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Vertex Pharmaceuticals Rolls Along

By Brian Orelli, PhD – Jul 29, 2015 at 5:40PM

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Solid quarter, but Orkambi sales in future quarters will dictate the biotech’s fate.

Vertex Pharmaceuticals (VRTX 1.55%) released second-quarter earnings today, posting $155 million in sales of Kalydeco, a 37% increase from the year-ago quarter. The growth in sales of the cystic-fibrosis drug has come from gaining regulatory approval to market Kalyeco for patients who have other mutations that cause cystic fibrosis.

While Kalydeco has had a nice run, management isn't expecting much quarter-over-quarter growth from here. The new guidance calls for Kalyedo sales of $575 million to $590 million for 2015. That's up from the prior range of $560 million to $580 million, but at the low end of the guidance, it predicts Kalydeco sales of just $290 million for the second half of the year, exactly the current run rate.

With yearly sales of just under $600 million, Kalydeco is a far cry from a blockbuster, but the drug doesn't have to be one for Vertex to be successful. Given the larger market, sales of Vertex's other cystic-fibrosis drug, Orkambi, are much more important to Vertex's future.

Orkambi, a combination of Kalydeco and another drug called lumacaftor, is approved to treat patients with the F508del mutation who are age 12 or older, potentially reaching 8,500 people in the United States. Even with all the mutations Kalydeco is approved for, only 3,400 people worldwide are approved to receive the drug.

But the FDA didn't approve Orkambi until July 2, so there aren't any Orkambi sales in the second-quarter earnings announcement. We'll have to wait until October to get the first sales numbers.

An EU approval for Orkambi, expected toward the end of the year, will further accelerate Vertex's sales. There are about 12,000 patients with the F508del mutation in Europe, although it'll take some time to gain reimbursement, so investors shouldn't pencil in sales immediately following EU approval.

Vertex is also looking to gain approval to market Orkambi for treating children ages 6 to 11. In the U.S., the process is fairly easy, as Vertex believes it will need a safety study in only about 50 kids to gain approval. Assuming all goes well with a trial currently under way, the biotech plans to submit an application to marker the drug for younger children in the first half of next year.

In Europe, regulators have told Vertex that it needs efficacy data in children ages 6 to 11 to gain regulatory approval there. Vertex recently started a trial testing lung function in the younger children, but it'll take some time to enroll the trial, and then all the participants have to be treated for six months. Add in a few more months to analyze the data, and it'll be a while before Vertex has the data ready to submit to EU regulators, putting EU substantially behind the U.S. for expanding into the younger children.  

Besides Kalydeco and Orkambi, Vertex is working on other cystic-fibrosis drugs, including VX-661 and VX-371, the latter of which was licensed from Parion Sciences.

VX-661 is being tested in four phase 3 trials in combination with Kalydeco. The combination is essentially Orkambi 2.0 as VX-661 replaces lumacaftor. The hope is that it'll have better efficacy than the first-generation drug and potentially be able to treat other combinations of mutations.

VX-371 works differently from Vertex's other drugs because it isn't mutation specific. Data from a phase 2a trial that Parion is running, testing the drug as a monotherapy in patients with a variety of mutations, is expected in the middle of next year, but the biggest benefit -- for both patients and Vertex -- will probably come when the drug is combined with other treatments. Vertex plans to start the first combination trial with Orkambi in patients with the F508del mutation early next year.

For the record, Vertex lost $131 million, or $0.54 per share, on a non-GAAP basis during the quarter. With the upcoming sales of Orkambi, the loss should turn into a gain in the not-too-distant future.

Brian Orelli has no position in any stocks mentioned. The Motley Fool recommends Vertex Pharmaceuticals. 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.

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