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A Cystic Fibrosis Backup Plan

By Brian Orelli, PhD – Apr 19, 2013 at 7:20PM

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Vertex's third cystic fibrosis drug seems to work. Perhaps better than its second.

Vertex Pharmaceuticals' (VRTX 0.02%) shares are up around 60% today after announcing data for its third cystic fibrosis drug.

The first one, Kalydeco, is already approved. The drug is a potentiator that keeps partially functioning cystic fibrosis transmembrane conductance regulator, or CFTR, protein open longer to increase the flow of salt and water. By itself, that helps 4% of patients that have mutations that allow the CFTR protein to reach the surface, but aren't fully functioning.

But about half of cystic fibrosis patients have two F508del mutations, which keeps the CFTR protein from getting to the surface of the cell. Another one-third have a single F508del mutation. For those patients, Kalydeco isn't useful by itself since keeping the protein open longer isn't beneficial if the protein isn't on the surface.

Enter CFTR correctors, which help get the protein to the surface. The first one Vertex developed, VX-809, seems to be helping patients when combined with Kalydeco, but the phase 2 data in patients with F508del mutations was far from clean. Vertex recently announced the start of two phase 3 trials to test the combination, but given the data, it's hard to have confidence the trials will be successful.

Yesterday, Vertex announced phase 2 data for VX-661, another corrector, in patients with two F508del mutations, which was was much cleaner. When combined with Kalydeco, the two higher doses produced a statistically significant improvement in FEV1, a measure of lung function. As part of the clinical trial, patients were taken off the drug and the FEV1 increase largely went away, suggesting the observed effect is real.

The data for VX-661 plus Kalydeco isn't perfect -- for instance, the highest dose produced a slightly lower effect than the second highest dose -- but it should give investors confidence that the combination will work in a larger phase 3 trial. What it says about the likelihood of its big brother, VX-809, passing its phase 3 trials, remains to be seen.

It appears that Vertex's hypothesis that combining a potentiator and a corrector can help patients with two F508del mutations. But it's entirely possible that VX-661 works and VX-809 doesn't, or at least doesn't work all that well.

It'll be a waste of money if VX-809 fails its phase 3 clinical trials, but it won't be the end of the world since VX-661 isn't that much further behind.

Whichever drug(s) end up working -- Vertex has a third corrector, VX-983, that should enter phase 2 development in the second half of the year -- the biotech won't have any real competition. Current cystic fibrosis treatments, such as Gilead Sciences' (GILD 2.41%) Cayston or Novartis' (NVS 2.52%) Tobi, are antibiotics that treat bacterial infections in the lungs that occur because the nonfunctioning CFTR protein causes buildup of mucus in the lungs, a safe haven for bacteria.

Gilead doesn't bother breaking out Cayston's sales, but they're far from a blockbuster. Novartis sold $317 million worth of Tobi in 2012. But Vertex should be able blow past those sales numbers because it'll sell its combination product at significantly higher price -- Kalydeco cost nearly $300,000 per year -- justifying the cost because it treats the underlying problem rather than the symptoms.

Fool contributor Brian Orelli has no position in any stocks mentioned. The Motley Fool recommends Gilead Sciences and Vertex Pharmaceuticals. 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.

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