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Can CF Drugs Drive Growth for Vertex (VRTX) in Q3 Earnings?

Zacks Equity Research

Vertex Pharmaceuticals Incorporated VRTX is scheduled to report third-quarter 2019 results on Oct 30, after the market closes.

Vertex boasts an excellent earnings surprise history, surpassing expectations in each of the trailing four quarters, the average being 17.87%. In the last reported quarter, the company delivered a positive surprise of 22.33%.

Shares of Vertex have rallied 17.3% so far this year versus the industry’s 2.5% decrease.

Let’s see, how things are shaping up for the quarter to be reported.

Factors at Play

Vertex’s cystic fibrosis (CF) drug portfolio has been performing well. Sales growth in the last reported quarter was driven by a rapid uptake of the company’s newest CF medicine Symdeko, a trend that most likely continued in the third quarter. The drug, a combination of tezacaftor and ivacaftor, has seen solid demand since its launch last year as more patients are resorting to treatment with the same.

In June this year, the FDA approved Symdeko to treat children (aged from six to 11 years) affected by CF with certain mutations in the CFTR gene. This label expansion might reflect on incremental sales in the to-be-reported results.

Moreover, Vertex’s other two CF medicines Kalydeco (ivacaftor) and Orkambi are expected to have contributed to the company’s top line in the to-be-reported quarter.

Though Kalydeco and Orkambi sales were initially hit by a switch in the respective patient base to Symdeko, management had stated on second-quarter conference call that owing to new reimbursement agreements in the ex-U.S. markets and latest regulatory approvals for children, new patients are starting treatment with Kalydeco and Orkambi. It remains to be seen whether this positive trend has continued in the third quarter or not.

Investors will be keen to get an update during third-quarter earnings’ call on Vertex’s investigational gene editing treatment CTX001, which is being evaluated in early-to-mid-stage studiesfor the two devastating diseases, namely sickle cell disease and thalassemia. Notably, Vertex has a partnership with CRISPR Therapeutics CRSP to develop CTX001.

Key Developments

Earlier this month, Vertex announced that the FDA has approved its triple combination regimen Trikafta (elexacaftor/tezacaftor/ivacaftor and ivacaftor) for the treatment of CF in patients aged 12 years and older, who have at least one copy of the F508del mutation in their CFTR gene. The approval of Trikafta, which can treat about 90% of total CF patients, came five months before the PDUFA date in March 2020.

We expect management to provide an update on this recent nod and discuss the launch activities for Trikafta during the upcoming investors’ call.

Meanwhile, in September 2019, Vertex inked an all-cash deal to acquire the privately-held biotech Semma Therapeutics for $950 million. This acquisition will add pre-clinical cell-based treatment candidates for type I diabetes to Vertex’s pipeline. The deal is expected to close in the fourth quarter of 2019.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for Vertex this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But this is not the case here. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.

Earnings ESP: Vertex has an Earnings ESP of -0.48%.

Zacks Rank: Vertex sports a Zacks Rank of 1, which increases the predictive power of ESP. However, its negative ESP leaves surprise prediction inconclusive.

Vertex Pharmaceuticals Incorporated Price and EPS Surprise

Vertex Pharmaceuticals Incorporated Price and EPS Surprise

Vertex Pharmaceuticals Incorporated price-eps-surprise | Vertex Pharmaceuticals Incorporated Quote

Stocks That Warrant a Look

Here are a few healthcare stocks worth considering as our model shows that these have the right mix of elements to beat estimates this time around.

Incyte Corporation INCY has an Earnings ESP of +1.15% and is Zacks #1 Ranked. The company is scheduled to release results on Oct 29. You can see the complete list of today’s Zacks #1 Rank stocks here.

Amgen, Inc. AMGN has an Earnings ESP of +0.50% and a Zacks Rank #3. The company is scheduled to release results on Oct 29.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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