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Vertex Reports First Quarter 2023 Financial Results

— Product revenue of $2.37 billion, a 13% increase compared to Q1 2022 —

— Company reiterates full year 2023 financial guidance, including product revenue guidance of $9.55 to $9.7 billion —

— TRIKAFTA approved in U.S. for children with cystic fibrosis 2 to 5 years of age —

— Pipeline advancement continues with completion of rolling BLA submissions for exa-cel in the U.S.; multiple additional clinical milestones expected in 2023 —

BOSTON–(BUSINESS WIRE)–Vertex Pharmaceuticals Incorporated (Nasdaq: VRTX) today reported consolidated financial results for the first quarter ended March 31, 2023 and reiterated full year 2023 financial guidance.

“Vertex delivered a strong start to 2023, with outstanding execution across our business. We continue to reach more patients globally with our cystic fibrosis medicines and progress our broad and diverse pipeline, most notably completing the rolling BLA submissions for exa-cel in the U.S.,” said Reshma Kewalramani, M.D., Chief Executive Officer and President of Vertex. “Over the course of this year, we look forward to continuing to expand our leadership in CF; preparing for near-term launches, including exa-cel; and advancing multiple potentially transformative medicines through mid- and late-stage clinical trials.”

First Quarter 2023 Results

Product revenue increased 13% to $2.37 billion compared to the first quarter of 2022, primarily driven by the strong uptake of TRIKAFTA/KAFTRIO in multiple countries internationally and continued performance of TRIKAFTA in the U.S. Net product revenue in the first quarter of 2023 increased 3% to $1.40 billion in the U.S. and increased 33% to $971 million outside the U.S., compared to the first quarter of 2022.

Combined GAAP and Non-GAAP R&D, Acquired IPR&D and SG&A expenses were $1.3 billion and $1.2 billion, respectively, compared to $818 million and $687 million, respectively, in the first quarter of 2022. The increases were due to higher acquired IPR&D expenses, increased investment in support of multiple programs that have advanced in mid- and late-stage clinical development, and the costs to support launches of Vertex’s therapies globally.

GAAP effective tax rate was 21.5% compared to 20.2% for the first quarter of 2022.

Non-GAAP effective tax rate was 21.3% compared to 21.5% for the first quarter of 2022. Please refer to Note 1 for further details on our GAAP to Non-GAAP tax adjustments.

GAAP and Non-GAAP net income decreased by 8% and 12%, respectively, compared to the first quarter of 2022, primarily driven by higher acquired IPR&D expenses, increased investment in our mid- and late-stage clinical pipeline, and the costs to support launches of Vertex’s therapies globally, partially offset by strong revenue growth and increased interest income.

Cash, cash equivalents and total marketable securities as of March 31, 2023 were $11.5 billion, compared to $10.9 billion as of December 31, 2022. The increase was primarily driven by strong revenue growth and operating cash flow, partially offset by our upfront payments to Entrada Therapeutics, CRISPR Therapeutics and other collaboration partners, repurchases of our common stock pursuant to our share repurchase program, and income tax payments.

Full Year 2023 Financial Guidance

Vertex today reiterated its full year 2023 financial guidance, including CF product revenue guidance of $9.55 to $9.7 billion. Vertex’s CF product revenue guidance includes expectations in the U.S. for continued performance of TRIKAFTA in ages 6+ and the launch of TRIKAFTA in the 2-5 age group, as well as continued uptake of KAFTRIO/TRIKAFTA in ages 6+ in countries outside the U.S., including those with recent reimbursement agreements. This guidance includes an approximately 150-basis-point negative impact from changes in foreign currency rates, inclusive of our foreign exchange risk management program.

Vertex’s financial guidance is summarized below:

 

Current FY 2023

 

Previous FY 2023

 

 

 

 

CF product revenues

Unchanged

 

$9.55 to $9.7 billion

 

 

 

 

Combined GAAP R&D, Acquired IPR&D and SG&A expenses (2)

Unchanged

 

$4.35 to $4.6 billion

Combined Non-GAAP R&D, Acquired IPR&D and SG&A expenses (2)

Unchanged

 

$3.9 to $4.0 billion

Non-GAAP effective tax rate

Unchanged

 

21% to 22%

Key Business Highlights

Cystic Fibrosis (CF) Marketed Products

Vertex anticipates the number of CF patients taking our medicines will continue to grow, including through new approvals and reimbursement for the treatment of younger patients. Recent progress includes:

Potential Near-Term Launch Opportunities

Vertex is preparing for the following near-term potential new product launches:

R&D Pipeline

Vertex is delivering on a diversified pipeline of potentially transformative small molecule, mRNA, cell and genetic therapies aimed at serious diseases. Recent and anticipated progress for programs in clinical development is summarized below.

Cystic Fibrosis

Vertex continues to pursue next-in-class, small molecule CFTR modulator therapies as well as an mRNA therapy for the approximately 5,000 patients who cannot benefit from CFTR modulators alone.

