Vertex Pharmaceuticals has tallied up an amazing amount of red ink in its 22-year history, but now it can say that all those long R&D years have created a profitable business.

The Cambridge, MA-based biotech company (NASDAQ: VRTX) said today that it generated $659 million in total revenues, and turned a profit of $221 million ($1.02 a share) in the third quarter that ended Sept. 30. Once before, the company had a quarterly profit in the 1990s from a one-time milestone payment, but this is the first time in Vertex’s history that it has generated a quarterly profit from its own product sales, says company spokeswoman Megan Pace. Vertex reached this point after ringing up an accumulated $3.8 billion deficit through mid-2011, according to its most recent quarterly report.

The emerging financial strength at Vertex is being driven by its new FDA-approved drug telaprevir (Incivek) for patients with hepatitis C. The product, first cleared for sale in the U.S. in May, has been creating a new wave of demand among patients which has been consistently underestimated by Wall Street. Vertex tallied $74.5 million in product sales in the previous quarter, and now has ramped up Incivek sales to $420 million in the period that ended on Sept. 30.

An estimated 3 million people in the U.S. are thought to have chronic hepatitis C infections, and about 170 million worldwide are believed to have the condition. Many patients have elected to go untreated before Vertex’s drug came along, because the prior drugs caused flu-like symptoms that last for almost a year, while offering a cure rate of less than 40 percent. Vertex’s drug has changed the situation, because when given in combination with standard pegylated interferon-alpha and ribavirin, it has cured about 80 percent of patients with this liver-damaging disease, and enabled patients to cut the treatment time in half. The drug costs about $49,200 for a full 12-week course of therapy.

Investors, many of whom have been burned by excessive hype around other biotech drug introductions, had much more tepid forecasts, especially since Vertex is competing with a new drug from Merck from the same class of protease inhibitors. Analysts only forecasted Vertex to generate $31.5 million of sales in the drug’s debut quarter, and about $300 million to $400 million in the period ended Sept. 30, according to reports from TheStreet.com.

“More than 17,000 people with hepatitis C have started treatment with Incivek since its approval in May, underscoring the strength of the launch,” said Nancy Wysenski, Vertex’s chief commercial officer, in a statement. “We are focused on further broadening the number of doctors using Incivek and are continuing to work with the hepatitis C community to increase awareness and screening and to help ensure patients are able to get the support they need.”

The financial performance enabled Vertex to bolster its cash reserves to $658.7 million as of Sept. 30, compared with $593.5 million on June 30, even while it was spending much bigger money on marketing. And, the company is looking to add a second revenue stream to its financial statements next year. This month, it filed an application with the FDA for clearance to sell ivacaftor (Kalydeco, aka VX-770) as a new treatment for cystic fibrosis, a deadly lung disease. That product could generate $700 million in annual revenue over time, according to analyst Tom Russo of Robert W. Baird.

Vertex didn’t provide any update for investors on its forecasts for quarterly sales, and profits.

Comments | Reprints | Share:          

Quite a few biotech entrepreneurs are thinking hard these days about how to reinvent the industry’s wobbling business models, and one of these interesting experiments is happening at San Diego-based aTyr Pharma.

John Mendlein, the well-known entrepreneur who splits time as the executive chairman at both San Diego-based aTyr Pharma and Fate Therapeutics, says that aTyr is working on setting up an unusual corporate structure that he hopes will make it easier to cut deals with a wide variety of partners with both for-profit and non-profit status. He’s not yet going into great detail, but aTyr’s basic idea is to make it so nonprofit disease foundations can support aTyr’s work, alongside government agencies like the National Institutes of Health, and the usual suspects in Big Pharma and Big Biotech.

“As we have explored different levels of therapeutic breadth, we feel it’s incumbent on the company to come up with a different business plan to fully exploit the new biology,” Mendlein says. “We think the proteins we’re working on lend themselves to striking relationships with different entities.”

aTyr is one of those classic biotech stories you don’t see much anymore, in which gobs of venture capital ($47 million so far) gets thrown behind a prominent scientific founder (Paul Schimmel) with a really early-stage idea with potential to crack open a new field of biology. The company (pronounced A-tire) is working on a new class of natural proteins called “physiocrines” that send signals between cells. The company, which we wrote about last October, is seeking to develop genetically engineered copies of physiocrine proteins so they can be given as replacement therapies for people with deficiencies, while at the same time, working to better understand the biology so that physiocrines could become new targets for conventional drugs.

