Vertex (VRTX) Q2 Earnings & Sales Beat, Revenue Guidance Up

Vertex Pharmaceuticals Incorporated VRTX reported second-quarter 2020 earnings per share of $2.61, which beat the Zacks Consensus Estimate of $2.13. Moreover, earnings skyrocketed 107.1% year over year. Strong cystic fibrosis (“CF”) product revenues led to higher earnings in the reported quarter.

Vertex’s revenues of $1.52 billion also surpassed the Zacks Consensus Estimate of $1.41 billion. Total revenues, comprising only CF product sales, soared 62% year over year, driven by the rapid uptake of the newest CF medicine Trikafta, a triple combination regimen, in the United States. Moreover, higher international revenues due to the reimbursement approvals received for Orkambi and Symkevi in some international markets in 2019 also drove revenues.

Quarter in Detail

Vertex markets four CF medicines, namely Kalydeco (ivacaftor), Orkambi (lumacaftor-ivacaftor), Symdeko (a combination of tezacaftor and ivacaftor) and Trikafta (elexacaftor/tezacaftor/ivacaftor and ivacaftor). The company did not record any collaborative and royalty revenues during the reported quarter.

Trikafta generated sales worth $918 million, compared with $895 million in the first quarter of 2020. The drug has seen solid uptake in the United States since its early launch and has been a key growth driver for Vertex’s growth. The drug was approved by the FDA in October 2019.

Trikafta is also under review in Europe with an approval expected later in 2020. A potential approval of Trikafta in the EU where it received recommendation for approval from the Committee for Medicinal Products for Human Use last month could bring additional Trikafta revenues in 2020.

Symdeko/ Symkevi registered sales of $172 million in the second quarter, down 52.5% year over year.

Meanwhile, Kalydeco, Vertex’s first CF medicine, recorded sales of $203 million in the quarter, reflecting a 22.5% decrease year over year.

Orkambi generated sales of $232 million in the reported quarter, down 26.6% year over year.

It is evident that strong adoption of Trikafta might have resulted in sales erosion of the existing combinations. On second-quarter earnings call, management stated that it expects Trikafta to be the main revenue driver for Vertex in 2020.

Per the company, Trikafta is now being taken by the majority of eligible patients in the United States.

Adjusted research and development (R&D) expenses rose 18.5% to $321 million in the second quarter.

Adjusted selling, general and administrative (SG&A) expenses increased 18.7% to $146 million in the reported quarter.

2020 Revenue Guidance Raised

Vertex raised its revenue guidance for the year on its second-quarter earnings call, primarily based on Trikafta’s continued strong performance in the quarter under review.

The company now expects total revenues from CF products in the range of $5.7-$5.9 billion compared with the previous range of $5.3-$5.6 billion. The Zacks Consensus Estimate of $5.76 billion lies within the newly guided range.

Shares of Vertex were up 0.6% in after-hours trading, following the guidance increase. In fact, the stock has rallied 27.6% so far this year compared with the industry’s increase of 5%.

Combined adjusted R&D plus SG&A expenses are anticipated in the band of $1.95-$2 billion, unchanged from the previous expectation.

Pipeline & Other Updates

Vertex is currently enrolling patients in a phase II proof-of-concept study on its investigational candidate, VX-147, for the treatment of APOL1-mediated focal segmental glomerulosclerosis (FSGS).

Notably, the company is co-developing a gene editing treatment, CTX001, in partnership with CRISPR Therapeutics CRSP for two devastating diseases, namely sickle cell disease and transfusion-dependent beta thalassemia. The companies remain on track to provide additional data from the two ongoing phase I/II studies on CTX001 later in 2020. Screening and enrollment in these studies are currently underway and dosing has been resumed following temporary COVID-19-related pauses in both studies.

We note that Vertex temporarily paused enrolling patients in the phase II study on its first oral small molecule corrector, VX-814, for the treatment of alpha-1 antitrypsin (“AAT”) deficiency following the onset of COVID-19. However, enrollment has resumed at some of the study sites. In July, the company initiated a phase II study to evaluate its second Z-AAT corrector, VX-864.

Vertex extended its research collaboration agreement with Moderna MRNA in March for developing mRNA therapeutics to treat CF.

Vertex Pharmaceuticals Incorporated Price, Consensus and EPS Surprise

Vertex Pharmaceuticals Incorporated Price, Consensus and EPS Surprise

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

Zacks Rank & Key Pick

Vertex currently carries a Zacks Rank #3 (Hold). A better-ranked stock in the biotech sector is BioMarin Pharmaceutical Inc. BMRN, which sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

BioMarin’s earnings per share estimates have risen from $1.51 to $1.57 for 2020 and from $2.46 to $2.80 for 2021 over the past 60 days.

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