Vertex’s track record has not been that great with the company posting a wider-than-expected loss in three of the last four quarters and delivering better-than-expected results in the remaining quarter. The average earnings surprise over the last four quarters is -1.23%.
Preliminary Look at 4Q Results Provided in Early January
Vertex, which has a strong presence in the cystic fibrosis (CF) market, has already provided a preliminary look at its fourth quarter results earlier this month.
While the company’s flagship product, Kalydeco, is expected to deliver fourth quarter sales of approximately $180 million, newly approved CF treatment, Orkambi sales are expected to come in at approximately $220 million. The preliminary results indicate a sequential increase in both Orkambi and Kalydeco revenues. As of Dec 31, 2015 more than 4,500 people were on Orkambi in the U.S.
Vertex said that it expects to report total 2015 net product revenues of about $980 million.
Operating expenses should keep increasing as the company continues to invest in the Orkambi launch and the ongoing VX-661 development program.
2016 Outlook Also Provided
Kalydeco revenues are expected to increase to $670 - $690 million in 2016, up from approximately $630 million in 2015. Growth rate in patients on Kalydeco will be tempered by enrollment in the VX-661 program.
However, Vertex refrained from providing guidance for Orkambi sales – the company said the same will be provided as the launch progresses. Vertex is currently working on gaining country-by-country reimbursement in the EU where Orkambi was approved in Nov 2015.
The company estimates that about 20,500 people in the U.S. and Europe are eligible for treatment with Orkambi.
Vertex is currently working on expanding Kalydeco's and Orkambi’s labels. Operating expenses are expected to shoot up from approximately $1.06 billion in 2015 to $1.18 billion to $1.23 billion in 2016. Pipeline candidates include VX-661 (four late-stage studies ongoing with results expected in 2017), VX-371 (in collaboration with Parion Sciences, phase IIa study ongoing with results due in mid-16) and next-generation correctors - VX-152 and VX – 440. Vertex is also looking beyond CF at therapeutic areas like cancer (three candidates in early-stage testing), pain (couple of candidates in development), primary ciliary dyskinesia (VX-371), acute spinal cord injury (VX-210) and flu (JNJ-872) among others.
What Our Model Indicates
Our proven model does not conclusively show that Vertex is likely to beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) to be able to beat earnings. That is not the case here as you will see below.
Negative Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -6.25% since the Most Accurate estimate is a loss of 17 cents per share while the Zacks Consensus Estimate is a loss of 16 cents per share.
Zacks Rank: Vertex carries a Zacks Rank #2. Vertex’s Zacks Rank #2 when combined with an ESP of -6.25% makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 and #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks That Warrant a Look
Here are some health care stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter.
Gilead Sciences Inc. GILD has an Earnings ESP of +5.86% and carries a Zacks Rank #1. It will be reporting results on Feb 2.
The Earnings ESP for AstraZeneca plc AZN is +24.32% and it carries a Zacks Rank #2. The company is scheduled to release results on Feb 4.
The Earnings ESP for Acorda Therapeutics, Inc. ACOR is +150.00% and it carries a Zacks Rank #2. The company is expected to release results on Feb 11.
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Click to get this free report ASTRAZENECA PLC (AZN): Free Stock Analysis Report VERTEX PHARM (VRTX): Free Stock Analysis Report GILEAD SCIENCES (GILD): Free Stock Analysis Report ACORDA THERAPT (ACOR): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research