Vertex Earnings: Robust Demand for Cystic Fibrosis Drugs; Diverse Pipeline Makes Progress

Vertex VRTX reported healthy first-quarter results driven by continued robust demand for its cystic fibrosis triple-combination therapy, Trikafta/Kaftrio. Quarterly product revenue of $2.37 billion represented a 13% increase from the prior-year period. Vertex is tracking our expectations, and we maintain our fair value estimate of $306 per share and view shares as fairly valued. Vertex’s lengthy patent protections and first-mover status in the lucrative cystic fibrosis market continue to support its narrow economic moat. The company’s positive moat trend is based on its cystic fibrosis drug approvals and its diverse pipeline that continues to make progress.

We forecast over $9.6 billion in revenue for 2023, and we continue to have a positive outlook as Vertex’s pipeline develops. Vertex’s most advanced pipeline candidate is its gene-editing drug, exa-cel, which is being developed in partnership with CRISPR Therapeutics for two blood diseases: transfusion-dependent beta thalassemia and sickle cell disease. Exa-cel’s regulatory submissions were completed in the EU, U.K., and U.S., and Vertex awaits a regulatory decision.

Vertex and CRISPR have presented promising phase 3 data for exa-cel demonstrating that the drug has the potential to be a durable, one-time functional cure. We assign a 60% probability of approval to exa-cel and anticipate it could reach the market as early as 2024. We forecast exa-cel could hold strong pricing power and become a blockbuster opportunity. We like that two additional phase 3 studies have been initiated to evaluate exa-cel in pediatric patients, which would broaden the addressable patient population, if approved.

Robust demand for Vertex’s highly effective drug, Trikafta/Kaftrio, is due to the drug’s rapid uptake in the U.S. and strong performance in multiple countries internationally. Trikafta/Kaftrio accounted for 88% of total sales for the quarter.