The story may be unique in the history of prescription drug development. Vertex Pharmaceuticals Inc.’s protease inhibitor Incivek (telaprevir), only two years ago considered the top drug for treating chronic hepatitis C infection, is sputtering.

The drug, approved in March 2011, posted sales of nearly $1 billion in its first year on the market, and reached blockbuster status in 2012.

But the signs were evident even in 2012 that the party would be short-lived. On a third-quarter earnings call Oct. 29, Vertex management announced a retrenchment in HCV, including steep cuts in the work force that supports Incivek, and plans to intensify its focus on cystic fibrosis and other therapeutic areas, such as cancer.

Incivek, once a high-profile success story of small molecule development, brought in just $86 million in the third quarter, well below consensus estimates.

Asked for another example of a drug tumbling so quickly without the hindrance of serious post-marketing safety issues, ISI Group analyst Mark Schoenebaum suggested Merck & Co. Inc.’s Crixivan (indinavir sulfate), also a protease inhibitor launched as an antiviral treatment for HIV in the mid-1990s.

Provided to patients under an FDA-designed direct-distribution model from Merck to specified pharmacies for more than a year before its approval in February 1998, Crixivan brought in net sales of $582 million in 1997, but fell to $290 million in 1998 due to new competitors in the HIV space. By 2011, in a franchise with Stocrin (efavirenz), the two drugs netted the New Jersey pharma just $192 million.

Incivek rose both higher and faster, but also has fallen more steeply and quickly than Crixivan. On the earnings call, Vertex attributed more than $2.8 billion net sales and royalty revenue (the drug is marketed in Europe as Incivo by Johnson & Johnson) from the drug in roughly 31 months on the market. Now, however, as doctors warehouse patients to await even bigger improvements in HCV cure rates, side-effect profiles and duration of therapy, very few patients are being started on Incivek, CEO Jeff Leiden said on the Oct. 29 call,

“We reached a point where our level of investment and support for Incivek was beyond what we believe is necessary to support future physician and patient demand,” he said. “The groups most impacted by this decision are those related to the promotion and development of Incivek. Related [general and administrative] infrastructure has also been reduced.”

Cutting 15% Of Worldwide Work Force

Vertex is eliminating 370 positions, about 15% of its total worldwide headcount, which should save the company between $150 million and $200 million in 2014. The company plans to take a one-time restructuring charge of approximately $35 million to $45 million in 2013. But with more than $1.4 billion in cash and cash equivalents, it expects to enter 2014, a critical year for data releases, with a healthy balance sheet, bolstered by growing revenues from its cystic fibrosis drug Kalydeco (ivacaftor).

In a same-day note, analyst Matthew Roden of UBS Investment Research said the savings would break down as follows: $50 million to $60 million from payroll, $30 million to $50 million in commercialization costs for Incivek, $35 million to $50 million in R&D, and $25 million to $30 million in G&A spend.

Wall Street was uniformly positive on Vertex’s adjustments, with Baird Investment Research analyst Brian Skorney saying in an e-mail, “I think it’s a positive. Their hepatitis C franchise is (was) a huge [operating expense] item and the sales are heading rapidly to zero. They could probably cut even more in the future. They made some costly miscalculations on the speed with which the hep C treatment paradigm would shift. But so did Merck and Roche; it’s been a tough indication to keep up with.”

For several years, several big pharmas and a handful of smaller virology specialist firms have competed to create a combination of oral, direct-acting antiviral drugs that would further improve on an already robust HCV regimen. The pace of change has been rapid, with big breaks coming in 2011 from the introductions of Incivek and Merck’s competing protease inhibitor, Victrelis (boceprevir).

The two PIs enabled many patients to undertake a shorter duration of therapy with a much higher chance of achieving cure, as measured by sustained virological response (SVR). But the two drugs still must be taken with existing backbone therapies ribavirin, a daily oral pill, and pegylated interferon, a weekly injection. The so-called Peg/Riba regimen had about a 50% cure rate and required a 48-week treatment period, which was especially grueling since interferon causes flu-like symptoms in many patients.

Even as the PIs have taken hold, a new generation of DAA combination therapies is on the way and likely to transform the landscape yet again. Gilead Sciences Inc., AbbVie Inc., Bristol-Myers Squibb Co. and Merck have drugs in development that will do away with the need for interferon and in some cases ribavirin, while cutting the treatment time even further – to 12 weeks or less – and eliminating the rash problems seen with Incivek ([A#00131028012]). As those regimens advance into late-stage trials, doctors have been warehousing patients, a practice that isn’t new to the field, but has hurt Incivek and Victrelis ([A#14130501004]).

Leiden said Vertex regrets the job cuts but they were necessitated by a rapidly changing HCV market. He also asserted that Incivek should be remembered as a breakthrough medicine that “transformed the treatment of genotype 1 hepatitis C patients by doubling cure rates in half the time.” He noted that more than 100,000 HCV patients have been treated worldwide since launch with Incivek.

Decision Pending On VX-135

Vertex now must determine whether it will push to remain in the HCV competition. Its goal there is to use Phase II nucleoside polymerase inhibitor (or “nuc”) VX-135 as the backbone of an oral DAA combo that cures HCV in 12 weeks or less ([A#14130227003]). This necessitates an R&D review, as the company increases its focus on its growing cystic fibrosis franchise. Kalydeco is off to a strong start and topped consensus estimates marginally on the quarter, with sales of $101 million. Follow-on CF drugs, as well as the Phase IIb Janus kinase 3 inhibitor VX-509 for cancer, are also in development, executives said.

If VX-135 comes through, this strategy offers promise simply because of the scarcity of nucs in clinical development. Gilead’s sofosbuvir, with a Dec. 8 action date at FDA, is the only other nuc in clinical development at present, as several others have been sidelined due to safety concerns ([A#00131028022]).

Leiden indicated on the call that Vertex would quickly make a go/no-go decision on development of ‘135 fairly early in 2014, following the receipt of data from several clinical trials. The nuc is being tested Phase II in tandem with Bristol’s NS5A inhibitor daclatasvir, with efficacy and safety data expected in early 2014; and a healthy volunteers study with J&J protease inhibitor simeprevir already is complete. Vertex and J&J are considering additional trials with the combo – simeprevir obtained unanimous support from FDA’s Antiviral Drugs Advisory Committee for agency approval ([A#00131028023]).

Vertex also is testing ‘135 on its with ribavirin in several other trials, some with data to be presented at the American Association for the Study of Liver Diseases meeting in early November in Washington, D.C., and others to report out in 2014. Chief Medical Officer Bob Kauffman noted that ‘135 currently is under a partial clinical hold at FDA, one which will limit the dose size that can be used in clinical trials or approved for treatment 200 mg daily.

In one study with ribavirin, a 200 mg dose of ‘135 produced an SVR rate of 50% in infected patients after 12 weeks of treatment, a data point that probably would not make the compound competitive with Gilead’s sofosbuvir.

With Incivek Deflated, Vertex’s HCV Roller Coaster Ride Hinges On Phase II Candidate VX-135

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