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Pharma Investors: Who's Eyeing Vertex in 2017?

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Part 4
Pharma Investors: Who's Eyeing Vertex in 2017? PART 4 OF 4

Why Vertex Expects Its Profit Margin to Rise in 2017

Rise in profit margin

In 2017, Vertex Pharmaceuticals (VRTX) has strategized to effectively manage its operating expenses for boosting profit margins. The company estimates its GAAP (generally accepted accounting principles) combined R&D (research and development) and SG&A (selling, general, and administrative) expenses to fall in the range of $1.55 billion–$1.70 billion. Vertex Pharmaceuticals’ non-GAAP combined R&D and SG&A expenses are estimated to fall in the range of $1.25 billion–$1.30 billion.

Why Vertex Expects Its Profit Margin to Rise in 2017

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Margin projections

Wall Street analysts have projected that in 2017, Vertex Pharmaceuticals’ net profit margin will turn positive and will be ~7.3%. Peers such as Gilead Sciences (GILD), Celgene (CELG), and Biogen (BIIB) are expected to report profit margins close to 44.0%, 35.0%, and 35.2%, respectively, in 2017.

Notably, Vertex Pharmaceuticals makes up ~0.77% of the Health Care Select Sector SPDR Fund’s (XLV) total portfolio holdings.

Future margin driver

In 1H17, Vertex Pharmaceuticals expects data from a Phase 3 trial evaluating the potential of the combination regimen of tezacaftor with ivacaftor in two categories of CF (cystic fibrosis) patients—one with two copies of the F508del mutation, and the other with one copy of the F508del mutation. Based on this data, the company has planned to file applications with the FDA (US Food and Drug Administration) and EMA (European Medicines Agency) seeking approval for this regimen in 2H17.

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