Friday, December 17, 2010

Morningstar Makes Vertex Its No. 1 BioTech Play -- Due To Telaprevir's Chances

Chicago-based Morningstar, those investment mavens with a truly independent analyst function (Morningstar has no affiliate that handles securities underwritings, or M&A advisory roles -- decidedly unlike JP Morgan and Morgan Stanley) just made Telaprevir®'s very likely win over legacy Schering-Plough/New Merck's Boceprevir® the basis for its "Top of the Heap" prediciton, this morning.

See it all here, but this is the most-salient bit:

. . . .Vertex ranked number 1 on our 2010 biotech takeout list, and we continue to believe the firm would benefit from the sales know-how of a larger pharma player like current partner Johnson & Johnson. The stock currently trades at a 25% discount to our fair value estimate, providing an attractive entry point for investors with a stomach for risk.

While Vertex also has a late-stage cystic fibrosis candidate and compounds in earlier-stage development, telaprevir remains the focus of investor excitement and the primary value driver of the firm. We give the drug a 70% chance of approval, 10% higher than our average Phase III drug. If telaprevir succeeds in clinching approval, our fair value estimate would rise to at least $50 (not including a takeout premium). With a drug on the market, we think Vertex could see profitability by 2013. . . .

Vertex is trading at $34.50 this morning -- and $50, before takeout premiums looks pretty good -- given that the FDA NDA is filed on Telaprevir, and approval is expected on-or-before June 2011. [Do your own due diligence, of course.] We'll keep you posted.


Anonymous said...

Let us see, Morningstar didn't see the housing and the Euro PIIGS collapse. Not much faith!

condor said...

How about now?

Vertex has north of 80 percent share, on first few months of launch, despite Merck spending immense amounts on high profile co-promotion partnerships for their drug.