Biotech Values

[DewDiligence]

VRTX: Kurt Graves, head of commercial operations and strategic planning,
resigned today for unstated reasons. Graves, formerly a top marketing
man at NVS, was arguably VRTX's most prominent executive and he
was the front man for the Telaprevir program. For Graves to resign for
unstated reasons a few weeks before the annual AASLD meeting—the
biggest HCV conference of the year—is curious indeed and is bearish, IMO.
(I suppose there's a bullish interpretation: that VRTX is getting munched
and Graves would be out of a job anyhow; however, this strikes me as less
plausible than the bearish scenarios.)

VRTX buried Graves’ departure within this PR:

http://finance.yahoo.com/news/Vertex-Pharmaceuticals-bw-3431515812.html?x=0&.v=1

›Vertex Pharmaceuticals Provides Corporate Update

-Vertex announces plans to initiate a Phase 2 proof-of-concept trial for VX-509 in rheumatoid arthritis

-Vertex to add $260 million to cash position; company increases guidance for year-end cash position to approximately $800 million and adjusts net loss guidance

-Vertex announces executive leadership change [yes, a major one]

Wednesday September 30, 2009, 4:12 pm EDT

CAMBRIDGE, Mass.--(BUSINESS WIRE)--Vertex Pharmaceuticals Incorporated (Nasdaq: VRTX ) today announced that it plans to initiate a Phase 2 proof-of-concept clinical trial for VX-509, a novel and highly selective inhibitor of Janus kinase 3 (JAK3). The 12-week trial is expected to enroll approximately 200 patients with moderate to severe rheumatoid arthritis (RA). Vertex expects to initiate the trial in the first quarter of 2010 and to obtain interim clinical data from this trial, including measurements of safety, tolerability and clinical activity, by mid-2010.

Vertex also today updated guidance for its 2009 year-end cash position and net loss. The updated financial guidance reflects Vertex’s strengthened cash position resulting from business development activities conducted in the third quarter of 2009, including the expected receipt of $155 million cash related to future telaprevir milestone payments, announced today in a separate press release, and a $105 million payment received from Mitsubishi Tanabe Pharma Corporation related to an amended agreement for the development and commercialization of telaprevir in Japan and certain Far East countries. These business development activities will result in the addition of $260 million in cash to Vertex’s June 30, 2009 cash, cash equivalents and marketable securities position of $754 million. Vertex now expects to end 2009 with approximately $800 million of cash, cash equivalents and marketable securities. In addition, Vertex today updated its guidance for 2009 non-GAAP and GAAP net loss.

“Vertex is committed to becoming a major, fully-capable biopharmaceutical company and is leading the development of late-stage drug candidates aimed at the treatment of hepatitis C virus infection and cystic fibrosis,” said Matthew Emmens, chairman, president and chief executive officer of Vertex Pharmaceuticals. “Our top priority remains the execution of the Phase 3 registration program for telaprevir in HCV, and we remain on track to submit a New Drug Application for telaprevir in the second half of next year. Beyond telaprevir, the planned initiation of a Phase 2 trial for VX-509 is another important step toward advancing our business while still maintaining a strong financial position as we enter 2010.”

Vertex also today announced that Kurt Graves will resign his position with the company effective Friday, October 2, 2009. Mr. Graves joined Vertex in July 2007 and most recently held the title of executive vice president, chief commercial officer and head, strategic development.

Mr. Emmens continued, “I thank Kurt for his efforts to build Vertex’s commercial infrastructure over the past two years. Today, Vertex is well-positioned to advance telaprevir toward commercialization, and I wish Kurt well in his future endeavors.”

VX-509 Phase 2 Proof-of-Concept Trial

The Phase 2 proof-of-concept trial announced today for VX-509 is expected to enroll approximately 200 patients with moderate to severe RA. The double-blind, randomized, placebo-controlled trial will evaluate the safety, tolerability and clinical activity of VX-509 dosed for 12 weeks compared to placebo. The primary endpoints of the trial are to evaluate safety and to measure the improvement in clinical signs and symptoms of RA in patients after 12 weeks of treatment. Efficacy assessments will include the American College of Rheumatology criteria (ACR20, ACR50 and ACR70) for defining clinical improvement in RA patients. ACR20, ACR50 and ACR70 are standardized measures of the number of patients who achieve at least a 20, 50 or 70 percent improvement, respectively, in ACR-specified measures of RA activity. The trial will also utilize disease activity score (DAS) and European League Against Rheumatism (EULAR) response criteria as additional efficacy assessments.