The company dropped a hint of the kind of partnerships it has in mind when it hired Melissa Ashlock as its new vice president of external scientific alliances and human genetics. Ashlock, formerly a researcher at the NIH, was one of the people at the nonprofit Cystic Fibrosis Foundation who helped craft a partnership that poured more than $75 million into developing a cystic fibrosis drug with Cambridge, MA-based Vertex Pharmaceuticals (NASDAQ: VRTX). Mendlein was one of the people on the other side of that deal, when he was at San Diego-based Aurora Biosciences, the original developer of the drug now known as VX-770. (Vertex acquired Aurora Biosciences in a 2001 deal initially valued at $592 million.) That drug has served as something of a model to many nonprofits and biotech companies—particularly since it went on to become such a clear hit in later clinical trials.

John Mendlein is executive chairman of San Diego-based aTyr Pharma

Mendlein, who’s both a lawyer and a scientist by training, said the Aurora/CF Foundation deal was a “really good model,” for supporting development of a drug for a small patient population. But he doesn’t want to be hemmed in to doing deals just like that, and aTyr wants to keep the proverbial options open to classic Big Pharma/little biotech collaborations.

This effort, Mendlein says, is being driven by the science. For example, there’s one case of a physiocrine that’s associated with a rare genetic disease (like cystic fibrosis) in which a nonprofit foundation might be the right entity to help finance further studies, and help do a lot of the legwork to build a network among patients and academic researchers. In another case, aTyr has a physiocrine program that could have much broader market potential for inflammatory conditions—the sort of thing that excites dealmakers in Big Pharma.

“We want to create a corporate mechanism to accommodate those different kinds of relationships,” Mendlein says.

Balancing the interests of all those different parties, plus aTyr’s investors and early employees, doesn’t sound like it will be easy. He didn’t offer a timetable for when the ink will be dry, and he can talk in more detail about the new aTyr structure. “I’m thinking of getting a second home on Mars, because the days are longer there,” he joked a couple weeks ago, during a break at the Biotechnology Industry Organization’s annual convention.

Comments (1) | Reprints | Share:          

This week we’ve seen news of acquisitions and funding, as well as longer articles on strategy and research moves for New England’s life sciences firms.

—BL Healthcare, a provider of telemedicine products that is based in Foxboro, MA, has bumped its Series A funding round up to $4.9 million, with another $2 million in equity-, debt-, and rights-based financing, an SEC filing showed.

—Luke took a look at the moves that Cambridge, MA-based Epizyme has been making in scoring deals with Big Pharma companies. GlaxoSmithKline (NYSE: GSK) paid the three-year-old biotech $20 million upfront with potentially another $630 million in milestones for a drug discovery partnership, and Japanese firm Eisai Pharmaceuticals will pump $6 million upfront and potentially $200 million in milestones into Epizyme for a collaboration to develop cancer drugs.

—Cambridge-based Vertex Pharmaceuticals (NASDAQ: VRTX) said the Phase III study of its cystic fibrosis drug, VX-770, met its primary goal among patients ages 6 to 11 of improving lung function through 24 weeks, showing that the drug is working about as well in children as it did in older patients with the genetic disorder. The 48-week study of 52 patients is still ongoing, but at 24 weeks, children on the drug showed a mean absolute improvement from baseline in lung function of 12.5 percent.

—Follica, the baldness treatment developer that got started in Boston in 2006, is working to protect its technology that uses lithium treatments to stimulate new hair growth with a patent application, filed in September and published this March. But that’s only one piece of the multiple areas of research that Follica is focusing on, CEO and president William Ju told Ryan.

