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Vertex Pharmaceuticals (NASDAQ:VRTX) reported earnings on Tuesday after the bell, but it was a plan to move its next-generation cystic fibrosis drugs into proof-of-concept studies that garnered most of the excitement on the third-quarter earnings call.

Vertex Pharmaceuticals results: The raw numbers


Q3 2016 Actuals

Q3 2015 Actuals

Growth (YOY)


$414 million

$310 million


(Loss) from Operations

($27.7 million)

($70.0 million)


(Loss) per share




Data source: Company press release. YOY = year over year.

What happened with Vertex Pharmaceuticals this quarter?

  • Sales of Vertex Pharmaceuticals' new cystic fibrosis drug Orkambi increased 79% year over year. While that's a nice large number, it's lower than originally expected due to a slowing of refills in the U.S. and a slow launch in Germany. Management warned of the slowdown last month, so the news wasn't a surprise to investors.
  • The launch of Orkambi in France, on the other hand, is progressing nicely, but sales won't show up on the revenue line until a final reimbursement agreement is reached.
  • Kalydeco, Vertex's older cystic fibrosis drug that treats a different subset of patients, increased just 6% year over year -- not surprising given that Vertex has saturated the market.
  • At the end of September, Orkambi was approved in the U.S. to treat children ages 6 to 11; the additional patients didn't have a material effect on third-quarter sales, but should give sales of the drug a boost in future quarters.
  • The big news came in a separate press release where Vertex announced plans to run two triple-combination phase 2 clinical trials with its next-generation correctors VX-440 and VX-152. The drugs will be tested separately in combination with tezacaftor (VX-661) and ivacaftor.

What management had to say

The expansion into treating children ages 6 to 11 with Orkambi is going well, according to Stuart Arbuckle, Vertex's chief commercial officer: "Interest is high in using Orkambi in this younger patient population. We're making good progress with both public and commercial payers in terms of securing access and already have approval for about 50% of covered lives, which is obviously an important prerequisite to getting access to these younger patients." Later he pointed out that the younger patients are likely to have a higher compliance rate since they're being supervised by their parents.

Drug launches in Europe go country by country since each has a different requirement for reimbursement, so next year could be challenging for management to give guidance since the timing of the launches can be hard to judge. "In terms of the other international markets of how quickly and the timing that they come off, we just need to give that some thought over the next few months of whether we actually try to provide a bracket around that guidance," Ian Smith, Vertex's chief financial officer commented.

Looking forward

Management is sticking with its previously adjusted guidance of Orkambi sales in the range of $950 million to $990 million and Kalydeco sales in the range of $685 million to $705 million.

In addition to the launch of Orkambi in children ages 6 to 11 and expanding the European launch, there will be plenty of data coming over the next year or so. Vertex expects data from a trial in children ages 6 to 11 that is required for European approval of Orkambi in the younger children by the end of the year. In the first half of next year, the company will present data from two phase 3 trials testing the combination of tezacaftor and ivacaftor. And then, the aforementioned triple-combination phase 2 trials will read out in the second half of 2017.

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