Vertex Pharmaceuticals (VRTX) is a great company, and after a couple of years of choppy action, it appears the buyers are finally beginning to flex their muscles, explains Mike Cintolo, editor of Cabot Growth Investor.
The company has made hay with cystic fibrosis (CF) treatments, with approvals of individual drugs (it has three on the market today) and combination therapies gradually expanding the share of the CF market it addresses—sales growth has been steady and earnings are following the same upward path.
But what’s brought in the buyers was news that the FDA approved (five months early) Vertex’s triple combination CF treatment — long story short, the combo will greatly expand the number of CF patients the company can serve, and the selling price it’s targeting was higher than many analysts expected.
Bottom line, management hiked revenue guidance after the approval (now looking for a 22% bump in revenues in 2019) and analysts are looking for a very solid 2020 (sales up 26%, earnings up 39%) as the triple combo product gains acceptance, with another round of excellent growth in 2021. All told, earnings are expected to basically double from 2019 to 2021.
The firm has some other early-stage research going on — it eventually wants to diversify away from just CF products — but there’s no question the cystic fibrosis business is going to drive perception in the quarters ahead.
Technically, the stock broke out of a two-year dead period in October and looks like it is going to be one of the stock market’s liquid leaders for 2020.
