TheChek News Flow

Its blockbuster cystic fibrosis treatment costs $300,000 a year. Now Vertex wants to solve the opioid crisis

With revenues having more than doubled since 2019, to $10bn, US pharma group targets painkillers

So effective is Vertex Pharmaceuticals’ blockbuster cystic fibrosis (CF) drug, Trikafta, that studies project it could extend the lives of some young patients by up to 45 years. As such, it is not cheap: in the US, it costs $300,000 per patient, per year. But given the transformative nature of the treatment for a disease with a poor prognosis, the high list price has not held back sales for the pharma group.

And, now, the same team of scientists at Vertex’s San Diego laboratory have a second decades-long research project coming to fruition that could unlock another potentially huge market: non-opioid painkillers.

If patients live longer, “it’s good for business”, says David Altshuler, Vertex’s chief scientific officer. The number of people living with CF worldwide is now 105,000, up from 70,000 in 2012, according to estimates from US non-profit the Cystic Fibrosis Foundation — a rise that experts attribute both to Vertex’s drugs and improved diagnostics.

“If you take a life-threatening disease that shortens life and you have a transformative medicine, you not only have the benefit in the short run, but then people live a long time and it’s a positive thing for everyone,” adds Altshuler. These positive effects are evident in Vertex’s revenues, which more than doubled between 2019 and 2022, from $4.2bn to $8.9bn, the period covered by the FT-Statista ranking of the Americas’ 500 fastest-growing companies. Revenues then rose again, to $9.9bn, in 2023.

Since its launch in 2019, Trikafta has generated $26bn in revenues and is expected to hit $10bn in annual sales next year. The Boston-based biotech is also poised to seek regulatory approval this year for its fifth CF treatment, known as the vanza triple, which is also projected to generate nearly $10bn in annual sales, according to investment bank William Blair.

Vertex “is probably going to be one of the fastest-growing top lines outside of the weight-loss drugmakers [Eli] Lilly and Novo [Nordisk],” predicts Debjit Chattopadhyay, a healthcare analyst at Guggenheim Securities. “I’d put Vertex in my pharma top three [to invest in].” This year, Vertex’s market capitalisation surpassed $100bn for the first time.

Daniel Lyons, a portfolio manager at Janus Henderson, a top-25 Vertex shareholder, says the biotech faces “no real competitive threats” to its dominance in CF, with patents extending until at least 2039.

“That gives the company an incredibly profitable base business and they’ve basically reinvested a significant amount of those profits in their pipeline.”

Scientists at Vertex’s laboratory in San Diego have spent decades on non-opioid painkiller research © AP

Altshuler says Vertex learnt the importance of continued investment in research from the troubled rollout of its hepatitis C treatment, Incivek. After becoming the fastest drug ever to hit $1bn in annual sales, it was rapidly supplanted by a superior treatment from rival Gilead. “It’s never the case that the first or second medicine is the best — but most companies think that no one’s going to keep with them so they stop,” he says. “We learnt from that: never assume you’re going to win; keep building better and better medicine.”

However, Vertex has come under fire for the hefty price tag of Trikafta, which has meant only 12 per cent of CF patients worldwide have been prescribed the treatment, according to research published in the Journal of Cystic Fibrosis in 2022.

The researchers concluded that “the medicines are so expensive they are essentially unavailable unless reimbursed by government or health system authorities”. Altshuler says the “vast majority” of CF patients worldwide who meet the prescription criteria for Trikafta have been prescribed the drug.

The challenge for Vertex is whether it can reproduce its success in CF in other diseases. The company received regulatory approval last year for the first ever treatment based on Crispr gene editing, which targets sickle cell disease and beta thalassaemia. It also paid $4.9bn this month for Alpine Immune Sciences, which is developing a treatment for an autoimmune kidney disease.

But it is a new generation of non-addictive painkillers that analysts say are the most promising drugs in Vertex’s pipeline.

