Goldman Comments On Vertex Pharmaceuticals Following FDA Approval

Shares of Vertex Pharmaceuticals Incorporated (NASDAQ: VRTX) were trading higher by nearly 4 percent on Thursday after the FDA approved the company's Orkambi (lumacafor/ivacaftor) for the treatment of cystic fibrosis patients 12 years and older.

Commenting on the FDA's approval, Terence Flynn, PhD of Goldman Sachs noted that the timing and decision by the FDA was in-line with the July 5 PDUFA date and follows the FDA AdCom's 12-1 recommendation for approval in May.

Flynn noted that the drug's label is not yet available, but based on the FDA AdCom he isn't expecting any surprises. The analyst also added that pricing of Orkambi is not yet available, but is expected to be on par with Kalydeco ($312,000 a year) in the U.S. given a strong secondary endpoint data. Other reasons to support the $312,000 per year cost includes the fact that the analyst is not aware of any precedents to significantly cut prices on already approved drugs and an analysis of historical orphan drug pricing.

Looking forward, the analyst is now expecting investor focus to shift to the drug's launch trajectory and the company's earnings power. The launch is expected to boost the company to profitability and the analyst is now modeling the company to report a non-GAAP earnings per share of $6.54 in 2016 and $9.75 in 2017.

Shares remain Buy rated with an unchanged price target of $142 based on a 70/30 percent blend of DCF ($133) and M&A ($165).