Guru Focus: Idenix Pharmaceuticals Lagging Behind In Breakthrough Hepatitis C Drug Development

Posted on 7/13/12 on www.gurufocus.com. The author is worried about Idenix's pan-genotype nuc, IDX184. I'm not as worried, but Idenix definitely needs other drugs beside it's own to pair IDX184 with - preferably those well into Phase IIb or Phase III studies.  Those are drugs that are most likely to make it to market first, barring any errant new safety signals that would gum up the works and put pinholes in the dreams of investors everywhere. A good example to follow is Medivr/Janssen's protease inhibitor TMC435. That partnership has done an outstanding job of partnering with every company with a drug that looks hopeful, expanding their status as the 'preferred partner' drug in every combination that looks effective and safe.  On the other hand, we've learned in HIV that a good, potent, well-tolerated nuc (preferably ones with a unique resistance profile) will always come in handy. A good drug never has to worry. Only the company developing it does. 

Idenix Pharmaceuticals Lagging Behind In Breakthrough Hepatitis C Drug Development
July 13, 2012

Idenix Pharmaceuticals (IDIX) is one of the biopharmaceutical companies focused on discovering, developing and commercializing drugs for the treatment of life-threatening human viral diseases such as Hepatitis C. Hepatitis C is a form of liver disease that is passed on from one person to another through contact of bodily fluids. The Hepatitis C virus can severely damage the liver as it is asymptomatic and therefore, the effects are slowly felt over a long period of time. Hepatitis C has the potential to kill if not detected early enough.

It is estimated that 75% to 85% of Hepatitis C infections become chronic, leading to serious liver disease such as cirrhosis and may even causing liver cancer. Researchers at the Centers for Disease Control and Prevention estimate that about 50% of the 3.2 million Americans who have chronic Hepatitis C do not know about it. This is frightening to say the least, given that Hepatitis C is now estimated to be killing more Americans than HIV, the virus that causes AIDS. The Hepatitis C virus has also been found to be more prevalent in the "baby boomer" generation born between 1945 and 1964. This was a time when casual sharing of needles and drug use was the norm. I was floored to discover that the current worldwide figure of persons considered to be living with chronic viral hepatitis stands at between 480 million and 540 million, with approximately 130 million to 170 million of them infected with the Hepatitis C virus.

IDX184 is a pan-genotypic oral nucleotide polymerase inhibitor and Idenix Pharmaceutical’s lead product for the treatment of Hepatitis C. It is Idenix’s belief that the Hepatitis C treatment paradigm will evolve rapidly within the next three to five years as various companies continue to develop direct-acting antivirals (DAAs) from different drug classes. The treatments would potentially reduce the duration of treatment from one year to six months or less, increase the sustained virologic response rates and improve drug tolerability. It would also be extremely convenient as patients would be able to take all the drugs orally. I believe this is significant as the side effects associated with the combination of Interferon and Ribaravin during treatment disqualify many Hepatitis C-infected candidates from undergoing the treatment. Therefore, a breakthrough in this area would be a huge stride for Idenix and has the potential to affect its share price positively. Idenix Pharmaceuticals has also co-developed a Hepatitis B drug candidate, telbivudine, with Norvatis Pharma AG (NVS). The product is commercially sold as Tyzeka®, and Idenix Pharmaceuticals earns royalties from the product sales.

Idenix Pharmaceuticals stock began trading on July 2004 with an initial public offering of 5.8 million shares at $14 per share. On 23 April, 2012 Idenix Pharmaceuticals gained 6.5% to even out at slightly below $9. Earlier in March 2012 the share price had traded at an average of $12. Idenix Pharmaceuticals released its fourth quarter and financial results for the year ending Dec. 31, 2011 in February. Its total revenue was $7 million compared to 10.2 million in the year ending Dec. 31, 2010. The company recorded a net loss of $52 million on Dec. 31, 2011 as compared to $61.6 million on Dec. 31, 2010. The share price seems to fluctuate a lot so if you’re looking to trade in stock it is probably advisable to consider day-trading or swing-trading as compared to making a long-term investment.

Another competitor, Gilead Sciences (GILD) made astronomical progress in April 2012, when a mid-stage clinical trial revealed that a combination of the GS-7977 drug and the antiviral Ribaravin cleared the virus in approximately 88% of the patients. The GS-7977 drug was administered together with Ribaravin, completely eliminating the need for the injectable interferon. Gilead Sciences is the world’s largest HIV drug maker, so this news comes as no surprise.

Gilead’s shares have evened out at an average of $51 after they jumped from about $47 to an average of $53. These developments have clearly placed Gilead Sciences ahead of the pack, and I would not hesitate to recommend trading its shares.

Vertex Pharmaceuticals (VRTX) is also in the process of carrying out a study to evaluate the effectiveness of a Hepatitis C treatment on patients who are not on antiretroviral therapy for HIV versus those who are on a Atripla- or Reyataz-based treatment for HIV. Vertex Pharmaceuticals is carrying out the study in collaboration with Janssen, one of Johnson & Johnson (JNJ)'s pharmaceutical companies. The study is intended to evaluate the safety and tolerability of the Incivek drug combination therapy in patients infected with both the Hepatitis C virus and HIV. The drug is marketed in the U.S. and Canada and is also available in the Far East and Japan.

Vertex Pharmaceuticals stock is trading at an average of $37. January 2012 was a terrible month for Vertex with their share price dipping to $34 after an analyst at Leerink Swann reduced the sales forecast for Incivek from $2.3 billion to $1.5 billion this year, citing recent developments of interferon-free regimens and the possibility of more aggressive developments. There is a great need for Hepatitis C treatment and more so amongst those infected with HIV. If Vertex Pharmaceuticals manages to develop a drug that can be safely used to treat those co-infected with Hepatitis C and HIV then it is safe to say that it will be worth your while to invest in Vertex Pharmaceuticals.

Victrelis, a product of Merck & Co. (MRK), was approved for the U.S. market by the Food and Drug Administration just last year for the treatment of Hepatitis C. It is surprising therefore when I learned from my research that the drug’s effectiveness is lowered when used in combination with some antiretroviral therapy drugs. It’s not all bad news though. Merck recently agreed to pay Endocyte (ECYT) up to $1 billion to develop and commercially market Vintafolide, an experimental cancer drug. Merck will own all the global rights meaning that a surge in sales will push its share price upwards. Merck is currently trading at an average of $28 and its future outlook does not look very promising at the moment.

Abbot Laboratories (ABT)'s main line of business is in the discovery, development, manufacture and sale of a wide range of health care products. Abbot Laboratories released data earlier in April 2012 from a mid-stage clinical trial that indicated combining ABT-450 boosted by an antiviral, Ritonavir, along with Ribaravin and a polymerase inhibitor achieved a 95% cure rate. Deutsche Bank consequently boosted Abbot Laboratories rating to “Buy” in March 2012 with a price target of $70. The share price is currently trading at slightly under $60. I’d say this is pretty close to what analysts at Deutsche Bank projected. Abbot Laboratories is in the process of separating into two healthcare companies by the end of the year, so it is advisable to carry out day trading and keep a close eye on the share price.

Vertex receives FDA warning letter on 'misleading branded story'...

Article posted 5/31/12 on Regulatory Focus.com.  Vertex brushes with the FDA over what the FDA considered to be a 'misleading branded story'.  The timing isn't great as Vertex supposedly is getting ready to amend it's labeling, possibly to include BID dosing. 

‘Misleading’ Patient Perspective Smacked Down by FDA in Untitled Letter
Latest News | Posted: 31 May 2012

By Alexander Gaffney

One pharmaceutical company is learning this week that reproducing a patient’s story to “mentor” other potential patients may not sit well with US regulatory authorities, regardless of whether it represents the patient’s perspective accurately.

Cambridge, Massachusetts-based manufacturer Vertex Pharmaceuticals was sent an Untitled Letter by the US Food and Drug Administration (FDA) warning it about its promotion of Incivek (teleprevir), a Hepatitis C (HCV) drug which FDA said was being marketed using a “misleading” branded story.

The branded story is told through the eyes of a patient, “JP”, who tells the audience of his struggle with HIV and subsequent—but difficult—success using Vertex’s Incivek, which he claims “cleared the virus” from his body.

FDA explained in its 25 May letter that Vertex has “overstated” the efficacy of Incivek because it suggests the drug is more effective than “substantial evidence or substantial clinical experience” has shown.

“While these claims may be an accurate reflection of James’ own experience with hepatitis C and treatment with Incivek, this branded story misleadingly implies that most or all cirrhotic prior null responders infected with hepatitis C will successfully achieve Sustained Virologic Response (SVR) on Incivek combination therapy,” wrote FDA in the Untitled Letter. “FDA is not aware of substantial evidence or substantial clinical experience to support this implication.”

Put succinctly, “one patient’s treatment response does not constitute substantial evidence,” said FDA. Further, FDA said the testimonial “misleadingly implies removal of HCV from the body, when this is not the case.” Instead, the virus may well have simply become undetectable while continuing to replicate, noted FDA.

The testimonial also minimized important risk information by downplaying the side effects of the drug, explained FDA. The testimonial recounts “JP” receiving the treatment, which caused him to lose significant amounts of hair and develop a rash. “But that was nothing,” said “JP,” referring to the side effects relative to the benefits of the treatment for him. FDA maintains this “minimizes the risk” of both side effects, and particularly the risks of the rash, which the agency called “serious.”

FDA called on Vertex to stop using the branded story and respond to FDA’s Untitled Letter within 15 days.

A Vertex spokeswoman, Nikki Levy, told The Boston Globe the company has never distributed the story and was now working to revise its content in light of FDA’s informal warning.

Untitled letters are different from official FDA Warning Letters in that they do not include a list of potential agency enforcement actions and are generally less serious than are formal Warning Letters.

