Vertex Pharmaceuticals (NASDAQ:VRTX) and Regeneron Pharmaceuticals(NASDAQ:REGN) are two big-cap biotech stocks, and each recently reported second-quarter financial results that were better than analysts were expecting. The two companies, however, target very different disease indications. Vertex Pharmaceuticals is reshaping how doctors treat the life-threatening disease cystic fibrosis, while Regeneron Pharmaceuticals markets drugs used to treat vision loss, high blood cholesterol, and eczema. Is one of these companies executing its business strategy better than the other?

New hope for tens of thousands of patients

Cystic fibrosis causes a buildup of mucus in the lungs that unfortunately claims the lives of most patients by the time they reach their 40s.

IMAGE SOURCE: GETTY IMAGES.

In the past, there have been few treatment options available to patients, but nowadays many patients can be helped by two drugs sold by Vertex Pharmaceuticals: Kalydeco and Orkambi. These two cystic fibrosis drugs can improve lung function in cystic fibrosis patients with an amenable genetic makeup. Roughly 30,000 of the world's 75,000 cystic fibrosis patients can be helped by these drugs.

Vertex Pharmaceuticals hopes to commercialize combination drug therapies that can allow it to treat up to 68,000 of the planet's cystic fibrosis patients. If it's successful, it would likely mean the company's sales and profit will grow significantly.

Vertex Pharmaceuticals' cystic fibrosis product revenues were $514 million in the second quarter. Orkambi generated $324 million in sales, up 32% from last year, while Kalydeco kicked in sales of $190 million, up 5%. Orkambi sales increased because of a label expansion last fall, allowing its use in patients age 6 to 11. Meanwhile, Kalydeco sales inched up as doctors continue to identify more patients to prescribe it to.

Overall, combined sales from the two drugs grew 20.7%, and leveraging that growth against fixed costs allowed the company to report a $0.07 per share profit in Q2. Research spending to develop new cystic fibrisos drugs to treat more people increased to $289 million last quarter from $271 million last year, while spending on selling, general, and administrative increased about $15 million year over year. Despite the increased spending, the $0.07 profit marked a major improvement from the $0.26 loss reported in Q2 2016.

Last month, management reported compelling data from mid-stage studies showing that its combination drug approach improved lung function in many patients that Orkambi and Kalydeco don't treat. Phase 3 trials are planned to confirm those mid-stage results, so Vertex Pharmaceuticals' spending isn't going to decline anytime soon.

Nevertheless, the company's guiding for total sales of between $1.87 billion to $2.1 billion this year, comprising of Orkambi sales of between $1.1 billion and $1.3 billion and Kalydeco sales of between $770 million to $800 million. Based on that guidance, analysts' think the company can deliver EPS of $1.59 this year.

Expansion efforts ramp up

Regeneron Pharmaceuticals multibillion-dollar vision restoring drug Eylea has been fueling a robust research and development program for years, and that spending is finally translating into new drug launches that could usher in a new era of growth at the company.

Eylea is co-commercialized with Bayer (NASDAQOTH:BAYRY) and it's become commonly used in treating age-related macular degeneration and diabetic macular edema, two conditions that are increasingly common because of aging baby boomers.

In the second quarter, Eylea's U.S. sales grew 11% year over year to $919 million. Outside the U.S., where Eylea is marketed by Bayer, Eylea sales were $542 million, up from $486 million in the second quarter of 2016. Regeneron's share of those ex-U.S. sales was $191 million, up from $167 million last year.

IMAGE SOURCE: GETTY IMAGES.

In addition to using Eylea revenue to fund research, Regeneron has also been collaborating for years with Sanofi to develop new drugs. The two companies' first drug to hit the market was the cholesterol fighting drug Praluent, which won FDA approval in summer 2015.

Praluent is a PCSK9 inhibitor that decreases cholesterol levels by increasing the number of bad cholesterol receptors in the liver. Initially, sales were tepid because of Praluent's high price, however, revenue clocked in at $46 million in Q2, up from $24 million in the same quarter last year.

Earlier this year, the two companies secured FDA approval for two more drugs that they developed together: Dupixent and Kevzara. Dupixent, an eczema drug, won approval in late March, and second-quarter revenue of $29 million shows it's off to a solid start. Kevzara won FDA approval in May for moderate to severe rheumatoid arthritis, but sales weren't broken out by the companies in their earnings report. The Q3 release should provide more insight into how its launch is progressing.

Overall, Regeneron's revenue was $1.47 billion, up 21% from Q2 2016. After subtracting expenses, its net income was $487 million, or $4.17 per share, up 48% year over year. Following the company's second-quarter performance, management has increased its Eylea full year growth forecast from a single-digit percentage increase to growth of 10%.

The company also said it and Sanofi won't renew their antibodies research collaboration at the end of this year, so Regeneron will likely receive less in R&D reimbursement revenue beginning in 2018. The two companies will continue working together, however, on drugs already on the market, and a separate immuno-oncology collaboration will continue on as planned through 2020.

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