Why Vertex Pharmaceuticals Rocketed 21.1% Higher in March

By Todd CampbellMarketsFool.com

What happened

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After the company reported compelling results from a late-stage trial for a combination therapy for use in cystic fibrosis patients, shares in Vertex Pharmaceuticals (NASDAQ: VRTX) skyrocketed 21.1% in March,according toS&P Global Market Intelligence.

So what

Cystic fibrosis is a serious, life-shortening disease affecting about 75,000 people globally, and while treatment options are limited, Vertex Pharmaceuticals is changing that.

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The company already markets Orkambi and Kalydeco, and those drugs can help about one-third of patients. Also,it's studying additional therapies that may eventually help the remaining two-thirds of cystic fibrosis patients.

For example, management recently reported phase 3 results from two studies evaluating a combination of Kalydeco and a new drug, tezacaftor.

In one trial, patients with two copies of the F508del mutation who were given Vertex Pharmaceuticals' combination drug saw statistically significant improvements in lung function, compared to placebo. The combination therapy similarly met its primary endpoint in a second trial involving patients with a mutation that results in residual CFTR (a protein that regulates important functions in the lungs and other organs) function and one copy of the F508del mutation.

Overall, the results were good enough for management to say it's planning on filing for approval with the U.S. Food and Drug Administration in the third quarter, and that timeline suggests this combination therapy could be available as soon as 2018.

Now what

If regulators give Vertex's combination therapy an OK, then the company will see a significant expansion in the number of patients its therapies address. Currently, Vertex Pharmaceuticals' Kalydeco and Orkambi benefit about 29,000 patients; if approved, this new approach could help 23,000 patients.

A big expansion of its addressable market would unquestionably be good news for the company's investors. Last year, Vertex Pharmaceuticals reported revenue of about $1.7 billion, yet it still lost more than $100 million because of its spending on marketing and research. If an approval allows this company to move into the black, its shares could soar higher still.

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Todd Campbell has no position in any stocks mentioned.His clients may have positions in the companies mentioned.The Motley Fool recommends Vertex Pharmaceuticals. The Motley Fool has a disclosure policy.