I should work for VX-661 as well. I'll see how much Van Goor knows about it, or how much he wants to reveal. I have Van Goor's email address.
I'll send the link to the journal paper to van Goor and Altshuler. It is likely that van Goor was one of the reviewers for the paper.
A week ago, Science Signaling, a sister publication of Science, reported a striking finding. It is stated that activation of a molecule could improve the performance of VX-809 (Lumacaftor) by threefold. The authors obtained VX-809 presumably from Vertex, and Vertex should be aware of their work and findings. This research group in Portugal has published the basic findings underlying the new results in earlier papers.
Their new finding will be summarized below.
In human cells there is a checkpoint pathway that removes improperly folded proteins from the plasma membrane through a mechanism called CHIP. Because this checkpoint degrades misfolded CFTR, it could also degrade some of VX-809-rescued F508del-CFTR, and limits its efficacy. They found that activation of the cytoskeletal regulator Rac1 resulted in bypassing the checkpoint. So that the exposure of airway cells to Rac1 activator together with VX-809 nearly tripled the efficacy of VX-809. They also found that by blocking an intermediate step VX-809 and Rac1 activation could not reproduce the gain seen without the blocker.
If this VX-809 performance can be replicated in human body, who needs second-generation correctors because 508del heterozygotes can achieve a 4% FEV1 improvement.
Verity, I only meant using one's own 508 CFTR as a template to replace the other CFTR on the other allele. They could do this kind in animals, but not for CFTR. They could also deliver normal pieces by attaching them to modified lentivirus. The compound has to be inhaled, I suppose.
Verity, thank you for pointing out that it may take more than 1 year for EU countries to reimburse for Orkambi use, and also that I did not include the likely participation by younger 508 homozygotes in the US. These two mistakes for the year 2016 roughly cancel each other, and in two years we may see substantial share price rise. Today's report that the New England Journal of Medicine published the results from Traffic and Transport studies is very encouraging.
I hope that Vertex has started some attempt to use CRISPR technology to put the missing phenylalanine base in the CFTR gene. It should be easier to convert heterozygous 508del into a homozygous 508del because existing DNA in the other allele can be used as template. Ultimately, exogenous CFTR DNA had to be delivered into the lung lining cells and other cells.
Other trial results which could raise PE would be Phase I dose optimization study for VX-970 and VX-803. These molecules are inhibitors of ATR and possibly ATM as well. ATR and ATM are cell cycle checkpoint initiators. Tumor cells damaged by radiation, cisplatin, gemcitabine, or etoposide can be rescued by DNA repair, which cannot happen if the cell cycle is allowed to proceed. If DNA damaged cells enter the mitosis phase, irreparable chromosomal break would occur. VX-970 and VX-803 inhibit the checkpoint initiator so that damaged tumor cells are not stopped before the entry into mitosis phase where the tumor cells would be mortally wounded.
VX-661 will achieve an absolute FEV1 change of 3 - 4%, and we have to give a minimum PE of at least 30. So you may expect 5.76 x 30 =$ 173/share by then. If the second generation correctors in the [oven] are really good in treating 508del heterozygotes, a PE of 75 is possible.
The net the company will be reimbursed for Orkambi pill would be assumed conservatively to be 200 K per year. The list price will be much higher, and cannot be much lower than the price of Kalydeco. If the price of Orkambi were much lower than that of Kalydeco, the 70% Kalydeco taking patients who have 508del mutation would switch to Orkambi because Orkambi can improve the FEV1 change by another 4% for people with 508del in one allele and Kalydeco responsive mutation in the other allele.
There are about 20,500 homozygous 508del persons (12 years old or older) in US and major EU markets. For this year, we can count on 8500 persons in the US. In the Lum+Iva rollover study, greater than 90% of Phase III participants joined the trial. Uptake of this combo will be slower than the speed of adoption by 551 CFers, and let us assume that an average of 75 % of 8500 homozygotes take the combo within 6 months of launch (by the end of the year). You get a revenue of 8500 x 0.75 x 200 K x 0.5 year = 638 Mln. Vertex projects to receive 570 Mln from Kalydeco responsive CFers. The annual company expenditure will not exceed 1.1 Bln (source: Vertex), and the tax for orphan drug sales is zero. Then, by the end of 2015 the net will be 108 Mln (= 638 Mln + 570 Mln - 1100 Mln). This corresponds to $ 0.39 per share.
For 2016, 200 Kalydeco taking CFer will be freed from the VX-661 Phase III trial to raise the sales to 600 Mln, the US sales from Orkambi will be 1.4 Bln, and the EU sales will be 800 Mln. Adding all three, we get 2.8 Bln. If R&D and SG&A amount to 1.2 Bln then, we have 1.6 Bln. Subtracting 10 % royalty payment to CF Foundation, we get 1.44 Bln. Dividing this figure with the number of shares which will be about 250 Mln, the earnings per share will be 1440 Mln/250 Mln = $ 5.76 per share.
My rather conservative calculation shows that Vertex will have positive earnings for the whole year of 2015, and can earn at least $ 5.5 per shr next year from the sales of Kalydeco and Orkambi. VX-661 and second correctors will be successful, and we have to give a P/E of 30 at least. Even if the earnings for the next year is only $5.5, the share price should be 165 at the end of 2016.
RBC notes says:
Orkambi helps VRTX get to $5B peak CF sales and visibility on $10 in
earnings power over next few years - using peer multiples of 15-20x gets the
stock to $150-200 with that math. Plus - there's pipeline that could further
expand on that with '661 (2-drug combo) or dual correctors (triplet combo)
for 30% more pts called heterozygous; Outperform
ARWR and TKMR design their drugs based on the principle of RNA interference as ALNY does. RGLS develops antisense drugs against maligned micro-RNAs (miRNA). RNA interference acts on messenger RNA (mRNA) to stop protein production from the mRNA. AntimiR acts on non-coding miRNAs to restore order in the mRNA activity. RG-101 acts on miRNA 122 to destroy them transiently, which protects HCV RNA. Although ALNY founded RGLS and allowed the use of its delivery technology in RG-101, the mechanisms of the two company drug actions are quite different.
The only competition in microRNA control space used to be Santaris, but it was bought by Roche.
The chance that treatments developed by Regulus are also bought by, or partnered with, other biotech or pharma is pretty good. It already partners with AstraZeneca for treatment of NASH in type II diabetes, and with Sanofi for Alport syndrome. In hepatitis C treatment space Regulus has RG-101 which uses superior delivery and nucleic acid chemistry technologies compared with Santaris' Miravirsen. I think that the combination of RG-101 with the direct-acting-antivirals marketed by Gilead, J&J, Abbvie, and Merck would cut treatment time to 4 weeks from 8-24 week practiced now. Just a single shot of RG-101 cuts the viral load by more than 4 log. This means that 99.99% of hep C virus is gone with a single shot. In hep C therapy the faster you can reduce the viral count the better your chance of getting rid of the virus for good. In technical terms, a higher RVR produces a higher SVR. Besides, even Gilead's Harvoni cannot treat well patients with genotype 3 virus, patients with other liver disease, and ones with HIV co-infected. Phase II trials are to start in Q2 this year, and trial duration is short because they are 4 wk dosing + 12 wk evaluation time. It takes only 4 months. We may see the registration trial next year.
Alethia Young, a Deutsche Bank analyst, has a price target of 30, but she said if RG-012, drug for Alport syndrome, is also successful, the price target for Regulus is 99 dollars. If RG-125 is also successful, then the sky is the limit.
[[Martin, who was recently named CEO of the year for 2014 by investment research firm Morningstar, added that he’d look to buy treatments for diseases in which the company already specializes. Gilead’s hepatitis C drugs Sovaldi and Harvoni, along with its portfolio of HIV therapies, make up the vast majority of its revenues.]]
With its cash flow of 29 Billions a year, it can buy more than one biotechs. By spending a few Bln it can buy the 3rd generation HCV drug. RG-101 can be combined with Harvoni to cure Hep C in just 2-4 weeks of dosing. I believe that a 4 wk dosing + a second shot is an overkill.
Gilead's newest triple (Sovaldi + Ledi + PI) given for 4 wks achieved 27% for the 12 wk SVR for GT1 where RG-101 achieved 32% SVR only with a single shot. When multiple doses are given and each dose knock out 4 log, it does not take many doses to cut down to the level where immune response alone can mop out the remaining HCV. Gilead's drug (Sovaldi) cannot cure GT 3 without Ribavirin and pegIFN, and even with the latter it takes 16-24 weeks of dosing. GT 3 is one of the most prevalent HCV GT worldwide. RG-101 is a pan-GT and prior-treatment-independent drug. Gilead has to acquire RG-101 if it is going to survive as a company.
Kleanthis indicated in the video presentation that the upcoming trial will have three combo arms sandwiched between two injections of RG-101: (1) 4 week dosing with NS5A inhibitors (he may be thinking of BMY's or Gilead's), (2) 4 week protease inhibitor (has to be Olysio for which DI has been tested), and (3) 4 week combination with NS5B and NS5A inhibitors (Harvoni of Gilead is the only candidate). To sum up, he is not committing to any single company to partner with. This may be wise. However, I think that the SVR outcome would be very similar no matter which DAA is used.
