Key trust holding Vertex gains US approval for new CF combo
Vertex Pharmaceuticals, a leading US biotech specialising in cystic fibrosis (CF) and core holding for most of the sector’s collective investment vehicles, yesterday reported the US FDA approval of Symdeko, its new combination containing tezacaftor/ivacaftor for CF in patients aged 12 and over who are homozygous (ie have two copies) for the F508del mutation.
The approval is expected to boost Vertex’s penetration of the homozygous CF population, already 65-75% based on its earlier doublet product, Orkambi (lumacaftor/ivacaftor), to ~90% based on the newer product’s improved safety/efficacy profile. Symdeko will be priced at $292,000 per patient, which is above Orkambi ($259,000), although is lower than Vertex’s original CF product Kalydeco (ivacaftor) at $311,000. Vertex’s guidance for CF product revenue is $2.65- 2.80bn in 2018, compared with $2.17bn recorded in 2017.
With the approval of Symdeko (and with European approval expected in the second half of this year), investor attention will likely focus on the development of a triple combination with VX-659 with Symdeko. Analysts expect the company to disclose regulatory guidance for this programme in the next few months, and gear up for Phase III studies. The triplets are designed to treat 90% of CF patients, including the currently untreatable F508del/min population.
Vertex is the sixth largest holding (with a weighting of 4.14%) in the US Nasdaq Biotech Index. Four investment trusts have over-weight positions in the stock: Biotech Growth Trust (BIOG) with 8.6% of NAV, BB Biotech with 5.9%, Tekla Life Sciences with 5.3% and Tekla Healthcare Investors with 5.0%, while International Biotech Trust (IBT) and Polar Capital Global Healthcare (PCGH) are both a shade under-weight at 3.6% and 3.2% respectively, based on portfolios as of 31 December 2017. Vertex’s stock has marginally out-performed the Nasdaq biotechnology index (IBB) in the year-to-date period. Its market cap is $39bn and the company has cash/cash equivalents of $2.1bn. In terms of price to sales ratio, its shares trade at a premium to large cap biotech peers (~15x FY18 consensus vs ~8x), but its three-year revenue CAGR is higher at 25%.