Updated with new information throughout.
CAMBRIDGE, Mass. ( TheStreet) -- Vertex Pharmaceuticals (VRTX) reported $420 million in sales of its hepatitis C drug Incivek during the third quarter, helping the company reach profitability for the first time.
The Incivek tally for the September quarter grew almost six times over second-quarter sales of $75 million and comfortable beat Wall Street expectations which varied from $300 million to $400 million leading up to Vertex's earnings announcement.
Vertex shares closed Thursday at $42.58.Vertex began selling Incivek in May so the accumulated $495 million in sales to date is an impressive accomplishment and distinguishes Incivek as one of the best-performing drug launches on record. Yet investors have expressed concern about independent data suggesting flattening Incivek prescription numbers over the past two months and what that means for the drug's growth and sales moving forward. On a Thursday night call, Vertex executives revealed internal data showing Incivek sales have reached $40 million to $45 million per week in September and October. That run rate implies fourth-quarter Incivek sales in the range of $520 million to $585 million, well above the current consensus of $411 million. Vertex officials were careful not to endorse the math or provide actual Incivek sales guidance, but the message sent was clear: Incivek's growth is far from over and investors relying on outside data services like IMS Health are not getting a complete picture of the drug's sales potential. The same internal data, however, also seemed to validate some investor worries about Incivek because the numbers show weekly sales flat from September through October. Why? If Incivek sales remain flat or even fall, can the drug reach $2 billion in sales in 2012 -- the current analyst consensus expectation? Vertex executives argued that Incivek's rapid, initial adoption came from the drug being used mostly by a smaller pool of doctors who tend to prescribe a relatively large percentage of drugs for hepatitis C. The next leg of growth for Incivek will come when a much larger group of doctors less familiar with the drug start to use it. More than 70,000 hepatitis C patients have been treated with Incivek since its May 23 approval, and 60-70% of those patients are new to treatment, Vertex said. That implies Incivek still has a significant opportunity in hepatitis C patients who failed to respond to previous treatment. The number of "warehoused" patients waiting for retreatment is estimated to be between 100,000 and 300,000. Incivek helped Vertex reach profitability for the first time. The company reported net income of $221 million, or $1.02 per share from a net loss of $209 million, or $1.04 per share, one year ago. On an adjusted basis, Vertex earned 70 cents a share in the quarter. Total revenue was $659.2 million, up from $23.8 million in the year-ago quarter. The increase in total revenue is primarily a result of Incivek sales and $200 million in milestone revenues earned from Vertex's collaborator Johnson & Johnson (JNJ). Total operating expenses rose 98% in the quarter to $443.5 million from $223.4 million a year ago, including a big jump in sales and marketing expenses to $110.7 million from $48.9 million. The higher costs were largely related to the Incivek commercial launch. Vertex CEO Matt Emmens spent a good portion of time on Thursday's call making the point that the company wants to be known for more than Incivek. A new cystic fibrosis drug, Kalydeco, has been filed for approval and could reach the market in the spring of next year. Mid-stage data from a rheumatoid arthritis pill will be presented at an upcoming medical meeting. Additional studies of the rheumatoid arthritis pill will begin early next year. Incivek competes against Merck's (MRK) Victrelis today but newer, potentially stronger hepatitis C drugs from Johnson & Johnson (JNJ), Pharmasset (VRUS) and Abbott (ABT), among others, are moving closer to approval. --Written by Adam Feuerstein in Boston.
>To contact the writer of this article, click here: Adam Feuerstein. >To follow the writer on Twitter, go to http://twitter.com/adamfeuerstein.
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