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Vertex Pharmaceuticals Looks to Jump From 18,000 Patients to 68,000

Brian Orelli, The Motley Fool

Vertex Pharmaceuticals (NASDAQ: VRTX) continues its march to higher revenue with the launch of its newest double combination cystic fibrosis drug, Symdeko, as the biotech waits for its next major growth inflection point from a yet-to-be-named triple combination.

Vertex Pharmaceuticals results: The raw numbers

Metric

Q1 2019

Q1 2018

Year-Over-Year Growth

Revenue

$858 million

$641 million

34%

Income from operations

$277 million

$129 million

115%

EPS

$1.03

$0.81

27%

Adjusted EPS

$1.14

$0.76

50%

Data source: Vertex Pharmaceuticals.

What happened with Vertex Pharmaceuticals this quarter?

  • Sales of Symdeko drove most of the year-over-year increase in revenue. Management also noted that the launch in Germany was "off to a strong start" with $32 million in international sales, primarily from that country.
  • The international launch of Symdeko continues with a recent recommendation for the drug by Australia's Pharmaceutical Benefits Advisory Committee.
  • Sales of the Vertex's older medications fell year over year. Kalydeco was down slightly -- $244 million versus $250 million in the year-ago quarter. Sales of Orkambi dropped more -- $293 million, compared with $354 million -- but that was expected because some patients switch from Orkambi to Symdeko.
  • GAAP EPS includes taxes, but it's a noncash charge because Vertex is still working through its net operating losses from when it wasn't profitable. The company added over $300 million to its coffers in the quarter.
  • In March, Vertex released clinical trial data from the triple combination that adds VX-445 to two other drugs -- tezacaftor and ivacaftor -- which were strikingly similar to results for the triple combination that uses VX-659. The lack of differentiation led the company to wait for the 24-week, longer-term data for both combinations before making a decision on which triple combination to submit to the Food and Drug Administration.
Paper on clipboard with cystic fibrosis headline with stethoscope and medication on a table

Image source: Getty Images.

What management had to say

CEO Jeffrey Marc Leiden highlighted how much the company's sales should jump for the triple combination as it goes from treating approximately half of the patients with cystic fibrosis (CF) to 90% of the patient population:

I think one way to think about this is: we're currently treating about 18,000 patients, generating about $3 billion in revenue. As we go to a triple world, where the benefit to patients is greater, we certainly don't anticipate major decrease as in the price of our triple versus our other medicines, given its value. And so you can begin to sort of do some rough math around as we move from 18,000 to potentially 65,000 or 68,000 eligible patients, what that might look like across the world.

Leiden also laid out how the company has learned how to move quickly with CF, which should help as it develops drugs for other diseases:

The first thing is that we work on validated targets. With cell markers and biomarkers in pre-clinical development, they can predict clinical success, and that both increases the probability of success when we get into the clinic, but also speeds the work forward. Don't spend a lot of time in animal models. We move more rapidly into humans. And in all cases -- and we'll talk about our pipeline -- we have biomarkers in the clinic that predict early success with small clinical trials in CF. As you remember, 18- or 20-patient phase 2 trials pretty much tells us the answer. 

Looking forward

Management reiterated its guidance for product revenue of $3.45 billion to $3.55 billion. Further growth should come from an expected FDA approval of Symdeko in children ages 6 to 11 later this year. If the company can secure reimbursement in large European countries, such as England or France, it would help Vertex reach the top of the guidance or perhaps even blow through it.

On the pipeline front, the company plans to decide which triple combination to take forward this quarter, with an FDA submission expected in the third quarter, followed by a submission to European regulators later in the year.

While all eyes are on the triple combinations as the next large growth story, Vertex does have drugs further back in development, including a pain drug called VX-150 as well as VX-814, which treats a genetic disease called alpha-1 antitrypsin deficiency. Both drugs should produce data this year.

Further back in the clinic, Vertex and its partner, CRISPR Therapeutics, are testing CTX001, a gene-editing treatment for beta-thalassemia, and plan to start testing it in the middle of this year in patients with sickle-cell disease.

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Brian Orelli has no position in any of the stocks mentioned. The Motley Fool owns shares of CRISPR Therapeutics. The Motley Fool recommends Vertex Pharmaceuticals. The Motley Fool has a disclosure policy.