32 Vertex Pharmaceuticals

Vertex Pharmaceuticals

By Allan Humphrey
April 08, 2018


Introduction: Living with Cystic Fibrosis

Jillian McNulty of Ireland has a story similar to that of many others who suffer from Cystic Fibrosis. Both in her childhood and adult life she’s had to visit the hospital at least once a month, at the easiest of times, but during the hardest, she would spend 12-13 straight weeks there. The hospital visits were for any number of symptoms including malnutrition, chronic indigestion, extreme difficulty in breathing or for life-threatening lung infections.  These conditions were so severe that Jillian and her family were considering a lung transplant to help alleviate these symptoms, something that would be difficult to obtain, due to a shortage of donors and the cost to her family. It was around this time, in 2015, that Jillian’s doctor prescribed her a new drug that was just on the market. The drug, Orkambi, promised to treat more patients than any previous treatment for cystic fibrosis to date. It also claimed to target the cause of the disease rather than just treating the symptoms, which is what, up until now, Jillian had been receiving during her long hospital visits. Within months after starting Orkambi Jillian’s health had improved drastically, the debilitating symptoms that she had been suffering her whole life were slowly cleared away. Two years after starting treatment Jillian managed to stay hospital visit free for over 12 months, and even after contracting swine flu, an infection that surely would have killed her before, she was capable of fighting the infection and made a full recovery. This drug changed her life for the better, something that many Cystic Fibrosis patients are still desperate for (Ryan, 2016).

The drug, Orkambi, was developed by a pharmaceutical company called Vertex Pharmaceutical from Boston Massachusetts. Vertex’s current company goals have been to develop treatments for Cystic Fibrosis that go beyond just trying to sustain the patients by treating the symptoms. This was not an easy task for Vertex. To start, Cystic Fibrosis is a complicated disease, that has implications from the genetic level all the way to full tissue organ and systemic conditions. Secondly, before going all in on Cystic Fibrosis, Vertex was not doing well, either finically or on the drug discovery front.

This report aims to tell the story journey of Vertex Pharmaceuticals, from their start as a small biotech start-up, and through their ups and downs as a company over the past decade. The purpose of the report is to see why certain decisions (and lucky breaks) were made that ultimately lead to their current success. Before the story of Vertex can be told, the complexities of Cystic Fibrosis and developing drugs for rare conditions need to be considered.


Cystic Fibrosis: One Disease, Many Complications

Cystic Fibrosis (or CF), is a disease that has a long history, with the first evidence of cases going back hundreds of years. In the past, the cause of CF was not clear. With many different symptoms and manifestations of the disease, it was difficult to understand the disease and also problematic to treat medically (Nick, 2012). Today, a much better understanding of CF exists due to breakthroughs in genetic/molecular technologies and diagnostic techniques.

While it was always understood that CF was genetically linked and spread through heredity, it wasn’t until 1989 the one specific gene was identified, named the Cystic Fibrosis Transmembrane Regulator (CFTR) Gene. While it may seem that this condition should be simplistic, with only a single gene being implicated in CF, it turns out that there are many (over 2000) mutations that have been identified in humans, with 127 of these directly linked to causing CF, thus adding to the complexity of treating CF. The CFTR gene codes for the CFTR transport protein which helps shuttle chloride ions into and out of cells (“Understanding CF | Vertex Pharmaceuticals,” n.d.). Basically, it is responsible for maintaining the balance of salt and mucus content on the inside and outside of cells. Some tissues are more susceptible to a damaged CFTR system, such as the lungs, where mucus can build up and restrict airways, causing difficulty breathing. There is also an increased risk of infection as the mucus cannot be easily removed from the lungs as normal, allowing pathogens to be trapped and do damage. CF also has effects in other tissues of the body including the digestive systems (liver bile production and pancreas activity) which leads to an inability to absorb nutrients which manifests in many different malnutrition issues (“Understanding CF | Vertex Pharmaceuticals,” n.d.).

Ultimately, these conditions mean that people that suffer from CF have significantly shortened life spans, around 39 years on average (Davies, Alton, & Bush, 2007). This makes finding a treatment that deals with the underlying cause of CF and not just the after effects very important to those suffering from this disease.


Challenges with Treating Rare Diseases

Besides the biological complexity of CF, the challenge of treating the disease also comes from its status as a ‘rare disease’. A disorder is considered rare when less than 200 000 people are affected by it (ICON, 2018). Cystic Fibrosis is considered a rare disorder with only approximately 75 000 people (in USA, Europe and Australia) diagnosed with it (“Understanding CF | Vertex Pharmaceuticals,” n.d.). Like most rare disease this creates challenges for drug development.

