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Vertex (VRTX) Beats on Q2 Earnings, Ups CF Product Sales View

Zacks Equity Research

Vertex Pharmaceuticals Incorporated VRTX delivered second-quarter 2019 earnings per share of $1.26, beating the Zacks Consensus Estimate of $1.03. Moreover, the figure came ahead of the year-ago earnings of 94 cents. Strong cystic fibrosis (CF) product revenues led to higher profits in the reported quarter.

Vertex’s revenues logged $941.2 million in the second quarter, also surpassing the Zacks Consensus Estimate of $884 million. The company’s sales increased 25% year over year, driven by the rapid uptake of its newest CF medicine, Symdeko, in the United States and Germany. Symdeko is marketed under the trade name Symkevi in the EU.

Shares of Vertex were up almost 1% in after-hours trading following the earnings announcement on Wednesday. In fact, so far this year, the stock has inched up 0.6% compared with the industry’s rise of 0.1%.

Last week, Vertex appointed Dr. Reshma Kewalramani as its new president and CEO, replacing the former chairman, president and CEO Dr. Jeffrey Leiden, who will now take responsibility as the board’s executive chairman effective Apr 1, 2020.

Quarter in Detail

Vertex’s second-quarter top line comprised CF product revenues of $940.3 million plus collaborative and royalty revenues of $0.91 million. The company markets three CF medicines, namely Kalydeco (ivacaftor), Orkambi (lumacaftor-ivacaftor) and Symdeko (a combination of tezacaftor and ivacaftor).

Total CF product revenues rose 25.4% year over year, mainly driven by the speedy adoption and strong demand for its newest CF medicine Symdeko in the United States. The drug was approved both in the United States and Europe last year.

Symdeko generated sales of $362 million in the reported quarter, reflecting an increase of 94.6% year over year. The drug has seen strong demand since its launch as more patients are resorting to treatment with the same. Symdeko is off to a flying start in the ex-U.S. markets, especially with its recent launch in Germany.

In June, the FDA approved Symdeko to treat children with CF aged from six to 11 years with certain mutations in the CFTR gene. This label expansion should boost the drug’s sales in the future quarters. Vertex plans to submit a marketing application in Europe in the second half of 2019 for the given patient population.

Meanwhile, Kalydeco — Vertex’s first CF medicine — generated sales of $262 million in the reported quarter, reflecting an increase of 3.6% year over year.

Vertex’s second CF medicine, Orkambi, generated sales of $316 million in the reported quarter, reflecting an increase of 1.6% year over year.

On second-quarter conference call, management stated that owing to new reimbursement agreements in countries outside the United States and new regulatory approvals for children, Vertex continues to see new patients starting treatment with Kalydeco and Orkambi.

Notably, Kalydeco and Orkambi were initially hit by a switch in their patient base to Symdeko.

Costs Rise

Adjusted research and development (R&D) expenses decreased 3.4% to $271.2 million in the second quarter.

Adjusted selling, general and administrative (SG&A) expenses escalated 14.5% to $122.7 million in the reported quarter.

2019 Revenue Guidance

Vertex raised its 2019 outlook for sales from CF products and the combined operating costs.

The company now expects total revenues for CF products in the range of $3.60-3.70 billion, which was previously expected in the band of $3.45-$3.55 billion.

However, combined adjusted research and development (R&D) plus selling, general and administrative (SG&A) expenses in 2019 are anticipated in the band of $1.65-$1.70 billion, which is unchanged from the previous view.

Pipeline & Regulatory Updates

Last month, Vertex submitted a new drug application (NDA) to the FDA for its triple combination regimen comprising VX-445 (elexacaftor), tezacaftor and ivacaftor to treat CF patients aged 12 years and older. If approved, the triple combination regimen will help Vertex address a significantly larger CF patient population — almost 90% of patients with CF — in the future. A similar regulatory filling in Europe is expected in the fourth quarter of 2019.

Vertex chose the VX-445 triple combination regimen over the VX-659 + tezacaftor + ivacaftor triple regimen for regulatory submission, based on a detailed analysis of multiple factors, which showed that the VX-445 triple regimen will be beneficial to a larger patient population compared to the VX-665 combo.

Another phase III study is currently enrolling patients to evaluate the triple combination of VX-445, tezacaftor and ivacaftor in children aged from six to 11 years.

Vertex’s non-CF pipeline, though in early stage, looks interesting with treatments being developed for beta thalassemia, sickle cell disease, alpha-1 antitrypsin deficiency (AAT), APOL1-mediated kidney diseases and pain.

Notably, Vertex has a partnership with CRISPR Therapeutics CRSP to evaluate an investigational gene editing treatment, CTX001, for the two devastating diseases — sickle cell disease and thalassemia. Phase I/II studies on CTX001 in adult patients with transfusion-dependent b-thalassemia and sickle cell disease are currently ongoing.

In June, Vertex announced the expansion of its collaboration with CRISPR Therapeutics and the acquisition of the privately held Exonics Therapeutics to boost its gene editing capabilities to develop novel therapies for Duchenne muscular dystrophy (DMD) and Myotonic dystrophy type 1 (DM1).

Vertex is advancing VX-814 into a phase II dose-ranging study for the treatment of AAT deficiency for patients with two Z mutations. Vertex plans to have clinical data from this study in 2020. The company also has a second AAT corrector, VX-864, in phase I development.

On the conference call, Vertex announced that it initiated a phase I study on VX-961, a NaV1.8 inhibitor, to address various pain indications. Recently, Vertex also began a phase 1 study on VX-147 for the treatment of APOL1-mediated focal segmental glomerulosclerosis (FSGS) and other serious kidney diseases.

Vertex Pharmaceuticals Incorporated Price, Consensus and EPS Surprise

Vertex Pharmaceuticals Incorporated Price, Consensus and EPS Surprise

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

Zacks Rank & Stocks to Consider

Vertex currently sports a Zacks Rank #1 (Strong Buy). Other top-ranked stocks from the healthcare sector include Acorda Therapeutics, Inc. ACOR and Repligen Corporation RGEN, both carrying a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Acorda’s loss per share estimates have been narrowed 2.2% for 2019 and 1.3% for 2020 over the past 60 days.

Repligen’s earnings estimates have been revised 4.3% upward for 2019 and 3.6% for 2020 over the past 60 days. The stock has surged 79% year to date.

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