More Than 30% Upside Seen For Vertex Stock On The Heels Of Phase 2 Data

Vertex Pharmaceuticals Incorporated VRTX's stock soared 25 percent after the company reported encouraging phase 2 data. The company's three-drug cocktails showed an improvement in lung function among patients with cystic fibrosis by 9.6 percentage points or more, which was better than what analysts were expecting.

Barclays' Geoff Meacham upgraded Vertex's stock from Equal-Weight to Overweight with a price target boosted from $115 to $180 as the company's phase 2 data was not only a "an unequivocal success" but represents a "major de-risking event."

"We find the rapid ~10% FEV-1 benefit in het/min CF patients across three different combos quite remarkable and with a dramatic sweat chloride benefit (and good tolerability) as a bonus," Meacham wrote.

By the analyst's own admission, he has been late to the "bull camp" on Vertex's stock due to prior "unimpressive" prior data reads, which supported an Equal Weight rating. But this is now clearly in the past and it's not too late to buy shares. The company's CF franchise can now be viewed as "highly defensible" and represents a major new opportunity.

Looking forward, the analyst is now projecting a conservative $2.7 billion revenue estimate in triple combo sales along with increased penetration/compliance in F508del homozygous CF patients for a potential triple combo.

Bottom line, the company's phase 2 read-out adds "meaningfully more confidence in the viability of the triple combo" which also signals an accelerated development path.

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