There are basically two reasons investors are so excited about the cystic fibrosis data even though the company has a hepatitis C drug that's already a blockbuster.
First, the drug combination -- VX-809 and Kalydeco -- treats cystic fibrosis, but it doesn't actually cure the patient. Patients have to take the drug for the rest of their lives. With hepatitis C treatments, on the other hand, after the course is done, there's no more opportunity to get further revenue from that patient. And that patient can no longer infect another patient, so it's a diminishing market.
Kalydeco is already on the market, but investors are rightfully more excited about the combination treatment because while Kalydeco is only designed to correct a mutation that occurs in about 4% of cystic fibrosis patients, the combination is designed to increase lung function in those with a mutation that occurs in half of cystic fibrosis patients.
Second, and equally important, Vertex basically has no competition in this space. There are companies trying to treat the lung infections that cystic fibrosis patients get, but treating the underlying condition is a completely different ball game.
Compare that to the hepatitis C market, where Vertex is dominating Merck
Those two reasons alone justify the value that Vertex added last week. Just keep in mind that the combination hasn't been de-risked entirely. The data, as strong as it was, is only from a phase 2 trial with just 37 patients treated.
The data is also a little puzzling because the standard biomarker for improvement in cystic fibrosis patients, sweat chloride, didn't go down by a statistically significant amount. Now granted, lung function, which did improve, is what doctors, patients, and the FDA will care about, but I'd have more confidence that we'll see the same improvement in lung function in the phase 3 trial if the biomarker also improved substantially.
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