Vertex Pharmaceuticals (NASDAQ:VRTX) keeps chugging along, generating increased sales for its two cystic fibrosis drugs as it gains additional approvals to treat more patients, and producing clinical trial data for its drug candidates that will hopefully be generating sales in the coming years.

Vertex Pharmaceuticals results: The raw numbers


Q2 2017

Q2 2016

Year-Over-Year Change

Product revenue

$514 million

$426 million


Income from operations

$52.7 million

$3.3 million


Earnings per share




Data source: Vertex Pharmaceuticals.

Clipboard with cystic fibrosis on it surrounded by medial paraphernalia.

Image source: Getty Images.

What happened with Vertex Pharmaceuticals this quarter?

  • Sales of Kalydeco increased 5% year over year. The drug was recently approved by the FDA for patients ages two and older who have one of 23 residual function mutations, but that only adds about 900 to the number of potential patients, which has reached saturation.
  • Sales of Orkambi, on the other hand, are still growing, up 32% year over year, as the drugs launches in Europe. Vertex recently gained reimbursement agreements in Ireland and Italy for Orkambi in people ages 12 and older with two copies of the F508del mutation, and it hopes to gain reimbursement in other countries, including France, the Netherlands, and the United Kingdom, sooner or later -- hopefully this year.
  • Vertex's next-generation cystic fibrosis drug combination tezacaftor/ivacaftor (tex/iva) was submitted to the FDA and European regulators.
  • Three of the company's next-next-generation cystic fibrosis combinations that include three drugs produced positive data in various phase 1 and phase 2 trials. The company is waiting for data for one more triple combination before it decides which regimens to take into further development.
  • Vertex completed the acquisition of once-daily drug candidate CTP-656 from Concert Pharmaceuticals (NASDAQ:CNCE), which should make future combinations more convenient to take.

What management had to say 

For the most part, tez/iva is a replacement for Orkambi, which could complicate the negotiations for reimbursement for Orkambi, but Stuart Arbuckle, Vertex's chief commercial officer, doesn't see it as a major issue:

We're very pleased that in Ireland and Italy, where we reached agreements in May after the tez/iva data was available, those countries still saw fit to do what we think is the right thing, make a transformative medicine like Orkambi available to patients as soon as possible because it treats the underlying cause of the disease. And we know, therefore, that it's important for patients to be treated as early as possible, and we're certainly going to be continuing to make that case to the existing authorities who are still not providing access for patients in their countries.

On how quickly Vertex can get CTP-656 into its combinations, Jeffrey Leiden, Vertex's chairman, CEO and president, wasn't willing to give an exact date, but he answered the question anyway:

It's a little early for me to give you a precise date. But if you ask me, could we come up with a triple regimen containing CTP-656 that is once a day and begin a pivotal trial in 2018, I'd say the answer from what I know today is likely yes.

As Vertex approaches having a treatment for most patients with cystic fibrosis, it'll need to find additional diseases to go after. Leiden was clear that future growth would come from developing drugs rather than just from buying revenue growth:

We're not going to go out and buy marketed products. But we are very interested in diversifying our earlier-stage pipeline with these kinds of transformative medicines, and I think you can expect more of that as our confidence is growing significantly.

Looking forward

Management reiterated revenue guidance for both drugs, but if you double sales from the first half, it's pretty clear, that revenue will fall in the top half of guidance, even considering that there was a boost in inventory ahead of the July 4th holiday, which will cut into third-quarter revenue slightly. Whether Vertex can exceed guidance depends a lot on whether negotiations for reimbursement of Orkambi in France conclude before the end of the year.

Looking further ahead, tez/iva should be approved by the FDA next year -- perhaps early in the year if the agency gives the drug combination a priority review. EU approval would follow a little while later, although, as we've seen with Orkambi, it takes longer to launch in Europe thanks to securing reimbursement. Finally, clinical trials required for approval for one or two of the triple combinations should start in the first half of next year.

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