Skip to Content
Stock Analyst Update

Why We're Still Bullish on Vertex Despite Low Guidance

The market is underestimating Vertex's entrenched position in the cystic fibrosis market supported by a robust pipeline of next-generation products.


We are lowering our fair value estimate for  Vertex (VRTX) to $130 per share from $136 following the company’s announcement of lower-than-expected 2017 guidance for Kalydeco and Orkambi sales. We expect European reimbursement for Orkambi to remain slow-going, while the side effect profile of the drug tempers our outlook for a speedy sales ramp-up in the U.S. Management now expects Kalydeco sales in the range of $690 million-$710 million and Orkambi sales at $1.1 billion-$1.3 billion in the upcoming year. We project Kalydeco and Orkambi sales in the top range of the company’s guidance, which are roughly 5% and 25% haircuts to our original 2017 sales projections for the two drugs, respectively. Despite our lowered fair value estimate, Vertex shares look undervalued in our view. We believe the market is underestimating Vertex’s entrenched position in the cystic fibrosis market supported by a robust pipeline of next-generation products.

Orkambi headwinds are expected to weigh on the company’s near-term growth. However, we believe the successful launch of next-generation corrector tezacaftor (VX-661) in combination with potentiator drug Kalydeco would boost penetration into the patient population with two F508del mutations and provide an opportunity to serve patients with one F508del mutation and residual CFTR protein functionality in 2018. The company expects to submit an NDA in the second half of the year if phase III trials meet their endpoints (data expected 1H 2017). The tezacaftor combination is not expected to produce the bronchoconstriction seen in Orkambi, which is encouraging and could translate into lower discontinuation rates and higher uptake in the cystic fibrosis market.

Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.

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

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.