—Worcester, MA-based RNA interference drug developer RXi Pharmaceuticals (NASDAQ: RXII) announced it has agreed to acquire Scottsdale, AZ-based Apthera, a developer of peptide immunotherapies for cancer. Apthera shareholders will get 4.8 million of RXi’s shares, which were valued at $1.50 before the deal. As part of the agreement, RXi CEO Noah Beerman will resign and will be replaced by RXi board member Mark Ahn.

Comments | Reprints | Share:          

Vertex Pharmaceuticals (NASDAQ:VRTX) reported today positive results from an ongoing late-stage study of its cystic fibrosis drug, VX-770, that show that the drug is working about as well in children as it did in older patients with the genetic disorder.

The Cambridge, MA-based company said that the Phase III study of the drug, which aims to improve the function of a defective protein with a specific mutation called G551D, met its primary goal among patients ages 6 to 11 of improving lung function through 24 weeks. The 48-week study involving 52 patients is ongoing. At 24 weeks, children on the drug showed a mean absolute improvement from baseline in lung function of 12.5 percent, slightly better than the still-impressive 10.6 percent improvement after 24 weeks among CF patients ages 12 and up who participated in a separate Phase III study described on February 23. The lung function test used in the study measures how much air a patient can exhale in a second.

The latest study also showed improvements in weight gain and reductions in sweat chloride levels in patients who took VX-770. People with the disease, which leads to the production of thick, sticky mucus and chronic lung infections that can be fatal, often lose weight in part because of the lung infections and nutritional problems that result from the disorder. And high levels of sweat chloride in patients with the disease are a key indicator of the defective CF protein, which fails to properly transport chloride ions through cell membranes. Vertex said that adverse events during the study included respiratory issues that were observed in both patients on its drug and those who took a placebo.

The positive results from the study of children on the drug and those from the trial involving older patients bode well for Vertex as it plans to submit applications including the data for U.S. and European approval of the VX-770 in the second half of 2011. The drug could become a game-changing therapy for certain patients with CF. There are about 30,000 patients in the U.S. and 70,000 patients worldwide with the genetic disorder; about 4 percent of them in the U.S. have at least one copy of the G551D mutation.

“The data announced today are highly encouraging because children with CF tend to be healthier than adults and significant improvements in lung function may be harder to demonstrate in a clinical study,” Robert Beall, president and CEO of the Cystic Fibrosis Foundation, which has supported the development of VX-770, said in a statement. “Data from Phase 3 studies of VX-770 in people with the G551D mutation provide strong support for the concept that addressing the defective protein that leads to CF may significantly improve outcomes for patients and give hope for the future of other CF treatments that repair the basic defect of the disease.”

Comments (1) | Reprints | Share:          

—Cambridge, MA-based Quanterix partnered up with Novartis Diagnostics, the unit of healthcare giant Novartis that tests the safety of 80 percent of the U.S. blood supply. Novartis will run tests to see how effective Quanterix’s device is at pinpointing a protein biomarker in the blood that is linked to an undisclosed neurological disorder. Terms of the arrangement weren’t disclosed.

—New York pharmaceutical company Forest Laboratories (NYSE: FRX) paid $1.2 billion ($30 per share) upfront to acquire Newton, MA-based Clinical Data (NASDAQ: CLDA), a drug developer that won FDA approval last month for its anti-depressant. Forest could pay another $6 per share to Clinical Data shareholders if the drug, vilazodone, hits certain sales goals over the next seven years.

—Watertown, MA-based Athenahealth (NASDAQ: ATHN) formed an alliance with Microsoft (NASDAQ: MSFT) to make the companies’ systems more compatible and easier for healthcare professionals to use together to get a single view of patient records for hospital and outpatient visits.

—Cambridge-based Vertex Pharmaceuticals (NASDAQ: VRTX) announced it had passed a pivotal clinical trial of 161 cystic fibrosis patients who were randomly assigned to the company’s VX-770 pill or  a placebo. Those who received the Vertex drug showed a 17 percent relative improvement in their ability to force out air from their lungs in one second (a measure of lung function). Vertex’s stock shot up 15 percent the morning of the news, to hit $44.03 per share at 10:14am.