Vertex expects to initiate the trial in the first quarter of 2010, which the company believes will result in interim clinical data, including measurements of safety, tolerability and clinical activity, being available by mid-2010. Vertex plans to pursue collaborative opportunities for VX-509 with major pharmaceutical companies to more fully capture the potential value of the compound across multiple immune-mediated inflammatory diseases. Vertex expects that any ongoing or future out-licensing activities for VX-509 will conclude during 2010, providing potential future sources of revenue and cash flow.

About JAK3 and VX-509

Janus kinase 3 is an enzyme that plays a critical role in the cell signaling process that results in the development of T-lymphocytes, which are white blood cells that are part of the body’s immune system. Based on the known activity of JAK3 on the immune system, it is believed that inhibitors of JAK3 may play a role in the treatment of a variety of immune-mediated diseases such as rheumatoid arthritis, psoriasis and others.

In in vitro studies, VX-509 was greater than 1000-fold more selective for JAK3 compared to non-JAK kinases and approximately 25- to 150-fold more selective for JAK3 compared to other JAK isotypes in cell-based assays. Results from two Phase 1, dose-ranging studies of VX-509 of up to 14 days duration in healthy volunteers completed in the first quarter showed no dose-limiting toxicities. Data from these Phase 1 studies also showed a profound dose-dependent and reversible reduction in PSTAT-5, a specific biomarker of JAK3 activity, and a high degree of selectivity for JAK3 over JAK2, consistent with observations from previous in vitro studies.

2009 Financial Guidance

As a result of the expected addition of $260 million of cash from business development activities conducted in the third quarter, Vertex is today updating its guidance for year-end cash, cash equivalents and marketable securities from approximately $700 million to approximately $800 million. Vertex is also updating its guidance for 2009 non-GAAP loss to approximately $535 million. As a result, the company expects its 2009 GAAP loss to be approximately $650 million. Vertex’s increased guidance for 2009 non-GAAP and GAAP loss results primarily from the decision to retain VX-509 for Phase 2 clinical development. This updated guidance does not anticipate further contribution of cash or revenue from new business development or out-licensing activities in 2009. Vertex’s guidance for GAAP loss includes an estimate of approximately $115 million in restructuring expense, acquisition-related expenses, executive transition expenses, stock-based compensation expense and loss on exchange of convertible subordinated notes.

“After the completion of key business development activities conducted in the third quarter, which will add $260 million to Vertex’s June 30, 2009 cash position of $754 million, we now expect to end the year with approximately $800 million in cash, cash equivalents and marketable securities,” said Ian Smith, executive vice president and chief financial officer of Vertex. “This strengthened financial position enables the continued investment in the telaprevir registration program as well as investment in multiple other development programs, including the Phase 3 program for VX-770 in cystic fibrosis and now the first proof-of-concept trial of VX-509 in RA.”

Phase 3 Programs in HCV and CF on Track

More than 2,200 HCV patients are enrolled in Phase 3 clinical trials of telaprevir. The ADVANCE and ILLUMINATE trials enrolled more than 1,500 treatment-naïve genotype 1 HCV patients. The REALIZE trial enrolled more than 650 patients with genotype 1 HCV who did not achieve a sustained viral response (SVR) with a previous peg-IFN-based treatment. The telaprevir dosing portion of these trials is complete, and Vertex expects to obtain SVR data from ADVANCE and ILLUMINATE in the first half of 2010 and from REALIZE in mid-2010. Vertex expects to submit a New Drug Application for telaprevir in the second half of 2010.

Vertex is also conducting the ENDEAVOR Phase 3 registration program for VX-770, an investigational Cystic Fibrosis Transmembrane Conductance Regulator (CFTR) potentiator that targets the defective CFTR protein that causes CF. The registration program consists of three ongoing clinical trials, known as STRIVE, ENVISION and DISCOVER.‹