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Vertex Pharmaceuticals Incorporated (VRTX - Analyst Report) recently announced the approval of its cystic fibrosis (CF) treatment, Kalydeco, in Canada. Kalydeco gained approval for the treatment of cystic fibrosis in patients aged 6 years and older who have at least one copy of the G551D mutation in the cystic fibrosis transmembrane conductance regulator (CFTR) gene.

Kalydeco is already approved in the US and the EU. While US approval came in January, EU approval was granted in July. Vertex Pharma reported Kalydeco sales of $49.2 million in the recently reported third quarter of 2012. Vertex Pharma is currently working on the EU launch of Kalydeco. The company expects reimbursement coverage in each of the four major European countries that account for 80% of the G551D patients in Europe in 2013.

Vertex Pharma reported that it is now treating most of the eligible G551D patients in the US. The company is working on expanding Kalydeco’s label and is conducting monotherapy studies which could expand the target population from the current 4% to approximately 15% of CF patients. Vertex Pharma also remains on track to commence pivotal studies in early 2013 with Kalydeco plus VX-809 in delta 508 homozygous patients.

Currently, Vertex Pharma has another marketed product in its portfolio: Incivek, which is approved for the treatment of hepatitis C virus (HCV). Vertex Pharma has an agreement with Johnson & Johnson (JNJ - Analyst Report) to commercialize Incivek outside the US.

Neutral on Vertex Pharma

We currently have a Neutral recommendation on Vertex Pharma, which carries a Zacks #4 Rank (Sell). Vertex Pharma’s third quarter results were disappointing with both earnings and revenues missing expectations. We expect Incivek sales to continue being affected by warehousing and a slowdown in new patient additions. Meanwhile, Kalydeco sales should pick up from 2013 when additional launches take place in the EU. With the company working on expanding Kalydeco’s label and strengthening its HCV portfolio, we expect investor focus to remain on pipeline progress.

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