It has been about a month since the last earnings report for Vertex Pharmaceuticals (VRTX Quick QuoteVRTX - Free Report) . Shares have lost about 6.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Vertex due for a breakout? 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 drivers.

Q3 Earnings & Sales Beat

Vertex reported adjusted earnings per share (EPS) of $4.08 in third-quarter 2023, beating the Zacks Consensus Estimate of $3.92. The adjusted EPS rose 10.6% year over year, driven by strong growth in product revenues. The upside was partially offset by higher research and development (R&D) expenses incurred during the quarter.

The company reported total revenues of $2.48 billion, comprising cystic fibrosis (CF) product revenues. The figure marginally missed the Zacks Consensus Estimate of $2.49 billion. However, total revenues rose 6.4% year over year, primarily driven by higher sales of Trikafta/Kaftrio (marketed as Kaftrio in Europe) in the U.S. and ex-U.S. markets.

CF product sales rose 7% year over year in the United States to $1.55 billion. Outside the United States, sales increased 6% to $929 million, driven by the continued strong uptake of Trikafta/Kaftrio in markets with recently achieved reimbursement as well expanded use in younger age groups.

Trikafta generated sales worth $2.27 billion, up 13.1% year over year. Trikafta sales beat the Zacks Consensus Estimate and our model estimate of $2.26 billion and $2.2 billion, respectively.

The upside was driven by the continued robust performance of Trikafta in the United States, fueled by label expansions to younger age groups (two to five years old). In the ex-U.S. markets, the drug continues to witness strong uptake with recently achieved reimbursements and expanded use in young age groups.

Sales from other CF products, namely Symdeko/Symkevi, Kalydeco and Orkambi, were down 35.4% year over year to $209.2 million. Sales of these drugs were hurt by patients switching to Trikafta.

Symdeko/Symkevi registered sales of $33.4 million in the quarter, down 12.6% year over year.

Kalydeco recorded sales of $112.8 million in the quarter, down 19% year over year. Orkambi generated sales of $63.0 million in the reported quarter, down 56.9% from the prior-year quarter.

Costs Rise

Adjusted operating expense was $993.0 million in the quarter, up 31% year over year, driven by higher R&D costs.

Adjusted R&D expenses rose 32.4% from the year-ago quarter’s levels to $726 million due to the expansion of the company’s mid- and late-stage pipeline.

Adjusted selling, general and administrative (SG&A) expenses increased 19.6% to $215.7 million in the reported quarter due to expenses for CF launches and pre-commercial activities for exa-cel.

During the reported quarter, Vertex recorded Acquired IPR&D costs of $51.7 million compared with $29 million in the year-ago quarter.

Adjusted operating income was $1.17 billion in the quarter, down 9% from the prior-year period.

2023 Guidance

Based on the solid uptake of Trikafta/Kaftrio worldwide, Vertex raised its 2023 CF product revenue guidance. Management expects total revenues from CF products to be approximately $9.85 billion compared with the prior expectation of $9.7-$9.8 billion.

The company has, however, maintained its guidance for full-year 2023 adjusted combined R&D, Acquired IPR&D and SG&A expenses in the band of $4.1-$4.2 billion.

The adjusted tax rate is expected in the range of 20-21%, lower than the previously expected band of 21-22%.

Currency headwinds are expected to have a negative impact of approximately 1.5% on revenue growth in 2023.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision.

The consensus estimate has shifted 13.22% due to these changes.

VGM Scores

Currently, Vertex has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Vertex has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Vertex belongs to the Zacks Medical - Biomedical and Genetics industry. Another stock from the same industry, GSK (GSK Quick QuoteGSK - Free Report) , has gained 3.9% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.

Glaxo reported revenues of $10.32 billion in the last reported quarter, representing a year-over-year change of +11.9%. EPS of $1.26 for the same period compares with $1.09 a year ago.

For the current quarter, Glaxo is expected to post earnings of $0.78 per share, indicating a change of +21.9% from the year-ago quarter. The Zacks Consensus Estimate has changed -7.6% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #2 (Buy) for Glaxo. Also, the stock has a VGM Score of C.