Telaprevir Tests Its Luck

Guiding a potential blockbuster drug through clinical testing and onto the market is often only half the battle. To get the most bang for their buck, drugmakers also need to get those compounds approved for use in the broadest possible patient population.

Yesterday, Rule Breakers pick Vertex Pharmaceuticals (Nasdaq: VRTX  ) revealed that it would begin patient enrollment in the U.S. for a late-stage study to potentially expand the use of its potential anti-hepatitis-C-virus (HCV) compound, telaprevir.

Earlier this year, Vertex and marketing partner Johnson & Johnson (NYSE: JNJ  ) brought the virus-fighting protease inhibitor into phase 3 testing as a potential treatment for patients newly diagnosed with HCV genotype 1, the disease's most common strain in the United States.

Yesterday's announcement means Vertex will also start testing telaprevir on patients who weren't cured by popular rival therapies from Roche and Schering-Plough (NYSE: SGP  ) . The interferons these companies make cure only about half of their patients; if Vertex can prove that its drug works after others have failed, it could dramatically expand telaprevir's market. Only a few months ago, Vertex released very positive interim phase 2 data from two studies, PROVE-3 and Study 107, in patients similar to those recruited for this new phase 3 study.

Analysts like me hoped that the phase 2 data from these studies would be good enough for Vertex to file for telaprevir's early marketing approval for use in so-called "treatment failure" patients late next year, or in early 2010. Vertex didn't rule out that possibility in last month's second-quarter conference call, but the company did say it wouldn't make that call until both studies wrap up in the second half of 2009.

For newly diagnosed patients, Vertex hopes to have results for its initial phase 3 studies by 2010, with possible marketing approval in the U.S. and Europe later that year or early in 2011. The new study for "treatment failure" patients should finish enrollment in next year's first quarter; each patient needs 72 weeks to complete it. Tack on a few more months to compile the data, and Vertex could have U.S. and European marketing application for these second-chance patients by mid-2011. If PROVE-3 and Study 107 yield outstanding results, approval could come even faster.

Vertex estimates that more than 300,000 patients in the U.S. have failed on existing treatments, along with a collective 650,000 such patients in Europe. Getting telaprevir approved to treat these patients would thus mean big bucks for Vertex and Johnson & Johnson. If a standard course of telaprevir costs $10,000 to $15,000 per patient, the potential maximum market for treatment-failure patients alone could range from $6.5 billion to $10 billion in the U.S. and Europe alone. (Before your eyes fill with dollar signs, remember that not all of these folks will ever use telaprevir.)

Vertex shares have zigged and zagged over the past year, in tandem with the changing prospects for telaprevir and those of its closest antiviral competitors from InterMune (Nasdaq: ITMN  ) , Gilead Sciences (Nasdaq: GILD  ) , and Pharmasset (Nasdaq: VRUS  ) . In the process, we've learned that telaprevir probably won't be on the market as soon as many investors had hoped for, that its efficacy data is stronger than many expected, and that the competition is tougher than most analysts had believed, too.

Telaprevir's trials and travails this year aren't over, either. The American Association for the Study of Liver Diseases medical conference kicks off in late October, and abstracts chock full of data about telaprevir and its competitors -- possibly including compounds further back in development, like Abbott Labs' (NYSE: ABT  ) ABT-333 -- should be released beforehand.

Find out why The Motley Fool picked Vertex and InterMune for our high-growth Rule Breakers newsletter by grabbing a 30-day trial subscription.

Fool contributor Brian Lawler does not own shares of any company mentioned in this article. Johnson & Johnson is an active Income Investor pick. Try any of our Foolish newsletters today free for 30 days. The Fool has an A+ disclosure policy.


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