About 500 patients with homozygous F508del mutation (two copies) are being enrolled in a six month Ph 3 study. Response to VX-661+Iva will not be the same across the treatment group. In real world some will respond far better with this combo than with Luma+Iva combo. The Phase II trials were relatively small to detect who respond better than others. Variables are degree of disease progression, age, weight and other drugs taken.
True value of VX-661 will be enhanced when it is combined with a 2nd generation corrector along with Iva to treat homozygous F508del CFers. There will be a quantum jump if the in vitro study is a good guide as it has been. Vertex will nominate a 2nd gen corrector this year and will test its potential to increase FEV1 (the change could be as much as 10% almost like Kalydeco on 551 mutation). For this triple combo VX-661 is essential.
Another 500 CFers with F508del in one allele and Kalydeco-responsive mutation in the other allele will be treated with VX-661+Iva duo for 8 weeks. Because this portion of trial is short the results may be available for presentation in this year's NACFC meeting in early October. Nearly ¾ of CFers with G551D, other gating mutations and with residual function mutations will enjoy the benefit beyond the benefit Kalydeco alone can provide because the other allele has 508 mutation which can be repaired by VX-661. The commercial value of the duo combo will greatly exceed that of Iva given alone, and could reach the 1.5 – 2.0 Bln range. There are 7000 CFers in this group in major markets.
It is easy for a blog writer to underestimate the clinical power of Lumacafter+Ivacator combination if he does not appreciate the seriousness of Pulmonary Exacerbations CF patients have to suffer every year. The combo (400mg Luma) reduced the rate of PE by 39%. This means that less frequent hospital visits for IV antibiotic infusion and a lower loss of lung function. The FDA will approve the combo marketing for the homozygous 508 suffers in a few months.
If you invest 100K in VRTX shares at 116 now, you will have a good chance to sell shares at above 150 when the FDA panel recommends approval in 1.3 months, and a good chance to make a 50% gain on your investment when the FDA approves Lumacaftor marketing and Vertex announces 300K pricing. Do not sell here. If you sell you are throwing away 50,000 dollars (on 100K investment). I do not know any other big-cap biotech which can appreciate so much in a few months.
Thank you, Q. Today, Celgene and Gilead are leading big cap biotechs to go lower. Celgene has a patent issue with Revlimid in the EU.
I agree with Robyn Karnauskas. VX-661 will succeed. A PE of 35 is modest when compared with Alexion, which earned only 3+ dollars in the past year. The Alexion's PE is 57 right now and its market cap is greater than the Vertex' by more than 20% where it will face a great competition from Alnylam in a few years.
In my earlier estimates (Bullish Case) I made an algebraic error and the target price came out to be ridiculously high. I corrected that below, and used very conservative values for revenues from Lumacaftor and Ivacaftor. The combo will be approved to treat homozygous F508del mutation by the FDA within a month or two, and also by the EU counterpart soon after. The net the company gets for the Lum/Iva combo pill twice daily over a year per person would be assumed conservatively to be around 180 K.
There are about 20,500 homozygous 508 mutation holders (12 years old or older) in US and major EU markets. In the Lum+Iva rollover study, greater than 90% of Phase III participants joined the trial. Uptake of this combo will be slower than the speed of adoption by 551 CFers, and let us assume that 75% of 20,500 homozygotes take the combo within 2 years of launch. You get a revenue of 20.5 K x 0.75 x 180 K = 2767.5 Mln. This figure is at the low end of revenue analysts have been predicting for the combo. Add to that the sales for the Ivacaftor mono.-responsive mutation holders 3.7 K x 180 K x 0.9 = 600 M,
assuming that Ivacaftor is taken by 90% of them and the revenue from each person is again 180 K. The annual company expenditure will not exceed 1.5 Bln, and the tax for orphan drug sales is zero. By the end of 2017 latest the gross from CF drug sales would be (2767 Mln + 600 Mln - 1500 Mln) = 1867 Bln.
Dividing this figure with the number of shares in 2017 which will be about 260 Mln, the earnings per share will be 1867Mln/260 Mln = $ 7.18 per share. After paying the 10% royalty to CF Foundation, we get a net of $ 6.46 per share. If VX-661 and second generation correctors are successful, we have to give a PE of at least 35 because heterozygous 508 CFers will be treated. So you may expect 6.46 x 35 =$ 226 /share by then.