Vertex (VRTX) Concerns Overdone, Buy Weakness - RBC Capital

RBC Capital maintained an Outperform rating on Vertex (NASDAQ: VRTX) with a price target of $145. Comments follow "significant incoming institutional call volume" in the last few days and concerns about the Bull thesis. Analyst Michael J. Yee discussed competitor data, and he said he continues to expect a strong Orkambi launch. Yee also recommended buying weakness.

Yee explained, "Based on discussions, there is a view that the recent underperformance has been driven in part by an increasing Street view that competition is emerging from: 1) Galapagos (presented Friday and growing awareness Phase I potentiator data presentation coming at NACF in October), and now getting on radar screen and if partner ABBV were to acquire the business that would heighten competitor worries, 2) CNCE Phase I PK "deuterated-ivacaftor" potentiator data press-release yesterday, which as a small cap, was off the radar for many large-cap investors, 3) we had PRQR mgmt on the road in Sep (see ourCF industry note 9/15) and their Phase I CF data starts YE:15 and more early '16. Additional concerns have refreshed around Q3 Orkambi launch and whether $90M+ consensus is high given summer months, paper work, logistics, etc."

"We understand the totality of "competition" emerging may be causing concerns given company history in Hep C, but this seems over-done as these are all Phase I or earlier, only a potentiator, no material evidence of any real differentiation, and seems more a "reason" to sell for some, rather than change in any fundamentals," continued the analyst.

Yee added, "We don't deny there is competition but clearly point out: 1) GLPG is Phase I in "healthies" and no CF pt data due until H2:16 and this is only a potentiator, or one part of a combo, 2) CNCE is only PK data and the primary benefit is "once daily" vs twice daily Kalydeco, and efficacy was same in-vitro so no improvement, (compliance is not an issue that CF docs have ever told us for Kalydeco...), 3) PRQR we've explained is promising but high hurdle for platform and for FEV benefits given no data. The Bulls will remember VRTX has been known to be a potential acquisition target and hurdles to "displace" Orkambi when pts are all on the drug in next few years is high...expenses can be wiped out, and EPS accretion potential is staggering for lots of large pharmas."

For an analyst ratings summary and ratings history on Vertex click here. For more ratings news on Vertex click here.

Shares of Vertex closed at $114.41 yesterday.

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