Vertex hopes to receive US Food and Drug Administration approval for a non-opioid painkiller, known as VX-548, this year after a late-stage clinical study showed it lowered pain with a far lower incidence of side-effects such as nausea and vomiting — and without the risk of addiction.

“Each year, we’re layering on evidence that we’re going to crack another disease open,” says Stuart Arbuckle, Vertex’s chief operating officer. He says Vertex’s $4.8bn R&D budget is not about maximising “shots on goal”; it is instead focused on “a set number” of diseases where Vertex has “super-high conviction that they’re going to work”.

Vertex’s acute pain drug is projected to generate $2.3bn in annual sales by 2030, according to analysts’ consensus forecasts, but the much bigger opportunity is an approved non-opioid painkiller that can serve as an alternative to the prescription opioids that have led to the deaths of hundreds of thousands of Americans.

“Wall Street is all over the place with how to handle chronic pain, because of the dirtiness of the opioid crisis and because people have gotten bullish on pain launches and the pain launches have failed,” says a person at a biotech fund with a shareholding in Vertex.

To overcome competition from cheap generic opioids, Vertex has hired a salesforce of several hundred people — much larger than its team focused on CF — to work on the product’s launch.

Some analysts say non-opioid pain medication could be the next blockbuster class of drugs, with an impact on the industry similar to the weight-loss medications. “Pain could be analogous to another GLP-1 scenario,” says Hartaj Singh, a biotech analyst at equity research company Oppen­heimer — referring to the hormone targeted by the weight-loss drugs. “If you can go from acute to chronic pain, we could be talking about a $10bn-$20bn revenue potential.”

Altshuler recalls how experts dismissed GLP-1s. “What they said . . . ten years ago, was that no medicines for diabetes and obesity are needed — they’re all generic, nothing really works, it’s not going to happen. That turned out to be untrue . . . I can’t promise but, to me, [the pain franchise] looks like [CF] in 2012.”

BHP, whose £31bn bid for Anglo has been rejected, faces fraught politics and complicated history in the country

South Africa’s mining minister was campaigning in Rustenburg, the northern capital of the country’s platinum belt, when news broke of BHP’s £31bn proposal to take over Anglo American.

Five weeks before critical general elections for the ruling African National Congress government, Gwede Mantashe was quick to shoot down the approach, telling the Financial Times that South Africa’s previous experience with BHP was “not positive”. The Australian miner “never did much for South Africa,” he added.

The ANC veteran’s barbed remarks — even as he was out championing the sector that has been crucial to propping up President Cyril Ramaphosa’s government — underscores what a sensitive matter such a takeover would be for Pretoria.

Anglo, whose largest investor is South African state entity Public Investment Corporation (PIC), on Friday rejected BHP’s offer as “highly unattractive”.

The Johannesburg-listed group has spent more than $6bn in the country in the past five years and has been a driving force behind national business efforts to help fix troubled state-owned enterprises Eskom and Transnet, implement market reforms in electricity and logistics, and revive economic growth. For bankers and advisers, this makes Anglo’s birthplace a “poison pill” against unsolicited takeovers.

The BHP offer hinged on exiting two of the company’s prized South African assets, which have been laid low by the country’s rolling blackouts and freight chaos in getting iron ore to world markets.

“Anglo American is a local mining story that goes back more than 100 years in South Africa,” said Zwelakhe Mnguni, chief investment officer for the Johannesburg-based Benguela Global Fund Managers. “There are fewer and fewer companies that believe in the country, and have invested in it like Anglo. It has a rapport with the government, and understood the lay of the land, and if this vanishes, I don’t see BHP filling that gap.”

Few companies have shaped a nation’s history the way that Anglo has South Africa’s since the second half of the 20th century. BHP’s offer comes up against a legacy that began in 1917, when Ernest Oppenheimer, a German-born diamond trader, raised £1mn to found the Anglo-American Corporation to mine gold around Johannesburg.

