Vertex Shares Plunge After Biotech Drops Closely Watched Drug Prospect
October 15 2020 - 1:16PM
Dow Jones News
By Joseph Walker
The flop of a promising drug from Vertex Pharmaceuticals Inc.
led to a sharp drop in the company's share price on Thursday as
analysts questioned the biotech's ability to replicate its success
in cystic fibrosis and diversify its revenue.
Boston-based Vertex disclosed late Wednesday it was stopping
development of the experimental drug because of its potential for
liver toxicity. The safety concerns arose in a Phase 2 trial for
the treatment of a rare liver and lung disease called alpha-1
antitrypsin deficiency, or AATD.
Vertex shares fell 19.9% to $217.01 in afternoon trading on
Thursday, shedding about $14 billion in market value. The stock had
risen 24% so far this year before the setback.
The day's drop was a sizable tumble considering the drug,
code-named VX-814, was still years away from coming on the market
and wasn't expected to be a blockbuster. Yet the drug's development
was closely watched by investors and analysts as a sign of Vertex's
prospects for diversifying a lineup concentrated on cystic-fibrosis
drugs.
"Vertex has a fraction of the R & D portfolio required to
sustain an enterprise of their scale and value," and will now
likely do more business development deals in the coming year to
beef up its pipeline, said Geoffrey C. Porges, a SVB Leerink
analyst, in a note to investors.
Vertex said it would continue testing another of its drugs for
AATD, VX-864, and expects to report Phase 2 study results in the
first half of 2021.
"We have a broad and deep pipeline of potential medicines across
seven different diseases and multiple modalities...that we hope
will one day transform the lives of people around the world with
serious diseases, as we've done in cystic fibrosis," a Vertex
spokeswoman said in an email.
Many on Wall Street considered VX-814 among the most promising
in Vertex's pipeline and a primary driver of its market value
outside of its core drug franchise for cystic fibrosis, analysts
said.
Nearly all of the company's sales last year were derived from
its treatments for the genetic lung disease. Analysts project total
2020 revenue to increase 50% to about $6 billion, according to
FactSet. Analysts at RBC Capital Markets had projected combined
sales of VX-814 and VX-864 to reach $99.3 million in 2024 and to
increase to $568 million in 2029.
Vertex is in a period of leadership transition, while it is
seeking to alleviate investors' concerns about diversification. In
April, Reshma Kewalramani took over as chief executive, replacing
longtime CEO Jeffrey Leiden, who helmed the company's success in
cystic fibrosis. Dr. Leiden remains with the company as executive
chairman.
To stock its pipeline and diversify its revenue, Vertex has
looked to expand its research into other diseases and new
technologies such as gene editing.
The failure of VX-814 underscored concerns about the near-term
economic potential of the company's pipeline. "Public market
investors are likely to apply a healthy degree of skepticism to the
potential returns from such investments, at least until proven
otherwise," Mr. Porges said.
Vertex stock has been among the best performing of larger
biotechs in recent years thanks to its advances in treating cystic
fibrosis. By targeting specific genetic mutations that cause the
disease, the company's drugs have helped to dramatically improve
life expectancy and quality of life for a disease that formerly
killed many patients before adulthood.
Before Thursday, the company's share price had risen 134% over
the past five years, compared with a 36% increase in the Nasdaq
Biotechnology Index.
(END) Dow Jones Newswires
October 15, 2020 14:01 ET (18:01 GMT)
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