Encouraging Phase II Telaprevir HIV/HCV coinfection treatment data presented at CROI...

Posted on March 6 on Vertex Pharmaceuticals.com: Data presented at CROI from the Phase II Telaprevir trial looking at the safety and effectiveness of Telaprevir + P/R in the HIV/HCV co-infected patient (all on Atripla and Reyataz as their antiretroviral regimen).  While this is SVR12 data and not the 'true' SVR of 24 weeks past End of Treatment (EOT), this data looks encouraging with 74% (28/38) patients undetectable at SVR12.  Given the huge potential of drug-drug-interactions with Telaprevir and antiretroviral regimens, it looks as if the Atripla + Reyataz regimen in combination with TVR + P/R is the one to go with - VERY encouraging in that there have been no HIV breakthroughs while on TVR + P/R + Reyataz + Atripla. The coinfected patient is a critical patients - coinfected individuals have have markedly increased disease progression far and above that of the monoinfected patient.  Considering that Boceprevir cannot be used in the HIV/HCV coinfected patient, Vertex has this niche all to itself until the 2nd gen compounds prove themselves.  I'm sure these interim results come to the relief of many providers who treat this patient population. 

Data from Phase 2 Study of an INCIVEK® Combination Regimen Showed 74% of People Co-Infected with Hepatitis C and HIV Had Undetectable Hepatitis C Virus 12 Weeks After Treatment Ended (SVR12)

- INCIVEK was well tolerated with commonly used Atripla- and Reyataz-based HIV treatment regimens, and no patients experienced HIV breakthrough -

- Enrollment is ongoing in Phase 3 study evaluating 24- and 48-week treatment durations in people who are co-infected -

SEATTLE--(BUSINESS WIRE)-- Vertex Pharmaceuticals Incorporated (Nasdaq: VRTX) today announced interim results from an ongoing Phase 2 study designed to evaluate the safety and tolerability of INCIVEK® (telaprevir) tablets in combination with pegylated-interferon and ribavirin in people who are co-infected with genotype 1 hepatitis C virus and human immunodeficiency virus (HIV). Data showed 74 percent (28/38) of patients who were treated with INCIVEK (in-SEE-veck) combination therapy had undetectable hepatitis C virus (HCV RNA) 12 weeks after the end of all study treatment (SVR12) compared to 45 percent (10/22) who were treated with pegylated-interferon and ribavirin alone. INCIVEK was well tolerated with commonly used Atripla®- and Reyataz®-based HIV treatment regimens. Changes in CD4 counts were similar between the treatment groups and no HIV viral load breakthroughs were observed in either treatment group during the study. The most common adverse events in the INCIVEK arms of the study were fatigue, pruritis (itching), headache, nausea and rash. No cases of severe rash were reported and there were no discontinuations due to rash. Interim results from this study are being presented at the Conference on Retroviruses and Opportunistic Infections (CROI), March 5 to 8, 2012 in Seattle.

"Hepatitis C generally progresses faster, leads to more long-term liver complications and has been harder to cure among people who also have HIV," said Robert Kauffman, M.D., Ph.D., Senior Vice President and Chief Medical Officer at Vertex. "These new INCIVEK data are important as we work toward our goal of helping cure more people with hepatitis C. We're actively enrolling co-infected patients in a Phase 3 study and expect that data from this study will be included in a submission for a supplemental approval of INCIVEK."

The Phase 2 study includes two parts: Part A is evaluating people who are not currently being treated with antiretroviral therapy (ART) for HIV infection and Part B is evaluating those who are taking an Atripla- or Reyataz-based regimen for HIV. This study enrolled patients who were new to hepatitis C treatment (treatment naïve). Patients who were randomized to receive INCIVEK were treated with 12 weeks of INCIVEK, pegylated-interferon and ribavirin, followed by 36 weeks of pegylated-interferon and ribavirin alone. Interim data also showed that 68 percent (26/38) of patients treated with INCIVEK combination therapy in this study had a rapid viral response (RVR, undetectable hepatitis C virus at week 4 of treatment) compared to none (0/22) of the patients who received pegylated-interferon and ribavirin alone.

"There is a great need for treatments that are well tolerated and offer co-infected patients a better chance at a cure for hepatitis C while maintaining suppression of their HIV," said Douglas Dieterich, M.D., Professor of Medicine in the Division of Liver Diseases, Mount Sinai School of Medicine, New York City. "It's very encouraging that nearly three out of four people had undetectable hepatitis C virus 12 weeks after stopping INCIVEK combination therapy and that their HIV medicines continued to work during treatment."

Interim Study Results

Sixty-two people 18 and older were enrolled in this Phase 2 study and 60 received at least one dose of study drug. This analysis was conducted 12 weeks after patients completed all treatment. The ART regimens evaluated in this study were selected based on current HIV treatment guidelines from the U.S. Department of Health and Human Services, International AIDS Society and drug-drug interaction studies of INCIVEK with commonly used ART medicines.

Interim Intent To Treat Analysis of Study #110

Part A (No ART)

Part B Atripla®-based regimen

Part B Reyataz®-based regimen

Total

INCIVEK- based Arm+

Control Arm++

INCIVEK- based Arm+

Control Arm++

INCIVEK- based Arm+

Control Arm++

INCIVEK- based Arm+

Control Arm++

RVR*

71% (5/7)

0% (0/6)

75% (12/16)

0% (0/8)

60% (9/15)

0% (0/8)

68% (26/38)

0% (0/22)

eRVR**

57% (4/7)

0% (0/6)

75% (12/16)

0% (0/8)

47% (7/15)

0% (0/8)

61% (23/38)

0% (0/22)

SVR12

71% (5/7)

33% (2/6)

69% (11/16)

50% (4/8)

80% (12/15)

50% (4/8)

74% (28/38)

45% (10/22)

Atripla-based regimen (efavirenz, tenofovir disoproxil fumarate and emtricitabine): INCIVEK was dosed at 1,125 mg, every 8 hours (q8h).

Reyataz-based regimen (ritonavir-boosted atazanavir, tenofovir disoproxil fumarate and emtricitabine or lamivudine): INCIVEK was dosed at 750 mg, every 8 hours (q8h).

*RVR: Rapid Viral Response; undetectable HCV RNA at week 4.

**eRVR: extended Rapid Viral Response; undetectable HCV RNA at weeks 4 and 12.

+12 weeks of INCIVEK, Pegasys® (PEG, pegylated-interferon alfa-2a) and Copegus® (RBV, ribavirin) followed by 36 weeks of only PEG and RBV.

++48 weeks of PEG and RBV only for hepatitis C treatment.

             
Atripla-based regimen (efavirenz, tenofovir disoproxil fumarate and emtricitabine): INCIVEK was dosed at 1,125 mg, every 8 hours (q8h).

Reyataz-based regimen (ritonavir-boosted atazanavir, tenofovir disoproxil fumarate and emtricitabine or lamivudine): INCIVEK was dosed at 750 mg, every 8 hours (q8h).

*RVR: Rapid Viral Response; undetectable HCV RNA at week 4.
**eRVR: extended Rapid Viral Response; undetectable HCV RNA at weeks 4 and 12.

+12 weeks of INCIVEK, Pegasys® (PEG, pegylated-interferon alfa-2a) and Copegus® (RBV, ribavirin) followed by 36 weeks of only PEG and RBV.
++48 weeks of PEG and RBV only for hepatitis C treatment.

The majority of adverse events in this study were mild or moderate. Adverse events that occurred more frequently in the INCIVEK arms compared to placebo (≥10 percent difference) were pruritis (itching), headache, nausea, rash, fever, and depression. Three patients, all in Arm B, discontinued all study treatment due to adverse events (one each due to gall stones, hemolytic anemia and nausea/vomiting).

About this Phase 2 Study

Vertex and its collaborator Janssen conducted extensive drug-drug interaction studies with INCIVEK and commonly used HIV medicines prior to initiating a development program in people co-infected with hepatitis C (HCV) and HIV. This Phase 2 study is a two-part (A and B), randomized, double-blind, placebo-controlled, parallel group, multi-center study in people chronically infected with both HCV and HIV who were new to HCV treatment. The primary endpoint of the study is to evaluate the safety and tolerability of INCIVEK combination therapy in people co-infected with HCV and HIV. A secondary endpoint is to evaluate rates of sustained viral response (SVR) 12 and 24 weeks after the end of treatment. The study is being conducted by Vertex in collaboration with Janssen.

Phase 3 Study Actively Enrolling

Enrollment is ongoing in a Phase 3 study evaluating 24- and 48-week response-guided regimens of INCIVEK combination therapy in people co-infected with HCV and HIV. Patients who are either new to treatment for HCV, or who had relapsed after at least one prior course of therapy with pegylated-interferon and ribavirin alone, will receive 24 or 48 weeks of INCIVEK combination treatment, based on their antiviral response. Patients who had not responded to a prior course of treatment (partial responders and nulls) will receive 48 weeks of INCIVEK combination treatment. A similar study is also being initiated by Janssen in its territories.

Data from In Vitro Evaluation of INCIVEK and HIV Protease Inhibitors

Also being presented at CROI this week are data from an in vitro evaluation of the anti-HIV activity of four HIV protease inhibitors (amprenavir, darunavir, lopinavir and atazanavir) in combination with INCIVEK. In the study, no antagonistic effects on the antiviral activity were observed when INCIVEK was used in combination with amprenavir, darunavir, and lopinavir, and slight antagonistic effects were observed on the antiviral activity of atazanavir.

About INCIVEK

INCIVEK ® (telaprevir) tablets is an oral medicine that acts directly on the hepatitis C virus protease, an enzyme essential for viral replication. INCIVEK is the most prescribed direct-acting antiviral for the treatment of adults with genotype 1 chronic hepatitis C and has been used to treat more than 30,000 people in the United States.

