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Vertex Pharmaceuticals Incorporated Message Board

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  • swhitemd50 swhitemd50 Apr 15, 2012 10:06 AM Flag

    Kalydeco guestimates

    Third, using your numbers for Kalydeco sales estimates (which are more conservative than the other two posters) doubling each year for the next few years, you have $1/share or $210 million in 2012, $2/share or $420 million in 2013, and $4/share or $840 million in 2014. I agree that the quality of these earnings is much higher than those from Incivek because there will be no real competition faced by Kalydeco for the foreseeable future. This is probably why the current forward PE of about 10, which is based on Incivek sales, is so low. The expectation is that competition from other hepatitis C drugs will take away a large portion of revenues from Incivek starting in 2014. Therefore, an $840 million revenue stream from a new drug facing no competition should result in a much higher PE ratio, possibly 25 or more. Earnings of $4/share with a 25 PE ratio would yield a $100 pps. Of course, this values Vertex on the basis of Kalydeco sales alone, with no value assigned to any remaining revenue from Incivek and no value assigned to the rest of Vertex's pipeline. The bottom line is: If Kaydeco is anywhere near as successful as you expect, Vertex is one of the most undervalued publicly traded biopharma companies ever.

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    • Correction: I should not be using the terms sales, revenues and earnings interchangeably. My analysis is based on earnings from Kalydeco, not revenue. So when I spoke of Kaydeco revenues, I meant to say earnings.

    • I agree with the statement,
      [Vertex is one of the most undervalued publicly traded biopharma companies ever].

      When the earnings from Kalydeco reaches 4-5 dollars, it will reach a plateau so the multiple cannot be 25, but 12 would be reasonable.

      Vertex bears should watch out for possible success of VX-661. 661 for homozygous F508del could be better than the efficacy of Kalydeco for 551. If 661 succeeds, the share price will skyrocket.

    • For comparison, Credit Suisse has a $42 price target for Vertex. That's based on total revenues of $1.83 B in 2012 and $1.73 B in 2013. They estimate Kalydeco revenues of $92 million in 2012 and $400 million in 2013. Unbelievably, they estimate 50% market penetration for Kalydeco in the US and 37.5% penetration in Europe for 2013. I think those numbers are going to have to be adjusted up a lot. And I would guess that most other analyst have significant upward adjustments to make too.

      • 1 Reply to tek_jansen500
      • I think you guys really dream on sometimes with estimates that are way too high. It will not be that the first year of sales the market penetration of Kadelyco will be higher than 50-60% of the patients and this will be a extremely high market penetration for most drugs. We can assume this penetration is possible because this patient population is small and so highly controlled by CF specialist. It is way too optimistic to think about 100% market penetration the first year of sales.

        Besides, it makes me wonder why all these predictions of Vertex stock to be 100 pps in the near future never ever realize. I have been reading these type of predictions in the board for > 3years, and see where the stock is right now, 50% below from its pick after the approval of two drugs.

        Be realistic, vertex is in a transition stage, even after two drugs approved. The reason is simple. Vertex has a super large burn rate and the revenues are questionable coming after 2014. They still need to show new drugs from clinical studies and we all know what are the chances that the current trials are successful, ... very low, recall most drugs fail in clinical trials even if they look promising!

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