--Vertex to eliminate 15% of its workforce after disappointing sales of its drug Incivek
--Third-quarter loss and revenue decline fall below analysts' expectations
--Vertex will focus its efforts in expanding growth through it cystic fibrosis drug franchise
(Updated throughout with added details.)
By Joseph Walker
Vertex Pharmaceuticals Inc. (VRTX) will trim its workforce by 15% and re-orient its research and development after sales of its hepatitis C drug Incivek plunged by two-thirds in the third quarter.
The company posted a loss of $124.1 million, or 54 cents a share, in the quarter amid a 34% decline in total revenue. The results were far below analysts' expectations and shares of Vertex fell 4.9% to $74 in early trading Tuesday.
The retrenchment of one of biotechnology's most followed companies illustrates how suddenly promising new drugs can be eclipsed by competitors' advances. Many patients with hepatitis C--which can take years to harm the liver--have delayed treatment with Vertex's Incivek in anticipation of a new therapy with fewer side effects and greater cure rates going onto the market later this year. The company expects the declines to continue.
"We reached a point where our level of investment and support for Invicek was beyond what we believe is necessary to support future physician and patient demand," said Chief Executive Jeffrey Leiden in prepared remarks during a conference call with analysts.
Vertex also cut its 2013 revenue outlook to $1 billion to $1.05 billion, from its previous estimate of $1.1 billion to $1.2 billion.
In all, the company expects the layoffs to total 370 positions, many of them sales jobs and other supporting roles for Incivek. Vertex's remaining workforce of 1,800 will focus on cystic fibrosis, the rare lung disease for which Vertex has developed a leading drug franchise.
The potential for the company's cystic fibrosis treatments have helped push the company's share price up roughly 75% this year. Sales of Vertex's currently approved drug, Kalydeco, more than doubled to $101.1 million in the third quarter, and analysts project annual sales of $1.82 billion annually by the end of 2016, according to FactSet Research.
Vertex is developing additional treatments that could greatly expand the number of patients treated with its cystic fibrosis drugs. Mr. Leiden said the company would continue to develop other drug candidates for hepatitis C, but said that staff reductions would enable Vertex to "focus our investment on key programs in cystic fibrosis and other diseases to position the company for future growth."
The majority of the job cuts will be made in the company's home state of Massachusetts and will reduce operating expenses by $150 million to $200 million next year. The company expects to incur restructuring charges of $35 million to $45 million this year.
Incivek was approved in 2011 for use in combination with two existing drugs, one of which--interferon--requires frequent injections that carry flu-like side effects. Sales in the quarter fell $85.6 million, down from $254.3 million a year ago.
Last Friday, an advisory committee to the U.S. Food and Drug Administration unanimously recommended approval for a new hepatitis C drug developed by Gilead Sciences Inc. (GILD). The drug, sofosbuvir, could be approved by mid-December and will eliminate the need for interferon in some patients. Sofosbuvir, as well as rival experimental treatments, are expected to eventually eliminate interferon for all people infected with the hepatitis C virus.
Mark Schoenebaum, an analyst with ISI Group, said he was pleased that the company "made the difficult decision to cut" costs related to its hepatitis C program. "This now sets the company up for massive long-term operating margin leverage should its efforts in [cystic fibrosis] be successful," Mr. Schoenebaum wrote in a research note to clients.
--Tess Stynes contributed to this report.
Write to Joseph Walker at email@example.com
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(END) Dow Jones Newswires
October 29, 2013 11:04 ET (15:04 GMT)Copyright (c) 2013 Dow Jones & Company, Inc.
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