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CHMP Positive on Vertex's Kalydeco

Zacks Equity Research

Vertex Pharmaceuticals Inc. (VRTX) recently announced that the European Committee for Medicinal Products for Human Use (CHMP) has given a positive opinion on the approval of Kalydeco.

Kalydeco is the first medicine that targets the underlying cause of cystic fibrosis (CF), which is a rare genetic disease, caused by defective or missing cystic fibrosis transmembrane conductance regulator (:CFTR) proteins. Approximately 1,100 people have this mutation in Europe.

The favorable opinion from the CHMP was based on two global phase III studies. These studies revealed that Kalydeco improves breathing and other symptoms of CF patients aged 6 years and above. Patients on Kalydeco showed improvements in lung function, weight gain and certain quality of life measurements in comparison to those on placebo.

The European Commission will review the CHMP’s positive opinion. While the European Commission generally follows the recommendations of the CHMP, it is not required to do so. Kalydeco is likely to be approved within the next three to four months.

The safety and effectiveness of Kalydeco is still a question in children under 6 years of age. The medicine can cause serious side effects like high liver enzymes in the blood..

Cystic fibrosis is a rare, life threatening genetic decease which can lead to buildup of abnormally thick, sticky mucus that can cause chronic lung infections and progressive lung damage. According to the company, cystic fibrosis is estimated to affect around 35,000 people in Europe and 70,000 people worldwide.

Vertex has a collaboration agreement with Cystic Fibrosis Foundation Therapeutics, Inc. for Kalydeco. According to the agreement, Cystic Fibrosis is entitled to receive royalties on net sales of Kalydeco.

Vertex recorded sales of $18.4 million for Kalydeco in the first quarter of 2012. On February 2, 2012 Vertex received the US Food and Drug Administration’s approval for Kalydeco for treating patients suffering from CF with at least one copy of the G551D mutation in the CFTR gene.

Our Take

We note that Kalydeco had a strong first quarter, and with the probable EU launch, the drug can be a major growth driver in future. We expect investor focus to remain on Kalydeco’s EU approval and its performance in the US.

We currently have a Neutral recommendation on Vertex in the long run. Vertex carries a Zacks #3 Rank (Hold rating) in the short run.

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