Vertex Pharmaceuticals (VRTX) yesterday received approval from The U.S. Food and Drug Administration for their drug Kalydeco, the first therapeutic drug to treat an underlying cause of cystic fibrosis. Kaydeco targets a genetic mutation affecting a small minority of patients suffering from the life-threatening breathing disorder. Kalydeco, from Vertex Pharmaceuticals Inc., will be among the most expensive therapies on the market, costing $294,000 a year.
The stock was halted from trading yesterday after tripping circuit breaks from a huge rush of buying on the news. When trading resumed, the stock held a 6.36% gain to close at $36.95 (37.25, 7.36% in after hours trading) on momentum built from the firm's FDA approval.
Sanford Bernstein analyst Geoffrey Porges was quoted as saying after the approval:
The FDA is trying to demonstrate a willingness to move quickly on medicines that make a big difference and this is a big difference maker.
In a prior article, I wrote how the deep and impressive Vertex R&D phase clinical pipeline should eventually see Vertex at least triple in stock value for the long term. Obviously, I still maintain this view.
As mentioned, Kalydeco is a very expensive treatment at almost a 300k a year cost. I am curious to see how insurance companies will support it. Since is does appear this drug will only be indicated for a small minority of patients, I am confident when deemed necessary for a patient's immediate well being, insurance companies will support Vertex's Kalydeco as they have supported the following companies: Alexion Pharmaceuticals (ALXN), Sanofi (SNY), Shire (SHPGY), and Biomarin Pharmaceuticals (BMRN), all of whom also have very expensive treatments for rare diseases, often referred to as "orphan diseases."
Vertex estimates that about 60% of eligible patients have commercial insurance with about 40% covered by government programs. Vertex will also have a variety of patient assistance programs to help those unable to afford the potentially life-altering treatment.
Kalydeco is Vertex's second product approved in the United States in less than nine months after the Hepatitis C treatment Incivek, which entered the U.S. market in May and is on track to hit $1 billion in sales faster than any drug in pharmaceutical history.
Vertex shares fell the other day from one analyst's at Leerink Swann's opinion that sales from Incivek will see a decline moving forward. While this may be true, I do not agree with the analyst's lowered price target analysis because it failed to understand the long term Vertex value which is to be found in its impressive and deep drug pipeline.
This new drug approval is really only the beginning of Vertex's long term story, as money earned from Incivek and now Kalydeco should provide a strong foundation for Vertex to build on their deep pipeline, which has even more potential to do even better for people suffering from horrendous life altering debilitating diseases. This should equate to much stronger revenues and earnings in the years ahead for Vertex.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