The first challenge is a financial one. Drug discovery and approval processes are expensive and time-consuming, costing on average around $500 million can take anywhere from 5-15 years (depending on the drug and disease) (Shimasaki, 2014). A rare disease that affects a smaller number of people also have a smaller potential market and therefore it is difficult to justify the cost of investment to develop these drugs. This is especially true when considering the risk that many drug trials fail, with only 13.8% of drugs making it from initial discovery through to approval (Cross, 2018).  Secondary challenges also exist with rare drug discovery, such as having fewer people available for clinical trials to meet the FDA approved standard (Fagnan, Gromatzky, Stein, Fernandez, & Lo, 2014).

Given these challenges for rare diseases, previous treatments for Cystic Fibrosis did not target the genetic or molecular cause of the symptoms but rather physicians used already developed and approved drugs and treatments to treat the symptoms directly. Some examples include antibiotics to treat lung infections, anti-inflammatories to reduce airway restriction as well as nutrient supplementation to deal with malnutrition due to poor absorption (Davies et al., 2007). One can imagine that these are only a temporary solution and CF patients needed a drug that could treat the cause.


Vertex Pharmaceuticals: Roller-coaster Pharmaceutical Development

Vertex Pharmaceuticals originated as a small pharmaceutical start-up company that was founded in 1989 by Josh Boger. Originally opening in Cambridge, Massachusetts, it was riding the new wave of biotech innovation from the previous decade, with new molecular technologies opening up new avenues for studying disease and drug discovery. With many team members coming from other large pharmaceutical companies, Vertex wanted to take a different approach to developing drugs. Their method was unique as they heavily invested in research and development into the diseases they wanted to develop drugs for and they specifically focused on using new techniques that utilized computer software to identify potential drug targets base on molecule structure. Using this unique model they wanted to develop breakthrough drugs that tackled difficult diseases where there weren’t current treatment options. They wanted to be different than Big Pharma, they wanted to generate revenue but also help people (Boston, 2001). Another key to their strategy was Boger’s focus on tackling many different projects at once. His thought that having many drug developments in the pipeline may help if one fails during trials, there is another candidate that’s already in development.

Although they struggled at first, the members of the team did not want their company to be bought out by a large pharmaceutical company, they had all worked there before and had faith that their model would work (Macaluso, 2014).  Their first focus was on anti-viral drugs but they had little success at first leaving the start-up low on resources. The company then went public in 1991, to raise funds (making around $25 million dollars). They used this capital to focus their efforts on HIV treatment since HIV was still an emerging disease in that era (Boston, 2001). This decision seemed to pay off as their drug Agenerase was approved in 1999 by the FDA and began to sell in the following year. By the end of the year 2000, their annual revenue was at its highest ever at $26.9 million (Griffith, 2001). Vertex stock had also shot up to it’s highest point in history with shares in December 2000 closing at $78.48 up from  $13.56 from the year prior (“Historic Stock Lookup | Vertex Pharmaceuticals,” n.d.).

Vertex did not rest on the success that Agenerase had brought and continued their strategy to invest in research and development for a number of drugs. They understood that you cannot rely on the success of one drug to sustain you, with competitors and generics coming down the pipeline which will cut into Agenerase sales. One of the main focuses for Vertex research investment was Hepatitis C. The Hepatitis C research had already been in development and was starting to show promise, and with the boost from Agenerase’s success, they could continue to develop it. However, the drug was still many years off from being approved and with a few other failed projects Vertex’s stocks began to sink over the next few years (closing at $9.21 in December 2003) (“Historic Stock Lookup | Vertex Pharmaceuticals,” n.d.).

During this time Vertex had also started projects involving Cystic Fibrosis. In 2001, when vertex had acquired the company Aurora Biosciences their CF research took another step forward due to a 40-million-dollar collaboration that existed between Aurora and the Cystic Fibrosis Foundation (CFF) (Higgins, LaMontagne, & Kazan, 2007). With funding from CFF and expertise in the area from Aurora team, the CF projects remained in Vertex’s pipeline; however, these were not the main focus for Vertex. There were a lot of complications surrounding developing drugs for CF given that it was a rare disease. They did not want to divert too many resources from their other projects since developing drugs for rare diseases is risky and they did not want to lose the confidence of their investors. There were also concerns from the CFF since the funding wasn’t originally meant to go towards a for-profit company like Vertex, but they continued to support the research since the foundation’s ultimate goal is to find a cure for the disease (Weisman, 2016).