—Greg took a look at iAMscientist, a Brookline, MA-based startup developing a global community and resource site for researchers and institutions in science, technology, and medicine. The company has raised $1 million in seed funding from a group that includes famed Harvard chemist George Whitesides, and more than a dozen companies, such as Genzyme.

—Cambridge-based Metamark Genetics is moving out of stealth mode, wrote my colleague Ryan, who caught up with the company’s relatively new CEO Mark Straley. The startup—which was founded by top scientists at Harvard and elsewhere—is out to release a molecular test to provide prognostic information that will help physicians make better treatment decisions.

—Waltham, MA-based lab instruments and services provider Thermo Fisher Scientific (NYSE: TMO) announced it had sold off its Athena Diagnostics and Lancaster Laboratories units for a total of $940 million in cash, to boost shareholder value. Madison, NJ-based lab testing firm Quest Diagnostics is paying $740 million for Athena, and Eurofins Scientific of Brussels, Belgium, will shell out $200 million to acquire Lancaster, a provider of contract testing and analysis services to pharmaceutical companies.

Comments | Reprints | Share:          

Vertex Pharmaceuticals’ winning ways are being felt on Wall Street this morning. The Cambridge, MA-based drug developer’s (NASDAQ:VRTX) shock price was up 15 percent to $44:03 per share as of 10:14 am Eastern time today as investors reacted to positive results the firm revealed this morning from a late-stage trial of its treatment VX-770 for certain patients with cystic fibrosis. My colleague Luke Timmerman provided the details this morning of the game-changing study for certain patients with the genetic illness that causes thick mucus to build up in their lungs. The results follow the company’s impressive results from late-stage studies of its experimental treatment for hepatitis C infections, telaprevir. The company now has a market value of about $9 billion.

Comments | Reprints | Share:          

Vertex Pharmaceuticals has been moving in this direction for a long time, but it can now say with confidence that it is on its way to shaking up the standard of care for not just one disease this year, but two.

The Cambridge, MA-based biotech company (NASDAQ: VRTX), which has operations in San Diego, is announcing today it has passed a pivotal clinical trial of 161 patients with cystic fibrosis who were randomly assigned to get the company’s VX-770 pill or a placebo. The study found that patients on the Vertex drug had a 17 percent relative improvement in their ability to force out air from their lungs in one second—a common measure of success in treating lung disease—compared with those on a placebo. The effect lasted over the entire 48-week course of the study. Side effects included headache, upper respiratory tract infections, nasal congestion, rash, and dizziness, although more patients on the placebo group dropped out of the study early because of side effects, Vertex said.

While 17 percent relative improvement in breathing capacity for people with a deadly lung disease might not sound like much, this result represents a watershed for a portion of the 30,000 people in the U.S. with cystic fibrosis. Vertex is valued primarily for a drug (telaprevir) that has shown an ability to double the cure rate for patients with hepatitis C liver infections, but the company could have a similar life-changing effect for many patients with this genetic disorder. Cystic fibrosis, the result of a genetic mutation, causes the buildup of thick, sticky mucus in the lungs, which suffocates people over time, allowing a typical life expectancy of about 37 years. Doctors currently treat the symptoms of the disease, but Vertex’s drug could become the first FDA-approved therapy that works by altering an underlying faulty protein at work in patients with cystic fibrosis.

This drug isn’t for everybody—it was tested in a subpopulation of just 4 percent of cystic fibrosis patients with an abnormality known as G551D—but it’s the kind of result that scientists hope they will be able to build on to expand treatment to more patients with the deadly lung disease.

The results Vertex is releasing today from a study called Strive, which will be discussed later this year at a medical meeting, are “far beyond our expectations,” Vertex said in a statement. The firm plans to put together an application before the end of this year to seek regulatory clearance in the U.S., and Europe, to start marketing VX-770.

“The results from Strive are highly encouraging for the CF community and provide scientific evidence supporting our long-standing belief that targeting the underlying defect of CF may have a profound effect on the disease,” said Robert Beall, the president and CEO of the Cystic Fibrosis Foundation, in a company statement. “We have much more to do to eliminate this disease, but these data are extremely exciting.” (The CF Foundation helped develop VX-770.)

