01—Abstract
Summary
Summary of the 10-K filed February 9, 2022. Cited figures are marked; the original filing is the authoritative source.
Vertex Pharmaceuticals' FY2021 10-K shows a company whose cystic fibrosis (CF) franchise is generating strong growth, led by TRIKAFTA/KAFTRIO, while it invests heavily to diversify into other serious diseases.
Total revenues rose 22% to $7.57 billiona, with net product revenues of $7.57 billion, driven by TRIKAFTA/KAFTRIO sales of $5.70 billion (up 47%) and ex-U.S. product revenues up 66% to $2.29 billion following KAFTRIO's European launch. Net income fell 14% to $2.34 billion (diluted EPS $9.01, versus $10.29 in 2020), largely because of a $900 million upfront payment to CRISPR Therapeutics for the amended CTX001 (sickle cell and beta thalassemia gene-editing) collaboration, which was expensed in R&D. Excluding that charge, operating profitability improved meaningfully.
The balance sheet remains very strong, with cash, cash equivalents and marketable securities of $7.5 billionb, working capital of $7.4 billion, and no borrowings under its $2.5 billion revolving credit facilities. Vertex repurchased about $1.4 billion of stock in 2021 under its $1.5 billion authorization, leaving roughly $0.5 billion remaining. Operating cash flow was $2.6 billion, reduced by the CRISPR payment.
For investors, the key issues are concentration risk, since substantially all revenue depends on CF medicines and TRIKAFTA/KAFTRIO in particular, and the execution risk of a pipeline that includes Phase 3 CTX001 programs, VX-880 for type 1 diabetes, VX-147 for APOL1-mediated kidney disease, and VX-548 for pain. Patent litigation over KALYDECO generics (Sun and Lupin, with trial set for October 2023) and the 2022 tax change that requires amortization of R&D expenses are additional factors to monitor.
02—Key points
Key Highlights
- Total revenues grew 22% to $7.57 billion, led by TRIKAFTA/KAFTRIO sales of $5.70 billion (up 47%), while legacy CF products declined as patients switched to the triple combination.
- Ex-U.S. product revenues rose 66% to $2.29 billion, supported by the European launch of KAFTRIO and reimbursement progress in more than 20 countries.
- Net income fell 14% to $2.34 billion (diluted EPS $9.01) because of a $900 million upfront payment to CRISPR Therapeutics for the CTX001 collaboration, expensed in R&D.
- R&D expenses rose 67% to $3.05 billion and total R&D plus SG&A reached $3.9 billion, reflecting pipeline expansion in sickle cell disease, type 1 diabetes, APOL1-mediated kidney disease, pain and muscular dystrophy.
- Liquidity remains strong, with $7.5 billion in cash and marketable securities, $7.4 billion in working capital, and undrawn credit facilities totaling $2.5 billion.
- Vertex repurchased $1.4 billion of common stock in 2021 and had about $0.5 billion left under its $1.5 billion authorization expiring December 31, 2022.
- Revenue remains concentrated in CF, and Vertex faces KALYDECO generic patent litigation against Sun and Lupin, with trial scheduled for October 2023.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2021, Vertex Pharmaceuticals Inc kept $0.31.
- Revenue$7.57B100.0%
- Cost of revenue−$904.2M11.9%
- Gross profit$6.67B88.1%
- Operating costs−$3.89B51.3%
- Operating income$2.78B36.7%
- Interest, other & tax−$440.0M5.8%
- Net income$2.34B30.9%
Where FY2021 revenue went
$7.57B- R&D: $3.05B, 40% of revenue
- Net income: $2.34B, 31% of revenue
- Cost of revenue: $904.2M, 12% of revenue
- SG&A: $840.1M, 11% of revenue
- Interest, other & tax: $440.0M, 5.8% of revenue
Kept 31% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2021filed February 9, 2022Financial Statements
FY2021 against FY2020
| Line item | FY2021FY2020 | Change |
|---|---|---|
| Revenue | $7.57B$6.21B | +22.1% |
| Cost of Revenue | $904.20M$736.30M | +22.8% |
| Gross Profit | $6.67B$5.47B | +22.0% |
| R&D Expenses | $3.05B$1.83B | +66.8% |
| SG&A Expenses | $840.10M$770.50M | +9.0% |
| Operating Expenses | $4.79B$3.35B | +43.1% |
| Operating Income | $2.78B$2.86B | −2.6% |
| Net Income | $2.34B$2.71B | −13.6% |
| EPS (Basic) | $9.09$10.44 | −12.9% |
| EPS (Diluted) | $9.01$10.29 | −12.4% |
| Shares Outstanding (Basic) | 257.70M259.80M | −0.8% |
| Shares Outstanding (Diluted) | 259.90M263.40M | −1.3% |
05—Questions
Frequently Asked Questions
What drove the decline in net income in 2021?
Net income fell 14% to $2.34 billion from $2.71 billion, mainly because of the $900 million upfront payment to CRISPR Therapeutics for the amended CTX001 collaboration, which was expensed as R&D. Lower gains on strategic investments also contributed. Operating income before the CRISPR payment increased, driven by product revenue growth.
How dependent is Vertex on its cystic fibrosis medicines?
Almost all revenue comes from CF medicines, and TRIKAFTA/KAFTRIO alone accounted for roughly 75% of 2021 product revenue. The 10-K flags this concentration as a major risk, since competing therapies, reimbursement pressure, or supply disruptions affecting CF products could materially harm the business.
What are the most important pipeline catalysts mentioned?
The company expected several readouts and filings: Phase 2 data for VX-548 in acute pain in Q1 2022, advancing VX-147 into pivotal development for APOL1-mediated kidney disease in Q1 2022, regulatory submissions for CTX001 in sickle cell disease and beta thalassemia in late 2022, and continued dosing in the VX-880 type 1 diabetes trial. Timelines carry the usual risk of delay and clinical uncertainty.
Is Vertex carrying significant debt?
No. As of December 31, 2021, Vertex had no principal or interest outstanding under its two revolving credit facilities totaling $2.5 billion, and it was in compliance with the covenants. Lease obligations are the main long-term liabilities, including finance lease liabilities of about $557 million.
06—Continue