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Vertex (VRTX) Q4 Earnings Beat on Strong CF Products Sales
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Vertex Pharmaceuticals Incorporated (VRTX - Free Report) reported fourth-quarter 2017 earnings per share of 61 cents, which beat the Zacks Consensus Estimate of 58 cents and came ahead of the year-ago earnings of 35 cents. Strong product revenues led to higher profits in the quarter and lower operating expense ratio year over year.
Vertex reported revenues of $651.6 million in the fourth quarter, up almost 42% year over year driven by strong product revenues. Revenues also beat the Zacks Consensus Estimate of $596.13 million.
Fourth Quarter Sales Strong
Vertex’s fourth-quarter revenues consisted of sales from cystic fibrosis (“CF”) products — Kalydeco and Orkambi, collaborative ($29.1 million) and royalty revenues ($1.3 million). CF product revenues were $621.2 million in the fourth quarter, up 37% year over year.
Kalydeco sales surged 44% to $256 million following approvals to treat an expanded population.
In May 2017, Kalydeco was approved for use in CF patients 2 years and older who have one of 23 residual function mutations in the CFTR gene. In August 2017, Kalydeco was approved in CF patients (2 years and older) who have one of five residual function mutations that result in a splicing defect in the CFTR gene. These line-extensions increased the eligible patient population for Kalydeco.
Orkambi (lumacaftor/ivacaftor) delivered sales of $365 million, up 32% year over year. The growth was supported by continued uptake globally, especially in pediatric patients in the United States.
Costs Rise
Adjusted research and development (R&D) expenses increased 20.3% to $249.2 million in the fourth quarter due to higher costs related to development of triple combination CF regimens. Adjusted selling, general and administrative (SG&A) expenses increased 20% to $105.5 million.
2017 Results
Vertex’s full-year revenues increased 46.2% year over year to $2.49 billion mainly driven by upfront payment of $315.2 million earned from Germany-based Merck KGaA (MKGAF - Free Report) and strong CF portfolio sales. The upfront payment was part of a collaboration agreement per which Vertex out-licensed four oncology programs to Merck KGaA. Adjusted earnings for 2017 were up 129% year over year to $1.95 per share.
Adjusted R&D expenses increased 10.8% year over year to $1.33 billion. However, it excluded an upfront payment of $160 million related to acquisition of a CFTR potentiator, VX-561, from Concert Pharmaceuticals, Inc. . Adjusted SG&A expenses increased 9% year over year to $375.3 million, which included costs related to the potential launch of tezacaftor/ivacaftor combination in the United States. The increase was also due to increased investment to support the global commercialization of Orkambi and Kalydeco.
Stock Repurchase Program
Concurrent with the earnings release, Vertex announced that the board has authorized a share repurchase program to buy back its common stock to the tune of $500 million in 2018 and 2019.
2018 Guidance
Vertex provided 2018 guidance for combined operating costs.
Combined adjusted research and development (R&D) and selling, general and administrative (SG&A) expenses in 2018 are anticipated in the range of $1.50 to $1.55 billion.
The increase in operating expense reflects anticipated costs related to development and commercialization of triple combinations for treating CF and planned launch of tezacaftor/ivacaftor combination.
Pipeline & Regulatory Updates
In December 2017, Vertex announced data from phase III study – ARRIVAL – evaluating Kalydeco in children (age 1-2 years)who have one of 10 mutations in the CFTR gene. It showed improvement across multiple endpoints, including measures of pancreatic function. Based on this data, Vertex plans to file regulatory applications for approval of Kalydeco in children aged one to two years in the first quarter of 2018.
In January 2018, the European Commission approved a line extension for Orkambi to include use in children with CF aged between six and 11 years and have two copies of the F508del mutation. The approval increases the targeted patient population by about 3,400 patients. The company has plans to file regulatory applications for approval of Orkambi in children aged two to five with CF who have two copies of the F508del mutation in the first quarter of 2018.
Vertex is also seeking approval for a combination of tezacaftor and Kalydeco (ivacaftor) in CF patients aged 12 and older who have two copies of the F508del mutation or who have at least one residual function mutation. Regulatory applications are under review in the United States and Europe. A decision is expected in the United States on Feb 28, 2018 and in Europe in the second half of 2018.
The company is also developing triple combination regimens for treating CF, which are capable of treating almost 90% of patients. Vertex has selected two out of four next-generation correctors – VX-659 and VX-445 – for advancing into two separate phase III triple combination studies. The candidates will evaluated in combination with tezacaftor and Kalydeco.
Apart from CF, Vertex is also developing treatments for sickle cell disease, thalassemia, influenza and pain management. During the fourth quarter, the company initiated a phase III study on pimodivir in combination with standard-of-care treatment in patients with influenza. This study is being conducted in collaboration with Janssen Pharmaceuticals, a subsidiary of Johnson & Johnson (JNJ - Free Report) .
Our Take
Vertex’s fourth-quarter results reflect strong performance of the CF products. The company beat estimates on both counts as sales of its CF drugs rose.
Shares rose over 6% in after-hours trading in response to the strong quarterly results. In the past year, Vertex’s share price has increased a massive 100.9%, comparing favorably with an increase of 6.8% for the industry.
Vertex’s CF pipeline is quite strong with a broad portfolio of next-generation CF correctors. Its triple combination CF regimens are considered crucial for long-term growth. If the triple-combo regimes are successful, Vertex can address a significantly larger CF patient population — almost 90% of the patients — in the future. However, competition is increasing as several major companies are expressing interest in CF.
