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Vertex stock price shoots up on hepatitis C results
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By Val Brickates Kennedy, MarketWatch
Last Update: 5:53 PM ET Feb. 7, 2006
BOSTON (MarketWatch) -- Shares of Vertex Pharmaceuticals shot up Tuesday after it released highly favorable clinical results for its hepatitis C drug candidate, VX-950.
Before the market's open, the company said that preliminary Phase II results showed that none of the 12 patients in the trial who used VX-950 in combination with two other leading hepatitis C drugs showed any tangible sign of the virus in their bloodstream after 28 days.
Vertex had tested VX-950 with the drugs pegylated interferon alfa-2a and ribavirin, current standards in treating the life-threatening liver disease. The 28-day study was not designed to measure how long the immune response could be sustained, according to the company.
Vertex plans to unveil full results from the study at medical conference later this year.
According to Vertex Pharmaceuticals chief executive officer Joshua Boger, the results were surprisingly good.
"No one has seen these results before with any regimen over any period of time," said Boger. "They can't get any better."
Currently, hepatitis C sufferers must undergo a one-year regimen of the pegylated interferon and ribavirin in order to try to rid their bodies of the virus. The regimen, which can be physically debilitating, only has about a 50% success rate.
Boger said that the company will use the data to help design much larger, longer Phase II clinical trials. As Vertex has been awarded fast-track status for the drug, the company will submit the information to the Food and Drug Administration by the end of the first quarter for its feedback on how the trials should be designed.
In particular, said Boger, the company wants to test to see if VX-950, in combination with pegylated interferon, can keep the body virus-free for at least three months. Vertex might also run longer-term tests of the drugs in combination with ribavirin.
Because hepatitis C has few treatment options, analysts have estimated the worldwide market for drugs such as VX-950 could be as high as $8 billion. If the clinical trials go smoothly, Vertex has said it could be ready to file for FDA approval in 2008.
The Cambridge, Mass.-based biotech firm will release its fourth-quarter earnings after the market's close Tuesday. It's expected to post a loss of 23 cents a share, compared with a loss of 38 cents a share last year, according to a survey by Thomson First Call.
Hoping a Small Sample May Signal a Cure
Vertex Hep C Protease Inhibitor
NY Times
February 7, 2006
Market Place
By ANDREW POLLACK
Joshua Boger might have finally found his billion-dollar molecule.
Mr. Boger, the brash founder and chief executive of Vertex Pharmaceuticals, was profiled, along with his company, in a 1994 book "The Billion-Dollar Molecule: One Company's Quest for the Perfect Drug." But the drug discussed in the book never made it to market, and after more than 16 years in business and losses totaling about $1 billion, Vertex has still not hit it big.
Now, though, the company's hopes, and its stock price, are soaring because of a drug to treat hepatitis C, a liver-destroying virus that infects about three million Americans, kills 10,000 of them a year and is the leading reason for liver transplants in this country.
Vertex is expected to announce today that when its drug, VX-950, was added to current common therapy, the virus became undetectable in the blood of all 12 patients tested after four weeks. The results could buttress the company's case that the drug will reduce treatment time for the toughest strain of the virus to three months, compared with about a year under current treatments.
"We haven't seen data like this before, where everybody's negative so early on in treatment," said Dr. John G. McHutchison, a professor at Duke and a coordinator of VX-950 trials. Dr. McHutchison, a consultant to Vertex and many other companies, said that the existing therapy reduced the virus to an undetectable level in only about 30 percent of patients after a four-week period.
The new results could further invigorate Vertex's stock price, which has tripled since May, when the company released its first VX-950 data, based on two weeks of testing. Vertex shares closed yesterday at $34.30, down 24 cents.
For all the drug's promise, though, some analysts emphasize that the results are from a very small sample of patients in early-stage clinical trials, and that the stock may be getting ahead of itself. Some are also wary of Mr. Boger's reputation as a zealous cheerleader. The company has had to abandon what it hoped were promising drugs in the past.
At a J. P. Morgan health care conference in San Francisco last month, Mr. Boger began his talk on VX-950 by showing a picture of the Apple iPod. "Every so often," he said, "there's a game-changing product - one that transforms a product category, one that transforms a company and one that transforms an industry."
Later, he compared Vertex to Thomas A. Edison's laboratory and concluded, "This astounding data can actually be a bit terrifying."
VX-950 is at the forefront of a new approach in attacking the hepatitis C virus by using techniques that have had great success against H.I.V., the virus that causes AIDS. Many doctors who treat hepatitis C are as excited as Wall Street has been by VX-950 and other drugs like it under development.
If the drugs work, said Dr. Eugene Schiff, chief of hepatology at the University of Miami and a consultant to many companies, "more people will achieve a sustained viral response over a shorter period of time with fewer side effects." Such a response, in which the virus remains undetectable six months after treatment ends, is considered by scientists to be evidence of a cure.
But so far, VX-950 has not achieved any sustained viral responses. "I haven't cured a patient yet," Mr. Boger said in an interview.
The company has released data on fewer than 60 patients, each treated for two or four weeks. Side effects that could derail the drug may pop up as it is tested for longer durations in more people. And other companies, including the much larger Schering-Plough, are developing similar drugs.
In November, David Witzke, an analyst at Banc of America Securities, lowered Vertex's stock rating to sell, saying that the company had been overly aggressive in predicting that it would be able to apply for federal approval of VX-950 in 2008.
He also noted that Vertex was being valued in the same range as ImClone Systems and Amylin Pharmaceuticals, companies with substantial revenue from drugs already on the market. Vertex's market capitalization is now around $3.4 billion.
Hepatitis C can cause cirrhosis and liver cancer, though these might not occur until decades after infection. The virus is transmitted by contaminated needles, blood transfusions and less often, sexually.
With donated blood now being screened for the hepatitis C virus, virtually eliminating that source of infection, only about 25,000 new infections a year occur in the United States. But because of the large number of baby boomers infected years ago, specialists estimate that the number of deaths from hepatitis C will triple in coming years, to 30,000 annually. The problem is greater outside the United States, with an estimated 170 million infected globally.
The current treatment is alpha interferon - either Roche's Pegasys or Schering-Plough's Peg-Intron - combined with ribavirin, which was developed by Valeant Pharmaceuticals but is now generic.
Patients must inject themselves with interferon once a week for 24 weeks or for 48 weeks, depending on the strain of virus. The treatment can cost $30,000 and have severe side effects, including flu-like symptoms and depression. Only about half those treated are cured.
Sales of hepatitis C treatments in the United States are now about $1 billion, Mr. Boger said. But if the treatment could be made quicker and more tolerable, as with VX-950, he said that such sales could grow to a range of $3 billion to $5 billion.
Vertex's drug and similar ones come in pill form. And while interferon and ribavirin are thought to work mainly by spurring the body's immune system to attack the virus, the newer drugs attack the virus directly by inhibiting enzymes it needs to replicate.
VX-950 inhibits the hepatitis C protease enzyme. Some other companies, led by Idenix Pharmaceuticals, are focused on another enzyme, polymerase. Most H.I.V. drugs similarly inhibit one of two enzymes - protease or reverse transcriptase.
Despite the strong early results for VX-950, there is already some evidence that the virus can rebound, evolving to become resistant to the drug.
Mr. Boger said that using VX-950 with interferon would slow viral replication so much that resistance was not likely to develop. Patients would still have to endure interferon injections, though experts say that eventually combinations of newer drugs would suffice.
Another question is whether Vertex will be first. Schering-Plough, which also has a protease inhibitor, started Phase 2 trials last fall, a few months ahead of Vertex. But its drug did not produce as sharp a drop in viral levels in its two-week trial as Vertex's did.
"The Vertex protease looks to be the strongest," said Dr. Robert G. Gish, medical director of the liver-transplant program at California Pacific Medical Center in San Francisco.
Moreover, Schering-Plough is testing its drug for 6 or 12 months, like the standard therapies. Vertex is gambling that it can leap ahead with tests lasting only three months.
Dr. Douglas Dieterich, a liver-disease specialist at Mount Sinai School of Medicine in Manhattan, termed that "very optimistic." He said he thought it would take longer to train the immune system to control the virus.
Analysts infer that Boehringer Ingelheim and Bristol-Myers Squibb have also begun early clinical trials of hepatitis C protease inhibitors. InterMune has two compounds in the laboratory.
Asked who was ahead, Dr. Schiff at the University of Miami replied that "there are a lot of people on the same playing field."
Andrew McDonald, an analyst at ThinkEquity Partners, said Vertex was worth no more than $30 a share based on VX-950 alone. But he recently upgraded the stock to buy with a $40 price target, based on another potential blockbuster drug he said had been overlooked by Wall Street.
That drug, VX-702, is aimed at treating rheumatoid arthritis by inhibiting an enzyme known as P-38. This is a hot area for drug companies, but many P-38 inhibitors caused unacceptable side effects.
VX-702 is chemically different, Mr. McDonald said. "It looks like Vertex has the lead with a compound that may escape the shortcomings of many of the dozen or so that have failed before it," he said. Results from a midstage trial of VX-702 are expected in the second quarter.
If either drug pans out, some analysts predict that Vertex will be acquired by a larger company.
Success would also mean vindication for Mr. Boger, who has a doctorate in chemistry from Harvard. He was a rising star at Merck until leaving in 1989 to start Vertex, whose founding premise was to design drugs suited to a target in the body, rather than screen thousands of compounds at random, a standard industry practice.
"The Billion-Dollar Molecule," by a journalist, Barry Werth, portrayed the egos and ambitions involved in the quest for scientific glory and financial gain. At one point in the book, Mr. Boger, settling for a tie in a race with a rival, is quoted nonetheless as saying, "I want to rub his nose in the dirt and step on his head."
Vertex has developed two AIDS drugs, Agenerase and a variant, Lexiva, that are sold by GlaxoSmithKline. They have been only modest sellers, and the royalties Vertex receives - $23.1 million in the first nine months of 2005 - have been far too small to make the company profitable.
But Vertex, unlike many other biotechnology companies, has never put all its effort behind one drug. It is developing treatments for cancer, cystic fibrosis and pain in addition to hepatitis and arthritis. It has partnerships with many big pharmaceutical companies.
"Right now they've got two potential blockbusters," said Jay Markowitz, an analyst at T. Rowe Price, one of the largest shareholders in Vertex. "Boger is a very smart scientist. He's hopefully got the company to a significant inflection point right now."
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