2Vertex Pharmaceuticals Which of the 4 projects portfolio options currently facing Vertex do you favor?VX-148PROSIt had the potential to treat a number of important diseases with unmet medical needs such as psoriasis, multiple sclerosis and even cancerMarket is established; psoriasis drugs already existRemaining development costs = $100 mill.Already in Phase IICONSMore competitors in the market
3Vertex Pharmaceuticals VX-702PROSCheap and easy to make75% of the drug stays in the system for therapeutically attractive periods. There are manageable side-effectsOral drug instead of injectiblesSupported by managementCONSProne to toxicitiesMany companies had tried without successHigh mechanism risk
4Vertex Pharmaceuticals VX-765PROSAs a small molecule, VX-765 could be taken orally and was thus thought to have excellent market potentialVX-765 was fully owned by Vertex;Believed to play an important role in chronic inflammatory diseasesLargest potential for sales and profit marginsCompleted the Phase ICONSHigh production costsUncertainty with the DosagesIf Vertex went ahead with another ICE inhibitor, with respect to pralnacasan (VX-740) it wouldlose rights to a subsidized sales force in US/Europe andsacrifice certain financial benefits of copromotion
5Vertex Pharmaceuticals VX-950PROSBillion $ drugCurrent treatments for the disease were only effective in roughly 40% to 60% of chronically ill HCV patients. Most of these treatments were associated with significant side effects and none was a direct antiviral therapy. Potential for a significant breakthrough leading to boosted image.Sell the drug to doctors thru’ a specialty sales force.CONSVX-950 was complex and costly to make.For regulatory and medical ethical reasons, the company would be required to test VX-950 in combination with α-IFN. Acquiring adequate supplies of α-IFN significantly increased the cost of testing VX-950.Decreasing number of new infections. Long Time to market (YR 2010)
6Vertex Pharmaceuticals Decision:Top 2 Products: VX-148 and VX-702, since they were in Phase II.Keep VX-765 and VX-950 as backup OR keep VX-765 as backup and partner with some other company for VX-950 since it was involved higher costs.
7Vertex Pharmaceuticals Specifically, which 2 projects would you advance in development? Why? Show analysis.CandidateIndicationPhase I SuccessPhase II SuccessPhase III SuccessApproval SuccessProbability SuccessProbability Fail1VX-148Psoriasis100.0%40.0%65.0%75.0%19.5%80.5%2VX-702ACS60.0%50.0%15.0%85.0%3VX-765RA/OA80.0%21.6%78.4%4VX-950HCV70.0%21.0%79.0%Candidate ChoiceBoth SuccessfulBoth FailingOne SucceedingOverall Success1-22.9%68.4%28.7%31.6%1-34.2%63.1%32.7%36.9%1-44.1%63.6%32.3%36.4%2-33.2%66.6%30.1%33.4%2-467.2%29.7%32.9%3-44.5%61.9%33.5%38.1%
8Vertex Pharmaceuticals Would you license out the two others not chosen or keep them as backup?Keep VX-765 as backup and partner with some other company for VX-950 since it was involved higher costs.VX-765 is in Phase I, highest remaining dev costs, highest potential peak salesVX-950 is in pre-clinical stage; the company would be required to test VX-950 in combination with α-IFN. Acquiring adequate supplies of α-IFN significantly increased the cost of testing VX-950.
9Vertex Pharmaceuticals How much should Vertex management rely on quantitative methodologies (such as real option valuation) versus qualitative approaches?Qualitative Approach has higher buy-inQuantitative Analysis is based on expert assumptions with all products having a high likelihood of failure.Boger would needInformation on the existing products in the market and their comparison to the drugs in questionMay need insight into the adverse events on VX-148 and VX-702 which are already in Phase-IISignificance of the results from Phase-I for the products