Vertex Pharmaceuticals focuses on development and commercializing therapies for the treatment of cystic fibrosis (CF), infectious diseases including viral infections such as influenza and bacterial infections, autoimmune diseases such as rheumatoid arthritis, cancer, inflammatory bowel disease and neurological disorders including pain and multiple sclerosis. 

Strength in existing products

While Vertex is now able to treat the majority of cystic fibrosis patients in North America, Europe, and Australia, management believes that it could treat up to 90% of all people with CF if it receives approval for expanded indications. The company continues to gain approval for younger age groups for its cystic fibrosis drugs and to expand the number of countries providing reimbursement coverage for these products. With an eye towards treating additional CF patients, Vertex recently announced that the FDA had accepted its NDA for its investigational once-daily triple combination CF therapy, vanzacaftor/tezacaftor/deutivacaftor (vanza triple), for certain people living with CF aged 6 years and older. Vertex used a priority review voucher for this submission, reducing the review time from 10 months to 6 months, resulting in a Prescription Drug User Fee Act (PDUFA) target action date of January 2, 2025. If approved, we believe that the drug could offer a meaningful expansion in the company's reach in the CF market. Vertex has also received validation of its Marketing Authorization Application (MAA) submission for the vanza triple by the European Medicines Agency (EMA) in the EU for patients ages 6 years and older and has also submitted applications in Canada, Australia, Switzerland, and the U.K. 

Pipeline for new products

Meanwhile, Vertex is also exploring treatments for other conditions. The company recently announced that the FDA had accepted its NDA submission for suzetrigine, an investigational, oral, selective NaV1.8 pain signal inhibitor to treat moderate-to-severe acute pain, granting the drug priority review and assigning a PDUFA target action date of January 30, 2025. If approved, suzetrigine would be the first new class of medicine to treat acute pain in over 20 years and would potentially serve as an opioid alterative for the treatment of pain. Vertex has also acquired Alpine Immune Sciences Inc., a biotechnology company focused on discovering and developing innovative, protein-based immunotherapies, whose lead product, povetacicept, has demonstrated best-in-class potential in patients with IgA nephropathy (IgAN), a serious, progressive, autoimmune disease of the kidney that can lead to end-stage renal disease. 

Price Target: $550

We ran a DCF analysis based on FCF estimates obtained from FactSet to 2028, backing out 2024 due to acquisition, using a 7.11% discount rate (CAPM), terminal growth of 5%. This analysis yielded $809.56 fair stock price.

On a Price-to-Earning multiples basis, we would like to apply a 26.5x multiple on 2026 estimated earnings. This multiple is the median forward PE that the stock has traded at in the past 5 years. Based on 2026 estimated EPS of $20.56, we arrive at a $544.84 share price.