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Five Cystic Fibrosis Questions for Vertex Pharma

Not so with the VX-809/Kalydeco combination, as far as we know. To date, Vertex has told us that the sweat chloride was reduced in patients treated with the 600 mg dose of VX-809 but it was not statistically significant relative to placebo. Vertex has downplayed the significance of this endpoint "miss," arguing that little is known about the actual correlation between sweat chloride and lung function improvement.

At the conference on Thursday, investors will be looking for more data on sweat chloride in the 200 mg and 400 mg VX-809 groups to see if there is any dose response.

4. Why did VX-809 as a monotherapy do worse than placebo? What activity does VX-809 have in the first place?

These are great questions from Karnauskas because they highlight one of the weirder data points from the phase II study. During the first 28 days of the study, the lung function of patients treated with VX-809 declined more than patients treated with a placebo. It was only in the second half of the study when VX-809 was combined with Kalydeco that lung function rebounded and eventually showed a numerical improvement. [Placebo patient lung function continued to decline throughout the 56 days of the study.]

Vertex insists that VX-809 and Kalydeco are synergistic and the company has committed to studying the combination in the phase III study? But the reasons for VX-809 monotherapy performing worse than placebo have not been explained.

5. What were the baseline values for the patients in the study?

"We know very little about the baseline characteristics of the population studied," says Karnauskas. "We will be looking at baseline FEV1 and sweat chloride levels. Our doc checks say that mild CF disease is harder to show a benefit."

Generally, Deutsche Bank's Karnauskas believes Thursday's VX-809/Kalydeco data presentation will raise investor confidence in Vertex's cystic fibrosis program, including the phase III study expected to start in early 2013.

"We believe the stock is currently reflecting an [approximate] 55% probability of success in this population. We assume a 75% probability of success by year-end 2013, which we think is fair for a phase II asset. The fair value of Vertex on phase III success is approximately $94 per share," she writes.

Vertex shares were up 1% to $59.16 in early Tuesday trading.

-- Reported by Adam Feuerstein in Boston.

Stock quotes in this article: VRTX, GILD, BMY, IDIX 
Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. 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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