Vertex Pharma’s Stock Has Tumbled. Earnings Will Stop the Pain.

A Vertex Pharmaceuticals laboratory in Boston. (Courtesy Vertex)

Key Points

• Vertex Pharmaceuticals’ stock dropped 11% since August after its non-opioid painkiller VXX-993 failed a Phase 2 trial.
• Analysts expect Vertex’s third-quarter sales to grow over 10% to $3.06 billion, driven by its cystic fibrosis business.
• Weekly prescriptions for Journavax increased 73% in the third quarter to about 9,000, indicating strong sales performance for the drug.

Vertex Pharmaceuticals stock has been in a world of hurt ever since the company announced that a next-generation painkiller had failed a drug trial. Third-quarter earnings could get shares headed in the right direction again.

Shares of Vertex, the first drugmaker in two decades to have a nonaddictive painkiller approved by the U.S. Food and Drug Administration, have dropped 11% since early August. That’s when VX-993, an oral version of its non-opioid painkiller Journavax, failed a Phase 2 drug trial.

Vertex, though, still has a lot going for it. Journavax has the potential to gain in popularity, while the company’s cash cow— its cystic fibrosis business —remains strong. This will all become clearer when the company reports on Monday. Analysts expect sales to grow more than 10% to $3.06 billion, with the majority coming from the cystic fibrosis business, while Journavax is expected to contribute $23 million. Analysts expect earnings of $4.58 per share.

Vertex has a history of beating earnings forecasts—the company has delivered better-than-expected sales in 16 of the past 20 quarters, according to FactSet—including last quarter, when its newer cystic fibrosis products beat estimates. Analysts expect more of the same in the coming year. “Cystic fibrosis continues to be the bright spot,” writes Truist Financial analyst Joon Lee.

Journavax can also continue to grow significantly. It easily surpassed estimates in the second quarter, and signs are pointing to another strong quarter. Weekly prescriptions for the drug appear to have grown 73% to about 9,000 from the start of the third quarter to the end, based on data from BMO analyst Evan Seigerman—a similar rate as in the second quarter off a larger base. Recent weekly prescriptions line up with revenue that would fall somewhere in the low $20 million range, Seigerman writes, showing that sales are likely to satisfy expectations.

It makes sense that the growth for Journavax is just beginning to ramp up, considering the potential size of the nonaddictive market. While smaller biotech specialists, such as Eli Lilly’s SiteOne Therapeutics, are making competitive nonaddictive pain drugs, potential spending on nonaddictive medicines is massive. Grand View Research estimates that spending on new nonaddictive ones could reach $70 billion by 2030 as physicians replace older drugs with them. That underpins the thesis that Vertex’s pain business will grow aggressively for years to come.

Meanwhile, management likely won’t issue any more scary news about VX-993 on Monday, Seigerman says. Yes, the market eventually wants to see that this drug is on track to receive FDA approval. But as long as the picture doesn’t worsen and the entire business continues to grow, the stock can rise after earnings.

Vertex stock is also much cheaper than it was earlier this year. Shares now trade at 20.9 times earnings, below their 2025 peak of 27.6 times. That may sound expensive, given that most pharma companies trade in the teens or single digits. But Vertex deserves a premium because of its outsize earnings growth, which it supports by using its free cash flow to repurchase shares every year.

Long-term question marks remain for Vertex, but the pain should at least subside on Monday.

Write to Jacob Sonenshine at jacob.sonenshine@barrons.com