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What’s Vertex’s Strategy to Sustain the Cystic Fibrosis Market?


Mar. 2 2016, Updated 1:06 a.m. ET

Vertex’s revenue expectations in 2016 and 2017 

According to analyst estimates, Vertex Pharmaceuticals (VRTX) might report revenues amounting to $2.1 billion in 2016 followed by $3.2 billion in 2017. This translates to 106% and 50% increases in total revenues for 2016 and 2017, respectively.

The strong growth in 2015 was attributed to Kalydeco and Orkambi. Following strong sales of Incivek, Vertex became profitable in 2011 for a brief period. However, with declining revenue from Incivek, it started incurring losses.

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Business strategy for Vertex

Vertex Pharmaceuticals (VRTX) plans to continue to create high-value drugs for CF (cystic fibrosis). In 2015, CF product revenue stood at $983 million, a 110% increase. With the purpose of market sustenance, Vertex is investing heavily in research and development.

Vertex has been experiencing negative operating margins for three years. Its aim is to achieve higher operating margins through the success of Kalydeco and Orkambi. The company’s diversified pipeline would support future opportunities for the company.

Vertex’s increasing revenue base would lead to improved efficiency. Kalydeco and Orkambi are costlier drugs. Alexion Pharmaceuticals’ (ALXN) Soliris (eculizumab), Amgen’s (AMGN) Blincyto (blinatumomab), and Gilead Sciences’ (GILD) Zydelig (idelalisib) are some other costly drugs in the United States.

Biotech companies are facing continued pricing pressures. Changing market dynamics along with pricing pressures may cause volatility in the share price. To avoid volatility and direct risk associated with the stock, investors can look for options such as the Health Care Select Sector SPDR ETF (XLV). Vertex Pharmaceuticals accounts for 0.84% of XLV.


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