Vertex Pharmaceuticals Inc. reported solid fourth-quarter and full-year 2017 financial results, pleasing analysts, but what really got their attention was the company's selection of next-generation correctors, VX-659 and VX-445, for phase III development as part of separate triple-combination regimens for individuals with cystic fibrosis (CF).
Vertex based its decision on initial phase II data, including new findings from ongoing studies, that showed mean absolute improvements in percent predicted forced expiratory volume in one second (ppFEV1) of up to 13.3 and 13.8 percentage points from baseline through four weeks of treatment, dosed once daily as part of the triple-combination regimens with VX-659 (400 mg) or VX-445 (200 mg), respectively, in people with one F508del mutation and one minimal function mutation (F508del/Min).
Although Boston-based Vertex continues to talk with regulators about the final design for the phase III programs, the company intends to initiate a phase III in the first half of the year to evaluate CFTR gene stimulator VX-659 in combination with tezacaftor and approved CFTR potentiator Kalydeco (ivacaftor) and a second phase III around midyear to evaluate CFTR modulator VX-445 in combination with tezacaftor and VX-561 – an asset acquired last year from Concert Pharmaceuticals Inc. – in a once-daily regimen.
"Based upon the totality of the data collected today from four different triple-combination regimens in more than 200 people with CF, we believe that both the VX-659 and VX-445 regimens have highly compelling profiles for late-stage development," Jeffrey Leiden, Vertex president and CEO, said on the company's earnings call to explain the rationale for advancing both regimens into phase III.
The triple-combo plan led Jefferies Group LLC analyst Michael Yee to characterize the company as "the best growth story in large-cap biotech with revenue and earnings more than tripling over the next five years and no biosimilar or generic issues on the horizon. We see [the] stock moving higher as they embark into a 'fast' phase III program and pull away from the competitor over time."
Jeffrey Chodakewitz, Vertex' executive vice president and chief medical officer, laid out the phase II data. The four-week VX-659 triple regimen enrolled 53 patients who received one of three doses of VX-659 (80 mg, 240 mg and 400 mg) in combination with tezacaftor and ivacaftor or placebo. In patients who received the triple combo, improvements in lung function of 10.2, 11.6 and 13.3 percentage points, respectively, occurred across the three dose groups. Those improvements were evident by the second week of the treatment period and sustained through four weeks of dosing.
"With sweat chloride, we saw significant decreases of 45.8, 43.7 and 51.4 millimole per liter for the triple-combination dose groups," Chodakewitz said, noting that "these were the largest decreases in sweat chloride observed for any of our triple-combination regimens to date."
Chodakewitz also pointed to gains in patient-reported respiratory symptoms of 24.6, 19.8 and 21.8 points, respectively, for those on the triple-combination regimens.
Across the study, the combination was generally well-tolerated and the overall safety profile was favorable, with most adverse events (AEs) considered mild or moderate and no discontinuations due to AEs. One patient interrupted triple-combo dosing due to a rash, which resolved following the interruption. The patient then restarted and completed dosing without any further rash.
The phase II study of the VX-445 triple regimen enrolled 53 patients who received one of three doses of VX-445 (50 mg, 100 mg or 200 mg) in combination with tezacaftor and ivacaftor or placebo. Individuals who received the triple combo showed improvements in lung function of 11.1, 7.8 and 13.8 percentage points, respectively, that were evident by the second week of treatment and also sustained through the dosing period.
"With sweat chloride, we saw significant decreases of 38.2, 33.2 and 39.1 millimole per liter for the triple-combination dose groups," Chodakewitz said. "We also observed significant improvements in patient-reported respiratory symptoms of 20.8, 15.4 and 25.7 points for those on the triple-combination regimens."
Vertex conducted post-dose spirometry evaluations for both triple-combo regimens and found no evidence of bronchoconstriction, he added.
The VX-445 combination also was generally well-tolerated and the overall safety profile was favorable. Two discontinuations occurred in the 100-mg dose group. One was due to increased bilirubin without concomitant transaminase elevation, observed on the final day of dosing, but the patient's bilirubin levels returned to baseline during the safety follow-up period following discontinuation of treatment. The second was due to rash, which resolved once treatment was stopped.
RBC Capital Markets analyst Brian Abrahams described the "best-case data" from the two next-gen correctors as showing activity "even better than game-changing results from first two, setting the stage for pivotal starts." He raised the company's price target to $200.
Similarly, Leerink's Geoffrey Porges headlined his earnings note "Fly Combo's Fly!" and raised the company's price target to $190 from $175, using adjectives such as "remarkable" and "impressive" to describe efficacy, to date, of the triple-combo regimens.
Vertex expects additional data in the first half of 2018, including phase II data on the combination of VX-445, tezacaftor and VX-561, a once-daily potentiator, in place of twice-daily ivacaftor. In July 2017, Vertex paid Concert $160 million in cash to acquire global development and commercialization rights to VX-561, then known as CTP-656, and other CF assets. Concert is eligible to receive up to $90 million in additional milestones based on regulatory approval in the U.S. and reimbursement in the U.K., Germany or France.
