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JPMorgan, Canaccord Confident That Vertex's CF Drug Will Get FDA Approval

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On May 12, the FDA advisory committee recommended that the FDA approve Vertex Pharmaceuticals Incorporated (NASDAQ: VRTX) Orkambi therapy to treat cystic fibrosis. Shares of Vertex increased nearly 8 percent in pre-market trading following the announcement.

The FDA advisory committee provides the FDA with independent sources verifying the safety and efficacy of the new therapies. The FDA has agency over making the final approval decision but often follows the advice of the advisory committee. The FDA is expected to announce Orkambi's final approval or rejection by early July.

Orkambi is an oral medication taken in tablet form. It is intended for use in people with cystic fibrosis over the age of 12 who have two copies of the F508del mutation, which is the leading cause of cystic fibrosis. According to Vertex, there are approximately 8,500 people in the United States who fit this criteria, representing the largest group of people with cystic fibrosis. If approved, Orkambi will be the first medication to treat this population of cystic fibrosis patients.

If Orkambi is approved, analysts estimate it could bring in $1.6 billion in revenue over the next year and more than $4 billion by 2020. However, health care experts are already concerned about the potential high cost of Orkambi and the burden it will pose on insurance companies and pharmacies.

According to Smarter Analyst, Cory Kasimov of J.P. Morgan reiterated an Overweight rating on VRTX with a $138 price target on May 12 following Orkambi approval from the FDA advisory committee. Kasimov noted he was not surprised that the FDA advisory committee approved Orkambi due to "the high unmet need of CF patients and the lack of current treatments." Although "things got dicey for a moment or two" while the advisory committee discussed the drug, the committee ultimately "voted almost unanimously" in favor of its approval. Looking forward, Kasimov remains confident that Orkambi will be approved by July.

Cory Kasimov has rated Vertex Pharmaceuticals 5 times since July 2014, earning a 100 percent success rate recommending the stock with a +10 percent average return per VRTX rating. Overall, Kasimov has a 61 percent success rate recommending stocks with a +10.4 percent average return per recommendation.

Separately on May 12, Adam Walsh of Canaccord Genuity reiterated a Buy on Vertex Pharmaceuticals with a $150 price target. Walsh expected the FDA advisory committee to vote in favor of Orkambi and is confident that the FDA will fully approve it by July. He added that pricing of the drug may be impacted by a "modest treatment effect observed in P3 trials." However, Walsh's KOL consultants predict Orkambi will penetrate more than 90% of the target population, so "the total Orkambi market opportunity will be primarily determined by price." Walsh continues, "However, we remind investors that our reimbursement specialist KOL, who advises pharmaceutical and biotechnology companies on pricing strategies, argues that pricing on par with Kalydeco is more likely." Kalydeco is an already-approved cystic fibrosis drug developed by Vertex but aimed at a smaller population of CF patients.

Adam Walsh has rated Vertex twice before in the past two months, earning a loss of -1.4 percent between both ratings. Overall, Walsh has a 76 percent success rate recommending stocks with a +28.3 percent average return per rating.

On average, the top analyst consensus for Vertex Pharmaceuticals on TipRanks is Moderate Buy.

Latest Ratings for VRTX

DateFirmActionFromTo
Dec 2016OppenheimerInitiates Coverage OnPerform
Nov 2016BarclaysDowngradesOverweightEqual-Weight
Nov 2016Janney CapitalInitiates Coverage OnNeutral

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The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

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