Vertex Pharmaceuticals stock was sinking Thursday morning, after the company said it was pulling the plug on a treatment some saw as a “crown jewel” in its pulmonary-drug portfolio.
After the close of trading on Wednesday, Vertex (ticker: VRTX) announced it would discontinue its Phase 2 study of protein-deficiency drug VX-814 and stop development because of safety concerns.
The company said it put a stop to the trial after 28 days of administering treatment to patients with alpha-1 antitrypsin deficiency (AAT), because several patients showed high levels of certain liver enzymes.
Vertex shares were down 17% to $225.74, a blow for a stock that has risen 24% year to date. The Dow Jones Industrial Average was down 0.8%. There appeared to be hope that the drug would replicate the stunning success of the company’s cystic fibrosis treatment.
Even bulls were taken aback by the news. “The discontinuation of VX-814 due to safety…issues is certainly a negative surprise and is likely to put meaningful pressure on Vertex shares, especially given management’s consistently bullish commentary surrounding the program,” Stifel analyst Paul Matteis wrote. He has a Buy rating and $309 price target on the stock. He noted that, while the company is developing a backup compound, this failure will tarnish the “reputational equity that comes from its outstanding accomplishments in cystic fibrosis. One setback doesn’t at all negate this, but given that there all along hasn’t been much AAT asset data (preclinical or clinical) to analyze, the surprising VX-814 setback may cap the amount of AAT credit in the stock until we get real human proof-of-concept.”
Oppenheimer’s Hartaj Singh, who has an Outperform rating and $305 price target on the shares, noted that “sentiment could dent the current ‘priced to perfection’ multiple.” He is slightly more optimistic, however, writing that the news “while not pleasant, should be overcome by the company in its follow-on programs. Vertex has a history of overcoming clinical development obstacles…If investors are convinced that this failure is a minor hiccup, we would expect the stock to rapidly make up lost ground.
Vertex rival Dicerna Pharmaceuticals (DRNA) maintained a Buy rating and $30 price target from B. Riley analyst Mayank Mamtani, who said it “represents a pure play with two shots on goal” in the form of its own drugs, while noting that “AAT was perceived as crown jewel of Vertex’s pulmonary R&D efforts.”