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Why Is Vertex (VRTX) Up 0.9% Since Last Earnings Report?

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It has been about a month since the last earnings report for Vertex Pharmaceuticals (VRTX). Shares have added about 0.9% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Vertex due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Q4 Earnings & Sales Beat Estimates, 2021 Guidance Up

Vertex reported fourth-quarter 2021 adjusted earnings per share of $3.37, which beat the Zacks Consensus Estimate of $3.28. Earnings rose 34% year over year. Strong cystic fibrosis product revenues led to higher earnings for the reported quarter.

Revenues of $2.07 billion surpassed the Zacks Consensus Estimate of $1.99 billion. Revenues, which comprised fully of CF product revenues, rose 27% year over year, primarily driven by higher sales of Trikafta/Kaftrio.

CF product sales rose 16% year over year in the United States to $1.39 billion while sales outside the country surged 61% to $679 million, primarily driven by the company’s triple combination therapy, Trikafta.

Trikafta generated sales worth $1.69 billion, up 55.2% year over year, driven mainly by the launch of the drug for pediatric patients (6-11 years of age) in the United States and strong launches of Kaftrio in Europe.

Vertex has now secured reimbursement agreements for Kaftrio in more than 20 countries. In the quarter, Vertex secured reimbursement agreements in new markets like Spain and the Netherlands.
 
Symdeko/Symkevi registered sales of $80 million for the quarter, down 37.5% year over year.

Kalydeco recorded sales of $152 million in the quarter, reflecting a 21.2% decrease year over year. Orkambi generated sales of $147 million in the reported quarter, down 31.6% from the prior-year quarter. Sales of Kalydeco, Symdeko/ Symkevi and Orkambi were hurt by patients switching to Trikafta.

2021 Results

For 2021, Vertex generated revenues of $7.6 billion, reflecting 22% growth year over year.

For the same period, the company reported earnings of $13.02 per share, up 26% year over year.

Costs Rise

Adjusted operating income rose 27% year over year to $1.12 billion for the quarter, driven by higher revenues and cost control.

Adjusted research and development (R&D) expenses rose 35.4% from the year-ago quarter to $493 million due to expansion of the CF and non-CF pipeline.

Adjusted selling, general and administrative (SG&A) expenses increased 20% to $210 million for the reported quarter due to investments made to support launches of its CF medicines globally.

2022 Guidance

The company expects total revenues from CF products in the range of $8.4-$8.6 billion for 2022. The midpoint of the guidance reflects approximately 12% growth from 2021 levels.

Combined adjusted R&D and SG&A expense guidance for 2022 is expected in the band of $2.70-$2.75 billion. Adjusted tax rate is expected in the range of 21-22%.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month.

VGM Scores

Currently, Vertex has an average Growth Score of C, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Vertex has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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