INCIVEK was approved by the U.S. Food and Drug Administration (FDA) in May 2011 and by Health Canada in August 2011 for use in combination with pegylated-interferon and ribavirin for people with genotype 1 chronic hepatitis C with compensated liver disease (some level of damage to the liver but the liver still functions), including cirrhosis (scarring of the liver). INCIVEK is approved for people who are new to treatment, and for people who were treated previously with interferon-based treatment but who did not achieve a sustained viral response, or viral cure (relapsers, partial responders and null responders).

Vertex developed telaprevir in collaboration with Janssen and Mitsubishi Tanabe Pharma. Vertex has rights to commercialize telaprevir in North America where it is being marketed under the brand name INCIVEK (in-SEE-veck). Janssen has rights to commercialize telaprevir in Europe, South America, Australia, the Middle East and certain other countries. In September 2011, telaprevir was approved in the European Union and Switzerland. Telaprevir is known as INCIVO® in Europe. Mitsubishi Tanabe Pharma has rights to commercialize telaprevir in Japan and certain Far East countries. In September 2011, telaprevir was approved in Japan and is known as Telavic®.

INCIVEK® is a registered trademark of Vertex Pharmaceuticals Incorporated.

PEGASYS® and COPEGUS® are registered trademarks of Hoffmann-La Roche.

Reyataz® is a registered trademark of Bristol-Myers Squibb.

Atripla® is a registered trademark of Bristol-Myers Squibb and Gilead Sciences, LLC.

About Hepatitis C

Hepatitis C is a serious liver disease caused by the hepatitis C virus, which is spread through direct contact with the blood of infected people and ultimately affects the liver.1 Chronic hepatitis C can lead to serious and life-threatening liver problems, including liver damage, cirrhosis, liver failure or liver cancer.1 Though many people with hepatitis C may not experience symptoms, others may have symptoms such as fatigue, fever, jaundice and abdominal pain.1

Unlike HIV and hepatitis B virus, chronic hepatitis C can be cured.2 However, approximately 60 percent of people do not achieve SVR,3,4,5 or viral cure,6 after treatment with 48 weeks of pegylated-interferon and ribavirin alone. If treatment is not successful and a person does not achieve a viral cure, they remain at an increased risk for progressive liver disease.7,8

More than 170 million people worldwide are chronically infected with hepatitis C.6 In the United States, nearly 4 million people have chronic hepatitis C and 75 percent of them are unaware of their infection.9 Hepatitis C is four times more prevalent in the United States compared to HIV.9 The majority of people with hepatitis C in the United States were born between 1946 and 1964, accounting for two of every three people with chronic hepatitis C.10 Hepatitis C is the leading cause of liver transplantations in the United States and is reported to contribute to 4,600 to 12,000 deaths annually.11,12 By 2029, total annual medical costs in the United States for people with hepatitis C are expected to more than double, from $30 billion in 2009 to approximately $85 billion.9

About Hepatitis C and HIV Co-Infection

There are 1 million people living with HIV in the United States, and an estimated 300,000 people living with HIV/AIDS in the United States are also infected with hepatitis C. 13 There have been dramatic improvements in the treatment of HIV and the prognosis for people living with HIV. However, liver disease progresses more rapidly in people co-infected with hepatitis C and HIV, with an increased rate of progression to cirrhosis, decompensated liver disease, hepatocellular carcinoma and death. 14, 15, 16, 17 The hepatitis C cure rate with a 48-week treatment of pegylated-interferon and ribavirin, the current standard of care for people with co-infection, is approximately 29 percent.18

About Vertex

Vertex creates new possibilities in medicine. Our team discovers, develops and commercializes innovative therapies so people with serious diseases can lead better lives.

Vertex scientists and our collaborators are working on new medicines to cure or significantly advance the treatment of hepatitis C, cystic fibrosis, rheumatoid arthritis, epilepsy and other life-threatening diseases.

Founded more than 20 years ago in Cambridge, MA, we now have ongoing worldwide research programs and sites in the U.S., U.K. and Canada. Today, Vertex has more than 2,000 employees around the world, and Science magazine named Vertex number one on its 2011 list of Top Employers in the life sciences.

Vertex's press releases are available at www.vrtx.com.

Special Note Regarding Forward-Looking Statements

This press release contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, including Dr. Kauffman's statements in the second paragraph of this press release and statements regarding ongoing and planned Phase 3 studies of INCIVEK combination therapy in people co-infected with HCV and HIV. While the company believes the forward-looking statements contained in this press release are accurate, there are a number of factors that could cause actual events or results to differ materially from those indicated by such forward-looking statements. Those risks and uncertainties include, among other things, that the outcomes from future clinical trials of INCIVEK combination therapy in co-infected patients may not be favorable and the other risks listed under Risk Factors in Vertex's annual report and quarterly reports filed with the Securities and Exchange Commission and available through Vertex's website at www.vrtx.com. Vertex disclaims any obligation to update the information contained in this press release as new information becomes available.

IMPORTANT SAFETY INFORMATION

Indication

INCIVEK® (telaprevir) is a prescription medicine used with the medicines peginterferon alfa and ribavirin to treat chronic (lasting a long time) hepatitis C genotype 1 infection in adults with stable liver problems, who have not been treated before or who have failed previous treatment. It is not known if INCIVEK is safe and effective in children under 18 years of age.

Important Safety Information

INCIVEK should always be taken in combination with peginterferon alfa and ribavirin. Ribavirin may cause birth defects or death of an unborn baby. Therefore, a patient should not take INCIVEK combination treatment if she is pregnant or may become pregnant, or if he is a man with a sexual partner who is pregnant. Patients must use two forms of effective birth control during treatment and for the 6 months after treatment with these medicines. Hormonal forms of birth control, including birth control pills, vaginal rings, implants or injections, may not work during treatment with INCIVEK.

INCIVEK and other medicines can affect each other and can also cause side effects that can be serious or life threatening. There are certain medicines patients cannot take with INCIVEK combination treatment. Patients should tell their healthcare providers about all the medicines they take, including prescription and non-prescription medicines, vitamins and herbal supplements.

INCIVEK can cause serious side effects including skin reactions, rash and anemia that can be severe. The most common side effects of INCIVEK include itching, nausea, diarrhea, vomiting, anal or rectal problems, taste changes and tiredness. There are other possible side effects of INCIVEK, and side effects associated with peginterferon alfa and ribavirin also apply to INCIVEK combination treatment. Patients should tell their healthcare providers about any side effect that bothers them or doesn't go away.

Please see full Prescribing Information for INCIVEK including the Medication Guide, available at www.INCIVEK.com.

(VRTX-GEN)

References:

1 Centers for Disease Control and Prevention. Hepatitis C Fact Sheet: CDC Viral Hepatitis. Available at: http://www.cdc.gov/hepatitis/HCV/PDFs/HepCGeneralFactSheet.pdf. Accessed February 22, 2012.

2 Pearlman BL and Traub N. Sustained Virologic Response to Antiviral Therapy for Chronic Hepatitis C Virus Infection: A Cure and So Much More. Clin Infect Dis. 2011 Apr;52(7):889-900.

3 Manns MP, McHutchison JG, Gordon SC, et al. Peginterferon alfa-2b plus ribavirin compared with interferon alfa-2b plus ribavirin for initial treatment of chronic hepatitis C: a randomised trial. Lancet. 2001;358:958-965.

4 Fried MW, Shiffman ML, Reddy KR, et al. Peginterferon alfa-2a plus ribavirin for chronic hepatitis C virus infection. N Engl J Med. 2002;347:975-982.

5 McHutchison JG, Lawitz EJ, Shiffman ML, et al; IDEAL Study Team. Peginterferon alfa-2b or alfa-2a with ribavirin for treatment of hepatitis C infection. N Engl J Med. 2009;361:580-593.

6 Ghany MG, Strader DB, Thomas DL, Seeff, LB. Diagnosis, management and treatment of hepatitis C; An update. Hepatology. 2009;49 (4):1-40.

7 Morgan TR, Ghany MG, Kim HY, Snow KK, Lindsay K, Lok AS. Outcome of sustained virological responders and non-responders in the Hepatitis C Antiviral Long-Term Treatment Against Cirrhosis (HALT-C) trial. Hepatology. 2008;50(Suppl 4):357A (Abstract 115).

8 Veldt BJ, Heathcote J, Wedmeyer H. Sustained virologic response and clinical outcomes in patients with chronic hepatitis C and advanced fibrosis. Annals of Internal Medicine. 2007; 147: 677-684.

9 Institute of Medicine of the National Academies. Hepatitis and liver cancer: a national strategy for prevention and control of hepatitis B and C. Colvin HM and Mitchell AE, ed. Available at: http://www.iom.edu/Reports/2010/Hepatitis-and-Liver-Cancer-A-National-Strategy-for-Prevention-and-Control-of-Hepatitis-B-and-C.aspx. Updated January 11, 2010. Accessed February 22, 2012.

10 Pyenson B, Fitch K, Iwasaki K. Consequences of hepatitis C virus (HCV): Costs of a baby boomer epidemic of liver disease. Available at: http://www.natap.org/2009/HCV/051809_01.htm. Updated May 2009. Accessed February 22, 2012. This report was commissioned by Vertex Pharmaceuticals, Inc.

11 Volk MI, Tocco R, Saini S, Lok, ASF. Public health impact of antiviral therapy for hepatitis C in the United States. Hepatology. 2009;50(6):1750-1755.

12 Davis GL, Alter MJ, El-Serag H, Poynard T, Jennings LW. Aging of hepatitis C virus (HCV)-infected persons in the United States: A multiple cohort model of HCV prevalence and disease progression. Gastroenterology. 2010;138:513-521.

13 HIV Advocate. HIV/HCV Coinfection. Available at: http://www.hcvadvocate.org/hepatitis/factsheets_pdf/HIV_HCV20coinfecton_10.pdf. Accessed February 28, 2012.

