Another small study of Vertex Pharmaceuticals' ( VRTX) experimental cystic fibrosis drug released Monday showed that the drug, VX-770, improved lung function and was safe.

Shares of Vertex fell 3% to $24.91, however, because results from the latest VX-770 study were not entirely consistent with the previous study released last March.

Despite some questions raised about the latest VX-770 study, Vertex said Monday that it intends to work with U.S. and European regulators to design a pivotal phase III study of VX-770 to begin in 2009.

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.

The phase II study detailed Monday enrolled 19 patients and randomized them to one of two doses of VX-770 (150 mg or 250 mg) or a placebo. Patients were treated with VX-770 or a placebo twice a day for 28 days, after which their lung function was measured and compared to baseline scores.

Biotech Select

Patients treated with 150 mg of VX-770 reported an 11.6% improvement in lung function after 28 days, while patients on the higher 250 mg dose reported a 7.4% improvement in lung function. Placebo patients, meantime, also reported a 7% improvement in lung function, essentially equivalent to patients treated with high-dose VX-770.

The lack of a dose response in this study (i.e. the low dose performed better than the high dose) plus the fact that placebo patients' lung function also improved, isn't entirely consistent with the VX-770 study from last March in which there was a clearer dose response amongst cystic fibrosis patients and the lung function deteriorated for those patients given a placebo.

Vertex spokesman Zach Barber says the small number of patients in the study -- just 15 patients on VX-770 and another 4 patients treated with placebo -- make any comparisons between groups difficult and help explain a lack of a dose response.

VX-770 is designed to improve the function of a gene that in turn, controls a protein called Cystic Fibrosis Transmembrane Conductance Regulator, or CFTR. Significant reductions in sweat chloride levels, a biomarker for improved CFTR function, were observed in the study by patients treated with both doses of VX-770. By comparison, placebo patients showed no such CFTR improvement.

Investors follow Vertex primarily for its work in hepatitis C treatments. The company's valuation hinges almost solely on the phase III hepatitus C drug telaprevir, which is partnered with Johnson & Johnson ( JNJ).

VX-770 is still a relatively low-profile piece of the Vertex story, but Monday's data, plus plans to move the drug into a phase III study, will raise the drug's visibility. VX-770 has the potential to reverse or modify the underlying causes of cystic fibrosis for some patients. Current cystic fibrosis drugs from Genentech ( DNA), Novartis ( NVS) and Gilead Sciences ( GILD) can only treat the symptoms of the disease.

At the time of publication, Feuerstein's Biotech Select model portfolio was long Genentech and Gilead Sciences.

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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