Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX): Here’s What Just Happened

Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) is one of the week’s runners so far, with the company trading up above $105 a share, a close to 20% run on the $90 a piece the company went for at yesterday’s open. The gains have come on the back of the company putting out data from a late stage trial of a cystic fibrosis drug.

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Here’s our take on the drug and its development program, with a look at what’s likely to happen next for Vertex and its shareholders.

So, the drug in question is called tezacaftor, and the program we are focusing on was looking at the way that this drug interacts with an already approved drug, a drug called Kalydeco, which is also a Vertex asset and a CF therapy.

By way of a bit of background, Vertex’s Kalydeco treats a subsection of CF patients that have certain mutations in the CFTR gene, and this group accounts for around 5% of the total population. In an attempt to expand this potential population, the company combined the drug with another drug called lumacaftor, and called it Orkambi. The combination treatment picked up an FDA approval and was subject to some very optimistic sales expectations based on the expansion potential and its price point. Fast forward a bit, however, and Orkambi failed to live up to these expectations. It’s still a blockbuster – the company reported that Orkambi generated $979 million sales during 2016, and expects this to rise to between $1.1 billion and $1.3 billion during 2017 – but it’s short on what was initially forecast.

The reason it’s short on the forecasts is rooted in tolerability.

The drug causes a host of side effects, one of which is serous chest tightening and the pain that comes with this tightening, and this has proven too much for some patients to shoulder.

And this is where the tezacaftor asset comes in to play. Vertex set up a study to see if a combination of Kalydeco and tezacaftor could bring around the same benefits in the expanded patient population of CF patients, without causing the side effects, and specifically, without inducing prohibitory chest pain.

The data that just hit press seems to show that it can, but that’s not all – it also seems to suggest that the new combination, which the company is called teza/iva at the moment, might actually work better in terms of efficacy on these patients as well as mitigating some of the safety and tolerability concerns.

Across a 24 week period during which patients were treated with a combination of active or placebo drug, and the active arm improved lung function by four percentage points when compared to the placebo arm. It was a stat sig improvement, and that classes as an endpoint hit for the study. As a comparator point, in a very similar study (one that underpinned the company’s application for registration), Orkambi improved lung function by three percentage points over placebo.

So there’s a one percentage point improvement between the teza/iva combination and the Orkambi combo of Kalydeco and lumacaftor, what about the safety numbers?

These were really what markets were looking at, and again, they’ve lived up to expectations. The respiratory and chest tightness issues were reported in around 13% of patients in the teza/iva study that were dosed as part of the study’s active arm. This compares to around 16% of patients in the placebo arm of the trial. Even more importantly, the comparable figures in the Orkambi study (the one the underpinned the above mentioned registration submission) came in at 22% and 14%.

That’s a one percentage point improvement in efficacy and a nine percentage points improvement in safety on a per patient, trial to trial comparison between Orkambi and teza/iva.

So what’s next?

Well, considering Vertex only really needed to prove comparable efficacy numbers between the development combination and the already approved Orkambi combination, but has managed to prove both an improvement in safety and efficacy.

As such, the chances of approval are high. The company is set to submit an NDA to the FDA during the third quarter of this year, and so we’re looking at an early to mid 2018 PDUFA, and a likely mid 2018 commercialization run for the drug.

Bottom line, a real win for Vertex and its shareholders.

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