With a $72.55 billion market cap, Vertex Pharmaceuticals Incorporated (VRTX) is a biotechnology company that develops and commercializes therapies for treating cystic fibrosis. Its pipeline includes VX-864 for treating AAT deficiency, VX-147 for treating APOL1-mediated focal segmental glomerulosclerosis, VX-880 for treating Type 1 Diabetes, and CTX001 for treating severe SCD and TDT.
The company sells its products primarily to specialty pharmacies and distributors in the United States and specialty distributors, retail chains, hospitals, and clinics internationally.
VRTX reported impressive financial results for the fiscal 2022 first quarter. Also, the company has a diversified pipeline of potentially transformative small molecule, cell, and genetic therapies for treating a range of serious diseases.
On July 20, VRTX and Verve Therapeutics, Inc. (VERV) established an exclusive, four-year global research collaboration focused on discovering and developing an in vivo gene editing program for single undisclosed liver disease. The two companies are expected to combine their expertise in gene editing and drug development to serve more needy patients.
In addition, on July 11, VRTX entered a definitive agreement to acquire ViaCyte, a privately held biotechnology company focused on delivering novel stem cell-derived cell replacement therapies as a functional cure for type 1 diabetes (T1D).
“VX-880 has successfully demonstrated clinical proof of concept in T1D, and the acquisition of ViaCyte will accelerate our goal of transforming, if not curing, T1D by expanding our capabilities and bringing additional tools, technologies, and assets to our current stem cell-based programs,” said Reshma Kewalramani, VRTX’s CEO and President.
VRTX’s shares have gained 27.5% year-to-date and 42.6% over the past year to close the last trading session at $283.68.
Here is what could influence VRTX’s performance in the upcoming months:
Solid Financials
VRTX's net product revenues increased 21.7% year-over-year to $2.10 billion in the fiscal 2022 first quarter ended March 31, 2022. The company’s non-GAAP operating income amounted to $1.17 billion, up 16.5% year-over-year. In addition, as of March 31, 2022, its cash, cash equivalents, and marketable securities stood at $8.24 billion compared to $7.52 billion as of December 31, 2021.
Furthermore, the company’s non-GAAP net income and non-GAAP net income per share came in at $907 million and $3.52, registering increases of 16.1% and 18.1% from the prior-year period, respectively.
Favorable Analyst Estimates
Analysts expect VRTX's revenue for the fiscal 2022 third quarter (ending September 2022) to come in at $2.16 billion, representing a rise of 16.3% from the same period in 2021. The $3.59 consensus EPS estimate for the ongoing quarter indicates a marginal year-over-year increase.
The company’s revenue and EPS for the current year (ending December 2022) are expected to grow 13.3% and 9% year-over-year, respectively. Also, Street expects the company's EPS to grow 8% per annum over the next five years. The company has surpassed the consensus EPS estimates in each of the trailing four quarters.
High Profitability
VRTX’s trailing-12-month EBIT margin of 36.85% is 2,794.3% higher than the 1.27% industry average. Its trailing-12-month EBITDA margin of 38.52% is 799.7% higher than the 4.28% industry average. Likewise, the company’s trailing-12-month asset turnover ratio of 0.60% is 74.3% higher than the industry average of 0.35%.
Discounted Valuation
In terms of forward P/E, VRTX’s 22.51x is 15.7% lower than the 26.69x industry average. Its 13.57x forward EV/EBIT is 21.9% lower than the 17.37x industry average. In addition, its forward EV/EBITDA of 13.03x compares with the industry average of 13.41x.
POWR Ratings Show Promise
VRTX has an overall rating of A, translating to Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by accounting for 118 distinct factors, with each factor weighted to an optimal degree.
VRTX has a grade of A for Quality, consistent with its higher-than-industry profitability ratios. In addition, the stock has a B grade for Growth, which is in sync with the revenue and earnings growth estimated by analysts.
VRTX is ranked #1 out of 402 stocks in the Biotech industry.
Beyond what I have stated above, we have also given VRTX grades for Momentum, Sentiment, Value, and Stability. Get access to all the VRTX ratings here.
Bottom Line
The company is well-positioned to benefit from its diversified pipeline as it continues to pursue small molecule CFTR modulator therapies and new treatment options for more patients around the globe.
Given the company’s strong financials, higher-than-industry profitability, low valuation, and solid revenue and earnings growth estimates, we think it could be wise to invest in the stock now.
How Does Vertex Pharmaceuticals Incorporated (VRTX) Stack Up Against its Peers?
VRTX has an overall POWR Rating of A. One could also check out these other stocks within the Biotech industry with an A (Strong Buy) rating: United Therapeutics Corporation (UTHR), Sino Biopharmaceutical Limited (SBHMY), and Biogen Inc. (BIIB).
VRTX shares were trading at $289.81 per share on Tuesday afternoon, up $6.13 (+2.16%). Year-to-date, VRTX has gained 31.97%, versus a -17.04% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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