14 Martin-Carbonero L, Benhamou Y, Puoti M, Berenguer J, Mallolas J, Quereda C, et al. Incidence and predictors of severe liver fibrosis in human immunodeficiency virus-infected patients with chronic hepatitis C: a European collaborative study. CID 2004;38:128-33.

15 Martinez-Sierra C, Arizcorreta A, Diaz F, Roldan R, Martin-Herrera M, Perez- Guzman E, et al. Progression of chronic hepatitis C to liver fibrosis and cirrhosis in patients coinfected with hepatitis C virus and human immunodeficiency virus. CID 2003;36:491-8.

16 Matthews GV, Dore GJ. HIV and hepatitis C coinfection. JGH. 2008; 23: 1000-1008.

17 Bruno R, Sacchi P, Puoti M, Soriano V, Filice G. HCV chronic hepatitis in patients with HIV: clinical management issues Am J Gastroenterol 2001; 97:1598—1606.

18 Levin, J. Pegasys/RBV in APRICOT Study- Adherence Improves SVR 300% in genotype 1. Available at: http://www.natap.org/2005/ICAAC/icaac_31.htm Accessed February 28, 2012.



Vertex Pharmaceuticals Incorporated

Media:

Dawn Kalmar
Erin Emlock
Zach Barber
617-444-6992
mediainfo@vrtx.com

or

Investors:
Michael Partridge, 617-444-6108
or
Lora Pike, 617-444-6755

Source: Vertex Pharmaceuticals Incorporated

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Vertex beats analyst expectations in Q4 2011...

Posted 2/2/12 on the CBS Moneywatch website. Vertex reports a profit of 74 cents a share, beating analysts forecasts on EPS by a couple o' pennies. Doing the math - Q4 2010, - 90 cents a share. Q4 2011 + 74 cents a share. That is remarkable.

Vertex posts 4Q profit on growing Incivek sales

CAMBRIDGE, Mass. — Drugmaker Vertex Pharmaceuticals Inc. said Thursday it turned a profit in the fourth quarter on sales of its hepatitis C pill Incivek, which was approved in May.

Vertex reported a profit of $158.6 million, or 74 cents per share. In the fourth quarter of 2010 it lost $180.4 million, or 90 cents per share. Its revenue surged to $563.3 million from $65.5 million a year earlier. That total included $456.8 million in Incivek revenue, and a $65 million milestone payment from Mitsubishi Tanabe Pharma, which is marketing the drug in Japan.

Analysts were forecasting a profit of 72 cents per share and $518.2 million in revenue, according to estimates compiled by FactSet.
The Food and Drug Administration approved Incivek in May, and Vertex reported $420 million in sales of the drug during the third quarter. Incivek and Merck and Co.'s drug Victrelis were the first breakthrough hepatitis C treatments approved in about 20 years, but other drug companies are developing treatments that have shown higher cure rates in studies so far than Victrelis and Incivek, and which might allow for simpler treatment regimens.
Hepatitis C is a chronic infection that can cause liver damage, cirrhosis, liver failure, or cancer. About 4 million Americans are believed to have the virus, and drug companies and analysts expect strong sales of hepatitis C drugs as the baby boom generation ages, more cases are diagnosed, and treatments improve. The virus is the main cause of liver transplants in the United States.
On Wednesday regulators approved Vertex's drug Kalydeco, a treatment for cystic fibrosis. The disease causes thick mucus buildup in the lungs. Vertex is also studying other treatments for hepatitis C, cystic fibrosis, inflammatory diseases, and epilepsy.
In 2011 Vertex posted a profit of $29.6 million, or 14 cents per share, after taking a loss of $754.6 million, or $3.77 per share, in 2010. Its revenue rose to $1.41 billion from $143.4 million.
Vertex Pharmaceuticals stock gained 55 cents to $38.38 in Thursday trading, and rose $1.62, or 4.2 percent, to $40 aftermarket.

'The Street' on the decline of Incivek...

Posted today on The Street.com . The author believes that Incivek's sales may have peaked in the 4th quarter of 2011 at lower-than-forecasted sales numbers. This may be due to a new 'watch and wait' period as providers hold off treatment for those that they feel can wait for the 2nd generation of HCV DAA drugs which hold promise for improved tolerability and dosing schedules. Also contributing to the negative slope are those that have treated HCV patients with Incivek and found that managing patients was more hands on than they had anticipated and those providers that may have been inclined to treat, but were turned off to doing so as negative rumors circulated. Economic issues may play a factor here as well - reimbursement rates for HCV care are less-than-ideal, formulary access is spotty and the cost of treating with Telaprevir is a head-spinning sum.

Vertex Hep C Sales Growth Nears End
By Adam Feuerstein

CAMBRIDGE, Mass. (TheStreet) --Vertex Pharmaceuticals'(VRTX_) fourth-quarter earnings report Thursday may represent the high-water sales mark for the hepatitis C drug Incivek -- with prescriptions already declining just seven months after launch.

Current consensus estimate for fourth-quarter 2011 Incivek sales is $483 million, down from more than $500 million earlier this month.

If Vertex meets lowered sales expectations, Incivek will still deliver its best-ever quarter. After that, Incivek sales in the current quarter and through the rest of 2012 are expected to flatten out, perhaps fall, as doctors slow their use of the drug. Hepatitis C patients who can afford to delay treatment may wait for the arrival of new, all-oral regimens expected in 2013-2014.

Before anyone throws a pity party for Vertex, some perspective is in order. Incivek, even with flat prescriptions and sales, is still a cash-generating machine for Vertex. The drug is on pace to record close to $1 billion in sales in 2011 -- amazing since it was only approved on May 23.

In 2012, Incivek will deliver sales around $2 billion, according to the most current consensus estimate. [Vertex has not yet provided 2012 sales guidance but may do so on Thursday.] The only reason that's bad is because many investors on Wall Street tend to value quarter-over-quarter sales growth over everything else. An Incivek year with flattish sequential revenue, even if that revenue totals $2 billion, just doesn't ring the bell for many institutional investors.

Vertex shares at $34.74 are up 5% since the start of the year but are down 40% from their peak right before Incivek was approved last May. That's investors baking in Incivek's relatively short revenue stream. The worst is expected so if Incivek outperforms lowered forecasts or if competing next-generation Hep C drugs from Gilead Sciences or Bristol-Myers Squibb falter, Vertex could very easily rebound in a big way.

Vertex is not ceding the race to develop an all-oral Hep C regimen to its rivals. Later this quarter, Vertex will announce early cure rates from a phase II study of triple therapy that combines Incivek, the experimental pill VX-222 and ribavirin. In the second quarter, the company will release the first proof-of-concept data on two Hep C "nucs" licensed from Alios Biopharma.

Vertex stock falls as Leerink Swann reduces sales forecast for Telaprevir...

Posted on Business Week today. Leerink Swann analyst cut his sales forecast for Telaprevir by 35% and target share price from $66 to $48 based on the current hyper-aggressive development space  for interferon-free therapy. It was only a matter of time once Pharmasset launched their broadside at AASLD 2011. This is a ground-breaking product, but burdened with a sharply curtailed life cycle.

Vertex Falls as Analyst Cuts Hep C Sales Estimate: Boston Mover
January 30, 2012, 6:40 PM EST
By Drew Armstrong

Jan. 30 (Bloomberg) -- Vertex Pharmaceuticals Inc. fell the most in seven weeks after an analyst with Leerink Swann & Co. cut sales estimates for a hepatitis C pill made by the company that was approved by U.S. regulators last year.
Vertex’s Incivek, among the first new hepatitis C drugs to reach the market in almost a decade, may be eclipsed by new pill-only treatments with fewer side effects and shorter courses of treatment. Incivek is given with interferon, an injected medicine. Merck & Co.’s similar pill, Victrelis, was also approved last year.
Shares of Cambridge, Massachusetts-based Vertex fell 3.5 percent to $34.74 at the close in New York, their biggest one- day drop since Dec. 8.
Howard Liang, an analyst with Leerink Swann in Boston, reduced his sales forecast for Incivek by 35 percent from $2.3 billion this year to $1.5 billion. Liang also cut his target price for Vertex shares from $66 to $48.
“In light of recent development of interferon-free regimens and likely more aggressive development as a result of recent transactions in the space, we are further curtailing the Incivek tail,” Liang said in a note to clients today.
Vertex had $420 million in revenue from Incivek in the third quarter of 2011. Revenue from the drug accounts for 64 percent of the company’s sales.
--Editors: Angela Zimm, Adriel Bettelheim
To contact the reporter on this story: Drew Armstrong in Washington at darmstrong17@bloomberg.net;
To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net

FierceBiotech interviews out-going Vertex CEO Matt Emmens and successor Jeffrey Leiden...

An interview with out-going CEO and successor to the throne, Jeffrey Leiden. Emmens appears to be jumping ship at a good time, with a record-breaking 3rd quarter with sales of it's HCV protease inhibitor incivek. Initial 4th quarter sales aren't living up to expectations, however. This may in part be due to the release of promising data hinting at interferon-free treatment for some patients in the next couple of years, reports of higher-than-anticipated anemia, DRESS and Stevens-Johnson syndrome driving providers and patients to use competitor Victrelis or simply taking a chance and waiting for more tolerable therapies. Successor Dr. Leiden faces an uphill battle as Vertex struggles to manage investor, patient and provider expectations as well as the prodigious problem of filling a considerable commercial gap in it's pipeline.

Interview: Vertex CEO concerned about investors' 'hyper-focus' on hep C
December 21, 2011 — 9:37am ET | By Ryan McBride

Matthew Emmens


On the heels of Vertex Pharmaceuticals' ($VRTX) big news last week about changing CEOs next year, FierceBiotech chatted with both current chief executive Matt Emmens (picture, top) and his successor Dr. Jeffrey Leiden. Both Emmens and Leiden are heavyweights in the biopharma industry, with hugely successful drug launches under their belts.

