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Insiders Active in Laggard Biotech with Cash-Rich Legacy Franchise and Plenty of Spending Power

by | Aug 4, 2021

Vertex (VRTX) sizable insider buy this week from director Bruce Sachs of 15,000 shares at $197.91, a more than $2.965M purchase. This is the largest – and only – open market buy in the name since November 2020 when Sachs bought $3.2M in stock at $217.36. Shares are down around 30% from the 2020 highs and back at a big volume node from 2018. VRTX is flagging on the daily under $202.50 and a volume gap from earnings with room to $210. The $51.36B company trades 15.5X earnings, 8X sales, and 7.4X cash. VRTX has $5.95B in cash buoyed by a cash-rich CF business even though sales are starting to flatten out. They announced a $1.5B buyback in June and likely spend further on investing in new growth verticals including M&A. VRTX has five mid-to-late stage programs ongoing across small molecules, cell therapies and gene therapies.

Their most-advanced program is CTX001, a gene editing therapy looking at beta thalassemia and SCD. They also have an ongoing partnership with Moderna to use mRNA-based approach to CF. Short interest is 1.58%. Hedge fund ownership rose 2.2% in Q1. Avoro Advisors adding a new 1.4M share position, their fifth largest. Avoro is a smart fund that’s run by Behzad Aghazadeh who ran Immunomedics before their $21B deal with Gilead. Analysts have an average target for shares of $268 with a Street High $331. Piper raising estimates on 7/30 citing strong earnings, guidance, and multiple upcoming readouts. Wolfe with a $252 PT citing the durability of the CF franchise, the outlook for VX-147 and CTX-001, and the company’s M&A outlook.

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