Vertex Flips Into the Black for First Time, as Hepatitis C Drug Beats Expectations Again
Vertex Pharmaceuticals has tallied up an amazing amount of red ink in its 22-year history, but now it can say that all those long R&D years have created a profitable business.
The Cambridge, MA-based biotech company (NASDAQ: VRTX) said today that it generated $659 million in total revenues, and turned a profit of $221 million ($1.02 a share) in the third quarter that ended Sept. 30. Once before, the company had a quarterly profit in the 1990s from a one-time milestone payment, but this is the first time in Vertex’s history that it has generated a quarterly profit from its own product sales, says company spokeswoman Megan Pace. Vertex reached this point after ringing up an accumulated $3.8 billion deficit through mid-2011, according to its most recent quarterly report.
The emerging financial strength at Vertex is being driven by its new FDA-approved drug telaprevir (Incivek) for patients with hepatitis C. The product, first cleared for sale in the U.S. in May, has been creating a new wave of demand among patients which has been consistently underestimated by Wall Street. Vertex tallied $74.5 million in product sales in the previous quarter, and now has ramped up Incivek sales to $420 million in the period that ended on Sept. 30.
An estimated 3 million people in the U.S. are thought to have chronic hepatitis C infections, and about 170 million worldwide are believed to have the condition. Many patients have elected to go untreated before Vertex’s drug came along, because the prior drugs caused flu-like symptoms that last for almost a year, while offering a cure rate of less than 40 percent. Vertex’s drug has changed the situation, because when given in combination with standard pegylated interferon-alpha and ribavirin, it has cured about 80 percent of patients with this liver-damaging disease, and enabled patients to cut the treatment time in half. The drug costs about $49,200 for a full 12-week course of therapy.
Investors, many of whom have been burned by excessive hype around other biotech drug introductions, had much more tepid forecasts, especially since Vertex is competing with a new drug from Merck from the same class of protease inhibitors. Analysts only forecasted Vertex to generate $31.5 million of sales in the drug’s debut quarter, and about $300 million to $400 million in the period ended Sept. 30, according to reports from TheStreet.com.
“More than 17,000 people with hepatitis C have started treatment with Incivek since its approval in May, underscoring the strength of the launch,” said Nancy Wysenski, Vertex’s chief commercial officer, in a statement. “We are focused on further broadening the number of doctors using Incivek and are continuing to work with the hepatitis C community to increase awareness and screening and to help ensure patients are able to get the support they need.”
The financial performance enabled Vertex to bolster its cash reserves to $658.7 million as of Sept. 30, compared with $593.5 million on June 30, even while it was spending much bigger money on marketing. And, the company is looking to add a second revenue stream to its financial statements next year. This month, it filed an application with the FDA for clearance to sell ivacaftor (Kalydeco, aka VX-770) as a new treatment for cystic fibrosis, a deadly lung disease. That product could generate $700 million in annual revenue over time, according to analyst Tom Russo of Robert W. Baird.
Vertex didn’t provide any update for investors on its forecasts for quarterly sales, and profits.