Vertex Pharmaceuticals went from king of the hill in the treatment of hepatitis C to yesterday’s news in about six wild months. But while many on Wall Street say Vertex’s big drug will soon become obsolete, Vertex and its small partner in South San Francisco have quietly put themselves in position to defend a big share of this future multi-billion dollar market.
Cambridge, MA-based Vertex (NASDAQ: VRTX), which has significant operations in San Diego, is running a series of small clinical trials this year that will mix and match combinations of antiviral medicines against hepatitis C. These trials will help determine whether Vertex and its partner, South San Francisco-based Alios Biopharma, have hit upon a combination of drugs that can raise the cure rate, and reduce side effects, for millions of patients with this liver-damaging virus.
While Vertex’s new drug has been a huge step forward in the past year, the ultimate way to fight the fast-mutating virus, many scientists believe, will be by putting together a cocktail of antivirals that attack hepatitis C from multiple angles like with HIV.
“There isn’t one magic pill that will solve the problem,” says Vertex CEO-to-be Jeff Leiden. “It’s clear the HCV space will evolve into different combination treatments for different patients. It’s not yet clear what the best combination is going to be. What you want is to have the component parts in your company so you can put them together.”
The hepatitis C world saw dramatic upheaval in the past year as researchers learned more about antivirals in development. Vertex won FDA approval in May for its new protease inhibitor, telaprevir (Incivek), which doubled the cure rate to about 80 percent for new patients when given in tandem with standard pegylated interferon alpha and ribavirin. About 25,000 people rushed in to get treated with the new combo regimen in its first seven months on the market, generating hundreds of millions in cash flow per quarter for Vertex, and pushing it into the black.
Exciting as it all was for physicians, patients, and Vertex shareholders, the company was soon upstaged. Researchers have long been looking for a way to get rid of the injectable interferon part of the regimen, which causes nasty flu-like symptoms that people must endure for months. To go beyond combo therapies (like the one from Vertex and another from Merck that include injectable interferon), the next step is to hit the hepatitis C virus with not just protease inhibitors, but also drugs from other classes—nucleotide polymerase inhibitors, and non-nucleotide polymerase inhibitors.
Princeton, NJ-based Pharmasset (NASDAQ: VRUS) stole the show last November at the American Association for the Study of Liver Disease when it said its nucleotide polymerase inhibitor cured all 40 patients with certain hepatitis C genotypes in a small study—a result that led to its $11 billion acquisition by Foster City, CA-based Gilead Sciences (NASDAQ: GILD). A few weeks later, another maker of drugs in that class, Alpharetta, GA-based Inhibitex (NASDAQ: INHX), got bought by Bristol-Myers Squibb for $2.5 billion. Separately, Bristol-Myers Squibb released some more promising clinical results from its own pipeline just last week.
Those developments got everyone talking about a new paradigm in hepatitis C, which many on Wall Street believe will leave Vertex in the dust. Jason Kantor, an analyst with RBC Capital Markets in San Francisco, said in a Dec. 19 note to clients that “the consensus view is that Vertex’s HCV franchise will essentially go to zero beyond 2015.” Vertex stock has dropped almost 40 percent in the past year, down from its 52-week high of $58.87 to $35.86 at yesterday’s close.
While Leiden has spent much time talking with investors about Vertex’s other drugs in development—particularly one expected to hit the market this year for cystic fibrosis—he says the company isn’t about to surrender in the hepatitis C market. He has a plan intended to allow Vertex to compete beyond 2015, when the first all-oral, interferon-free regimens are expected to could come along and replace today’s standard of care.
Sometime before the end of March, Vertex expects to see results from an early-stage study of an all-oral combo regimen of telaprevir (a non-nucleotide polymerase inhibitor called VX-222 that it acquired from a Canadian company in 2009) and the usual ribavirin. If Vertex can cure about 75 percent to 80 percent of patients with this cocktail, and reduce side effects by eliminating interferon, Leiden says the company would be ready to go to pivotal clinical trials this year with its own all-oral combination.
“If we can do that, it will be a very exciting result. If you take that regimen into pivotal trials, now we’re talking about 2014 to finish those trials,” Leiden says.
And that isn’t the only combo Vertex has in mind. Within weeks of seeing those results, Vertex expects to pull the blinds off a couple of small studies that could be equally important for the company’s long-term hepatitis C franchise. Those results will look at the safety and antiviral activity of a couple of nucleotide polymerase inhibitors that Vertex licensed last June from Alios Biopharma. These are the key compounds to watch. Vertex licensed them just a few months before the bidding war started over rival drugs in the same class from Pharmasset and Inhibitex. (Leiden notes that the Alios drugs were “a very smart use of Vertex resources” because the company only paid $60 million upfront, plus $1.5 billion in future milestones, for the right to those compounds, before the Pharmasset/Inhibitex frenzy started.)
Vertex has said little publicly about the Alios compounds, but Leiden said during an interview earlier this month at the JP Morgan Healthcare Conference that he’s confident they will stack up well. Vertex has long has its eye on putting together a portfolio of antiviral combo meds, and settled on the Alios compounds after a careful review of all the nucleotide polymerase inhibitors in development. Vertex knew the Alios drugs were potent, that Alios had unquestioned intellectual property ownership of them, and the drugs could easily be combined with telaprevir and other kinds of hepatitis C medicines in the works, Leiden says.
“I really like the way we’ve positioned ourselves because we have the component parts,” Leiden says. “We have the best protease inhibitor, we have a non-nuc polymerase inhibitor (VX-222), and two different nucleotide polymerase inhibitors (ALS-2200 and ALS-2158).”
One analyst told me on background yesterday that analysts are curious to see what the Alios compounds can do, but nobody on the Street knows how to value them because Vertex hasn’t published any scientific papers on them yet.
Without getting into too many specifics, Leiden says the Alios drugs can kill many of the different genetic mutant forms of the hepatitis C virus, which can emerge when the virus is pressured by a new therapy. “We know they are potent, and they are pan-genotypic. Each could be anchor in all-oral regimen,” Leiden says. Vertex also could combine one of them with telaprevir, or its non-nucleotide inhibitor, VX-222. “We believe our pipeline could allow us to sustain our leadership for many years to come.”
Whatever Vertex learns from its trials this year, it has got to be hoping for black-or-white results. There won’t be much time to ruminate over the data, or to fuss over how to design the next clinical trials, as it can hear the stampede of competitive footsteps. “Our goal is to go to pivotal studies as quickly as possible,” Leiden says.
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