Vertex Pharmaceuticals Inc. (VRTX) posted a lower fourth-quarter 2010 loss (including stock-based compensation expense) of 85 cents per share, compared with the Zacks Consensus Estimate of a loss of 92 cents, but wider than the year-ago loss of 76 cents.
The 2010 loss per share of $3.48 was narrower than the Zacks Consensus Estimate loss of $3.71, but wider than the year-ago loss of $3.46.
Increased expenses related to the potential launch of telaprevir (being developed for the treatment of hepatitis C virus or HCV) led to the decline.
While revenues for the reported quarter increased 93% to $65.5 million, annual revenues climbed 40% to $143.4 million. Both figures comfortably beat the Zacks Consensus Estimate of $38 million and $118 million, respectively.
Higher reimbursements from partner Mitsubishi Tanabe Pharma Corp. for the commercial supply of telaprevir helped boost revenues.
Vertex Pharma’s fourth quarter revenues consist of royalty revenues (flat year over year at $8.4 million) and collaborative revenues (up 124% to $57.1 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.
Other Details
Adjusted research and development (R&D) expenses for the quarter increased 25% to $152.7 million, mainly due to costs related to the potential launch of telaprevir and other R&D activities.
Fourth-quarter adjusted selling, general and administrative (SG&A) expenses almost doubled to $55.1 million. Higher SG&A expenses resulted from an increase in head count and certain overheads related to the potential launch of telaprevir and VX-770 (under evaluation for the treatment of cystic fibrosis).
Outlook
Vertex Pharma expects operating expenses to range from $890 million to $930 million in 2011.
Expenses in R&D for 2011 are expected to be at 2010 levels. The expenses will primarily be related to investment in the hepatitis C and cystic fibrosis portfolios.
The SG&A expenses for 2011 are expected to be higher than the 2010 figure. Continued investment for the commercialization of telaprevir and VX-770 will lead to the increase.
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 during 2010, we are pleased to note that Vertex Pharma has secured priority review status for telaprevir in the United States, Canada and the European Union. The US Food and Drug Administration (FDA) has set May 23, 2011, as the target date for the candidate.
However, with Vertex Pharma banking on telaprevir for growth, any delay in the approval of the drug would weigh heavily on the stock. Moreover, we note that the HCV market is highly competitive with several pharmaceutical companies developing candidates for the said indication.
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