WASHINGTON/NEW YORK Health regulators approved Vertex Pharmaceuticals' Kalydeco, the first drug designed to treat the underlying cause of cystic fibrosis, a rare genetic disease.
The Food and Drug Administration said on Tuesday Kalydeco was effective in treating people with the life-shortening disease, which impairs the lungs and digestive system.
Vertex shares shot up as much as 11 percent after the announcement of the approval, which came well ahead of the FDA's expected April 18 decision date.
Cystic fibrosis affects about 30,000 people in the United States. Kalydeco, which is a pill taken twice daily, targets a defective protein that is the cause of cystic fibrosis in only about 4 percent of patients.
"This is a breakthrough therapy for the cystic fibrosis community because current therapies only treat the symptoms of this genetic disease," said Dr. Janet Woodcock, head of the FDA's drugs division.
Vertex said it will charge $294,000 per year for Kalydeco --
near the high end of analyst expectations. The company said about 60 percent of eligible patients have commercial insurance with about 40 percent covered by government programs. Vertex will also have a variety of patient assistance programs to help those unable to afford the potentially life-altering treatment.
Kalydeco is Vertex's second product approved in the United States in less than nine months after the hepatitis C treatment Incivek, which entered the U.S. market in May and is on track to hit $1 billion in sales faster than any drug in pharmaceutical history.
A second commercial product with big sales potential should help alleviate investor concerns that Incivek sales are leveling off sooner than expected, which has pressured shares. Vertex shares have also fallen each time data is released from a potential rival with a drug regimen that promises fewer side effects than Incivek, which must be taken with two older, difficult-to-tolerate drugs.
"Our view has been that this company is a short-term hepatitis C story that's funding a long-term global business in cystic fibrosis with options for other opportunities," said Geoffrey Porges, an analyst with Sanford Bernstein.
The FDA approved Kalydeco, known chemically as ivacaftor, under a six-month priority review granted to medicines that represent a significant advance over existing therapies. It is approved for patients age 6 and older, and Vertex is hoping to expand use to patients as young as 2, based on upcoming data.
Kalydeco is the second drug in as many days to gain U.S. approval well ahead of schedule, following Monday's approval of Roche's skin cancer drug Erivedge.
"The FDA is trying to demonstrate a willingness to move quickly on medicines that make a big difference and this is a big difference maker," Porges said of Kalydeco.
Porges sees near-term annual Kalydeco sales of $1.5 billion to $2 billion worldwide, with peak sales of $3 billion to $4 billion if the drug proves effective for the larger cystic fibrosis population in combination with another medicine.
Vertex is currently testing Kalydeco with other drugs in separate trials in the hope of eventually reaching some 90 percent of CF patients. Data from those trials are expected later this year.
Cystic fibrosis causes the thin layer of mucus that helps keep the lungs free of germs to become thick, clogging airways and leading to infections that damage the lungs. The average life expectancy for the disease is 37 years, as damage to the lungs progresses, severely limiting the ability to breathe.
In clinical trials, Kalydeco significantly improved lung function, reduced the number of lung problems that required treatment with antibiotics and led to weight gain, which is desirable for CF patients who typically have trouble maintaining a healthy weight.
Vertex said it would begin shipping Kalydeco to U.S. pharmacies this week.
Since the disease is so rare, the FDA granted Kalydeco orphan drug status. The designation comes with a seven-year marketing exclusivity period and will allow the company to command the premium price.
European regulators have also granted Kalydeco a priority review, and Vertex said if all goes well European approval could come in the third quarter. However, the drug will almost surely command a lower price there, where price controls are common and the cost will have to be negotiated on a nation by nation basis.
The approval of a second major revenue generator could make Vertex even more attractive as a takeover target to large drugmakers desperate for new medicines that can make up for lost sales as key products face generic competition.
Vertex shares were up $2.88, or 8.3 percent, at $37.60 on Nasdaq after climbing as high as $38.62 earlier in the day.
(Reporting by Anna Yukhananov in Washington and Bill Berkrot in New York; Editing by Gunna Dickson and Maureen Bavdek)