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Vertex Pharmaceuticals’ Gross Margin Trends

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Product revenue

Kalydeco, Orkambi, and Symdeko are Vertex Pharmaceuticals’ (VRTX) products on the market. Kalydeco sales rose YoY (year-over-year) to $245.73 million from $213.46 million in the third quarter, while Orkambi sales fell YoY to $281.86 million from $336.18 million. Symdeko generated sales of $254.92 million.

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Revenue forecast

In fiscal 2018 and fiscal 2019, Vertex is expected to generate revenue of $2.99 billion and $3.52 billion, respectively, compared with $2.17 billion in fiscal 2017. Meanwhile, peers Amgen (AMGN), Biogen (BIIB), and Pfizer (PFE) are expected to have revenue of $23.36 billion, $13.31 billion, and $53.59 billion, respectively, in fiscal 2018. Vertex has cash per share of $11.73, while Amgen, Biogen, and Pfizer have cash per share of $45.66, $21.60, and $2.92, respectively.

Gross margins

In the third quarter, Vertex’s costs of sales rose YoY to $111.25 million from $72.87 million, and its gross margin contracted YoY to 85.81% from 87.39%.

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Expected trends

Vertex’s gross margin is expected to be 87.01% and 87.18%, respectively, in fiscal 2018 and fiscal 2019, compared with 87.34% in fiscal 2017. Meanwhile, Amgen’s, Biogen’s, and Pfizer’s fiscal 2018 gross margins are expected to be 85.83%, 86.71%, and 79.2%, respectively.

Valuation metrics

Vertex’s EV (enterprise value) is $41.02 billion, and its EV-to-revenue ratio is 14.50x. The stock’s forward PE ratio is 38.64x, its price-to-sales ratio is 15.05x, and its price-to-book ratio is 14.34x. Amgen’s, Biogen’s, and Pfizer’s price-to-book ratios are 8.41x, 4.31x, and 3.49x, respectively. Next, we’ll look at Vertex’s operational performance.

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