Over the next decade Vertex ran into problems with many of their projects failing to make it through to clinical trials, however, in 2011 they finally saw a second successful drug make it through approval. This was for the Hepatitis C drug, Incivek, which at this point had been in development for the past 15 years (Macaluso, 2014). This was a much-needed break for the company and it was reported that it was the first time that the company was regularly profitable.  The Incivek drug was something of an overnight success, with Vertex total pharmaceutical sales reaching over $585 million dollars up from the previous quarter’s sales of $75 million (Feuerstein, 2011). The drug had the designation of the “fastest selling drug in history” when it sold over a billion dollars within its first year of sale (Macaluso, 2014). Vertex’s stock at the end of October 2011 closed at $43.99 which was the highest it had been since the 2001 spike (“Historic Stock Lookup | Vertex Pharmaceuticals,” n.d.).

Even with the successful launch of the drug Vertex would still have to endure challenges. While Incivek success seemed like the beginning of a new start for Vertex, the horizon of its sales suddenly seemed bleak. A competitor drug, Sovaldi (from Gilead Sciences) was set to be released. This drug had a better efficacy and was sold a cheaper price. This quickly battered Incivek sales and by 2012, Vertex’s stocks were down 50% from the previous year  (Herper, 2017). For a company that took over 22 years to see a regular profit and had invested over $4 billion dollars in drug development over that time period, it seemed doomed to cave now that their flagship Hepatitis C drug was being destroyed by the competition. However, thanks to Vertex’s focus on having many projects in the pipeline, and a change in leadership, they were still in the game


Enter Jeffery Leiden

For those in the biotech and pharmaceutical industry, Dr. Jeffery Leiden needs no introduction.  He had an illustrious academic career, starting from elementary school (where he skipped a grade), to high school (which he left early after being accepted to university during his junior year). This trend of academic excellence continued and he had earned both PhD. in biological sciences and a Medical Degree from the University of Chicago before the age of 25  (Huggin, n.d.). Leiden’s accolades continued into his career, where he became a seasoned cardiologist, and then stepped into the biotech realm where he saw the successful launch of arthritis and HIV drugs during his tenure as CEO at a pharmaceutical company called Abbot Laboratories (Herper, 2017).

As Leiden entered Vertex in 2012, they were struggling due to the unfortunate circumstances surrounding the quick success but the immediate drop in their drug Incivek. He was still interested in working with Vertex, since they had a reputation of being research focused in the past, with a real passion for discovering breakthrough drugs. Leiden wanted to reignite this part of the company with their Cystic Fibrosis projects.


Vertex and Cystic Fibrosis: A Shift in Focus

During the 2000s Vertex had mostly focused on getting Incivek onto the market; however, they still had a team working away on Cystic Fibrosis projects that were acquired 10 years earlier with the Aurora Biosciences acquisition. This team, like most Vertex projects, focused heavily on researching the disease and not just drug development. This research into the genetics and on the CFTR gene (which had been ongoing for the past 12 years) paid off as the team had found a molecule that offered CF treatment that was targeting the actual protein malfunction due to mutation. This drug, called Kalydeco, would gain FDA its approval right before Leiden started as CEO. It targeted the CFTR protein directly, allowing it to let some chloride ions through (where defective CFTR does not) and thus returns the salt and mucus balance of the membranes to alleviate symptoms in the lungs and pancreas. It was the first breakthrough Cystic Fibrosis drug that looked to address the cause of CF and not just deal with the symptoms (Herper, 2017).

While it was a breakthrough, it was not enough to save the company from the failing Incivek, with Kalydeco only doing around $317 million in its first year (compared to Incivek’s billion dollars in the same time frame). This is because the drug only worked for a small percentage of the CF patients (around 3000) and because only a small percentage are affected by the mutation that Kalydeco deals with. This is where targeting a rare disease can be financially dangerous, you need to be able to treat a good portion of those affected, otherwise, your drug will have to be very expensive to cover costs.

Leiden did what he could to save the company, by cutting costs through a workforce reduction of 15% (Herper, 2017). However, Leiden saw the potential in CF treatment and research. The team was already working on other promising CF projects at Vertex, and with their monopoly on the genetic research, this could be the area where they would have the lead. This coupled with the fact that there was still money coming in from the Cystic Fibrosis Foundation (funding had increased to $125 million), meant that Leiden did not need as much from investors, who had begun to lose faith in the company after the Incivek debacle (Garde, 2017). Another advantage he saw was that a focus on one disease, where they have the monopoly, would mean that they could reduce spending on advertisements and funnel that back into the research and development. With pharmaceutical companies traditionally spending anywhere from 27-33% of budgets on advertising, this was an opportunity for substantial savings for Vertex (Staton, 2013).

