Vertex: Progress Towards Expanding Cystic Fibrosis Market Continues (NASDAQ:VRTX)

Vertex Pharmaceuticals (NASDAQ:VRTX) is a great speculative biotech play to look into. The reason why I state that is because it has a huge hold in the Cystic Fibrosis (CF) space, but it continues to make an advancement in this area. By that, I mean that it is gearing up to initiate a phase 1 study using VX-522 for the treatment of patients with CF. While it has done well to advance treatments for this patient population, there are still 5,000 CF patients who receive no benefit at all from CFTR modulators. As such, the hope is that VX-522 as a messenger RNA (mRNA) drug could help these patients to develop a functional CFTR protein (About 5,000 patients don’t produce the CFTR protein at all and don’t benefit from current CFTR medications). Vertex is not doing this on its own though, this drug was developed in collaboration with Moderna (MRNA), who is an expert in developing mRNA drugs. With this company’s expertise in developing mRNAs (like the covid vaccine Spikevax), plus Vertex’s expertise in developing treatments for CF, the targeting of these other 5,000 CF patients may become a reality. Not only that, but I believe additional value can be made here with the advancement of a non-opioid pain drug known as VX-548. It received the go ahead to initiate a phase 3 study using this drug for the treatment of patients with moderate to severe acute pain. Lastly, it is hoping to initiate a phase 2 dose-ranging study in neuropathic pain by the end of 2022. With a huge hold on the CF market, plus the ability to expand it with the targeting of an additional 5,000 patients who currently have no relief, these are the reasons why I believe that Vertex Pharmaceuticals is a great speculative biotech play to look into.

Vertex’s Hold On CF Market Is Only The Beginning

As I stated above, Vertex Pharmaceuticals has a huge hold on the Cystic Fibrosis (CF) market. Cystic Fibrosis is an inherited life-threatening disorder in which the lungs and digestive system become damaged. This genetic disorder causes mucus to become thick and glue-like and when this occurs in the lungs it is very devastating. That’s because mucus is supposed to be thin and slippery to help your organs work. The CF market continues to grow and is a large market. It is expected the Cystic Fibrosis market is expected to reach $13.9 billion by 2025. In order to determine if a treatment works for CF, FEV1 is used to measure lung function. This is a highly devastating disease, because there are many symptoms associated with it. These symptoms are as follows:

• Shortness of breath
• Wheezing
• Constant Coughing with phlegm
• Frequent lung infections taking place
• Weight gain despite not eating as much

Vertex has done well to develop many treatments for patients with Cystic Fibrosis. It has been expanding its presence for this indication since its first approval of KALYDECO (ivacaftor). It then went on to receive FDA approval of a triple combination regimen for CF known as TRIKAFTA. TRIKAFTA is made up of elexacaftor/tezacaftor/ivacaftor and was first approved in 2019 to treat CF patients ages 12 and older with mutations. In the most recent FDA approval, TRIKAFTA was approved in younger CF patients (6 through 11 years) with mutations. Vertex continues to do well with sales of all of its CF drugs, but as I stated above there are about 5,000 patients who do not achieve relief from current CFTR modulator drugs. As such, the company has decided to advance another drug known as VX-522. This drug is messenger RNA (mRNA) drug which was developed to treat patients with CF. It is not an expert in mRNA, which is why it developed this drug with Moderna which understands this type of science very well. VX-522 was developed as an exclusive research collaboration with Moderna back in 2016. The goal of this drug is to provide a functional working copy of the CFTR protein for a CF patient. The hope is that it will end up reducing disease burden, but that remains to be seen. That’s because Vertex is only going to initiate a phase 1 single-ascending dose trial using VX-522 to treat this CF patient population. It received IND clearance of using this drug for this patient population from the FDA recently. If ultimately successful in this and other studies for these 5,000 CF patients, then this drug would provide a treatment for the underlying cause of their disease.

Advanced Late-Stage Pipeline Brings Additional Hope

The thing is that Vertex has always been reliant on its CF franchise. As I described directly above, it has the potential to expand in this indication with the 5,000 CF patients who do not achieve any relief for the time being. The good news is that it may not end up being reliant on this indication for long. What do I mean by that? Well, it is gearing up to advance a phase 3 program using another drug known as VX-548, which is being developed to treat patients with acute pain. The reason why the biotech has been able to push this program forward is because of positive results that were announced from a phase 2 study earlier this year. It was announced that treatment with a high dose of VX-548 resulted in a rapid, statistically significant improvement in the primary endpoint of time-weighted Sum of Pain Intensity Difference over 48 hours (SPID48), compared to placebo. This statistical significance was achieved over placebo with a p-value of p = 0.0251. The patients who were recruited were those who had acute pain after abdominoplasty surgery or bunionectomy surgery. One other major thing to point out from the data is that there was also an active comparator arm. Such a comparator arm was hydrocodone bitartrate/acetaminophen to see how well it did against placebo. This comparator arm in the study achieved a p-value of p= 0.3706. When comparing both p-values, you can see that the high dose of VX-548 performed much better compared to the comparator arm when going against placebo.

