Summary
- Vertex Pharmaceuticals owns a blockbuster drug, TRIKAFTA, which treats cystic fibrosis (CF). The company currently commands a monopoly in treating CF.
- It is armed with a cash chest of $4.2 billion, growing global sales and drug approvals, a strong balance sheet, and an exciting pipeline.
- I am bullish on the company in the long term.
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We are a wealthy country. We also are the global engine of innovation in health care, whether it's the pharmaceutical industry or the creation of medical devices. - Ron Williams
Vertex Pharmaceuticals (NASDAQ:VRTX) has got everything going for it - a blockbuster drug, a monopoly in treating cystic fibrosis (CF), an exciting pipeline, insignificant COVID-19 impact, a strong balance sheet, and more. In Q1 2020, the company reported total CF-related revenues of $1.52 billion, of which TRIKAFTA, its blockbuster drug, accounted for $895 million. These are very significant numbers when you consider that TRIKAFTA received FDA approval less than a year back, in October 2019.
The going seems great except for a minor COVID-19 issue in the coming one or two quarters, and I am bullish on the stock in the long term. VRTX is coffee can material, and here's my analysis.
Products
VRTX is currently making drugs that treat CF and is also into research and development of drugs for the treatment of other diseases. Currently, it has a portfolio of four brands of CF drugs. These are:
1. TRIKAFTA, as the name suggests, is a combination drug of three active ingredients - elexacaftor, tezacaftor, and ivacaftor. It is prescribed in a co-packaged form along with ivacaftor (i.e., combination tablets of elexacaftor/tezacaftor/ivacaftor along with ivacaftor tablets). It is used for treating CF patients in the age group of 12 and above who exhibit at least one F508del mutation in the CFTR gene.
2. SYMDEKO (co-package of tezacaftor/ivacaftor and ivacaftor): This drug is used in the treatment of CF patients aged 6+ years who have two copies of the F508del mutation in the CFTR gene or who have at least one mutation in the CFTR gene that is responsive to tezacaftor/ivacaftor.
3. ORKAMBI (combination drug of lumacaftor/ivacaftor): This drug is used to treat CF patients aged two years and above who have two copies of the F508del mutation in their CFTR gene. It is not known if this drug is safe for children below two years.
4. KALYDECO (ivacaftor): This drug can be used in the treatment of CF patients as young as six months (as well as older pediatric patients and adults) who have at least one mutation in their CF gene that is responsive to ivacaftor.
The company believes that TRIKAFTA can treat up to 90% of CF patients around the globe with high efficacy. Currently, even patients on ORAKAMBI and KALYDECO are being transitioned to TRIKAFTA in cases where the indications are overlapping, so much so that TRIKAFTA is almost cannibalizing their sales in the U.S.
TRIKAFTA is called KAFTRIO outside the U.S. On June 30, 2020, England's National Health Service (NHS) decided to reimburse KAFTRIO in combination with KALYDECO once it gets approval from the European Commission. The approval is expected by the end of August 2020.
The other drugs continue to experience growth outside the U.S. On June 10, 2020, the European Commission approved the use of KALYDECO in children with cystic fibrosis as young as six months old and weighing at least 5 kg who have the R117H mutation in the CFTR gene.
