Vertex (VRTX) update #2

Vertex (VRTX) shares took a big hit today, down 13% on nearly 9x normal volume. The fuss was over a press release by Shering-Plough (SGP) providing preliminary data on phase 2 of their HCV protease inhibitor, boceprevir. The results indicated that 79% of boceprevir patients—who took boceprevir, interferon, and ribavirin—had an undetectable level of HCV after 12 weeks of treatment compared with 34% of a control group on the current standard of care (SOC) regimen of interferon plus ribavirin. Also, there were no incidents of skin rash among the boceprevir patients (significant because in the Vertex studies, this is a notable side effect among telaprevir patients, increasing the dropout rate among them).

This was a surprise because the phase 1 numbers for boceprevir were significantly inferior to telaprevir, so most had written it off as a potential competitor. To have it roar back with phase 2 numbers apparently comparable to telaprevir’s—and apparently less noisome side effects— is disquieting.

Having said that, it is difficult to compare the studies. In the boceprevir study, patients are treated with ribavirin and interferon for four weeks prior to taking any boceprevir, which they then take in combination with ribavirin and interferon for either 24 or 44 additional weeks. There is no pretreatment in the telaprevir studies; maybe the Schering-Plough guys were smarter to think of it but one wonders how much better telaprevir’s results might have been in a similar circumstance. In the event, the shortest proposed boceprevir course of treatment is 28 weeks including four weeks of just interferon and ribavirin followed by 24 weeks of all three drugs. The shortest telaprevir course of treatment is 24 weeks including 12 weeks of all three followed by 12 weeks of interferon and ribavirin. Some telaprevir patients dropped out because of the rash; likely some boceprevir patients will drop out because of the extra month of debilitating interferon injections…we will have to await the final numbers to see which is worse.

Vertex were very aggressive in designing the parameters for the phase 2 trials; there was some hope at the time that with outstanding results, these might suffice for approval. For example, in measuring sustained virologic response (SVR—that is, the lack of detectable levels of HCV in the patient’s blood as time goes by), Vertex used a standard of HCV RNA <10 IU/ml. while Schering-Plough were content with a measure of HCV RNA <15 IU/ml. It would be interesting to know how many patients in the respective studies fell into this gap, but clearly to compare them either the telaprevir rates should be adjusted up or the boceprevir rates down.

In the event, the main point is that Vertex are moving faster with their studies. Their phase 2 studies were bigger with more rigorous standards and they expect to start their phase 3 study by the end of 2007. SGP are still just getting preliminary results from phase 2 and have not yet announced plans for phase 3 testing of boceprevir. Unless there is an unanticipated problem with telaprevir, it is still likely to beat boceprevir to market by at least six months.

And speaking of progress, soon we will have more telaprevir data to kick around—the company has promised to release more interim phase 2 data early next month at the annual American Association for the Study of the Liver meeting in Boston.

Bottom line: we need to pay more attention to boceprevir that we thought, but telaprevir still has the inside track to the lion’s share of a huge market. Looks as if this selloff—which has brought the stock back down to where we bought it—is overdone. LOL welcome to the wonderful world of stock speculation, not to be confused with investing.