Analyst Note| Anna Baran |
We are maintaining our fair value estimate of $259 per share for narrow-moat Vertex following the news that the company is discontinuing development of VX-814 for the treatment of alpha-1 antitrypsin deficiency after elevated liver enzymes were observed in several patients. We think the market was pricing in undue success for the asset, which was in a phase 2 study, and Oct. 15’s 20% drop in share price is overcorrection in the market’s expectations for Vertex’s pipeline. We’ve revised our estimates for Vertex’s potential in AATD by removing VX-814 from our model. VX-864, another corrector molecule in development, is in an ongoing phase 2 proof-of-concept study, and while we assign the asset a low probability of success given its early stage, investors should note that the company still has at least one more shot for the rare indication.