Why Vertex Pharmaceuticals Will Likely Climb to New High

NEW YORK (TheStreet) --  Vertex Pharmaceuticals (VRTX) is now within weeks or even days of announcing top-line results on its two phase 3 Traffic and Transport studies for cystic fibrosis, results that will almost certainly move the stock wildly in one of two directions. Both studies are testing a combination therapy of lumacaftor and Kalydeco (ivacaftor) on CF patients with the F508del mutation, the majority of CF patients.

Judging by the FDA's history of approvals with CF, Vertex's phase 2 data for the combination therapy and the science behind the treatment, the chances of approval are high.

The Science Behind Traffic and Transport

Adam Feuerstein already discussed the phase 2 data last week, but the theory behind lumacaftor and Kalydeco working together synergistically is important to grasp in order to get a better understanding of what's going on here.

Kalydeco is already approved since 2012. The problem is, it is only effective on CF patients with the G551D mutation, which includes about 4%-5% of CF patients. This specific mutation alters one amino acid in the CFTR protein, the malfunctioning protein responsible for cystic fibrosis. While all cases of CF involve a malfunctioning CFTR protein, that protein can malfunction for different reasons due to different mutations. In the case of G551D, CFTR can still Traffic to the correct area in the cell, at the cell surface. It just can't do its job very well once there, and its job is to Transport chloride. Kalydeco helps by chemically forcing the chloride channel open, enabling a hobbled and mutated CFTR protein to do its job.

The problem is, the majority of CF patients have the F508del mutation, and that gives them a CFTR protein so defective that it can't even make it to the cell surface in the first place. That's where lumacaftor comes in. Lumacaftor grabs the CFTR protein and TRAFFIC's it to the cell surface. From there, Kalydeco can do its job by forcing the chloride Transport channel open.

Hence, the Traffic and Transport studies, and why these drugs are specifically being tested together for a synergistic interaction.

FDA Approval History for Cystic Fibrosis

Besides Kalydeco, there have been three FDA approvals for CF in the past 16 years, only one of which was aiming for the same improvement in lung function metric aimed at in Traffic and Transport. It's called FEV1, meaning the amount of air expelled from the lungs in one second. The three FDA approvals are:

  1. Zenpep, approved in 2009 from a study of only 34 patients. Zenpep introduces digestive chemicals into the intestine similar to what the pancreas produces, enabling CF patients to absorb fat better and gain weight.
  2. Ultresa, approved in 2012, and is the same concept as Zenpep. It was approved from data on only 24 patients.
  3. Cayston, approved in 2010, is an antibiotic developed by Gilead (GILD). It was approved after a study on 164 patients, with data showing a 10% improvement in FEV1 lung function. Cayston, then, is the most relevant approval for the Vertex case.

So far, the data for the Kalydeco/Lumafactor combination therapy show an absolute improvement of 6.7%, not 10%. However, in all probability, Traffic and Transport won't have to show a 10% improvement in FEV1, because Cayston was designed to treat CF patients specifically with a bacterial infection hampering lung function. It stands to reason that removing an infection caused by CF will lead to a much higher improvement in FEV1 than would treating otherwise healthy CF patients. Bacterial infection of the lung is actually an exclusion factor in both the Traffic and Transport studies. 

Meaning, if phase 3 can come anywhere near duplicating phase 2, Vertex will rocket higher to a new vertex. If it can't, the stock will move just as quickly the other way.

Taken all together - the science, the phase 2 data, and past FDA approvals for CF treatments, the probability of success here is pretty high.

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At the time of publication, the author was long VRTX.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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