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No. of Recommendations: 2

I can appreciate the disappointment of long-term holders of ABSC stock. There is an emotional attachment and familarity that develops with time.

I have held VRTX for about a year (bought in at about $40, watched it go up and watched it go down). Because I own a number of other biotechs, I was having thoughts about selling VRTX, because my perception of the company has changed. When I bought it they seemed to be strongly focused on determining structure of proteins and using that knowledge to develop drugs. About 8 months ago they changed their website and now it is hard for me to see what is unique about the company. I note that the VRTX board has beed virtually dead for months. Although there is no arguing with pipeline, as a former holder of CRXA I know what happens when you run out of cash before you reach the finishline....I am expecting CRXA to be acquired by someone in the near future also, but that is another story.... I see VRTX as needing all the cash it can get to turn its pipeline into profits. ABSC may or may not be a net cash drain from the merged company. Although I have read the PR chat about how the ABSC technology will drive VRTX drug discovery, VRTX has been telling its holders for months that it was already and it alreadu has more targets than it has cash to fully support...If the ABSC technology was so important I do not see why it could not have been secured by contract or license. Acquiring ABSC seems to limit VRTX to one technology when flexibility might have been more desirable. I am not knocking ABSC, but ther are certainly other drug discovery platforms.

Bottomline, I consider myself a fairly well informed guy and I do not see what was compeling about this merger technically or financially. If I owned more of VRTX, I'd probably sell at least part of it.

In general, I do not see the value of a drug development company acquiring a pick-N-shovel company, they should just licsense the technology. (Why buy, when you can rent at a reasonable price.)

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No. of Recommendations: 1
Good points. However, I respectfully disagree. Assay development has become of increasing strategic importance to VRTX and will continue to do so. So much so that it no longer makes sense to license the technology. Good assays are more important than fast assays and ABSC has the goods.

Regarding VRTX's cash. You are right that the ABSC will not affect VRTX's cash burn rate. I follow VRTX closely and do not recall management saying that they have more targets now than they can fund the development of. To the contrary VRTX is looking to expland the pipeline significantly every year. Most important is that they will do so at a much lower cost than traditional drug development. Yes there is risk that VRTX will not bring drugs to market and will run out of cash in the future. This is the general risk of investing in all drug development companies. Is VRTX's risk greater than its peers? No easy answer. You can use clinical index or another metric as a first approximation but ultimately it comes down to a subjective assessment re: their technology and business model.


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Another reason for the buyout is to increase and or strengthen collaborations with other companies who my wish to do more business with you. ABSC has a very strong list of collaborators that can be seen here:

And, since ABSC is making a profit, before the use of this profit form R&D, this will not harm the balance sheet of VRTX and it is an all stock deal so will not effect the cash, but to increase it as VRTX picks up the cash of ABSC.

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