The fourth-quarter revenue numbers for Vertex Pharmaceuticals (NASDAQ:VRTX) weren't a big surprise since the biotech had previously announced preliminary results earlier this month at the JP Morgan Healthcare Conference. Nevertheless, Wednesday's earnings release contained details about the bottom line -- a profit, no less -- and updates on its pipeline of drugs.

Clipboard with a piece of paper titled cystic fibrosis.

Image source: Getty Images.

Vertex Pharmaceuticals results: The raw numbers


Q4 2016

Q4 2015

Year-Over-Year Change

Revenue from cystic fibrosis drug sales

$454 million

$401 million


Income from operations

$39.6 million

($53.7 million)


Earnings per share




Data source: Vertex Pharmaceuticals.

What happened with Vertex Pharmaceuticals this quarter?

  • The increase in drug sales came from Vertex's newer cystic fibrosis drug Orkambi. Sales of Kalydeco actually slipped slightly from $181 million in the year-ago quarter to $177 million in the fourth quarter of 2016.
  • The bottom line swung to a profit because Vertex spent substantially less on research and development compared to a year ago.
  • Earlier this month, Vertex announced a deal with Merck KGaA to license its oncology programs to the German drugmaker. Vertex will receive $230 million upfront and won't have to pay for the development further. If the drugs are eventually approved, Vertex is due royalties on sales of the drugs.
  • The company announced positive data from a phase 2 trial testing its pain drug VX-150 in patients with osteoarthritis of the knee. Before moving into phase 3, Vertex plans to run additional phase 2 trials in neuropathic and acute pain to decide the best pain indication(s) to get VX-150 approved to treat.
  • Vertex ended the year with $1.43 billion in cash, which doesn't include Merck's $230 million, giving it a nice nest egg to use to ramp up spending on clinical trials as its pipeline hits late-stage.

What management had to say

Chairman and CEO Jeff Leiden laid out the company's plans for future growth pretty clearly:

"First, we remain focused on increasing the number of people eligible for and being treated with Orkambi."

"Second, we're advancing multiple potential new medicines for [cystic fibrosis] that may improve treatment and also provide many more people with the first medicine to address the underlying cause of their disease."

"And third, we're committed to reinvesting in our pipeline to create future medicines for other serious specialty diseases beyond [cystic fibrosis] while creating value for our shareholders."

Looking forward

This year, management is looking for Kalydeco sales of $690 million to $710 million and Orkambi sales between $1.1 billion and $1.3 billion. Where sales fall in the Orkambi range -- or if Vertex can exceed the range -- largely depends on when reimbursement is established with European countries. U.S. growth for Orkambi is likely to be minimal from here because most of the cystic fibrosis patients eligible to take the drug are already on it.

On the clinical trial front, investors can expect data from phase 3 trials testing its next-generation cystic fibrosis drug tezacaftor, which used to go by VX-661, in the first half of the year. Assuming the trials are positive, Verex plans to apply for FDA approval in the second half of the year.

Around that same time frame, Vertex should have earlier-stage clinical trial data for its triple-combination drugs for cystic fibrosis. And data from a trial testing Orkambi with VX-371, which works under a different mechanism of action, is also due in the second half of the year.