Vertex Pharmaceuticals beat Wall Street's third-quarter expectations, but the real story for Vertex stock is still to come, analysts said Tuesday.
The Street is closely watching for the next update from Vertex's pain treatment, suzetrigine. The Food and Drug Administration is scheduled to make a decision on whether to approve it as a treatment for acute pain in January.
But before year-end, analysts expect to see the results of a suzetrigine study in patients with LSR, or lumbosacral radiculopathy. This condition occurs when nerves in the spine are compressed or irritated. It can cause leg pain known as sciatic pain. If suzetrigine works in LSR, it could provide fodder for approval in chronic pain treatment. Chronic pain is often treated with highly addictive opioids.
LSR is a "high unmet need multibillion-dollar condition," RBC Capital Markets analyst Brian Abrahams said in a report. Though concerns over Vertex's ability to replicate the results in a Phase 3 study could cap the stock upside, he said.
Vertex stock surged 5.7% to 499.88. Shares are forming a flat base with a buy point at 510.63, according to MarketSurge. But the stock is flirting with a downtrend line between 499.09 and 500.25, offering investors an early entry.
Vertex Stock Faces FDA Decisions
The pain drug is far from Vertex's only catalyst in the near term. The FDA is also scheduled in January to consider approving its next-generation cystic fibrosis treatment.
"We still believe pipeline success would be needed to drive another leg of stock upside and have less confidence in appreciation potential from upcoming readouts, though continued CF performance will likely reaffirm to the market that the high-margin, long-duration, core franchise continues to justify a premium," Abrahams said.
During the third quarter, Vertex's sales climbed 12% to $2.77 billion, beating calls for $2.69 billion. The lion's share of that came from Trikafta, the company's latest-generation CF treatment. Sales easily beat expectations at nearly $2.59 billion.
Vertex also earned an adjusted $4.38 per share, up 7% and ahead of forecasts for $4.08 a share.
Other products, including Vertex's Crispr Therapeutics-partnered gene-editing treatment for sickle cell disease and beta thalassemia, brought in $187 million. Analysts expected $184 million from Vertex's other products. It's important to note, Vertex doesn't break out which sales came from Casgevy and which stemmed from its non-Trikafta CF treatments.
But Mizuho Securities analyst Salim Syed says forecasts for Casgevy sales may need to come down a bit. Making Casgevy is a complicated process. Patients must first have their immune cells collected. Then, it can take up to six months to manufacture the bespoke drug.
So far, about 40 patients have had their cells collected. But only one has received the actual treatment. The companies don't capture any revenue from Casgevy until a patient has been treated. Thus, Syed says, the $43 million estimate for 2024 sales is likely too high.
Crispr stock 0.5% to 50.36, mostly wiping out a steeper loss in earlier trades.
Analysts Split On 2025 Prospects
For the year, Vertex raised its sales outlook to $10.8 billion to $10.9 billion. Analysts called for earnings of 33 cents a share and $10.76 billion in sales.
Analysts were split on 2025 prospects for Vertex. Piper Sandler analyst Christopher Raymond says it will be an important year with two potential approvals and three pivotal studies ongoing. Abrahams, the RBC analyst, is more conservative. The company will need to invest heavily to ensure access to the pain drug.
"We are more confident on (CF drug) switching and some new patient starts" after the potential FDA approval date in January, he said in a report. He has a sector perform rating on Vertex stock, while Piper Sandler's Raymond rates shares overweight.
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