Nearing Telaprevir Endgame, Vertex Bulks up War Chest

Nearing Telaprevir Endgame, Vertex Bulks up War Chest



By Jennifer Boggs



Assistant Managing Editor
Approaching the last leg of development with hepatitis C drug telaprevir, Vertex Pharmaceuticals Inc. continues to shore up its balance sheet in preparation of the product's U.S. launch, which, if all goes well, could come in early 2011.

The Cambridge, Mass.-based firm, which has amassed more than $1 billion from public offerings over the last 18 months and picked up another $160 million in exchange for royalty rights for two protease inhibitors sold by GlaxoSmithKline plc, opted to retool its Asian partnership for telaprevir, giving up future royalties for an immediate cash infusion of $105 million.

Vertex also could earn up to $65 million in "bonus" milestones from Mitsubishi Tanabe Pharma Corp. related to Japanese approval of the HCV drug. The company declined to break out specific payments, but hitting all milestones - i.e. earning the entire $170 million - in timely fashion would make Vertex's end of the deal look pretty good.

The firm has refrained from even ballparking the royalty rate attached to the original Mitsubishi deal, but some analysts have estimated double digits. Oppenheimer & Co., assuming a 15 percent royalty, estimated that net present value of that royalty stream would have fallen in the $140 million to $150 million range.

But, if Vertex is not able to reach all the milestones in a reasonable time frame, then "the deal may slightly favor Mitsubishi," Oppenheimer analyst Brian Abrahams wrote in a research note.

The Phase III Japanese telaprevir program is ongoing. Though Vertex has not disclosed a specific timeline for filing, it said sustained viral response data from those studies are expected in 2010. Analysts are projecting a Japanese launch in 2012.

In the U.S., telaprevir is about a year ahead, with a new drug application expected in the second half of 2010 and potential approval as early as the first half of 2011. Vertex maintains all rights to the protease inhibitor in the U.S., a crucial - and expensive - part of the company's strategy.

"It's important for us to vigorously maintain our capital position," company spokeswoman Jane Kramer told BioWorld Today, adding that the amended Mitsubishi deal also allows the firm to avoid dilution while padding its coffers.

As of March 31, Vertex had cash, equivalents and marketable securities totaling $869 million. But the firm has been burning through cash at a fairly rapid pace - R&D costs alone came to $143.6 million in the first quarter - as it pushes telaprevir and a cystic fibrosis program, VX-770, through large Phase III programs.

Getting telaprevir to launch means Vertex will need an estimated $1.2 billion between now and the first half of 2011, Piper Jaffray analyst Edward Tenthoff wrote in a research note.

Vertex is hoping to add some more cash through the sale of its European telaprevir milestones. Earlier this month, the company said it was seeking near-term cash in exchange for rights to potentially $250 million in milestone payments - $100 million for regulatory filing and approval in Europe and $150 million upon launch - anticipated from partner Cork, Ireland-based Tibotec Pharmaceuticals Ltd., a unit of Johnson & Johnson division Janssen Pharmaceutica. (SeeBioWorld Today, July 13, 2009.)

Kramer acknowledged that discussions for the European milestones were ongoing. The company has not disclosed how much cash it's hoping to get for those future payments, but Piper Jaffray has estimated that the figure could come in above $200 million.

Vertex would still be eligible for mid-teen royalties on telaprevir sales in Europe.

Telaprevir has generated significant buzz in the HCV space, with clinical data to date showing marked improvement over the pegylated interferon-plus-ribavirin standard of care often criticized for its low cure rate. Analysts are expecting a speedy uptake upon approval, though it faces likely competition from Kenilworth, N.J.-based Schering-Plough Corp.'s boceprevir, another protease inhibitor in late-stage development.

The amended Mitsubishi agreement also gives the Osaka, Japan-based firm rights to telaprevir for use in a combination regimen with interferon and ribavirin, as well as a monotherapy treatment.

Alongside telaprevir, Vertex is advancing in Phase III studies with VX-770, a potentiator of cystic fibrosis transmembrane conductance regulatory that is being developed in collaboration with Cystic Fibrosis Foundation Therapeutics Inc. Vertex maintains global rights to that program and has "no plans to partner at this time," Kramer said.

Shares of Vertex (NASDAQ:VRTX) closed Thursday at $36.59, up 36 cents.