Vertex's Billion-Dollar Drug?

Over the weekend, Vertex Pharmaceuticals (Nasdaq: VRTX  ) and partner Johnson & Johnson (NYSE: JNJ  ) announced exciting clinical trial results for hepatitis C compound telaprevir.

Telaprevir, a drug candidate in phase 2 testing, could become the most important new way to treat hepatitis C since 2001  -- if it can gain regulatory approval in several years. Let's take a look at the clinical trial results and see whether the hype (and Vertex's $4 billion market capitalization) is warranted.

Breaking down the Prove-1 trial
The phase 2b clinical study of telaprevir has been dubbed Prove-1 by Vertex. The study was a moderately sized 250-person clinical trial studying the efficacy and safety of the drug in hepatitis C genotype-1 patients.

The two leading genotype-1 hepatitis C treatments currently on the market are Pegasys from Roche, and Peg-Intron from Schering-Plough (NYSE: SGP  ) . Both drugs are pegylated interferons, usually administered in combination with ribavirin to hepatitis C sufferers over a 48-week period, if the patient shows a positive response to the drugs. If at the end of the 48 weeks, the patient has undetectable levels of the virus in his body; and another six months pass with the patient continuing to show undetectable levels of the hepatitis C virus (HCV) in his blood, then for all practical purposes, the patient can be considered cured. The virus rarely ever relapses and becomes detectible inside the body again.

If patients gets through this six-month period at the end of treatment without relapsing and become cured, they have what's known as a sustained virologic response (SVR). Some patients respond faster to treatment, though, achieving undetectable levels of the virus much sooner than 48 weeks. If this happens after 12 weeks of treatment, it's called an early virologic response (EVR). The majority of patients achieving an EVR go on to have an SVR.

Vertex only has data from 12 weeks of telaprevir treatment for a majority of patients in the Prove-1 trial. Comparing the Prove-1 study results to pivotal studies that helped lead to the approval of Pegasys and Peg-Intron shows the promise that telaprevir therapy holds relative to these two current standards of care.

Prove-1 study results

Prove-1 Study

Duration of Treatment

% of patients with EVR*

Telaprevir +Pegasys and ribavirin

12 weeks

70%

Placebo+ Pegasys and ribavirin

12 weeks

39%

*EVR= early virologic response

Pivotal Pegasys clinic study results

Duration of treatment

% of patients with SVR**

Pegasys + ribavirin

48 weeks

44%

Pivotal Peg-Intron clinical study results

Duration of treatment

% of patients with SVR**

Peg-Intron + ribavirin

48 weeks

41%

**SVR = sustained virologic response

Before comparing the efficacy results of these three studies, it's important to reiterate that the Vertex study results are from only 12 weeks of therapy, while the Pegasys and Peg-Intron results are from 48 weeks of therapy with a 24-week follow-up. In other words, the telaprevir study results only show patients achieving an EVR, whereas the Pegasys and Peg-Intron results cover the more robust SVR efficacy endpoint.

Historically, the vast majority of patients who achieve an undetectable level of virus in their systems at any stage in treatment often continue to have undetectable levels of the virus once treatment stops, and through that critical six-month period after the end of therapy. Similarly, for the pegylated interferons (Pegasys and Peg-Intron), patients who do not achieve undetectable levels of the virus by week 12 are hardly ever cured, which gives more weight to the telaprevir efficacy results.

This means that the Prove-1 placebo group efficacy results probably won't improve much more over time, and the Prove-1 telaprevir group won't show much worse efficacy or relapse over time. Therefore, these telaprevir efficacy results are very robust, and they should continue to hold up over the length of the trial (barring huge amounts of patient dropouts later on in the study).

Comparing the Prove-1 results across the different studies shows that the placebo group of the clinical trial didn't do markedly worse than what would be expected from the Pegasys or Peg-Intron pivotal clinical trials.

Considering that the telaprevir-treated patients in the Prove-1 trial did nearly twice as well as the patients not getting the drug in the study, and based on the efficacy results, telaprevir looks like as close to a lock as is possible in the biotech sector for eventual marketing approval.

