Monday, May 7, 2012


Fantastic article today by The Street's Adam Feuerstein labeling Vertex as the next Gilead after VRTX revealed good early data on their cystic fibrosis therapies Kalydeco and VX-809. He's absolutely spot-on, which makes me both happy and sad, as I'm a fan of VRTX, but sold out of VRTX stock some time ago based on their Hep-C approval, so I missed an opportunity, as VRTX stock is up 55% today.

(Here's a news story on the VRTX CF news.)

Vertex added about $4B in market cap based on the news, but this probably understates the potential for VRTX, as Feuerstein postulates that the VRTX CF therapies could contribute $6-7B in annual revenue once approved. By way of comparison, GILD is worth about $38B, while VRTX is worth about $12B today.

I'd predict that VRTX never makes it as high as GILD, with an acquisition by a big pharma to take place before then, but VRTX has been steadfastly independent throughout its' history in spite of being an attractive target for many periods of its' history. In fact, the CF news - which transforms VRTX from a 1-dimensional company to a multi-dimensional company* probably insures that JNJ won't want to/be able to buy-out VRTX in the near term based on the success on Telapivir, their partnered Hep C therapy.

The next thing to watch for is the FDA reaction to the VRTX CF data. You can never predict an early or accelerated approval, but the current FDA administration seems more open to green lighting clinical success that might have a broad impact. Right now, I'd bet on an earlier than expected approval, but not one in 2012, as the CF data is only from a Phase II study. It will take some time to design and initiate the Phase III trial, but we could get approval after analysis of PIII interim data (2014?), or perhaps a very limited conditional approval for use in patients with a very specific mutation (F508del.)

Oh, btw: I'm a little late on this, but I just noticed that in 2011,  VRTX achieved positive operating cash flow, - one more reason to love the company and perhaps they won't even need to raise equity to support the commercialization of the CF developments.

* just to be clear: the label "1-dimensional" isn't meant to be pejorative. Having "only one" blockbuster is still an absolutely screaming corporate success, and even that label downplays the rest of the company's research programs and existing products.

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