Why Vertex Shares Skyrocketed

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of drug developer Vertex Pharmaceuticals (NAS: VRTX) soared a whopping 45% today on news that its cystic fibrosis drug Kalydeco, in combination with its experimental VX-809, led to improved lung function in a mid-stage study.

So what: About 70,000 people live with cystic fibrosis worldwide, so the news naturally triggers excitement over the two-drug therapy's blockbuster prospects. Vertex shares were crushed in late 2012 on signs that competitors were quickly gaining ground in the hepatitis C treatment space, but today's massive surge has the stock back near its 52-week highs.

Now what: Vertex said it would look to begin clinical trials for the combination therapy near the end of 2012 or early 2013. "These data did exceed our expectations," Vertex CEO Jeff Leiden said on a conference call with analysts. "They are leading us to accelerate 809 and Kalydeco into pivotal trials." I'm always leery about buying into a rally as spectacular as this one, but given the therapy's legitimate multibillion-dollar sales potential, multibagger returns from this point aren't out of the realm of possibility.

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At the time thisarticle was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Motley Fool newsletter services have recommended buying shares of Vertex. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

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