Vertex Pharmaceuticals(NASDAQ: VRTX) has churned out nice profits quarter after quarter for years. The big biopharmaceutical company's cystic fibrosis (CF) franchise made it easy.
However, Vertex announced its second-quarter results following the market close on Thursday. Lo and behold, the company posted a net loss of $3.6 billion, based on generally accepted accounting principles (GAAP). Its non-GAAP loss was $3.3 billion.
Should investors worry about this big loss? Not even for a second.
A simple explanation for that glaring loss
Vertex's loss didn't stem from sales of its vaunted CF therapies crashing during Q2. Instead, product revenue rose a respectable 6% year over year, thanks mainly to continued strength for Trikafta/Kaftrio.
The loss was entirely due to Vertex's acquisition of Alpine Immune Sciences, which closed in May. This transaction cost Vertex $5 billion in cash and resulted in a charge to acquired in-process research and development (IPR&D) in Q2 of around $4.4 billion. If we back out this IPR&D charge, Vertex's profit in Q2 was in the ballpark of $800 million.
Buying Alpine should pay off handsomely for investors over the long run. The deal adds Alpine's lead product povetacicept to Vertex's pipeline. The experimental drug is slated to begin phase 3 testing this year targeting IgA nephropathy, a kidney disorder also known as Berger's disease that doesn't have any approved therapies.
But Vertex views povetacicept as a "pipeline-in-a-product." The drug holds the potential to treat other autoimmune diseases that affect the kidney.
The good news from Vertex's Q2 update
I think Vertex's Q2 loss is a big nothingburger. The company announced good news that was more important for investors.
Vertex raised its full-year product revenue guidance to a range of $10.65 billion to $10.85 billion. It previously projected full-year product revenue of between $10.55 and $10.75 billion.
Some of this improved outlook stems from continued growth in sales of Vertex's CF franchise. However, the company is also counting on revenue beginning to flow in from the launch of gene editing therapy Casgevy.
Casgevy has already won regulatory approvals in the U.S., Great Britain, European Union, Saudi Arabia, and Bahrain for treating sickle cell disease and transfusion-dependent beta-thalassemia. Vertex has activated over 35 authorized treatment centers across the world so far. It could take some time for sales of the therapy to pick up, but Casgevy should easily become another blockbuster drug for the company.
The most important story for Vertex
However, Casgevy isn't the most important story for Vertex. So what is? Vertex should have multiple major catalysts on the way.
The U.S. Food and Drug Administration set a PDUFA date of Jan. 2, 2025 for an approval decision on Vertex's vanzacaftor triple-drug CF combo. The agency should make a decision on suzetrigine in treating moderate-to-severe acute pain by Jan. 30, 2025.
Vertex has great expectations for both products -- and rightly so. The vanzacaftor triple should become the company's most successful CF therapy yet, in my opinion. Suzetrigine has a big opportunity as a non-opioid pain treatment.
And there's more. Vertex is on track to begin late-stage studies evaluating suzetrigine in treating diabetic peripheral neuropathy (pain resulting from damage to the brain and spinal cord) this quarter. It plans to share results from a phase 2 study of the drug in treating lumbosacral radiculopathy (pain resulting from nerve roots in the spine being compressed or irritated) later this year.
The future for Vertex remains very bright. I think this biotech stock is still a great pick for long-term investors.
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Keith Speights has positions in Vertex Pharmaceuticals. The Motley Fool has positions in and recommends Vertex Pharmaceuticals. The Motley Fool has a disclosure policy.
