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What's in Store for Vertex (VRTX) This Earnings Season?

Zacks Equity Research

Vertex Pharmaceuticals Inc. VRTX is scheduled to report first-quarter 2019 earnings results on Apr 30, 2019, after the market closes.

Shares of Vertex have risen 5.8% so far this year, outperforming the industry’s 2.2% increase.

 

The company’s surprise track has been impressive so far, having delivered an earnings beat in each of the trailing four quarters, the average being 23.60%. In the last reported quarter, Vertex came up with a positive surprise of 23.81%.

Let’s see, how things are shaping up for this quarter to be reported.

Factors at Play

Vertex’s cystic fibrosis (CF) drug portfolio has been performing well. However, a channel inventory build of approximately $10 million that occurred at the end of 2018 is expected to hurt first-quarter revenues. The same-period CF product revenues could therefore be sequentially lower than the fourth quarter of 2018 as potential growth from new patients is expected to be offset by channel inventory dynamics.

Sales growth in the fourth quarter was driven by a rapid uptake of the company’s newest CF medicine, Symdeko. The drug, a combination of tezacaftor and ivacaftor, has seen solid demand since its launch last year as more patients are resorting to treatment with the same. It is expected to be a significant contributor to sales in the to-be-reported quarter.

Meanwhile, continued label expansions and a resultant increase in patient population consistently drive sales for Vertex’s first CF medicine, Kalydeco (ivacaftor).

The drug was approved by the FDA and the European Commission for use in children aged from 12 months to two years with at least one of the specified nine mutations in the CFTR gene last August and November, respectively. This nod for an expanded patient population can boost the medicine’s sales in the upcoming quarterly release.

Sales of the second CF medicine, Orkambi, are expected to be persistently hurt by a switch in patient base to Symdeko from Orkambi as patients are discontinuing Orkambi to start treatment with Symdeko.

Meanwhile, a key focus of investors during the first-quarter conference call will be on the updates regarding Vertex’s investigational triple combination CF regimens.

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 studies investigating VX-445 in combination with tezacaftor and Kalydeco (ivacaftor) met the primary endpoint of a significant improvement in lung function of CF patients.Last November, the VX-659 phase III analysis also met the primary endpoint, 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 data for both regimens, which are expected to be available in the second quarter of 2019.

Accordingly, the company will file a regulatory application for the two regimens in the United States for addressing both the F508del/Min and F508del homozygous patient populations. The filing will take place in the third quarter of 2019 after including the 24-week data in the global submissions. An update is awaited at first-quarter earnings call.

The regulatory filing timeline is slightly deferred from the prior deadline to mid-2019 for selecting the drug to be petitioned for with the regulatory authorities.

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. Earlier this January, the FDA granted a Fast Track designation to CTX001 for the treatment of sickle cell disease, a severe hereditary form of anaemia. Earlier this month, the FDA assigned a Fast Track designation to CTX001 for the treatment of transfusion-dependent beta thalassemia (TDT), a severe genetic disease causing anemia.

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 probes on acute pain following bunionectomy surgery, pain from osteoarthritis of the knee and pain caused by small fiber neuropathy. Data from a phase IIb dose-ranging study of VX-150 on bunionectomy surgery is expected to be presented during the first half of 2019.

Investors remain optimistic about the study’s outcome as this could support a pivotal development of VX-150 in acute pain.

Earnings Whispers

Our proven model does not conclusively show that Vertex is likely to beat on earnings this reporting cycle. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.

Earnings ESP: Vertex has an Earnings ESP of +4.62% as the Most Accurate Estimate stands at $1.03 while the Zacks Consensus Estimate is pegged lower at 98 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Vertex has Zacks Rank #4 (Sell), which lowers the predictive power of ESP. Therefore, surprise prediction is left inconclusive for the stock this earnings season.

We caution against the Sell-rated stocks (# 4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Vertex Pharmaceuticals Inc. Price and EPS Surprise

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

 

Stocks That Warrant a Look

Here are a few health care stocks worth considering as our model shows that these have the right mix of elements to beat estimates this time around.

Aduro Biotech, Inc. ADRO has a Zacks Rank #2 and an Earnings ESP of +82.00%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Incyte Corp. INCY has an Earnings ESP of +14.47% and a Zacks Rank of 1. The company is scheduled to release first-quarter results on Apr 30, before the market opens.

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Vertex Pharmaceuticals Incorporated (VRTX) : Free Stock Analysis Report
 
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