Vertex Investors Rightfully Ignore Earnings

Vertex Pharmaceuticals is in transition to a cystic fibrosis company. Expectations of new drugs from Gilead, Johnson & Johnson, Bristol-Myers, and others have decimated hepatitis C drug sales.

Jan 30, 2014 at 5:17PM

Vertex Pharmaceuticals (NASDAQ:VRTX) didn't exactly have the best fourth quarter:

  • U.S. sales of its previous blockbuster hepatitis C drug Incivek were down 91% year over year, to just $19 million
  • Contributions from royalties Vertex receives from Johnson & Johnson (NYSE:JNJ), which sells Incivek elsewhere, dropped, as well.
  • The biotech's net loss more than doubled.

And yet Vertex's shares were up 4% today.

Sounds about right.

Incivek has crashed and burned with the launch of Gilead Sciences' (NASDAQ:GILD) Sovaldi, but investors saw it coming. Incivek set a new standard of care for hepatitis C patients in 2011, but Gilead's Sovaldi, and cocktails that will contain it, are so much better that doctors are waiting for the next standard of care to be set.

All about its cystic fibrosis program
Sales of Kalydeco were up 87% year over year. Fourth-quarter sales came in just under $110 million, so it's replacing Incivek yet. With 2014 guidance of $470 million to $500 million, there's a little growth left. The top of the range implies quarter-over-quarter growth of 9%.

The big growth for Kalydeco could come from combining Kalydeco with an experimental drug VX-809 in cystic fibrosis patients with a mutation called F508del. That subgroup is substantially larger than the G551D population, which only needs Kalydeco monotherapy.

Data from two phase 3 trials testing Kalydeco and VX-809 -- dubbed Traffic and Transport -- are expected to be released in the middle of this year.

Backup plan in question
Vertex wrote down the value of its next-generation hepatitis C drug, VX-135, which it licensed from Alios BioPharma. Management said that it's still looking for a way to bring VX-135 to market, but after safety concerns were raised, investors shouldn't hold out hope (clearly Vertex's pencil pushers aren't). The drug was being tested in combination with Bristol-Myers Squibb's (NYSE:BMY) daclatasvir, so Vertex is likely at the mercy of Bristol-Myers to determine if the development continues.

The biotech also has a rheumatoid arthrtitis drug, VX-509, which passed its phase 2 trial; but there were two deaths in the six-month study, which might make it hard to justify continuing. Vertex is looking for a partner for VX-509, so hopefully, if development of VX-509 continues, it won't be on Vertex's dime.

Ultimately it's going to come down to the Traffic and Transport clinical trials to see Vertex's future. Until then, investors can ignore year-over-year revenue changes.

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Brian Orelli has no position in any stocks mentioned. The Motley Fool recommends Gilead Sciences, Johnson & Johnson, and Vertex Pharmaceuticals. The Motley Fool owns shares of 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.

A Financial Plan on an Index Card

Keeping it simple.

Aug 7, 2015 at 11:26AM

Two years ago, University of Chicago professor Harold Pollack wrote his entire financial plan on an index card.

It blew up. People loved the idea. Financial advice is often intentionally complicated. Obscurity lets advisors charge higher fees. But the most important parts are painfully simple. Here's how Pollack put it:

The card came out of chat I had regarding what I view as the financial industry's basic dilemma: The best investment advice fits on an index card. A commenter asked for the actual index card. Although I was originally speaking in metaphor, I grabbed a pen and one of my daughter's note cards, scribbled this out in maybe three minutes, snapped a picture with my iPhone, and the rest was history.

More advisors and investors caught onto the idea and started writing their own financial plans on a single index card.

I love the exercise, because it makes you think about what's important and forces you to be succinct.

So, here's my index-card financial plan:


Everything else is details. 

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