The company’s approved cystic fibrosis drugs are Kalydeco, Orkambi, Symdeko, and Trikafta, which will make Vertex eligible to treat about 90% of the CF population, assuming international and pediatric approvals. We expect Vertex to maintain its dominant position in CF, 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 a progressive and deadly decline in lung function, affecting approximately 83,000 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 Trikafta. Orkambi’s launch in 2015 expanded the eligible patient population by 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. Trikafta, a triple combination therapy, had a strong launch since its U.S. approval in 2019, significantly expanding the company’s addressable patient population to heterozygous patients.
Vertex’s comprehensive approach has already shaped the treatment of CF and earned it a dominant position worldwide. The chronic nature of therapy and limited competition on the horizon heighten the CF market’s attractiveness. Given these positive market dynamics, we think Vertex’s CF program could grow to over $11 billion within our forecast period. Vertex’s pipeline spans several rare diseases, including CTX001 for beta-thalassemia and sickle-cell disease, VX-864 for alpha-1 antitrypsin deficiency, and VX-147 for APOL1-mediated kidney disease. We think the CF franchise will provide ample cash for the development of these assets and others.
Fair Value and Profit Enhancers
We are maintaining our fair value estimate of $259 per share. Our valuation remains heavily dependent on the cystic fibrosis portfolio, including its latest drug, Trikafta. This new triple combination drug is poised to continue generating solid sales throughout our explicit forecast period. We model about $7 billion in cystic fibrosis sales in 2021, driven by Trikafta (in both F508del homozygous and heterozygous patients). Vertex’s complete portfolio of cystic fibrosis therapies allows it to target about 90% of cystic fibrosis patients globally, assuming international and pediatric approvals.
While we give the company’s pipeline candidates fairly low probabilities of approval due to their early stages in development, Vertex is targeting several blockbuster opportunities, which amount to over $1 billion in 2026 pipeline sales. Key opportunities include CTX001 (gene editing) for beta-thalassemia and sickle-cell disease as well as VX-864 for alpha-1 antitrypsin deficiency. Vertex is leading the global development and commercialization efforts of CTX001 in a 60/40 agreement with CRISPR Therapeutics. We believe the potential commercial success of this therapy will be a key indicator of the company’s ability to diversify, as management targets regulatory submissions within the next 18-24 months. We also expect the company to continue funding research in cystic fibrosis to develop next-generation therapies for CF, including small-molecule correctors and gene-editing technology.
Vertex’s Narrow Moat Underpinned by Intangible Assets From Cystic Fibrosis Drugs
Vertex has continued to be a leader in the treatment of cystic fibrosis worldwide. Its four approved drugs–Kalydeco, Orkambi, Symdeko, and Trikafta–are the only disease modifying CF drugs on the market. The company also holds significant patient share as nearly 50% of patients worldwide are currently treated for CF using its drugs. Vertex’s portfolio makes up the backbone of cystic fibrosis therapy and supports strong six-figure pricing power. After taking a fresh look at the company, we maintain our $259 fair value estimate and narrow moat rating. We view the shares as undervalued, trading in 4-star territory. Vertex is well supported by lengthy patent protection extending as far as 2037 and first-mover status in the lucrative cystic fibrosis market, which underpins our narrow moat rating. Our valuation remains heavily dependent on the cystic fibrosis portfolio, including the latest drug, Trikafta. This new triple combination drug is poised to continue generating significant sales throughout our explicit forecast period. Trikafta will make the company eligible to treat about 90% of the CF population globally, assuming international and pediatric approvals. We model about $7 billion in cystic fibrosis sales in 2021, largely driven by Trikafta.
Vertex Pharmaceuticals Inc’s Company Profile
Vertex Pharmaceuticals is a global biotechnology company that discovers and develops small-molecule drugs for the treatment of serious diseases. Its key drugs are Kalydeco, Orkambi, Symdeko, and Trikafta for cystic fibrosis, where Vertex therapies remain the standard of care globally. In addition to its focus on cystic fibrosis, Vertex’s pipeline includes gene-editing therapies such as CTX001 for beta-thalassemia and sickle-cell disease as well as small-molecule medicines targeting diseases associated with alpha-1 antitrypsin deficiency and APOL1-mediated kidney disease. Vertex also has an expanding research pipeline focused on inflammatory diseases, non-opioid treatments for pain, and genetic and cell therapies for type 1 diabetes and rare diseases.
Source: Morningstar
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