Vertex shares surge as its cystic fibrosis combo proves marginally positive, but payers may not be so impressed

Vertex Chief Medical Officer Jeffrey Chodakewitz

Vertex came up with the positive data that analysts were looking for in pivotal studies of a combination drug for cystic fibrosis, teeing up new drug applications in the US and Europe later this year. The stock $VRTX responded in kind, shooting up a whopping 17% in after-market trading, even though there’s little sign that the data on display will thaw some frigid relationships with a large segment of payers who clearly are reluctant to cover these drugs.

The good news: The combination of tezacaftor (‘661) and Kalydeco (ivacaftor) delivered a mean increase of 4% improvement in FEV-1 in patients with two copies of a genetic mutation, the F508del group. Orkambi hit 3%. That’s a wee bit better, of course, which is particularly good if you consider that sell-side analysts were only looking for a match here to declare a victory.

In a second study, the FEV-1 improvement in the new combo was 6.8% compared to 4.7% for Kalydeco alone. That should help open the market a bit, says Jefferies’ Brian Abrahams, who was clearly stoked at the prospect that future triples would do even better, winning a big future for itself in the CF field. Estimated peak sales of a triple: $3 billion.

Significantly, only 3% of patients stopped taking the combo due to side effects, compared to 15% of Orkambi patients in its pivotal test. And the combo should therefore give those patients who had to stop a new option with a better chance of success.

Noted Abrahams Tuesday evening:

We had believed ‘661/Kalydeco just needed to show 1) reasonable comparable (2-3%) FEV-1 benefits in F508 patients 2) without any major safety issues, for the translatability of VRTX’s preclinical assays to be reaffirmed and for the combo to serve as a solid, lower-DDI backbone for the key triple-combos. With two components now de-risked, and multiple shots on goal for the third (‘440, ‘152, ‘659 POC data 2H17, with hundreds more correctors preclinically), we believe this serves to further distance VRTX considerably from potential competitors — which should enable the market to better appreciate the likely LT sustainability of their CF franchise.

The bad news: Some payers, particularly in Europe, have been woefully underwhelmed by Orkambi, which they view as a modest improvement at best that can’t justify the price — $259,000 — Vertex has been seeking. That reluctance on payers’ part has kept revenue dragging significantly behind initial expectations. And there’s no convincing reason to believe that the combo data is so strong payers will drop their objections and embrace the new pair-up.

Galapgos and AbbVie, meanwhile, have a triple threat of their own in the clinic for cystic fibrosis. Vertex is one step further ahead tonight on CF, but this race has a long way to go.

“The tezacaftor/ivacaftor combination treatment demonstrated clinically meaningful benefits, with a favorable safety profile, across multiple patient groups,” said Jeffrey Chodakewitz, EVP and Chief Medical Officer at Vertex. “This combination treatment may provide a promising new option for treating the underlying cause of CF in the future and brings us increasingly closer to our goal of developing new medicines for all people with the disease.”

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Research Scientist - Immunology
Recursion Pharmaceuticals Salt Lake City, UT
Director of Operations
Atlas Venture Cambridge, MA

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