6, of which 1/2 treat off-label. If these 250 patients start treatment on average half-way through the year, that's another (250 * 270,000 * 0.5) $34 million this year.
Finally, let's assume European approval in August for G551D and the other mutations. I'll guess that the European treatable population is the same size as the US, so 2000 patients, but that Vertex only gets $190,000 per patient-year. I'll assume slower uptake as well, with 1500 patients getting on treatment for an average of just November & December. That gives another (1500 * 190,000 * 2/12) $47 million in revenues this year.
That gives Vertex a total of $283 million of Kalydeco revenues this year. (As an aside, I'll also guess $1 billion of European Incivek sales, with 15% royalty to Vertex for $150 million. That's $433 million of revenue this year that no one is counting yet.)
For 2013, I'll assume the same number of US patients for the full year, plus 2000 European patients all year. That's (1250 * 270,000) $337 million in the US plus (2000 * 190,000) $380 million in Europe for $717 million total Kalydeco revenues. Not too shabby.
I agree. If they manage to raise that $75 million in the near future, it's likely to be at around $4.50 a share, possibly lower. The day that's announced, the share price will drop down closer to that level. That'll be the time to get in. (That's what I plan to do.)
Anyone know what's the latest with the Watson/Ampha litigation? Or if nothing has happened, when things are scheduled to happen? I just have no idea where to look for such information.
Thanks in advance.