Vertex Pharmaceuticals Inc. (NASDAQ: VRTX) has seen a lot of choppy trading in 2019, rising from about $164 at the start of the year to near $195 during the first month of 2019 alone. Its shares have been in a fairly wide trading range of about $165 to $185 for most of the time since that initial move. Now Vertex has two new pieces of information that may highlight more value for the $45 billion market capitalization.
On top of the company announcing an acquisition on Tuesday, Vertex has seen a substantial analyst upgrade from Goldman Sachs.
Vertex is acquiring a privately held biotech outfit targeting the research of stem cell-derived human islets as a potentially curative treatment for type 1 diabetes. On August 30, Vertex Pharmaceuticals entered into a merger agreement with Semma Therapeutics via its Vertex Disc wholly-owned subsidiary. The merger subsidiary will merge into Semma, and Semma will be the surviving entity as a wholly-owned subsidiary of Vertex. The price tag is shown to be $950 million in cash upon consummation of the merger, but there is an additional payment concerning certain stock options.
As far as the analyst upgrade, Goldman Sachs added Vertex to its prized Conviction Buy list while raising its target price to $254.00 from $226.00. This former price target was already higher than the prior consensus analyst target price of $213.05 from Refinitiv.
Multiple issues were cited for Tuesday’s addition to the Conviction Buy list and for the price hike:
- Growth and profitability profile with multiyear margin expansion and earnings outperformance.
- Solid drug pipeline makes it one of the most attractive biopharma stocks.
- Investors were too focused on its cystic fibrosis drugs.
- It has a non-opioid pain portfolio and is targeting similar efficacy without associated abuse potential.
- R&D execution and development.
- Targeting rare genetic disease called alpha-1 antitrypsin deficiency (Phase 1 completed) with peak sales of nearly $7.5 billion.
- Its early-stage kidney disease study and mRNA therapy efforts.
As far as how much of a boost this is against the rest of the analyst community, the prior street-high analyst target price was $235.00 ahead of the Goldman Sachs call.
Refinitiv shows that the consensus analyst estimates are for earnings to rise to $4.58 per share in 2019 (from $4.08 per share in 2018) and to $6.17 per share in 2020. Revenue growth is currently projected to be 21.8% to $3.71 billion in 2019 and then 21.6% to $4.51 billion in 2020.
Vertex shares were trading fractionally lower to $179.92 midday Tuesday, and the market capitalization had ticked down to $46.2 billion. Its 52-week trading range is $151.80 to $195.81.