Morningstar | Intangible Assets From Robust Cystic Fibrosis Franchise Underpin a Narrow Economic Moat for Vertex
Vertex was once known for discovering Incivek, a blockbuster hepatitis C drug now overshadowed by Vertex's robust cystic fibrosis franchise with megablockbuster potential. Approved treatments Kalydeco, Orkambi, and Symdeko allow Vertex to target about 50% of the CF population, and label expansions and its pipeline triplet will likely expand the eligible patient population further to about 90%. We expect Vertex to maintain its dominant position in cystic fibrosis, given the strong efficacy of its therapies, lengthy patents, and lack of competition, while developing pipeline candidates in other rare indications to spur growth. Cystic fibrosis is a rare indication characterized by progressive and deadly decline in lung function, affecting approximately 75,000 people worldwide. Since its 2012 launch, Kalydeco has captured most of its target patient population (less than 10% of CF patients with specific genetic mutations) and has become the backbone of combination therapies, including Orkambi, Symdeko, and the pipeline triplets. Orkambi's launch in 2015 expanded the eligible patient population significantly, adding CF patients with homozygous F508del mutations, but its uptake was slower because of its safety profile. Symdeko's 2018 launch didn’t come with any worries over safety and contributed over $700 million in revenue in its first year, targeting the same population as Orkambi plus some. We expect peak sales of over $5 billion in this patient population. All eyes are now on the company's pipeline, including two triple combinations that aim to target patients with heterozygous F508del mutations. The company will likely choose its best triplet and file in the third quarter of 2019, and if approved, launch in 2020, years ahead of any branded competitor. We think Vertex's comprehensive approach has already shaped the treatment of CF and earned the firm a dominant position in this market worldwide. The chronic nature of therapy and limited competition on the horizon heighten the market's attractiveness. Given these positive market dynamics, we think Vertex’s CF program could grow to over $9 billion within our forecast period.Vertex Pharmaceuticals is focused on developing and commercializing therapies for the treatment of cystic fibrosis (CF) and developing research and development programs in other indications. The company's marketed products are TRIKAFTA (elexacaftor/tezacaftor/ivacaftor and ivacaftor), SYMDEKO/SYMKEVI (tezacaftor in combination with ivacaftor), ORKAMBI (lumacaftor in combination with ivacaftor) and KALYDECO (ivacaftor), which are approved to treat patients with CF who have specific mutations in their cystic fibrosis transmembrane conductance regulator gene. The company is evaluating CTX001, a genetic therapy as a potential treatment for sickle cell disease and beta-thalassemia.
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