Why Booming Vertex is on Its Way to Becoming Gilead's Mini-Me

Why Booming Vertex is on Its Way to Becoming Gilead's Mini-Me September 28, 2017
By Mark Terry, BioSpace.com Breaking News Staff

Boston-based Vertex Pharmaceuticals is well on its way to being a dominant player in the cystic fibrosis (CF) arena. And it’s a growing company, with a market cap of around $40 billion and likely to increase. Wall Street projects Vertex’s earnings to grow almost 70 percent annually over the next couple years.

This kind of growth and dominance causes Keith Speights, writing for The Motley Fool, to note the similarities between Vertex and another dominant biotech player, Gilead Sciences (GILD). According to Vertex’s chief operating officer, Ian Smith, who spoke at the Leerink conference yesterday in New York, Vertex wants to do in CF what Gilead has done in HIV.

Gilead’s first HIV drug Viread was approved in 2001. It then launched Emtriva, but since has been successful in combination drugs, such as Truvada, which is a combo of Viread and Emtriva. It was approved in 2003 and has since become one of Gilead’s best sellers. And its Genvoya is dubbed the most successful HIV drug launch in history. Gilead’s Descovey and Odefsey, both HIV combinations containing tenofovir alafenamide (TAF) are doing well. And there’s a lot of optimism about its bictegravir/emtricitabine/TAF combo therapy.

Speights writes, “This relentless pursuit of new combinations is the same path that Vertex is taking. The company’s initial CF product, Kalydeco (ivacaftor), picked up its first FDA approval in 2012. Vertex followed up with Orkambi, a combination of ivacaftor and lumacaftor. The biotech currently awaits approval for its third two-drug combo—tezecaftor/ivacaftor.” And there are some promising triple-drug combos in its pipeline.

The two companies differ in the area of business development, however. Gilead has used strategic acquisitions to grow its pipeline and push into new therapeutic areas. Vertex, on the other hand, hasn’t used acquisitions to break into new areas, but has mostly focused on CF.

Speights writes, “But Vertex has taken another approach also used by Gilead: collaborations. The company partnered with CRISPR Therapeutics in 2015 to explore using gene editing in treating CF and sickle cell disease. Last year, Vertex teamed up with Moderna Therapeutics to develop messenger ribonucleic acid (mRNA) therapies for treating CF. The deal cost Vertex $40 million up front with the potential or up to $275 million in milestone payments plus royalties on any future sales.”

Vertex also had a recent deal with Concert Pharmaceuticals (CNCE) to buy the rights to CTP-656 for CF.

So, there are similarities, although M&A and collaborations are hardly unique to Vertex and Gilead. But Speights is also speculating on whether Gilead might acquire Vertex. He’s not the first to consider it. Back in July, Geoffrey Porges, an analyst with Leerink, argued that Gilead should buy Vertex, although The Motley Fool’s George Budwell had counterarguments.

At that time, Porges reasoned that Gilead’s most obvious acquisition targets were oncology companies like Tesaro or Incyte . He was right on oncology, even if Kite Pharma wasn’t on the list. In late August, Gilead bought Kite for $11.9 billion.

Allison Gatlin, writing for Investor’s Business Daily in July, noted that, “Vertex would offer Gilead a rare disease portfolio and a robust pipeline. Vertex is now working on a triple-pill combination to treat cystic fibrosis, a lung disease. It’s about a year ahead of its nearest rivals, Galapagos /AbbVie , and the regimen looks likely to launch in 2020.”

Budwell’s arguments against were that Vertex is overvalued, there’s not enough overlap between the two companies—Gilead’s focus is infectious diseases with some growth into inflammatory diseases and cancer, while Vertex is rare diseases, primarily CF—and a weak pipeline. Budwell pointed out that Gilead’s history of mergers and acquisition was marked by buying promising early-stage drug candidates, pushing through clinical trials, and getting blockbuster drugs out of it. But Vertex’s pipeline isn’t that exciting, particularly for any drugs that haven’t already been partnered or licensed by other companies.

Speights, for his part, writes, “Getting into the rare-disease market isn’t something that Gilead’s management team has talked about in the past. But if Gilead truly wants to boost its revenue and earnings growth prospects sooner rather than later, Vertex would be a smart target. Vertex clearly looks at Gilead as an example to follow. Perhaps Gilead is also looking at Vertex.”

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