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Vertex Pharmaceuticals Incorporated Message Board

  • adunlap123 adunlap123 May 25, 2011 8:28 AM Flag

    MS lowers VRTX pps to $33, downgrades to underperform

    I'm not sure if this is manipulation by Morgan Stanly or if this is in fact correct:

    Morgan Stanley commented on Vertex Pharmaceuticals (NASDAQ: VRTX) in a report released yesterday. In the report, Morgan Stanley was negative in its assessment of the company.

    Morgan Stanley writes, "We believe the Street is overestimating the sales growth trajectory of Vertex's novel hepatitis C (HCV) therapy, TVR. We expect numbers to disappoint, especially in the early quarters of launch. TVR has shown SVR rates superior to Merck's Victrelis, but the company has priced the drug at a premium ($4,100/wk vs. $1,000/wk) that we believe could pressure market share as the HCV population is largely un/under-insured, Victrelis has the marketing power of Roche and Merck, and the therapeutic differences between the drugs are modest.

    Street models assume a rapid launch of TVR, with it swiftly gaining dominant market share in a rapidly expanding treated pt pool. We do not believe this launch pace is feasible given the dynamics within physicians offices. By YE12, we model 63% growth in G1 treated pts vs. our consensus sales derived est. of ~100%."

    Morgan Stanley currently has an Underweight rating on Vertex and a price target of $33. Shares of Vertex closed at $56.26, up from $55.66 at the open.

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    • I'm a VRTX long, but with the pricing of the drug and considering that many patients on social assistance will receive treatment, I am a little nervous. If anyone on this board is a former KV/A or (KV.A) shareholder who got burned on Makena pricing, you know what can happen once the government steps in. I am thinking of shorting some shares, at least in the short run to cover some upcoming weakness resulting from the MS downgrade. Any thoughts from other VRTX longs? Thanks.


    • Although the general analysis by MS is probably too extreme, there is some truth in that pricing the drug at $49,000 and promoting extensive and generous programs for access to the drug for uninsured patients (free drug to uninsured patients with income <$100K) with also generous co-pay reimbursement programs (up to 20% of drug cost) make very difficult to predict the effectiveness of the marketing and future sales.

      There is a chance that they will need to reprice soon after launch if sales are disappointing the first two months. At least there is flexibility to reprice down and modify the reimbursement programs to make them more effective in marketing, if needed.

      The sales for first quarter after launch will reveal many things ... and will define the stock.

    • Morgan Stanley's 100-doctor survey was taken prior to FDA approval of the MRK and VRTX drugs. It reported 15% of its respondents in early May planned not to add protease-inhibitor treatment after FDA approval, which would now appear to be grounds for malpractice litigation. It placed novel emphasis on an alleged inelasticity of office capacity to take on new patients. It provided no detailed report on its own methodology (margin or error, sampling method, interviewing methods, etc.), but did disclose that only 9 of the 100 respondents were hepatologists (the thought leaders for treatment.)

      The *relevant* evidence will be found in the actual prescription data, which will be available to those subscribing to weekly scripts reports. The relevant driver for patient capacity will be mandated SOC guidelines and insurance protocols, not May 2011 hiring plans for new paramedical slots.

      MS has been the consistently low outlier on VRTX in the financial analysis community.

    • Excellent analysis by morgan. Stock could fall to their 33 target by end of summer imo.

    • This MS opinion is sophistry:

      1. The therapeutic differences between the drugs are not modest, they are significant. Very few patients will be started on the less effective drug as first-line.

      2. I don't know exactly what the nebulous reference to the "dynamics within physician's offices" refers to, but we have staff that has had years of experience obtaining interferon and ribavirin from insurers. Adding telaprevir requests/processing to their task list is not re-inventing their job.

      3. The implication that the difference between $4100/wk and $1000/wk for someone who is uninsured will affect market share is silly. If MRK literally gives the drug away for indigent care then market share may be affected, but those without insurance cannot afford $1000/wk for 24-36 weeks of bocepreivr(on top of the costs of interferon and ribavirin)anymore than they can afford $4100/wk for 12 weeks of telaprevir.

      4. The marketing power of Merck/Roche is irrelevant. I know that this doesn't play into the conspiracy theories of Big Pharma buying off doctors, but there aren't any docs who will be prescribing these drugs that are in need of being addressed by marketing. The protease inhibitors are game-changing and every liver doc is already aware of the drugs and the data. The concept of a need to market these drugs is analogous to stating that the DH rule would have to be marketed to American League managers prior to the start of the '73 season. We already get it, there's nothing left to market. One drug is DEFINITELY better. Do you think this fact was lost on VRTX when they elected to price it where they did? Were they looking to price themselves out of market share? Think about it.

      Maybe the MS analyst might have wanted to talk to a couple hepatologists before issuing this opinion....Just sayin'.

    • You both have good points. Looking at pre-market, it may be a rough day today and for the near term though. Good luck to you both.


    • I have been saying this for a a few weeks on this board - way over priced at this time....

      next year you migh be looking at mid 60's but were headed back to mid 40's by end of june

    • 1) Differences in therapy are NOT modest. They ARE statistically significant.
      2) Under-insured patients exist. The alternative is to have these patients go on to cirrhosis, hepatocellular carcinoma, transplant. Better to pay now than pay 10X or more down the road.
      3) There are only 3-4,000 docs who will treat these patients in the USA, probably the bulk of these patients will be treated by 3-500 hepatologists. VRTX sales force will be targeting these doctors.
      4) Enhanced screening may reveal many patients not known to the system. VRTX is working on that.
      5) Marketing by MRK will not be able to persuade the docs that an inferior drug is better. Sorry, it won't work with this cohort gruop of doctors. You don't understand the natue of the people who will be prescribing these drugs.

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