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Vertex Pharmaceuticals: Robust Growth Trends for Kalydeco in 2017

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Jul. 26 2017, Updated 6:42 a.m. ET

Kalydeco growth trends

In 1Q17, Vertex Pharmaceuticals’ (VRTX) Kalydeco reported revenues close to $186 million, of which $102 million came from the US market and while $84 million came from international markets. Based on the run rate in 1Q17, the company has projected Kalydeco’s full-year revenues to fall in the range of $710 million to $730 million in 2017. The company has upped its full-year guidance for the drug by around $30 million. To learn more about Kalydeco, see How Kalydeco Could Be Vertex’s Steady Revenue Story.

If Kalydeco manages to surpass these revenue projections, it may have a favorable impact on Vertex Pharmaceuticals’ stock as well as the Health Care Select Sector SPDR Fund (XLV). Vertex Pharmaceuticals makes up about 1.3% of XLV’s total portfolio holdings.

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Growth drivers

Kalydeco was initially approved for cystic fibrosis (or CF) patients with one of the ten specific transmembrane conductance regulator (or CFTR) gene gating mutations. On May 17, 2017, the FDA expanded the drug’s label to add an additional 23 CFTR gating mutations. This approval was based on data from a small phase 2 study comprising only 19 patients, representative of around 1,500 CF patients in the United States. The company also supplemented this study with in-vitro data as well as a preclinical human cell-line assay. Since these human assays have demonstrated accuracy in almost 100% cases, FDA approved Kalydeco for the new indication a year after the application was submitted. This move has expanded Kalydeco’s addressable market size by 900 patients or around 3% of the total CF population.

Vertex Pharmaceuticals is currently awaiting FDA approval for Kalydeco in CF patients with certain splice mutations. FDA, however, isn’t confident about the drug’s efficacy in these patients based on in-vitro data. Vertex Pharmaceuticals aims to submit data from a phase 3 trial evaluating the tezacaftor/ivacaftor combination regimen, which also involved arm treated with Kalydeco monotherapy. If approved, this indication would further add 600 patients to the drug’s addressable market.

Vertex Pharmaceuticals has also collected long-term outcome data for Kalydeco, which shows a 40% reduced decline in lung function annually for patients using the drug.

With Orkambi and Kalydeco, Vertex Pharmaceuticals is competing effectively with existing and upcoming CF players such as Roche Holdings (RHHBY), Novartis (NVS), and Pfizer (PFE).

In the next part of this series, we’ll discuss the growth potential of the investigational tezacaftor/ivacaftor combination regimen in greater detail.

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