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How Bad Is This News for Vertex Pharmaceuticals?

Vertex Pharmaceuticals (NASDAQ: VRTX) climbed as much as 32% from the start of the year through the middle of last month. The company was on a roll when it came to good news. Its cystic fibrosis (CF) platform continued to bring in billion-dollar revenue and profit. Vertex said it would apply for the regulatory approval of a potential blockbuster treatment for blood disorders by the end of the year. And the company announced positive results from a phase 2 trial of its non-opioid pain candidate.
So, there’ve been plenty of reasons for investors to cheer. But earlier this week a new announcement darkened the picture a bit. The U.S. Food and Drug Administration placed one of Vertex’s clinical trials on clinical hold. The study is for a candidate that eventually may cure type 1 diabetes (T1D). Now the question is: How bad is this news for Vertex? And what should you do as investor? Let’s find out.
Image source: Getty Images.

A closer look at the news
First, let’s take a close look at the candidate and the news. Vertex is studying a stem cell-derived pancreatic islet cell replacement treatment in a phase 1/2 trial. The idea is VX-880 restores pancreatic islet function — and that, in turn, means the body is able to regulate glucose levels. In T1D, the body destroys pancreatic islet cells that produce insulin. As a result, the body can’t regulate its sugar levels.
Vertex’s VX-880 trial includes three parts. The company treated two patients with a half dose in Part A. The plan is to treat five patients with a full dose in Part B. Part C will include additional patients, all at the full dose level. The trial aims to treat a total of 17 patients.
Vertex reported positive results from Part A. The first patient reached insulin independence 270 days after infusion of the treatment. The second patient showed reduction in the need for insulin treatments through day 150. An independent monitoring committee, based on those results, recommended that the study move on to Part B. And the first patient given a full dose in Part B showed improvement in the control of blood glucose levels through day 29.
Safety results also were encouraging. VX-880 was well tolerated. All adverse events were considered mild to moderate.
A clinical hold
Still, the FDA placed the study on clinical hold. That means Vertex can’t continue dosing patients until it responds to the agency’s questions — and the agency gives the green light for dosing to resume. Why did the FDA put the trial on hold? The regulator considers there is “insufficient” information to move on to a full dose in Part B.
Vertex said it was surprised by the decision, considering the strength of its trial data so far. But the company is working with the FDA to answer questions as soon as possible so the trial may resume.
The FDA’s move is surprising. The data we have access to look encouraging. The independent monitoring committee’s support is another positive. And that’s why we shouldn’t be overly alarmed by the FDA’s decision. It’s possible the agency is being extra cautious considering the cutting-edge nature of Vertex’s technology. That’s what often happens when something is completely new. Regulators might want more details from Vertex before supporting the use of a higher dose in more patients.
What does this mean for investors?
The clinical hold isn’t great news. The hold will delay this program’s progress in the near term. But it isn’t reason to flee Vertex shares either. From the information we have right now, I’m optimistic Vertex will be able to address the FDA’s questions — and that the trial eventually will resume.
It’s also important to keep in mind two things. First, drug development is rarely one smooth path. It’s normal to hit a roadblock from time to time — and a roadblock doesn’t necessarily lead to failure. And second, Vertex isn’t just about one program. As I mentioned earlier, its CF treatments generate significant revenue. And Vertex is the global market leader. The company also is close to the finish line with its blood disorder candidate. Success there would help Vertex show it can expand beyond CF.
Vertex shares slipped 4.1% in one trading session after the trial hold news. I wasn’t worried. If they extend declines, I won’t worry either. The promise of the T1D program still is intact. And Vertex’s CF business and pipeline are strong. All of this makes the company a great biotech stock for long-term portfolios.
Adria Cimino has positions in Vertex Pharmaceuticals. The Motley Fool has positions in and recommends Vertex Pharmaceuticals. The Motley Fool has a disclosure policy. –

Vertex Pharmaceuticals (NASDAQ: VRTX) climbed as much as 32% from the start of the year through the middle of last month. The company was on a roll when it came to good news. Its cystic fibrosis (CF) platform continued to bring in billion-dollar revenue and profit. Vertex said it would apply for the regulatory approval of a potential blockbuster treatment for blood disorders by the end of the year. And the company announced positive results from a phase 2 trial of its non-opioid pain candidate.

So, there’ve been plenty of reasons for investors to cheer. But earlier this week a new announcement darkened the picture a bit. The U.S. Food and Drug Administration placed one of Vertex’s clinical trials on clinical hold. The study is for a candidate that eventually may cure type 1 diabetes (T1D). Now the question is: How bad is this news for Vertex? And what should you do as investor? Let’s find out.

Image source: Getty Images.

A closer look at the news

First, let’s take a close look at the candidate and the news. Vertex is studying a stem cell-derived pancreatic islet cell replacement treatment in a phase 1/2 trial. The idea is VX-880 restores pancreatic islet function — and that, in turn, means the body is able to regulate glucose levels. In T1D, the body destroys pancreatic islet cells that produce insulin. As a result, the body can’t regulate its sugar levels.

Vertex’s VX-880 trial includes three parts. The company treated two patients with a half dose in Part A. The plan is to treat five patients with a full dose in Part B. Part C will include additional patients, all at the full dose level. The trial aims to treat a total of 17 patients.

Vertex reported positive results from Part A. The first patient reached insulin independence 270 days after infusion of the treatment. The second patient showed reduction in the need for insulin treatments through day 150. An independent monitoring committee, based on those results, recommended that the study move on to Part B. And the first patient given a full dose in Part B showed improvement in the control of blood glucose levels through day 29.

Safety results also were encouraging. VX-880 was well tolerated. All adverse events were considered mild to moderate.

A clinical hold

Still, the FDA placed the study on clinical hold. That means Vertex can’t continue dosing patients until it responds to the agency’s questions — and the agency gives the green light for dosing to resume. Why did the FDA put the trial on hold? The regulator considers there is “insufficient” information to move on to a full dose in Part B.

Vertex said it was surprised by the decision, considering the strength of its trial data so far. But the company is working with the FDA to answer questions as soon as possible so the trial may resume.

The FDA’s move is surprising. The data we have access to look encouraging. The independent monitoring committee’s support is another positive. And that’s why we shouldn’t be overly alarmed by the FDA’s decision. It’s possible the agency is being extra cautious considering the cutting-edge nature of Vertex’s technology. That’s what often happens when something is completely new. Regulators might want more details from Vertex before supporting the use of a higher dose in more patients.

What does this mean for investors?

The clinical hold isn’t great news. The hold will delay this program’s progress in the near term. But it isn’t reason to flee Vertex shares either. From the information we have right now, I’m optimistic Vertex will be able to address the FDA’s questions — and that the trial eventually will resume.

It’s also important to keep in mind two things. First, drug development is rarely one smooth path. It’s normal to hit a roadblock from time to time — and a roadblock doesn’t necessarily lead to failure. And second, Vertex isn’t just about one program. As I mentioned earlier, its CF treatments generate significant revenue. And Vertex is the global market leader. The company also is close to the finish line with its blood disorder candidate. Success there would help Vertex show it can expand beyond CF.

Vertex shares slipped 4.1% in one trading session after the trial hold news. I wasn’t worried. If they extend declines, I won’t worry either. The promise of the T1D program still is intact. And Vertex’s CF business and pipeline are strong. All of this makes the company a great biotech stock for long-term portfolios.

Adria Cimino has positions in Vertex Pharmaceuticals. The Motley Fool has positions in and recommends Vertex Pharmaceuticals. The Motley Fool has a disclosure policy.

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