Remember Vertex? Important Cystic Fibrosis Data On Tap Next Week

CAMBRIDGE, Mass. ( TheStreet) -- Vertex Pharmaceuticals ( VRTX) has slipped from the radar screen of biotech investors, many of whom are still recovering from the American Society of Clinical Oncology annual meeting. But Vertex is presenting additional data on its combination therapy for cystic fibrosis at the European Cystic Fibrosis Society (ECFS) conference on June 13. Investors should take notice.

The first look at positive results from the combination of VX-661 and Kalydeco released by Vertex in April spiked shares from $52 to $85, as it indicated the Vertex drugs could effectively address a much larger share of the cystic fibrosis patient population. Kalydeco is currently only approved for the 4 percent of cystic fibrosis patients carrying the G551D mutation in the CFTR gene. Clearly, expanding the size of the addressable market would be quite meaningful to Vertex.

Cystic fibrosis is caused by dysfunction in the CFTR gene, which severely limits the ability of the CFTR protein to express in the epithelial cells of the lungs, intestines, and exocrine glands. Malfunctioning CFTR proteins inhibits the ability of chloride ions to cross those membranes, which ultimately creates a thick mucus that impedes the proper functioning of the organ and leads to numerous opportunistic infections. In general, a drug (or combinations) needs to address three issues to be effective as a cystic fibrosis therapy: Production of a functional CFTR protein, trafficking the protein to the proper place on the cell membrane, and gating it through the cell membrane.

Kalydeco is effective in the G551D population because these patients have functional CFTR proteins that are properly trafficked but have issues with gating. Kalydeco works as a "potentiator" by essentially opening the gates and letting chloride ions pass through. Kalydeco is not effective in the other 96 percent of cystic fibrosis patients because they have problems with either the production of the protein and/or trafficking it to the proper spot. This is where combination therapy comes into play. A "corrector" drug could handle protein function and trafficking while Kalydeco takes care of gating.

Vertex has three "correctors" in development (VX-809, VX-661, and VX-983) which attempt to address issues in production and trafficking. The ultimate goal is to develop a successful corrector/Kalydeco combination that gets enough functional protein across the cell membrane to produce a benefit for cystic fibrosis patients similar to what's been demonstrated by Kalydeco monotherapy in the G551D mutation population. Vertex's early combination data improved lung function only about half as well as Kalydeco. Still, the improvement in lung function and decrease in sweat chloride production were statistically significant, providing a clear proof of concept. It looks more like a matter of when, not if, Vertex will be able to develop an effective combination treatment for the much larger CF patient populations.

Vertex still needs to be address the economics of combination therapy for cystic fibrosis. Kalydeco currently costs about $294,000 a year but it also produces a significant clinical benefit to patients. Is it feasible to price a combination therapy at double the price for half the benefit? Obviously not, but Vertex can certainly take a hit on the price when moving into a market that could be almost 15 times larger. While there are certainly issues that still need to be resolved in terms of the needed combinations and the price that the market is willing to bear for the benefits, it seems more clear that Vertex will get there.

As investor focus turns from ASCO, I would expect a quick pivot back to Vertex with the ECFS conference coming up next week The presentation of confirmatory data on combination efficacy could reinvigorate investor interest in the stock.

Sobek has no position in Vertex.
David Sobek has been writing on biotech for a number of years through various outlets with a general focus on small cap oncology and antibiotics companies. He received his PhD in political science from Pennsylvnia State Univeristy in 2003 and a BA in international relations from The College of William and Mary in 1997.

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