Vertex Pharmaceuticals' (NASDAQ: VRTX ) shares are up around 60% today after announcing data for its third cystic fibrosis drug.
The first one, Kalydeco, is already approved. The drug is a potentiator that keeps partially functioning cystic fibrosis transmembrane conductance regulator, or CFTR, protein open longer to increase the flow of salt and water. By itself, that helps 4% of patients that have mutations that allow the CFTR protein to reach the surface, but aren't fully functioning.
But about half of cystic fibrosis patients have two F508del mutations, which keeps the CFTR protein from getting to the surface of the cell. Another one-third have a single F508del mutation. For those patients, Kalydeco isn't useful by itself since keeping the protein open longer isn't beneficial if the protein isn't on the surface.
Enter CFTR correctors, which help get the protein to the surface. The first one Vertex developed, VX-809, seems to be helping patients when combined with Kalydeco, but the phase 2 data in patients with F508del mutations was far from clean. Vertex recently announced the start of two phase 3 trials to test the combination, but given the data, it's hard to have confidence the trials will be successful.
Yesterday, Vertex announced phase 2 data for VX-661, another corrector, in patients with two F508del mutations, which was was much cleaner. When combined with Kalydeco, the two higher doses produced a statistically significant improvement in FEV1, a measure of lung function. As part of the clinical trial, patients were taken off the drug and the FEV1 increase largely went away, suggesting the observed effect is real.
The data for VX-661 plus Kalydeco isn't perfect -- for instance, the highest dose produced a slightly lower effect than the second highest dose -- but it should give investors confidence that the combination will work in a larger phase 3 trial. What it says about the likelihood of its big brother, VX-809, passing its phase 3 trials, remains to be seen.
It appears that Vertex's hypothesis that combining a potentiator and a corrector can help patients with two F508del mutations. But it's entirely possible that VX-661 works and VX-809 doesn't, or at least doesn't work all that well.
It'll be a waste of money if VX-809 fails its phase 3 clinical trials, but it won't be the end of the world since VX-661 isn't that much further behind.
Whichever drug(s) end up working -- Vertex has a third corrector, VX-983, that should enter phase 2 development in the second half of the year -- the biotech won't have any real competition. Current cystic fibrosis treatments, such as Gilead Sciences' (NASDAQ: GILD ) Cayston or Novartis' (NYSE: NVS ) Tobi, are antibiotics that treat bacterial infections in the lungs that occur because the nonfunctioning CFTR protein causes buildup of mucus in the lungs, a safe haven for bacteria.
Gilead doesn't bother breaking out Cayston's sales, but they're far from a blockbuster. Novartis sold $317 million worth of Tobi in 2012. But Vertex should be able blow past those sales numbers because it'll sell its combination product at significantly higher price -- Kalydeco cost nearly $300,000 per year -- justifying the cost because it treats the underlying problem rather than the symptoms.
Another biotech with upcoming data
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Bill Pugliano/Getty Images WASHINGTON -- U.S. manufacturing activity held steady at firmer levels in June and automobile sales were on track to beat expectations, pointing to momentum in the economy after a rough winter. The Institute for Supply Management said Tuesday its index of national factory activity was at 55.3, little changed from May's 55.4 reading. A reading above 50 indicates expansion. The forward-looking new orders subindex hit a six-month high, but factory employment was unchanged. "Manufacturing has gathered some momentum in the second half of the year. That's an important pillar for the economy along with housing. The details are better with new orders rising," said Ryan Sweet, senior economist at Moody's Analytics in West Chester, Pennsylvania. Separately, early sales reports indicated the auto industry overall had a better-than-anticipated showing last month, even though there were two fewer selling days than a year ago. General Motors (GM) bucked Wall Street's low expectations and negative publicity over a flood of safety recalls, reporting a modest rise in U.S. sales in June. Chrysler Group and Nissan Motor also reported year-to-year increases Tuesday. They, along with Ford Motor (F), topped analyst expectations. The reports were the latest to suggest the economy rebounded in the second quarter after a weather-induced slump earlier in the year. However, another report showing construction spending barely rose in May indicated that second-quarter growth could fall short of expectations. Economic growth contracted at a 2.9 percent annual pace in the first quarter, also weighed down by a slow pace of inventory accumulation by businesses. Economists last week slashed their second-quarter growth estimates after weak consumer spending in May. Growth forecasts are now running as high as a 3.5 percent pace and as low as a 2.1 percent rate. Construction spending edged up 0.1 percent to an annual rate of $956.1 billion, the Commerce Department reported. However, April's data was revised up to show a 0.8 percent rise in construction spending, taking some of the sting out of the report. Economists had expected construction spending to advance 0.5 percent after a previously reported 0.2 percent gain. Construction spending in May was held back by a 0.3 percent decline in private construction projects, which offset a 1 percent rise in public construction outlays. Private construction accounts for the largest portion of construction spending. Private residential construction tumbled 1.5 percent, reflecting weak housing starts. A run-up in mortgage rates has stymied the housing market recovery. Investment in home building and nonresidential structures such as factories and gas pipelines contracted in the first three months of this year for a second straight quarter. Spending by the federal government dropped 8.9 percent, the largest fall since December 2010. State and local government projects increased a solid 2 percent. -.
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