And why he says the stock could see double-digit upside over the next 12 months.
One Citi analyst got more bullish on a big-name biotech stock this week.
In a note from Wednesday, Mohit Bansal rated Vertex Pharmaceuticals (NASDAQ: VRTX) a Buy and boosted his price target from $225 to $265 – 15% higher than the current price.
Bansal says Vertex is one of his top large cap picks for this year citing the value of the company’s cystic fibrosis franchise.
“We think VRTX is still undervalued,” Bansal wrote in the note, adding that Vertex is underestimated by the market given the potential of its experimental therapy to treat Alpha-1 antitrypsin deficiency, which can cause liver and lung disease, which he says represents a possible $3 billion a year opportunity for the company.
According to Bansal, Vertex’s VX-814 and VX-864—the compounds it is developing to treat Alpha-1 antitrypsin deficiency—have a “reasonable likelihood” of delivering success.
“We currently model 35% probability of success, given strong preclinical data, validated mechanism of action and Vertex’s above average R&D success rate,” Bansal said.
VX-814 is currently in a Phase 2 trial and data is expected later on this year. According to the analyst, Vertex shares could jump by $20 to $30 per share if the company delivers positive results.
On the cystic fibrosis front, in October, Vertex won approval for Trikafta, its new CF drug, which extended the size of the patient population it can treat with the drug.
The game changing three-in-one treatment was approved for roughly 90% of the 27,000 cystic fibrosis patients in the U.S. And with the Trikafta treatment costing $311,000 per year, Bansal said that Trikafta could deliver $10 billion in annual sales for more than a decade.
“We see [$500 million to $650 million] upside to consensus CF numbers in 2022-25 time-frame as we think Trikafta conversion could be rapid once initial bottleneck is resolved,” the analyst wrote.
Bansal isn’t the only analyst bullish on Vertex shares.
RBC Capital Markets analyst Brian Abrahams recently issued an Outperform rating on the stock and boosted his price target from $235 to $240.
“Among large caps, investors mostly favor Vertex and Gilead Sciences (NASDAQ: GILD) into 2020, with Biogen (NASDAQ: BIIB) seen as the least favored among the top five [biotech stocks],” Abrahams wrote in a note. “Among generalists, Vertex is the most favored name.”
“While valuation is becoming more optimistic, we believe a robust Trikafta launch, scarcity value as a low-risk high-quality growth biotech and growing enthusiasm around the pipeline could drive some additional appreciation,” Abrahams said.