Beta Thalassemia and Sickle Cell Disease

Exa-cel is a non-viral ex vivo CRISPR gene-editing therapy, which is being developed as a potential functional cure for TDT and SCD. Vertex is developing exa-cel in collaboration with CRISPR Therapeutics.

Neuropathic Pain (NaV1.8)

Vertex has discovered multiple selective small molecule inhibitors of NaV1.8 with the objective of creating a new class of pain medicines that have the potential to provide effective pain relief, without the limitations of opioids and other currently available medicines.

APOL1-Mediated Kidney Disease (AMKD)

Vertex has discovered multiple oral, small molecule inhibitors of APOL1 function, pioneering a new class of medicines that target an underlying genetic driver of kidney disease.

Type 1 Diabetes (T1D)

Vertex is evaluating cell therapies using stem-cell derived, fully differentiated, insulin-producing islet cells to replace the endogenous insulin-producing islet cells that are destroyed in people with T1D, with the goal of developing a potential functional cure for this disease. Vertex has three programs that use these fully differentiated cells.

  1. VX-880, fully differentiated cells with standard immunosuppression: Vertex has completed enrollment and dosing in Part B of the Phase 1/2 study of VX-880. Vertex expects to present updated clinical data, including data from more patients and with longer duration of follow-up from the VX-880 study at scientific congresses in 2023, including the American Diabetes Association Scientific Sessions in June. Next, Vertex intends to begin Part C of the study with concurrent dosing. In March 2023, VX-880 was granted PRIME designation by the EMA.
  2. VX-264, fully differentiated cells encapsulated in immunoprotective device: The Investigational New Drug (IND) application in the U.S. and the Clinical Trial Application (CTA) in Canada for VX-264, the cells plus device program, have been cleared, and Vertex plans to begin enrollment and dosing in a Phase 1/2 clinical trial in the near term.
  3. Edited fully differentiated cells: Vertex’s hypoimmune cell research program continues to progress.

In addition, a Phase 1/2 study of VCTX-211, a hypoimmune cell program using ViaCyte cells that originated under the CRISPR Therapeutics and ViaCyte collaboration, is active and enrolling patients.

Alpha-1 Antitrypsin Deficiency

Vertex is working to address the underlying genetic cause of alpha-1 antitrypsin (AAT) deficiency by developing novel small molecule correctors of Z-AAT protein folding, with a goal of increasing the secretion of functional AAT into the blood and addressing both the lung and the liver aspects of AAT deficiency.

Additional Earlier Stage R&D Programs

Consistent with its overall strategy, Vertex takes a portfolio approach to all of its programs, with additional assets in CF, SCD, TDT, pain, AMKD, T1D and AATD in earlier stages of development.

Vertex is also advancing preclinical assets in new disease areas, such as Duchenne muscular dystrophy (DMD) and myotonic dystrophy type 1 (DM1). Additionally, Vertex is working on preclinical molecules with the potential to expand our leadership in existing disease areas, including assets targeting gentler conditioning for exa-cel and NaV1.7 in pain.

Investments in External Innovation

Consistent with its strategy to develop transformative medicines for serious diseases, in the first quarter of 2023, Vertex announced a new licensing agreement for the use of CRISPR Therapeutics’ gene editing technology, known as CRISPR/Cas9, to accelerate the development of Vertex’s hypoimmune cell therapies for T1D. Under this agreement, Vertex made an upfront payment of $100 million to CRISPR in the first quarter of 2023.

In addition, the previously announced global research collaboration with Entrada Therapeutics, focused on therapeutics for DM1, has closed. Under the terms of the agreement, upon closing, Vertex made an upfront payment of approximately $225 million to Entrada, as well as an equity investment of approximately $25 million.

Non-GAAP Financial Measures

In this press release, Vertex’s financial results and financial guidance are provided in accordance with accounting principles generally accepted in the United States (GAAP) and using certain non-GAAP financial measures. In particular, non-GAAP financial results and guidance exclude from Vertex’s pre-tax income (i) stock-based compensation expense, (ii) gains or losses related to the fair value of the company’s strategic investments, (iii) increases or decreases in the fair value of contingent consideration, (iv) acquisition-related costs, and (v) other adjustments. The company’s non-GAAP financial results also exclude from its provision for income taxes the estimated tax impact related to its non-GAAP adjustments to pre-tax income described above and certain discrete items. These results should not be viewed as a substitute for the company’s GAAP results and are provided as a complement to results provided in accordance with GAAP. Management believes these non-GAAP financial measures help indicate underlying trends in the company’s business, are important in comparing current results with prior period results and provide additional information regarding the company’s financial position that the company believes is helpful to an understanding of its ongoing business. Management also uses these non-GAAP financial measures to establish budgets and operational goals that are communicated internally and externally, to manage the company’s business and to evaluate its performance. The company’s calculation of non-GAAP financial measures likely differs from the calculations used by other companies. A reconciliation of the GAAP financial results to non-GAAP financial results is included in the attached financial information.

