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On Tuesday, RBC Capital Markets adjusted its price target for Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX), raising it to $420 from the previous $408, while maintaining a Sector Perform rating on the stock. Currently trading at $484.82, Vertex has demonstrated strong momentum with a 20.39% gain year-to-date. According to InvestingPro analysis, the company maintains a "Good" financial health score, reflecting its solid market position. The revision follows an analysis of the early performance of Vertex’s Alyftrek, which has shown promising signs of uptake despite initial data suggesting a modest market share.
Brian Abrahams, an analyst at RBC Capital, noted that while third-party scripts since the launch of Alyftrek indicated a limited uptake of approximately 3% share, there has been a noticeable decline in prescriptions for Trikafta, Vertex’s other cystic fibrosis treatment. With revenue growth of 11.66% in the last twelve months, Vertex continues to demonstrate strong market performance. This trend suggests that the switch to Alyftrek could be occurring more rapidly than anticipated, potentially outperforming the Street’s forecast of $79 million in sales, which was based on only a 5% patient switch rate.
Abrahams highlighted that the initial success of Alyftrek could be underestimated due to the way prescriptions are captured. He anticipates a majority of patients on Trikafta will eventually switch to Alyftrek, estimating a 65% conversion in future years. This shift is expected to lead to higher operating margins, with a projected increase to 58.2% from 57.2%.
The analyst pointed out that a strong start for Alyftrek would likely result in cannibalization of Trikafta sales, providing incremental revenue and margin benefits. Trading at an EV/EBITDA multiple of 24.09x, and with InvestingPro analysis suggesting the stock is currently overvalued, more evidence of growth in new areas, such as the launch of Journavx, may be necessary to drive the stock’s price higher from its current level. InvestingPro subscribers have access to 12 additional key insights about Vertex, including detailed valuation metrics and growth projections. Get the full picture with the comprehensive Pro Research Report, available exclusively on InvestingPro.
The price target increase to $420 reflects updates to RBC Capital’s financial model for Vertex, taking into account the potential impact of Alyftrek’s market performance and the anticipated switch from Trikafta to Alyftrek by patients.
In other recent news, Vertex Pharmaceuticals announced the termination of its VX-264 program for Type 1 Diabetes due to insufficient efficacy in clinical trials. Despite meeting safety endpoints, the therapy did not achieve the expected increase in C-peptide levels, leading to the decision to halt further development. Meanwhile, Vertex is advancing its zimislecel trial for T1D, with plans for global regulatory submissions by 2026. Zimislecel has received multiple designations from health authorities, which could impact up to 60,000 patients in the U.S. and Europe. Additionally, UnitedHealth (NYSE:UNH) has included Vertex’s non-opioid pain medication, Journavx, in its coverage, but at a higher cost tier compared to other treatments. This classification may result in higher out-of-pocket expenses for patients using Journavx. On the financial front, Canaccord Genuity maintained its Hold rating on Vertex Pharmaceuticals, noting that the VX-264 program accounted for approximately $12 per share of their price target. The firm expressed continued interest in T1D treatments, although they remain cautious about the opportunities for VX-880 and other experimental therapies.
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