Vertex Pharmaceuticals Inc said its combination cystic fibrosis treatment significantly improved patient lung function in a mid-stage clinical study, but investor skepticism about how the results were presented and over the strength of the data itself sparked a sharp selloff of company shares.
Vertex shares closed down 16.2 percent at $51.18 on Thursday and were off as much as 21.7 percent at the depth of the selloff.
The data was the final results from a Phase II study of Vertex's cystic fibrosis drug Kalydeco in combination with an experimental drug, VX-809. Interim results from the trial presented last month sent the company's shares soaring as they appeared to show a surprisingly strong improvement in lung function in patients with the life-shortening disease.
Some of those gains were later lost after the company was forced to revise the data due to a statistical mistake in which it confused relative with absolute results. The final results presented on Thursday contained ambiguities that further unsettled investors.
"This is now the third and most confusing disclosure about a relatively small study, and this one raises even more questions about management's transparency and credibility," said Sanford Bernstein analyst Geoffrey Porges, who has been a strong supporter of Vertex in the past.
In particular, the company did not present exactly comparable results between the interim and final data.
"This non apples-to-apples disclosure has created investor doubt that the data are 'real,'" said Mark Schoenebaum, an analyst at ISI Group, in a research note.
Company executives told analysts on a conference call that even though it did not present exactly comparable results, the final results should stand alone and indicate the treatment is effective at the highest VX-809 dose of three tested. Vertex said the results warrant moving forward into late-stage clinical development, which it plans to begin in early 2013.
"At the interim analysis they encouraged everybody to focus on the difference between day zero - the start of treatment - and day 56 - the end of treatment - which is a logical approach. But in final analysis they asked everyone to focus on halfway through the study at day 28 and day 56," Porges said.
"They (Vertex management) believed that they could move the goal posts on the disclosure, spin the story heavily in their favor and not see a reaction. I don't think that they'll believe that after today."
The company declined to comment on the steep drop in its share price.
Kalydeco, which in January became the first drug approved to treat the underlying cause rather than symptoms of the serious lung disease, helps about 4 percent of cystic fibrosis patients with a specific gene mutation.
Vertex is hoping that the drug, when combined with VX-809, will eventually be able to treat the larger cystic fibrosis population.
Cystic fibrosis causes the thin layer of mucus that helps keep lungs free of germs to thicken, clogging airways and damaging the lungs. The average life expectancy for the disease is 37 years as damage to the lungs progresses, limiting the ability to breath.
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