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Vertex (VRTX) Beats on Q3 Earnings & Sales, Raises '21 View

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Vertex Pharmaceuticals Incorporated (VRTX - Free Report) reported third-quarter 2021 adjusted earnings per share of $3.56, which beat the Zacks Consensus Estimate of $3.12. Earnings rose 35% year over year. Strong cystic fibrosis (“CF”) product revenues led to higher earnings for the reported quarter.

Revenues of $1.98 billion, which surpassed the Zacks Consensus Estimate of $1.85 billion, comprised fully of CF product revenues. Total product revenues rose 29% year over year, primarily driven by higher sales of Trikafta (marketed as Kaftrio in Europe).

Shares of Vertex have lost 23.3% so far this year in comparison with the industry’s 8.9% decline.

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CF Franchise Sales Performance

The company markets four CF products - Trikafta/Kaftrio, Symdeko/Symkevi, Orkambi and Kalydeco.

Vertex’s newest drug, Trikafta, a triple combination therapy, generated sales worth $1.38 billion, up 13% year over year driven by a high level of treatment penetration in the United States including rapid uptake in pediatric patients (6-11 years of age).

Earlier this year in June, the FDA approved Trikafta to treat CF in children aged 6-11 years who have at least one F508del mutation in the cystic fibrosis transmembrane conductance regulator (“CFTR”) gene or a mutation in the CFTR gene that is responsive based on in vitro data.

Sales surged 92% year over year to $601 million outside the United States owing to an impressive launch of the drug in Europe.

Kaftrio was approved in Europe in August 2020. Following the nod, the drug saw substantial uptake across all European countries. The company has now secured reimbursement agreements for Kaftrio in more than 20 countries, including new major markets of Canada, France and Italy.

Symdeko/Symkevi registered sales of $81 million for the quarter, down 48.1% year over year.

Kalydeco recorded sales of $162 million for the quarter, reflecting a 16.5% decrease year over year. Orkambi generated sales of $185 million for the reported quarter, down 18.1% from the prior-year quarter. Sales of Kalydeco, Symdeko/ Symkevi and Orkambi were hurt by patients switching to Trikafta.

Costs Rise

Adjusted operating income rose 39% year over year to $1.19 billion for the quarter, driven by higher revenues and cost control.

Adjusted research and development (R&D) expenses rose 15.1% from the year-ago quarter to $403 million due to expansion of the CF and non-CF pipeline.

Adjusted selling, general and administrative (SG&A) expenses increased 7.5% to $158 million for the reported quarter due to investments made to support the CF business expansion.

2021 Guidance

Vertex revised its product revenue guidance for 2021 upward owing to strong business performance and reimbursement agreements for Kaftrio in Europe along with the approval for younger age groups in the United States.

The company now expects revenues from CF products in the range of $7.4-$7.5 billion compared with the previous expectation of $7.2-$7.4 billion. The midpoint of the guidance reflects approximately 20% growth from the previous projection.

Combined adjusted R&D and SG&A expenses for 2021 are expected in the band of $2.25-$2.30 billion. Adjusted tax rate is expected in the range of 21-22%, unchanged from the previous guidance.

Pipeline Update

While Vertex focuses on the development and strengthening of the CF franchise, the company has a rapidly advancing early-stage portfolio in five additional diseases beyond CF.

The company’s most advanced program is CTX001, a CRISPR/Cas9-based gene editing therapy, which is being co-developed in partnership with CRISPR Therapeutics (CRSP - Free Report) for two devastating diseases — sickle cell disease and transfusion-dependent beta thalassemia. It has achieved target enrollment in both the studies and expects regulatory submission for the therapy in both indications by 2022-end.

The company completed enrolment in a phase II study on VX-147, its first oral small molecule medicine in APOL1-mediated focal segmental glomerulosclerosis. Data from the study is expected in fourth-quarter 2021.

During the quarter, Vertex commenced two phase II studies for its investigational NaV1.8 inhibitor candidate, VX-548, to treat acute pain following bunionectomy surgery and another post abdominoplasty surgery. Data from both of these studies are anticipated in first-quarter 2022.

A phase I/II study was initiated on VX-880 for the treatment of type I diabetes (T1D) in March. Initial data from the phase I/II study announced in October 2021 demonstrated that after 90 days of the single infusion of VX-880 at half the target dose along with immunosuppressive therapy, restoration of insulin production was observed. VX-880 is Vertex’s first of the two investigational programs for the transplant of functional islets into patients. VX-880 is for the transplantation of islet cells alone, using immunosuppression, to protect the implanted cells. The second program will involve the implantation of the islet cells inside an immunoprotective device. The company anticipates the submission of an investigational new drug application for the second program in 2022.

Zacks Rank & Other Stocks to Consider

Vertex currently carries a Zacks Rank #2 (Buy). Other top-ranked stocks in the same sector include Alkermes (ALKS - Free Report) and Regeneron Pharmaceuticals (REGN - Free Report) , each carrying a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Alkermes’ earnings per share estimates for 2021 have increased from $0.61 to $0.68 in the past 60 days. The same for 2022 has risen from $1.06 to $1.11 in the past 60 days. The stock has rallied 48.9% in the year so far.

Regeneron’s earnings per share estimates for 2021 have increased from $54.15 to $62.36 in the past 60 days. The same for 2022 has risen from $44.11 to $46.69 over the same period. The stock has rallied 32.2% in the year so far.

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