UPDATE 2-Vertex 3rd quarter loss widens on costs

* Q3 loss $0.84 vs Street loss $0.82

* Says on track to seek telaprevir 2H 2010 (Adds revenue, clinical background)

NEW YORK Oct 26 (Reuters) - Vertex Pharmaceuticals Inc (VRTX.O) reported a larger third-quarter net loss on Monday on higher costs as it prepares to launch its first product, the closely watched experimental hepatitis C drug.

Vertex, which has said it expects to become profitable soon after it begins selling the hepatitis C treatment telaprevir, said it is on track to file its application seeking U.S. approval in the second half of 2010.

The Cambridge, Massachusetts-based biotechnology company reported a net loss of $149.6 million, or 84 cents per share, compared with a net loss of $130 million, or 93 cents per share, a year ago, when there were fewer shares outstanding.

Analysts on average had expected a loss of 82 cents per share, according to Thomson Reuters I/B/E/S.

Total costs for the quarter rose to $173.2 million from $162.2 million a year ago.

But unlike previous quarters when cost increases were primarily due to expensive clinical trials, the jump this time was in sales, general and administrative expenses, with an increase in the number of employees and commercial investments as the company gets ready to market its first product.

Revenue for the quarter fell to $25 million from $31.6 million a year ago, when the company received a one-time milestone payment.

But investor interest is clearly focused on clinical data on telaprevir that will be presented at an upcoming liver disease meeting in Boston, and on data from a potential rival drug being developed by Schering-Plough Corp SGP.N.

Of greatest interest are results of a study that will reveal the sustained viral response (SVR) of telaprevir when administered twice daily. All previous data on the eagerly anticipated drug has involved patients taking the medicine three times a day in combination with standard treatments.

The percentage of patients in whom the virus is undetectable after stopping treatment determines the critical measure known as SVR. In previous studies, telaprevir has shown the potential to knock out the serious liver disease when combined with standard treatments in a higher percentage of patients and in a shorter amount of time than the 48 weeks that patients must now take the difficult to tolerate current drugs.

The American Association for the Study of Liver Diseases meeting will be held from Oct. 30 to Nov. 3.

The company is also engaged in late stage testing of an experimental cystic fibrosis treatment and said it expects to complete enrollment in a 48-week Phase III trial in the first quarter of 2010. (Reporting by Bill Berkrot; Editing by Carol Bishopric and Richard Chang)