In an embarrassing move, Vertex Pharmaceuticals has revised previously announced interim results of a Phase II study of a combination cystic fibrosis treatment that had sent its stock soaring over the past month. This morning, the drugmaker unexpectedly disclosed that results were overstated due to a mistake, but continues to maintain that improvements in lung function seen in the study continue to "exceed... expectations."
The analysis of 37 patients that was released on May 7 reported that 17 patients or 46 percent, experienced an improvement in a measure of lung function of 5 percentage points or more, and that 11 patients, or 30 percent, experienced an improvement of 10 percent or more. But the results "were relative improvements, not absolute improvements as originally reported," Vertex says in a statement. The problem, by the way, was blamed on a contract research organization.
So what was the reality? Well, it turns out that 13 patients, or 35 percent, improved 5 percent, and another 7 patients, or 19 percent, improved 10 percent or more. No patients on placebo, however, showed improvement. The data was based on 37 patients who completed 56 days of treatment with VX-809, an experimental therapy, and the existing Kalydeco drug, and 11 patients with one or two copies of F508del, the most common genetic mutation that causes cystic fibrosis.
Vertex shares had soared 73 percent since the initial disclosure was reported, because the combination therapy is designed to expand usage of Kalydeco, which is effective in a small patient population, to a much larger pool with a more common genetic mutation. For this reason, Wall Street has viewed the cocktail as a potential blockbuster, although there had been skepticism from some investors.
Toward that end, Vertex also disclosed awaited data on the mean change lung function for all patients on the combination therapy, which was 8.5 percent compared with placebo, and the improvement was statistically significant. The result was due to both a 4 percent increase in lung function by patients who the cocktail and a 4.6 percent decrease among patients given a placebo.
To one analyst, this may bode well for the cocktail. Even if there had been less of a decline among those on placebo, the treatment still improved lung function. "If placebo had behaved more in-line with expectations (a decline of 1 to 2 percent) then the combo’s absolute improvement from baseline versus placebo would have been 4 to 6 percent, which is still well above original street expectations," ISI Group analyst Mark Schoenebaum wrote in an investor note.
Nonetheless, investors are not reacting favorably. Vertex shares fell roughly 20 percent in pre-market trading in response to the unexpected disclosure. Beyond the immediate implications for the cocktail and the next step in the study, which Vertex, of course, is committed to pursuing, the revision may well tarnish the reputation of the drugmaker, which has largely been widely regarded.
[UPDATE: Despite an 18 percent sell off after trading began, Needham analyst Alan Carr writes in an investor note that he remains bullish: "While the corrected data are not as strong, our view towards commercial potential of this drug is not markedly diminished. We believe this is an exceptional patient population where there will be strong interest in early treatment initiation and a bias towards remaining on drug in the long-term (assuming safety profile stays clean). No other disease-modifying drugs are available and the pipeline is sparse."]