Valeant Pharmaceuticals Intl Inc (NYSE:VRX) reported consolidated financial results for the quarter ended March 31, 2016 and provided an update on its approved CF medicines and other investigational medicines. Vertex also provided financial guidance for 2016 ORKAMBI® net revenues and increased its prior guidance for 2016 KALYDECO® net revenues. Key financial results include:
“2016 marks an important transition for Vertex following the launch of ORKAMBI. With recent approvals and label expansions, there are now approximately 27,000 people with CF eligible to take ORKAMBI or KALYDECO. The number of CF patients eligible for and initiating treatment is driving significant revenue growth for a second straight year, and we expect this trend to continue in 2017 and beyond,” said Jeffrey Leiden, M.D., Ph.D., Chairman, President and Chief Executive Officer of Vertex. “In addition, we believe our portfolio of approved and pipeline medicines has the potential to treat the vast majority of people with CF. We remain focused on investing to create transformative future medicines and generating continued earnings growth in the years ahead.”
CF Medicines and Pipeline Update
Vertex today provided the following updates for ORKAMBI, KALYDECO and the company’s progress toward developing new medicines with the goal of treating all people with CF:
Additional Regulatory Approvals Support Expansion Efforts: During the first quarter of 2016, Vertex received regulatory approval for ORKAMBI for the treatment of people with CF ages 12 and older who have two copies of the F508del mutation in Canada and Australia, where together there are approximately 2,500 people who are eligible for treatment with ORKAMBI. Vertex has now begun the reimbursement approval process in these countries.
Supplemental New Drug Application in Children Ages 6 to 11: In late March 2016, Vertex submitted a supplemental New Drug Application (sNDA) to the FDA for the approval of ORKAMBI for treatment of children with CF ages 6 to 11 who have two copies of the F508del mutation. The submission included a request for Priority Review, which if granted would shorten the FDA’s anticipated review time from 10 to six months. There are approximately 2,400 children ages 6 to 11 who have two copies of the F508del mutation in the U.S.
Vertex has submitted data from an open label Phase 3 clinical safety study of ORKAMBI in children ages 6 to 11 who have two copies of the F508delmutation for presentation at the 39th European Cystic Fibrosis Society Conference (ECFS), June 8 – 11 in Basel, Switzerland.
Enrollment Complete in Phase 3 Study of Children Ages 6 to 11: Vertex has completed enrollment in a six-month Phase 3 efficacy study evaluating ORKAMBI in approximately 200 children ages 6 to 11 who have two copies of the F508del mutation. Pending data from the study, Vertex plans to submit a Marketing Authorization Application (MAA) variation in Europe in the first half of 2017 for approval of ORKAMBI for use in this age group. There are approximately 3,400 children ages 6 to 11 who have two copies of the F508del mutation in the European Union.
Study in Children Under Two Years of Age: Vertex has initiated a Phase 3 clinical study of KALYDECO in children under 2 years of age to evaluate the effect of KALYDECO on markers of CF in young children. The study will utilize a weight-based dose of KALYDECO granules that can be mixed in soft foods or liquids. The study will enroll infants with one of the 10 mutations for which KALYDECO is currently approved.
Regulatory Filing for Patients with Residual Function Mutations: In October 2015, Vertex submitted an sNDA for approval of KALYDECO for treatment of people with CF ages 2 and older who have one of 23 residual function mutations. The company is in ongoing discussions with the FDAregarding a Complete Response Letter it received in February 2016. There are approximately 1,500 people ages 2 and older in the U.S. who have one of the 23 residual function mutations included in the sNDA.
Pipeline of Investigational Medicines for CF
VX-661 – Broad Phase 3 program ongoing in multiple groups of people with CF
Vertex provided the following updates on the Phase 3 studies of the investigational combination of VX-661 and ivacaftor in multiple different groups of people with CF who have at least one copy of the F508del mutation:
Enrollment in the study in people with two copies of the F508del mutation is expected to be complete in mid-2016, and data from this Phase 3 study are expected in early 2017.
Enrollment is ongoing in the Phase 3 study of VX-661 in combination with ivacaftor in patients with one copy of the F508del mutation and a second mutation that results in a gating defect. Vertex plans to complete enrollment of this study in late 2016 or early 2017.
Vertex has revised its enrollment target for the Phase 3 study of VX-661 in combination with ivacaftor in patients with one copy of the F508delmutation and a second mutation that results in residual CFTR function. The original expectation was for up to 300 patients to enroll in this study. Vertex now plans to enroll approximately 200 patients. Enrollment is expected to be complete in the second half of 2016.
Enrollment is complete in Part A of the study in people with one copy of the F508del mutation and a second mutation that results in minimal CFTR function. An interim futility analysis of efficacy data from Part A of this study is expected to be completed in the third quarter of 2016.
In addition to evaluating the efficacy of the combination regimen, these Phase 3 studies will also provide safety data on the combination of VX-661 and ivacaftor to support the planned development of a triple combination regimen that includes a next-generation corrector in combination with VX-661 and ivacaftor.
