Vertex Investors Balk at New Study Plans

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) recently announced the start of phase III studies for its competing hepatitis C drug.