This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

Vertex Is the Next Gilead Sciences or Alexion

CAMBRIDGE, Mass. ( TheStreet) -- Vertex Pharmaceuticals (VRTX - Get Report) is the next Gilead Sciences (GILD - Get Report). You think I'm reaching? Okay, then Vertex is the next Alexion Pharmaceuticals (ALXN - Get Report).

Either way, the big move higher in Vertex's stock price Monday, spurred by the release of strong cystic fibrosis data, is totally justified and likely undervalues the company going forward.

Vertex shares rose $20.71, or 55%, to $58.12 Monday following the announcement that two drugs -- the experimental VX-809 and currently marketed Kalydeco -- significantly improved lung function in patients with the most common genetic mutation causing cystic fibrosis.

Monday's data were the result of an interim analysis from a relatively small number of patients, so without a doubt, caution is warranted and the benefit seen from the two-drug therapy must be maintained and confirmed in a larger, pivotal trial.

But if we assume VX-809 and Kalydeco are approved, the revenue numbers for Vertex get very, very large: $4 billion a year in peak cystic fibrosis sales is a floor. The company's cystic fibrosis drugs could top $6-7 billion a year, easily.

There are 70,000 cystic fibrosis patients worldwide and Vertex could easily treat more than half of them with Kalydeco or the VX-809-Kalydeco combination. A year of Kalydeco therapy today costs $294,000 -- not uncommon for orphan disease pricing. Vertex may cut the price of the two-drug regimen but even if you assume $200,000 per year, the sales potential is enormous.

Vertex cystic fibrosis revenue of $6-7 billion year is equal to what Gilead generates in revenue every year from is antiviral product sales, mostly its dominant HIV drugs.

Comparing Vertex to Gilead is very appropriate because their respective revenue streams are sticky, like an annuity delivered every year without fail. Think about it, a cystic fibrosis patient with the f508del mutation will start therapy on Vertex's VX-809 and Kalydeco as a child and will continue on therapy for their rest of their life. Vertex has no competition on the near horizon and its patents extend out to 2027.

This is exactly how Gilead grew to be a monster stock in biotech. Patients take Gilead's Truvada or Atripla to keep the virus in check and they continue taking these drugs day after day, year after year. If anything, Gilead's position is a bit more tenuous compared to Vertex because competitive HIV drugs from other companies exist and Gilead's patent position is weaker.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
ALXN $181.76 -0.74%
GILD $103.29 -0.86%
JNJ $102.77 -0.03%
SNY $48.76 -0.23%
VRTX $119.43 -0.45%

Markets

DOW 18,197.27 -17.15 -0.09%
S&P 500 2,110.39 -0.35 -0.02%
NASDAQ 4,983.9740 -3.9160 -0.08%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs