Macro Tsimmis

intelligently hedged investment

Vertex (VRTX) update #12

Posted by intelledgement on Mon, 09 Jun 08

Wow! Vertex today reported more results from their Phase 2b study of folks infected with hepatitis C who failed to be cured by the current standard of care (SOC) treatment—48 weeks of nausea-inducing interferon plus ribaviron—and among such patients administered an experimental 24-week treatment including telalprevir for the first twelve weeks (and interferon plus ribaviron for the whole 24 weeks), 52% were still virus-free twelve weeks following the end of the treatment. Typically when such patients undertake the SOC treatment a second time, it cures them 10%-to-15% of the time.

The ultimate litmus test of the cure is being virus-free six months after treatment ends, but typically there isn’t much dropoff among those virus free three months after treatment. So telaprevir seems highly likely to prove not just two or three times as effective as the SOC—curing 30%, as we’ve been hoping for—but more likely to prove three-to-four times more effective—curing, say 45%.

The company announced plans to run a Phase 3 trial with patients who failed the SOC—there is already a Phase 3 trial underway for treatent-naive patients—but should these results hold up and no serious AEs show up in the early going in the Phase 3 trials, the FDA may consider approving telaprevir on a limited label basis for patients who have failed the SOC even before the Phase 3 results are final, given the needs of that patient population.

The stock popped up 13% last Thursday after it was upgraded by Rachel McMinn of Cowen and Co. McMinn is considered to be a relatively conservative biotech analyst and her acceptance of the likelihood of the early-approval scenario reverberated.

Also last week, management obtained cash reinforcements to the tune of $160MM when they sold their rights to future royalties in the HIV protease inhibitors Lexiva® and Agenerase® under their 1993 license agreement with GlaxoSmithKline (GSK) for a one-time payment. They now definitely have enough cash to last through 2009 and well into 2010…by which time, if telaprevir has been approved on a limited label basis, they could be generating enough revenue to avert any further need for funding.

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