Vertex Pharmaceuticals Inc. (VRTX) posted a second-quarter loss (including stock-based compensation expense) of 83 cents per share, in-line with the Zacks Consensus Estimate and narrower than the year-ago loss of 92 cents. Despite an increase in expenses, higher revenues helped Vertex Pharma lower its loss from the year-ago period.
Quarter in Detail
Quarterly revenues amounted to $31.6 million, beating the Zacks Consensus Estimate of $28 million and about 65% higher than the year-ago figure of $19.1 million. Higher collaborative revenues were the guiding force behind the sharp increase in total revenues.
Collaborative revenues consist of reimbursements received by Vertex Pharma under its agreements with Johnson & Johnson (JNJ) and Mitsubishi Tanabe Pharma Corp.
R&D expenses for the quarter increased about 11% year over year to $155.1 million, mainly due to costs related to the potential launch of telaprevir (indicated for the treatment of the hepatitis C virus or HCV).
Second-quarter SG&A expenses came in at $40.9 million, reflecting a year-over-year increase of around 26%. Higher SG&A expenses resulted from an increase in headcount 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 (‘Hold’). We are pleased to note that Vertex Pharma is progressing smoothly with its rolling New Drug Application submission for telaprevir, which is expected to be completed in the second half of 2010. The company plans to launch the drug in 2011. Additionally, patient enrollment in phase III trials with VX-770 has been completed, with data expected in the first half of 2011.
With Vertex Pharma banking on the potential approval and launch of telaprevir, 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 also in phase III trials. Meanwhile, companies like Boehringer Ingelheim, Gilead Sciences Inc. (GILD) and InterMune Inc. (ITMN) all have pipeline candidates for the treatment of HCV.
GILEAD SCIENCES (GILD): Free Stock Analysis Report
INTERMUNE INC (ITMN): Free Stock Analysis Report
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