Seeking Alpha
Long/short equity, deep value, value, research analyst
Profile| Send Message|
( followers)

Vertex Pharmaceuticals (NASDAQ:VRTX) engages in the discovery, development, and commercialization of small molecule drugs for the treatment of serious diseases worldwide. Its product pipeline includes Telaprevir (VX-950), a Phase III clinical trial product for the treatment of hepatitis C virus (HCV) infection; VX-222, a Phase IIa clinical trial product targeting HCV infection; VX-770, a Phase III clinical trial candidate for the treatment of cystic fibrosis; and VX-809, a Phase IIa clinical trial product targeting cystic fibrosis.

The company's products also comprise VX-509, a Phase IIa clinical trial product for the treatment of rheumatoid arthritis; VX-765, a Phase IIa clinical trial product targeting epilepsy; and VX-759, a Phase I clinical trial product for the treatment of HCV infection. It has collaboration agreements with Janssen Pharmaceuticals, Mitsubishi Tanabe Pharma Corporation, Cystic Fibrosis Foundation Therapeutics Incorporated, Merck & Co (NYSE:MRK) and GlaxoSmithKline (NYSE:GSK). The company was founded in 1989 and is headquartered in Cambridge, Massachusetts.

Drug Pipeline

Telaprevir (VX-950), treatment of hepatitis C virus (HCV) infection.
VX-222, targeting HCV infection.
VX-770, treatment of cystic fibrosis.
VX-809, targeting cystic fibrosis.
VX-509, treatment of rheumatoid arthritis.
VX-765, targeting epilepsy.
VX-759, treatment of HCV infection.

VRTX has a real nice pipeline going for it. Some believe Vertex is an acquisition target for mega pharmas like Bristol-Meyers (NYSE:BMY) and Pfizer (NYSE:PFE), companies that seem to be seeking out smaller bio-pharmas with deep and impressive pipelines. However, with a market cap of 7.45 billion, it is hard to imagine a mega pharma would be willing to pay such a hefty price tag for Vertex.

Fiscal Year
Fiscal Year Ends: Dec 31
Most Recent Quarter (mrq): Sep 30, 2011
Profitability
Profit Margin: -33.90%
Operating Margin : -18.85%
Management Effectiveness
Return on Assets : -5.40%
Return on Equity : -47.41%
Income Statement
Revenue : 912.81M
Revenue Per Share : 4.49
Qtrly Revenue Growth (yoy): 2,670.30%
Gross Profit : 130.64M
EBITDA 6: -138.57M
Net Income Avl to Common : -309.45M
Diluted EPS : -1.52
Qtrly Earnings Growth (yoy): N/A
Balance Sheet
Total Cash (mrq): 658.68M
Total Cash Per Share (mrq): 3.16
Total Debt (mrq): 498.42M
Total Debt/Equity (mrq): 68.20
Current Ratio (mrq): 2.27
Book Value Per Share (mrq): 2.78
Cash Flow Statement
Operating Cash Flow : -526.03M
Levered Free Cash Flow : -378.06M

The current Vertex balance sheet does not look great in terms of profit generation and cash burn, but with a deep pipeline and plenty of cash on hand for larger phase 3 clinical funding, all Vertex needs is The FDA to approve a couple of their pipelined drugs to generate big revenue and turn huge profits in the future.

In my opinion, Vertex seems to have the technological know-how, so these drugs should see the market eventually. I really like their science and I strongly feel Vertex is engaged in very important work for the betterment of society with these drugs. I encourage potential investors to do the deeper due dilligence on all the phase clinical data, as I think most will like what they find.

I think for the very aggressive investor who is willing to buy and hold Vertex for 3 to 5 years, they could see a price appreciation of up to 5 times the current pps of $35.72 in this time frame. Numerous speculative biopharmas also make for very good swing trades, so consider looking at Vertex for this as well.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: Vertex Pharmaceuticals Could See Huge Long-Term Gains