VRTX (My best beaten-down stock)
A stock near a 2-year low, despite record growth in its financials & great execution. This drop doesn’t seem to have a particular reason - the main one seems to be a failure in its experimental trial for VX-814 for treatment of alpha-1 antitrypsin deficiency (AATD). Though this is a disappointing result, it absolutely does not warrant the current overreaction and selling - down over 35% since the result of the trial, the underlying performance, strength & growth of the company is being severely undervalued and provides ample opportunity for share-price appreciation.
Vertex Pharma has a f p/e of 14, and is expecting CAGR of around 10% for the next few years. This growth rate is an absolute steal, and especially so when you factor in the strength of its balance sheet. The company holds a monstrous amount of cash and no debt - this has led to an amazing phenomenon, where as opposed to most pharma companies, it holds a lower Enterprise Value than Market Cap - in fact, you are paying 88% less than the sticker price for the company due to its balance sheet strength.
The value of this company is ever more overstated when it is compared to its competitors in the industry. Though not directly comparable, if we take a company like Amgen, when we factor in the debts of both companies, Vertex trades for a lower multiple & is growing at a much faster rate.
This stellar balance sheet is at the center of a lot of my arguments - but another key facet is the essential monopoly that the company has developed in the CF field, especially with its superior combo Trikafta. There is no current remedy to CF outside of the company’s lineup, this gives the company great pricing power & predictable cash flows. The company is poised to drive value from expanded adoption of Trikafta, and label expansions (which they expect the new drug will expand the label by 50%)… The best part is that this cash engine is built into the company until at least 2028-2029, for its three original CF drugs, and until 2037 for its new blockbuster Trikafta…
The company, with its incredible financial position is poised to also drive returns from its promising pipeline - the company has a promising non-opioid pain medication, a few gene editing therapies & a potentially revolutionary type 1 diabetes drug to top it all off. While these are all definitely a few years off, the company’s CF moat should drive impressive returns for years to come!
In conclusion, I believe that Vertex is one of the most unfairly beaten down stocks currently on the market!
By: Mateo Gjinali
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