Biotech Values

[DewDiligence]

VRTX just inked another monetization deal that might concern
me if I were long. In return for waiving all royalties on sales of
Telaprevir in Asia, VRTX is getting $105M in up-front cash plus
$15-65M in potential milestones from partner Mitsubishi. This
deal follows the announcement on July 10 that VRTX is seeking
to monetize the potential milestone payments from JNJ pertaining
to Telaprevir development in the EU (#msg-39423304). Inasmuch
as VRTX is loaded with cash, I’m puzzled by VRTX’s urgency to
monetize the above assets; my kneejerk reaction is to interpret
these actions as somewhat bearish for the Telaprevir program.

http://finance.yahoo.com/news/Vertex-Pharmaceuticals-and-bw-3709876257.html?x=0&.v=1

›Vertex Pharmaceuticals and Mitsubishi Tanabe Pharma Corporation Amend Agreement to Develop and Commercialize Telaprevir in Asia

— Vertex to receive $105 million from Mitsubishi following signing, plus the potential for additional milestones upon commercialization —

— Phase 3 registration program for telaprevir in Japan expected to complete enrollment in the third quarter of 2009 —

Thursday July 30, 2009, 3:37 am EDT

CAMBRIDGE, Mass.--(BUSINESS WIRE)--Vertex Pharmaceuticals Incorporated (Nasdaq: VRTX ) and Mitsubishi Tanabe Pharma Corporation today amended their agreement for the development and commercialization of telaprevir for the treatment of hepatitis C virus (HCV) infection in Japan and other countries in the Far East. Telaprevir is an HCV protease inhibitor currently in Phase 3 clinical trials in Japan, as well as in the United States and in Europe. Under the terms of the amended agreement, Vertex will receive $105 million following signing, and will be eligible to receive further milestones [but not royalties on sales—see below] upon approval and commercialization in Japan.

The previous agreement signed in 2004 between Vertex and Mitsubishi Tanabe provided certain development and commercial rights to telaprevir as a potential monotherapy for the treatment of Hepatitis C. The amended agreement announced today provides a fully-paid license to commercialize telaprevir as part of a combination regimen with interferon and ribavirin to treat hepatitis C in Japan and the Far East. Vertex retains exclusive development and commercial rights to telaprevir in North America. Janssen Pharmaceutica, an affiliate of Johnson & Johnson, holds development and commercial rights to telaprevir in Europe, South America, Australia, and the Middle East.

“This amendment recognizes the value of telaprevir-based combination therapy as a potential major advance in the treatment of hepatitis C in Japan and Asian countries, aligning the telaprevir development program on a global basis,” said Kurt Graves, Vertex Executive Vice President, Chief Commercial Officer and Head of Corporate Development. “Moreover, following this amendment, the cash received strengthens our corporate financial position during an important period of investment and growth as we advance two Phase 3 programs in hepatitis C and cystic fibrosis.”

Terms of the Agreement

Under the amended development and commercialization agreement, Mitsubishi Tanabe will receive a license in its territory for telaprevir-based combination therapy with interferon and ribavirin, as well as rights to manufacture telaprevir for sale in its territory. Mitsubishi Tanabe will pay Vertex $105 million upon signing. In addition, the parties have reached other commercial agreements in the amendment, including potential bonus milestone payments in lieu of royalties, that if realized would range between $15 million and $65 million.

Status of Telaprevir Phase 3 Registration Program in Japan

Mitsubishi Tanabe is conducting Phase 3 registration studies with telaprevir in combination with pegylated interferon and ribavirin in Japan in approximately 300 treatment-naïve and treatment-failure genotype 1 hepatitis C patients. The registration program is expected to be fully enrolled sometime in the third quarter of 2009, and sustained viral response (SVR) data from these studies is expected to be available in 2010. SVR is the goal of hepatitis C therapy, and is defined as the absence of detectable virus in the blood 24 weeks after the completion of treatment.

About Telaprevir and Vertex's HCV Development Portfolio

Telaprevir (VX-950) is an investigational oral inhibitor of HCV protease, an enzyme essential for viral replication, and is one of the most advanced investigational antiviral agents in development that specifically targets HCV. Telaprevir is being evaluated as part of a global Phase 3 registration program in more than 2,200 treatment-naïve and treatment-failure patients.‹