Still, Vertex needs another hit to follow the successful approval and launch of its hepatitis C drug Incivek this year, and it could have one in the experimental cystic fibrosis drug Kalydeco now under FDA review. Much of the company's stock growth of recent years has wilted over the past 6 months on fears that Incivek faces lots of competition in the years ahead from Merck's ($MRK) rival drug and interferon-free treatments against hep C in development, which analysts believe could rapidly eat into Vertex's Incivek business if approved.


Emmens, a 60-year-old biopharma veteran who headed Shire ($SHPGY) prior taking over as CEO of Vertex in 2009, is handing over his chief executive duties to Dr. Leiden on Feb. 1 and will serve as executive chairman until May. Leiden, 56, has served on the board of Vertex since 2009, and he made a name for himself in past leadership roles at Abbott Labs ($ABT), where he oversaw the launch of the blockbuster rheumatoid arthritis drug Humira.

Here's an edited version of FierceBiotech's conversation with Emmens and Leiden on Tuesday:

FierceBiotech: What has been your biggest mistake as CEO of Vertex?

Emmens: You ask tough questions, you know that [laughing]. I don't see any mistakes. I don't know if I'd do anything different. People are going to second-guess a lot of things. But when you look retrospectively at things, without all the information, that's easy to do. When you're there, the decisions that you have to make at the time have quite a different face on them. I don't think I would have done anything differently knowing what I knew then. Knowing what I know now, yeah, in the drug industry I think I would have gone back and bought Genentech when it was three people.

FierceBiotech: What's your biggest concern about Vertex's business heading into 2012?

Emmens: My biggest concern is the way it's perceived by some in the investment community. I think you have a company here that has the best pipeline that I've ever seen in any company in terms of numbers of projects that are successfully proven in man and in a time frame that's not 15 years out. You see, basically, 8 projects here that could all be on the market by [2017], and you see three or four that could be on the market by [2015]. That's very nice, I think. The hyper-focus on hepatitis C has taken people's focus away from that. And I think on top of that, in hepatitis C, we've got a number of projects that could put us in an all-oral regimen in the time frame of [2014]. That's being overlooked.

FierceBiotech: Do you see yourself being a biopharma CEO again after you leave your executive role at Vertex in May?

Emmens: No. I've been working since I was 11 years old. I retired once from Shire, as you probably know. I was on the board here at Vertex and I saw a unique opportunity to use my skill set at a time that the company needed it. I would not be willing to do that for the long term again. I'll be happy to be on boards and advise and help people who are earlier in their career be successful.

FierceBiotech: According to an online poll, lots of people believe that you are the best CEO in biotech this year. Do you agree with them?

Emmens: They were obviously deluded [laughing]. I thank those who voted and it's a nice honor but I have no idea whether I agree with them or not. I did the best I could, and I try to do the best job I can everywhere I've been. And I came here to help the company along into the commercial realm and be successful, and that's happened.

[FierceBiotech's Q&As with Leiden]

FierceBiotech: What's one meaningful change that you plan to bring to Vertex as CEO?

Leiden: I've been very involved in the strategy that Matt and the team have crafted on the management side and the board side. I'm very supportive of that strategy, and I don't anticipate any major changes to it.

FierceBiotech: Did you have any doubts about whether you should take the CEO job?

Leiden: There's no question that Matt is leaving some big shoes to fill, and, frankly, so did Josh Boger. There have been two fantastic CEOs of this company. So that's always a challenge. On the other hand, I see the opportunities at Vertex looking forward are just fantastic. I've had the good fortune to look at a number of biotech and pharma CEO jobs over the last 5 or 6 years, and this was absolutely a unique opportunity because of the pipeline, the team and the proven record of execution here. The job now is to come here and execute over and over, just like they executed on [Incivek and Kalydeco].

FierceBiotech: As a physician and scientist by training, do you see yourself getting more involved in R&D than Matt has been as CEO?

Leiden: I really see my job as integrating the R&D-scientific-medical function with the commercial function. It's what I did at Abbott and I think it made a difference at Abbott. One of the problems that biopharmas have had is a disconnect between the discovery organization, which first makes the molecules, the development organization, which takes it through human trials to approval, and the commercial organization, which obviously brings [a treatment] to patients and the market. The discovery organization makes drugs that are difficult to develop. The development organization develops them in a way that makes it difficult to sell them. So the real key to the success of a modern-day biotech company is a highly integrated organization.

FierceBiotech: Does Vertex spend enough money on R&D, or too little, to keep growing?

Leiden: I've never seen an R&D organization spend as relatively little money and produce so much. The key metric at Vertex is to look at the productivity per dollars spent, and I would hold that up against any company out there--Pfizer, Merck or Genentech. We're spending an 8th to a 10th of what most of the Big Pharmas are spending and producing more.



Read more: Interview: Vertex CEO concerned about investors' 'hyper-focus' on hep C - FierceBiotech http://www.fiercebiotech.com/story/interview-vertex-ceo-concerned-about-investors-hyper-focus-hep-c/2011-12-21#ixzz1hESYZiaF
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Xconomy.com: The Hepatitis C Market: Biotech’s Version of the Daytona 500

National Biotech Editor of Xconomy, Luke Timmerman likens the current HCV market to Daytona 500 vs a toe-to-toe slug fest between two competitors. Surprises lurk at every turn as a wide array of competitors, from Big Pharma to little Biotech upstarts vie to out-maneuver each other for the championship. This makes for trecherous ground for investors, as we know anything can happen and usually does in drug development. But for the patient suffering from HCV, all this is good news. Intense competition usually sparks innovation - we've already seen from the recent AASLD meeting that a possible all-oral regimen for HCV without the need for interferon may be a distinct possibility for some patients. possibly within 5 years. A good read whether you're an investor, treater or a patient.


Biotech rivalries are sometimes a bit like boxing matches, where you have two lone fighters vying for the prize. But the hepatitis C market is turning into a battle royal that’s more wide open and unpredictable, with all the competitive maneuvering, surprise crashes, and comebacks you might expect from the Daytona 500.

The medical advances in hepatitis C have been dizzying this year, especially in what it means in terms of multi-billion dollar business implications. The safest thing to say is that there’s plenty of good news for patients this year, but that shareholders in the major hepatitis C drug developers had better hold on tight as a new standard of care gets established.

Some commentators figured that Gilead Sciences (NASDAQ: GILD), the world’s biggest maker of HIV drugs, had essentially locked up the dominant position in this new drug class through its $11 billion acquisition last month of Princeton, NJ-based Pharmasset (NASDAQ: VRUS). But it’s still too soon for anyone to declare victory over the wily and fast-mutating virus that causes hepatitis C. Given the way drug development is going now, it’s possible we could have dueling antiviral drug cocktails that cure almost 100 percent of patients within five years. And before we get there, we’re going to see some fascinating chess moves—and probably a few surprising collaborations—from companies like Vertex Pharmaceuticals, Merck, Roche, Johnson & Johnson, Bristol-Myers Squibb, and Abbott Laboratories, as well as several smaller biotech startups like Alpharetta, GA-based Inhibitex (NASDAQ: INHX).

The Pharmasset compound that prompted Gilead to write such a big check, PSI-7977, is “certainly not a panacea, not the lone answer,” says Kleanthis Xanthopoulos, the CEO of San Diego-based Regulus Therapeutics, and the co-founder of another hepatitis C drug developer, Anadys Pharmaceuticals.


Regulus Therapeutics CEO Kleanthis Xanthopoulos

Xanthopoulos says Gilead was “taken to the cleaners,” and that the hepatitis C market is still up for grabs. “It’s going to take some time before people figure out how it plays out,” he says. The Pharmasset drug “is a powerful player, but you will need other direct-acting antivirals. You want to go to a 100 percent cure rate. I can guarantee the Pharmasset compound isn’t going to do it alone.”

Hepatitis C has never really captured big headlines in the U.S., as it has never benefitted from massive awareness boosting campaigns that have supported research for, say, HIV, or breast cancer. But hepatitis C has clearly emerged as one of the biggest opportunities in pharmaceuticals over the past few years. There are more than 3 million people in the U.S., and an estimated 170 million worldwide, with this liver infection that can lead to cirrhosis and liver cancer. Most people have never bothered to get treated, partly because the infection takes years to fully wreak havoc. The other reason is the standard of care with a combination of drugs—pegylated interferon alpha and ribavirin—causes flu-like symptoms that last for almost a year, and usually cures only 30-40 percent of patients. Essentially, most people figure the treatment is worse than the disease.

Vertex Pharmaceuticals changed the equation back in May. The company won FDA approval for a direct antiviral drug, a protease inhibitor called telaprevir (Incivek), that is added to the usual two-drug combo regimen. By adding the Vertex drug, researchers saw the cure rate boom to almost 80 percent of patients, while cutting the treatment time with the other drugs in half. The Vertex drug also significantly raised the cure rate for patients who failed to respond to prior rounds of therapy.

Vertex looked golden for a while, as its stock soared above $55 a share, sending its market value above $10 billion. Analysts were raving about how Vertex smashed sales expectations in its first few months on the market, and started turning profitable in just its second quarter of selling the drug. Waves of patients were suddenly showing up at doctors’ offices to get treatment for hepatitis C, now that the odds of a cure were so much higher.

But important as the Vertex advance has been, researchers have made it clear that this story isn’t over. The ultimate goal is to get rid of interferon, and its side effects, so that physicians can count on some combination of direct antivirals that can be taken as oral pills. That might include Vertex’s drug in combination with others, or might not.

So that’s why Vertex, and other companies, have feverishly been looking to mix and match various hepatitis C drugs. It’s all part of a quest to come up with the ideal combo that can raise the bar on cure rates, minimize side effects, and maximize convenience.

