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Vertex Pharmaceuticals Inc. (VRTX - Snapshot Report) posted a loss of 12 cents per share (including stock-based compensation expense) in the first quarter of 2013, well below the year-ago earnings of 41 cents per share. First quarter 2013 loss was, however, narrower than the Zacks Consensus Estimate of a loss of 17 cents.
Excluding the impact of stock-based compensation expense, first quarter 2013 earnings were 3 cents, well below the year-ago earnings of 55 cents.
Revenues for the reported quarter fell 25.2% to $328.4 million. Revenues were above the Zacks Consensus Estimate of $301 million.
The Quarter in Detail
Vertex Pharma’s first quarter revenues consisted of revenues earned from the sale of Incivek ($205.6 million), Kalydeco ($61.8 million), royalty revenue ($43.6 million) and collaborative revenues ($17.4 million).
While Incivek revenues declined 42.4% from the year-ago quarter, revenues declined 7.5% on a sequential basis. Revenues continue to be affected by a fewer number of new patients seeking treatment and the warehousing effect. Patients are basically deferring treatment and waiting for new and more effective drugs to become available.
Royalty revenues for the quarter consisted of revenues received from partner Johnson & Johnson (JNJ - Analyst Report) on Incivo sales in international markets. Incivo’s performance was strong in Latin America.
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 including Japan (brand name: Telavic).
Kalydeco continued to perform well with Vertex Pharma reporting rapid uptake in a major part of eligible patients in the US. While US sales were $50 million, ex-US sales were about $12 million in the first quarter of 2013. Ex-US sales should continue to improve with Vertex Pharma achieving reimbursement approval in major European countries.
Research and development (R&D) expenses for the quarter increased 11.1% to $194.8 million, mainly due to continued investment in development activities.
First quarter 2013 selling, general and administrative (SG&A) expenses declined 19.9% to $79.8 million.
Kalydeco Outlook Raised
Vertex Pharma raised its outlook for Kalydeco revenues by $20 million to $300 million - $340 million. However, the full year revenue forecast remained unchanged at $1.10 - $1.25 billion.
Operating expenses (excluding stock-based compensation expense and Alios expenses) continue to be expected in the range of $1.09 billion to $1.15 billion. This includes R&D expenses of $750 million to $790 million and SG&A spend of $340 million to $360 million.
This implies higher R&D expenses and lower SG&A expenses in 2013 compared to 2012.
Vertex Pharma’s first quarter results were better-than-expected. However, we expect Incivek revenues to continue being affected by warehousing and a slowdown in new patient additions. Meanwhile, Kalydeco revenues should pick up with additional launches taking place in the EU.
With Vertex Pharma working on expanding Kalydeco’s label and strengthening its hepatitis C virus (HCV) portfolio, we expect investor focus to remain on pipeline progress. The successful development of the Kalydeco and VX-809 combination would expand the market for Kalydeco significantly.
Vertex Pharma currently carries a Zacks Rank #3 (Hold). Companies that currently look well-positioned include Osiris Therapeutics (OSIR - Analyst Report) and Cleveland BioLabs, Inc. (CBLI - Snapshot Report). Both are Zacks Rank #1 (Strong Buy) stocks.