VX-371 – Enrollment ongoing in Phase 2 study of VX-371 in combination with ORKAMBI
Vertex today announced data from an exploratory Phase 2, 14-day study of its inhaled epithelial sodium channel (ENaC) inhibitor, VX-371 (P-1037), being developed in collaboration with Parion Sciences. The study dosed 142 people ages 12 and older with a confirmed diagnosis of CF. There was no restriction based on CFTR mutation. 136 people completed the study. Patients were not using any CFTR modulator therapy immediately before or during the study. The primary endpoint of the study was safety compared to placebo. Secondary endpoints evaluated the effect on mean absolute forced expiratory volume in one second (FEV1) and patient-reported respiratory symptoms as reported in the CF questionnaire-revised (CFQ-R). The study met its primary safety endpoint, and safety data from the study showed that VX-371 was generally well tolerated. There were no statistically significant changes in FEV1 or CFQ-R for those who received VX-371.
The clinical safety data announced today provide support for the company’s ongoing placebo-controlled Phase 2a study evaluating VX-371 in combination with ORKAMBI, both with and without the addition of hypertonic saline. This study is expected to enroll approximately 150 people with CF ages 12 and older who have two copies of the F508del mutation. The primary endpoints of the Phase 2a study are safety and mean absolute change from baseline in FEV1 at day 28 compared to placebo.
In vitro, VX-371 showed a meaningful change in cilia beat frequency when VX-371 was used in combination with ORKAMBI in human bronchial epithelial cells with two copies of the F508del mutation, but did not show a meaningful change in cilia beat frequency when VX-371 was used alone.
Next-Generation Correctors – Phase 1 studies in healthy volunteers progressing as planned
In the fourth quarter of 2015, Vertex initiated clinical development of two next-generation correctors known as VX-152 and VX-440. Both VX-152 and VX-440 are being evaluated alone and as part of a triple combination with VX-661 and ivacaftor in ongoing Phase 1 studies in healthy volunteers.
Pending successful completion of the Phase 1 studies of VX-152 and VX-440, the company expects to begin Phase 2 proof-of-concept studies in combination with VX-661 and ivacaftor in the second half of 2016.
CRISPR Collaboration – Gene editing collaboration focused on discovering potential treatments to address the mutations and genes known to cause and contribute to CF
In October 2015, Vertex entered into a strategic research collaboration with CRISPR Therapeutics focused on the use of CRISPR’s gene editing technology, known as CRISPR-Cas9, to discover and develop potential new treatments aimed at the underlying genetic causes of human disease. The collaboration will evaluate the use of CRISPR-Cas9 across multiple diseases where targets have been validated through human genetics. As part of the collaboration, Vertex and CRISPR will evaluate the use of CRISPR-Cas9 to potentially correct the mutations in the CFTR gene known to result in the defective protein that causes CF and to edit other genes that contribute to the disease.
Other Research and Development Programs
Beyond CF, Vertex is advancing research and development programs focused on the treatment of key mechanisms in serious diseases. The company today provided the following updates to its pipeline programs:
VX-970: VX-970 is an inhibitor of ATR, a critical regulator of the DNA damage repair system. Vertex presented data from a Phase 1 trial of VX-970 in combination with cisplatin in patients with advanced solid tumors at the Annual Association for Cancer Research (AACR) meeting on April 17, 2016.
Vertex is currently conducting two Phase 1/2 studies that are enrolling specific cohorts of triple-negative breast cancer patients and non-small cell lung cancer patients. In these studies, VX-970 is being dosed in combination with commonly used DNA-damaging repair therapies.
Vertex has also entered into two cooperative research and development agreements (CRADAs) with the National Cancer Institute to support evaluation of VX-970 across other types of cancers. The CRADA enables NCI to conduct multiple clinical studies that will evaluate treatment with VX-970 in people with small cell lung, head and neck, bladder, ovarian and other cancers.
VX-150: Vertex is developing VX-150 as a potential medicine for the treatment of pain. VX-150 is designed to block pain signaling through inhibition of a sodium channel known as NaV 1.8. In the first quarter of 2016, Vertex initiated a six-week crossover Phase 2 proof-of-concept study of VX-150 in approximately 100 people with symptomatic osteoarthritis of the knee. Vertex expects to complete enrollment of this study in the second half of 2016.
Acute Spinal Cord Injury
VX-210: In the first quarter of 2016, Vertex initiated a randomized, double-blind, placebo controlled Phase 2b/3 study to evaluate the efficacy and safety of VX-210 in patients with certain acute cervical spinal cord injuries. Vertex is developing VX-210 as a potential medicine for acute spinal cord injury. VX-210 is designed to inhibit a protein known as Rho that blocks neural regeneration after injury.
First Quarter 2016 Financial Highlights
- Net product revenues from ORKAMBI were $223.1 million. ORKAMBI was launched in the U.S. in July 2015.
- Net product revenues from KALYDECO were $170.5 million, compared to $130.2 million for the first quarter of 2015.
