Three months ago, Vertex Pharmaceuticals shared news that investors were eagerly expecting.

A drug the company developed for a rare genetic disease appeared to work as intended, executives said, boosting levels of a key protein without harming patients in a small trial. The finding meant Vertex might eventually be able to pioneer a new type of medicine for a condition with no effective treatments, much as it did for cystic fibrosis.

But within the announcement was a significant revelation. Vertex had decided the drug wasn't good enough to move forward, just like an earlier prospect it had tested for the same condition, known as alpha-1 antitrypsin deficiency or AAT. The company said it would make a better one, and has tried to convince investors and analysts why it remains confident ever since.

"This is the time to double down, not walk away," CEO Reshma Kewalramani said in an interview with BioPharma Dive. "This is when it counts the most."

The data, and Wall Street's response, reflect the position Vertex finds itself in today. After competition quickly wiped out its budding hepatitis C drug business early last decade, Vertex rebounded to develop four cystic fibrosis medicines that, combined, are on track to generate more than $7 billion a year. That repeat success has turned Vertex, already one of the biotech industry's oldest and most storied drug developers, into one of its most valuable as well.

But Vertex's efforts to branch out haven't borne fruit, and threats to its business have crept forward, causing a chorus of critics to grow louder. Shares have fallen nearly 30% over the past year to lows the company hasn't seen since 2019. Analysts have begun questioning Vertex's strategy and value; one of them, Brian Abrahams of RBC Capital Markets, even went so far as to suggest the company could consider a sale or splitting in two if its recent slide persists.

"They haven't had success of late to help shift the narrative," Abrahams said in an interview, adding that recent setbacks may be focusing attention away from the company's strong cystic fibrosis drug business.

Vertex isn't the first to reach such a crossroads. Though many have tried, few biotechs can create multiple, company-sustaining drug franchises. Even those that come close can run aground. Alexion and Celgene, for instance, struggled to expand beyond their flagship medicines. Investor frustration mounted over time and both were eventually acquired.

"They're a victim of their own success," said Paul Matteis, a biotech analyst at Stifel, of Vertex. "A lot of big companies in biotech get to a point where they build an incredible company on one drug and the investment question becomes, can you do it again?"

A growing disconnect

When David Altshuler, a renowned geneticist and founding member of the Broad Institute of Harvard and MIT, joined Vertex in 2015, he was hired to help steer the company's diversification plan, a multi-pronged strategy meant to protect Vertex from a redux of its hepatitis C collapse. He was joined two years later by Kewalramani, a doctor by training and Amgen veteran who served in multiple top executive roles within Vertex before becoming its CEO in 2020.

The plan revolves around making drugs that could have a large impact on serious "specialty diseases" — typically rare conditions for which medicines can be sold at high prices and with a small sales force. Essentially, Vertex's strategy is to become an expert in a specific disease and advance several, similar drugs at it iteratively, hoping to find one that stands out.

"Disproportionate value is created when you actually open a disease," Altshuler said in an interview, contrasting his company's approach with the more typical industry strategy of pursuing as many programs within a broad therapeutic area as possible.

In attempting to do so, Vertex is willing to try any type of medicine, from chemical drugs to complex gene editing therapies, and its pipeline has changed significantly as a result.

When Kewalramani joined in 2017, all of Vertex's clinical-stage drugs were for cystic fibrosis. Now that group is led by a gene editing treatment for two chronic blood diseases; small molecule drugs for pain and a type of kidney disease; a cell therapy for type 1 diabetes; and, until the recent setbacks, a treatment for AAT. A new cystic fibrosis drug is also in advanced testing.

The company has additionally become more active as a dealmaker, partnering with several smaller biotechs in edgy fields of drug research.

"I see us as an R&D engine that has accelerated," Kewalramani argued. It's challenging for biotechs to go from one approved drug to several, she said, and "even more difficult to go from one disease area to many."

Yet there is a growing disconnect between how Vertex views its progress and how some analysts and investors do. Matteis said many investors gave Vertex the "benefit of the doubt" that its extraordinary achievements in cystic fibrosis would translate elsewhere. But the company has since moved on from two experimental pain drugs and two more for AAT, which has shaken confidence. And for a company with a $7 billion franchise, the "level of maturity" of the rest of its drugs are "probably a little bit less than one would like to see," said Abrahams of RBC.

Another analyst, SVB Leerink's Geoffrey Porges, wrote in June that he doesn't expect much to change unless Vertex makes a significant deal or loses enough value to become a buyout target. In the meantime, Vertex could face another threat, as data from its closest competitor in cystic fibrosis, AbbVie, are expected in 2022.

To supporters, Vertex has fought off many would-be rivals in cystic fibrosis, owns a dominant and still-growing franchise and is building with discipline, Matteis said. But skeptics believe the cystic fibrosis drugs are already fairly valued and need confidence in what comes next.

On the outside looking in

The tension between the two views has heightened pressure on Vertex, an environment Kewalramani acknowledged as an unavoidable part of running a large biotech company. "If you could not imagine working in a high-risk environment, drug development is clearly not the right career choice for you," she said.

Yet both Kewalramani and Altshuler staunchly defended their research plan, arguing that the market isn't crediting the company's overall progress.

"The aperture for the observer is narrow. People can only hold a few things in their mind at one time," Kewalramani said. "The focus is on one at a time, then the setups for binary events, if you will," referring to data readouts that serve as triggers for sharp changes in stock value.

In AAT, for example, both executives believe Vertex has made notable gains. Levels of a key protein increased in patients who received Vertex's latest drug, and then declined after they stopped treatment. That didn't happen with placebo patients.

"The data we obtained strongly support continuing to invest," Altshuler argued. "It reminds me of where we were with cystic fibrosis five or 10 years ago," he added, noting that Vertex's first drugs for the disease also led to "meaningful but modest" increases on a marker of lung function.

"We're not claiming success before we have it," Altshuler said, but "we have conviction."

That leaves Vertex analysts and investors, at least for now, to decide whether to believe the company is on the right track in AAT and beyond. Abrahams, for example, said the recent results showed "some proof of principle" to support Vertex's confidence, but still raised questions. Among them: higher doses of Vertex's AAT drug weren't clearly better, and the effect size the company is looking for seems to be "really far off," according to Matteis.

"It's hard, from the outside looking in, to understand exactly what they see," he said.

Vertex, then, is leaning on the credibility it's earned over the years and asking for patience. The question facing Kewalramani and Altshuler is how long investors will give the company.

"There is no shortcut to actually trying to transform the lives of patients with serious diseases," Altshuler said. "That's where the value is, so we're going to do our best to achieve that goal."