Vertex Pharmaceuticals ( VRTX) in the next week or so is expected to release new data on an experimental cystic fibrosis drug that could change the way the disease is treated. VX-770 works by improving the function of a particular gene that is known to cause cystic fibrosis when defective. This is game-changing territory in cystic fibrosis research, because there are no drugs currently that address the underlying causes of the disease, only those that can treat the symptoms. The downside to VX-770 is that it may only work for a very small percentage of cystic fibrosis patients who have this specific gene mutation. Positive results from a small, phase IIa study treating cystic fibrosis patients for 14 days were released last March. Now, Vertex is gearing up to release results from a longer, 28-day study that is also examining higher doses of VX-770. An exact date for the data release isn't being disclosed, but Vertex will issue a press release sometime before Oct. 23, when the VX-770 data is scheduled for presentation at a cystic fibrosis meeting. If this phase IIb study is also positive, Vertex plans on seeking Food and Drug Administration permission to design and conduct a pivotal phase III study for VX-770 in the first half of 2009.
Last month, the FDA refused to approve a new antibiotic from Gilead Sciences ( GILD) used to treat lung infections in cystic fibrosis patients. The addressable patient population for VX-770 may be small, but remember, that doesn't necessarily mean sales will also be small -- especially if Vertex can demand ultra-premium pricing. In a research note published last week, Citigroup's Yaron Werber did some early number crunching and came up with peak sales in the $300 million range for VX-770.
While it's premature to be thinking about VX-770 sales, the drug deserves attention -- mainly because most investors aren't thinking about it at all. Vertex is still known primarily for its work in hepatitis C treatments. The company's valuation hinges almost solely on the phase III hepatitis C drug telaprevir, which is partnered with Johnson & Johnson ( JNJ). Vertex shares closed Wednesday down 10.2% to $24.60. The stock traded close to $35 this summer before the stock market crash erased the gains. If the pending VX-700 data are positive, there will be more to the Vertex story than just telaprevir.