The Food and Drug Administration has cleared Vertex Pharmaceuticals to restart testing a diabetes treatment. VRTX stock jumped to a fresh high Wednesday.
The restart resolves a May 2 clinical hold in which the FDA said there wasn't enough evidence to support increasing the dosage of its treatment, dubbed VX-880. Vertex's study was placed on hold while the agency looked through additional data. The FDA lifted the hold on Tuesday.
"We believe the hold was due to excess caution from the FDA moving forward with the approach though we cannot rule out the possibility FDA is focused on a specific issue and could request additional information as the (study) progresses," RBC Capital Markets analyst Brian Abrahams said in a report to clients.
On today's stock market, VRTX stock rose 0.8% to 291.16. Earlier, shares popped as much as 1.6%, touching a fresh high at 293.62.
VRTX Stock: Replacing Faulty Cells
The diabetes treatment aims to replace islet cells in people with type 1 diabetes. Islet cells help produce insulin. But they don't work properly in patients with type 1 diabetes.
To date, Vertex has tested the treatment in three patients with type one diabetes — two at a half-size dose with the third receiving the full dose. The next part of the study will evaluate the drug in five patients. Vertex plans to add more patients in the third part of the test.
Abrahams kept his sector perform rating on VRTX stock.
"We believe investors had already factored in a resolution to the hold either through direct response based on FDA's request or following additional results from dosing (outside the) U.S., so (we) do not expect a substantial impact to shares," he said.
Top-Notch Biotech Stock
On Tuesday, VRTX stock climbed 0.6% following the news.
Vertex could tap into a $2.5 billion market for VX-880, Abrahams said.
"We believe Vertex shares have been enticing to investors stepping back into biotech of late given the healthy, high-margin, still-growing (cystic fibrosis) franchise and lack of major upcoming binary data, though we believe shares at current levels appropriately balance the core commercial platform and pipeline reward/risk," he said.
VRTX stock has high ratings across the board, according to IBD Digital. Shares have identical 98 out of a best-possible 99 ratings for Composite, Relative Strength and EPS measures.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
