UPDATE: Canaccord Genuity Initiates Coverage on Vertex Pharmaceuticals with Hold Rating, $55 PT on VX-809/Kalydeco Combination Therapy

In a report published Monday, Canaccord Genuity analyst Salveen Richter initiated coverage on Vertex Pharmaceuticals

with a Hold rating and $55.00 price target. In the report, Richter noted, “We are initiating coverage of Vertex with a HOLD rating and $55 price target. The key value driver is VX-809 + Kalydeco combination therapy in homozygous ΔF508 cystic fibrosis (CF) with P3 data in 2014. Recent top-line P2 data is encouraging given a dose response (physicians are not as concerned with the monotherapy run-in decline) and per physician feedback, we expect ≥5% improvements in relative FEV1 in the P3 trials followed by substantial uptake in the ~24K eligible patients in the U.S./E.U. However, the near-term focus is on top-line P2 VX-661 (similar to VX-809) + Kalydeco data in Q2 to show efficacy comparable to VX-809 P2 data to provide comfort on VX-809 success and validate Vertex's CF discovery platform. Given the difficulty in handicapping VX-661 (no clinical or pre-clinical data has been released and no monotherapy run-in) and potential for ambiguity (9 dose arms) on the results, we recommend risk-averse investors avoid Vertex in front of VX-661 and possibly use weakness as an entry point pending the data outcome; see scenario analysis below. Nonetheless, we fundamentally like VX-809 and model for peak U.S./E.U. revenue to Vertex of $4.8B in FY26 from Kalydeco, Incivek and VX-809 combo, with other pipeline products (VX-135 in HCV, VX-509 in RA and VX-787 in flu) serving as upside. Post-VX-661 data, the next key catalyst is 12-week P2 VX-135 hepatitis C data in H2 to provide comfort on cardiac safety concerns.” Vertex Pharmaceuticals closed on Friday at $53.23.