On July 31, 2019 Vertex Pharmaceuticals Incorporated (Nasdaq: VRTX) reported consolidated financial results for the second quarter ended June 30, 2019 and increased its full-year 2019 total product revenue guidance (Press release, Vertex Pharmaceuticals, JUL 31, 2019, View Source [SID1234537932]).
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"We have made tremendous progress across our business in 2019 thus far. In CF, we submitted a New Drug Application to the FDA for our VX-445 triple combination regimen, which we believe has the potential to treat up to 90% of all CF patients in the future. We continue to focus on ensuring all eligible patients have access to our CF medicines as early as possible," said Jeffrey Leiden, M.D., Ph.D., Chairman, President and Chief Executive Officer of Vertex. "Additionally, we have rapidly grown our pipeline beyond CF, advancing seven new potential medicines across five disease areas, including beta thalassemia, sickle cell disease, alpha-1 antitrypsin deficiency, APOL1-mediated kidney diseases and pain. And through our expanded collaboration with CRISPR Therapeutics and acquisition of Exonics Therapeutics, we have now established a leading gene editing platform for the treatment of Duchenne Muscular Dystrophy and Myotonic Dystrophy Type 1."
Total product revenues increased 25% compared to the second quarter of 2018, primarily driven by the uptake of SYMDEKO in the U.S. and SYMKEVI in Germany.
GAAP net income increased compared to the second quarter of 2018, driven by the strong growth in total product revenues, and was partially offset by increases in operating expenses, including a $50 million upfront payment as part of Vertex’s recent collaboration with Kymera Therapeutics, and income taxes.
Non-GAAP net income increased compared to the second quarter of 2018, driven by the strong growth in total product revenues, and was partially offset by increased income taxes.
Cash, cash equivalents and marketable securities as of June 30, 2019 were $4.0 billion, an increase of approximately $800 million compared to $3.2 billion as of December 31, 2018.
Combined GAAP R&D and SG&A expenses increased compared to the second quarter of 2018 primarily due to the $50 million upfront payment to Kymera Therapeutics.
Combined Non-GAAP R&D and SG&A expenses were similar to the second quarter of 2018.
GAAP and Non-GAAP income taxes increased significantly compared to the second quarter of 2018 due to Vertex’s release of its valuation allowance on the majority of its deferred tax assets in the fourth quarter of 2018. GAAP and non-GAAP income taxes in the second quarter of 2019 include a provision for income taxes on Vertex’s pre-tax income using an estimated effective tax rate approximating statutory rates. This provision for income taxes includes a significant non-cash charge due to Vertex’s ability to offset its pre-tax income against previously benefited net operating losses. Refer to "Supplemental Income Tax Information" for discussion of the cash versus non-cash components of Vertex’s provision for income taxes.
Share Repurchase Program
In order to reduce the impact of dilution from employee equity programs, the Board of Directors has authorized a share repurchase program of up to $500 million of common stock through December 31, 2020.
The repurchase is expected to be executed from time to time, subject to general business and market conditions and other investment opportunities, through open market purchases or privately negotiated transactions, including through Rule 10b5-1 plans.
Business Highlights
CF CLINICAL DEVELOPMENT
On July 22, 2019, the company announced that it submitted a New Drug Application (NDA) to the U.S. Food and Drug Administration (FDA) for the triple combination of VX-445 (elexacaftor), tezacaftor and ivacaftor. A Marketing Authorization Application (MAA) submission to the European Medicines Agency (EMA) is planned for the fourth quarter of 2019.
Enrollment is ongoing in a Phase 3 study evaluating the triple combination of elexacaftor, tezacaftor and ivacaftor in children ages 6 to 11 years.
A Phase 2 dose-ranging study is ongoing to evaluate the once-daily potentiator VX-561 to support potential Phase 3 development of VX-561 in a once-daily triple combination regimen.
A Phase 2 study is ongoing to evaluate the next-generation corrector, VX-121, in combination with VX-561 and tezacaftor as a potential once-daily triple combination regimen. VX-121 was granted Fast Track Designation by the FDA in the second quarter of 2019.
Vertex continues to make significant progress toward gaining approval for its CF medicines for use earlier in the course of disease progression. Recent highlights include:
Approval for SYMDEKO in the U.S. for children ages 6 to 11 years; MAA submission in the EU planned for the second half of 2019
Approval for ORKAMBI in Australia for children ages 2 to 5 years
Approval for KALYDECO in Australia for children ages 12 to <24 months
CLINICAL DEVELOPMENT
Alpha-1 Antitrypsin (AAT) Program:
Vertex has completed its evaluation of single and multiple doses of VX-814, the company’s first investigational molecule for the treatment of alpha-1 antitrypsin (AAT) deficiency, in healthy volunteers. Based on the safety, tolerability and pharmacokinetic data from this study, the company plans to advance VX-814 into a Phase 2 dose-ranging study in patients with two Z mutations.
The company expects to have clinical data from its AAT program in people who have two Z mutations in 2020.
Vertex has also advanced a second investigational small molecule corrector, VX-864, into Phase 1 clinical development. Both VX-814 and VX-864 have received Fast Track Designation by the FDA.
Sickle Cell Disease and Beta Thalassemia:
Vertex and its partner CRISPR Therapeutics have dosed the first patient in the Phase 1/2 clinical study of severe sickle cell disease using the novel gene-editing therapy CTX001. The first patient with beta thalassemia was dosed in the first quarter of this year.
APOL1-Mediated Kidney Diseases:
Vertex has initiated a Phase 1 study evaluating VX-147, the company’s first investigational oral small molecule medicine for the treatment of APOL1-mediated focal segmental glomerulosclerosis (FSGS) and other serious kidney diseases. VX-147 is designed to inhibit APOL1 function, which is a causal genetic factor in FSGS and other proteinuric kidney diseases. Vertex is also advancing multiple other APOL1 inhibitors through preclinical development.
INVESTMENTS IN EXTERNAL INNOVATION
On June 6, 2019, Vertex announced that it is expanding its collaboration with CRISPR Therapeutics and acquiring Exonics Therapeutics with the goal of developing novel therapies for Duchenne Muscular Dystrophy (DMD) and Myotonic Dystrophy Type 1 (DM1). Vertex completed the CRISPR and Exonics transactions in July 2019.
On May 15, 2019, Vertex and Kymera Therapeutics entered into a four-year strategic research and development collaboration to develop small molecule protein degraders against multiple targets. The collaboration will leverage Kymera’s expertise in targeted protein degradation and its proprietary Pegasus drug discovery platform and Vertex’s scientific, clinical, and regulatory capabilities to accelerate the development of first-in-class medicines for people with serious diseases.