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Vertex Pharmaceuticals Inc. (VRTX - Analyst Report) recently received European approval of Kalydeco for treating people suffering from cystic fibrosis (CF). The European Commission approved the drug to treat patients with CF, aged 6 years and above and who have at least one copy of the G551D mutation in the cystic fibrosis transmembrane conductance regulator (CFTR) gene. Vertex intends to launch Kalydeco in Europe shortly.

The European approval did not come as a surprise as in May this year, the European Committee for Medicinal Products for Human Use (CHMP) voted in favor of approving the drug. Kalydeco is the first medicine that targets the underlying cause of CF, which is a rare genetic disease, caused by defective or missing CFTR proteins. Approximately 1,100 people have this mutation in Europe.

Notably, Vertex conducted two global phase III studies, determining the efficiency of Kalydeco in treating patients with CF. These studies revealed that Kalydeco improves breathing and other symptoms of CF patients aged 6 years and above.

Patients on Kalydeco showed improvements in lung function, weight gain and certain quality of life measurements in comparison to those on placebo. Favorable results from these studies backed the CHMP’s positive opinion.

Vertex has a collaboration agreement with Cystic Fibrosis Foundation Therapeutics, Inc. for Kalydeco. According to the agreement, Cystic Fibrosis is entitled to receive royalties on net sales of Kalydeco.

Kalydeco is already available in the US, where it was approved in January 2012 for treating patients suffering from CF, with at least one copy of the G551D mutation in the CFTR gene. Vertex recorded sales of $18.4 million for the drug in the first quarter of 2012.

Currently, Vertex has another product marketed in the EU: Incivo. Vertex has an agreement with Johnson & Johnson (JNJ - Analyst Report) to commercialize Incivo outside the US.

Our Recommendation

Given the strong first-quarter sales of Kalydeco in the US along with the EU approval, we believe the drug can be a major growth driver in the future. We expect investor focus to remain on Kalydeco’s performance in the US as well as its launch progress in the EU.

We currently have a Neutral recommendation on Vertex. The stock carries a Zacks #3 Rank (Hold rating) in the short run.

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