Concert Pharmaceuticals has been plugging away with an experimental cystic fibrosis drug that, if successful, might someday pose a threat to Vertex Pharmaceuticals. So rather than wait to find out, Vertex today paid $160 million in cash, up front, to bring the drug in house.
Boston-based Vertex (NASDAQ: [[tickerVRTX]]) has acquired CTP-656, a CF drug currently in Phase 2 testing, from Concert (NASDAQ: CNCE). Vertex could pay Concert, of Lexington, MA, another $90 million in downstream payments if the drug progresses and eventually hits the market in the U.S. and other countries. The deal is subject to vote from Concert’s shareholders.
Shares of Concert surged 34 percent in pre-market trading on Monday.
The acquisition is a defensive move for Vertex, which—wary of its short-lived run as a hepatitis C powerhouse—has used a group of deals to help protect its growing and critical cystic fibrosis franchise. After some 27 years, Vertex is finally close to being a sustainably profitable drugmaker, thanks to the 2012 FDA approval of ivacaftor (Kalydeco) and the 2015 nod for ivacaftor-lumacaftor (Orkambi)—the first drugs to address the molecular malfunction that underlies CF. Combined, both drugs generated nearly $1.7 billion in sales in 2016, up from $982 million in 2015.
But Vertex needs more to fully turn the corner. Despite significantly cutting its losses last year, Vertex still ended up $112 million in the red. In addition, competition is heating up from a Galapagos and AbbVie (NYSE: ABBV) partnership and others.
Two things will help. First, growing the market for its CF treatments. Ivacaftor and ivacaftor-lumacaftor are pills that improve CF patients’ lung function but don’t cure the disease. Ivacaftor is approved only for a roughly 5 percent subset of the 70,000 patients worldwide with CF. But Vertex sees the drug as the backbone of “cocktails” that would treat a wider swath of patients with different genetic characteristics. The ivacaftor-lumacaftor pill is the first such combination, and is approved for about a third of patients with the disease.
This year Vertex has data coming on three more combinations. One is a Phase 3 trial of a combination of tezecaftor and ivacaftor. The second is Phase 2 data from a pair of three-drug combinations—one that incorporates experimental VX-152, and the other VX-440.
Secondly, Vertex has used dealmaking to bring in more experimental CF medicines. Deals with Parion Sciences, Moderna Therapeutics, and CRISPR Therapeutics are part of a plan to bet on a variety of CF drugmaking approaches, which Vertex hopes will help it maintain dominance and protect itself from the quick rise and fall it experienced in hepatitis C. Now it’s added Concert’s CTP-656 to the list.
Concert takes existing drugs with proven safety profiles and selectively replaces a few of their hydrogen atoms with deuterium atoms to change how they are metabolized in the body—making them potentially safer, more potent, or less liable to interact badly with other drugs. CTP-656 is Concert’s attempt to boost the capabilities of ivacaftor, and while the company hasn’t shown just yet that it’s superior to Vertex’s drug in patients—it has only accrued early data in healthy volunteers—Vertex has clearly seen enough to bring it in just in case. Executive VP and chief medical officer Jeffrey Chodakewitz said in a statement the company plans to test CTP-656 in a variety of combination regimens. Vertex has acquired rights to all of Concert’s preclinical CF work as well.