Slice and Dice Data and Investors Will Slice You

"First we made them bad, then we made them better, look how good our data is," was the basic gist of Vertex Pharmaceuticals' (NAS: VRTX) press release yesterday.

Investors didn't buy it, sending shares down 16%.

This isn't the first misstep the biotech has made releasing data for its combination of VX-809 and Kalydeco to treat cystic fibrosis. When the company reported interim data last month, it presented the data as if it was absolute improvements in lung function, but then had to backtrack when it realized that the data was actually relative to placebo. Since the placebo patients got worse, the absolute improvements weren't as impressive as the relative improvements.

With the final data from the phase 2 trial available, Vertex was out with another press release yesterday but, instead of presenting the improvement from the start of the trial through the end of the trial, Vertex decided to present the data from day 28 through the end of the trial.

During the trial, patients got VX-809 alone for 28 days, and then received VX-809 in combination with Kalydeco for the remainder of the trial, that ended after 56 days total. VX-809 and Kalydeco work in different ways, and the rationale was that treatment with VX-809 would make the patients respond to Kalydeco. That might be happening, but it also makes patients worse. After the first 28 days, patients receiving the highest dose of VX-809 had a 2.9 percentage point decline in forced expiratory volume in one second, FEV1, a measure of lung function, compared to just a 0.9 percentage point decline for the placebo group.

Once patients started taking Kalydeco, their FEV1 improved by 6.1 percentage points, while the placebo group continued declining another 2.5 percentage points.

On the surface, the data looks good, but the important number, the change from day 0 to day 56, wasn't presented. And since that's the measurement Vertex used when it presented interim data last month, investors can't compare the two.

This is a phase 2 trial, which was supposed to give investors confidence that the phase 3 trial would be a success. By slicing and dicing the data, investors are rightfully worried that the combination might not work in a larger trial. Investors have seen this before when companies don't follow standard protocols. Aeterna Zentaris (NAS: AEZS) and Keryx Biopharmaceuticals' (NAS: KERX) cancer drug perifosine failed after the company took a subset of patients that looked good in phase 2 trials into phase 3. And InterMune (NAS: ITMN) massaged its data combining a couple of trials to show its drug worked, but that didn't get it past the Food and Drug Administration.

The combination might still work, but if Vertex wants investors to hold shares until the phase 3 trial is completed, management is going to have to earn back their confidence.

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