Stock Analysis

Despite Recent Underperformance, Institutions are Liking Vertex Pharmaceuticals (NASDAQ:VRTX)

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NasdaqGS:VRTX
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When it comes to volatility, few sectors can match the risks and rewards of biotechnology.

While Vertex Pharmaceuticals Incorporated ( NASDAQ: VRTX ) is still over 30% below the peak, the company is showing potential signs of bottoming after making a higher low in August.

In this article, we will examine the latest developments of this potentially undervalued stock, as well as the current ownership situation.

Latest Developments

VRTX is a market leader for cystic fibrosis treatment. Yet, it continues to improve its position with a new therapy combining tezacaftor with VX-121 and VX-561. Phase 3 trials are expected later this year.

The company enjoys a market share of over 50% in this segment while simultaneously researching other rare diseases. A prominent addition to the portfolio is CTX001, a treatment for beta-thalassemia and sickle-cell disease based on gene-editing therapy. This collaboration with CRISPR Therapeutics might result in a first movers advantage into a new lucrative segment.

Furthermore, the company has signed a new collaboration agreement with Arbor Biotechnologies. This deal worth up to US$1.2b will see Arbor receive an upfront cash payment, royalties on future net sales, and an investment in the form of convertible bonds. In return, it will provide proprietary CRISPR gene-editing technology for select diseases.

Ownership Structure

With a market capitalization of US$52b, Vertex Pharmaceuticals is rather large. We'd expect to see institutional investors on the register. Companies of this size are usually well known to retail investors, too.In the chart below, we can see that institutions are noticeable on the share registry.Let's delve deeper into each type of owner to discover more about Vertex Pharmaceuticals.

View our latest analysis for Vertex Pharmaceuticals

ownership-breakdown
NasdaqGS: VRTX Ownership Breakdown August 27th, 2021

Institutional Ownership is Dominant

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

As you can see, institutional investors have a fair amount of stake in Vertex Pharmaceuticals.This can indicate that the company has a certain degree of credibility in the investment community.

However, if multiple institutions change their view on a stock simultaneously, you could see the share price drop fast. It's therefore worth looking at Vertex Pharmaceuticals' earnings history below.

earnings-and-revenue-growth
NasdaqGS: VRTX Earnings and Revenue Growth August 27th, 2021

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences.

  • Hedge funds do not own vertex Pharmaceuticals .
  • BlackRock, Inc. is currently the largest shareholder, with 9.0% of shares outstanding.

In comparison, the second and third largest shareholders hold about 7.8% and 6.1% of the stock.

The shareholder registry shows that the top 15 shareholders control 50% of the ownership, meaning that no single shareholder has a majority interest in the ownership.

While studying institutional ownership data for a company makes sense, it also makes sense to study analyst sentiments to know which way the wind is blowing.Quite a few analysts cover the stock so that you could look into forecast growth quite easily.

CEO is Betting on the Stock

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least.Company management runs the business, but the CEO will answer to the board, even if they are a member of it.

Insider ownership is positive when it signals leadership is thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

Our information suggests that Vertex Pharmaceuticals Incorporated insiders own under 1% of the company.Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own US$94m of stock.

It is important to note that the CEO, Reshma Kewalramani, just bought US$1.9m worth of the stock on August 19, increasing her stake to 73.8k shares. Furthermore, director Bruce Sachs bought additional 15,000 shares 2 weeks earlier, worth US$3.0m.

It is positive to see insiders placing hefty bets as it shows high conviction in the stock recovery.

General Public Ownership

The general public holds an 8.6% stake in Vertex Pharmaceuticals, representing a relatively small class of owners.Thus, only a relatively small part of the company is held by retail investors. Since they are only a small group of shareholders in the company, they can do little if their interests are not prioritized.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Vertex Pharmaceuticals better, we need to consider many other factors.

I always like to check for a history of revenue growth . You can, too, by accessing this free chart of historic revenue and earnings in this detailed graph .

Ultimately the future is most important . You can access this free report on analyst forecasts for the company .

NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full-year annual report figures.

What are the risks and opportunities for Vertex Pharmaceuticals?

Vertex Pharmaceuticals Incorporated, a biotechnology company, engages in developing and commercializing therapies for treating cystic fibrosis.

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Rewards

  • Trading at 33.6% below our estimate of its fair value

  • Earnings are forecast to grow 10.05% per year

  • Earnings have grown 29% per year over the past 5 years

Risks

  • Large one-off items impacting financial results

View all Risks and Rewards

Share Price

Market Cap

1Y Return

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Further research on
Vertex Pharmaceuticals

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Simply Wall St analyst Stjepan Kalinic and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Stjepan Kalinic

Stjepan Kalinic

Stjepan is a writer and an analyst covering equity markets. As a former multi-asset analyst, he prefers to look beyond the surface and uncover ideas that might not be on retail investors' radar. You can find his research all over the internet, including Simply Wall St News, Yahoo Finance, Benzinga, Vincent, and Barron's.

About NasdaqGS:VRTX

Vertex Pharmaceuticals

Vertex Pharmaceuticals Incorporated, a biotechnology company, engages in developing and commercializing therapies for treating cystic fibrosis.

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Future Growth2
Past Performance4
Financial Health6
Dividends0

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