Anyone who was watching Vertex Pharmaceuticals (VRTX) yesterday (October 11th, 2012) probably noticed the huge ~5% drop that was followed with an immediate reversal and subsequent decline. Vertex is normally a very calm and slow-moving stock, so any VRTX investors caught off guard may have added to the volatility with reactionary decisions. I became interested in the Vertex situation when I reported its big activity on Bio-Wire.
Selling can some induce more selling, which in turn reduces even more selling until there is some clarity or some sort of headline that explains the situation. Automated trading bots don't help the situation either, but that's a whole different subject that I won't get into.
The big jump in trading volume was a reaction to the company's presentation at the North American Cystic Fibrosis Conference, which is being held in Orlando, Florida between October 11-13. With the presentation, we saw additional data from the company's ongoing Phase II study of the compound known as VX-809 in the treatment of cystic fibrosis.
Cystic fibrosis affects 30,000 in the U.S. (and 70,000 worldwide), causes premature death in its patients, and has no cure. There are treatments that delay the deterioration of patients' lung function, but the vast majority are limited to "air clearance techniques." A small percentage of the cystic fibrosis population, with the "G551D mutation" can take Vertex's Kalydeco (VX-770). This drug brought the company $46 million in revenue last quarter. Kalydeco is a "CFTR corrector," and is sometimes called "ivacaftor" by the company.
VX-809 works through the same mechanism as VX-770, but is being developed for patients that have other cystic fibrosis-inducing mutations. Like 770, VX-809 is an orphan drug on fast track designation. This means that the FDA will be faster and more lenient than usual during the clinical development of VX-809.
The Phase II study co-administered varying dosages of VX-809 with Kalydeco (ivacaftor, or VX-770) in f508del cystic fibrosis patients, and measured sweat chloride levels and FEV1 (forced expiratory volume). Higher FEV means that patient lung function is improved, while sweat chloride levels are a golden standard test for cystic fibrosis.
Results were a bit mixed. The 21 patients in the 200 mg VX-809 / 250 mg ivacaftor arm didn't demonstrate statistically significant reductions versus placebo in sweat chloride levels until the third week. The other arm, with just 150 mg of ivacaftor didn't demonstrate enough improvement against placebo in sweat chloride to ever be statistically significant.
The good part is that the clinical trial demonstrated some better data in FEV measuring. Once VX-809 was combined with ivacaftor (halfway through the trial), there was an obvious outperformance in the VX-809 600 mg + 250 mg ivacaftor arm. In the last four weeks of the study, this high-concentration arm improved FEV1 by 6.1% while the placebo arm declined by 2.5%. This data point was interesting, because it proved that VX-809 does well when mixed with ivacaftor. Data from the first month says the opposite - the monotherapy of VX-809 actually underperformed the placebo arm in FEV1.
Taking the entire trial into account, we saw that the monotherapy-switched-to-combination arm (originally given 600mg of VX-809 then given 250mg ivacaftor too after four weeks) didn't actually improve the outcome versus placebo. This is probably what is dragging Vertex down as much as 4% today (October 12). Still, the combination therapy seems to work. In future clinical trials, I expect to see stellar data from patients that are given even higher VX-809 dosages combined with ivacaftor. VX-809 is not going anywhere alone.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.