Most investors have a love/hate relationship with drug stocks: They love these stocks when things are going smoothly and drug candidates are breezing through the clinic, and hate them when compounds get delayed or fail to gain marketing approval. In the past two years, Rule Breakers pick Vertex Pharmaceuticals (Nasdaq: VRTX) has given investors much more to love than hate, and the rest of 2007 promises to be a defining year in its history.
Despite other promising products in its pipeline, Vertex has a $3.6 billion market cap as a result of its hepatitis C virus (HCV) drug candidate, telaprevir. In April more results from a phase 2 trial of the drug will be presented. These results could build on the phenomenal interim results of this study that Vertex announced in December. Vertex will also have completed enrollment in two other phase 2 telaprevir clinical trials this year.
What makes the coming years so important to Vertex is that if these results are positive enough and in conjunction with other clinical trials that the company is running with telaprevir, the drug could be sped to market, with a new drug application (NDA) being filed in late 2008. If efficacy results are less impressive versus the current standard of care for genotype 1 HCV patients, or safety issues become more prominent, then the telaprevir NDA could then be delayed by a year or more, as Vertex would need to wait for more phase 3 data to come in.
There are many novel compounds in development, from competitors like InterMune (Nasdaq: ITMN), Schering-Plough (NYSE: SGP), and Viropharma (Nasdaq: VPHM), to treat HCV. So the sooner Vertex can bring telaprevir to market and entrench it as one of the standards of care for HCV, then the easier time it will have in staving off this potential competition. These are all long-term competitive threats, as many of these compounds are just entering the clinic or are in the early stages of development; still, investors need to watch out for them.
The prevalence of hepatitis C is growing rapidly, with 3.4 million sufferers of the disease in the United States alone. If telaprevir can prove to be more efficacious and safer compared to existing therapies, it may radically change the way hepatitis C is treated, and has the potential to grab a large share of this multibillion dollar market. Shares of Vertex are trading near their 52-week lows, and if the telaprevir phase 2 efficacy results hold up in longer-term data, investors will not get a chance to buy the stock this cheaply again.
Tell us what you think about Vertex by giving it a rating in our Motley Fool CAPS database. If you want to learn what some of our crack analysts think about Vertex and other innovative companies, take a free trial to our Rule Breakers newsletter, where Vertex is up 171% since we recommended it.
Vertex Pharmaceuticals and InterMune are Rule Breakers recommendations.
Fool contributor Brian Lawler owns shares of InterMune but no other company mentioned in this article. The Fool has a disclosure policy.
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