Macro Tsimmis

intelligently hedged investment

Vertex (VRTX) update #6

Posted by intelledgement on Wed, 23 Jan 08

Vertex (VRTX), one of our biotech plays, issued a press release this morning announcing the long-anticipated initiation of a Phase 3 trial for their anti-hepatitis C protease inhibitor, telaprevir. Unfortunately, there was bad news mixed in with the good, and the stock is down over 10% today and has set a new 52-week intraday low.

The good news is that company management and the FDA have agreed on the basic design of a telaprevir trial, with the objective of proving the efficacy and testing the safety of 24-week telaprevir-boosted courses of treatment to replace the current 48-week standard of care (SOC), and enrollment starts in March. There are three arms in the trial:

  • First 24-week treatment—eight weeks of interferon, ribavirin, and telaprevir followed by 16 weeks of interferon and ribavirin
  • Second 24-week treatment—12 weeks of interferon, ribavirin, and telaprevir followed by 12 weeks of interferon and ribavirin
  • 48-week treatment (SOC control)—48 weeks of interferon and ribavirin

The bad news is that the FDA are also insisting on an additional 48-week study “to develop additional sustained viral response (SVR) and relapse rate data with 48-weeks treatment duration that confirm results from the Phase 2 studies, thereby providing additional evidence supporting the 24-week regimen in the Phase 3 trial.” That is what Vertex says the purpose of the 48-week trial is, but it doesn’t scan for us: unless telaprevir is less effective when dosed for a longer period of time, these results would presumably favor a longer dosing. And that is bad because telaprevir’s two advantages over the current SOC are [a] greater cure rate and [b] shorter course of treatment. Take away [b] and the product would be a lot less attractive. The Phase 2 trials clearly demonstrated that telaprevir offers HCV patients an improved chance of a cure with a shorter course of treatment; don’t know why the FDA wants to test 48-week courses of treatment for telaprevir but we have to hope if the drug is as effective and safe in Phase 3 as it was in Phase 2 that the agency will approve it for use in 24-week treatments regardless of what the 48-week trial shows, and let patients and their doctors decide what works best for them. It would be weird if the FDA approved the product but limited use to 48-week courses of treatment—no one would use it—but then it was weird to reject provenge and it was weirder to reject indiplon, so who knows? It is already weird to require a pointless 48-week trial.

In any event, there is worse news: management does not expect final results from these trials until mid-2010, about 12-to-15 months later than investors had been anticipating. This is probably the biggest reason the stock is selling off. Aside from the fact that the extra year of operations with no telaprevir revenue—plus the added expense of the pointless 48-week trial—means Vertex will need more cash (which probably means more dilution for shareholders), the delay appears to give all of telaprevir’s would-be competition a lot more time to mount a challenge. One hopes that the FDA will not lower the bar here for potential competitors, and if they all will face similar delays, then telaprevir’s lead in the race to be first-to-market is still intact. Regardless, however, now the competition have an extra year to showcase drugs that have a less requiring regimen (one needs to take telaprevir every eight hours for eight or twelve weeks) or are more effective, so overall, risk here has increased. If telaprevir were approved today when there is no better alternative, that’s one thing, but if approval comes in three years, who knows what forthcoming alternatives may discourage HCV patients from trying telaprevir.

In any event, whatever the FDA’s purpose might be in insisting on the additional 48-week trial, the worse still news is that VRTX management are still haggling with them over the design. Who knows when it will start enrolling? Under the circumstances, even management’s projection that the final results will be available in mid-2010 has to be taken with a grain of salt.

This one is definitely not looking as good as it used to. Stay tuned.

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