Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) shows shockingly strong efficacy and clean safety across all triple studies in cystic fibrosis. Credit Suisse is increasing is TP from $125 to $195. All four molecules have profiles that could move into Phase 3, and the data looks very robust and consistent.
Interestingly preclinical and Phase 1 tolerability findings (AEs) were not seen in patient work. Credit Suisse thinks Vertex was smart to tread slowly with dose and then escalate over the next few months to see how much efficacy they can drive. Credit Suisse has made various changes to the model and base case. Credit Suisse now models the entire platform with longer IP into the 2030s and has increased the probability of success in the HetMin population from 75% to 100%. Credit Suisse peak sales in the HetMin population is now $2.7B vs. $2.2B previously, as Credit Suisse has also increased peak market share and compliance rates due to the impressive data profile.
A new question emerges around whether there is a faster path to market with HetMin vs Credit Suisse expectations. Credit Suisse currently model the triple launching in HetMin in 2020. The unmet need is very high in this population which is about 24,000 patients and they are currently talking with the FDA. Although it is not Credit Suisse base case, Credit Suisse thinks that there is a possibility of an accelerated approval in this population with the Phase 3 trials acting as confirmatory trials. If Credit Suisse assumed a scenario like that (launch in 2018, peak sales by 2021 year) vs. base case launching in 2020, it would add $6/share to DCF. In terms of accelerated approval, Credit Suisse thinks the question will come down to the size of the safety database since the next generation correctors are a novel mechanism of action.
Key risks to Credit Suisse Outperform and $195 target price include unexpected clinical or commercial setbacks with key assets such as Orkambi, VX-661 or the triple combination.