Tuesday, April 01, 2008

Early data suggests Telaprevir may be helpful for patients who need it most

On Monday March 31st, Vertex announced, through an abstract, the interim results of an open-label phase 2 trial for Telaprevir for treatment of Hepatitis C. 26 of 32 patients who previously failed other therapies (81%) experienced rapid virologic response (RVR) after four weeks of treatment. Even though these rates may not be sustained in longer term, chances are a good portion of these patients will be cured.

The release of these results have prompted analysts who disliked the company and the stock last week to all of a sudden change their minds. I was surprised at the timing of this news as I was expecting some results released in second half of this year.

If you read through some of my past articles, you will find that I have violated almost every rule of investing when it comes to Vertex Pharmaceutical's stock (VRTX). In fact, I have even called my behavior stubborn, which always guarantees significant losses when trading or investing.

But my fascination has always been with Telaprevir not the stock or the company. I have always believed that this drug had the best potency, efficacy and side effect profile which would make it a standard therapy for Hepatitis C, a disease with poor standard of care therapy. I won't get into the biochemical details but this is not something easily reproducible by other pharmaceutical companies. This partially explains why other similar products have failed or have had major set backs in the clinic.

Some people have blamed the recent volatility in the stock price on the management over promising results. In fact there has been some class action law suits filed. I am not a legal expert but I doubt they will serve any purpose besides costing the tax payers some money and making some lawyers rich. The law suits will end up getting thrown out of court andI wish someday the laws will change to stop these ridiculous and destructive behaviour!

The stock may fluctuate 50-60% in a year but the story remains the same. Telaprevir is the first Hepatitis C Protease inhibitor in Phase III clinical trials. It is the only drug to show significant improvement to standard of care in both treatment naive and non-responding patients and it will be the first one on the market as early as late 2009 (maybe!). It has the potential to becoming a multi-billion dollar drug, and for that VRTX should be valued no less than 5 billion dollars or about 50% higher than current price of $25.4. I am basing this on other blockbuster phase III products such as Celgene's Revlimid.

Bottom line: Buy Vertex for the long term for a once in a lifetime return!

Disclosure: The author has a long position in this company.