Vertex Investors Balk at New Study Plans

06/24/08 - 09:27 AM EDT

Adam Feuerstein

The New Phase III Study

Vertex spokesman Michael Partridge says Monday's disclosure of a new phase III telaprevir study is in line with the company's previous guidance and "not closely connected to a possible [FDA] filing based on PROVE 3 results."

Partridge added that Vertex and the FDA are still discussing the previously disclosed PROVE 3 data, but that "initiation of a new phase III study is a natural extension of the PROVE 3 results which we would have started no matter the path to a filing."

The new phase III study disclosed Monday will test two different regimens of telaprevir in patients who previously did not respond to conventional hepatitis C treatment with pegylated interferon and ribavirin.

The study differs from previous studies in that patients will be treated with two regimens of telaprevir for a full 48 weeks instead of the accelerated 24-week treatment cycle used for treatment-naïve patients.

In addition, one of the arms of the new study will see whether a "lead-in" treatment with interferon and ribavirin alone before dosing of telaprevir may improve overall cure rates.

The design of the new study is sufficiently different from the previous PROVE 3 and study 107 trials to suggest that regulators want more and different data on telaprevir's effect on treatment-resistant patients before considering the drug for approval.

Cowen & Co. analyst Rachel McMinn views Monday's selloff as an overreaction to expected news. She reiterated her outperform raring on Vertex.

"We believe that yesterday's [Vertex] sell off was driven by an over-reaction to two-week old information. Timelines for commercial launch of ... telaprevir (late 2010/early 2010) are unchanged, and we see 50% upside relative to the market on the basis of this timeframe. While probability of an early 2009 FDA approval is low, we see 100% upside relative to the market under this scenario over the next 6-12 months."

Schering-Plough (SGP Quote - Cramer on SGP - Stock Picks) recently announced the start of phase III studies for its competing hepatitis C drug.

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Adam Feuerstein writes regularly for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.
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