Why Vertex Pharmaceuticals Inc. Shares Skyrocketed

Vertex shares blast off after reporting positive late-stage results from its cystic fibrosis study. See what this could mean for existing shareholders.

Jun 24, 2014 at 3:08PM

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Vertex Pharmaceuticals (NASDAQ:VRTX), a biopharmaceutical company focused on discovering small-molecule compounds to treat serious and rare diseases, scorched higher by as much as 48% this morning after announcing positive results from two phase 3 studies involving the combination of VX-809 and Kalydeco as a treatment for patients with cystic fibrosis (CF) who have two copies of the F508del mutation, the most common form of CF.

So what: According to its early morning press release, all four treatment arms in the 24 week-long studies demonstrated a statistically significant improvement in forced expiratory volume in one second, also known as FEV1, with both studies, TRAFFIC and TRANSPORT, meeting their primary endpoint of absolute improvement in percent predicted FEV1. As the results show, mean absolute improvement in percent predicted FEV1 was between 2.6 and 4 percentage points from baseline compared to placebo with mean relative improvements of 4.3% to 6.7%.

The combination also delivered a number of improvements based on predefined secondary endpoints, including statistically significant reductions in pulmonary exacerbations and statistically significant improvements in body mass index and the proportion of patients with a minimum 5% improvement in percent predicted FEV1. Following its positive data, Vertex announced plans to file a new drug application in the U.S. and a marketing authorization application in Europe in the fourth quarter.

Now what: Since losing hepatitis C blockbuster drug Incivek to more effective competition Vertex has done a good job of pushing the company into the largely unmet field of CF treatments. Including sales of Kalydeco and this combo, analysts project that peak annual sales potential could be in the billions. With the U.K.'s National Genetics and Genomics Education Centre estimating that 76% of all CF cases express the F508del mutation, it's quite possible Vertex could hit Wall Street's lofty sales targets.

While nothing is ever for certain when the Food and Drug Administration is involved, I'd suggest that Vertex's CF combo therapy has a better than 50-50 shot at approval, but it'll still be up to Vertex to successfully price and commercialize its therapy. It did a great job with Incivek, but will need to repeat that quick success with VX-809 and Kalydeco if it hopes to maintain its current $22 billion valuation.

Vertex may have soared today, but keeping up with this top stock over the long run could prove impossible! 
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Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

The Motley Fool recommends Vertex Pharmaceuticals. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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