- Shareholders should expect more, and potentially larger, M&A from Vertex due to its stronger cash position, company leadership said during an earnings call Wednesday. As of June 30, Vertex held $4 billion in cash, cash equivalents and marketable securities, up from the $3.2 billion recorded at the end of 2018.
- CEO Jeffrey Leiden said accessing technology platforms has been, and continues to be, a priority for his company. Drugs that complement Vertex's pipeline and the diseases it targets are of interest too — as evidenced by the recent acquisition of Exonics Therapeutics, a gene therapy developer focused on Duchenne muscular dystrophy.
- While Vertex remains on the lookout for drugs that could boost its cystic fibrosis business, Leiden said they haven't found any because the company's three-drug regimen, which is under regulatory review, "set such a high bar." In any case, Leiden doesn't foresee Vertex entering deals for late-stage or on-market products, opting instead for assets earlier in development.
Investors have pressed Vertex about its plans beyond cystic fibrosis. On Wednesday, company executives gave them something to chew on by not only touting M&A prospects, but also outlining incremental advances in five other disease areas.
Perhaps most notable: the company anticipates having Phase 2 proof-of-concept data on VX-814 by next year. Researchers are evaluating the small molecule drug in patients with a genetic disorder that affects an inflammation-regulating protein called alpha-1 antitrypsin, or AAT.
Preclinical data showed VX-814 had a positive impact on toxic AAT polymers. Now, the drug is headed into a mid-stage study that should be a similar size and have a similar timeline to Vertex's past cystic fibrosis trials, according to Reshma Kewalramani, the company's R&D head and soon-to-be CEO.
Kewalramani, a nephrologist, said she was also excited about a new program in Vertex's pipeline targeting liver diseases, specifically those spurred by mutations in the APOL1 gene.
Vertex estimates about 10,000 U.S. patients with a condition known as focal segmental glomerulosclerosis (FSGS) are homozygous for APOL1 mutations. The company is therefore developing an FSGS drug, VX-147, and has begun dosing in a Phase 1 study. If the results read out positive, Vertex intends to kick off a Phase 2 proof-of-concept study next year.
In addition to AAT and liver diseases, its pipeline has taken aim at multiple types of pain — including acute, which Vertex sees as a multibillion-dollar market opportunity. The company's most advanced pain candidate completed Phase 2 studies for osteoarthritis and acute pain. Another candidate, announced Wednesday as VX-961, is just heading into the clinic.
The fourth quarter should also bring preliminary safety and efficacy data from Phase 1/2 studies of CTX001, a gene-edited therapy co-developed by Vertex and CRISPR Therapeutics for patients with transfusion-dependent beta thalassemia and sickle cell disease.
And Vertex is diving into Duchenne muscular dystrophy research, too, through its acquisition of Exonics. On the Wednesday earnings call, Leiden cautioned against describing the roughly $1 billion Exonics deal as "small," perhaps offering some context as to what larger M&A could look like for Vertex moving forward.
The updates, along with another solid quarter for Vertex's cystic fibrosis business, seemed to affirm investor confidence. Shares were up 4% to $173.42 apiece at market's open Thursday, and continued to climb in morning trading.
"[W]e remain bullish on Vertex due to productivity of its R&D efforts," Alethia Young of Cantor Fitzgerald wrote in a July 31 note. "We think past is prologue, so we remain confident that Vertex will successfully interrogate various biologies and find fast-to-market pathways in various rare diseases."
Moving beyond cystic fibrosis, though, will put Vertex in more competitive fields. Alnylam Therapeutics, Dicerna Therapeutics and Arrowhead Pharmaceuticals are all advancing AAT candidates, while the Duchenne field has become crowded with multiple gene therapy developers.
Vertex recorded $940 million in product revenue for the second quarter, a 25% increase year over year that handily beat Wall Street estimates of $886 million. Almost all of the company's growth came from its newest cystic fibrosis drug Symdeko (tezacaftor/ivacaftor and ivacaftor), which fetched $362 million during the three-month period.
Having considered the portfolio's performance over the first half of 2019, Vertex leadership raised full-year product revenue guidance to a range of $3.6 billion to $3.7 billion.
Revenue is sure to tick higher still, with the anticipated approval of the company's three-drug regimen next year. Vertex expects the addition of a triplet will allow it to treat around 90% of the cystic fibrosis population with its medicines.