Vertex Pharmaceuticals Could See Strong Gains From Incivek

Apr. 9.12 | About: Vertex Pharmaceuticals (VRTX)

Vertex Pharmaceuticals (VRTX) is looking to be a big frontrunner in the biotech industry. With the development and mildly successful testing of Vertex's next big drug, Incivek, there is great potential for Vertex to be a major competitor against big names such as Dendreon (DNDN). I believe that as long as the Hepatitis C "cure," Incivek, continues to pass all milestones, it will be a great opportunity for investors to make some money. Incivek will be very beneficial for the future of Vertex, due to the heavy media attention that surrounds Hepatitis C.

While the interim test for Incivek was rather positive, it did of course present some short term side effects that will hinder its later acceptance by the FDA. The most common effects reported were fatigue, itching, headache, nausea, and a mild rash. No subjects/ tests were stopped due to severe rash, further accentuating the fact that the rash that some test subjects developed was really very mild. The test results were exceptional: 74% of treated patients with both HCV and HIV had undetectable HCV just twelve weeks after the end of the study. Comparatively, out of those with HCV and HIV who were treated with just pegylated-interferon and ribavirin alone, only 45% ended up now showing HCV after the same twelve weeks that was given to Incivek. So, should you invest in Vertex right now? Well, let's go over some opposing companies that you may find of interest before answering that question.

One of the biggest biotech companies that just cannot seem to catch a break lately is Dendreon. Beginning with the crash of its headlining prostate cancer treatment drug (and subsequently, stocks prices), and the entrance of a drug that outclasses its newest, and trouble ridden, release, Dendreon really needs something to get back into the market. The aforementioned drug that has caused Dendreon so much is, of course, Provenge. To simplify the issue, Provenge just did not sell the way that Wall Street and Dendreon had predicted. Also, the sales never picked up, and they in fact may be decreasing due to articles like this from Reuters.

After the announcement of the poor sales of Provenge, and the new speculation arose, stocks that were once high due to the passing of the drug and its supposed "amazing" status were now sinking, and they did not stop until they hit 75% of what they had been before the drug's failure. Also, according to one blogger, Provenge is not even the best prostate cancer treatment on the market. He says that the title of best prostate cancer treatment belongs to Johnson & Johnson's (JNJ) Zytiga. Zytiga has already beaten Provenge in blind tests; great news for Johnson and Johnson, but it is just adding fuel to the fire that is burning Dendreon.

So, as we all know, drugs can all fail miserably even after being approved, and this may or may not be the case with Vertex and Incivek, but only time will tell.

Another biotech company that is in a similar boat as Vertex is Achillion Pharmaceuticals (ACHN). Achillion saw a rise in its stock when it came out with its HCV cure, which is about to release its phase IIa data for ACH-1625 (not yet named). Stocks rose almost a point from late March to early April in anticipation of the results for ACH-1625. All of these investors are looking to have their hands in if Achillion's answer to Incivek proves to be a success. ACH-1625 could possibly be a hindrance to the development and subsequent release of Incivek if it is to pass every test, and barring any roadblocks for either drug, we could see a market war over the two treatments/cures for HCV. Some would compare this proverbial war to the confrontation between Zytiga and Provenge, but it is a different case where the facts are incomparable because, as of right now, the effectiveness of ACH-1625 and Incivek is about equal. So, with all of this said, what is the future of Vertex and should you be a part of it?

Now that the information from the main competitors has been accounted for, what is the future of Vertex? As we can see, a company can suffer a near collapse with the failure of such an important headlining drug like Provenge, or in this case, Incivek. With these current results, it seems as if the new drug is on its way to success. But some drugs can hit roadblocks even right before approval, so I would suggest staying out of Vertex until we get closer to Phase III testing. If it holds up in the last step of the tests before it goes to the review boards that are not paid by Vertex, then we will see the stock rise in hopes of acceptance by Vertex. This will, of course, be your opportunity to make quick money as then everyone will be purchasing the stocks if Incivek is FDA-approved, and you could sell at this opportunity.

Or, if you would like to hold out for the long run, the stock will be selling relatively high until it is time for sales figures. As you can see from this Dendreon graph, the sales numbers are what will determine a recommended long term investment versus an extremely quick bailout. So, my final suggestion is to read the reports as they come out about the Phase III testing of Incivek and base your investments off of common sense. For example, if it is a unanimous no from everyone to making it past Phase III, much less the FDA, then reconsider any investments that you have thought about putting into Vertex. Vertex has a possible future with this HCV drug, but as an investor, be cautious about putting any amount into the company until further results come back on the drug.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.