Valuentum Exclusive Analysis for the Discerning Investor

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Image: Vertex Pharma has advanced more than 18% since the beginning of 2021, trouncing the performance of the SPDR S&P Biotech ETF by an incredible margin. The outperformance gap stands at more than 50+ percentage points at the time of this writing.

By Brian Nelson, CFA

We were blown away by the phase II results released March 31 at Vertex Pharma (VRTX) for its non-opioid, non-addictive pain killer, the NaV1.8 inhibitor VX-548, and we think the molecule has the potential to provide a solution to the widespread opioid crisis in a meaningful way. According to the U.S. Department of Health and Human Services, tens of thousands of deaths each year are “attributed to overdosing on synthetic opioids.”

The company’s phase II results for VX-548 provide “proof of concept” in order to push the study to more advanced studies, and we are highly encouraged. We also note that the long-term revenue and earnings potential for VX-548 is not included in our valuation model for Vertex Pharma and would offer pure incremental upside to our fair value estimate. VX-548 could be a game-changer in the fight against the opioid epidemic, in our view.

According to the press release:

Treatment with an initial dose of 100 mg followed by 50 mg every 12 hours of VX-548 (high-dose) compared to placebo resulted in a rapid, statistically significant and clinically meaningful improvement in the primary endpoint of the time-weighted Sum of Pain Intensity Difference over 48 hours (SPID48), which was consistent in both trials. The study also included an active reference arm of the opioid hydrocodone bitartrate/acetaminophen (HB/APAP) to support the evaluation of the VX-548 treatment effect.

Management noted that the VX-548 could potentially become a “first-in-class non-opioid treatment for acute pain,” and that there was “remarkable consistency in the safety, tolerability and efficacy results” in the VX-548 studies. We can’t reiterate enough how excited we are about the potential for this non-addictive alternative to treat acute pain and Vertex's advancing pipeline, more generally.

Concluding Thoughts

We’re huge fans of Vertex Pharma on the basis of its strong balance sheet, solid free cash flow generation, impressive and commercialized cystic fibrosis franchise, collaborations with firms advancing CRISPR solutions, and we view VX-548 as icing on the cake. The high end of our fair value estimate for Vertex Pharma is $365 per share, and we would not be surprised to see the company’s share price creep ever higher on this news. 

Vertex Pharma remains our favorite biotech idea and a key holding in the Best Ideas Newsletter portfolio. The company’s shares have advanced more than 18% since the beginning of 2021, trouncing the performance of the SPDR S&P Biotech ETF (XBI) by an incredible margin. The outperformance gap stands at more than 50+ percentage points at the time of this writing. We couldn’t be more pleased and think there is more good news to come.

The Best Ideas Newsletter portfolio >>

Vertex Pharma's stock page >>

Vertex Pharma's 16-page Stock Report (pdf) >>

"Our Favorite Biotech Vertex Pharma Powers Ahead, Leaps 6%+" (January 30, 2022)

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Brian Nelson owns shares in SPY, SCHG, QQQ, DIA, VOT, BITO, and IWM. Valuentum owns SPY, SCHG, QQQ, VOO, and DIA. Brian Nelson's household owns shares in HON, DIS, HAS, NKE. Some of the other securities written about in this article may be included in Valuentum's simulated newsletter portfolios. Contact Valuentum for more information about its editorial policies.  

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