That outcome was likely the best for Concert, and certainly for patients, after the FDA sought to impose a washout period and withhold treatment with Kalydeco during Concert's phase II effort with CTP-656, designed to identify optimal dose selection for a phase III trial in individuals with CF. Concert's task was problematic, at best, and potentially insurmountable given screening criteria to enroll individuals who were on at least three months of stable Kalydeco therapy. (See BioWorld Today, Jan. 18, 2017.)
Vertex has ample ammunition to move quickly into pivotal trials.
"Our strategy of advancing both VX-659 and VX-445 into phase III gives us the opportunity to generate data from two different triple-combination regimens, including one that may be dosed once daily, and pick the best regimen to bring to patients as quickly as possible," Chodakewitz said. Vertex plans to conduct separate studies for each triple-combination regimen: a study of each regimen in people with CF who have one F508del mutation and one minimal function mutation and a study in those with two F508del mutations.
In addition, in the second half of the year Vertex plans to move each triple-combo regimen into patients who have one F508del mutation and a second gating or residual function mutation.
Vertex outlook 'could move the needle for anyone'
Vertex initiated its CF research program in 2000 in collaboration with Cystic Fibrosis Foundation Therapeutics Inc., or CFFT, a nonprofit drug discovery and development affiliate of the CF Foundation whose activities are being transferred to the foundation this year. The partnership produced Kalydeco, Orkambi (lumacaftor/ivacaftor), tezacaftor, VX-659, VX-445 and other assets.
Piper Jaffray's Edward Tenthoff saw another sign of excitement for Vertex with its decision to exercise an option on CRISPR/Cas9 therapy CTX-001 to treat beta-thalassemia and sickle cell disease, with a CTA in the former indication already filed by co-developer Crispr Therapeutics AG, of Basel, Switzerland, and an IND on CTX-001 in the latter indication expected soon. The "first ever potentially curative CTX-001 data could be a driver for VRTX shares this year," Tenthoff wrote.
In its earnings, Vertex reported that commercial CF products generated 2017 net revenues of $2.17 billion – a 29 percent increase over 2016 revenues. Total CF product revenues of $621 million in the fourth quarter represented a 37 percent increase compared to $454 million in the fourth quarter of 2016.
Kalydeco accounted for 2017 net revenues of $845 million, an increase of 20 percent over 2016, driven by uptake among children 2 and older in the U.S. with certain residual function mutations and growth in patients treated ex-U.S. in countries where the drug is approved and reimbursed. Fourth-quarter Kalydeco revenues were $256 million, a 44 percent increase year over year.
Orkambi netted $1.32 billion in 2017 sales, an increase of 35 percent over the previous year. Vertex attributed Orkambi's trajectory to continued uptake in children with CF ages 6 to 11 in the U.S. and an increase in patients receiving treatment in European countries where the drug is reimbursed. Orkambi's fourth-quarter 2017 product revenues were $365 million, a 32 percent increase compared to the fourth quarter of 2016.
The company's 2017 GAAP collaborative revenues increased to $315.2 million, from $1.9 million for 2016, including $230 million in up-front revenue from the out-licensing of four oncology programs to Merck KGaA, of Darmstadt, Germany, in January 2017.
Full-year GAAP R&D expenses were $1.32 billion compared to $1.05 billion for 2016, with the increase attributed primarily to the up-front payment to Concert for acquisition of VX-561. Full-year GAAP net income was $263.5 million, or $1.04 per diluted share, compared to a 2016 GAAP net loss of $112.1 million, or 46 cents per diluted share.
Vertex reported cash, equivalents and marketable securities of $2.09 billion as of Dec. 31 compared to $1.43 billion at year-end 2016.
The company's financials represented solid validation for a company whose shares (NASDAQ:VRTX) have doubled from a year ago, closing Thursday at $172.99 for a gain of $6.12 after hitting a historic high of $174.96. On Feb. 1, 2017, shares closed at $86.24.
Kalydeco was approved in 2012, marking the beginning of the company's transformation from one whose hepatitis C assets were quickly overrun in the marketplace to a leader in CF treatment. (See BioWorld Today, Feb. 1, 2012.)
And Vertex has room to grow, according to J.P. Morgan analyst Cory Kasimov. With the triple-combo data bolstering the company's "already dominant position in the CF space," the growth rate "solidifying a highly differentiated large-cap growth trajectory," substantial free cash flow and financial flexibility and the opportunity to participate in "large scale industry consolidation," the CF outlook for Vertex "could move the needle for anyone," Kasimov wrote in an earnings note. "Despite a tremendous run over the past year, we believe the breadth of institutional interest still has substantial room to expand as generalists take greater notice of VRTX's growth profile."