The latest deals in pharma are coming fast and furious, but the big winners from the past few months could all come from companies that have been under pressure for months to come out ahead in the drug-pricing game.
Vertex is one of the more visible examples of this trend, as it was among the most successful of all the drug companies to get the FDA approval to develop a blockbuster new blood-thinning drug called fenfluramine.
The company has also been aggressively pushing back against rivals in the space, including Pfizer, Johnson & Johnson, and AstraZeneca.
But this month, the company announced it would cut 10% of its workforce from its top-tier labs, with a focus on new products.
And the company said it will spend about $200 million to develop its new product, Hemadropres , which it hopes will be available for sale in the third quarter of 2019.
This will mark a dramatic shift in Vertex’s strategy, which was one of its biggest draws for the approval of the blockbuster drug, said Jim Gee, an analyst at FactSet.
That strategy, coupled with its $20 billion valuation, has made it one of Wall Street’s most valuable companies.
But while Vertex has shown some of the most rapid growth of any of the companies in the $50 billion drug-maker space, the real test will come this year, when the company has to demonstrate that it can be competitive with the competition.
The company will need to show it can stay ahead of competitors, and its revenue projections are optimistic.
“Vertex’s $30 billion valuation is based on the company’s ability to deliver its product, which will be a critical component of its earnings growth plan,” said Gee.
“This is not a question of being able to get $1 billion of growth, which is what many companies are doing.
This is a question about making it more profitable and growing your revenues.”
What we’re seeing right now is a company that has taken on the mantle of being the next big thing in the health-care industry, and it’s going to need to grow its revenue and deliver on its sales targets, Gee said.
“There is a sense that if they’re able to do it, they’re going to be able to deliver on their growth targets,” he said.
Vervel has been on a tear since 2014, when it raised $6 billion from a combination of investors, including Sequoia Capital and a number of other companies, including the pharmaceutical industry’s biggest players.
It sold $10.5 billion worth of its stock to fund its acquisition of rival Astra Zeneca, which it acquired in November, and now is the biggest single drug-company in the United States.
Vervex has made a lot of money in the past year, with revenues of $7.5B and a profit margin of about 23%.
In 2018, it reported a loss of $1.4 billion.
Vermes revenue, by comparison, was $9.4B, and profit margin was 14.5%.
In its earnings report this week, Vertex said its revenue had grown by more than $6B since the year prior.
The firm said it had made a net investment of $2.3B in new acquisitions and $1B in sales and service fees.
That means it was able to add about $100M in value to its balance sheet, according to its statement.
Vervens stock rose 3% in after-hours trading.
The latest news comes as Vertex is on track to report $1,974.2 million in net income for the third fiscal quarter ending March 31, 2019, according a proxy statement provided by the company.
Vermex is also one of a handful of drug companies that has been working to boost its profit, with its stock up 2.5% this year.
It said it was the largest company in its category by revenue last year and had been the second-largest in the category in 2019.
But Gee and other analysts say Vertex could be facing a tough year as it attempts to deliver what it believes will be its biggest hit to profits since it acquired Astra in December.
“This is a new business and it will have to grow,” said Greg Leavitt, an industry analyst with FactSet who has been following the company closely.
The stock was up 9% in early trading on Tuesday, with the price climbing about $20 in after hours trading.
Vermedax is one company that can help it in its quest to keep pace with competition.
And its revenue is expected to increase substantially next year, as the company works to develop new treatments for leukemia, Hodgkin’s lymphoma and other types of blood cancers, as well as improve its ability to get new drugs approved quickly.For now,