Analysts Sidelined Despite Key Strides from Vertex Pharmaceuticals Incorporated (VRTX) and Regeneron Pharmaceuticals Inc (REGN)


Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) and Regeneron Pharmaceuticals Inc (NASDAQ:REGN) have excited investors with key clinical moves forward for the firms, between VRTX’s double whammy Phase III readouts for its cystic fibrosis combination treatment tezacaftor/ ivacaftor and REGN’s FDA green light for Dupixent in adult moderate/severe atopic dermatitis. Yet, for now, analysts from Cowen and Canaccord are erring on the side of caution when it comes to betting on these stocks, even though they appraise these developments from an encouraging slant. Let’s dive in:

Vertex Clears an Important Hurdle

Vertex shares rose 20% yesterday after enthusing the biotech-verse with not one, but two successful Phase III trials for tezacaftor/ ivacaftor, which hit statistical significance in lung function in people with cystic fibrosis 12+ years old who suffer from certain mutations in the cystic fibrosis transmembrane conductance regulator (CFTR) gene.

Cowen analyst Phil Nadeau sees these results as a solid step forward for Vertex, whose combination drug trials ended up “producing a better benefit/risk than Orkambi,” a fellow combination drug from the firm. While the analyst is positive on Vertex’s clinical wins, he opts to play it safe until the firm develops its franchise, achieving a substantial rise in growth.

Therefore, the analyst reiterates a Market Perform rating on shares of VRTX with a $75 price target, which represents a close to 31% downside from where the stock is currently trading.

Nadeau notes, “The results are good, even somewhat better than expectations, in our opinion. Nonetheless, though we expect teza/iva to expand VRTX’s franchise, success of the ‘triple combos’ in Het-Min patients will be necessary for more dramatic growth.”

“We and investors had expected tezacaftor/ivacaftor to produce similar efficacy as Orkambi, but with an improved adverse event profile. With tezacaftor/ ivacaftor as well tolerated as anticipated, but with its improvement in ppFEV1 of 4 percentage points approximately 1 percentage point better than investor expectations, we think the data were somewhat better than expectations. There are no evident problems with the data as disclosed, and therefore we think these results will be sufficient to support world wide approvals of tezacaftor/ivacaftor during 2018,” Nadeau surmises.

According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, four-star analyst Phil Nadeau is ranked #569 out of 4,555 analysts. Nadeau has a 51% success rate and realizes 8.1% in his annual returns. When recommending VRTX, Nadeau earns 0.0% in average profits on the stock.

TipRanks analytics indicate VRTX as a Buy. Out of 14 analysts polled by TipRanks in the last 3 months, 8 are bullish on Vertex stock while 6 remain sidelined. With a loss potential of nearly 4%, the stock’s consensus target price stands at $104.22.

Regeneron’s Dupixent to Be More Valuable After 2021

Regeneron investors sent shares rising 3% yesterday once they caught exciting word that the FDA had approved the firm’s drug Dupixent (dupilumab) in the indication of adult moderate/severe atopic dermatitis, designed to treat patients failing or not suitable for topical therapies.

Though Canaccord analyst John Newman sees this as “favorable language for the indication,” he remains sidelined until the drug garners approval for pediatric atopic dermatitis, the “larger opportunity.” As such, the analyst reiterates a Hold rating on REGN with a price target of $375, which represents a just under 5% downside from where the shares last closed.

For 2019, the analyst angles for the firm to hit $1 billion in domestic sales, with international peak sales to reach $500 million, and REGN to split half of the net profits with Sanofi. Estimating a quarter of the 1 million adult patient population and a fifth of the approximate two million pediatric patients are immunosuppression therapy-eligible, which from Newman’s stance is “a population well-suited for Dupixent,” estimating, “Within the adult population, we assume rapid market penetration by Dupixent, reaching 20% market share by 2020.” REGN management sets expectations for annual treatment expenses at around $37,000, and adjusting for 5% yearly price surges, 70% adherence, and 20% gross or net discounts, the analyst projects the EU cost to circle $22,000 without price lifts.

“We acknowledge the value created by Dupixent approval, but believe the full value will be realized when the drug is approved for pediatric atopic dermatitis, which we expect to be in 2021. Furthermore, we still see EYLEA growth and the Praluent market entry challenge as ongoing concerns. The fact that REGN will no longer provide revenue guidance for US EYLEA revenues, its core revenue driver, after 2017 is disappointing and concerning regarding future revenue and EPS growth. Sarilumab approval for RA would be a positive stimulus to REGN shares, but we note that the RA market is highly competitive and increasingly crowded with biosimilars,” Newman concludes.

As usual, we recommend taking analyst notes with a grain of salt. According to TipRanks, John Newman is ranked #4,438 out of 4,555 analysts. Newman has a 39% success rate and faces a loss of 5.8% in his yearly returns. When recommending REGN, Newman forfeits 1.2% in average profits on the stock.

TipRanks analytics indicate REGN as a Buy. Based on 19 analysts polled by TipRanks in the last 3 months, 7 rate a Buy on Regeneron stock while 12 maintain a Hold. The 12-month average price target stands at $420.71, marking a nearly 7% upside from where the stock is currently trading.

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