Vertex Pharmaceuticals Incorporated Prepares for (More) Growth

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Vertex Pharmaceuticals (VRTX 0.20%) reported second-quarter earnings last week as the company continues to grow sales of its cystic fibrosis franchise.

Vertex Pharmaceuticals results: The raw numbers

Data source: Company press release.

What happened with Vertex Pharmaceuticals this quarter?

• Sales of Vertex's older cystic fibrosis drug, Kalydeco, increased 16% year over year to $180 million, boosted by a few new patients, mostly in the U.S. The market is fairly saturated until Vertex can get Kalydeco approved for additional mutations.
• Vertex's newer cystic fibrosis drug, Orkambi, already has sales higher than Kalydeco -- $245 million in the second quarter -- even though it's been on the market for less than a year because the drug treats patients with a more common mutation.
• Most of those Orkambi sales are coming from within the U.S. In Europe the drug is available in Germany and France, but the uptake has been slow in Germany. France has seen a strong usage of Orkambi, but that comes from an early access program before the formal reimbursement approval. Vertex isn't booking revenue in France but will book catch-up revenue next year once the price is established.
• The company completed enrollment for the clinical trial to get Orkambi approved in Europe to treat children ages 6 through 11. In the U.S., data from the trial isn't necessary and the application to market Orkambi for that age group is already under review by the Food and Drug Administration.

What management had to say

The amount of patients that start and stay on Kalydeco is higher than for patients that take Orkambi, but Stuart Arbuckle, Vertex's chief commercial officer, pointed out that it's hard to know exactly why that's the case: "I'm sure it's got to do with the benefit risk and tolerability profile of Orkambi versus Kalydeco, but exactly which factor is weighting it one way or the other, I think would be impossible to differentiate."

Ian Smith, CFO, noted that Vertex has an upcoming interim readout for its cystic fibrosis drug candidate, VX-661: "If there is a discontinuation of the study due to the futility, we'll announce that the study is discontinuing, and that would be an appropriate announcement at the time that we get that information." Alternatively if the interim readout is positive, the company will open up further recruitment, which investors would learn about on clinicaltrials.gov.

Looking forward

Vertex reiterated its 2016 guidance of $1 billion to $1.1 billion in sales of Orkambi and Kalydeco sales of $685 million to $705 million. Kalydeco is already at a run rate required to meet that guidance, but Orkambi sales need to accelerate to meet management's goal for the year.

Unless sales in Germany pick up, investors will likely have to wait for the fourth quarter to see substantial Orkambi growth. The FDA is scheduled to hand down a decision about Vertex's aforementioned application to market Orkambi for children ages 6 to 11 by Sept. 30.