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Vertex’s future hinges on push into new areas

Cambridge biotech has had a drop in demand for key drug

“We’re not interested in lifestyle medicines,” Vertex CEO Jeffrey Leiden says.

ESSDRAS M SUAREZ/GLOBE STAFF

“We’re not interested in lifestyle medicines,” Vertex CEO Jeffrey Leiden says.

This winter was shaping up as a coming-out party for Vertex Pharmaceuticals Inc. After 2½ heady years of winning drug approvals and building an integrated research and commercial organization, it was ready to claim its status as one of the area’s highest-profile biotechnology companies by occupying a marquee headquarters on the South Boston Waterfront.

Vertex’s move from 11 buildings scattered across Cambridge to an $800 million two-building campus on Fan Pier will go on as scheduled, starting in mid-December and continuing through the early months of 2014. But the company’s perch atop the Greater Boston life sciences hothouse suddenly looks far from secure. The company disclosed last week that a sharper-than-expected drop in sales of its lead drug, which treats hepatitis C, was forcing it to shed about 370 jobs, including 175 in Massachusetts.

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Now the 24-year-old company’s future hinges on whether it can accelerate a formidable pivot already underway. The shift from reliance on the hepatitis C antiviral to a growing portfolio of medicines treating the rare genetic disease cystic fibrosis — and, later, to drugs combating other diseases — is the type of challenge few biotechs have met.

Vertex’s execution will be closely watched by other Boston area biotechs scrambling for a second chance in an unforgiving business defined by risk and reward. Last spring, US regulators dashed the hopes of Cambridge’s Aveo Pharmaceuticals Inc. when they rejected its experimental kidney cancer drug, forcing it to lay off 140 workers and revert to a research-stage company. Last week another Cambridge drug maker, Ariad Pharmaceuticals Inc., was forced to stop selling its leukemia therapy after clinical studies revealed safety risks, imperiling its plans to expand its market and open a new headquarters in Kendall Square.

Globe Staff

Starting in mid-December, Vertex will begin moving employees to a new building in Boston’s Seaport District. Employees are now housed in 11 buildings around Cambridge.

“Failure is the name of the game in biopharma,” said Michael Ringel, a Boston Consulting Group partner who focuses on the health care business. “But you shouldn’t count a company out just because they’ve had a failure. No one can rest on the laurels of one drug. It’s all about the ability to follow up by developing a pipeline of drugs.”

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In an article posted last month on the scientific website nature.com, Ringel and three coauthors maintained that the most important qualities needed to achieve repeated research and development success in biotechnology are deep knowledge of drug discovery and the capacity to make smart decisions based on that knowledge.

Executives at Vertex have spent much of the past three years beefing up sales and commercial ranks to support their hepatitis C drug only to be upended by the rapid emergence of new treatments for the virus. Now they will refocus on the drug discovery playbook.

“The thing that got us here is this fabulous scientific innovation engine,” said Vertex chief executive Jeffrey Leiden. “It’s the scientists who are working here, and what they’re producing. You have to keep that and maintain it and nurture it. And it’s easy to accidentally suppress that and squash that as you’re building the rest of the organization.”

Vertex will cut the sales and marketing force for Incivek, its hepatitis C pill, across the United States. While the pioneering drug has treated over 100,000 patients worldwide and generated more than $2 billion in revenue, its sales have dropped dramatically in anticipation of new treatments soon to enter the market. The new drug regimens will be all-oral; Incivek, by contrast, must be taken along with an injected drug.

Researchers and scientists will be largely spared. As they move into shiny new labs on Fan Pier, company leaders will try to keep their efforts trained on pursuing breakthroughs. With that aim, the company is hosting “science days” in Boston and other sites to celebrate drug research with outside speakers and presentations where scientists discuss cutting edge ideas. They will also continue their tradition of Friday afternoon beer hours where science and other topics are talked about less formally. The gatherings will be held next year on an outdoor patio overlooking Boston Harbor.

Vertex’s strategy has been to identify specific disease targets where there is, in Leiden’s words, “a big scientific opportunity and big unmet medical needs.”

Its scientists are in the early stages of investigating treatments for at least 10 diseases, including progressive multiple sclerosis, some cancers, and Huntington’s disease, as well as bacterial infections. “We’re not interested in lifestyle medicines,” Leiden said. “We’re not interested in things that are just moderate improvements over what’s out there.”

The goal is to build a multidrug company. But the immediate task is to field an arsenal of therapies to treat cystic fibrosis, an often fatal inherited disease that afflicts about 75,000 people globally. Vertex’s cystic fibrosis program is at the forefront of personalized medicine, which seeks to customize treatments based on patients’ genetic makeups. Rather than approach cystic fibrosis as a single disease, it recognizes it as multiple diseases requiring multiple drugs for patients with different mutations.

For patients suffering from cystic fibrosis, which causes mucus to thicken and block the passage of air to the lungs, an effective treatment has been long in coming. For the company that gets there first, the market could be worth $5 billion a year, analysts project.

“There’s a great deal of clinical risk, but there’s a big upside if it works out,” said biotechnology analyst Howard Liang, managing director at Leerink Swann, a health care investment bank based in Boston. “These are game-changing drugs that attack not the symptoms but the underlying causes of the disease.”

Understanding complex diseases such as hepatitis C and cystic fibrosis requires deep scientific knowledge few companies have. Developing treatments requires the execution even fewer are capable of. To discover two or more breakthrough medicines is so rare that only a few biotechs, including Genzyme Corp. and Biogen Idec Inc., have been able to pull it off.

Vertex is the clear leader in the fight against cystic fibrosis and has worked closely with patient advocacy groups. But thus far, its only approved cystic fibrosis drug, called Kalydeco, can treat just 4 percent of patients, or about 2,000 people. Between now and the end of next year, Vertex expects to apply for approval of new variations of the drug that could treat another 2,000 to 5,000 patients.

The big leap, now in late-stage clinical trials, would be a combination therapy that deploys Kalydeco along with an experimental medicine called VX-809, better known as “the corrector.” The cocktail targets the most common mutation, Delta F508, seen in roughly half of cystic fibrosis patients. A second-generation corrector, being developed in Vertex labs, could boost the number of treatable patients to 90 percent — all but those with hard to treat specific mutations.

Vertex’s stock took a hit when it disclosed weak sales of Incivek. Leiden said he’s trying to keep the biotech focused on new drugs that help patients.

“The stock is not our report card,” he said. “Making medicines is our report card. If we make the transformative medicines we want to make, everything else will take care of itself, including the stock.”

Robert Weisman can be reached at robert.weisman@ globe.com. Follow him on Twitter @GlobeRobW.
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