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After “Hubris” and Its HCV Collapse, Can Vertex Avoid Same Mistakes?

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plug away on telaprevir and its May 2011 approval triggered a “huge celebration,” Leiden says. It was the end of a long scientific journey. Analysts predicted more than $2 billion in annual U.S. sales—an example of how estimates of future drug sales should be viewed with healthy skepticism.

Telaprevir never came close to that, and now Vertex must prove that it can do what it couldn’t before: diversify into new areas without losing its key franchise.

The company has work to do. Despite the near-$1 billion in 2015 sales from its CF franchise, Vertex has been trying to stem massive losses, which peaked in 2014 at $739 million before dropping to $558 million last year. In its 27 years, Vertex has turned a profit once, and a slim one at that, in 2011.

The company recently lowered its sales projections for 2016, but Vertex has generated net income in the first two quarters (by non-GAAP accounting), meaning its long-awaited era of sustainable profitability might be on the way if it can keep hold of its current dominance in CF.

That adds to the pressure of defending its CF franchise. “If [and] when a better choice comes along, it will penetrate [the market] quickly,” wrote ISI Evercore analyst Mark Schoenebaum in a research note earlier this year.

One former executive says CF should be easier to defend than HCV.

Nancy Wysenski, who was chief commercial officer from 2009 to 2012, says telaprevir’s downfall was partly due to doctors holding off because they knew better options with gentler side effects—sofosbuvir and others—were coming soon. It’s the same reason telaprevir did so well at first; it promised fewer side effects and better cure rates than the then-standard interferon treatments. HCV is a chronic disease, and many patients can withstand being off the drug for some time.

“None of that exists in CF,” Wysenski says. “These are sick kids. Who’s not going to treat a sick kid, right? It’s an entirely different treatment paradigm.”

Additionally, there is no rival miracle drug on the horizon coming to threaten Vertex’s cystic fibrosis business. Ivacaftor is no miracle, either. It improves lung function but doesn’t cure the disease. And it is approved only for patients with genetic mutations who comprise about 5 percent of the roughly 70,000 people worldwide with CF. But Vertex sees it as the backbone of “cocktails” that would treat a wider swath of patients with different genetic characteristics. The ivacaftor-lumacaftor pill is the first such combination, and is approved for about a third of patients with the disease. Early data on a closely watched three-drug combination, which could expand Vertex’s reach further, are expected shortly.

But there is room for improvement, and others are trying to one-up Vertex, like Belgium’s Galapagos NV, which is working with pharma giant AbbVie (NYSE: ABBV) on its own cocktail of CF drugs.

Leiden says Vertex scours for CF drugs outside its own walls and has looked at “almost every asset out there.”

It has inked deals with Parion Sciences, Moderna Therapeutics, and CRISPR Therapeutics. The Parion deal is meant to complement Vertex’s own in-house CF work with drugs that add to its cocktail approach. With Moderna and CRISPR, Vertex is getting involved with cutting edge drugmaking methods like messenger RNA and gene editing, hoping to find long-lasting or even permanent CF treatments. Vertex hopes this multi-pronged approach will keep it ahead of the pack, and Leiden swears that the company is taking a different approach than with HCV. “We won’t repeat that mistake in CF,” he says.

But whose mistake was it? Leiden, who succeeded Matt Emmens as CEO in February 2012, says there was conflict within Vertex as to the threat the competition presented. Some saw the coming crash of telaprevir, while others “just didn’t want to believe it or didn’t have enough experience to really believe it could happen,” Leiden says. Vertex believed it ultimately had the best drug in telaprevir and never made an offer for Pharmasset, says Leiden: “It was a combination of hubris and putting on blinders, and you just can’t do that in this innovative world.”

By the time it became clear Pharmasset had a winning drug, Gilead was “very far along” towards its acquisition, Leiden says.

Only two members of the company’s previous management team remain: CFO Ian Smith, and executive vice president of policy Amit Sachdev.

Xconomy reached out to several current and former Vertex executives and board members about the HCV collapse. Many declined comment, didn’t respond, or deferred to other executives. Reached by e-mail, one ex-board member “respectfully disagree[s]” with Leiden’s take, but wouldn’t comment any further. However, The Antidote, the second of Werth’s two books about the history of Vertex, gives insight into executives’ thinking at the time.

Werth notes that in 2011 CFO Smith thought Vertex “needed to be more aggressive” and acquire a late-stage “nuc,” a type of oral nucleotide drug (like sofosbuvir) that had safety risks but had shown promise in treating HCV. Then-CEO Emmens, however, “saw the future differently,” according to Werth. Emmens was less concerned with the urgency of fighting the near-term threat of nucs than “positioning Vertex to be in the right place in 2020 and beyond.” (Vertex licensed two “nucs” from San Francisco-based Alios Biopharma in 2011, but they hadn’t begun clinical testing yet and were years behind the competition. Vertex gave up on the drugs when it ended its HCV work three years later.)

Wysenski says the truth is … Next Page »

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