While people on Wall Street like to embrace a simple storyline with clear winners and losers, the hepatitis C virus is one tricky adversary. Like HIV, it has a tendency to mutate and develop resistance capabilities, whenever scientists throw a new antiviral drug against it. So there isn’t likely to be a single magic bullet. The most likely route to success is with a combination of two, three, or maybe four antiviral drugs that attack the virus from different angles, making it much harder for the bug to mutate and escape one drug.

As Steve Worland, the CEO of San Diego-based Anadys Pharmaceuticals, put it in a guest editorial for Xconomy in September, there are at least four important categories of hepatitis C antivirals. There are protease inhibitors on the market like Vertex’s drug and Merck’s boceprevir (Victrelis). There are nucleotide polymerase inhibitors like Pharmasset’s PSI-7977 and a rival drug called mericitabine from Roche. There are non-nucleotide polymerase inhibitors in the works from Abbott Laboratories, Vertex, and Anadys (which Roche acquired this fall for $230 million.) And Bristol-Myers Squibb is betting on another kind of compound, an NS5A inhibitor. (You could also count microRNA therapies, which Santaris Pharma and Regulus are working on at earlier stages of development.)

Just this year, we’ve seen some fascinating jockeying for position. Drug companies often don’t like to test combinations of experimental drugs together in clinical trials, because when side effects emerge, people often like to point the finger at the other guy’s drug. And who wants to divvy up the profits with some other pharma giant when you have the whole thing yourself?

But with hepatitis C, the market opportunity is so big, and the variety of drugs to attack it is so broad, that pharma companies have set aside those concerns just to get a piece of the action. We’ve already seen Merck and Roche form a partnership to co-market Victrelis against the leading drug on the market from Vertex. Gilead just shelled out the breathtaking sum of $11 billion for Pharmasset, even though the smaller company’s lead compound still has to navigate the third and final phase of clinical trials required for FDA approval. Bristol-Myers Squibb and Johnson & Johnson have teamed up in an interesting new collaboration. Roche, through internal efforts and acquisitions, has sought to put all the pieces of the puzzle together under one roof—a protease inhibitor, a nucleotide polymerase inhibitor, a non-nucleotide polymerase inhibitor.

Nobody knows which compounds will match up best together, which ones will be too toxic in combination, or even how many antivirals will be needed to raise the cure rate. But it’s worth noting that Vertex raised the bar very high, by getting cure rates up to around 80 percent. Doctors are certainly eager to get rid of the nasty interferon part of the regimen, but they will only do that when a new regimen can do at least as well on cure rates. And any of these drugs can be derailed by somewhat mild side effects, since the bar on safety is set quite high already.

It might be relatively safe and simple to declare Gilead/Pharmasset the winners in this market, but this race isn’t even close to over. There are 200 laps in the Daytona 500, and in the hepatitis C race, I’d say we’re at about lap 50. There are going to be some fascinating strategic maneuvers, and maybe even a spectacular crash or two, before somebody zooms in under the checkered flag.



Luke Timmerman is the National Biotech Editor of Xconomy, and the Editor of Xconomy Seattle. E-mail him at ltimmerman@xconomy.com or follow him on Twitter at twitter.com/ldtimmerman

Seeking Alpha.com's Chris Katje on Gilead potential for antiviral dominance...

A bullish outlook for Gilead from Seeking Alpha author Chris Katje. His view is that Gilead will have market dominance in both HIV and HCV. He sees that Gilead will have full control of the Pharmasset HCV portfolio through the buyout, thus negating any worry about royalty payments. I'd also add the potential for co-formulation between Pharmasset's portfolio and Gilead's current HCV portfolio, which has always been Gilead's hallmark. An interesting read and it seems the rest of the market seems to agree with Katje, as Gilead stock has received several outlook upgrades from analysts. It just took some time for the initial sticker shock to wear off.

Acquisition of Pharmasset

Gilead Sciences (GILD) announced its intent to acquire Pharmasset (VRUS) for a whopping $11 billion on Monday morning. The deal has led many analysts and investors to question if Gilead overpaid for the deal. I think the deal is a great long-term play for the company and actually could present a buying opportunity of shares, which were down sharply after the announcement. Shares were up around five percent the following day after the announcement. Gilead will now be a large player in the HIV and Hepatitis markets.

Pharmasset has no drugs on the market, which is the biggest reason why people question the valuation. Drug candidate PSI-7977 appears to show enough promise that other companies were nibbling at acquiring the company. Gilead is confident in its acquisition and is funding the deal through cash and $6 billion in debt it is taking on. Hepatitis C is being targeted by this drug and it could actually save many Americans from the life threatening liver damage that is usually caused by the disease and leads to many liver transplants. The drug is expected to be filed with the Food and Drug Administration in 2014. Pharmasset owned the worldwide rights to the drug so Gilead will take full control and will not have to worry about licensing or royalty payments. Gilead now will be the leader in the race to find an all oral drug for the treatment of Hepatitis C.

Why the Acquisition and Hefty Premium

Gilead presented a slide show on its website shortly after the announcement to acquire Pharmasset. Gilead reconfirmed its goal of creating the best Hepatitis C drug, which would be determined by some of the following:

Taken Once Daily
Manageable Side Effects
Higher Cure Rates Than Current Drugs on the Market
Increased Treatments With a New Drug

Gilead has recognized that a combination of two or more drugs may be needed to create this super Hepatitis C drug. This is where I believe that Gilead’s acquisition will ultimately pay off. Gilead has combined several of its own drugs with products of other companies to create better acting and more effective drugs for patients.

Competition in Hepatitis C Market

Several other Hepatitis C drugs have popped up on the market recently. Victrelis is a drug owned by Merck (MRK), acquired through its acquisition of Schering Plough. The drug has so far been a disappointment as it only brought in $31 million of revenue in the third quarter reported on October 31, for Merck. Incivek, a drug owned by Vertex Pharmaceuticals (VRTX), on the other hand posted sales of $419 million in the past quarter. Analysts have already been lowering price targets of VRTX because of the likely competition from PS-7977 pending approval. Vertex will enjoy a couple of years of dominating market share before the competing drug enters the market. Annual sales could hit $2 to $3 billion for Vertex. Merck on the other hand is playing second fiddle and is likely to never see blockbuster status with its Hepatitis C drug.

Gilead’s Biggest Acquisitions

Gilead has a long history of acquiring other drug companies as many large drug companies do. Highlights include:

1999 Nexstar Pharmaceuticals - Gained two drugs through the acquisition. One, Ambisome, is still a marketed drug by Gilead. Deal seemed to be made more for the company’s intent on expanding in Europe.

2003 Triangle Pharmaceuticals - Emtriva, now a part of two Gilead drugs, was gained through this $464 million acquisition. Atripla and Truvada both use the component emtricitabine, a former Triangle product.

2006 Corrus Pharma - Has a current drug in Gilead’s pipeline aimed at treating Cystic Fibrosis.

2006 Myogen - Myogen was the most expensive acquisition previous to Pharmasset coming in at $2.5 billion. This has also been one of the most important and successful acquisitions made by Gilead as it brought three drugs, two marketed, and one currently sold by Gilead to the company.

2009 CV Therapeutics - Billion dollar purchase helped strengthen and diversify Gilead’s pool of drugs as it gained two drugs aimed at cardiovascular diseases.

Several other million dollar deals were made by Gilead over the last eight years. Gilead has made many of its acquisitions to strengthen its own technology and combine existing drugs with new ones.

Gilead’s Products

Gilead remains the market leader in drugs that treat the HIV virus. Its marketed products in the HIV market are:

Atripla is marketed with Bristol Myers Squibb (BMY) after its approval in 2006. The drug treats HIV and will lose patent expiration in 2021.

Complera is one of Gilead’s newest drugs on the market. It was approved by the FDA in August of 2011, and is co-marketed with Johnson and Johnson (JNJ).

Emtriva was approved in 2003 and will expire in 2021.

Truvada treats HIV and is one of Gilead’s top selling drugs. It was approved in 2004 and will lose its patent protection in 2021.

Viread treats Hepatitis B and HIV viruses. The drug was the first successfully launched HIV drug in 2001 by Gilead. The drug, which is a huge seller for Gilead, will lose patent protection in 2017.

Gilead has drugs in several other fields that compete with numerous other large drug companies. The other drugs currently on the market are:

Ambisome treats infections like fungal, meningitis, and Cryptococcus. The drug was approved in 1997 and will lose patent protection in 2016. The marketing partner on the drug is Astellas Pharma.

Cayston is Gilead’s cystic fibrosis drug that was approved in 2010. The drug has exclusive patent protection until 2021. Gilead markets the drug on its own and maintains all revenue from the drug.

Hepsera treats Hepatitis B and is owned and marketed by Gilead. The drug was approved in 2002 and its patent expires in 2014.

Letairis has since 2007 treated Pulmonary Hypertension. The drug is co-marketed with GlasxoSmithKline (GSK) and loses patent protection in 2015.

Lexiscan is a cardiovascular drug marketed with Astellas Pharma and it will lose patent protection in 2019.

Macugen is an age-related macular degeneration drug first approved in 2004, which is shared with Pfizer (PFE) and will lose patent protection in 2017.

Ranexa treats chest pain and will lose patent protection in 2019. The drug is co-marketed with Swiss drug company Roche.

Tamiflu treats the influenza virus as an oral capsule. The drug, which loses its patent protection in 2016, is licensed to Roche.

Vistide treats Cytomegalovirus and also certain eye problems involving the retina. The drug was founded in 1996 and has since lost its patent protection.