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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Vertex (VRTX) Q4 Earnings Beat on Strong CF Products Sales
Vertex Pharmaceuticals Incorporated (VRTX - Free Report) reported fourth-quarter 2017 earnings per share of 61 cents, which beat the Zacks Consensus Estimate of 58 cents and came ahead of the year-ago earnings of 35 cents. Strong product revenues led to higher profits in the quarter and lower operating expense ratio year over year.
Vertex reported revenues of $651.6 million in the fourth quarter, up almost 42% year over year driven by strong product revenues. Revenues also beat the Zacks Consensus Estimate of $596.13 million.
Fourth Quarter Sales Strong
Vertex’s fourth-quarter revenues consisted of sales from cystic fibrosis (“CF”) products — Kalydeco and Orkambi, collaborative ($29.1 million) and royalty revenues ($1.3 million). CF product revenues were $621.2 million in the fourth quarter, up 37% year over year.
Kalydeco sales surged 44% to $256 million following approvals to treat an expanded population.
In May 2017, Kalydeco was approved for use in CF patients 2 years and older who have one of 23 residual function mutations in the CFTR gene. In August 2017, Kalydeco was approved in CF patients (2 years and older) who have one of five residual function mutations that result in a splicing defect in the CFTR gene. These line-extensions increased the eligible patient population for Kalydeco.
Orkambi (lumacaftor/ivacaftor) delivered sales of $365 million, up 32% year over year. The growth was supported by continued uptake globally, especially in pediatric patients in the United States.
Costs Rise
Adjusted research and development (R&D) expenses increased 20.3% to $249.2 million in the fourth quarter due to higher costs related to development of triple combination CF regimens. Adjusted selling, general and administrative (SG&A) expenses increased 20% to $105.5 million.
2017 Results
Vertex’s full-year revenues increased 46.2% year over year to $2.49 billion mainly driven by upfront payment of $315.2 million earned from Germany-based Merck KGaA (MKGAF - Free Report) and strong CF portfolio sales. The upfront payment was part of a collaboration agreement per which Vertex out-licensed four oncology programs to Merck KGaA. Adjusted earnings for 2017 were up 129% year over year to $1.95 per share.
Adjusted R&D expenses increased 10.8% year over year to $1.33 billion. However, it excluded an upfront payment of $160 million related to acquisition of a CFTR potentiator, VX-561, from Concert Pharmaceuticals, Inc. . Adjusted SG&A expenses increased 9% year over year to $375.3 million, which included costs related to the potential launch of tezacaftor/ivacaftor combination in the United States. The increase was also due to increased investment to support the global commercialization of Orkambi and Kalydeco.
Stock Repurchase Program
Concurrent with the earnings release, Vertex announced that the board has authorized a share repurchase program to buy back its common stock to the tune of $500 million in 2018 and 2019.
2018 Guidance
Vertex provided 2018 guidance for combined operating costs.
Combined adjusted research and development (R&D) and selling, general and administrative (SG&A) expenses in 2018 are anticipated in the range of $1.50 to $1.55 billion.
The increase in operating expense reflects anticipated costs related to development and commercialization of triple combinations for treating CF and planned launch of tezacaftor/ivacaftor combination.
Pipeline & Regulatory Updates
In December 2017, Vertex announced data from phase III study – ARRIVAL – evaluating Kalydeco in children (age 1-2 years)who have one of 10 mutations in the CFTR gene. It showed improvement across multiple endpoints, including measures of pancreatic function. Based on this data, Vertex plans to file regulatory applications for approval of Kalydeco in children aged one to two years in the first quarter of 2018.
In January 2018, the European Commission approved a line extension for Orkambi to include use in children with CF aged between six and 11 years and have two copies of the F508del mutation. The approval increases the targeted patient population by about 3,400 patients. The company has plans to file regulatory applications for approval of Orkambi in children aged two to five with CF who have two copies of the F508del mutation in the first quarter of 2018.
Vertex is also seeking approval for a combination of tezacaftor and Kalydeco (ivacaftor) in CF patients aged 12 and older who have two copies of the F508del mutation or who have at least one residual function mutation. Regulatory applications are under review in the United States and Europe. A decision is expected in the United States on Feb 28, 2018 and in Europe in the second half of 2018.
The company is also developing triple combination regimens for treating CF, which are capable of treating almost 90% of patients. Vertex has selected two out of four next-generation correctors – VX-659 and VX-445 – for advancing into two separate phase III triple combination studies. The candidates will evaluated in combination with tezacaftor and Kalydeco.
Apart from CF, Vertex is also developing treatments for sickle cell disease, thalassemia, influenza and pain management. During the fourth quarter, the company initiated a phase III study on pimodivir in combination with standard-of-care treatment in patients with influenza. This study is being conducted in collaboration with Janssen Pharmaceuticals, a subsidiary of Johnson & Johnson (JNJ - Free Report) .
Our Take
Vertex’s fourth-quarter results reflect strong performance of the CF products. The company beat estimates on both counts as sales of its CF drugs rose.
Shares rose over 6% in after-hours trading in response to the strong quarterly results. In the past year, Vertex’s share price has increased a massive 100.9%, comparing favorably with an increase of 6.8% for the industry.
Vertex’s CF pipeline is quite strong with a broad portfolio of next-generation CF correctors. Its triple combination CF regimens are considered crucial for long-term growth. If the triple-combo regimes are successful, Vertex can address a significantly larger CF patient population — almost 90% of the patients — in the future. However, competition is increasing as several major companies are expressing interest in CF.
Vertex carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Vertex Pharmaceuticals Incorporated Price, Consensus and EPS Surprise
Vertex Pharmaceuticals Incorporated Price, Consensus and EPS Surprise | Vertex Pharmaceuticals Incorporated Quote
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