Vroom! There Goes Vertex

With a market share exceeding 75%, Vertex Pharmaceuticals (Nasdaq: VRTX  ) is winning the next-generation hepatitis C drug war. The company's Incivek was approved 10 days after Merck's (NYSE: MRK  ) Victrelis, but Vertex was poised to go. The first patient started taking Incivek just three days after approval!

Over the first six weeks of the launch, Vertex sold about $75 million worth of Incivek, about half of which represented inventory build. The company didn't provide further details, but we can get an idea of how sales are increasing from several facts that management provided.

The drug still in the sales channel at the end of the quarter amounted to about $37 million. Management said that most of those drugs had already made their way through the sales channel and to patients. So we can assume there's been almost $37 million worth of sales in the last 28 days since the end of the quarter, for a 50% increase.

Incivek has to continue growing sales at a substantial clip, although a 50% month-over-month growth rate is certainly unsustainable. The current run rate puts sales at about $450 million per year, which doesn't justify Vertex's current market cap.

In addition to beating out Victrelis, a solid launch has the added benefit of establishing Incivek as the standard of care. Competition is looming from Pharmasset (Nasdaq: VRUS  ) , Johnson & Johnson (NYSE: JNJ  ) , Bristol-Myers Squibb (NYSE: BMY  ) , Gilead Sciences (Nasdaq: GILD  ) , and many others that have hepatitis C drugs in the works. By establishing Incivek as the leader, Vertex sets itself up for potential combo-drug partnerships in order to work with the competition, not against it.

Vertex said it plans to be substantially earnings-positive in 2012, which I take to mean that there's little chance of the company moving into the black this year. With a $1.72-per-share loss from the first half of the year, it has a substantial hole to climb out of, even with the solid launch.

Keep track of Vertex as it unleashes Incivek. Click here to add it to My Watchlist, which will help you keep track of all our Foolish analysis on Vertex.

Fool contributor Brian Orelli holds no position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Johnson & Johnson. Motley Fool newsletter services have recommended buying shares of Johnson & Johnson, Vertex Pharmaceuticals, and Gilead Sciences. Motley Fool newsletter services have recommended creating a diagonal call position in Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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