Leiden’s plan with CF was to continue to further understand the genetic causes and find targets that would help more CF patients than Kalydeco alone.  All this focus on CF research paid off as Vertex’s second drug Orkambi, was approved in 2015. This drug may not have been as effective of a treatment in relieving CF symptoms compared to Kalydeco, but it did target a mutation that was more common in people with CF and thus could treat more patients, around 25 000 worldwide. In 2016  Kalydeco and Orkambi generated $1.7 billion for Vertex (Tirrell, 2017), and upwards of $2 billion in 2017 (Garde, 2017). Vertex stock at the end of 2017 closed at its highest to date $149.86 and continues to rise in 2018 (“Historic Stock Lookup | Vertex Pharmaceuticals,” n.d.). It seemed that Leiden’s strategy worked out for Vertex, saving them from going under just a few years earlier.


Price Point Controversy

One of the main reasons the CF drugs are able to support Vertex, despise them being targeted towards the low install base of CF patients, is how expensive they are. With Kalydeco costing a patient upwards of $300 000 a year, calling it very expensive is an understatement. One of the risky things Leiden did was to price Orkambi equally has high (at about $272 000 a year). Even though Orkambi was a less effective treatment, it actually could treat many more patents meaning the revenue it could generate was substantial at that price point (Herper, 2017).  There is a lot of controversy over Leiden setting this high price point for the drug. Many people see this as taking advantage of CF patients since there are no other options currently available. Also, given that much of this research was funded by the CFF, whose original goal was to fund the non-profit Aurora Biosciences to find a CF cure, there was concern from those who donated to and support the CFF.

There is concern Cystic Fibrosis Foundation still supports Vertex’s endeavours with the Foundation pledging $75 million in 2016 and future payments of $6 million a year (Weisman, 2016). While the foundation also benefits from royalties during the negotiation, which can be seen as good since the CFF has many programs to help people with CF, there is a lot of criticisms as to why they don’t pressure Vertex to lower prices (to allow more people access to the drug); or even why they continue to fund Vertex’s research now that they are profitable themselves (Weisman, 2016). Some felt that their goals were being overlooked due to potential profits.

Even so, these prices are what allow Vertex to thrive and Leiden was seen as a company saviour as they were not only profitable but generating sustainable revenue. The argument that Leiden and Vertex makes is that although they are now profitable they continue to invest 9 out of every 10 dollars back into CF research. Their next goal is to treat 90% of people who suffer from Cystic Fibrosis but the research into their new combination therapies is expensive (Tirrell, 2017).

There are also attempts from Vertex to improve their public relation which include them starting their own CF programs to give back to the community from their profits. These include scholarship and award programs to CF students (“Cystic Fibrosis Programs,” 2017). Even so, Jillian McNulty, who has benefited greatly from Orkambi still has mixed views on the company and the drug cost. On one hand she says that all of the hospital stays and other drugs would quickly add up to a price that is comparable to the yearly costs of Orkambi; but, on the other hand she says “it is difficult for her to see friends with CF struggling because they can’t access Orkambi, while she is reaping its benefits” (Ryan, 2016).


Future Directions and Suggestions for Vertex

The current projects for Vertex all involve Cystic Fibrosis and the combination therapies that are in development. Vertex hopes generate new treatments and drug combinations to help over 90% of CF patients over the next few years (Tirrell, 2017). Their immediate goals are all focused on gaining approvals on combination therapies for their current Orkambi and Kalydeco drugs. This strategy is in line with their “all in for CF” strategy that Leiden brought to the table. Their final goal with CF treatment is to have one pill that a patient can take and be asymptomatic (Tirrell, 2017).

One suggestion for Vertex is to attempt to develop a few drugs in different categories and get them through the first few stages of the approval process. While the Cystic Fibrosis focus saved Vertex from going under 7 years ago, the only reason they had that option in the first place was because of their founder’s stance of developing a diverse portfolio of drugs. Reinvesting some of their revenue into drugs outside of the Cystic Fibrosis category will allow them to be diverse in drug discovery, and could have the potential of producing another breakthrough.



Vertex is a company that has had its ups and downs over the past 30 years but they have shown great tenacity during these trials and tribulations. While there are many things that lead to them to the company they are today, it seems that there are three key factors continued to their current success. The first is the focus on research and development to understand a disease and drug beyond just efficacy. This allowed them to obtain knowledge for the rare disease of Cystic Fibrosis, and they became a world leader in its drug development. The second was keeping their drug targets diverse. This sustained them between their three breakthroughs, from HIV to Hepatitis C and finally having the CF projects to fall back on when Incivek fell out from under them. The last factor was Leiden’s choice to go “all-in” with the CF development. Rather than looking at the rare disease as challenging, he saw the advantages that Vertex had over the competition when developing drugs for this disease. These key factors and a little luck are what drove Vertex from the small startup to the billion dollar company it is today. Hopefully, Vertex can continue to develop CF drugs to reach their goal of eradicating the disease, while also finding a price point that works for more people.



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