Today Vertex Pharmaceuticals (VRTX) , a biotechnology company focused on creating cures for rare diseases, announced positive results from two crucial phase 3 trials for a combination of drugs being used to treat patients with Cystic Fibrosis. This was a huge event for Vertex Pharmaceuticals; a miss in this study would tanked the stock. The results were viewed positively and VRTX surged as high as 40% during the trading day.

Interestingly, Vertex combined its two drug compounds, lumacaftor and ivacaftor, to combat cystic fibrosis in patients with two copies of the F508del mutation in the CFTR gene.

The first drug from Vertex Pharmaceuticals Kalydeco treats cystic fibrosis with many types of genetic mutations except the F508del mutation listed above. So the maximum population that can be treated with Kalydeco are approximately 2,000 patients. The reason for the stock surging as high as it has today is because the drug against the new targeted mutation will be able to treat approximately 20,000 patients. This means more revenue for Vertex. Currently Kalydeco costs $200,000 for treatment. The new drug combination has yet to be priced by the company. The company will take into account many factors when determining price, though it has lots of room -- there are no other treatment options for these patients.

Vertex's combination of drugs met the primary endpoint which was improved function of the lungs. The problem with Cystic Fibrosis is that patients that have CF-producing mutations generate an overabundance of thick mucus in the lungs. The body needs watery mucus to keep infections away, but Cystic Fibrosis patients develop sticky/thick mucus which blocks the airways. This also allows frequent infections.

The researchers measured lung improvement with the drug vs. a placebo. The results were statistically significant.

On top of meeting the primary endpoint, the combination of drugs also reduced the rates of pulmonary exacerbations due to infection or inflammation. Patients with the F508del mutation of Cystic Fibrosis lose about 2% of their lung function each year. This drug may actually reverse the process. More info about today's results can be found here. 

Vertex expects to file an NDA in the U.S. and an MAA in Europe in the 4th quarter of 2014. Approval is being sought for patients 12 years old or older. Additional safety testing will be necessary in younger patients. 

Even though the stock surged as much as 40% today closing at $93.65 per share, we believe that the share price can continue rising. We think that Vertex Pharmaceuticals is a long term buy. Vertex also has a diverse pipeline of drugs for other rare diseases and very positive prospects.