Vertex’s trial would have been deemed a success if it delivered just 4.5 percentage points of absolute improvement in patients’ breathing, as measured by the standard clinical trial goal (forced expiratory volume in one second, or FEV1). The actual result, in absolute terms from the beginning … Next Page »

Comments (3) | Reprints | Share:          

John Flatley, a real estate developer and philanthropist, has founded an investment group called Flatley Venture Capital to back life sciences startups with potential treatments for the genetic disease cystic fibrosis. Flatley, who has a close family member with the disease, told me he launched the venture group within the last few months.

Flatley Venture Capital, unlike a traditional VC firm, isn’t primarily focused on making profits on its investments, Flatley says. The venture outfit aims to provide between $200,000 and $2 million to support biotech startups that might not otherwise be able to afford to develop their technologies for the cystic fibrosis market, which consists of 30,000 patients in the U.S. and about 70,000 worldwide—numbers that pale in comparison to the cancer and heart disease markets. Flatley only expects to break even with his investments from the fund, he says.

Flatley, the son of the late Boston-area real estate mogul Thomas Flatley, has hired a Harvard University graduate named Alex Pickett as a senior analyst to evaluate deals for the venture group. While the group hasn’t made any investments yet, Flatley says “it’s going to be a substantial fund.” He says he is already considering backing two companies, which he declined to name.

This isn’t Flatley’s first foray to help advance cystic fibrosis treatments. He previously led the creation of a nonprofit laboratory, now called the Flatley Discovery Lab, in the Charlestown neighborhood of Boston. The nonprofit effort, quietly launched in 2008, has the mission of finding new drugs for cystic fibrosis, which causes the body to produce thick mucus that leads to chronic lung infections and poor absorption of nutrients. (The median life expectancy of someone with the disease was about 37 years in 2008).

When word got out last year that Flatley had started the research lab, formerly known as … Next Page »

Comments (5) | Reprints | Share:          

Investors apparently have an endless appetite for shares of Vertex Pharmaceuticals, so the company is taking advantage of this good fortune to raise another mountain of cash. The Cambridge, MA-based biotech said its latest stock sale this year has raised $443 million.

The company (NASDAQ: VRTX) fattened up its cash hoard by selling 11.5 million new shares of stock at $38.50 apiece, or about $1 cheaper than yesterday’s closing market price. The deal was underwritten by Goldman Sachs, Bank of America/Merrill Lynch, JP Morgan Securities, and Morgan Stanley. The underwriters are getting options to buy another 1.5 million shares at the same terms.

Vertex has been raising—and spending—huge sums of money this year to support experimental drugs that it hopes will establish new standards of care for a chronic liver infection, hepatitis C, and for a deadly lung disease, cystic fibrosis. Before the latest financing, Vertex raised $313 million from investors in February, another $105 million in July through an amended licensing deal for its hepatitis C drug in Japan, and in September, it pulled in another $155 million in debt financing tied to its European commercial prospects. Last month, it shed $109 million in debt by offering noteholders a chance to convert their holdings into stock.

Even after flooding the market with new shares through those deals this year, demand is still there: Vertex stock is still up about 30 percent since Jan. 1.

Vertex said it had $856 million in cash and investments on its books at the end of September in its most recent filing, so this financing means that it will have socked away well more than $1 billion. It will take a lot more investment to commercialize the Vertex drugs if they are approved for sale by regulators, but analysts say the potential payoffs will justify the expense. Demand for the Vertex drug for hepatitis C alone is expected to be huge, and it has a chance to exceed $2.6 billion in U.S. sales alone in 2013, according to a Cowen & Company estimate.

What is making investors so eager to pony up? It really takes some time and effort to understand the clinical trial results thus far for telaprevir for hepatitis C, and for VX-770 for cystic fibrosis. I won’t recap all of that for today’s financial story, but here are a couple of links to stories we’ve written this year explaining why researchers are so interested in the drugs for hepatitis C and cystic fibrosis.

