3 Things to Watch With Vertex Pharmaceuticals


Vertex Pharmaceuticals (NAS: VRTX) is a biotechnology company focused on treating serious diseases worldwide. Its lead drug is Incivek, an FDA-approved treatment for genotype-1 hepatitis-C. Vertex also has Kalydeco, which is approved for the treatment of a specific mutation of cystic fibrosis, as well as eight experimental drugs currently in clinical trials and more than a dozen preclinical studies ongoing.

Today, let's look at three things investors should be watching regarding Vertex Pharmaceuticals, as they'll provide us with better insight into the company.

1. Competing hepatitis-C drugs
With only two FDA-approved drugs currently on the market to treat hepatitis-C, Merck's (NYS: MRK) Victrelis, and Vertex's Incivek, Vertex has been able to dominate. Incivek is the fastest drug to eclipse the $1 billion cumulative sales mark, but fears are mounting that Incivek's best days might be behind it.

In the first quarter, Incivek sales fell to $357 million from $457 million in the previous fourth quarter. Some have speculated the drug may have satiated the pent-up demand for treatment of hepatitis-C, but there's also reason to believe that patients and doctors are waiting for new interferon free treatments with fewer side effects to hit the market. That poses a serious threat to Incivek's long-term growth story.

Gilead Sciences' (NAS: GILD) GS-7977, which it acquired when it purchased Pharmasset for $11 billion in late 2011, is Vertex's most immediate threat. By itself, GS-7977 eliminated the virus in 88% of patients in just 12 weeks and showed even higher efficacy when combined with Bristol-Myers Squibb's (NYS: BMY) daclatasvir. In addition to Gilead and Bristol, Idenix Pharmaceuticals (NAS: IDIX) posted strong results for its drug hopeful IDX-184, which eliminated the virus in 100% of patients in 24 weeks at high dose levels.

Keeping an eye on the clinical data from these competitors is imperative for Vertex shareholders.

2. Kalydeco's clinical trials
Kalydeco is already approved in the U.S. to treat a specific mutation, G551D, for those over the age of 6 who have cystic fibrosis, but Vertex is working on expanding the indications for the drug.

Vertex is running multiple studies, some using Kalydeco by itself to target other specific CF mutations and also to target children as young as 2 years of age. The main indication, however, is Vertex's usage of Kalydeco in combination with experimental drug VX-809 to treat the most common CF mutation, F508del. Or, in plainer terms, one major key to Vertex's success will be expanding the type of mutations Kalydeco can treat given that G551D only affects 4% of all CF patients.

The results so far have been nothing short of confusing. In May it appeared that the combination had been significantly more effective than anyone had predicted. However, just two weeks ago, Vertex was forced to restate its findings, blaming it on a misinterpretation on its part and in the analysis of its vendor. The statistical significance of the Kalydeco and VX-809 was not nearly as effective as it first appeared.

I wouldn't discount an approval for Kalydeco's indications expanding, but it's no longer the sure-shot that it appeared to be two months ago.

3. Buyout chatter
Vertex Pharmaceuticals isn't exactly cheap with a market value of $11.5 billion, but investor apathy and more lukewarm news from its CF trials could put the company back on the radar of larger pharmaceutical companies with aging pipelines.

It's unlikely that Incivek will be completely replaced at any point in the next few years, but it seems pretty obvious that it won't be the only show in town given the strong efficacy we've witnessed from Gilead and Idenix's clinical results. Therefore, those expanded CF trials as well as its smaller clinical trials focused on epilepsy and influenza could be what finally draws the attention of a suitor. Don't get me wrong, I feel Vertex could succeed for shareholders as a stand-alone company, but investors could also stand to make a pretty penny if Vertex were bought out.

Keep your ears open for big pharmaceutical buyout chatter.

Foolish roundup
Now that you know what to watch for, it should be easier to analyze Vertex Pharmaceuticals' successes and pitfalls in the future, and hopefully you'll gain a competitive investing edge.

If you're still craving even more info on Vertex Pharmaceuticals, I would recommend adding the stock to your free and personalized watchlist so you can keep up on all of the latest news with the company.

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At the time thisarticle was published Fool contributor Sean Williams has no material interest in any of the companies mentioned in this article. You can follow him on Motley Fool CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.Motley Fool newsletter services have recommended buying shares of Gilead Sciences and Vertex Pharmaceuticals. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy that's better than a shot in the arm.

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Originally published