Tuesday, May 29, 2012

Vertex (Nasdaq: VRTX) corrects cystic fibrosis data; shares fall

Vertex (Nasdaq: VRTX) corrects cystic fibrosis data; shares fallShawshank, VA 5/29/12 (StreetBeat) -- Vertex Pharmaceuticals Inc (Nasdaq: VRTX) released corrected data involving its cystic fibrosis treatments on Tuesday that lowered the number of patients who showed certain levels of improvedlung function, sending its shares down more than 22 percent.

The initial data, released earlier this month, sent Vertex shares soaring on hopes the company could have a multibillion-dollar franchise in the treatment of cystic fibrosis, a life-threatening genetic disorder that affects about 70,000 people worldwide.

"The corrected data appear weaker than the original data," ISI Group analyst Mark Schoenebaum said.

Vertex blamed the error on a misinterpretation of the data from a vendor involved in the statistical analysis.

"This mistake is very disappointing," Chief Executive Officer Jeffrey Leiden told analysts on a conference call. "It's unacceptable to us."

Still, Leiden said, the company's conclusions "haven't changed" and that it plans to move forward with a late-stage clinical trial.

Cystic fibrosis causes the thin layer of mucus that helps keep the lungs free of germs to become thick, clogging airways and leading to infections that damage the lungs.

The phase 2 study involves a combination of Vertex's new cystic fibrosis drug, Kalydeco, with an experimental drug called VX-809.

Kalydeco helps only about 4 percent of cystic fibrosis patients with a specific gene mutation. Vertex is testing combinations it hopes will eventually be able to address the larger CF population.

The study examined patient performance based on a measure of the maximum amount of air that can be exhaled in one second, known as FEV1.

On May 7, Vertex released data that it said showed that about 46 percent of patients experienced an improvement in lung function of 5 percentage points or more based on FEV1. On Tuesday, the company said that figure was actually about 35 percent.

The initial results also said about 30 percent of patients experienced an improvement of at least 10 percentage points. That number has been lowered to 19 percent.

The company also released data that showed patients on the combination saw an average absolute improvement in lung function of 8.5 percent compared to those taking a placebo.

That effect looked more pronounced in part because patients on a placebo saw a decline in lung function that was much greater than expected by Wall Street analysts.

Even with the placebo patients worsening, the improvement for patients on the Vertex treatments "is much higher than original Street expectations," Schoenebaum said in a research note.

Brian Abrahams, an analyst at Wells Fargo, said in a research note that the early drop in Vertex's shares seemed "excessive" and recommended buying the shares on weakness.

"While we are slightly disappointed by the less robust data, the Kalydeco/'809 combo still clearly appears active to us and we believe should still have multi-billion dollar potential."

Vertex plans to release final data from the Phase II study by the middle of the year.

Vertex shares fell more than 22 percent to $50.41 in early trading on Nasdaq.

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