Comments (1) | Reprints | Share:          

Bonnie Ramsey remembers the dark days of treatment for cystic fibrosis. About 30 years ago, when she devoted her career to the research and treatment of this genetic lung disease, children who were diagnosed had a life expectancy of about 17 years. The outlook is much brighter for patients now, as quality of life has improved significantly, and median lifespans have doubled.

But part of what makes Ramsey more optimistic today is an experimental treatment from Vertex Pharmaceuticals (NASDAQ: VRTX), based in Cambridge, MA. This drug, VX-770, along with a related compound, VX-809, have the potential to be the first drugs ever to fix underlying genetic defects at the root of this condition that affects 30,000 people in the U.S., she says.

Ramsey’s opinion counts for a lot. She’s a clinical researcher affiliated with Seattle Children’s Hospital, and the University of Washington, and serves as executive director of the Cystic Fibrosis Foundation’s Therapeutic Development Network, in which she coordinates a 77-site network of clinical trial sites dedicated to helping companies develop new therapies for this rare disease.

The work for the CF Foundation is how she first got exposed to San Diego-based Aurora Biosciences in 2000, the company that began developing the new drug and was later acquired by Vertex. The CF Foundation has contributed more than $75 million to Vertex to keep the program going over the years, so this is a relationship that’s hugely important to both sides. The drug has now shown enough promise that it has advanced into the final stage of clinical trials needed to win FDA approval.

Ramsey spoke with me in depth about the changing standard of care in cystic fibrosis, why the Vertex programs matter, and how foundations are playing an increasingly important role in financing clinical trials. Here is an edited account of the conversation:

Xconomy: So you got started back in the dark days of treatment for cystic fibrosis, 30 years ago. What have been the major advances since then?

Bonnie Ramsey: There have been advances in terms of research, and those have been phenomenal. Things really turned around in the 1980s. Everyone is aware the gene was identified in 1989, but … Next Page »

Comments (16) | Reprints | Share:          

Vertex Pharmaceuticals (NASDAQ: VRTX), the Cambridge, MA-based biotech company which has significant operations in San Diego, said today it has started a pivotal clinical trial program for its drug candidate for cystic fibrosis, a genetic lung disease. The company is running a series of three trials of VX-770, a drug that aims to be the first of its kind to target the defective protein that causes cystic fibrosis. The trials will aim to enroll 240 patients at 110 clinical trial sites in North America, Europe, and Australia.

Comments (2) | Reprints | Share:          

Vertex Pharmaceuticals has been around the block with biotech hedge funds. These are the people who aim to get rich trading volatile stocks second-to-second, and make big bets, long or short, on whether an experimental drug will work. Now that Vertex has passed some of the riskiest stages of drug development, the company figured it was time for steady, buy-and-hold investors to support the next phase, as it morphs into a commercial player.

That was one of the insights that I gathered yesterday in a conversation with Vertex chief financial officer Ian Smith. He was in a pretty good mood—as you might be too, if you’d just helped your company raise $320 million in a secondary stock offering. The financing is important because it gives Vertex (NASDAQ: VRTX) enough cash to operate until it introduces its lead drug to the market and starts generating positive cash flow, according to analyst Thomas Russo of Robert W. Baird & Co. Especially in the midst of a recession, that’s good news for Vertex’s 1,300 employees in Cambridge, MA, and 200 in San Diego.

But beyond the stability that comes with the dollars, Smith was just as enthused about being able to recruit the type of long-term shareholder he wants backing Vertex for the next five years. Vertex was able to attract these blue-bloods because of growing interest from investors in a pair of drugs that aim to transform the standard of care for patients with hepatitis C and cystic fibrosis. Since these drugs have continued to make important progress, and telaprevir, the hepatitis drug, is thought to be worth at least $2 billion a year in U.S. sales by 2013, Vertex saw an opportunity to invite in new investors who want to hold onto shares throughout that trajectory, not just between now and next Tuesday. To get some insight into the company’s thinking, look at its stock chart from 2007, when shares fell 37 percent, even though the company continued to make progress.

“We as a company have been trying to align our shareholder base with the progress of the company,” Smith says. “These are people who invest for the long haul.”

