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Vertex Pharmaceuticals Incorporated Message Board

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  • brokenideas brokenideas Nov 2, 2012 11:46 PM Flag

    Vertex strategy has failed as a business

    Thanks. I agree with your points but unfortunately I feel the situation is more dire that you may think.

    In the last quarter Vertex burned about $300 million. If they maintain the same burn rate per quarter in 2013 it will be $1.2 billion in 2013, what is ridiculous given the slow progress of the pipeline. If you add all the possible revenues they may generate in 2013, something like $700 million, the difference is about $500 in loses for 2013.

    Ian Smith's comments during the CC sounded scary ... "we are now balancing and calculating the budget/revenues financials for 2013" meaning, "we will lose a boatload of money" ... given how bad they have predicted the last quarters I don't have any confidence their prediction will be good news for the investors ...

    I don't see how 2014 would bring revenues above $700 million as Incivek sales probably will plummet given the new oral combos coming along soon after, and Kalydeco will not be able to compensate for the drop of Incivek revenues ... so assuming another loss of $500 million in 2014, here you have it, $200 of cash left for 2015 ...

    Any delay in approval of the CF combo, and the company will need to dilute tremendously to raise additional capital in the open market by 2015 ... really inadmissible ...

    What Vertex shall do now is close the facility in the UK (it is a useless R&D place that has not generated anything), close the facility in Canada (why do they need any R&D in canada is beyond my comprehension), cut by half the team in San Diego (just keep the core CF team and stop any work on pain, Huntington's, etc), and cut to the bone the R&D in Boston, with just a lean team of R&D that focuses in the core areas of expertise (invectives), dropping oncology, multiple sclerosis, rheumatoid arthritis and IBD ... they have zero assets in these areas and they are burning money like hell ... it is an illusion that early research efforts in these non-core areas would produce value for the company in the next 5-7 years, that is the critical time for Vertex ....

    Making these cuts would reduce the burn rate by at least $400 millions and possibly Vertex would break even in 2013 and 2014, so that they could use the cash they have ( $1.3 billion), to acquire 2 phase II assets (at least one phase III ready asset) that could go to market in 2015, or 2016 the latest ...

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    • Your speculate that 809/770 CF combo therapy will not reach market in 2014, and that Kalydeco monotherapy when approved next year for twice the current treatment population, will not more than double current revenue for Kalydeco next year (when EU revenues finally start kicking in), You worry that the large number of patients with advanced liver disease that could sustain at least current revenues for Incivek will not treat with Incivek, and will gamble their lives on waiting for all oral regiemns that will not likely be available until 2014. I believe your 2013 revenue estimates are too low, and that the company will likely be close to breakeven with net revenue next year, even with the expensive R&D pipeline, which of course makes the future of this company so potentially valuable. VX 809/770 will generate 3 to 4 billion a year alone, Oral VX 509 could easily become a replacement for injectable drugs like Humira (which Leiden brought to Abbott, and currently generates 5 to 6 billion a year for Abbott). VX 787 could generate a billion a year in an average flu year and many fold more in a pandemic, offering treatment for Tamiflu resistant pandemic strains and efficacy up to four days after onset of symptoms,(features lacking in neurminidase inhibitors Tamiflu and Relenza).

      This quarter's drop in Incivek sales was anticipated, with current revenue guidance for this year unchanged since July. The key however will be successful timely completion of positive clinical trials to prove my point I am optimistic Vertex, who delivered both Incivek and Kalydeco to market as promised last year, will succeed with the expanded lablel for 770 and approval for 809 in 2014. Positive 661, 787, 509 and 135 Phase 2 trials will continue to promise future growth. The Pre-clinical pipeline for Huntington' s, and drug candidates for other neurologic, oncology, and infectious diseases will likley be on hold until revenues increase sufficiently to fund additional future clinical trials This large and diverse pipeline is the lifeblood of any pharma..... and that's what makes
      Vertex so potentially valuable.

      Sentiment: Strong Buy

      • 1 Reply to qdelfan
      • I wish to be wrong, believe me, I have a sizable investment at Vertex and now I am not sure the best path to get out. Wait or sell now? Will it ever recover? How long will it take?

        But in the interest of sharing my opinion and learning from others points of view I will answer some of your points.

        Your speculate that 809/770 CF combo therapy will not reach market in 2014

        Yes, 809/770 combo will not hit the market until 2015, probably H2-2015, with NDA filing by the end of 2014 to early 2015. These are the current expectations by Vertex management.

        Kalydeco monotherapy when approved next year for twice the current treatment population

        Yes, this is the most possible option to increase revenues. I just doubt they will be able to balance the loss of Incivek revenues, at least in 2013, for certain not. At most Kalydeco will sell $100/quarter, to reach $400 million/year in 2014, I doubt will be in 2013. Just think that in 2012 Kalydeco has already saturated the USA market at a rate of $50 million per quarter. Approval for other mutations will not happen until 2014 ... and then there are a number of mutations, so will take some years to double the market size. Expansion in Europe will be progressive and slow, and pricing will be pressure down.

        I believe your 2013 revenue estimates are too low

        Can you be more specific, what part of the revenues you think I am underestimating, Incivek or Kalydeco?

        VX 809/770 will generate 3 to 4 billion a year alone

        Do you recall that they have not even started phase III trials ?... yes, if approved this could (not sooner than 2015) be a large revenue for Vertex, and it is the only reason the stock is now valued close to $10 billion ... any misstep with the combo and the company is gone ... that is what irritates me ... it is now like a biotech with a risky pipeline needing to underscore its promise.

        Oral VX 509 could easily become a replacement for injectable drugs like Humira

        Vertes, today, doesn't have capacity/funding to undertake this molecule to market, they need to partner and so far they haven't. Even if they develop the molecule, it will not be in the market until 2016 ...

        VX 787 could generate a billion a year in an average flu year and many fold more in a pandemic

        Vertex will stop development of VX 787 once the finish the current trial. To stock pile the drug after approval (assuming it is approved) Vertex will need to invest hundreds of millions of dollars that cannot afford. The government will not pay for stockpiling, will only pay if there is a pandemic and the drug is used, and being third line of treatment, it will be too much risk for vertex to invest in the stock pile. Consequently this drug will not add much value to the company, even if they sell it to a Big Pharma after the phase II trial (something they desperately try to do!).

        This quarter's drop in Incivek sales was anticipated, with current revenue guidance for this year unchanged since July.

        You mean 20% sequential drop in sales for Incivek was anticipated. maybe, but if they knew why they always fail to forecast and meet the earning/revenue expectations? In my calculation I assumed a progressive sequential drop of revenues from here ... based on the past drop.

        The key however will be successful timely completion of positive clinical trials to prove my point I am optimistic Vertex, who delivered both Incivek and Kalydeco to market as promised last year, will succeed with the expanded lablel for 770 and approval for 809 in 2014. Positive 661, 787, 509 and 135 Phase 2 trials will continue to promise future growth.

        Exactly, you have to assume that every single drug works well in the clinic ... something unrealistic ...

        The Pre-clinical pipeline for Huntington' s, and drug candidates for other neurologic, oncology, and infectious diseases will likley be on hold until revenues increase sufficiently to fund additional future clinical trials

        Vertex has been very inefficient developing drugs from their own R&D, that is why I propose that they reduce it dramatically ...

 
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