Stifel: Buy Vetrex, Checks Predict Strong Orkambi Launch

• Shares of Vertex Pharmaceuticals Incorporated VRTX are up 9 percent year-to-date, but slipped below the $100 mark in September.
• Stifel’s Adam Walsh initiated coverage of the company with a Buy rating and a price target of $160.
• The company’s growth is expected to be driven by its dominant position, ramp up of Orkambi, growth of Kalydeco and a strong pipeline, Walsh stated.

Vertex is well positioned to not only sustain, but also expand its leadership position in the Cystic fibrosis [CF] segment. The company’s strong position is expected to be driven by the ramp up of Orkambi, growth of Kalydeco and a host of new pipeline medicines, analyst Adam Walsh mentioned.

Recent checks with multiple CF key opinion leader physicians suggest that the uptake of Orkambi will remain steady. The analyst added that a potential US label expansion of Kalydeco into residual function mutations was expected.

“Despite some risks to the sNDA filing, we assign 75% probability for first-pass approval, based on our analysis, and include revenue from residual function patients in our model,” Walsh wrote.

Vertex continues to expand its pipeline with data for several potential clinical catalysts expected in 2016. Next year, the company is expected to report:

1. P2a results for ENaC inhibitor VX-371 monotherapy in the “all-comers” CF trial
2. VX-661/Kalydeco data in "het-min" patients
3. A first look at P1 triple combo regimens including next-gen correctors VX-152 and VX-440

Walsh expects Vertex to become profitable in 4Q15, with strong and sustained revenue and earnings growth expected thereafter. The company is likely to record revenues of $6 billion, EPS of more than $11 and operating margins of about 65 percent in FY20.