Achtung! What about the safety of Telaprevir?
One black mark against the telaprevir Prove-1 results is that 11% of patients taking the drug dropped out of the study due to experiencing adverse events, compared to only 3% of those on placebo. Initially, this sounds like it will make doctors more hesitant to prescribe telaprevir in the front-line setting, but it's important to remember that a drug's safety profile needs to be measured against the disease it's treating.

If these serious safety issues popped up for a drug that prevents constipation, like Adolor (Nasdaq: ADLR  ) and GlaxoSmithKline's (NYSE: GSK  ) Entereg, then that drug would be in serious trouble. But telaprevir is being used to treat hepatitis C, which is responsible for anywhere from 50%-76% of all liver cancers and is a major cause of liver transplants.

Additional longer-term data is needed to better flesh out the safety issues with telaprevir. But since HCV is such a serious indication, the higher rate of patient dropouts and adverse events in the telaprevir arm of the Prove-1 study do not appear to be unconquerable impediments to the drug's sales potential at this point. Another point to consider: If telaprevir can shorten the duration that most patients need to be on the interferons, that could mean fewer adverse events over time, compared to patients taking interferons over a 48-week period without telaprevir.

For example, compare the Pegasys and Peg-Intron clinical trials to Prove-1. If telaprevir can shorten the length of treatment down to 24 or possibly 12 weeks (Vertex looks to be aiming for a label indicating a 24-week treatment period), then the Prove-1 telaprevir dropout rate of 11% compares very favorably to the 10%-14% of patients that discontinue longer-term Peg-Intron therapy, and the 15% of patients that dropped out before completing 48 weeks of Pegasys treatment. And since a patient's response to 12 weeks of therapy is a good predictor of longer-term success in fighting HCV, then eventual FDA labeling indicating a shortened treatment duration with telaprevir is a very plausible outcome, and somewhat diminishes the negativity of the higher patient dropouts in the Prove-1 trial.

Of course, there is the caveat that comparing drugs across studies with different patient populations can be fraught with problems. However, with more continued trial results like this, telaprevir appears poised to become a front-line agent in conjunction with Pegasys or Peg-Intron, considering how much more it improves patient outcomes compared to treatment with standard of care without telaprevir in treating HCV.

Telaprevir: A billion-dollar drug?
Telaprevir appears to succeed in every meaningful way that a new therapy needs to in order to become a first-in-class compound for the indication that it serves. Improved efficacy versus existing drugs: check. Relatively good safety and tolerability profile: check (so far). Possible shortened dosing regimen: check. Ability to treat patient groups not responding well to current therapies: check. You don't have to work at a bank to know that this many checks add up to multi-billion dollar market opportunity for telaprevir.

To suss out the market potential for telaprevir, consider that sales for Roche's Pegasus therapy were $1.2 billion last year and growing at double-digit percentage points in its main European market. Schering's Peg-Intron had 2006 worldwide sales of $840 million, growing 11% versus 2005.

If telaprevir can gain marketing approval in 2009, then Vertex will have the HCV protease inhibitor market all to itself for several years. As long as Vertex continues to produce solid telaprevir clinical trial data and, upon approval, the drug's sales trajectory is as rapid as some of the HIV protease inhibitors have been, then it should have no problem in achieving that billion-dollar blockbuster status -- at least until potential competitors like InterMune (Nasdaq: ITMN  ) come along.

Vertex has been one of the Rule Breakers newsletter best performers, up nearly 180%, since biotech analyst Charly Travers recommended it in early 2005. Partly by finding biotech stocks like Vertex with strong early stage clinical trial data, the Rule Breakers portfolio is outperforming the market.

A free 30-day trial of the Fool's market-beatingRule Breakers newsletter will give you all our recommendations as well as access to our message boards and exclusive content.

Fool contributor Brian Lawler once sang a blockbuster musical "Der Knutsong" and owns shares InterMune but no company mentioned in this article. The Fool has a disclosure policy. InterMune is a Rule Breakers recommendation, and Johnson and Johnson and GlaxoSmithKline are Income Investor selections.


Read/Post Comments (0) | Recommend This Article (101)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 525917, ~/Articles/ArticleHandler.aspx, 9/21/2014 6:30:43 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement