EUR 850.00 For Business Accounts Only

Morningstar | Vertex's Cystic Fibrosis Franchise Fortifies Narrow Moat; Maintaining FVE After Solid 2Q

Vertex Pharmaceuticals' portfolio for cystic fibrosis treatment remains strong; it posted 46% total revenue growth in the second quarter, driven by next-generation molecule Symdeko, which was approved in February. Management raised its full-year revenue guidance to a midpoint of $2.95 billion from a midpoint of $2.73 billion, thanks to the better-than-anticipated adoption of the new combination regimen. After adjusting for this rapid uptake in our model, we do not expect a material change to our fair value estimate of $183 per share, and we continue to believe that the firm's position in cystic fibrosis warrants a narrow economic moat and positive moat trend.

Although the successful launch of Symdeko is cannibalizing some Orkambi sales as expected, Symdeko expands the eligible treatment population, capturing patients who previously discontinued treatment by Orkambi as well as patients naive to Vertex combinations. We expect the firm to further stretch the eligible population with new corrector molecules, VX-445 and VX-659, which we anticipate launching in the second half of 2019, if approved. Furthermore, results for Food and Drug Administration approval of Kalydeco and Orkambi in younger patients are anticipated in August. While the reimbursement environment remains tough with some non-U.S. payers (such as those in the United Kingdom, France, and Australia) due to the expensive price tag of Vertex treatments, we believe the firm will successfully negotiate reimbursement for the rare disease, leaning on the superior efficacy of the treatment regimen and the lack of alternative treatments. While its cystic fibrosis portfolio steals the spotlight, Vertex is well positioned to diversify with pipeline therapies in pain and partnership with CRISPR Therapeutics for sickle cell disease, in addition to a healthy accumulation of cash for worthy acquisitions.