Vertex Falls After FDA Halts Diabetes Study in Surprise Move

(Bloomberg) -- Vertex Pharmaceuticals Inc. tumbled after U.S. regulators placed its study of a key new treatment for type 1 diabetes on clinical hold.

The Food and Drug Administration paused the early-stage study after determining that there is insufficient evidence to support increasing dosage of the product, VX-880, Vertex said Monday in a statement. The drugmaker said it's “surprised” by the decision because findings have been promising in the first two patients treated with half of the target dose.

Vertex was informed by the FDA of the clinical hold “very recently,” said company spokesperson Heather Nichols. Nichols said Vertex is trying to get more information from the FDA “as quickly as possible.”

Development of VX-880 has been closely watched on Wall Street. The product is a cell therapy that has the potential to reach blockbuster sales, typically considered $1 billion or more per year, according to Bloomberg Intelligence. Vertex has been touting early results from the treatment as it works to diversify its pipeline away from its core cystic fibrosis medicines.

Vertex shares fell as much as 7%, their biggest intraday drop since June 11. Through last week, the stock had gained 24% this year compared with a 13% drop in the S&P 500 Index.

Type 1 diabetes occurs when patients stop making sufficient insulin to control blood sugar levels, and when untreated it can lead to a variety of severe complications in the heart, eyes, kidneys and other organs and tissues. The vast majority of patients with diabetes have the type 2 form of the disease, which occurs when people respond insufficiently to insulin made by the pancreas.

One patient has received the full target dose of VX-880 in the study, and early data show improving control of blood sugar through 29 days, Vertex said. The patient had a serious adverse event of neutropenia, an abnormally low count of white blood cells, but it wasn't considered related to VX-880, the company said.

The FDA hold is “somewhat cryptic” and “does add a point of uncertainty for a pipeline that had been on a roll of late,” said Brian Abrahams, an analyst at RBC Capital Markets, in a research note.