Smith wouldn’t give all the names yet of the new crew of investors, but this deal went to a small number of investors—three “anchor” funds that took the biggest stakes, two other “high-quality” funds, and a few others, Smith said. What they all have in common is that they like to invest in late-stage biotech companies that have cleared major risky steps, and need to get to the next level. These funds typically backed some of the industry’s bellwethers–Genentech, Gilead Sciences, Biogen Idec, and Celgene—when they reached this stage, Smith says. One of them is San Francisco-based Capital World Investors, although he said he couldn’t yet name the others.

Smith, as well as other Vertex leaders, have been cultivating relationships … Next Page »

Comments | Reprints | Share:          

Vertex Pharmaceuticals has struck a deal to raise a jaw-dropping $320 million in a secondary offering of stock. The biotech company, which has 1,300 employees at its Cambridge, MA headquarters and 200 in San Diego, is rallying investors around drug candidates that it hopes will set new standards of effectively treating hepatitis C and cystic fibrosis. It is in the final, hugely expensive stages of development to prove that point, and this offering could represent an important test whether investors still have the appetite for this sort of classic biotech risk.

Vertex (NASDAQ: VRTX) said it is offering 10 million new shares, priced at $32 each. Merrill Lynch and Cowen & Co. are underwriting the $320 million deal. The transaction hasn’t officially closed yet, so company officials can’t comment under SEC rules, but we expect to hear more about the strategy when the deal is done.

This much is clear: The company is in the final stage of clinical trials with telaprevir, which is attempting to be a first-in-class protease inhibitor drug for hepatitis C, a chronic liver disease. This drug has shown an ability to almost double the cure rate of standard meds, with a course of treatment that takes half as long. The drug has an opportunity to exceed $2.6 billion a year in U.S. sales in 2013, according to analyst Rachel McMinn of Cowen & Co. The cystic fibrosis drug, VX-770, is being primed for the final stage of clinical trials this year. It represents an opportunity to develop the first oral pill that can affect the underlying protein abnormality that causes the deadly lung disease.

While $320 million might sound like a lot of money to most people, this is actually not a whole lot to Vertex. The company has run up an accumulated deficit of $1.9 billion since it was founded 20 years ago. This year alone, the company expects to report a breathtaking loss of $495 million to $530 million as it conducts a big push to turn telaprevir and VX-770 into FDA-approved products.

The company was already in a position absorb that kind of loss, entering this year with about $832 million in cash reserves. But the new cash will definitely pad the cushion as it makes the switch from a drug development organization into a marketer of new drugs judged on its ability to maximize profits. Earlier this month, Vertex signaled its willingness to make that transition, as its charismatic founder, CEO Josh Boger, announced he will step down and be replaced by Matthew Emmens, a veteran hand at commercializing drugs within big drugmakers.

Investors might balk at the thought of how a new offering will dilute the value of existing shares, but that hasn’t dampened the demand for Vertex stock. The company’s last stock offering was just six months ago, when 7.5 million shares were offered at $25.50 apiece. The stock price has climbed 25 percent since then.

Comments (1) | Reprints | Share:          

Vertex Pharmaceuticals has some good news this morning on its experimental drug for cystic fibrosis. The treatment, taken an oral pill, helped patients breathe better for 28 days, at both a high and low dose, than did a placebo. The drug didn’t appear to cause any serious side effects.

The findings for VX-770 were from a mid-stage study of 19 cystic fibrosis patients with a specific, and rare, mutation called G551D. The results confirm an earlier look at the data after 14 days, which Cambridge, MA-based Vertex (NASDAQ: VRTX) first announced in March, and which we highlighted again in August. Now that researchers say VX-770′s effect appears to be holding up, Vertex said it plans to finalize work with regulators around the world on the design for a pivotal clinical trial to start next year. The data will be presented later this week at the North American Cystic Fibrosis Conference in Orlando, FL.

