Vertex (VRTX) To Post Q2 Earnings: What's In The Cards?

Vertex Pharmaceuticals Inc. (NASDAQ:VRTX) is scheduled to report second-quarter 2019 earnings results on Jul 31, 2019, after the market closes.

Shares of Vertex have risen 2.3% so far this year, outperforming the industry’s 0.6% increase.

The company’s surprise track has been impressive so far, having delivered an earnings beat in each of the trailing four quarters, the average being 19.93%. In the last reported quarter, Vertex came up with a positive surprise of 16.33%.

Let’s see, how things are shaping up for this quarter to be reported.

Factors at Play

Vertex’s cystic fibrosis (CF) drug portfolio has been performing well. Sales growth in the first quarter was driven by a rapid uptake of the company’s newest CF medicine, Symdeko. The drug, a combination of tezacaftor and ivacaftor, has seen solid demand since its launch last year as more patients are resorting to treatment with the same. In the first quarter, Symdeko revenues included only $32 million of Symkevi revenues from the ex U.S. markets, primarily from Germany. With management then stating that Symkevi launch was off to a strong start in Germany, we expect the drug’s sales to be higher in the second quarter.

Last month, the FDA approved Symdeko to treat eligible cystic fibrosis patients as young as six years of age. However, this label expansion will not be a significant contributor to sales in the to-be-reported quarter.

Notably, a channel inventory build of approximately $10 million that occurred at the end of 2018, hurt first-quarter revenues sequentially. However, this negative impact might be reversed in the to-be-reported quarter.

Meanwhile, sales of Vertex’s other two CF medicines — Kalydeco (ivacaftor) and Orkambi — were hit by a switch in patient base to Symdeko, a trend we expect will continue in the second quarter.

On second-quarter conference call, key investor focus will be on the updates regarding Vertex’s investigational triple combination CF regimens.

Earlier this week, Vertex submitted a new drug application (NDA) to the FDA for its triple combination regimen comprising VX-445 (elexacaftor), tezacaftor and ivacaftor. The NDA includes a request for Priority Review, which will shorten the FDA’s review period to eight months from the date of submission compared with the standard review timeline of 12 months from the filing date.

We remind investors that in May, Vertex chose the VX-445 triple combination regimen over the VX-659 + tezacaftor + ivacaftor one for regulatory submission based on a detailed analysis of multiple factors, which showed that the regimen will be beneficial to a larger patient population compared to the VX-665 combo.

Notably, Vertex has a partnership with CRISPR Therapeutics AG (NASDAQ:CRSP) to evaluate an investigational gene editing treatment, CTX001, for the two devastating diseases, namely sickle cell disease and thalassemia. The FDA has granted a Fast Track designation to CTX001 for the treatment of sickle cell disease and transfusion-dependent beta thalassemia (TDT).

Last month, Vertex expanded its collaboration with CRISPR Therapeutics for an exclusive licensing agreement to discover and develop gene editing therapies targeting Duchenne muscular dystrophy (DMD) and Myotonic dystrophy type 1 (DM1). Following this deal, the company will get exclusive worldwide rights to CRISPR Therapeutics’ existing and future intellectual property including foundational CRISPR/Cas9 technology. We expect management to provide an update on the same during the upcoming earnings call.

Earnings Whispers

Our proven model does not conclusively show that Vertex is likely to beat estimates this quarter to be reported. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. But that is not the case here as you will see below.

Earnings ESP: Vertex has an Earnings ESP of -0.43%. The Zacks Consensus Estimate is pegged at $1.03. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Vertex sports a Zacks Rank of 1, which increases the predictive power of ESP. However, its negative ESP leaves surprise prediction inconclusive.

We caution against the Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Vertex Pharmaceuticals Incorporated Price and EPS Surprise

Stocks That Warrant a Look

Here are some biotech stocks worth considering as our model shows that these have the right mix of elements to beat on earnings this reporting cycle.

Gilead Sciences, Inc. (NASDAQ:GILD) is scheduled to release second-quarter results on Jul 30, after the market closes. The company has an Earnings ESP of +3.20% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN) has a Zacks Rank #3 and an Earnings ESP of +6.25%. The company is scheduled to release second-quarter results on Aug 6, before the market opens.

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