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Can Vertex (VRTX) Withstand the Coronavirus Impact on Q1 Earnings?

Zacks Equity Research
·4 min read

Vertex Pharmaceuticals Incorporated VRTX is scheduled to report first-quarter 2020 results on Apr 29, after the market closes.

The company’s surprise record is pretty impressive with earnings estimate beat in each of the trailing four quarters, the average being 21.76%. In the last reported quarter, Vertex delivered a positive earnings surprise of 40.50%.

Shares of Vertex have rallied 22.4% in the year so far compared with the industry’s 1.4% increase.

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 newly-launched CF medicine Trikafta, a trend that most likely continued in the first quarter.

Last October, the FDA approved the triple combination regimen Trikafta (elexacaftor/tezacaftor/ivacaftor and ivacaftor) for the treatment of CF in patients aged 12 years and above with at least one copy of the F508del mutation in their CFTR gene.

Among Vertex’s other CF medicines, Symdeko (a combination of tezacaftor and ivacaftor), has seen solid demand since its launch in 2018 as more patients are resorting to treatment with the same. Last 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 reflected on incremental sales in the last reported quarter, a trend that most likely continued in the first quarter as well.

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

Further, international sales of its CF drugs might have been higher in the first quarter and the momentum is likely to continue in the quarters ahead this year owing to recent reimbursement approvals across key countries like England and France.

Key Developments

Last month, Vertex announced that it will halt enrollment in certain ongoing studies and may delay any new evaluation, depending on the disease, stage of development and the type of study. The decision was taken to reduce the burden on the healthcare system and allow doctors and healthcare facilities ample time to focus solely on efforts to combat the currently-plaguing coronavirus disease (COVID-19).

However, management stated that it will try to ensure continuity of the ongoing clinical studies by setting up virtual clinic visits and home delivery of the study drug wherever possible. An update on this is expected during the first-quarter conference call,

On a positive note, in March 2020, Vertex announced that the coronavirus outbreak hitherto had no impact on its supply chain and that the company will be able to continue supplying its medicines. The company retained its 2020 guidance provided in January.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for Vertex this time around. 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 that is not the case here.

Earnings ESP: Vertex has an Earnings ESP of -5.31%, representing the difference between the Most Accurate Estimate of $1.70 and the Zacks Consensus Estimate of $1.79. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Vertex has a Zacks Rank #2.

Vertex Pharmaceuticals Incorporated Price and EPS Surprise

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 to Consider

Here are some biotech stocks that have the right combination of elements to beat on earnings this reporting cycle:

Abeona Therapeutics Inc. ABEO has an Earnings ESP of +9.52% and a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Gilead Science GILD has an Earnings ESP of +20.00% and a Zacks Rank #3. The company is scheduled to release results on Apr 30.

Alexion Pharmaceuticals ALXN has an Earnings ESP of +0.83% and a Zacks Rank of 2. The company is scheduled to release results on May 6.

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