Vertex cystic fibrosis drugs ace clinical trials, sparking 26% stock price surge

Vertex’s triple-combination cystic fibrosis regimens have aced early-phase clinical trials. The strong efficacy seen in the trials suggests the combinations can treat most cystic fibrosis patients, opening the door to an expanded multibillion-dollar market.

Lung capacity measure FEV1 was the standout data point from the phase 1 and 2 trials. Each of the next-generation correctors Vertex added to its tezacaftor-Kalydeco backbone regimen triggered an improvement in FEV1 of about 10 percentage points as compared to placebo. The improvement is comparable to the FEV1 gain Kalydeco achieved during its development. But while Vertex tested Kalydeco in a genetic subset of patients, the combination trials delivered such efficacy in the larger, harder-to-treat population that has the F508del/Min mutation.

The clinical and economic consequences of early-phase success in this larger population are big. If Vertex can replicate the performance in phase 3, it will win approval for a product that could treat up to 90% of cystic fibrosis patients. Today, Vertex’s Kalydeco and Orkambi can treat about 40% of patients. The anticipated approval of the tezacaftor-Kalydeco combination will move Vertex closer to 50%. But it is the addition of next-generation correctors to this backbone that Vertex thinks will bring clinically-significant improvements in FEV1 to the vast majority of patients.

Approval of such a product could change the lives of tens of thousands of patients and significantly increase the size of the market available to Vertex. Analysts at Jefferies think that could drive an increase in revenue from $3 billion to close to $7 billion. Investors responded to the shortening of the odds of this coming to pass by driving up Vertex’s share price by 26% in after hours trading, a huge surge for a company with a $32 billion market cap.

The positive response reflects a belief that Vertex has, by biotech standards, a relatively clear route to dominance of a big market. Across the three trials of next-generation correctors VX-152, VX-440 and VX-659, two patients dropped out of the treatment arms because of adverse events. The most concerning events occurred in the VX-440 trial. Two patients who received VX-440 experienced an elevation in their liver enzymes. One of the patients dropped out of the trial. Preclinical studies have also suggested VX-440 is unsuited for use during pregnancy. 

While those results could restrict use of VX-440, the breadth of Vertex’s pipeline means it can drop that candidate and still deliver an effective triple combination. Data suggest VX-152 and VX-659 can effectively fill the same role in a triple combination as VX-440 without causing the adverse events associated with the latter corrector. And Vertex has a fourth corrector, VX-445, making its way through the clinic.

Vertex will decide which of these correctors to advance into phase 3 in the first half of next year. By then, management will have additional phase 2 data on triple combinations featuring all four of the correctors. Some of the studies are looking at higher doses of the correctors, which could dial up the efficacy further still. 

The correctors also have a healthy head start over the competition. Galapagos and its partner AbbVie are working on their own ambitious triple-combination program. But the decision to delay the start of the first of their combination trials until the fourth quarter has left the pair trailing Vertex by some distance. The Vertex data set a high bar for Galapagos and AbbVie to clear, but also suggest the market for triple combinations will be big enough to support sizable sales for two similarly safe and effective products.

Vertex is positioned to come to market far enough ahead of Galapagos and AbbVie to capture the lion’s share before competition ramps up, particularly if it can persuade the FDA to sign off on a three- or six-month pivotal study.