Vtrade Proposes to SELL Vertex Pharmaceuticals Incorporated (NASDAQ: VRTX)

Vertex Pharmaceuticals Incorporated

NASDAQ: VRTX

COMPANY DESCRIPTION

Founded in –1989 | Current Market Cap – 48.04 Billion USD

Vertex Pharmaceuticals Incorporated is focused on the discovery, development, and commercialization of small molecule drugs targeting serious diseases. The company’s main area of focus is cystic fibrosis (CF). The company’s lead product is Kalydeco (ivacaftor), which is approved for the treatment of patients with CF who have the G551D mutation or other specified mutations in their cystic fibrosis transmembrane conductance regulator (CFTR) gene. In 2015, Vertex gained approval for another CF treatment, Orkambi (lumacaftor-ivacaftor combination), for the treatment of the underlying cause of CF in patients with two copies of the F508del mutation in their CFTR gene, also referred to as F508del homozygous patients. Symdeko, which is a combination of tezacaftor (VX-661) and ivacaftor (Kalydeco) gained FDA approval in February 2018 for the treatment of patients with CF twelve years of age and older who are F508del homozygous or who have at least one mutation that is responsive to tezacaftor/ivacaftor. The company headquartered in Boston, Massachusetts.

RECOMMENDATION

We rate Vertex Pharma. a Sell at USD 188 for a target of USD 165 in one months.

Below are the basic reasons to recommend this stock as a Sell.

·         Orkambi Sales Growth Dependent on Reimbursement Approvals: Vertex has faced some challenges with respect to commercialization of Orkambi in ex-U.S. markets due to re-imbursement hurdles. Though Vertex has reached reimbursement agreements for Orkambi in several European countries, including Germany, Ireland, Sweden and Italy, it is still in negotiations with several European countries that represent significant potential markets including the United Kingdom and France. It has recorded limited revenues of Orkambi in these countries due to ongoing pricing discussions regarding the reimbursement rate for Orkambi.

·         Competing Therapies in Development: The CF market has been attracting the interest of several companies like Novartis, Pfizer and Sanofi. These companies are pursuing the development of CFTR potentiators, CFTR correctors and candidates with other mechanisms of action that can address the underlying cause of CF.

·         Meanwhile, many other companies like AbbVie and Proteostasis Therapeutics are developing triple CFTR combinations for CF, which can pose competition to Vertex’s triple combos. Even though Vertex enjoys a strong position in this market, the entry of additional competition would cut into revenues.

·         Banking on CF Franchise: Although we are positive on Vertex’s decision to focus on the CF franchise, we remain concerned about the company’s dependence on just this franchise for growth. While the company does have other pipeline candidates targeting other therapeutic areas, it is too early to get excited about them.

·         Pipeline/Regulatory Setbacks: Vertex has several studies ongoing with its CF product candidates and any negative development on the pipeline/regulatory front would have an adverse impact on the shares. In Aug 2016, Vertex announced that it will be stopping one of the phase III studies being conducted on the VX-661 - ivacaftor combination following a planned interim futility analysis. The study was being conducted in patients with one copy of the F508del mutation and a second mutation that results in minimal CFTR function.

·         In October 2018, Vertex discontinued development of VX-210 (acute cervical spinal cord injuries) due to futility. In October 2017, Vertex announced that it will not file regulatory applications for VX-661 - ivacaftor combination in CF patients with one copy of the F508del mutation and one copy of a gating mutation, as a phase III study evaluating VX-661 — ivacaftor use in such patients failed to meet the primary endpoint.

EARNINGS

Vertex reported third-quarter 2018 earnings per share of $1.09, which beat the Consensus Estimate of $1.00. Moreover, the figure came ahead of the year-ago earnings of 53 cents. Strong product revenues led to higher profits in the reported quarter.

Vertex reported revenues of $784.5 million in the third quarter, surpassing Consensus Estimate of $783 million.

Disclaimer:

Views are strictly personal. This Interim Financial Results & News posts or updates includes forecasts, projections and other predictive statements that represent Vtrade's assumptions and expectations in light of currently available information. These forecasts, etc., are based on industry trends, circumstances involving companies and other factors, and they involve risks, variables and uncertainties. The Group’s actual performance results may differ from those projected in these Interim Financial Results. Consequently, no guarantee is presented or implied as to the accuracy of specific forecasts, projections or predictive statements contained herein.