Macro Tsimmis

intelligently hedged investment

Vertex (VRTX) update #4

Posted by intelledgement on Mon, 05 Nov 07

Well, it’s more speculation fun for our hepatitis C play, Vertex (VRTX), which is now in triple whammy mode.

A week ago, the company reported 3Q07 results and management failed to repeat earlier suggestions about the start of phase 3 testing for their would-be lead product, telaprevir by the end of 2007, engendering concerns that the FDA might mandate a substantial delay.

Then on Friday at the American Association for the Study of Liver Diseases conference in Boston, the company reported more interim data from their ongoing phase 2 trials including efficacy results that came in on the low side of the expected range (61%-to-65% cure rate; many were hoping for 70%+) and on the high side on safety concerns (7%-to-8% of patients dropped out of the course of treatment due to telaprevir-related skin rash issues). The stock was down 9% on 4x normal volume.

And thirdly, starting on Friday and continuing through the weekend at the conference, new information came to light about a raft of potential competitors. Here is a rundown:

  • Boehringer Ingelheim (privately held): have a second generation HCV product currently being tested with humans in Europe and expect to start trials in the USA soon; this was the first company to develop an efficacious anti-HCV protease inhibitor several years ago but it flamed out in animal testing with cardiac toxicity issues
  • Gilead (GILD): has a polymerase inhibitor antiviral product for HCV under development
  • Human Genome Sciences (HGSI)/Albuferon: This is a long-acting interferon product currently enrolling phase 3 studies…patients only need a shot every two weeks instead of every week, which could make the SOC only half as onerous as the flu symptoms attendant to every such shot are the most debilitating adverse effects (AEs)…not particularly a competitor to telaprevir (because there is no indication that efficacy is improved) but potentially good news for everyone in HCV-land
  • Idenix (IDIX): has a polymerase inhibitor antiviral product for HCV under development
  • InterMune (ITMN)-Roche (RO.SW) partnership/ITMN-191: this one is considered a “me-too” candidate as, like boceprevir and telaprevir, it requires dosing three times a day—unlike most of the other new drugs on this list which require only one or two daily doses—and so would have to have efficaciousness and safety off the charts to keep it competitive
  • Merck (MRK): has a protease inhibitor antiviral product for HCV under development
  • Pharmasset (VRUS)-Roche (RO.SW) partnership/R7128: revealed a 14-day phase 1 monotherapy study of patients who failed to respond to SOC; there was a 99% mean decrease in HCV with no serious AEs
  • Roche (RO.SW)/R1626: released results from a phase 2a study wherein HCV was undetectable in 81% of patients after four weeks of treatment with the drug in combination with interferon and ribavirin, with only mild to moderate AEs; a phase 2b study is currently enrolling patients in eight countries including the USA
  • Romark Laboratories (privately held)/Alinia: this one really comes out of left field—it is already approved as a drug for diarrhea caused by two different parasites, but now data from a small phase 2 study conducted in Egypt indicates success on eliminating HCV type 4…the company plans a trial with type 1 patients soon…the kicker here is that the drug costs $40 for a week’s supply, which is drastically cheaper than interferon/ribavirin, not to mention the projected prices of any of these other drugs under development
  • Tibotec (JNJ; they are a Johnson & Johnson company): has a protease inhibitor antiviral product for HCV under development
  • Vertex (VRTX)/VX-500: yep, Vertex too has a potential telaprevir-killer under development, expected to start phase 1 trials as early as December…of course if all goes according to the master plan, this drug—which presumably will be more effective, more convenient, and less toxic than telaprevir—will be dubbed “telaprevir2” and the transition to it would be more of a baton-passing thing than a race to the death
  • ViroPharma (VPHM): has a polymerase inhibitor antiviral product for HCV under development

The thing is, there are no comparable data on efficaciousness on any of these drugs (except boceprevir, which seems inferior to telaprevir). So Vertex are shadow-boxing here against undefined opponents…any one of whom might be Goliath, or might be David without his slingshot. Or maybe just a dust cloth blowing in the wind and casting a scary-looking shadow.

The Street, however, is considering the apparent delay in the start of phase 3 testing for telaprevir, the relatively tepid phase 2 results, and the large lineup of hungry understudies ready to rush into the spotlight should the star falter here and reducing their bets on VRTX: on the heels of Friday’s 9% decline on 4x normal volume, the stock was down another 17% today on 5x normal volume.

For our part, we still like the potential here (which the plethora of competitors tends to confirm) and are inclined to hold to see what the outcome is with respect to the phase 3 schedule. If there is a substantial delay, or no word whatsoever by early 2008, then we will start considering alternative opportunities.


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