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Stock Strategist

We See Value in Vertex

A strong competitive position in the cystic fibrosis market gives the firm a narrow moat.


 Vertex Pharmaceuticals' (VRTX) stock price has declined significantly in recent months as a result of worries about the sustainability of drug pricing and, in particular, concerns about the launch trajectory of the firm's soon-to-be blockbuster cystic fibrosis drug Orkambi. However, we think the company's value has become more compelling as the launch of Orkambi takes hold and its portfolio of cystic fibrosis drugs positions Vertex to dominate this lucrative rare-disease market and achieve probability-adjusted peak sales of over $6 billion. Vertex's strong competitive positioning in the cystic fibrosis market is the basis of our narrow economic moat rating. The firm enjoys strong pricing power for its drugs (six-figure annual pricing for the chronic disease), extended patent protection (until at least 2027), and a welcoming commercial and regulatory environment due to severe unmet medical need. Competition is increasing, but it remains early-stage, unproven, and unlikely to displace Vertex's growing franchises.

Vertex was once best known for discovering Incivek, a blockbuster hepatitis C virus drug; however, with that drug's sales disappearing because of increased competition in the HCV market, the firm's future is now tied to its burgeoning cystic fibrosis portfolio. Approved treatments Kalydeco and Orkambi and additional pipeline assets are expected to create a dominant franchise in this lucrative rare-disease market.

Stefan Quenneville, CFA does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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