Vertex Profits Hinge on FDA Approving New Cystic Fibrosis Drug This Week

BOSTON (TheStreet) -- Vertex Pharmaceuticals (VRTX) is widely expected to win U.S. approval later this week for a new drug which could one day treat almost half of cystic fibrosis patients.

Sales of the new Vertex cystic fibrosis drug, Orkambi, are also expected to transform Vertex into a sustainably profitable company for the first time since its founding in 1989.

The U.S. Food and Drug Administration has until July 5 to issue an approval decision on Orkambi, barring any surprise delays. The agency is expected to follow the positive recommendation from a panel of outside experts who voted 12-1 in May that two large clinical trials conducted by Vertex provided sufficient evidence to support the efficacy and safety of Orkambi.

European drug regulators are also reviewing Orkambi with an approval decision expected in the fourth quarter.

If investors have already factored Orkambi's approval into their view of Vertex, there's still uncertainty over the cystic fibrosis therapy's price and the trajectory of the commercial launch which needs to be settled.

Vertex is expected to set the Orkambi gross price (before negotiated insurance discounts) in the range of $230,000 to $250,000 per year, according to a survey of investors conducted by Evercore ISI analyst Mark Schoenebaum.

The Orkambi commercial launch will be closely watched for any reimbursement pushback or protests about the Orkambi price from insurance companies and pharmacy benefit managers.

Vertex is one of the biotech sector's largest companies by market cap but is still not profitable. Orkambi is supposed to stop Vertex's money-burning ways quickly. Current analyst consensus has Vertex losing $1.12 per share this year but earning $4.54 per share in 2016, according to S&P CapitalIQ.

Total Vertex revenue in 2015 will total $982 million and grow to $2.7 billion in 2016, according to consensus estimates compiled by S&P CapitalIQ. Vertex revenue will come from Orkambi and Kalydeco, the company's currently approved cystic fibrosis drug.

Vertex shares were down 2% to $124.28 in Monday trading. Vertex shares have traded as high as $135 this year.

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