It has been about a month since the last earnings report for Vertex Pharmaceuticals Incorporated (VRTX - Free Report) . Shares have lost about 1.2% in that time frame.
Will the recent negative trend continue leading up to its next earnings release, or is VRTX 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 catalysts.
Vertex Q1 Earnings Beat on Strong CF Products Sales
Vertex reported first-quarter 2018 earnings per share of 76 cents, which beat the Zacks Consensus Estimate of 58 cents and came ahead of the year-ago earnings of 41 cents. Strong product revenues led to higher profits in the quarter.
Vertex reported revenues of $640.8 million in the first quarter, beating the Zacks Consensus Estimate of $617.6 million. However, sales were down 10.3% year over year due to significantly lower collaborative revenues.
The company had received an upfront payment of $230 million from Merck KGaA in the year-ago period for out-licensing four oncology programs, which was missing in the first quarter of 2018.
CF Franchise Sales Strong
Vertex’s first-quarter revenues consisted of sales from cystic fibrosis (“CF”) products, Kalydeco and Orkambi, collaborative ($1.7 million) and royalty revenues ($1.4 million). CF product revenues were $637.7 million in the first quarter, up 33% year over year. Continued label expansion of Kalydeco and Orkambi and launch of Symdeko pulled up CF sales in the quarter.
Kalydeco sales surged 34.4% to $250 million, following approvals to treat an expanded population.
Orkambi (lumacaftor/ivacaftor) delivered sales of $354 million, up 20% year over year due to higher sales in the United States as well as international markets.
Symdeko contributed $34 million to the top line in the quarter which reflects the initial seven weeks of sales. On the call, the company said that Symdeko launch is off to a strong start in the United States while approval in the EU is expected in the second half.
Adjusted research and development (R&D) expenses increased 14.7% to $260 million in the first quarter due to higher costs related to phase III development of triple combination CF regimens. Adjusted selling, general and administrative (SG&A) expenses increased 15.4% to $99.6 million mainly driven by worldwide investments to support its drugs, Kalydeco and Orkambi and costs incurred to prepare for the launch of Symdeko.
Vertex provided guidance for 2018 CF revenues in the range of $2.65 to $2.8 billion. The midpoint of this range represents approximately 26% growth over 2017.
Combined adjusted research and development (R&D) and selling, general and administrative (SG&A) expense guidance for 2018 was maintained in the range of $1.50 to $1.55 billion.
The increase in operating expense reflects anticipated costs related to pivotal studies for the two triple combinations regimens and investment to support the launch of Symdeko.
The company is optimistic that operating margins and earnings will expand in 2018 as increase in revenues will exceed increase in costs.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month. There have been seven revisions higher for the current quarter compared to two lower.
At this time, VRTX has a strong Growth Score of A, though it is lagging a lot on the momentum front with a C. The stock was allocated a grade of D on the value side, putting it in the bottom 40% 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.
Our style scores indicate that the stock is more suitable for growth investors than momentum investors.
Estimates have been broadly trending upward for the stock and the magnitude of these revisions looks promising. Notably, VRTX has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.