- Non-GAAP research and development (R&D) expenses were $222.0 million compared to $177.2 million for the first quarter of 2015. The increase was primarily driven by increased investment to progress our portfolio of CF medicines. GAAP R&D expenses, including stock-based compensation expense, were $255.9 million compared to $215.6 million for the first quarter of 2015.
- Non-GAAP sales, general and administrative (SG&A) expenses were $83.7 million compared to $69.1 million for the first quarter of 2015. The increase was primarily driven by increased investment to support the global launch of ORKAMBI. GAAP SG&A expenses, including stock-based compensation expense, were $105.2 million compared to $85.9 million for the first quarter of 2015.
Net Income (Loss) Attributable to Vertex:
- Non-GAAP net income was $22.4 million, or $0.09 per diluted share, compared to a non-GAAP net loss of $148.4 million, or $0.62 per diluted share, for the first quarter of 2015. The GAAP net loss, including stock-based compensation expense, was $41.6 million, or $0.17 per diluted share, compared to Vertex’s GAAP net loss of $198.6 million, or $0.83 per diluted share, for the first quarter of 2015.
- As of March 31, 2016, Vertex had $1.03 billion in cash, cash equivalents and marketable securities compared to $1.04 billion in cash, cash equivalents and marketable securities as of December 31, 2015.
- As of March 31, 2016, Vertex had $300 million outstanding from a credit agreement, repayable by the end of the third quarter of 2017. The agreement allows for the facility to increase to up to $500 million.
2016 Financial Guidance:
Vertex today provided 2016 revenue guidance for ORKAMBI and increased 2016 revenue guidance for KALYDECO. The company also reiterated guidance for its 2016 combined non-GAAP R&D and SG&A expenses. The guidance is summarized below:
ORKAMBI: The company anticipates total 2016 product revenues for ORKAMBI of $1.0 to $1.1 billion. This guidance is based on the company’s understanding of treatment patterns from the launch of ORKAMBI to date, including:
- Uptake: Approximately 65% of the 8,500 eligible patients in the U.S. have initiated treatment as of March 31, 2016. Vertex continues to expect the vast majority of eligible patients ages 12 and older in the U.S. will initiate treatment by the end of 2016.
- Persistence: Of the patients who have started on treatment, approximately 15% discontinued treatment within the first three months of initiation. The company projects that the proportion of all patients who initiate and remain on treatment will stabilize at approximately 70% to 80%.
- Compliance: The overall compliance rate, which reflects the number of pills actually taken by a patient in a given month, is expected to be between 70% to 80%.
2016 ORKAMBI guidance also reflects potential revenues from the anticipated approval of ORKAMBI in the U.S. for the treatment of people ages 6 to 11 who have two copies of the F508del mutation in the second half of 2016 and revenues from sales of ORKAMBI outside the U.S., primarily in Germany.
KALYDECO: Vertex today increased its guidance for 2016 revenues of KALYDECO. The company now expects product revenues of $685 to $705 million. The prior range, provided on January 10, 2016, was for KALYDECO product revenues of $670 to $690 million for 2016.
The change in KALYDECO guidance reflects:
- A continued increase in the number of patients initiating treatment with KALYDECO globally
- A reduced impact from the VX-661 Phase 3 program
2016 guidance for KALYDECO currently excludes any revenues related to the potential approval of KALYDECO for people in the U.S. who have residual function mutations.
Operating Expenses, Excluding Cost of Revenues (Combined Non-GAAP R&D and SG&A Expenses): Vertex continues to expect that its combined non-GAAP R&D and SG&A expenses in 2016 will be in the range of $1.18 to $1.23 billion. Vertex’s expected non-GAAP R&D and SG&A expenses exclude stock-based compensation expense and certain other expenses. (Original Source)
Shares of Valeant Pharmaceuticals closed today at $34.94, down $1.28 or -3.53%. VRX has a 1-year high of $263.81 and a 1-year low of $25.27. The stock’s 50-day moving average is $36.67 and its 200-day moving average is $81.57.
On the ratings front, Valeant has been the subject of a number of recent research reports. In a report issued on April 25, Wells Fargo analyst David Maris maintained a Sell rating on VRX. Separately, on the same day, BMO’s Alex Arfaei reiterated a Hold rating on the stock and has a price target of $66.
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, David Maris and Alex Arfaei have a total average return of 1.6% and 5.2% respectively. Maris has a success rate of 46.9% and is ranked #1745 out of 3829 analysts, while Arfaei has a success rate of 64.3% and is ranked #671.
The street is mostly Neutral on VRX stock. Out of 21 analysts who cover the stock, 10 suggest a Hold rating , 7 suggest a Buy and 4 recommend to Sell the stock. The 12-month average price target assigned to the stock is $57.60, which represents a potential upside of 60.8% from where the stock is currently trading.
Valeant Pharmaceuticals International, Inc. is a multinational specialty pharmaceutical company that develops manufactures and markets a broad range of pharmaceutical products primarily in the areas of dermatology, eye health, neurology, and branded generics. The company operates through two operating and reportable segments: (i) Developed Markets and (ii) Emerging Markets.