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The Key Behind Vertex's Great Q3 Results

By Keith Speights and Brian Orelli, PhD – Nov 11, 2021 at 6:47AM

Key Points

  • Vertex reported tremendous revenue and earnings increases in Q3.
  • Cystic fibrosis drug Trikafta/Kaftrio drove all of this growth.
  • Vertex now has a cash stockpile of nearly $7 billion that it needs to put to use.

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One cystic fibrosis drug is powering Vertex's strong revenue and earnings growth.

Vertex Pharmaceuticals (VRTX 1.82%) announced strong growth in its third-quarter update on Nov. 2, 2021. In this Motley Fool Live video recorded on Nov. 3, 2021, Motley Fool contributors Keith Speights and Brian Orelli discuss the key behind Vertex's great Q3 results.

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Keith Speights: There was another big biotech that also reported earnings. Sticking with earnings, Vertex Pharmaceuticals (VRTX 1.82%) reported its Q3 results also after the market close on Tuesday. What you think of Vertex's numbers?

Brian Orelli: It was a good quarter for Vertex. Product revenue increased 29%. Vertex has four drugs on the market. Three of them went down, and it still posted a 29 percent increase in sales. That's because Trikafta -- which goes by Kaftrio in Europe -- sales increased 62%. Some of that is obviously from switching from other Vertex drugs, and that's the reason why the other Vertex drugs went down. It's still doing quite well.

Most of the growth is coming from Europe and outside the U.S., sales grew 92 percent, while inside the U.S., sales were up 13 percent. The company raised full-year guidance, now expects to make 7.4-7.5 billion dollars. That's up from 7.2-7.4 billion dollars. It's generating a ton of cash.

It paid CRISPR [Therapeutics] $900 million during the quarter, repurchased shares, and still put $300 million in the bank. It's got 7 billion dollars on its books and it really needs to use that to make an acquisition to bolster up its pipeline because behind the cystic fibrosis drugs, there isn't a whole lot, especially in this internal pipeline.

Speights: I know Vertex has been making some licensing deals. We've talked about some of them with some smaller CRISPR gene-editing-focused biotechs, but I agree with you. I think that cash stockpiles growing like Amgen in a way, except Vertex continues to grow, thanks to mainly Trikafta/Kaftrio.

I think this company does need to use some of that cash. It's really not doing investors a whole lot of good just sitting there not making much. I think the company is just having to figure out which companies are the best ones to target here. Do you see Vertex wanting to focus mainly on rare diseases?

Orelli: Yeah, I think that's probably its sweet spot, but not like super-rare diseases, just lower places where it can find a niche. I think a lot of what, how, why Vertex has been so successful in cystic fibrosis is just because there hasn't been much competition. It's probably also looking for places where there are 10 drugmakers working in this space because that's obviously a recipe for competition, which is going to divide up the market plus put competition on the price of the drugs, which results in lower sales there, too.

Keith Speights owns shares of Vertex Pharmaceuticals. The Motley Fool owns shares of and recommends Vertex Pharmaceuticals. The Motley Fool recommends Amgen. The Motley Fool has a disclosure policy.

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