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Vertex lowers Incivek view; new drug data lifts shares

(Reuters) - Vertex Pharmaceuticals Inc VRTX.O reported further declines in sales of its hepatitis C drug Incivek and lowered its full year forecast for the medicine, but promising data on another drug for the virus lifted its shares more than 5 percent.

Vertex reported on Monday positive results from a very small, early stage trial of a hepatitis C medicine licensed from Alios BioPharma called ALS-2200 that appeared to allow investors to ignore falling Incivek sales. The experimental drug belongs to a class of medicines called nucleotide analogues, or nucs.

“It’s all due to the data on their nuc,” Brean Murray, Carret & Co analyst Brian Skorney said of the Vertex share jump.

He said the data looked comparable to early data from closely watched drugs being developed by Gilead Sciences Inc GILD.O and by Bristol-Myers Squibb Co BMY.N.

“It puts them back in the hep C race,” Skorney said. “It makes them a real player again.”

If all goes well, Vertex said it could potentially begin pivotal Phase III testing of combinations including ALS-2200 by the end of 2013.

ISI Group analyst Mark Schoenebaum said the early ALS-2200 data surpassed expectations and agreed that it could be a serious potential rival for the drugs that Gilead and Bristol-Myers paid billions of dollars to acquire by buying other companies.

He added that Wall Street had not yet factored in the drug’s potential in assessing the future value of Vertex.

“The Street has very little in the Vertex model for next generation hep C assets, so we think of this drug as all upside at this point,” Schoenebaum said.

Second-quarter Incivek sales of $328 million fell short of Wall Street estimates of about $360 million and first-quarter sales of $356.9 million.

The company said it now expects full-year Incivek sales of $1.1 billion to $1.25 billion, down from its prior forecast of $1.5 billion to $1.7 billion.

Incivek, which was approved in May 2011, earlier this year eclipsed $1 billion in total sales, making it the fastest prescription drug to reach that mark in pharmaceutical history. But it must be taken with the difficult to tolerate injectable drug interferon and Incivek’s life as a blockbuster is likely to end once all-oral treatment options become available over the next two years.

The continued decline in sales could indicate that patients are already beginning to wait for interferon-free regimens with fewer side effects being developed by several companies, including Vertex.

The company said it was still getting 70-75 percent of new hepatitis C prescriptions, but the number of patients beginning treatment has declined from initial demand. In addition to some patients delaying treatment, Vertex said many potential new patients were being recruited into clinical trials of new medicines being pursued by many companies.

“We believe ALS-2200 could become an important part of all-oral treatment regimens,” Chief Executive Jeffrey Leiden told analysts on a conference call.

He said the company would move quickly to advance ALS-2200 into Phase II testing, and to develop all-oral regimens that include ALS-2200 in combination with its own medicines or those being developed by rival drugmakers.

Sales of the new cystic fibrosis drug Kalydeco were $46 million for the quarter, topping Wall Street estimates of about $41 million. Kalydeco, the first drug to treat the underlying cause of the life-shortening lung disease rather than just symptoms, won U.S. approval in late January and European approval just last week.

Kalydeco treats about 4 percent of cystic fibrosis patients with a specific gene mutation. It is currently testing Kalydeco in combination with another experimental drug with the hope of eventually addressing the larger cystic fibrosis population.

Vertex posted a net loss of $65 million, or 31 cents per share, after taking a $78 million charge as reserve against potential for excess Incivek inventory. That compared with a loss of $174 million, or 85 cents per share, a year ago.

Total revenue for the quarter of $418.3 million included $28 million in royalty payments from Johnson & Johnson JNJ.N, which holds overseas rights to Incivek. That was short of analysts' revenue estimates of $471.2 million.

Vertex shares, which were already up about 50 percent this year, rose 5.3 percent to $52.60 in extended trading from their Nasdaq close at $49.96.

Reporting by Bill Berkrot in New York; Editing by Bernard Orr, Leslie Gevirtz and Tim Dobbyn