Vertex shares soar on cystic fibrosis drug data

Mon May 7, 2012 2:15pm EDT

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(Reuters) - Vertex Pharmaceuticals Inc's (VRTX.O) new cystic fibrosis drug Kalydeco, when combined with its experimental treatment for the disease, led to significantly improved breathing ability in a mid-stage study, sending Vertex shares soaring 49 percent.

The data suggested Vertex could have a multibillion-dollar franchise in cystic fibrosis, a life threatening genetic disorder that affects about 70,000 people worldwide.

"This is very exciting data," said Dr. Joseph Pilewski, adult cystic fibrosis physician at the University of Pittsburgh Medical Center.

"If this were to bear out in a Phase III pivotal trial it will dramatically impact the treatment options we have for patients with cystic fibrosis," Pilewski said, cautioning that the data is preliminary and has not yet been fully analyzed.

Kalydeco, which in January became the first approved drug to treat the underlying cause rather than symptoms of the life-shortening lung disease, helps only about 4 percent of cystic fibrosis patients with a specific gene mutation.

Vertex is testing combinations it hopes will eventually be able to address the larger CF population. The combination data available on Monday's involves patients with genetic mutations that make up about half the population with the disease. Further data expected from the study could yield results meant to help an additional 30 percent of CF patients.

The company is also testing Kalydeco as a monotherapy in patients as young as 2-1/2 years old and in patients with gene mutations not studied in its original pivotal trials. If results are encouraging, this could potentially expand its use from 4 percent to 8 to 10 percent of patients worldwide, the company said.

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.

The interim analysis of the study looked at 37 patients who completed 56 days of treatment with the Kalydeco/VX-809 combination, and 11 patients who received a placebo. It found a statistically significant lung function improvement for those on the study drugs.

"These improvements were clinically very, very meaningful for these patients," said Brian Skorney, an analyst with Brean Murray, Carret & Co. "This is really a game-changing combination therapy."

The data could be the clearest sign yet that Vertex will soon be as well known for its cystic fibrosis medicines as its hepatitis C treatments. Vertex's Incivek has transformed care for hepatitis C patients in the past year, but investors are concerned a new generation of drugs will unseat the Vertex drug for addressing the infectious disease in the next few years.

ISI Group analyst Mark Schoenebaum said Vertex could have a $4 billion franchise in cystic fibrosis. He called the data "excellent and much better than expected."

Vertex shares soared 49 percent to $55.83 in afternoon trade on Nasdaq, elevating the biotechnology company's market value to more than $11 billion.

Vertex officials said they would seek to start clinical trials to support approval for the combination at the end of the year or early next year.

"These data did exceed our expectations," Vertex Chief Executive Officer Jeff Leiden told analysts on a conference call. "They are leading us to accelerate 809 and Kalydeco into pivotal trials."

In the data released on Monday, about 46 percent of patients who received the drugs experienced lung function improvement of 5 percentage points or more based on FEV1 -- a measure of the maximum amount of air that can be exhaled in one second, Vertex said.

About 30 percent who received Kalydeco and VX-809 had a lung function improvement of at least 10 percentage points. None of the placebo patients achieved a 5 percent improvement from baseline to day 56, the company said.

"The fact that it showed improvements in lung function in this small-sized trial I think is very impressive," Skorney said.

The drugs were generally well tolerated with serious adverse events similar between the treatment and placebo groups, the company said. Complete data from the Phase II study are expected to be available in the middle of this year.

(Reporting by Bill Berkrot and Lewis Krauskopf; Editing by Gerald E. McCormick, Maureen Bavdek, Dave Zimmerman)

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