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Vertex Pharmaceuticals Incorporated Message Board

  • gladpick gladpick Apr 24, 2002 6:39 PM Flag

    OVERREACTION

    Vertex being a biotech company is engaged in a lot of research to develop new drugs. So its research expenditures are based on research needs as they arise rather than a pre-planned definitive financial plan. Sometimes additional spending may be a good sign rather than a negative. So they had a penny in extra loss than the street expected due to additional research spending--Big Deal. To me that is not a negative. It shows that Boger is willing to spend on research to bring products to the market as he has promised.

    As to the reduced revenues, if you read the company's release it states that they have decided to concentrate on "dicovery tools and services business' focus on the higher margin product revenues." This is also reflected in the reduction of $1.9 million in cost of revenues. This $1.9 million cost reduction does not compare badley with the so called revenue shortfall every one is talking about. The Multex consensus was $43.3 mln vs actual 40.7 -- a shortfall of $2.6 mln which as I said before has resulted in almost equally reduced costs.

    The problem is some people think this is a fully developed company and only look at the quarterly profit/loss figure. Vertex will come back just like it did not long ago from $16 to $31 in a relatively short period of time.

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    • I just assumed that since the stock is not too far from where it was when they bought in the converts, that the converts would also be roughly the same price. I believe DWMS has a convert website that will give you quotes. I will look it up and let you know if they have a quote on the bonds. As to your point for size, VRTX is probably in a pretty good position since any seller of size would likely approach them first since they are on record as being a large buyer at the right price.

    • absolutely, but as I suggested in the last post, that might not be possible. my guess is that the market for the debt is rather thin (as I understand it, they're restricted as to who can buy them) and that any sizeable demand would disrupt the pricing. for the same reason, my "by the company below net cash, shut it down, distribute the cash" hypothesis couldn't really happen.

      btw, what's your source for the convert quote?

      -cw

    • I probably am a little aggressive marking the whole issue to market, but doing so does give a better picture of how the market is really valuing VRTX. They did buy in a decent chunk of the converts in the fall, and I hope they continue to take advantage of any opportunity to do so. They certainly don't need all the cash they have, and I would be willing to risk using some of it to reduce debt at a big discount (ie wouldn't you be happy to see them buy in 100mm of debt for 35-40mm?).

    • Vertex Market Cap is a totally random thing. No one has a clue about the worth of this company. WItness the climb to $31 just this past week. Stock now at $20. It's all just gambling. This stock can just as easily go to $10 as it can to $30. I'm long but getting ready to bail. Playing roulette in Vegas....the odds are no worse.
      So, for those who say this company is undervalued or overvalued I say it is neither because no one can put any type of value on VRTX. But today, it will cost you $20 to play the game. Good luck. Baby needs a new pair of shoes.

      • 2 Replies to dscmenlopark
      • All biotechs have high volatility due to the heavy weighting one has to give the pipeline. However, VRTX has products/services on the market, and one can easily value them as a multiple of sales per the industry average, lets say 6-8x. Sales should be around 100mm this year so the value is 600-800 million. Net cash is around $500million. Total value excluding the pipeline is 1.1-1.3 billion versus a market cap of around 1.5 billion. Market is valuing the pipeline at 200-400 million. Question is is it worth that much. Given the broad range of products and collaborations and their stage of development, to me the answer is yes. I agree that in the short term the stock price can be quite random, but that is something totally different from the business value. Any positive news on any compound in development will have the reverse effect of what just occurred, while further bad news is unlikely, to depress the stock much below its fundamental value.

      • So true - so true - like Vegas knowing when to get in and when to get out. Timing is everything. Although I'm sure you'll agree - we'd have a much better chance of making a profit predicting the stock movements of a profitable company.

    • The drop had nothing to do with earnings, it had to do with the phase II results. Thought they weren't horrible, the stock had gone up a lot in recent weeks on rumors that the news would be very positive. The drop was just putting the stock back to where it would have been without the big buildup. In the last two months VRTX went from 20 to 30 while vitually every other stock in the sector dropped or stayed even. This was due to rumors that proved to be unfounded, thus the drop. I expect to see 20 or 21 in a day or two soon, then to trade with the sector after that.

    • I agree with your opinion. If VRTX'S goal was to beat the street all they had to do was cut R&D by about 3% and they would have beat by a penny. It's also clear that VRTX is focusing on higher profit revenue. I'm not sure what they estimated as gross revenue since I found 2 different numbers floating around ie. 43 mil and 48 mil. however if you combine operating and other inc. they reported 44 mil. In either event they emphasized their goal of increasing gross profit margins which implies some possible reduction of gross revenues.

 
VRTX
92.13-0.86(-0.92%)Sep 15 4:00 PMEDT

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