Vertex: Targeting Cystic Fibrosis

11/03/2016 10:00 am EST


Crista Huff

Editor, Cabot Undervalued Stocks Advisor

This stock is a biotech company that develops breakthrough drugs and carries them through to the manufacturing process, informs Crista Huff, editor of Cabot Undervalued Stocks Advisor.

Vertex Pharmaceuticals (VRTX) is a clear leader in the treatment of cystic fibrosis (CF), a disabling and deadly genetic disease affecting the lungs.

Vertex has lengthy patent protection on the only two disease-modifying drugs within that rare-disease niche. Its projected one-, three- and five-year revenue growth rates are all significantly higher than those of its US biotech peer group.

Vertex reported that its research on a new "triplet" pill for cystic fibrosis is moving into Phase II studies. The treatment combines Vertex' currently marketed drug, ivacaftor (Kalydeco), with two additional drugs.

The market was highly-concerned that the Phase II studies might be delayed, so this announcement should signal the end of the recent downturn in the share price.

VRTX is a vastly undervalued, aggressive growth stock. The company is expected to report third-quarter EPS of 20 cents on the afternoon of October 25th.

VRTX had a big pullback after its summertime run-up. The pullback lasted longer than I expected, however, it's in tandem with a pullback among biotech stocks.

Vertex reported third-quarter 2016 earnings per share (EPS) of 16 cents vs. the consensus estimate of 18 cents. Revenues were $413.5 million vs. the consensus estimate of $419 million.

The stock bounced at $80, half a dozen times this year. I don't see any red flags. Buy VRTX now. There's upside resistance at $110, in the low $130s, and again at the August 2015 high of $141. Buy.

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