Vertex Pharmaceuticals: New Drug, Same Great Growth Story

Vertex Pharmaceuticals (VRTX -0.85%) is continuing its domination in cystic fibrosis, increasing the number of patients it's treating to about 18,000. And it's looking to grow that number even more with next-generation drugs.

Vertex results: The raw numbers

Data source: Vertex Pharmaceuticals.

What happened with Vertex this quarter?

• Combined sales of cystic fibrosis drugs, which made up almost all of Vertex's revenue in the fourth quarter, were up 40% year over year.
• Most of the increase came from the launch of Vertex's newest medication Symdeko, which added $294 million in sales.
• Sales of Orkambi dropped a little from $365 million in the year-ago quarter to $315 million in the most recent quarter, but that's to be expected as patients switch to Symdeko.
• Sales of Vertex's third drug, Kalydeco, came in at $259 million, up ever so slightly from $256 million in the fourth quarter of 2017.
• In November, Vertex announced solid results from the first of two triple combination regimens for cystic fibrosis. Data from the second set of studies for the other triple combination containing VX-445 are due later this quarter.
• In its partnership with CRISPR Therapeutics, Vertex has started clinical trials for CTX001, a gene-editing treatment for sickle-cell disease and beta-thalassemia.
• While sales have gone up dramatically, so have expenses, as the company pays for the launch of Symdeko and invests in its triple combination regimens for cystic fibrosis and the rest of its earlier-stage pipeline.
• Wonky GAAP accounting having to do with adjustments to the value of Vertex's partnerships led to the outrageously large GAAP earnings number.

Image source: Getty Images.

What management had to say

Jeff Leiden, Vertex's chairman and CEO, highlighted the next generation of cystic fibrosis (CF) medications: "We've set a high bar with the triple combination data, but we're also committed to creating even better CF medicines for the future, including once-daily triple combination regimens, and regimens that contain other next-generation correctors that may have enhanced profiles. We have multiple molecules in preclinical and clinical development that may provide future improvements for the treatment of CF."

While cystic fibrosis is important in the near term, Leiden pointed out that the company is focused even longer term: "As we look toward future years, Vertex has the potential for significant revenue and earnings growth through the mid-2020s, based solely on treating more patients with our approved and future CF medicines. Importantly, we also have a rapidly advancing portfolio of potentially transformative medicines for other serious diseases and the ability to enhance our internal R&D [research and development] efforts with external innovation to drive long-term future growth."

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Looking forward

Management is guiding for sales from cystic fibrosis drugs to be in the range of $3.45 billion to $3.55 billion. At the midpoint, that's only a 15% increase over 2018, but the guidance only includes countries where Vertex has gained reimbursement. That's reasonable since the timing is somewhat out of the company's control, but it leaves potential for guidance to increase as the year progresses.

Once Vertex has data from the VX-445 triple combination studies, it plans to make a decision about which one to take forward, and submit a marketing application to the Food and Drug Administration by the middle of this year.

After that, the next drug that could be approved from the pipeline is Vertex's pain drug VX-150. The company has already run three positive proof-of-concept studies for the drug but is running one more, with data expected in the first half of this year, to figure out the best dose to take into late-stage development.