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Cowen Analyst Goes All in For Vertex (VRTX) Stock


Vertex (VRTX) is Cowen analyst’s top large-cap pick for the second year in a row. That’s how Phil Nadeau put it while increasing his price target from $200 to $210. The analyst says he expects the cystic fibrosis franchise to power a 22% revenue CAGR through 2023, which would imply it has the best growth prospects in large-cap biotech. With expectations like this, it’s easy to see how Nadeau could reiterate an Outperform rating. (To watch Phil Nadeau’s track record, click here)

Nadeau says the company will continue to perform well and is poised to drive industry-leading growth into the next decade. The company’s VX-659-based “triple” CF regimens touted breakthrough-quality Phase III results earlier in the week. Data is anticipated for early 2019 and Vertex will file the best performing regimen for an FDA approval by the middle of 2019, which implies a possible launch by early 2020.

“As the triples have demonstrated dramatic improvements in lung function which will likely extend life, we expect they will be rapidly and broadly adopted. Based on the promise of the triple regimens we project VRTX should have a 2017-23 revenue CAGR of 22%, and EPS CAGR of 41%, the highest in large-cap biotech. With patents that protect exclusivity into the 2030’s, the triple regimens should have long and lucrative commercial lives. Moreover, we anticipate the potential of VRTX’s non-CF pipeline will become more clear in 2019 as VRTX will have at least 3 candidates in or through early clinical testing. In a large-cap universe of middling growth prospects, we think these fundamentals position Vertex as the “must own” biotech for large-cap growth investors. We expect Vertex’s stock to appreciate to our price target as the triple regimens approach commercial launch and Vertex’s non-CF pipeline generates proof-of-concept,” Nadeau said.

While Nadeau agrees most investors generally appreciate VRTX’s long-term growth prospects, he believes the difference in revenue growth between the company and competitive large-cap peers is still not appreciated enough. The analyst predicts a compound annual growth rate of 22% between 2017 and 2023. He notes the six other large-cap biotechs typically see a CAGR of around 7%. Nadeau believes VRTX will continue to successfully innovate.

Other analysts see VRTX in the same way. It’s considered a Strong Buy on the street, with a consensus price target of $207.67, showing an upside of about 15%. TipRanks checked in on 13 analysts who reviewed the stock and 12 say it’s a Buy, while one is sidelined. (See VRTX’s price targets and analyst ratings on TipRanks)