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Vertex pharmaceuticals: Telaprevir is a potential blockbuster drug!

|Includes: Johnson & Johnson (JNJ), VRTX

VRTX is a pharmaceutical that is currently suffering from loss of revenues because of drugs facing patent expiration.  However, VRTX's attraction is Telaprevir-- which is a potential blockbuster drug with a multibillion-dollar market that could get approval next year.  Telaprevir sales could top $3.6 billion in 2013, which would make it one of the highest-profile biotech product launches in the next 18 months.

Shares of Vertex have hit a 52-week high of 38.50 a share on Sept. 21 from a 52-week low of 18.43 on Oct. 28, 2008. The stock's advance is in part ascribed to the takeover speculation. It climbed as high as 45 in 2006 when the deal with Johnson & Johnson was announced.  Vertex partnered with J&J in 2006 to develop and commercialize telaprevir in Europe and several other regions. Vertex received an upfront payment of $165 million from J&J and could potentially receive a total of $545 million in license and milestone payments. 

At 35.35/share, you can write Nov strike 30 calls for a premium of 5.70/contract.  This gives a downside protection to 29.65, or 1.30/share in intrinsic time value if VRTX closes above 30 by Nov option expiration.

Disclaimer: MD Capital Management does not own VRTX or JNJ