Please ensure Javascript is enabled for purposes of website accessibility

Here's How Vertex Pharmaceuticals Beat Expectations in Q1

By Keith Speights - Apr 30, 2021 at 6:05AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The biotech's improving fortunes relied on one drug.

Vertex Pharmaceuticals (VRTX 1.96%) is proof that Wall Street doesn't always reward companies with monopolies. It markets the only approved drugs that treat the underlying cause of cystic fibrosis (CF), but the company's shares have fallen 30% from the highs set in 2020.

The big drugmaker announced its first-quarter results after the market closed Thursday. However, the update didn't move the needle much, with the biotech stock moving less than 1% higher in after-hours trading. Here are the highlights of Vertex's Q1 update.

A scientist in a lab mixing formulas.

Image source: Getty Images.

By the numbers

Vertex reported revenue in the first quarter of $1.72 billion, a 14% year-over-year jump. This result topped the average analysts' revenue estimate of $1.66 billion.

The company also delivered solid improvement on its bottom line. Vertex announced net income of $653 million, or $2.49 per share, based on generally accepted accounting principles (GAAP). In the prior-year period, its GAAP earnings totaled $603 million, or $2.29 per share.

Vertex recorded Q1 adjusted net income of $781 million, or $2.98 per share, up from $674 million, or $2.56 per share, in the prior-year period. This figure easily beat the consensus Wall Street adjusted earnings estimate of $2.69 per share.

The biotech ended the first quarter with cash, cash equivalents, and marketable securities totaling $6.9 billion. This reflected an increase of $265 million from the end of 2020.

Behind the numbers

Vertex's revenue growth in the first quarter was driven entirely by Trikafta/Kaftrio. The CF drug generated net sales of $1.19 billion in the period, up 33% year over year. Most of this growth came from increased uptake in Europe.

However, these gains were partially offset by declining revenue for all of the company's other CF drugs. Sales for Symdeko/Symkevi fell nearly 28% year over year to $125 million. Orkambi pulled in Q1 sales of $219 million, down 6% from the prior-year period. Sales for Kalydeco slid nearly 13% lower to $186 million.

While Vertex's solid revenue growth trickled down to its bottom line, the biotech's spending also increased. Research and development costs rose nearly 2% year over year to $456 million. Selling, general, and administrative costs increased 5% to $192.1 million. In addition, the company's provision for income tax nearly tripled year over year to $167.8 million due in large part to a big tax benefit in the prior-year period.

Looking ahead

Vertex anticipates that its revenue growth rate will slow down this year. The company projects full-year 2021 sales of between $6.7 billion and $6.9 billion. The midpoint of this range reflects an increase of nearly 10% compared to 2020.

This means that investors will need to look more to Vertex's pipeline for catalysts. The biotech appears to be increasingly confident about the prospects for CTX001, which it's developing with CRISPR Therapeutics. Vertex recently amended its agreement with CRISPR to up its share of development expenses and potential profits for the gene-editing therapy to 60% from 50% in exchange for an upfront payment of $900 million.

The company also has important clinical updates on the way soon. Vertex expects to report results from a phase 2 study of VX-684 in treating alpha-1 antitrypsin deficiency, a rare genetic liver disease, in the second quarter of 2021. Results from another phase 2 study evaluating VX-147 in treating APOL1-mediated focal segmental glomerulosclerosis, a disease that causes scarring in the kidney, are also expected later this quarter.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Vertex Pharmaceuticals Incorporated Stock Quote
Vertex Pharmaceuticals Incorporated
VRTX
$287.32 (1.96%) $5.53
CRISPR Therapeutics Stock Quote
CRISPR Therapeutics
CRSP
$63.79 (4.97%) $3.02

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
316%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/03/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.