10-QPeriod: Q3 FY2019

VERTEX PHARMACEUTICALS INC / MA Quarterly Report for Q3 Ended Sep 30, 2019

Filed October 31, 2019For Securities:VRTX

Summary

Vertex Pharmaceuticals Inc. reported strong revenue growth for the nine months ended September 30, 2019, with total revenues increasing by 26% to $2.75 billion, primarily driven by a 27% rise in net product revenues to $2.74 billion. This growth was largely attributable to the continued success of their cystic fibrosis (CF) treatments, particularly SYMDEKO/SYMKEVI, which saw a 129% increase in revenue for the nine-month period. The company also announced a significant milestone with the FDA approval of TRIKAFTA in October 2019, a triple combination regimen expected to expand treatment options for a broader CF patient population and contribute to future revenue growth. While revenues are strong, operating costs and expenses also increased significantly by 26% to $2.1 billion for the nine-month period. This rise was mainly due to substantial upfront payments for collaboration agreements with CRISPR and Kymera Therapeutics, totaling $261.6 million in R&D expenses, and costs associated with the acquisition of Exonics Therapeutics. Despite increased expenses, the company's net income attributable to Vertex for the nine months increased by 9% to $593.6 million, demonstrating robust underlying profitability. Vertex also maintains a strong liquidity position with $4.0 billion in cash, cash equivalents, and marketable securities as of September 30, 2019.

Financial Highlights

50 data points
Beta

Revenue

$949.83M

86.1% Gross Margin

Net Income

$57.52M

6.1% Net Margin

EPS (Diluted)

$0.22

Total Assets

$7.51B

Cash & Equivalents

$3.40B

Free Cash Flow

$310.50M

Financial Statements
Beta
Revenue$949.83M
Cost of Revenue$131.91M
Gross Profit$817.91M
R&D Expenses$555.95M
SG&A Expenses$159.67M
Operating Expenses$850.50M
Operating Income$99.33M
Interest Expense$14.55M
Net Income$57.52M
EPS (Basic)$0.22
EPS (Diluted)$0.22
Shares Outstanding (Basic)256.95M
Shares Outstanding (Diluted)260.47M

Key Highlights

  • 1Total revenues increased by 26% year-over-year to $2.75 billion for the first nine months of 2019.
  • 2Net product revenues grew by 27% to $2.74 billion for the first nine months of 2019, driven by SYMDEKO/SYMKEVI's significant revenue increase of 129%.
  • 3Vertex received FDA approval for TRIKAFTA in October 2019, a new triple combination CF therapy expected to boost future revenue.
  • 4Research and development expenses increased substantially due to upfront payments for collaborations ($261.6 million) and the acquisition of Exonics.
  • 5Net income attributable to Vertex rose by 9% to $593.6 million for the first nine months of 2019.
  • 6The company maintained a strong liquidity position with $4.0 billion in cash, cash equivalents, and marketable securities as of September 30, 2019.

Frequently Asked Questions

Vertex's revenue growth is primarily driven by its portfolio of cystic fibrosis (CF) treatments. Specifically, the SYMDEKO/SYMKEVI drug has shown exceptional performance, significantly increasing its revenue. The recent approval of TRIKAFTA is also expected to contribute substantially to future revenue growth by treating a larger segment of the CF patient population.

The increase in operating costs and expenses is attributed to several factors, including substantial upfront payments made for strategic collaboration agreements with companies like CRISPR and Kymera Therapeutics, which are expensed as R&D costs. Additionally, the acquisition of Exonics Therapeutics contributed to the rise in expenses. These investments are aimed at expanding Vertex's pipeline and therapeutic reach beyond cystic fibrosis.

Vertex demonstrates strong financial health and liquidity. As of September 30, 2019, the company held $4.0 billion in cash, cash equivalents, and marketable securities. The company's working capital also saw a significant increase, indicating a solid financial position to fund ongoing operations, research and development, and strategic initiatives.

The FDA approval of TRIKAFTA in October 2019 is a major milestone. This triple combination regimen is indicated for a broader patient population within cystic fibrosis than previous treatments, significantly expanding the addressable market. This is expected to be a key driver of future revenue growth and solidify Vertex's leadership in CF treatment.