Vertex Pharmaceuticals Inc.
) fourth quarter 2013 loss came in at 64 cents per share
(including stock-based compensation expense), well wider than the
loss of 9 cents reported in the year-ago quarter. Fourth quarter
2013 loss was wider than the Zacks Consensus Estimate of a loss
of 57 cents.
Excluding the impact of stock-based compensation expense, fourth
quarter 2013 loss was 56 cents per share, well below the year-ago
earnings of 4 cents per share.
Revenues for the reported quarter increased 5.1% to $351.2
million. Revenues were above the Zacks Consensus Estimate of $232
million. Despite a significant fall in product revenues, the
fourth quarter revenues rose on the back of a cash payment of
$152 million from
Johnson & Johnson
). In Nov 2013, Vertex Pharma sold its product royalty rights to
its hepatitis C virus (HCV) treatment, Incivo (U.S. trade name:
Incivek), to Janssen Pharmaceutica N.V., a Johnson & Johnson
Full year loss (including stock-based compensation expense) was
$1.47 per share compared to year-ago earnings of 67 cents per
share. The Zacks Consensus Estimate was at a loss of $2.66 per
share. Excluding the impact of stock-based compensation expense,
2013 loss was 90 cents, well below the year-ago earnings of
$1.18. Revenues decreased 20.6% to $1.2 billion in 2013. Revenues
were above the Zacks Consensus Estimate of $1.1 billion.
The Quarter in Detail
Vertex Pharma's fourth quarter revenues consisted of sales from
Incivek ($19.3 million), Kalydeco ($109.5 million), royalty
revenues ($36.9 million) and collaborative revenues ($185.4
Incivek revenues declined 91.3% year over year and 77.5% on a
sequential basis. Revenues continued to be affected by a fewer
number of new patients seeking treatment. Other factors affecting
Incivek revenues included channel inventory reduction and a
reduced realized price due to changes in the payer mix.
Royalty revenues for the quarter consisted of revenues received
from partner Johnson & Johnson on Incivo sales in
international markets. Vertex Pharma will not receive any Incivo
royalties from the first quarter of 2014.
As far as Kalydeco (cystic fibrosis) sales are concerned, Vertex
Pharma reported an increase of 87.2% in the fourth quarter 2013
from the year-ago period. Rapid uptake among eligible patients in
Europe where reimbursement discussions concluded drove revenues.
Additional growth should materialize with the conclusion of
reimbursement discussions in Australia and Canada.
Adjusted (including stock-based compensation expense) research
and development (R&D) expenses for the quarter increased 8.8%
to $226.6 million. Fourth quarter 2013 adjusted (including
stock-based compensation expense) selling, general and
administrative (SG&A) expenses declined 34.6% to $71.6
Apart from the fourth quarter and full year 2013 results, Vertex
Pharma provided an update on its pipeline. The company announced
that VX-661 in combination with Kalydeco has received
Breakthrough Therapy designation by the U.S. Food and Drug
Administration (FDA). The VX-661-Kalydeco combination is being
developed for the treatment of patients suffering from cystic
fibrosis, who have two copies of the F508del mutation. The
company is currently finalizing the design for a phase II study,
which is expected to begin in the first half of 2014.
Vertex Pharma also announced encouraging top-line, 24-week
results from a phase IIb study evaluating VX-509 in
moderate-to-severe rheumatoid arthritis (RA) patients who
continued to receive stable doses of methotrexate during the
Meanwhile, the company is also working on expanding Kalydeco
label. The company is looking to get Kalydeco approved for
non-G551D gating mutation (decision expected by Mar 27, 2014).
Data from two phase III studies (TRAFFIC and TRANSPORT)
evaluating Kalydeco plus VX-809 for cystic fibrosis patients with
two copies of the F508del mutation, are expected in mid-2014.
Disappointing Revenue Guidance
Vertex Pharma expects total revenues for 2014 in the range of
$570 million to $600 million. Pre-earnings, the Zacks Consensus
Estimate for 2014 was $619 million, above the company's guidance
Vertex Pharma expects Kalydeco revenues in the range of $470
million to $500 million in 2014, much higher than the $371.3
million recorded in 2013.
The company continues to expect operating expenses (excluding
stock-based compensation expense) in the range of $900 million to
$950 million. Both R&D and SG&A expenses are expected to
decline in 2014 from 2013 levels. R&D expenses (excluding
stock-based compensation expense) are expected to lie in the
range of $665 million to $695 million, while SG&A expenses
(excluding stock-based compensation expense) are expected in the
range of $235 million to $255 million. First quarter 2014
operating expenses are expected to be lower than the sequentially
Vertex Pharma's fourth quarter results were disappointing with
the company posting a wider loss. Revenues were entirely driven
by a one-time payment and are expected to slide significantly in
the future given the plummeting Incivek revenues and the
discontinuation of Incivo royalties. The 2014 revenue guidance is
below our expectations.
Meanwhile, Kalydeco revenues should keep growing with launches in
Australia and Canada and expansion into additional patient
populations. Vertex Pharma has a series of pipeline related
events lined up in the coming quarters and we expect investor
focus to remain on pipeline progress.
Vertex Pharma carries a Zacks Rank #2 (Buy). Other stocks which
look attractive at current levels include
). Both carry a Zacks Rank #1 (Strong Buy).
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