Vertex Drug Could Be Huge

In recent trading, Vertex shares were up more than 3% to $36.35. With an enterprise value of $4 billion already, Vertex isn't cheap, given that telaprevir hasn't yet started phase III studies (they're expected toward the end of the year) and approval is still two to three years away.

But if telaprevir lives up to its promise and generates sales on the upper side of the $2 billion-to-$4 billion range, Vertex at $36 and change might look fairly undervalued.

For more background on Vertex and telaprevir, check out this previous column, but here's a quick recap:

Telaprevir is a pill designed to attack hepatitis C by inhibiting the protease enzyme, one of the key enzymes the virus uses to copy itself. This "direct antiviral" approach differs from current hepatitis C drugs, which boost the immune system's ability to tamp down and eliminate the virus.

The current standard of care for hepatitis C patients is a weekly injection of long-acting alpha interferon combined with daily oral doses of a generic drug, ribavirin. A normal treatment course for Type 1 hepatitis C (the most prevalent form) takes 48 weeks to complete. But the standard treatment cures only about 40% of patients, and many patients find the side effects, such as flu-like symptoms, anemia and depression, difficult to tolerate.