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Why Vertex Lowered Its Guidance for Orkambi

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Behind lower Orkambi sales expectations

Orkambi, a combination of lumacaftor and ivacaftor (Kalydeco), has been the major growth driver for Vertex Pharmaceuticals (VRTX). For details on the growth prospects for the drug, please refer to What’s Vertex’s Label Expansion Strategy for Orkambi?

On September 28, 2016, Orkambi won FDA (U.S. Food and Drug Administration) approval for use in CF (cystic fibrosis) patients aged six years through 11 years having two copies of the F508del mutation. With this approval, the CF population base for Orkambi in the United States rose to 11,000.

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Projections for Orkambi

Vertex expects Orkambi to generate revenue of $950 million–$990 million in 2016 from an earlier guidance of $1.0 billion–$1.1 billion for the period. As directed by VRTX, Orkambi might earn $230 million–$235 million in the third quarter of 2016.

Wall Street analysts expect the drug to earn $232.8 million in 3Q16 and $265.8 million in 4Q16. To find out about the growth concerns for the drug, please read Higher Discontinuations Are among Orkambi’s Concerns.

Why lower revenue from Orkambi in 2016?

The slower launch of Orkambi in Germany is to blame for the drug’s lowered guidance. We’ll look more closely at why Germany and Europe are so important for VRTX in the next part of this series.

Although the total eligible CF population for Orkambi in Germany is 2,500, fewer than 20.0% of patients have initiated the therapy to date. The drug is approaching its peak penetration in the United States. In July and August, refills for the drug were lower than expected. All these factors have contributed to lower-than-anticipated revenue in 2016.

Orkambi has a peak sales opportunity of more than $4.0 billion. If it stretches the potential, Vertex’s share price will rise significantly, but it will definitely take a longer time.

To get exposure to VRTX, you can invest in the iShares Nasdaq Biotechnology (IBB). IBB has 3.4% of its total holdings in Vertex. It also holds assets in Amgen (AMGN), Biogen Idec (BIIB), and Celgene (CELG).

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