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Vertex Pharmaceuticals Posts Strong 3rd-Quarter Revenue Growth

Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) issued its third quarter results after the closing bell on Wednesday.

Shares posted a significant 1.1% ($2.17) fall to $197.11 in extended trading, signaling the market was not happy with Vertex missing forecasters on GAAP earnings by 51 cents. The Boston-based biotech company posted 22 cents earnings per share, which was down 56% versus the prior-year quarter.

Vertex Pharmaceuticals generated $949.8 million in revenue, reflecting a 21.1% increase year over year as a result of a global upick in sales of its cystic fibrosis treatment Symdeko/Symkevi amid patients aged 12 years and above. The top line beat projections by $1.42 million.

The chart below shows the positive trend in Vertex Pharmaceuticals' third quarter revenues over the past eight years through Sept. 30, 2019.

By key product, the biotech company reported the following sales changes:

  • The sale of Kalydeco, which is a cystic fibrosis treatment for patients with a specific gene mutation, produced $249 million in revenue, up 1.2% year over year.
  • The sale of Orkambi, which is another cystic fibrosis treatment for children who are at least 2 years old, resulted in $297 million revenue, gaining 5.3%.
  • The sale of Symdeko/Symkevi produced $404 million in revenue, soaring 58.4% from the year-ago quarter.

Chairman, President and CEO Jeffrey Leiden commented:

2019 has been a year of significant progress for Vertex across all parts of our business. With the historic approval of TRIKAFTA, we are now one step closer to providing treatment for up to 90% of all people with CF. We've also had tremendous success bringing our CF medicines to more patients globally with reimbursement agreements recently reached in England, Spain, Australia, and Scotland, and through label expansions to younger patients.

Looking ahead to full 2019, Vertex Pharmaceuticals reaffirmed it expects to generate revenue of $3.70 billion to $3.75 billion versus analysts' projections of $3.74 billion. The company also anticipates that expenditures for research and development, selling, general and administrative activities will fall in a $2.35 billion - $2.45 billion range. Further, the pro forma effective tax rate is left unchanged at 21% - 22%.

Jeffrey Leiden added: "The company also continues to successfully execute on our strategy of creating transformative medicines for serious diseases through serial innovation. The rapid progress of our pipeline is expected to yield proof-of-concept data in multiple diseases in 2020, which will position Vertex for continued growth in the years ahead."

Analysts estimate that Vertex Pharmaceuticals will grow its annual earnings by 37.61% (on average) every year over the next 5 years.

The American biotech stock can fund expected growth with almost $4 billion liquidity available in cash on hand, equivalents and short term-securities as of Sept. 30. Total shareholder's equity was worth approximately $5.25 billion. Total debt accounted for about 12-13% of total equity. Free cash of more than $1 billion flows in from operations every 12 months.

Sell-side analysts recommend an overweight rating for shares of Vertex Pharmaceuticals with an average target price of $224.85, a 14% upside from Wednesday's closing price of $197.11.

Year to date the share price has risen 20%, but it underperformed the Nasdaq Exchange-traded funds by 8%.

The stock has a market capitalization of $51.22 billion and a 52-week range of $151.8 to $199.46. The company doesn't pay a dividend.

Disclosure: I have no positions in any securities mentioned.

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This article first appeared on GuruFocus.