Why Vertex Earnings Prospects Are So Bright

Vertex Pharmaceuticals (VRTX -1.02%) will release its quarterly report on Monday, and investors have gotten increasingly excited about its growth prospects in some of its most promising treatments. Even though Vertex earnings aren't likely to turn profitable in the near future, investors believe that the long-term impact of getting its prospects through the pipeline will eventually pay off in big profits.

Vertex Pharmaceuticals has a couple of approved drugs, including its Kalydeco cystic fibrosis drug and its Incivek treatment for hepatitis C. But it also has some promising prospects in the development stage. With the company having reported some positive study results during the quarter, Vertex saw its shares soar as more investors got aboard the biotech's bandwagon. Let's take an early look at what's been happening with Vertex Pharmaceuticals over the past quarter and what we're likely to see in its quarterly report.

Stats on Vertex Pharmaceuticals

Source: Yahoo! Finance.

When will prospects pay off for Vertex earnings?
Just looking at analyst expectations, views on Vertex earnings have posted some wild swings in recent months. Analysts have narrowed their loss estimates for the June quarter by $0.04 per share, but they've predicted a loss for the full year that's more than double what they expected a few months back. The stock, though, has soared, rising 57% since mid-April.

Just about all of Vertex's share-price gains came as a result of favorable mid-stage study results in its combination trial of cystic fibrosis treatments. The company has been testing a combination of its previously approved Kalydeco with its developmental drug VX-661, and the April results showed improved lung-exhalation capacity that as much as tripled the improvement of a placebo. With few drugs targeting cystic fibrosis and almost half of patients suffering from the particular mutation that the study targeted, Vertex could well have identified a blockbuster in the space. Moreover, with an ongoing phase 3 trial of another developmental drug, VX-809, in combination with Kalydeco, Vertex has a couple of swings at a new hit.

Yet Vertex faces some trouble in its hepatitis C market. Its approved drug Incivek was seen as a potential blockbuster when it was approved in 2011, but sales have been on the decline. With Gilead Sciences (GILD 0.07%) having reported 95% cure rates from its phase 2 trials of its combination hepatitis C treatment involving drugs sofosbuvir and ledipasvir, the prospect of an all-oral combination drug could lead to further declines for Incivek, which is administered with ribavirin and the injected drug peginterferon alfa. Yet Vertex has its own all-oral treatment in studies, and with royalties coming from Johnson & Johnson (JNJ -0.69%) as a result of their collaboration on the hep C drug Incivo, Vertex gains some greater exposure to international markets where J&J has boosted its availability recently.

In evaluating Vertex earnings, be sure to watch for the latest development-program progress reports. Even though existing drugs provide solid revenue for the company, it'll be essential for Vertex to add new products in order to maintain its success.

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Editor's note: A previous version of this article incorrectly stated that the drug Incivek is injected. Peginterferon alfa, one of the drugs administered with Incivek for the treatment of Hepatitis-C infection, is injected. The Fool regrets the error.