Gilead’s Pipeline

Gilead has twenty drugs listed on its site in current phases of trial. The drugs target HIV, Hepatitis C, numerous Cardiovascular diseases, Diabetes, Leukemia, Non-Hodgkin’s Lymphoma, and other diseases. Like many other large drug companies, Gilead has kept a strong pipeline targeting some of the biggest diseases affecting the world today. Three drugs targeting HIV are in Phase III trials currently. The Pharmasset acquisition will improve the company’s pipeline as it focuses on becoming a large player in the Hepatitis C market. Gilead will likely test several of its own Hepatitis drugs with Pharmasset products to create dual drugs much like it has with its HIV drugs.

The most important drug for Gilead in my opinion is known as the Quad. The drug combines Gilead’s own products and will help cut part of its revenue share with other marketing partners. The drug has held up well in trials. The drug will be brought in front of the FDA in 2012 and could be a substantial revenue earner for Gilead. The Quad drug is cutting down on symptoms from Gilead’s Atripla including dizziness, insomnia and depression. There are two trials testing Gilead drugs together in the Quad trials. Atripla had sales of $2.9 billion over the last year. However a portion of that revenue is given to Bristol Myers Squibb for its contribution to the drug. The approval of the quad pill could provide a nice bump to the share price in 2012.

Gilead’s Current Sales

Gilead is the leader in the HIV drug market and has shown its dominance. From the slide show presentation after the Pharmasset announcement it listed trailing twelve month revenue at $7.4 billion. The total market for HIV drugs is currently $13 billion so Gilead controls 50% of this blockbuster medical category. In the last fiscal year Gilead had earnings per share of $3.32 based on earnings of $2.9 billion.

Analysts call for earnings of $4.37 for the next fiscal year. With a closing share price of $39.28 on Friday, the price-to-earnings ratio is less than nine. According to Yahoo Finance, over 91% of the shares are currently held by institutions and mutual funds. More than 900 funds hold shares of Gilead as it represents one of the best plays on the healthcare and drugs industry.

Analyst Upgrades

Several days after the acquisition of Pharmasset was announced, analysts have upgraded shares. Citigroup and Bank of America both upgraded the shares after revaluating. Bank of America said that the company’s Hepatitis C program could some day be worth $15 to $30 billion. Gilead currently has a market capitalization of just under $30 billion so this deal could clearly define the company for the future.

My Share Valuation

I think the buyout of Pharmasset is a great purchase for Gilead. Gilead has made great use of drugs acquired through pipelines of companies it has bought out. Gilead absolutely owns the HIV drug market and the deal should help insure it gets a large portion of the Hepatitis C drug market in the future as well. For the coming year shares should trade closer to 12 times earnings, which would represent a share price of $52.44. The approval of the Quad drug as well as earnings announcements could power shares past $60. I think long term the company could double its market capitalization to $60 billion with its marketed HIV drugs and several Hepatitis C drugs on the market. I think shares would be a great purchase for an IRA as a bet on the company for the future.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in GILD over the next 72 hours.

DAA market whispers...

My affinity for robust data is only usurped somewhat by my affinity for market trends. Although my sample size is incredibly small and my methods are unscientific and most likely engulfed in torrents of biases, there are a few things that seem to be happening in the DAA market that I'd like to present to you all for input. Depending on the response, I'll propose more.

1. Interferon may be going the way of the dinosaur for treatment of HCV, but ribavirin is here to stay. At least for the foreseeable future.

2. New Rx's for the DAAs have leveled off and may continue grow slower than anticipated. Victrelis may gain share against Incivek, also conversely to 'expert' forecast.

Feel free to share your thoughts.

Incivek sales drive Vertex 3rd quarter profit...

$420 million in net product revenues for Incivek in the third quarter helped Vertex record a record net income or $221 million sending shares up almost 2% today, this despite a recent rumored stall in the sales trajectory for Incivek. The company also gives an update to it's HIV/HCV co-infection trial (an exceptionally under-served part of the population), potential BID dosing, a 12 week study of TVR + P/R in patients with the 'CC' variation near the IL28B gene and it's quad therapy trial looking at it's VX-222 polymerase inhibitor + P/R

CAMBRIDGE, Mass., Oct 27, 2011 (BUSINESS WIRE) -- ---Continued strength in launch of INCIVEK for hepatitis C; submissions of KALYDECO(TM) (VX-770, ivacaftor) approval applications complete-

Vertex Pharmaceuticals Incorporated /quotes/zigman/79675/quotes/nls/vrtx VRTX +1.81% today reported consolidated financial results for the quarter ended September 30, 2011 and provided an update on the launch of INCIVEK(TM)(telaprevir) tablets and its development programs evaluating potential new medicines.

The company reported total revenues of approximately $659 million, including approximately $420 million in net product revenues for INCIVEK in the third quarter. Vertex recorded net income of approximately $221 million, or $1.02 per diluted share, on a GAAP basis and approximately $151 million, or $0.70 per diluted share, on a non-GAAP basis for the quarter. Vertex ended the quarter with a cash position of approximately $659 million.

Vertex also today provided an update on ongoing and planned clinical trials for its broad pipeline of potential new treatments for hepatitis C, cystic fibrosis, rheumatoid arthritis, epilepsy and influenza. In addition to INCIVEK, Vertex has seven other potential medicines in clinical development.

"Our continued progress with the launch of INCIVEK together with our global approval applications for KALYDECO highlight Vertex's strengths in moving innovative science from the lab to people with serious diseases," said Matthew Emmens, Chairman, President and Chief Executive Officer of Vertex. "As we enter 2012, we expect to have more than a dozen ongoing clinical trials across our broad and diverse pipeline, which we believe may lead to additional new medicines to support our future growth."

"More than 17,000 people with hepatitis C have started treatment with INCIVEK since its approval in May, underscoring the strength of the launch," said Nancy Wysenski, RN, Executive Vice President and Chief Commercial Officer. "We are focused on further broadening the number of doctors using INCIVEK and are continuing to work with the hepatitis C community to increase awareness and screening and to help ensure patients are able to get the support they need."

Recent Progress and Upcoming Milestones

Hepatitis C

INCIVEK Now Available in Multiple Countries

-- In the third quarter, Vertex announced the availability of INCIVEK for people in Canada who have chronic genotype 1 hepatitis C. INCIVEK is the first medicine marketed in Canada by Vertex.

-- Vertex's collaborator, Janssen, announced in September that the European Commission approved telaprevir in Europe, where it is being marketed by Janssen as INCIVO(R). INCIVO is now available in the U.K., Germany, France and Sweden. Also in the third quarter, Vertex's collaborator Mitsubishi Tanabe Pharma announced the approval of telaprevir in Japan, where it will be marketed by Mitsubishi as TELAVIC(R).

Phase 3b Study of INCIVEK Dosed Twice Daily

-- Vertex is currently conducting a Phase 3b clinical trial to evaluate twice-daily dosing of INCIVEK (1,125 mg; BID) compared to three-times-daily dosing of INCIVEK (750 mg; q8h) in combination with Pegasys(R) (pegylated-interferon alfa-2a) and Copegus(R) (ribavirin) for people with chronic genotype 1 hepatitis C. Sustained viral response (SVR, or viral cure) data from OPTIMIZE are expected as early as the second half of 2012, which could support the submission of a supplemental New Drug Application (NDA) for twice-daily dosing of INCIVEK by the end of 2012.

Phase 3b CONCISE Study Underway Evaluating 12-week Regimens of INCIVEK Combination Treatment

-- Earlier this week, Vertex announced the start of a Phase 3b trial to evaluate the potential for treatment with INCIVEK(TM) combination therapy to be shortened to 12 weeks in people with genotype 1 chronic hepatitis C who have the 'CC' variation near the IL28B gene. Approximately one-third of people with hepatitis C have the 'CC' genotype, which has been associated with higher sustained viral response (SVR, or viral cure) rates and faster response to interferon-based treatment. The trial is expected to include approximately 350 people with genotype 1 chronic hepatitis C who have not previously been treated and people who have relapsed after at least one prior course of treatment with pegylated-interferon and ribavirin alone.

Enrollment Complete in All-Oral Arms of Phase 2 ZENITH Study of INCIVEK and VX-222

-- Vertex completed enrollment in the third quarter in the two, all-oral three-drug treatment arms of the ongoing Phase 2 ZENITH clinical trial evaluating response-guided regimens of Vertex's lead investigational hepatitis C virus polymerase inhibitor, VX-222, dosed in combination with INCIVEK and ribavirin. The all-oral, three-drug treatment arms are evaluating a twice-daily, interferon-free regimen of INCIVEK (1,125 mg), VX-222 (400 mg) and ribavirin in people with genotype 1a or 1b chronic hepatitis C. Vertex expects to obtain end-of-treatment data from the all-oral arms of the study in early 2012.

-- Two four-drug (quad) arms of the study are also fully enrolled and are evaluating response-guided four-drug combinations of VX-222 (400 mg or 100 mg; BID), INCIVEK (1,125 mg; BID), pegylated-interferon and ribavirin.

-- Earlier this year Vertex announced interim data from ZENITH and expects to provide additional data from the four-drug arms at the upcoming Liver Meeting in November.

Multiple INCIVEK and VX-222 Presentations at the Liver Meeting in November

-- At the 2011 Liver Meeting, being held in San Francisco, November 4-8, Vertex expects to present clinical data from multiple studies of INCIVEK and VX-222. New data, including sustained viral response (SVR, or viral cure) results from the ZENITH study, will be presented for the first time. Additionally, new data from a Phase 2 study evaluating INCIVEK combination treatment in people co-infected with genotype 1 chronic hepatitis C virus (HCV) and human immunodeficiency virus (HIV), will be presented at the meeting.

Phase 3b HCV-HIV Co-infection Trial to Begin This Year

-- Based on data from a Phase 2 trial of INCIVEK combination treatment in people co-infected with HCV and HIV, Vertex plans to initiate a Phase 3b trial of INCIVEK in people co-infected with HCV and HIV by the end of 2011. The trial is expected to enroll approximately 150 people and will be designed to provide safety and efficacy data to support registration of INCIVEK for the treatment of HCV-HIV co-infection as early as 2013. All patients in this trial will receive INCIVEK combination treatment. Vertex's collaborator Tibotec also plans to conduct a similar trial in Europe, which will provide additional safety and efficacy data in people co-infected with HCV and HIV. Tibotec expects to begin enrollment in this study in early 2012.

