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Vertex (VRTX) Q1 Earnings and Revenues Surpass Estimates

Zacks Equity Research

Vertex Pharmaceuticals Incorporated VRTX delivered first-quarter 2019 earnings per share of $1.14, beating the Zacks Consensus Estimate of 98 cents. Moreover, the figure came ahead of the year ago earnings of 76 cents. Strong cystic fibrosis (CF) product revenues led to higher profits in the reported quarter.

Vertex’s revenues logged $858.4 million in the first quarter, also surpassing the Zacks Consensus Estimate of $851.04 million. The company’s sales surged 34% year over year, driven by the rapid uptake of its newest CF medicine, Symdeko, in the United States.

However, first-quarter revenues declined sequentially due to a channel inventory build that occurred at the end of 2018.

Shares of Vertex have inched up 2% so far this year, underperforming the industry’s increase of 4.7%.

Quarter in Detail

Vertex’s first-quarter top line comprised CF product revenues of $857.2 million plus collaborative and royalty revenues of $1.18 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 augmented 34.4% 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 is marketed under the trade name of Symkevi in the EU.

Symdeko generated sales of $320 million in the reported quarter, reflecting an increase of 8.8% sequentially. 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 in Germany after the drug got approved in the EU last November.

On first-quarter conference call, management stated that it expects additional patients to start treatment with Symdeko in the United States as well as in the EU. Vertex plans for Symdeko’s label expansion to include younger patients, aged from six to 11 years in the United States.

Meanwhile, Kalydeco sales dipped 2.4% to $244 million year over year. Along with its earnings release, Vertex announced that the FDA has approved Kalydeco for the treatment of CF in children, aged six to less than 12 months with at least one mutation in the CFTR gene.

Orkambi sales declined 17.2% year over year to $293 million due to a switch in the patient base to Symdeko from Orkambi as subjects are increasingly discontinuing the latter to start treatment with the former.

Costs Rise

Adjusted research and development (R&D) expenses increased 5.1% to $273.2 million in the first quarter, primarily due to Vertex's pipeline expansion for CF and the other new disease areas.

Adjusted selling, general and administrative (SG&A) expenses escalated 14.8% to $114.3 million in the reported quarter due to investments made in supporting CF patients’ treatment, globally.

2019 Revenue Guidance

Vertex maintained its 2019 outlook for CF products and the combined operating costs.

The company expects total revenues for CF products in the range of $3.45-$3.55 billion.

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.

Pipeline & Regulatory Updates

Vertex is evaluating two next-generation CFTR correctors (VX-659 and VX-445) in phase III studies as part of a triple combination with tezacaftor and ivacaftor. It is examining both the combinations in two separate programs for treating F508del/Min and F508del homozygous patients.

In March 2019, Vertex announced that two phase III programs investigating VX-445 in combination with tezacaftor and Kalydeco (ivacaftor) met the primary endpoint of a significant improvement in lung function of the CF patients. Last November, the VX-659 phase III analysis also achieved the primary goal, showing a significantly better lung function.

Given the four-week data similarity between the studies on the two regimens, the management in March stated that the company has decided to wait for the final 24-week results from both regimens, which are expected to be available during the second quarter of 2019.

Accordingly, the company will file a regulatory application for the better regimen in the United States in third-quarter 2019 after including the 24-week outcomes in the global submissions. A regulatory filling in Europe is expected in the fourth quarter of 2019.

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. The FDA has granted a Fast Track designation to CTX001 for the treatment of sickle cell disease and transfusion-dependent beta thalassemia (TDT).

A key non-CF pipeline candidate in Vertex’s portfolio is VX-150, a NaV1.8 inhibitor. The candidate has produced positive results in phase II studies on acute pain following bunionectomy surgery besides pain from osteoarthritis of the knee and pain caused by small fiber neuropathy.

Vertex also initiated a phase I study on its first small molecule corrector, VX-814, for the treatment of alpha-1 antitrypsin (AAT) deficiency last December. The candidate enjoys a Fast Track Designation from the FDA.

Vertex Pharmaceuticals Incorporated Price, Consensus and EPS Surprise

Vertex Pharmaceuticals Incorporated Price, Consensus and EPS Surprise | Vertex Pharmaceuticals Incorporated Quote

Zacks Rank & Other Stocks to Consider

Vertex currently carries a Zacks Rank #2 (Buy). Other top-ranked stocks from the healthcare sector include Merus N.V. MRUS and PDL BioPharma, Inc. PDLI, both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Merus’ loss per share estimates have been narrowed 28% for 2019 and 30.7% for 2020 over the past 60 days. The stock has rallied 10.3% year to date.

PDL BioPharma’s earnings estimates have been revised 100% upward for 2019 and 30% for 2020 over the past 60 days. The stock has gained 12.7% year to date.

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