Vertex upgraded at Morgan Stanley as AbbVie fails in cystic fibrosis study
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Vertex Pharma (NASDAQ:VRTX) has bounced back on Tuesday after Morgan Stanley upgraded the commercial-stage biotech citing a favorable setup following a setback to AbbVieâs (ABBV) plans to challenge its dominance in cystic fibrosis.
Vertex (VRTX) shares dropped on Monday after the company disclosed that the U.S. Food and Drug Administration (FDA) imposed a clinical hold on its stem cell-derived diabetes candidate, VX-880.
In a research note issued on Tuesday, Morgan Stanley analysts Matthew Harrison and Charlie Yang upgraded the stock to Equal Weight from Underweight, citing a more favorable risk-reward setup. The price target of $250 per share implies a downside of ~5% downside to the last close.
The analysts estimate that the companyâs cystic fibrosis business is worth $200 per share, and argue that given the current market conditions, the investors are ready âto pay a premium for downside protection from the long-term clarity on CF cashflows.â
Given its ambitions in cystic fibrosis, AbbVie (ABBV) could be a threat to Vertex (VRTX) with a negative risk-reward, the duo had previously assumed. However, âthe risk/reward is skewed more favorably post AbbVie failure,â they noted.
At the recent earnings call, AbbVieâs (ABBV) Chief Scientific Officer Tom Hudson said that its triple combination therapy for CF did not perform as expected to support further development. However, the company hasnât dropped its plans in CF, with a Phase 2 trial expected to begin early next year targeting a new triple combination therapy.