Can Trikafta Drive Vertex's (VRTX) Revenues in Q3 Earnings?

We expect Vertex Pharmaceuticals Incorporated VRTX to surpass expectations when it reports third-quarter 2020 results on Oct 29, after the market closes.

The company’s surprise record is pretty impressive with an earnings beat in each of the trailing four quarters, the average being 27.71%. In the last reported quarter, Vertex delivered an earnings surprise of 22.54%.

Shares of Vertex have lost 3.3% in the year so far compared with the industry’s 2.8% decrease.

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

Factors at Play

Revenue growth in the last reported quarter was driven by a rapid uptake of the company’s newly-launched cystic fibrosis (CF) medicine Trikafta, a trend that most likely continued in the third quarter as well.

Notably, first-half sales of Trikafta benefited from some early refills by patients amid COVID-19-led disruptions. This increased patient inventory is likely to have normalized in the third quarter. Also, the pace of new patient initiations of Trikafta might have slowed in the third quarter as a high percentage of currently eligible patients is already on Trikafta. Investors will be keen to know the sales numbers of Trikafta on the upcoming earnings call.

In August 2020, the European Commission approved Kaftrio (brand name of Trikafta in Europe).

Following the nod in the EU, about 10,000 new patients with one minimal function mutation and one F508del mutation are now eligible to be treated with Kaftrio. The drug is most likely to have contributed to revenues in the third quarter.

However, in the last reported quarter, management had stated that they will launch Kaftrio virtually in Europe during the peak of the pandemic. This, in turn, may hurt the drug’s initial uptake as patients may not be able to see their doctors for treatment initiation. Therefore, there is uncertainty about the actual rate and the level of adoption in Europe.

The strong acceptance of Trikafta caused the sales erosion of Vertex’s other CF drugs and its existing combinations, namely Kalydeco, Orkambi and Symdeko. In the last reported quarter, all the other three CF medicines saw a year-over-year decline in sales, a trend that most likely continued in the to-be-reported quarter as well.

Meanwhile, higher international revenues owing to a strong patient uptake of Orkambi and Symkevi following the completion of reimbursement arrangements in the key ex-U.S. countries like England and France in 2019, might have boosted the company’s sales in the third quarter.

Why a Likely Positive Surprise?

Our proven model predicts an earnings beat for Vertex this season. 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. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.

Earnings ESP: Vertex has an Earnings ESP of +3.83% as the Zacks Consensus Estimate is pegged at $2.39 while the Most Accurate Estimate is pegged at $2.48.

Zacks Rank: Vertex has a Zacks Rank #3, currently.

Vertex Pharmaceuticals Incorporated Price and Consensus

Vertex Pharmaceuticals Incorporated Price and Consensus

Vertex Pharmaceuticals Incorporated price-consensus-chart
| Vertex Pharmaceuticals Incorporated Quote

Other Stocks to Consider

Here are some other drug/biotech stocks worth considering from the same space as our model shows that these too have the right combination of elements to beat on earnings this reporting cycle.

Alnylam Pharmaceuticals ALNY has an Earnings ESP of +4.23% and a Zacks Rank of3, currently. The company is scheduled to report earnings on Nov 5.You can see the complete list of today’s Zacks #1 Rank stocks here.

Compugen CGEN has an Earnings ESP of +7.69% and a Zacks Rank #2, presently. The company is scheduled to report earnings on Nov 5.

Gilead Sciences GILD has an Earnings ESP of +3.08% and is Zacks #3 Ranked at present. The company is scheduled to report earnings on Oct 28.

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