By Sam Boughedda
Vertex Pharma (NASDAQ:VRTX) was upgraded to Outperform from Market Perform by SVB Securities analysts who argue that the company's growth and durability are underappreciated.
The analysts also raised the firm's price target on the stock to $374 from $265 in a research note Tuesday.
SVB's investment thesis is that potential positive financial inflections associated with next-gen triple combo in cystic fibrosis and pipeline developments can drive outperformance in the stock.
"We significantly raised our long-term financial projections, with higher contributions from pipeline candidates more than offsetting higher spending growth," wrote the analysts. "Our analysis of the company's pipeline and meetings with management give us greater confidence in the company's R&D portfolio, and we have built initial market models for certain late-stage candidates."
They added that a recent development increasing the firm's bullishness about the commercial potential for Vertex's VX-548 drug for acute pain was that a new law — the NOPAIN Act provision — was enacted at the end of last year which "directs CMS to make a separate add-on payment for non-opioid medicines."
"This should drive greater VX-548 (acute pain) adoption than we previously anticipated, assuming it succeeds in Ph3 in early '24. We boosted our 8-yr CAGR (2022-2030) rev from +4.5% to +9.3% and EPS from +5.3% to +10.0%. Our near-term financial projections are roughly in line with consensus, but our 2030E rev of $18.1B is $2.3B or 14% above cons' $15.8B (including VX-548 pain candidate $1.6B above) and EPS of $30.92 is 12% above cons' $27.72," explained the analysts.