If it can be shown to work in a larger study, the Vertex drug will be the first to treat cystic fibrosis by directly targeting this underlying mechanism, stimulating the faulty protein that causes the disease, researchers say. In contrast, other cystic fibrosis drugs on the market treat symptoms of the disease (for instance, Novartis’ inhalable antibiotic Tobi, which kills bacteria that build up in the lungs). About 30,000 children and young adults in the U.S. have cystic fibrosis, which causes a buildup of thick, sticky mucus in the lungs, and kills patients at an average age of about 37.

The new drug has its roots in work done in San Diego at Aurora Biosciences, which Vertex acquired in 2001 for more than $500 million. The treatment has also gotten a lot of help from the Cystic Fibrosis Foundation, which has pumped about $79 million into the program since it began.

The results, while still preliminary, showed that patients had a 11.6 percent improvement in what’s called FEV1, a measurement of lung capacity, after 28 days of taking a low dose of the Vertex drug twice a day. That was actually a little better than the high dose, which showed an average improvement of 7.4 percent.

Before patients get too excited, the drug isn’t for everybody. Only about four percent of patients with cystic fibrosis have the specific gene mutation that might be helped by this treatment, Vertex says. Still, these results will certainly get some buzz from researchers in Orlando at its presentation on Thursday, and it paves the way for an important clinical trial for Vertex in the coming year.

Comments | Reprints | Share:          

All eyes aimed at Vertex Pharmaceuticals tend to focus, understandably, on its experimental drug for hepatitis C. The Cambridge, MA-based company showed in mid-stage clinical trials that the drug, called telaprevir, could eliminate the liver-damaging virus from the blood for about twice as many patients as do standard treatments; the firm is now on a quest to prove it to regulators in an ongoing clinical trial of 1,050 patients called Advance.

Yet lost amid the hepatitis C buzz in yesterday’s second-quarter earnings call was Vertex’s (NASDAQ: VRTX) news that it is making headway with another product, an experimental drug for cystic fibrosis. An estimated 30,000 children and young adults in the U.S. have the genetic disease, which largely affects the lungs and reduces patients’ life expectancy to an average of 37 years.

Vertex said it has completed enrollment in the second part of a mid-stage clinical trial that will look at how patients perform on the drug compared with a placebo for 28 days. By the end of the year, Vertex said, the company should have data which, if positive, will position the firm to start a pivotal clinical trial program in 2009 that could pave the way for approval in the U.S. and Europe.

Back in March, Vertex released data showing that VX-770 was able to improve lung function by 10 percent for patients who took a high dose of the drug for 14 days, compared with less than 1 percent improvement for those on a placebo. The pill is designed for a subset of cystic fibrosis patients who have one of several mutations that cause the disease by producing malfunctioning versions of a protein called CFTR. That protein normally transports chloride ions out of certain types of cells; when it’s faulty, chloride ions get stuck inside the cells, leading to a buildup of mucus in the lungs, infections, and lung damage, Frank Accurso, director of the Cystic Fibrosis Center at Children’s Hospital in Denver, explained in an interview I did while I was at Bloomberg News.

If it works, the Vertex treatment will be the first to treat cystic fibrosis by directly targeting this underlying mechanism, stimulating the faulty protein to let chloride ions pass through the cells’ membranes more normally, said Accurso, the lead investigator of the study. In contrast, other cystic fibrosis drugs on the market treat symptoms of the disease (for instance, Novartis’ inhalable antibiotic Tobi, which kills bacteria that build up in the lungs). One patient in the Vertex study had a serious adverse event when lung function worsened, but it wasn’t considered drug-related, Accurso said at the time.

One other notable aspect of this cystic fibrosis program is that more than just Vertex shareholders have skin in the game. The Cystic Fibrosis Foundation, one of the better-financed and organized patient advocacy groups out there, co-sponsored the VX-770 trial with Vertex and has invested $79 million in the project since it began. Apparently, the foundation likes the returns it sees so far. “The emerging data for VX-770 represents the most exciting results we’ve seen from a Phase 2 trial and increase our confidence that we’re on the right track,” said Robert Beall, CEO of the foundation, in a statement in March.

That’s all the more reason to stay tuned for the 28-day study results later this year. Even if everybody in the market remains laser-focused on telaprevir.

Comments | Reprints | Share: