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Vertex faces first notable setback as it pushes beyond cystic fibrosis

Vertex Pharmaceuticals said Wednesday it will stop working on a closely watched experimental drug because of safety signals seen in a mid-stage study.The study was testing Vertex’s drug, VX-814, in patients with an inherited disorder that leaves them with too little of a lung-protecting protein called alpha-1 antitrypsin, or AAT. Researchers evaluated multiple doses of VX-814 and, according to Vertex, saw elevated liver enzymes in “several” patients across the different doses. For four of those patients, the elevations were more than 8 times the upper limit of normal enzyme levels.

Vertex said the enzyme issues were either resolved or are now resolving. But after analyzing results, investigators determined these patients’ exposure to the drug was low. “Based on these data, Vertex concluded that it would not be feasible to safely reach targeted exposure levels, and thus meaningful increases in AAT levels, with VX-814,” the company said. Vertex has another drug for AAT deficiency in mid-stage testing, and plans to continue on with that program.

Wall Street analysts have called Vertex the cleanest growth story in biotech” thanks to its pioneering work in cystic fibrosis. Since 2012, the Boston-based company has brought to market four drugs that now provide treatment options for about 90% of patients with the lung disease. That revolution in care is reflected in Vertex’s rapidly growing revenue, which the company expects to reach at least $5.7 billion this year.

While investors have been encouraged by Vertex’s success in cystic fibrosis — shares in the biotech have tripled in value since late 2017 — they’ve also pressed the company for details on what diseases it will target next. Executives haven’t disclosed the full list of illnesses they want to address, but, as of last year, there were roughly 20, with one being AAT deficiency.

Like cystic fibrosis, AAT deficiency is caused by genetic defects that lead to misfolded proteins. Vertex has been trying to treat the disease with oral medicines that correct the protein misfolding, having advanced both VX-814 and a drug known as VX-864 into mid-stage testing.

Now, only the second of those will continue to be studied.

Vertex made note in an Oct. 14 statement that VX-864 is structurally distinct from VX-814. The mid-stage study of that drug continues to enroll and dose patients, the company said, with data anticipated in the first half of 2021.

However, that safety net doesn’t appear to have placated Vertex investors. Company shares fell about 20% Thursday morning, falling to roughly $217 apiece in one of the largest stock drops for the company in years. SVB Leerink analyst Geoffrey Porges wrote in a Thursday note that he expects Wall Street to “flush all value for AATD out of Vertex forecasts and valuation,” in part because Vertex’s track record of keeping programs going after the lead drug fails is “not encouraging.”

Meanwhile, Stifel analyst Paul Matteis wrote that the discontinuation of VX-814 is “certainly a negative surprise … especially given management’s consistently bullish commentary surrounding the program.”

Matteis added that, while VX-864 isn’t far behind in development, investors may remain uneasy since much of the excitement around Vertex’s work in AAT deficiency has been rooted in preclinical data and, perhaps more importantly, the company’s “outstanding accomplishments in cystic fibrosis.”

“One setback doesn’t at all negate this,” he wrote, “but given that there all along hasn’t been much AAT asset data (preclinical or clinical) to analyze, the surprising VX-814 setback may cap the amount of AAT credit in the stock until we get real human proof-of-concept.”

Several other biotechs, including Arrowhead Pharmaceuticals, Dicerna Pharmaceuticals, and Alnylam Pharmaceuticals, are developing genetic medicines meant to treat liver disease caused by AAT deficiency.

Following Vertex’s announcement, shares of Arrowhead and Dicerna each rose around 7%, while Alnylam, which is partnered with Dicerna, remained relatively unchanged. Mani Foroohar, also an analyst at SVB Leerink, wrote that Vertex has been a potential “existential threat” to the three companies, making the VX-814 upset a positive for them and their medicines.