Vertex Pharmaceuticals became one of the world’s largest biotechnology companies thanks to a series of successful cystic fibrosis drugs that have helped many patients live longer, better lives. A fresh earnings report shows those drugs remain on an upward trajectory, with revenue from them increasing by double digits in the second quarter to crest above $3.2 billion.
That performance not only surpassed Wall Street estimates, but pushed Vertex to hike its annual guidance. The company now expects $13.1 billion to $13.2 billion in total revenue this year — up from a prior range $12.95 billion to $13.1 billion. Multiple analysts described the earnings as a “solid beat and raise.”
Yet, a small rival poses a potentially big problem for Vertex’s star franchise. In the coming weeks, fellow Boston-area biotech Sionna Therapeutics should have data from an important study of its most advanced cystic fibrosis drug. How the trial shakes out will likely set the tone as to whether Sionna is a real threat. The readout “looms large,” according Christopher Raymond, a Raymond James analyst who covers Vertex.
In a note to clients, Raymond wrote that his team’s lone — and “outsized” — concern for Vertex “centers around the potential for competition” from Sionna, which is designing drugs to stabilize the defunct protein that causes cystic fibrosis. Specifically, Sionna’s approach is to pair stabilizers with either standard treatments, like Vertex’s Trikafta, or the company’s own complementary protein modulators.
A mid-stage study is stress-testing the underlying idea of that first approach by layering a Sionna drug codenamed SION-719 on top of Trikafta. While the experiment is primarily focused on safety, it’s also evaluating changes in “sweat chloride levels” for early signs the drug is working as intended. In cystic fibrosis, an array of genetic mutations impair vital chloride-pumping proteins. So if a medicine restores that protein’s function, researchers expect to see the chloride content in a patient’s sweat lower over time.
Sionna leadership has indicated that an improvement of “10 millimoles per liter” would be “clinically meaningful” and differentiate its drug from others. Analysts at TD Cowen, meanwhile, have spoken to key doctors in the space, who suggested an improvement of 5 to 7 millimoles per liter would support continued development.
Until the data become available, “we remain on the sidelines” with Vertex’s stock, Raymond wrote.
Others hold a more optimistic outlook for Vertex. Michael Yee, an analyst at UBS, notes that Vertex’s newest cystic fibrosis product Alyftrek “already shows strong data,” with a once-daily dose offering 3 to 8 millimoles per liter improvement in sweat chloride. Researchers have found that at least two-thirds of pediatric patients reach “normal” levels. Sionna’s study also only enrolled patients with a select genetic makeup, meaning results “may have limited readthrough” to Vertex.
Though Sionna “remains an overhang, even if those conversations have receded of late,” Vertex shares “should regain momentum on the other side of those data,” wrote Cantor Fitzgerald analyst Carter Gould.
Vertex shares were mostly flat Tuesday — trading about 2% higher, to $478 apiece, by late morning — while Sionna’s were up 3% to just shy of $51 apiece. The companies currently sport market caps of $121 billion and $2.3 billion, respectively.
Notably, Vertex earnings did not account for a planned, $10 billion acquisition of endocrine drugmaker Crinetics Pharmaceuticals. Though the deal's price and premium did raise some investor eyebrows, analysts have defended the deal as strategic, as it hands Vertex two products that the company predicts will eventually deliver $5 billion in combined annual sales.
