Vertex Pharmaceuticals Inc. (VRTX) posted a higher third-quarter loss (including stock-based compensation expense) of 99 cents per share, compared with the Zacks Consensus Estimate of a loss of 91 cents and the year-ago loss of 83 cents.
Increased expenses related to the potential launch of telaprevir (being developed for the treatment of hepatitis C virus or HCV) led to the decline.
Quarter in Detail
Quarterly revenues amounted to $23.8 million, lower than the Zacks Consensus Estimate of $31 million and the year-ago figure of $25 million.
Vertex Pharma’s revenues consist of royalty revenues (up 4% to $8.2 million) and collaborative revenues (down 9% to $15.6 million). The company receives royalty from GlaxoSmithKline plc (GSK) on sales of Lexiva, a HIV protease inhibitor.
Collaborative revenues consist of reimbursements received by Vertex Pharma under its agreements with Johnson & Johnson (JNJ) and Mitsubishi Tanabe Pharma Corp.
Research and development (R&D) expenses for the quarter increased about 29% year over year to $170.4 million, mainly due to costs related to the potential launch of telaprevir and other R&D activities.
Third-quarter selling, general and administrative (SG&A) expenses came in at $48.9 million, reflecting a year-over-year increase of around 34%. Higher SG&A expenses resulted from an increase in head count and certain overheads related to the potential launch of telaprevir.
Vertex Pharma maintained its fiscal year 2010 net loss guidance of $600 million.
Our View
We currently have a Neutral recommendation on Vertex Pharma, which is supported by a Zacks #3 Rank (short-term Hold rating). Despite the losses incurred in the reported quarter, we are pleased to note that Vertex Pharma is progressing smoothly with its rolling New Drug Application submission for telaprevir, which is expected to complete in the fourth quarter of 2010. The company is looking to launch the drug in 2011.
However, with Vertex Pharma banking on telaprevir for growth, any delay in the approval of the candidate would weigh heavily on the stock. Moreover, we note that the HCV market is highly competitive with several small and large pharmaceutical companies working on clinical candidates.
The biggest potential competitor for telaprevir could be Merck & Co.‘s (MRK) boceprevir, a similar protease inhibitor molecule. Merck plans to complete the regulatory filings of the drug in the US and Europe in 2010. Meanwhile, companies like Boehringer Ingelheim, Gilead Sciences Inc. (GILD) and Roche Holdings Ltd. (RHHBY), all have pipeline candidates for the treatment of HCV.
VERTEX PHARM (VRTX): Free Stock Analysis Report
Zacks Investment Research
