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Vertex Pharmaceuticals Inc. Dropped 26% in January -- Here's Why

By Brian Feroldi – Feb 9, 2016 at 2:59PM

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The market dumped everything related to biotechnology, and Vertex got caught up in the storm.

What: Investors in Vertex Pharmaceuticals (VRTX 2.56%), a biotech focused on creating products that treat cystic fibrosis, had to swallow a bitter January. Shares shed 26% of their value during the month, according to data from S&P Global Market Intelligence.

So what: Despite the stock's drubbing, Vertex Pharmaceuticals did have some good news to share with investors during the month.

  • At the J.P. Morgan Healthcare Conference, Vertex provided investors with a preliminary outlook for 2016. The company believes that sales of its first cystic fibrosis therapy, Kalydeco, will land between $670 million to $690 million and that its non-GAAP operating expenses will be between $1.18 billion to $1.23 billion. It didn't feel comfortable giving product revenue guidance for its newest CF drug, Orkambi, just yet as it wanted a few more months of data before it could make that call. 
  • Vertex confirmed that Orkambi received regulatory approval in Canada, which expands the drug's addressable market by approximately 1,500 patients.
  • The company released its fourth-quarter and full-year results during the month. Revenue during the final quarter of 2015 came in at $417.9 million, which topped Wall Street's forecast of only $406 million. Adjusted earnings per share of $0.17 were also ahead of expectations.

Now what: Anything related to the biotech sector took a major hit in January, so it's likely that Vertex's stock simple got caught up in the carnage. For example, the First Trust NYSE Arca Biotech ETF (FBT 0.94%), an ETF with an expense ratio of 0.58% that holds a collection of biotechnology stocks, also plunged in lockstep with Vertex's stock during the period, shedding more than 21% of its value.

VRTX Chart

Looking ahead, I think there are plenty of reasons for Vertex's investors to be optimistic about its prospects for 2016 and beyond. Vertex currently has several trials underway that could continue to expand the addressable market for both Orkambi and Kalydeco, and also boasts a pipeline full of next-generation cystic fibrosis drugs. The company is also nicely profitable again and has more than $1 billion in cash on its balance sheet, so it is on sound financial footing. 

Vertex's bulls should probably chalk up the poor monthly performance to the market being in a foul mood and refocus their attention on the company's rollout of Orkambi. If that continues to go well, then its share price will likely take care of itself. 

Brian Feroldi has no position in any stocks mentioned. The Motley Fool recommends Vertex Pharmaceuticals. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Vertex Pharmaceuticals Incorporated Stock Quote
Vertex Pharmaceuticals Incorporated
$296.95 (2.56%) $7.41
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First Trust Exchange-Traded Fund - First Trust NYSE Arca Biotechnology Index Fund
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