Vertex Pharmaceuticals Inc.
) posted second quarter 2012 earnings (including stock-based
compensation expense) of 32 cents per share, well below the Zacks
Consensus Estimate of 57 cents. The company's year-ago loss was 82
cents per share. Earnings were positively impacted by increased
Revenues for the reported quarter came in at $418.3 million,
above the year-ago figure of $114.4 million, but significantly
below the Zacks Consensus Estimate of $467 million. The
year-over-year improvement in revenue was mainly due to hepatitis C
virus (HCV) treatment, Incivek (telaprevir), which was launched in
the second quarter of 2011.
Vertex Pharma's second quarter revenues consisted of revenue
earned from the sale of Incivek ($327.7 million), Kalydeco ($45.5
million; launched in January 2012), royalty revenue (up 234.5% to
$33.5 million) and collaborative revenue (down 61.3% to $11.6
Incivek is the primary revenue contributor for Vertex Pharma,
which is looking to expand its label to drive growth.
Vertex Pharma's other marketed product, Kalydeco, recently
gained approval in the EU to treat patients with cystic fibrosis
(CF), aged 6 years and above and who have at least one copy of the
G551D mutation in the cystic fibrosis transmembrane conductance
regulator (CFTR) gene.
Royalty revenue for the quarter included $28.0 million received
Johnson & Johnson
) on sales of Incivo in Europe.
Vertex Pharma has exclusive US commercialization rights to
Incivek and has agreements with Johnson & Johnson and
Mitsubishi Tanabe Pharma for the commercialization of the drug
outside the US. While Johnson & Johnson is responsible for the
commercialization of Incivek outside North America and the Far
East, Mitsubishi Pharma markets it in certain areas of the Far East
While Incivek gained European approval under the trade name
Incivo during the third quarter 2011, the product is marketed in
Japan as Telavic.
Research and development (R&D) expenses for the quarter
increased 13.2% to $196.5 million, mainly due to continued
investment in development activities.
Second quarter 2012 selling, general and administrative
(SG&A) expenses shot up 21.6% to $117.5 million, as a result of
expansion activities related to the company's commercial
organization and costs related to the US launch and preparation
activities for the European launch of Kalydeco.
Vertex Pharma is currently enrolling for its phase IIb study of
VX-509 in moderate-to-severe rheumatoid arthritis (RA) patients.
The company plans to initiate additional studies with the candidate
in the beginning of 2013.
Vertex Pharma is also running a phase II study of VX-787, which
is being developed to treat influenza A, including recent H1
(pandemic) and H5 (avian) influenza strains. The company expects
phase II data in the second half of this year.
Incivek Guidance Cut
Vertex Pharma cut its 2012 Incivek revenue guidance to the range
of $1.1-$1.25 billion from the old guidance of $1.5-$1.7 billion.
The company attributed the downward trend in the number of patients
initiating HCV treatment as the reason for the curtailed guidance.
Vertex Pharma believes that the reason behind the downward trend is
mainly that physicians are adopting deferral treatment in some
patients. Another possible reason as per the company is the
increasing number of clinical trials in hepatitis C, which is
drawing increasing number of patients.
The company reiterated its operating expenses guidance of
CF drug Kalydeco is off to a strong start and should continue
performing well. But, the decreasing number of patients for Incivek
can be a matter of concern for the company.
We currently have a Neutral recommendation on Vertex Pharma. The
stock carries a Zacks #3 Rank (Hold rating) in the short run.
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