First Phase 2b Study of INCIVEK in People with Hepatitis C Following a Liver Transplant

-- By the end of 2011, Vertex expects to initiate the first Phase 2b clinical study of INCIVEK combination treatment in people who have recurrent hepatitis C following a liver transplant. The 2-part trial will evaluate approximately 80 people.

Phase 1 Trials to Begin for ALS-2200 and ALS-2158

-- Vertex and Alios plan to advance ALS-2200 and ALS-2158 into clinical development beginning later this year. The first Phase 1 study is expected to begin by year-end for ALS-2200, followed by a study of ALS-2158 in early 2012. The studies will evaluate healthy volunteers followed by people with hepatitis C. The goal of these studies is to generate safety, pharmacokinetic and viral kinetic data to support the potential evaluation of either or both compounds in all-oral treatment regimens for hepatitis C.

Additional information on INCIVEK, including important safety information, appears at the end of this release.

Cystic Fibrosis (CF)

U.S. and E.U. Applications for Approval of KALYDECO (VX-770, ivacaftor) Complete

-- Last week, Vertex submitted an NDA to the U.S. Food and Drug Administration (FDA) and a Marketing Authorization Application (MAA) to the European Medicines Agency (EMA) for KALYDECO, Vertex's cystic fibrosis transmembrane conductance regulator protein (CFTR) potentiator. Vertex requested Priority Review from the FDA and has received agreement from the EMA for accelerated assessment of KALYDECO in Europe.

Phase 2 Combination Trial of KALYDECO and VX-809 Enrolling Patients in Part 2

-- Vertex today announced the start of the second part of a Phase 2 clinical trial to evaluate combination regimens of KALYDECO and VX-809, a CFTR corrector, in people with the most common mutation in CF, known as F508del. Part Two of this trial will evaluate dosing of VX-809 alone for four weeks followed by dosing of KALYDECO and VX-809 in combination for four weeks. The study is expected to evaluate multiple dose levels of VX-809, including doses higher than those studied in the first part of the trial. The study is expected to enroll approximately 100 people with CF who have one copy or two copies of the F508del mutation. Similar to Part One, the primary goals of the second part of the trial are to evaluate safety and tolerability and the effect of the combination of KALYDECO and VX-809 on CFTR function as measured by sweat chloride. Lung function will be measured as a secondary endpoint. Patient screening for this study is underway.

KALYDECO and VX-809 Presentations at the North American Cystic Fibrosis Conference

-- Nine abstracts were accepted for presentation at the 2011 North American Cystic Fibrosis Conference (NACFC), being held in Anaheim, CA, November 3-5. Complete 48-week data from the Phase 3 ENVISION study of KALYDECO in children ages 6 to 11 years will be presented for the first time, as will data from a subset of patients in the open-label PERSIST extension study who had completed 48 weeks of treatment (placebo or KALYDECO) in one of the KALYDECO Phase 3 trials (STRIVE or ENVISION). Data from the first 12 weeks of the rollover study in patients who completed the STRIVE study and entered PERSIST will be presented at the meeting. In addition, complete data from the first part of the Phase 2 study combining KALYDECO and VX-809 will be presented for the first time.

Additional Studies of KALYDECO Planned for 2012

-- Pediatric Study: Vertex remains on track to initiate a Phase 2 study of KALYDECO dosed as monotherapy in children ages 2 through 5 in 2012. This will be the first study to evaluate a pediatric formulation of KALYDECO in children with the G551D mutation as young as two years of age.

-- Other CFTR Mutations: Also in 2012, Vertex plans to begin evaluation of KALYDECO monotherapy in people with certain other gating mutations (not G551D) and in mutations that result in some residual function of the defective CFTR protein on the cell surface. Vertex is in discussions with global regulatory agencies regarding the design of these studies and intends to provide additional information upon the initiation of the first study in these additional mutations.

First Study of VX-661 Planned for First Quarter of 2012

-- In addition to the ongoing Phase 2 study of KALYDECO and VX-809, Vertex also plans to begin Phase 2 development of VX-661, another CFTR corrector, in the first quarter of 2012. VX-661 is expected to be evaluated as monotherapy followed by dosing of VX-661 in combination with KALYDECO in people with two copies of the F508del mutation.

Rheumatoid Arthritis

350-patient Phase 2b Study of VX-509 To Begin by Early 2012 for Rheumatoid Arthritis

-- In September, Vertex announced data from a Phase 2 proof-of-concept clinical trial of the oral JAK3 inhibitor VX-509 in people with moderate to severe rheumatoid arthritis (RA). Based on these data, Vertex plans to begin a six-month Phase 2b study of VX-509 in RA by early 2012. This study will evaluate once-daily (QD) and twice-daily (BID) doses of VX-509 in combination with methotrexate, a commonly prescribed disease-modifying antirheumatic drug (DMARD) for RA that is frequently used in combination with other RA medicines. The study is expected to enroll approximately 350 people with moderate to severe RA.

Epilepsy

400-patient Phase 2b Study of VX-765 To Begin by Year-end for Epilepsy

-- Earlier this year, Vertex announced results from a Phase 2 study of VX-765 in people with treatment-resistant epilepsy. Based on these results, Vertex plans to initiate an additional Phase 2 study to evaluate longer dosing of VX-765 in approximately 400 people with treatment-resistant epilepsy. The trial is expected to begin by the end of this year.

Influenza:

Phase 1 Development Underway for VX-787

-- In September, Vertex began clinical development of VX-787 in a Phase 1 study in healthy volunteers. VX-787 is an investigational medicine that is designed to treat influenza A, including recent H1 (pandemic) and H5 (avian) influenza strains. VX-787 is the first of a new class of molecules that aims to treat influenza in a way that is distinct from neuraminidase inhibitors, the current standard of care for the treatment of influenza, and from other previous approaches to the treatment of influenza.

-- Phase 1 development in healthy volunteers is ongoing, and Vertex plans to begin evaluation of VX-787 in influenza infection as part of a Phase 2a proof-of-concept trial in mid-2012.

Third Quarter Financial Results

"Our financial performance in the third quarter was driven by the successful launch of INCIVEK, enabling Vertex to be profitable and cashflow positive in the first full quarter after INCIVEK was available," said Ian Smith, Executive Vice President and Chief Financial Officer. "We remain committed to reinvesting in our broad pipeline and to the creation of significant earnings, which we believe will deliver the greatest value for patients, the company and shareholders."

Total Revenues: Total revenues for the quarter ended September 30, 2011 were $659.2 million, compared with $23.8 million in total revenues for the third quarter of 2010. The increase in total revenues is primarily a result of INCIVEK net revenues of $419.6 million and $200.0 million in milestone revenues earned from Vertex's collaborator Janssen in the third quarter.

INCIVEK Revenues: For the quarter ended September 30, 2011, Vertex reported $419.6 million in net revenues of INCIVEK, which were recorded on an ex-factory basis and reflect the first full quarter of INCIVEK sales following approval on May 23, 2011. Net revenues of INCIVEK for the second quarter of 2011 were $74.5 million.

Cost of Product Revenues: Cost of product revenues for the quarter ended September 30, 2011 was $35.3 million, which principally reflects royalty expenses owed to third parties on the sale of INCIVEK.

Research and Development (R&D) Expenses: R&D expenses for the quarter ended September 30, 2011 were $189.1 million, including $18.7 million in stock-based compensation expense, compared to $170.4 million, including $17.0 million in stock-based compensation expense, for the third quarter of 2010. These expenses reflect the company's continued investment in its research and development pipeline, including preparation for the initiation of multiple clinical trials planned to begin by early 2012.

Sales, General and Administrative (SG&A) Expenses: SG&A expenses for the quarter ended September 30, 2011 were $110.7 million, including $10.8 million in stock-based compensation expense, compared to $48.9 million, including $6.8 million in stock-based compensation expense, for the third quarter of 2010. This increase reflects the expansion of the company's commercial organization to support both INCIVEK and KALYDECO and costs related to the commercial launch of INCIVEK.

GAAP and Non-GAAP Net Income (Loss) Attributable to Vertex: For the quarter ended September 30, 2011, the company's GAAP net income attributable to Vertex was $221.1 million, or $1.02 per diluted share, compared to a GAAP net loss attributable to Vertex for the quarter ended September 30, 2010 of $209.0 million, or $1.04 per diluted share.

The non-GAAP net income attributable to Vertex for the quarter ended September 30, 2011 was $151.2 million, or $0.70 per diluted share, compared to a non-GAAP net loss of $174.6 million, or $0.87 per diluted share, for the quarter ended September 30, 2010. The non-GAAP net income for the third quarter of 2011 and the third quarter non-GAAP net loss for the third quarter of 2010 excludes stock-based compensation expense, restructuring expense (credit), any revenues and expenses related to certain September 2009 financial transactions, any intangible asset impairment charge, net of tax, and items related to Vertex's collaboration with Alios. The increase in the third quarter 2011 non-GAAP net income attributable to Vertex resulted principally from increased revenues related to the sale of INCIVEK.

Cash Position: At September 30, 2011, Vertex had $658.7 million in cash, cash equivalents and marketable securities, compared to cash, cash equivalents and marketable securities at June 30, 2011 of $593.5 million.

This section contains forward-looking guidance about the financial outlook for Vertex Pharmaceuticals.

Vertex is today reiterating its guidance for 2011 total operating expenses, excluding cost of revenues, stock-based compensation expense and intangible asset impairment charge, of $960 to $980 million, as provided on July 28, 2011.

Go here for the full press release.