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Vertex (VRTX) Q1 Earnings Lag, Sales Top, Expense View Tweaked

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Vertex Pharmaceuticals Incorporated (VRTX - Free Report) reported first-quarter 2022 adjusted earnings per share of $3.52, which missed the Zacks Consensus Estimate of $3.60. Earnings rose 18% year over year. Strong cystic fibrosis (“CF”) product revenues led to higher earnings for the reported quarter.

Revenues of $2.10 billion, which surpassed the Zacks Consensus Estimate of $2.08 billion, comprised fully of CF product revenues. Total product revenues rose 22% year over year, primarily driven by higher sales of Trikafta (marketed as Kaftrio in Europe).

Shares were down almost 3% in after-hours trading on May 5 after the results were announced. This year so far, shares of Vertex have risen 21.3% in contrast to the industry’s 19.8% decline.

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Quarter in Detail

The company markets four CF products — Trikafta/Kaftrio, Symdeko (marketed as Symkevi in Europe), Orkambi and Kalydeco.

CF product sales rose 9% year over year in the United States to $1.37 billion while sales outside the United States surged 55% to $729 million.

Trikafta generated sales worth $1.76 billion, up 47.7% year over year, driven by additional patients starting treatment with Trikafta, most notably pediatric patients (6-11 years of age- approval received in mid-2021) in the United States and strong launches in several countries in Europe. Vertex has now secured reimbursement agreements for Kaftrio in more than 25 countries.

Symdeko/Symkevi registered sales of $65 million in the quarter, down 48% year over year.

Kalydeco recorded sales of $139 million in the quarter, down 25.3% year over year. Orkambi generated sales of $132 million in the reported quarter, down 39.7% 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 16% year over year to $1.17 billion in the quarter, driven by higher revenues. Adjusted research and development (R&D) expenses rose 36.8% from the year-ago quarter to $520 million due to the expansion of the CF and non-CF pipelines.

Adjusted selling, general and administrative (SG&A) expenses increased 10.6% to $167 million for the reported quarter.

2022 Guidance

The company maintained its previously issued product sales guidance in the range of $8.4-$8.6 billion for 2022.

Combined adjusted R&D and SG&A expense guidance for 2022 was raised from a range of $2.70-$2.75 billion to $2.82 to $2.92 billion. The change in the combined adjusted R&D and SG&A expense guidance was to reflect the change in industry-wide reporting of upfront and milestone expenses. The adjusted tax rate is expected in the range of 21-22%.

Pipeline & Other Updates

While Vertex’s main focus is on the development and strengthening of its CF franchise, the company also has a rapidly advancing mid- and late-stage clinical pipeline across six disease areas.

Vertex is co-developing a gene-editing treatment, CTX001 in partnership with CRISPR Therapeutics (CRSP - Free Report) in two devastating diseases — sickle cell disease and thalassemia. Phase I/II studies of CTX001 in adult transfusion-dependent b-thalassemia in Europe and sickle cell disease in the United States are ongoing. The preliminary safety and efficacy data from the studies were positive. Vertex and CRISPR Therapeutics plan to file regulatory applications for CTX001 for both indications in late 2022. Vertex expects CTX001 to be its next commercial launch. Vertex and CRISPR Therapeutics have also initiated two new phase III studies in pediatric patients with TDT and SCD.

In March, Vertex announced that it is moving VX-147, its first oral small molecule medicine for APOL1-mediated kidney disease, into pivotal development. A pivotal phase III study on VX-147 targeting a patient population with proteinuric kidney disease mediated by two mutations in the APOL1 gene began enrollment.

VX-548, a novel first-in-class, non-opioid NaV1.8 inhibitor, is being evaluated in two phase II acute pain studies, one following bunionectomy surgery and the other following abdominoplasty surgery. In March 2022, Vertex announced positive data from the two phase II studies on VX-548. The studies met their primary endpoint and established proof of concept for VX-548. Based on this data, the company plans to advance VX-548 into pivotal development for acute pain in second-half 2022.

A phase I/II study is ongoing on VX-880, Vertex’s stem cell-derived, fully differentiated islet replacement therapy that could offer a functional cure for type 1 diabetes (T1D) patients. Data from the first three patients treated to date in the phase I/II study were announced last week. The first patient, who received VX-880 at half the target dose, achieved insulin independence at day 270, with a HbA1c of 5.2%. The second patient who also received a half dose of VX-880, showed robust increases in fasting and stimulated C-peptide and reductions in exogenous insulin requirements through day 150. Overall, the results from the two patients demonstrated proof of concept for VX-880. The third patient, who received a full dose of VX-880, reached the day 29 milestone, which encouraged early indications of efficacy, with increasing C-peptide levels and improving glycemic control.

The Independent Data Monitoring Committee reviewed the totality of the safety and efficacy data from the first two patients dosed in part A of the study and recommended advancement to part B, where patients receive the full target dose of VX-880. However, the FDA placed a clinical hold on the study due to a determination that there is insufficient information to support dose escalation with the product.

Zacks Rank & Other Stocks to Consider

Vertex currently carries a Zacks Rank #2 (Buy). Some other top-ranked stocks in the biotech sector include Alkermes (ALKS - Free Report) and Deciphera Pharmaceuticals (DCPH - Free Report) . While Alkermes sports a Zacks Rank #1 (Strong Buy), Deciphera Pharmaceuticals carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Vertex Pharmaceuticals Incorporated Price and Consensus

Vertex Pharmaceuticals Incorporated Price and Consensus

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

Alkermes’ loss per share estimates for 2022 have narrowed from 14 cents to 3 cents over the past 30 days. Shares of Alkermes have risen 20% this year so far.

Earnings of Alkermes beat estimates in all the last four quarters, delivering a surprise of 350.5%, on average.

Deciphera Pharmaceuticals’ loss per share estimates for 2022 have narrowed from $2.94 to $2.77 while that for 2023 have gone down from $2.38 to $1.84 in the past 30 days.

Earnings of Deciphera Pharmaceuticals missed estimates in three of the last four quarters while beating the mark on one occasion, delivering a negative surprise of 2.0%, on average. The stock is up 8.8% this year so far.