Cambridge, MA-based Vertex Pharmaceuticals has seen its stock take a whopping 17 percent hit in the past two days at a scientific meeting, as investors have had time to think about the implications of new clinical trial data from a couple of competitors in the hepatitis C field.
Vertex (NASDAQ: [[ticker:VRTX]]) saw its stock tumble from $36.63 at Friday’s close to $30.41 at today’s close—a 17 percent drop over two days of trading—as investors absorbed a flurry of news stories at the annual meeting of the American Association for the Study of Liver Disease (AASLD) in San Francisco. Vertex’s decline coincided with a boost in the stocks of of Alpharetta, GA-based Inhibitex (NASDAQ: [[ticker:INHX]]) and Princeton, NJ-based Pharmasset (NASDAQ: [[ticker:VRUS]]).
Vertex has been the reigning king of hepatitis C for the past year. Its protease inhibitor drug telaprevir (Incivek) was FDA approved as a new treatment that boosts cure rates to almost 80 percent, while shortening the time people need to take interferon and ribavirin, a standard combination that causes significant side effects. The company has handily beaten Wall Street sales estimates for its first couple quarters on the market, and turned profitable, while fending off competition from a protease inhibitor from Merck (NYSE: [[ticker:MRK]]). But researchers are pushing hard now to fight hepatitis C with a combination of new antiviral medicines, much like how HIV is controlled, and Vertex’s existing drug could end up being less important over time than other treatments.
Pharmasset, which is developing a nucleotide polymerase inhibitor, saw its stock climb at the meeting when it said its drug had cured all 40 patients in a clinical trial. Importantly, the Pharmasset drug produced cures whether patients got interferon or not—and although the number of patients was small, it would be a big advantage if Pharmasset’s drug could eliminate the need for interferon. The company is still at least a couple years away from challenging Vertex on the market, but analysts see this new drug and potentially another one from Inhibitex as becoming potent new options that might be able to reach a goal that has so far eluded Vertex—the elimination of interferon, and the flu-like symptoms it causes, from the standard treatment regimen for hepatitis.
Thomas Russo, an analyst with Robert W. Baird, downgraded Vertex to “neutral” today after going over the results from the liver meeting. One of the bullet points in his note today was headlined “AASLD event reveals Vertex itself uncertain, lacking convincing strategy to defend position 2014+.”
Russo said he applauded Vertex management for “sincere, credible” comments about how Pharmasset may have changed the hepatitis C paradigm, but he isn’t sure Vertex can fend off the challenge through its own internal development, or through an acquisition.
“We remain positive on cystic fibrosis catalysts in the first half of 2012, but investors first need confidence in the HCV floor, and we’ve lost conviction this stock can “thread the needle” in an environment of new uncertainty (and resignation?) coming from the company itself,” Russo wrote.
Besides the nucleotide inhibitors in the works, other pharma companies are developing so-called non-nucleoside inhibitors as a third class of antiviral medicine that could go into combinations. Roche recently agreed to acquire San Diego-based Anadys Pharmaceuticals (NASDAQ: [[ticker:ANDS]]) for $230 million to get its “non-nuc,” while Abbott Laboratories is also pursuing a drug in that category.
