After “Hubris” and Its HCV Collapse, Can Vertex Avoid Same Mistakes?
Five years ago, in November 2011, a company from Princeton, NJ, called Pharmasset shared news that would have an impact on millions of people around the world with hepatitis C. Its experimental drug PSI-7977 had quickly cleared the virus from 40 patients, with minimal side effects, and they had stayed infection-free. If the data held up in wider testing, it could mean that hepatitis C could be cured someday with a short course of pills, without the flu-like symptoms that dogged regimens of the past.
“It was absolutely the biggest deal,” says Durhane Wong-Rieger, a longtime hepatitis C patient advocate who now runs the Canadian Organization for Rare Disorders. “It was the evidence we’d all been looking for.”
Officials at Vertex Pharmaceuticals (NASDAQ: VRTX), who were planning a move from Cambridge, MA, into a new $800 million headquarters with views of Boston Harbor, should have seen something much different in those Pharmasset data: An oncoming freight train. According to Vertex’s CEO, Jeff Leiden, then just a Vertex board member, not everyone did.
With what Leiden (pictured) now calls “hubris” and “blindness,” Vertex failed to react quickly enough. Its own hepatitis C drug was crushed. In three years, Vertex went from having a billion-dollar hepatitis C business to zero—abandoning the research completely.
Now Vertex has another flagship franchise, consisting of two drugs approved for the rare and deadly disease cystic fibrosis and perhaps more on the way. Sales of both drugs, ivacaftor (Kalydeco) and the combo pill ivacaftor-lumacaftor (Orkambi), reached almost $1 billion in 2015 and are growing. But the drugs aren’t cures, and competition looms.
Has Vertex learned from its past missteps? “They are on more solid footing than they were, but there’s no such thing as solid footing in this industry,” says Rajeev Shah, a managing director at biotech investment firm RA Capital, which had been a Vertex investor but no longer is. “The moment [a company] becomes a little passive and unaware of the hundreds of threats coming at it is the moment that it risks being extinct.”
Six months before the Pharmasset data release, Vertex had won FDA approval of telaprevir (Incivek), which was a big advance in the treatment of the liver-damaging hepatitis C virus (HCV). Vertex began as a bootstrapped startup in 1989 and was on its way to being a profitable enterprise that helped thousands of patients with a devastating disease. Telaprevir sales rocketed to nearly $1 billion in the first six months, at the time the fastest drug launch ever.
But the Pharmasset data came out, and Gilead Sciences (NASDAQ: GILD), looking to build upon its lucrative portfolio of HIV treatments, pounced. It bought Pharmasset in November 2011 for $11 billion and continued PSI-7977’s stellar run of clinical data. Called sofosbuvir (Sovaldi), the drug won FDA approval in December 2013. With evidence of up to 90 percent cure rates in three months and a very clean safety profile, sofosbuvir quickly made telaprevir obsolete.
Other similarly effective HCV drugs have followed. Telaprevir’s sales cratered, and Vertex axed 15 percent of its workforce in October 2013. In August 2014—just six months after moving into its new glass towers—Vertex announced plans to take telaprevir off the market. Then it exited HCV research entirely.
“It was absolutely a neck snapping phenomenon,” says Leiden.
Yet it wasn’t a fatal blow. Thanks to foresight, luck, and no small amount of help from a nonprofit foundation, Vertex had a Plan B that turned into a lucrative Plan A.
The company won approval in January 2012 of ivacaftor, the first drug to directly address the molecular malfunction that underlies the deadly disease cystic fibrosis (CF), which causes thick, sticky mucus to clog the lungs. Ivacaftor-lumacaftor followed three years later. Vertex has reinvented itself as the leader for CF treatments.
“We’re a very, very different company than we were four years ago,” says Leiden. “We’ve learned a lot from that experience.”
Vertex started out as an early believer in “rational” drug design—building drug molecules to fit the structure of specific biological targets, like a lock and key. Vertex went public in 1991 and used its discovery tools on one project after another, from immunosuppressive drugs for organ transplants, to HIV drugs, to HCV medicines. Its acquisition of Aurora Biosciences in 2001, and a critical $150 million in research funding from the Cystic Fibrosis Foundation (which just committed another $75 million to the company last week), led it to CF. Much of that narrative was captured in two books about Vertex, The Billion Dollar Molecule from 1994 and its 2014 sequel The Antidote: Inside the World of New Pharma, both by veteran journalist Barry Werth.