Vertex Gets Out of TRAFFIC and TRANSPORTs Shares 40% Higher

Vertex Pharmaceuticals cystic fibrosis combination looks good enough to get approved and knock down sales of antibiotics from Gilead Sciences and Novartis.

Jun 24, 2014 at 7:01PM

Sometimes good enough really is good enough. But only if you're treating the right patient population.

Vertex Pharmaceuticals (NASDAQ:VRTX) seems to be really good at picking them.

The biotech gets a passing grade for improving lung function in its clinical trials dubbed "TRAFFIC" and "TRANSPORT" testing the combination of Kalydeco and lumacaftor. And the company deserves a little extra credit for decreasing pulmonary exacerbations and helping cystic fibrosis patients gain weight. See Stephen Simpson's article for a full breakdown of the data.

Shares shot up 40% today, but it wasn't because the data was great. It wasn't. A mean absolute improvement in lung function of 2.6-4.0 percentage points is better than nothing, but it isn't anything to get excited about. By comparison, Kalydeco on its own produces a 10.6-12.5 percentage point change in mean absolute improvement in lung function compared to placebo in cystic fibrosis patients with a different mutation.

It's that "better than nothing" that's caused shares to climb higher today. There aren't any drugs to treat cystic fibrosis patients with the mutation that the patients in the trials have. There are a couple of antibiotics -- Gilead Sciences' (NASDAQ:GILD) Cayston and Novartis' (NYSE:NVS) Tobi -- that are used to treat patients when they get the inevitable bacterial infection in their lungs, but the drugs don't actually improve lung function. Gilead Sciences and Novartis could see their sales go down given the reduction in pulmonary exacerbations if Vertex's combination is approved.

And it will get approved
Again it comes down to the lack of treatments. The Food and Drug Administration is highly likely to approve the drug because it's better than placebo. Side effects seemed mild enough although there were a few cases of early signs of liver damage; they seemed to go away when patients went off the drug so the FDA should give the company a pass given the unmet need.

After the combination is approved, doctors will prescribe it because, again, there are no other options. A slight improvement is better than nothing. Fortunately the drug appears to work over the entire 24-week study, so it could be a drug that patients stay on for life.

Not like the last time we saw this story
This isn't the first time Vertex has hit a pot of gold. Its last foray into treating diseases with few options was in hepatitis C. The treatment at the time only cured about 50% of patients and had nasty side effects. Vertex's Incivek substantially improved the cure rate and decreased the time patients had to deal with the side effects from the existing drugs.

Two problems quickly arose though. Patients only needed to take one course of treatment, so to increase sales, Vertex had to find more and more new patients. And Gilead came along with a better treatment knocking sales down substantially.

Vertex won't have to worry about the treatment issues since its drugs don't cure cystic fibrosis patients, but investors should keep an eye on AbbVie and Galapagos that are developing competing cystic fibrosis drugs. Fortunately they're years away from getting drugs on the market, so Vertex has plenty of time to react.

In fact, Vertex is working on a new drug, VX-661, which might be used in combination with Kalydeco and lumacaftor. Let's hope the triple combination performs better than "good enough."

This company is going beyond good enough.
There is a product in development that will revolutionize not how we treat a common chronic illness, but potentially the entire health industry. Analysts are already licking their chops at the sales potential. In order to outsmart Wall Street and realize multi-bagger returns, you will need The Motley Fool's new free report on the dream-team responsible for this game-changing blockbuster. CLICK HERE NOW.

Brian Orelli has no position in any stocks mentioned. The Motley Fool recommends Gilead Sciences and Vertex Pharmaceuticals. The Motley Fool owns shares of Gilead Sciences. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information