In South African business circles, the news hit home sharply. For decades, Anglo dominated corporate life, owning a large part of the Johannesburg Stock Exchange until the end of the Apartheid era, with its tentacles reaching into sugar, wider industry, and even media. The group still owns a wine estate, Vergelegen, in the hills of the Western Cape outside Cape Town.

“South Africa as a country may feel it’s losing a national champion to an international foe,” said Dawid Heyl, a portfolio manager at Cape Town-based asset manager Ninety One, which holds more than 2 per cent of Anglo American.

BHP has a complicated history in South Africa. The Melbourne-based miner demerged its operations in the country in 2015 as South32, in effect reversing its 2001 merger with Billiton. “What we remember is that it dumped coal and then created a small company called South32, which is now marginal,” Mantashe warned.

Rio Tinto, which still owns titanium dioxide miner Richards Bay Minerals in the eastern KwaZulu-Natal region, has also tried to reduce its exposure to risky jurisdictions such as South Africa.

BHP is also battling widespread sentiment that it is trying to get Anglo on the cheap. “It’s something of a cheeky offer,” Heyl said.

Many UK investors would be reluctant to keep shares in Anglo’s Kumba Iron Ore and its Amplats platinum unit, which BHP wants to exclude from any takeover offer, because of limits on their South African exposure. This is giving them extra impetus to demand a higher price for Anglo’s other assets to make up for the exit.

Analysts note that Anglo, which is currently cutting thousands of jobs in South Africa to become more profitable, has not been immune from government criticism. “They have stolen our money,” Mantashe said in 2013, after Amplats announced a cut of 400,000 ounces in platinum production, threatening to revoke licences of the company that remains one of the country’s top private employers.

“The government doesn’t really know what it wants here — if they wanted jobs, it would have mollycoddled Anglo 30 years ago instead of attacking them nonstop,” said Peter Major, director at Mining for Modern Corporate Solutions. “But . . . you’ve got a bunch of inexperienced people who all have different objectives, and few of them have really been in a corporate world. So policy is very mixed here.”

PIC has a mandate to foster the country’s development including a long-term future for mines that provide jobs and skills in a country with a one-third jobless rate.

Companies buying into South Africa’s mining sector “have systematically got rid of the South African assets, so really the question we should be asking our minister is why do these companies keep on getting rid of South African assets”, said Bruce Williamson, a mining analyst with Integral Asset Management.

Ultimately, the government may find its hands tied in trying to stop any deal going ahead, analysts suggested.

“You can bet the government is going to get on a soapbox, but they’re going to find out how little control they have over this,” said Major. “And that’s a product of their own making.”

Thyssenkrupp said its discussing the potential acquisition by EP of a further 30% stake in the steel business with the aim of forming an equally owned joint venture

Thyssenkrupp TKA 8.73%increase; green up pointing triangle agreed to sell a 20% stake in its steel business to Czech billionaire Daniel Kretinsky’s EP Corporate Group for an undisclosed sum, settling on a partial divestment of the unit after yearslong efforts to offload it.

The German industrial group said Friday that the two companies are discussing the potential acquisition by EP of a further 30% stake in the steel business with the aim of forming an equally owned joint venture.

The deal looks set to open a new chapter for Thyssenkrupp’s steel business. For years, the company had been seeking an exit from steelmaking, which dragged its financial results of late.

An attempt by Thyssenkrupp to sell the business to Britain-based Liberty Steel Group fell through in 2021 after the parties failed to reach an agreement. A prior deal with India’s Tata Steel was blocked by European Union competition authorities.

For the year ended Sept. 30, the company booked a write-down of 2.11 billion euros ($2.26 billion) that it said it reflected mainly worsening conditions at its European steel operations.

Thyssenkrupp earlier this month said it would cut jobs and scale back productions at its steel business in response to market challenges, with weak demand, high energy costs and rising competition from Asia hurting the business.

DAX:

MDAX:

SDAX: