Vertex Pharmaceuticals Inc.
Why 2017 was Vertex's year:
The biotech's pipeline is brimming with potential, sales are expected to fetch more than $2 billion this year and shares have doubled in value since January.
A premier biotech:
Following positive readouts for three cystic fibrosis treatments, analysts say Vertex has the goods to become the fastest-growing large-cap biotech.
Vertex has locked down a place at the top of cystic fibrosis market, and could develop a monopoly should its combo treatments win approval.
Correction: A previous version of this article incorrectly characterized the tezacaftor/Kalydeco combination treatment and the patient population it targets.
Vertex Pharmaceuticals Inc. left 2016 on a high note. Net revenues of its cystic fibrosis products totaled $1.68 billion — a company record, and one that executives expected would be broken again soon as its newest offering Orkambi (lumacaftor/ivacaftor) gained traction in Europe.
Performing beyond even Vertex's expectations, Orkambi and Kalydeco (ivacaftor) had already raked in a combined $1.54 billion through the end of September, and are poised for at least $2.1 billion in sales by year's end.
Yet, ballooning bottom lines are just part of why 2017 was a standout 12 months for the Boston biotech. Strong readouts for its experimental drug tezacaftor and several triple combination therapies solidified Vertex as the premier player in the cystic fibrosis market, with analysts predicting its medicines could treat up to 90% of patients with the genetic disease.
Orkambi opens up wider market for Vertex2017 figure represents YTD sales as of Sept. 30
"Valuation of a company is driven by the future value of its portfolio, and the future value of the Vertex portfolio has been de-risked this year," Tony Butler, managing director at Guggenheim Securities LLC, said in an interview with BioPharma Dive.
With its hep C drug Incivek (telaprevir) long pulled from market, Vertex's portfolio consists entirely of Orkambi and Kalydeco. But that may soon change. The Food and Drug Administration is scheduled to make an approval decision by late February on a combination of tezacaftor and Kalydeco.
Cystic fibrosis affects more than 70,000 people worldwide. The disease, which stems from mutations in a type of protein known as the cystic fibrosis transmembrane conductance regulator (CFTR), creates a mucus that coats the lungs and traps bacteria, leaving patients vulnerable to infection. Researchers have identified hundreds of CFTR mutations that give rise to the disease, according to the Cystic Fibrosis Foundation.
To that point, Vertex is seeking to secure approval of its tezacaftor/Kalydeco combo in a subset of patients with two copies of a mutation called F508del in their genes that code for CFTR, as well as patients with one F508del mutation and a residual functional copy of the CFTR gene. Orkambi is indicated for the roughly 25,000 patients who have two F508del copies, while Kalydeco offers benefits to around 5,000 patients with various other mutations.
The tezacaftor/Kalydeco pairing also serves as the backbone for Vertex's triple combination therapies. In July, the biotech revealed a slew of positive early- and mid-stage data showing patients with two F508del copies or one F508del copy and a minimally functional copy experienced improved lung health when taking the backbone plus one of three Vertex drugs: VX-152, VX-440 or VX-659. Company leadership is still evaluating which triple combos to take into late-stage pivotal testing, though analysts anticipate that the portfolio could ultimately reach 68,000 cystic fibrosis patients.
"We're rapidly moving towards enrollment [of triple combo studies], which we believe that up to 90% of patients will be on a single triple regimen and getting maximum effect," Vertex CEO Jeffrey Leiden said during the company's third quarter earnings call. "Ten percent are going to be waiting for genetic therapies, and there will be a few, a small number that remain on Kalydeco monotherapy. That's how we see the world a few years from now."
Perhaps most importantly, Vertex is the only drugmaker with FDA-approved CFTR modulator therapies, which treat the underlying cause of the disease as opposed to its symptoms. Patients and physicians have had years to develop a rapport with the company's drugs, meaning competitors will likely have a hard time convincing them to leave those effective treatments in lieu of experimental ones.
"If I have a finite population and I'm the first in the market selling a drug, everybody who needs the drug is taking the drug," Butler said. "That's what makes it very difficult for a competitor to come in. You don't have a patient pool that's available to you to do a clinical trial that's sufficiently large enough to get a clinical trial to the FDA."
Understandably, shareholders are responding well to the powerful position Vertex has carved out for itself. The biotech's stock has more than doubled so far this year, trading at almost $150 per share in early November. That added investment also comes as the global cystic fibrosis drug market is slated to grow from $3.6 billion in 2016 to $13.9 billion by 2025, according to a June report from Grand View Research.
Vertex's good year
Now that Vertex has built an enviable market position, analysts are also looking far down the line at what Vertex's next therapeutic area of interest could be. Butler, for one, explained the company could delve into gene therapies as a way of treating the remaining 10% of the market it hasn't tapped into with its current pipeline. Moving into muscular dystrophy or niche orphan diseases aren't entirely out of the question either.
"A $5 billion market [where] you're kind of the only guy in town is pretty neat," Butler said. "So the question then becomes, well, what do you do for your second stanza after you've written an entire song?"
Having built on its success in cystic fibrosis, Vertex now has the industry wondering what its next therapeutic focus will be.