Vertex Pharmaceuticals (VRTX -0.12%) started the year on a high note with the approval of its new cystic fibrosis drug, Symdeko. It posted solid first-quarter results, although the company announced it had to adjust its plans slightly for the next-generation triple combination cystic fibrosis drugs after the Food and Drug Administration (FDA) put up a roadblock.

Vertex results: The raw numbers


Q1 2018

Q1 2017

Year-Over-Year Change


$640.8 million

$714.7 million


Income from operations

$128.9 million

$270.8 million


Earnings per share (EPS)




Adjusted EPS




Data source: Vertex Pharmaceuticals.

What happened with Vertex this quarter?

  • The year-over-year decrease in revenue -- and the rest of the GAAP numbers -- came from a $230 million payment from Vertex's collaboration with Merck KGaA in the year-ago quarter. Adjusted EPS are definitely the best way to measure the growth of the company's underlying business.
  • Sales of cystic fibrosis drugs, which make up almost all of the revenue for the current quarter, were up 33% year over year. Newly launched Symdeko brought in $34 million in the first partial quarter of sales. Kalydeco and Orkambi were up 34% and 20% respectively.
  • After announcing positive data for its next-generation triple combination cystic fibrosis drugs containing VX-659 and VX-445 on its fourth-quarter conference call -- including plans to develop VX-445 in combination with VX-561, a once-daily version of Kalydeco -- Vertex decided to scrap the VX-561 plans and develop VX-445 with its older Kalydeco drug. Apparently the FDA decided it wants more data on VX-561 before Vertex can put the drug into late-stage trials. It's a loss of convenience for patients, and more drug development costs for VX-561, but probably won't cost Vertex much in the way of revenue given it currently has the cystic fibrosis market essentially to itself.
  • On the clinical-trial front, Vertex reported positive phase II data for VX-150 as a treatment of acute pain following bunionectomy surgery.
  • Vertex added about $400 million in cash during the quarter, increasing its nest egg for potential licensing deals or acquisitions to $2.5 billion.
Clipboard with cystic fibrosis written on it with medication and stethoscope

Image source: Getty Images.

What management had to say

CEO Jeff Leiden laid out the reason for pressing ahead with Kalydeco in the triple combination with VX-445 and tezacaftor rather than just waiting for data on VX-561:

Because our goal has always been to get the best regimen to patients as quickly as possible, we decided to move forward with VX-445 with Kalydeco because that's the quickest route and we didn't want to take a delay. Having said that, I also think that the decision was probably a bit influenced by the fact that Kalydeco has been so well studied in so many thousands of patients and, frankly, it set a very, very high bar, both in terms of efficacy and safety. And so [FDA regulators] have a lot of comfort with it, and that made it, I think, easier to enable us to move forward more quickly with that regimen.

Stuart Arbuckle, Vertex's chief commercial officer, highlighted where Symdeko patients are coming from: "We are certainly seeing patients transition from Orkambi and Kalydeco based on the strength of the clinical data, but perhaps more importantly, we're also seeing use in patients who were not being treated with CFTR modulator prior to the approval of Symdeko."

Perhaps more importantly? The latter group seems certainly more important, as those patients will add substantial revenue rather than just moving revenue from one column to another.

Looking forward

Management reiterated its guidance for cystic fibrosis drug sales in the $2.65 billion to $2.80 billion range, which seems attainable given the first-quarter numbers. Where the revenue falls within that range -- and whether Vertex can actually exceed it -- will be determined by a combination of how many new-to-therapy patients end up taking Symdeko, and Vertex's ability to set up reimbursements in countries where it's not currently getting paid for Orkambi.

Looking beyond cystic fibrosis, Vertex expects data from its pain drug VX-150 in neuropathic pain in early 2019, at which point it'll make a decision about what pain indications it should go into for phase 3 development. There's also CTX001, which is being developed with CRISPR Therapeutics (CRSP -3.62%), for two blood diseases, beta-thalassemia and sickle cell disease, which will enter clinical trials later this year.