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Vertex Pharmaceuticals Crumbles on Analyst Worries

Zacks Equity Research

Bernstein analyst Geoff Porges has concluded that two pivotal phase III studies (TRAFFIC and TRANSPORT) on Vertex Pharmaceuticals Incorporated’s (VRTX) combination cystic fibrosis (CF) therapy are more likely to fail, according to a report by The Street. The analyst’s opinion is based on his discussion with doctors and cystic fibrosis experts at the European Cystic Fibrosis Society conference in Sweden. Vertex Pharma shares were down 8.67% on the news.

We note that the release of data from TRAFFIC and TRANSPORT, expected shortly , is a highly awaited event for the company. The studies are evaluating fixed-dose combinations of VX-809 and Kalydeco in patients suffering from CF who have two copies (homozygous) of the F508del mutation in the CFTR gene. Based on the results, Vertex plans to submit marketing applications in the U.S. and EU in the second half of the year.

Why is this Data so Important for Vertex Pharma?

Vertex Pharma is currently focused on its CF franchise. The CF franchise, consisting of approved product Kalydeco and other pipeline candidates, is expected to drive long-term growth. The company has decided to no longer invest in the hepatitis C virus (:HCV) pipeline. The termination of development activities related to the HCV pipeline is a strategic move by Vertex Pharma to cut its losses considering the fact that HCV treatment has advanced significantly with the introduction of new oral treatments.

As a result, Vertex is highly dependent on Kalydeco for growth. In an attempt to diversify and expand its patient population, Vertex Pharma has been developing fixed-dose combinations of Kalydeco and VX-809, which is the most advanced candidate at the company. We believe any negative update on this front will hurt the stock badly.

Vertex Pharma carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the biotech sector include Gilead Sciences Inc. (GILD), Regeneron Pharmaceuticals, Inc. (REGN) and Alexion Pharmaceuticals, Inc. (ALXN). While Gilead and Regeneron are Zacks Rank #1 (Strong Buy) stocks, Alexion holds a Zacks Rank #2 (Buy).

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