Vertex on the Verge of Victory

[Guest guest]

http://www.fool.com/investing/high-growth/2008/08/04/vertex-on-the-verge-of-vict\

ory.aspx

Vertex on the Verge of Victory

By Lawler August 4, 2008

Last week, Vertex Pharmaceuticals (Nasdaq: VRTX) concluded one of the most

important quarters in its history, with the announcement of its second-quarter

financial results. Like the vast majority of biotech drugmakers, Vertex's

financials proved less crucial than the clinical trial results from the

drugmaker's pipeline.

During the quarter, we all got a better glimpse of the excellent data for

Vertex's second large phase 2 study of its lead drug, telaprevir, in hepatitis C

genotype 1 patients. The study, called PROVE-2, should signal to all investors

that Vertex and partner & (NYSE: JNJ) have a compound with very

high odds of eventually gaining marketing approval worldwide.

Unfortunately, we also found out in the second quarter that Vertex (in the U.S.)

and & (in Europe) likely won't be filing marketing applications

to get telaprevir onto the market until after their phase 3 studies in newly

diagnosed hepatitis C patients are completed in 2010. Add some necessary time to

collect all the data and submit the drug for regulatory review, and telaprevir

most likely won't be on the market for newly diagnosed hepatitis C patients in

the U.S. or Europe until the first half of 2011.

Today, Vertex's main rival in hepatitis C treatments, Schering-Plough (NYSE:

SGP), announced excellent new phase 2 data for its competing compound,

boceprevir. In response, Vertex shares fell 10%. I've always argued that

telaprevir will face stiffer-than-expected competition from drugmakers like

Schering, Gilead Sciences (Nasdaq: GILD), Novartis (NYSE: NVS), and Roche. In

addition, other compounds in early development from drugmakers like InterMune

(Nasdaq: ITMN) and Pharmasset (Nasdaq: VRUS) look similarly promising.

With so many top hepatitis C drugmakers pouring large amounts of resources into

their own (or partnered) antiviral drug programs, telaprevir will inevitably

face direct competition in the future. Nonetheless, telaprevir has produced the

most robust data by far, in the largest number of patients, of all the hepatitis

C compounds currently in testing.

Investors can't ask for much more than a near-certain approval for a drugmaker's

lead candidate. Vertex and its strong telaprevir data almost definitely provided

this in the second quarter. As long as no major safety issues pop up in phase 3

tests, we should see telaprevir start producing sales and royalty revenue for

Vertex no later than 2011.