Vertex Investors Balk at New Study Plans

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Vertex Investors Balk at New Study Plans

06/24/08

A speedier-than-expected regulatory filing for Vertex Pharmaceuticals' (VRTX -

Cramer's Take - Stockpickr) hepatitis C drug appears less likely after the

company disclosed plans Monday for a new phase III study of the drug.

Investors have been hoping that Vertex and partner & (JNJ -

Cramer's Take - Stockpickr) could seek regulatory approval for telaprevir in

2009 based on data from existing clinical trials in treatment-resistant

patients.

However, the companies posted details of a new phase III study of telaprevir in

treatment-resistant hepatitis C patients on the ClinicalTrials.gov Web site

Monday. The disclosure dampened investor outlook for a quick telaprevir filing.

If Vertex cannot file telaprevir with the U.S. Food and Drug Administration in

2009, the filing will likely come in the second half of 2010 after studies of

the drug in treatment-naïve hepatitis C patients are completed.

Vertex shares fell 5% to $31.66 Monday as a result.

" We have learned that telaprevir's phase III study in treatment experienced

hepatitis C patients is different from PROVE 3 and study 107, which in our view

decreases the chances of an early filing, " wrote Citibank analyst Yaron Werber

in a note to clients Monday evening. PROVE 3 and study 107 refer to the existing

telaprevir studies in treatment-resistant patients.

Werber has a hold rating on Vertex, and perhaps echoing the sentiment of his

momentum and catalyst-driven hedge fund clients, he added that, " We are no

longer warming up to the stock and believe the momentum has cooled off as we

believe that the chances for an early approval on PROVE 3 and 107 are low. "

Vertex spokesman Partridge says Monday's disclosure of a new phase III

telaprevir study is in line with the company's previous guidance and " not

closely connected to a possible [FDA] filing based on PROVE 3 results. "

Partridge added that Vertex and the FDA are still discussing the previously

disclosed PROVE 3 data, but that " initiation of a new phase III study is a

natural extension of the PROVE 3 results which we would have started no matter

the path to a filing. "

The new phase III study disclosed Monday will test two different regimens of

telaprevir in patients who previously did not respond to conventional hepatitis

C treatment with pegylated interferon and ribavirin.

The study differs from previous studies in that patients will be treated with

two regimens of telaprevir for a full 48 weeks instead of the accelerated

24-week treatment cycle used for treatment-naïve patients.

In addition, one of the arms of the new study will see whether a " lead-in "

treatment with interferon and ribavirin alone before dosing of telaprevir may

improve overall cure rates.

The design of the new study is sufficiently different from the previous PROVE 3

and study 107 trials to suggest that regulators want more and different data on

telaprevir's effect on treatment-resistant patients before considering the drug

for approval.

Cowen & Co. analyst McMinn views Monday's selloff as an overreaction to

expected news. She reiterated her outperform raring on Vertex.

" We believe that yesterday's [Vertex] sell off was driven by an over-reaction to

two-week old information. Timelines for commercial launch of ... telaprevir

(late 2010/early 2010) are unchanged, and we see 50% upside relative to the

market on the basis of this timeframe. While probability of an early 2009 FDA

approval is low, we see 100% upside relative to the market under this scenario

over the next 6-12 months. "

Schering-Plough (SGP - Cramer's Take - Stockpickr) recently announced the start

of phase III studies for its competing hepatitis C drug.

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