Analyst Note| Rachel Elfman |
Vertex announced it is shelving VX-864, an experimental drug for Alpha-1 Antitrypsin Deficiency, after disclosing that the magnitude of treatment effect observed in its phase 2 study is unlikely to translate into substantial clinical benefit. However, this development has minimal impact on our fair value estimate because we had accounted for only 10% probability of the drug being approved in our valuation model. We maintain our $259 fair value estimate and narrow moat. Shares dropped over 10% as investors reacted negatively to the announcement. However, the decline in Vertex's share price presents an opportunity for long-term investors as we view shares as undervalued, currently trading in 4-star territory.