July 28, 2011 / 8:30 PM / 8 years ago

UPDATE 3-New Vertex hepatitis drug shines out of gate

* EPS loss of $0.85 vs Street view loss $0.96

* Incivek sales $74.5 million in first five weeks

* Shares rise 1.6 percent (Adds company comment, hepatitis background, updates shares)

By Bill Berkrot

NEW YORK, July 28 (Reuters) - Vertex Pharmaceuticals Inc’s (VRTX.O) new hepatitis C drug stormed out of the gate, posting sales of nearly $75 million in its first five weeks on the market, and the company’s shares rose.

Incivek, which is likely to become part of the standard of care for hepatitis C and widely expected to become a multibillion-dollar seller, won U.S. approval in May.

“This is a really, really impressive revenue ramp,” Sanford Bernstein analyst Geoffrey Porges said. “You run this trend forward and you get to $200 million in revenue in the third quarter.”

More than 3,000 patients had started therapy with Incivek by mid-July with a broad mix of previously untreated patients and those who failed to be cured by older drugs, Vertex told analysts and investors on a conference call.

There had been speculation that thousands of patients had been delaying treatment in anticipation of the new medicine and the early sales figures appear to bear that out.

Investors who have been shorting the Vertex stock with a view that Incivek was bound to fall shy of sky-high expectations “are going to be in a world of pain tomorrow,” Porges predicted.

Vertex also said it would file an application seeking U.S. approval of its experimental cystic fibrosis drug, VX-770, in October. It had previously said it would file sometime in the second half of the year.

The company reported a narrower and smaller-than-expected second-quarter net loss as the high cost of launching its first commercial product and higher research and development expenses were offset by strong early demand for the new medicine.

The biotechnology company on Thursday posted a net loss of $174.1 million, or 85 cents per share, compared with a loss of $200 million, or $1 per share, a year ago. Analysts on average expected a loss of 96 cents per share, according to Thomson Reuters I/B/E/S.

The company said it expects to be “significantly earnings positive in 2012.”

Total revenue for the quarter of $114.4 million, including $74.5 million from Incivek sales, sailed past Wall Street revenue estimates of $54.3 million, according to Thomson Reuters I/B/E/S.

A review of recent analyst expectations for early Incivek sales compiled by ISI Group analyst Mark Schoenebaum found a mean estimate of $31 million, less than half of what sales turned out to be.

Incivek is competing with a similar new drug from Merck & Co (MRK.N) called Victrelis. Incivek prescriptions have been outpacing Victrelis at a rate of better than 3-to-1 in the early going, according to data compiled by Wolters Kluwer’s inThought unit.

“Physicians are opting for the drug that’s easier to use and that’s Incivek,” Porges said.

The new drugs in combination with older standard treatments have demonstrated far higher cure rates than the older medicines alone, as well as the possibility of significantly shorter treatment durations for many patients.

About 170 million people worldwide are chronically infected with hepatitis C, including some 3.2 million Americans who have the serious liver disease that can lead to cirrhosis, liver cancer, need for transplant or death if untreated.

The disease is spread primarily through sharing of needles, such as for illegal drugs and tattoos, or from blood transfusions prior to standard blood screening for the virus.

Patients can live with the virus for many years without detecting any symptoms, leading for calls by some for increased hepatitis testing.

Vertex shares were up 1.6 percent in extended trading at $48.75 from their Nasdaq close at $47.98 after initially rising more than 4 percent following the release of the second quarter results. (Reporting by Bill Berkrot; Editing by Tim Dobbyn, Gunna Dickson and Bernard Orr)

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