Vertex: The Year Ahead

Vertex Pharmaceuticals (NASDAQ: VRTX  ) presented at the JPMorgan Healthcare Conference on Monday, but investors had a sneak peek at the 2013 plans. I already touched on the company's rough patch last year when the third-quarter report showed a faltering lead drug. How does Vertex plan to have a better year?

Strengthen hepatitis C position
Vertex has two approved drugs: Incivek for hepatitis C and Kalydeco for cystic fibrosis. The most recent quarterly report showed Incivek revenues dropped 40% year-over-year. What happened?

Incivek currently stands at the top of hep C treatments, but its reliance on interferon became a problem. A new batch of interferon-free drugs is coming up the pipelines led by the likes of Gilead (NASDAQ: GILD  ) and AbbVie (NYSE: ABBV  ) . The slow onset of hepatitis C means that doctors and patients can hold off on Incivek and wait for the other treatments.

VX-135 may alleviate this problem, but it's too early to predict success potential. The all-oral treatment will undergo three phase 2 trials early this year testing it in combination therapies. One of the paired drugs is Johnson & Johnson's  (NYSE: JNJ  )  simeprevir, which belongs to the same protease inhibitor class as Incivek. Pivotal trials could begin in 2014.

Expand cystic fibrosis position
Kalydeco is the first cystic fibrosis drug to treat the underlying cause of the disease. But the drug approved for one mutation of the disease, which represents a small subset. The company wants to expand Kalydeco's indications to cover the majority of patients.

A number of phase 3 trials will test Kalydeco in other genetic mutations not previously studied. Those trials will begin reporting data in the third quarter. Vertex will also examine the drug's potential as a combination therapy with its own pipeline projects VX-809 and VX-661. The VX-809 phase 3 trial should initiate in the first half of the year, around the same time the phase 2 data for VX-661 reports.

Kalydeco received Breakthrough Therapy Designation by the FDA for both its solo form and as a combination therapy. That designation was created with the recent Food and Drug Administration Safety and Innovation Act, so its power isn't clear. But it means an expedited review process, which is always a welcome thing.

Finding an autoimmune collaborator
VX-509 is moving through the pipelines as a rheumatoid arthritis treatment with phase 2b data due later this year. But Vertex hopes to expand into psoriasis and irritable bowel syndrome. The company has begun reaching out to potential collaborators in hopes of securing some additional resources.

Foolish final thoughts
Vertex has other pipeline projects, but the drugs mentioned here are the ones to watch for the next year. It's crucial for the company to offset the losses that Incivek suffered. Investors should have a better idea by year's end on whether the hepatitis C and cystic fibrosis focus will pay off.

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