Vertex Stock Rocked On Lacking Near-Term Catalysts

Vertex Pharmaceuticals‘ (VRTX) fourth-quarter sales divided analysts Wednesday as VRTX stock toppled on concerns over its lack of near-term catalysts.

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The company’s December-quarter sales grew 11% to $2.3 billion. Analyst estimates ranged from $2.29 billion to $2.39 billion, according to various reports. Adjusted profit, though, rocketed 25% to $3.76 per share and handily topped expectations for $3.53, according to FactSet.

But VRTX stock skidded 2.7% near 300.10 in morning trading on the stock market today.

Needham analyst Joseph Stringer says there are plenty of catalysts facing Vertex — but not until late in the year and early next.

“Cystic fibrosis sales and margins remain solid, but we don’t see significant catalysts over the next six to eight months,” he said in a note to clients. “In our view, as investors have started to warm up year to date to more risk-on small-and-mid-cap names and away from pharma/large-cap biotech, we see the risk/reward as balanced at these levels.”

He kept his hold rating on VRTX stock.

VRTX Stock: Guidance Appears Conservative

Fourth-quarter growth was driven by Trikafta, a triple regimen of drugs that can treat 90% of patients with cystic fibrosis. Revenue from that treatment surged more than 19% to $2.02 billion. That was just ahead of analysts’ call for $1.97 billion.

Meanwhile, sales of Vertex’s other cystic fibrosis treatments slipped. The company credits this to patients’ decision to switch to Trikafta from older medicines.

For the year, Vertex guided to $9.55 billion to $9.7 billion in sales of its cystic fibrosis treatments. The midpoint of the company’s guidance is above VRTX stock analysts’ call for $9.55 billion in product sales. The guidance includes expectations that Trikafta will gain FDA approval in children age 2 to 5.

“We see the top line expectations as conservative, especially in light of Vertex’s recent raised estimates on the cystic fibrosis population size,” UBS analyst Colin Bristow said in his note to clients. “The focus on the call was the pipeline, which is key to realizing further upside for Vertex, in our view.”

He noted Vertex projected higher-than-expected operating expenses for the year at $3.9 billion to $4 billion. Analysts figured $3.3 billion to $3.5 billion. But Bristow raised his price target on VRTX stock to 375 from 373. He maintained his buy rating on shares.

Catalysts Remain Distant

Most of the catalysts for Vertex stock are weighted to the back end of 2023 and early 2024.

The company is working on a next-generation version of Trikafta. UBS analyst Bristow expects Phase 3 test results in early 2024. Vertex expects the drug to outperform Trikafta in managing symptoms and offer a more convenient dosing regimen.

Vertex is also testing a messenger RNA approach to treat cystic fibrosis with Moderna (MRNA). Moderna uses messenger RNA in its Covid vaccines. There’s a chance the companies could have an update on study results this year.

VRTX stock analysts are also closely watching the company’s approach to pain treatments. Vertex hopes to replace opioids for some patients post-surgery and sees a $4 billion opportunity in acute pain medications. Chronic pain is a larger market opportunity and Vertex has a Phase 2 study underway on one drug.

But Bristow noted Vertex didn’t offer an update on the company’s efforts in type 1 diabetes. The Food and Drug Administration recently put a hold on Vertex’s plans to begin enrolling patients in a study of a treatment delivered by an implantable device.

Promisingly, the company’s partner Crispr Therapeutics (CRSP) is on track to finish submitting its application for a gene-editing approach to sickle cell disease and beta thalassemia by the end of March. It could be the first to use CRISPR gene editing to hit the market.

Follow Allison Gatlin on Twitter at @IBD_AGatlin.

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