Maxim: Our Vertex Pharma Thesis Is Unchanged

In a report published Friday, Maxim Group analyst Jason Kolbert said that his thesis on Vertex Pharmaceuticals Incorporated VRTX remains unchanged for the following reasons:

Kalydeco (ivafcaftor) has been approved for children with one of ten gating/conductance mutations, adding an additional 300 patients aged two to five in the U.S.

The analyst noted that this approval has been expected and previously accounted for in-valuation models.

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The "value driver" remains for Vertex to be successful with combination therapy in the F508del homozygous and heterozygous markets. In homozygotes the ivacaftor/lumacaftor PDUFA is July 5, 2015, and if approved, adds 8,500 eligible patients in the US. We also expect the MAA approval in Europe adding another 11,000 patients by 2016.

A study will initiate (first half 2015) to extend the combination to homozygotes ages 6-11.

However, Kolbert added that the "critical question" remains if the company can crack the heterozygous market. The analyst expanded that the VX- 661/ivacaftor phase III trial is expected to begin in the first half of 2015 but there are more variables in the heterozygous population that increases risk.

"We believe that success for the CF franchise hinges on success all the way into the heterozygous market," Kolbert wrote. "We are still asking: What is the risk? If we raise our risk rate to 30 percent our price target falls sharply from $121.00 to $49.00."

Shares remain Hold rated with a $121 price target.