Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) Update Reinforces Cystic Fibrosis Dominance

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Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) just hit markets with a clinical update, and within it, notified us of the development timelines for four separate phase 3 trials. Each has the potential to dictate some upside in the company’s market capitalization, so here’s a look at what’s on offer, and what it might mean going forward.

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Each of the trials relates to a drug called VX-661, for which the company is attempting to demonstrate efficacy across a scope of cystic fibrosis sufferers. Those familiar with Vertex will already be aware that the company has probably the most advanced cystic fibrosis portfolio in the world. It’s blockbuster, Kalydeco, is the number one drug in this indication, and the company has spent the last two years attempting to develop combination therapies that work alongside Kalydeco to both enhance its efficacy in the already treatable patient population, but more importantly, enable patients for which Kalydeco isn’t appropriate on its own, a combo therapy option.

We’ve got quite a lot to cover, so without going into too much detail, the necessity for treatment variations revolves around certain mutations associated with cystic fibrosis. The condition is caused by different genetic mutations, and Kalydeco is only able to target a particular variation. By combining it with other therapies, the patient population expands.

The variations in question for the four ongoing phase 3 trials are rooted in a mutation called the F508Del mutation, and variations thereof.

First up, there is a trial for patients with two copies of this mutation.  As mentioned, it’s a phase 3, and this one is the most advanced of the four ongoing. Completion is slated for the middle of this year, and we should see topline sometime during the first quarter, 2017.

Next in line this a trial investigating VX-661 in patients that have one F508Del mutation and a second mutation that causes what’s called a gating defect. Channel gating is one of the primary defects associated with cystic fibrosis, and if Vertex can use a combination therapy that includes VX-661 to target both the F508Del mutation and a gating defect associated mutation, it would open up a large number of patients currently not eligible for treatment under a Kalydeco regimen. This one’s behind the first, with enrollment slated to complete sometime before the end of this year. Chances are we wont see topline before early 2018, but interim data should serve up some catalysts in the mean time.

The final two trials relate to patients that suffer from the aforementioned F508Del mutation, and either a mutation that results in residual CFTR function, or one that results in minimal CFTR function. In the former instance, Vertex announced the trimmings of its enrollment target from 300 patients to 200 patients, and suggested completion before the third quarter of this year. In the latter, we should see an interim analysis of efficacy data before October.

So that’s the dates and the associated trials sorted, what might they all mean for Vertex and its shareholders as we get into the latter half of the year?

Well, there are number of development stage biotech companies working on novel cystic fibrosis therapies. With the high price of Kalydeco, markets are very conscious of the fact that if one of these novel therapies reaches commercialization, it could quickly impact the former’s market penetration. As such, the doubling down on cystic fibrosis products in its portfolio by Vertex represents a much needed strengthening – and in turn, buffer – against outside competition. The good thing about VX-661 from Vertex’s perspective is that it is designed to work in tandem with Kalydeco. Why this important? Because if a company is to developed a competing treatment to commercialization, it is going to have to outshine both Kalydeco and VX-661 in whatever mutation it targets.

So what’s the takeaway here?  That Vertex already dominates the cystic fibrosis space, and the ongoing trials mean that it is likely to do so for the foreseeable future – assuming each runs smoothly. With a number of pivotals ongoing, there is no shortage of upside catalysts, and as the necessity for treatments to target the increasing variations of cystic fibrosis mutations deepens, Vertex looks to be both an interesting volatility play for the speculative investor and, concurrently, a longer-term prospect in the cystic fibrosis arena.

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