Vertex Pharmaceuticals (VRTX -1.35%) reported its fourth-quarter earnings for 2021 on January 26, and there's quite a bit for investors to analyze. First and foremost is news that might improve the performance of its shares.
Though the total return of the stock has only grown by just over 29.9% in the last three years, compared to the market's growth of around 74%. There's reason to believe that things could be turning around on the basis of better-than-expected earnings results. In the last three months, Vertex's shares have grown by more than 31%, compared to the market's contraction of around 3.4%, and the earnings report looks like it was an inflection point for the stock. But will the fresh rally continue? Let's investigate a few of the most salient issues to weigh the chances of this outcome.
All eyes remain on the core pipeline
Vertex has four approved drugs on the market, all of which are designed to treat cystic fibrosis (CF), a rare hereditary lung disease.
Between sales of these medicines, it brought in revenue of $7.6 billion in 2021 -- and sales are booming, with quarterly revenue growing by 27.5% year-over-year. That's all the more impressive when investors consider the fact that there are only an estimated 83,000 people in the U.S., E.U., Canada, and Australia who have CF. Investors should expect revenue growth to continue, especially considering that management's expectations of $7.5 billion for 2021 were topped, albeit not by much.
Three of its products are combinations of drugs it developed and commercialized previously, and it's all but guaranteed that the company is going to continue to iterate on its existing intellectual property by pursuing additional new combinations. Hot off the recent international launch of Kaftrio, annual net product revenue outside the U.S. jumped by 66%, reaching $2.3 billion in 2021.
So, investors should probably expect more effort spent on the penetration of low-hanging fruit in other international markets moving forward. Each new patient onboarded is a stream of recurring revenue and a probable customer for the pharma's projects in development, so strong performance is a highly favorable sign.
In terms of drug development, the most important project in the next few years will be a combination of one of its approved drugs, Tezacaftor, and two new entities. This combination is currently in phase 3 clinical trials. Management suspects that with the new combination, as many as 25,000 patients who are currently untreated may become accessible for treatment. The new combination will have massive implications for the pharma stock's future revenue potential, as its current pool of patients only accounts for slightly more than half of all of those who are eligible.
Collaborations and early-stage projects bring some excitement too
In the first quarter of 2022, Vertex might also advance a pair of its early-stage pipeline projects into pivotal stages. VX-147, a medicine for APOL1-mediated kidney disease, is on track to start its phase 3 clinical trials, with enrollment concluding in roughly a year. Its VX-548 phase 2 project to treat pain is similarly due for a data readout soon, which could determine its chances of advancing to the next phase. Both projects are worth paying attention to because they're some of the company's first late-stage forays in drug development outside the CF space.
Then there are the projects from Vertex's development collaborations, which are similarly approaching a decisive point. In particular, the collaboration with CRISPR Therapeutics is high-stakes. The working arrangement between the small biotech and Vertex is centered around developing CTX001, a gene-editing therapy that appears to be effective at treating (or potentially even curing) both sickle cell disease and beta thalassemia, a pair of hereditary blood disorders.
If everything goes according to plan with CTX001, management expects to be filing regulatory approval paperwork before the end of the year. If there's a hiccup, it's bound to dent the stock, as a lot of time and money has been invested in the program so far. In the second quarter of 2021, Vertex paid CRISPR $900 million to advance CTX001, which investors will be looking for a return on.
Finally, with $7.5 billion in cash and only $566.7 million in debt, don't be surprised if Vertex opts to announce new collaborations or expand the scope of its current ones. Especially as the push to diversify away from CF continues, forging new agreements in search of future growth will be something that shareholders should be watching for like a hawk.