CAMBRIDGE, Mass. ( TheStreet) -- Deutsche Bank Securities biotech analyst Robyn Karnauskas says Vertex Pharmaceuticals ( VRTX) needs to come up with good answers to five key questions about its VX-809/Kalydeco cystic fibrosis therapy to boost investor confidence in the program as it moves into a phase III study early next year. Detailed and final data from the phase II study of VX-809/Kalydeco will be presented Thursday at 11:40 am EDT at the 2012 North American Cystic Fibrosis (NACF) conference. Here are Karnauskas' five key questions: 1. Was there a dose-response trend with the lower doses of VX-809 (200 mg and 400 mg) not reported in June? Vertex has previously disclosed the 200 mg and 400 mg doses of VX-809 reported statistically significant improvements in lung function compared to placebo although those improvements were lower than what was observed in the highest, 600 mg dose of VX-809 studied in the phase II trial.
At the 600 mg dose, lung function improvement as measured by FEV1 was 6.1% within group and 8.6% relative to placebo. "We would like to see a dose response and a reasonable relationship between all three doses on FEV1% response," writes Karnauskas. 2. Did huge outliers drive the FEV1 benefit in the 600 mg dose arm that will be studied in phase III? In June, Vertex disclosed that 55% of responders in the VX-809 600 mg arm had an FEV1 (lung function) improvement of more than 5%, while 25% of responders have an FEV1 improvement of more than 10%. Among the slides presented Thursday should be a waterfall plot depicting the FEV1 lung function improvements for each patient treated with VX-809 600 mg or a placebo. Investors will be comforted if the waterfall plot shows consistent efficacy for VX-809 across most patients. What the Street doesn't want to see are a small handful of outliers or "super responders" driving most of the lung function improvements, says Karnauskas. 3. Was the sweat chloride change at 200 mg and 400 mg statistically significant? Reduction in sweat chloride is a laboratory marker for improved CFTR protein function (missing or malfunctioning CFTR proteins causes cystic fibrosis) and is a co-primary endpoint of the phase II study. Conventional wisdom held that if drugs like VX-809 and Kalydeco are working as designed, a direct correlation between reduced sweat chloride levels and improvements in lung function should be evident. That was the case for Kalydeco monotherapy in cystic fibrosis patients with the G551D mutation.
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. Follow @AdamFeuerstein