With these positive results in hand, Vertex took them to the FDA for an end-of-phase 2 meeting. It received positive feedback from the FDA and that’s where it came to an agreement with the agency on what type of phase 3 studies needed to be done to possibly eventually receive regulatory approval of VX-548 for the treatment of patients with acute pain. The phase 3 program, will be of two randomized, double-blind, placebo-controlled phase 3 studies using VX-548 for acute pain after bunionectomy or abdominoplasty surgeries. The primary endpoint will remain the same, which is time-weighted Sum of the Pain Intensity Difference over the first 48 hours (SPID48) as recorded by the 11-point Numeric Pain Rating Scale (NPRS) compared to placebo. A secondary endpoint for this trial will be SPID48 of VX-548 compared to hydrocodone bitartrate/acetaminophen. As I stated above, this late-stage study will focus on the bunionectomy or abdominoplasty surgeries only. However, Vertex is also adding in another single-arm into this phase 3 study. This other arm is going to test safety/efficacy of VX-548 for the treatment of other types of moderate-to-severe acute pain. This study though is only going to test out these other acute pain patients in a 14-day window. There is an expansion opportunity that traders/investors should be aware of though. This is whereby the company is also going to test out the use of VX-548 for the treatment of patients with neuropathic pain. This is going to be explored in a phase 2 dose-ranging study that is expected to begin by the end of 2022. The primary endpoint for this mid-stage study is going to be the change from baseline in the weekly average of daily pain intensity on a numeric pain rating scale (NPRS) at week 12.

Financials

According to the 10-Q SEC Filing, Vertex Pharmaceuticals had cash, cash equivalents and marketable securities of $9.8 billion as of September 30, 2022. The thing about this company is that it is in good shape. Especially, since it is continuing to increase sales in the CF space. For instance, it reported product revenue of $2.33 billion in Q3 of 2022. This amount of revenue produced is a year over year increase of 18% compared to the same quarter in 2021. I see sales continuing to grow and there are two reasons why I believe this will be the case. The first reason is that while sales are decent in the United States increasing by 5% to $1.46 billion, sales outside of the U.S. are growing at an alarming rate with an increase of 46% to $879 million. The second reason is that Vertex has not stopped in expanding its label for its current CF drugs. What do I mean by this? Well, label expansion in terms of targeting children patient populations. For example, Vertex received FDA expanded label approval from the U.S. FDA for ORKAMBI, which was approved by the FDA for the treatment of CF patients who are ages 12 to < 24 months who are homozygous for the F508del mutation (F/F genotype) in CFTR gene. ORKAMBI was approved by the FDA for several other age groups beforehand, but this latest approval is another expansion opportunity for the CF franchise. The ability to expand to other age groups, plus the consistent growth seen with TRIKAFTA in the United States, are the reasons why I believe earnings will continue to come in strong.

Risks To Business

There are several risks that traders/investors should be aware of before investing in this biotech. The first risk to consider would be with respect to the ongoing earnings. I don’t see growth dropping off, but depending upon the economy things could change. Sales may not meet expectations for some quarters. As I stated above, I believe that this risk might be mitigated for the fact that it has done well to continue to receive expanded FDA approval labels for its CF drugs. A second risk would be with respect to the two phase 3 randomized placebo studies using VX-548 as an acute pain drug. Specifically, it is being deployed for the treatment of acute pain after bunionectomy or abdominoplasty surgeries. One downside is that both studies are just expected to start in the coming weeks/months, which means it will take time to see if this drug works. This remains a huge risk, because there is no guarantee that the primary endpoint will be met for either of these phase 3 randomized studies. On the flip side, the company is not just relying only on this late-stage program. In total, it has three other non-CF late-stage pipeline programs being advanced. This means while there is risk with respect to the CF programs, Vertex is taking steps to branch out to other indications.

Conclusion

The final conclusion is that Vertex Pharmaceuticals is a great speculative biotech play to look into. The reason why I state that is because it is doing very well with respect to sales of its CF franchise. As I noted above, it was able to grow product revenue by as much as 18% to $2.33 billion in the most recent Q3 of 2022. I expect that this sales number will increase for the two reasons I stated before. The first being that uptake of TRIKAFTA in the United States continues to do well, plus there is huge growth of product revenue for territories outside of the United States by 46% in the most recent third-quarter. Secondly, sales should continue grow as Vertex starts to attain label expansion for its CF drugs targeting younger children patient populations. Eventually, there is a possibility that it will be able to expand to the remaining 5,000 CF patients who currently receive no benefit from current CFTR drugs. This will be by using VX-522 which is being done in collaboration with Moderna. I think that it is improving upon its long-term growth. Especially, since as I noted above it is branching off to other indications and not relying solely on the CF franchise. I already talked about VX-548 being explored in a late-stage phase 3 clinical program targeting acute pain. It is also moving towards potential regulatory approvals of Exa-cel with its partner CRISPR Therapeutics (CRSP) for the treatment of patients with Sickle-Cell Disease (SCD) and beta thalassemia. The U.S. FDA rolling review submission is expected to be completed in the U.S. in Q1 of 2023. European Medicines Agency and MHRA submissions for Exa-cel are on track in the coming weeks/months. With continued growth in sales for TRIKAFTA and other CF drugs, plus three non-CF late-stage programs being advanced, these are the reasons why I believe Vertex Pharmaceuticals is a great speculative biotech play to look into.