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Vertex (VRTX) Q4 Earnings Beat on Solid CF Products Sales

Zacks Equity Research

Vertex Pharmaceuticals Incorporated VRTX reported fourth-quarter 2018 earnings per share of $1.30 which beat the Zacks Consensus Estimate of $1.05. Moreover, the figure came ahead of the year-ago earnings of 61 cents. Strong cystic fibrosis (CF) product revenues led to higher profits in the reported quarter.

Vertex’s revenues logged $870.1 million in the fourth quarter, also surpassing the Zacks Consensus Estimate of $822 million. The company’s sales surged 33.5% year over year, driven by the rapid uptake of its newest CF medicine, Symdeko, in the United States and the impact of the label expansion of Kalydeco.

Shares of Vertex were up almost 3% in after-hours trading following its earnings announcement on Tuesday. In fact, the stock has rallied 17.5% in the past year against the industry’s decrease of 17.1%.

CF Drugs Sales Remain Strong

Vertex’s fourth-quarter revenues grossed $868.2 million in sales of its CF products such as Kalydeco (ivacaftor), Orkambi (lumacaftor-ivacaftor) and Symdeko (a combination of tezacaftor and ivacaftor) plus collaborative and royalty revenues of $1.9 million.

Total CF product revenues rose 39.8% year over year, mainly driven by the rapid uptake and strong demand of its newest CF medicine, Symdeko, in the United States. The drug was approved both in the United States and Europe last February and November, respectively. Symdeko is marketed under the trade name of Symkevi in the EU.

Symdeko generated sales of $294 in the reported quarter, reflecting an increase of 15.3% sequentially. The drug has seen solid demand since its launch as more patients are resorting to treatment with the same. The company expects to witness a rise in Symdeko revenues in future quarters.

Kalydeco sales inched up 1.2% to $259 million year over year, driven by continued label expansions wherein the drug’s eligible patient population has grown. The drug was approved by the FDA and the European Commission (EC) for use in children aged 12 months to two years with at least one of specified nine mutations in the CFTR gene last August and November, respectively.

Orkambi sales declined 13.7% year over year to $315 million due to a switch in patient base to Symdeko from Orkambi as patients are discontinuing Orkambi to start treatment with Symdeko. Last month, the EC granted an approval to a regulatory application seeking Orkambi’s label expansion for its use in 2-5 year-old children suffering CF, who have two copies of the F508del mutation. Orkambi was approved by the FDA for the same patient population last August.

Costs Rise

Adjusted research and development (R&D) expenses increased 10.4% to $275 million in the fourth quarter, primarily due to the advancement of the company's portfolio of triple combination regimens for CF.

Adjusted selling, general and administrative (SG&A) expenses escalated 17.9% to $125 million in the reported quarter due to investments made in supporting CF patients’ treatment, globally.

2019 Revenue Guidance

Vertex provided 2019 outlook for CF products and combined operating costs.

The company expects total full-year revenues for CF products to be 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 range of $1.65-$1.70 billion.

The increase in operating expense is due to estimated costs related to development and the potential launch of triple combinations regimen for treating CF.

Pipeline & Regulatory Updates

Vertex is evaluating two next-generation CFTR correctors (VX-659 and VX-445) in phase III evaluations as part of a triple combo regime with tezacaftor and ivacaftor. During the reported quarter, two phase III studies evaluating VX-659 in combination with tezacaftor and Kalydeco met the primary endpoint of improvement in lung function amid patients afflicted with CF.

Meanwhile, enrollment in the VX-445 phase III studies is now complete with the top-line data predicted to be presented during the first quarter of 2019. A regulatory submission in the United States for one of the two regimes is planned for mid-2019.

If the triple-combo therapies are successful, Vertex can then address a significantly larger CF patient population — almost 90% of patients with CF — in the future.

Vertex has collaborated with CRISPR Therapeutics CRSP to evaluate an investigational gene editing treatment, CTX001, for two devastating diseases, namely sickle cell disease and thalassemia. Last month, the FDA granted a Fast Track designation to CTX001 for the treatment of sickle cell disease, a severe hereditary form of anaemia. Also, a phase I/II program on CTX001 for treating sickle cell disease and beta-thalassemia is currently underway.

Last December, Vertex announced positive results from a phase II study, evaluating its NaV1.8 inhibitor — VX-150 — on patients afflicted with pain caused by small fiber neuropathy. Also, the FDA granted a Breakthrough Therapy status to VX-150 for treating moderate-to-severe acute pain. Data from this phase IIb dose-ranging study is expected in the first half of 2019.

Vertex Pharmaceuticals Incorporated Price, Consensus and EPS Surprise

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

Zacks Rank & Stocks to Consider

Vertex currently carries a Zacks Rank #3 (Hold). Two better-ranked stocks in the biotech sector are Celgene Corporation CELG and Ligand Pharmaceuticals Incorporated LGND, both sporting a Zacks Rank #1 (Strong Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.

Celgene’s earnings estimates have been revised 3.4% upward for 2019 over the past 60 days.

Ligand’s earnings estimates have moved 2.9% north for 2019 over the past 60 days.

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