The company provides guidance regarding combined R&D, Acquired IPR&D and SG&A expenses and effective tax rate on a non-GAAP basis. Unless otherwise noted, the guidance regarding combined GAAP and non-GAAP R&D, Acquired IPR&D and SG&A expenses does not include estimates associated with any potential future business development transactions, including collaborations, asset acquisitions and/or licensing of third-party intellectual property rights. The company does not provide guidance regarding its GAAP effective tax rate because it is unable to forecast with reasonable certainty the impact of excess tax benefits related to stock-based compensation and the possibility of certain discrete items, which could be material.

 

Vertex Pharmaceuticals Incorporated

Consolidated Statements of Income

(in millions, except per share amounts)(unaudited)

 

Three Months Ended March 31,

 

 

2023

 

 

 

2022

 

Product revenues, net

$

2,374.8

 

 

$

2,097.5

 

Costs and expenses:

 

 

 

Cost of sales

 

266.9

 

 

 

245.8

 

Research and development expenses

 

742.6

 

 

 

601.1

 

Acquired in-process research and development expenses

 

347.1

 

 

 

2.0

 

Selling, general and administrative expenses

 

241.1

 

 

 

215.2

 

Change in fair value of contingent consideration

 

(1.9

)

 

 

(7.5

)

Total costs and expenses

 

1,595.8

 

 

 

1,056.6

 

Income from operations

 

779.0

 

 

 

1,040.9

 

Interest income

 

122.6

 

 

 

1.6

 

Interest expense

 

(11.4

)

 

 

(14.9

)

Other income (expense), net

 

1.3

 

 

 

(72.8

)

Income before provision for income taxes

 

891.5

 

 

 

954.8

 

Provision for income taxes

 

191.7

 

 

 

192.7

 

Net income

$

699.8

 

 

$

762.1

 

 

 

 

 

Net income per common share:

 

 

 

Basic

$

2.72

 

 

$

2.99

 

Diluted

$

2.69

 

 

$

2.96

 

Shares used in per share calculations:

 

 

 

Basic

 

257.4

 

 

 

255.1

 

Diluted

 

260.3

 

 

 

257.9

 

 

Vertex Pharmaceuticals Incorporated

Product Revenues

(in millions)(unaudited)

 

Three Months Ended March 31,

 

 

2023

 

 

2022

TRIKAFTA/KAFTRIO

$

2,096.7

 

$

1,761.6

Other CF products

 

278.1

 

 

335.9

Product revenues, net

$

2,374.8

 

$

2,097.5

 

Vertex Pharmaceuticals Incorporated

Reconciliation of GAAP to Non-GAAP Financial Information

(in millions, except percentages)(unaudited)

 

Three Months Ended March 31,

 

 

2023

 

 

 

2022

 

GAAP cost of sales

$

266.9

 

 

$

245.8

 

Stock-based compensation expense

 

(1.9

)

 

 

(2.2

)

Non-GAAP cost of sales

$

265.0

 

 

$

243.6

 

 

 

 

 

GAAP research and development expenses

$

742.6

 

 

$

601.1

 

Stock-based compensation expense

 

(76.3

)

 

 

(80.4

)

Acquisition-related costs (3)

 

(2.8

)

 

 

(2.8

)

Non-GAAP research and development expenses

$

663.5

 

 

$

517.9

 

 

 

 

 

Acquired in-process research and development expenses

$

347.1

 

 

$

2.0

 

 

 

 

 

GAAP selling, general and administrative expenses

$

241.1

 

 

$

215.2

 

Stock-based compensation expense

 

(44.2

)

 

 

(47.7

)

Non-GAAP selling, general and administrative expenses

$

196.9

 

 

$

167.5

 

 

 

 

 

Combined non-GAAP R&D, Acquired IPR&D and SG&A expenses

$

1,207.5

 

 

$

687.4

 

 

 

 

 

GAAP other income (expense), net

$

1.3

 

 

$

(72.8

)

(Increase) decrease in fair value of strategic investments

 

(6.4

)

 

 

75.6

 

Non-GAAP other (expense) income, net

$

(5.1

)

 

$

2.8

 

 

 

 

 

GAAP provision for income taxes

$

191.7

 

 

$

192.7

 

Tax adjustments (1)

 

22.7

 

 

 

56.2

 

Non-GAAP provision for income taxes

$

214.4

 

 

$

248.9

 

 

 

 

 

GAAP effective tax rate

21.5

%

 

20.2

%

Non-GAAP effective tax rate

21.3

%

 

21.5

%

 

Vertex Pharmaceuticals Incorporated

Reconciliation of GAAP to Non-GAAP Financial Information (continued)

(in millions, except per share amounts)(unaudited)

 

Three Months Ended March 31,

 

 

2023

 

 

 

2022

 

GAAP operating income

$

779.0

 

 

$

1,040.9

 

Stock-based compensation expense

 

122.4

 

 

 

130.3

 

Decrease in fair value of contingent consideration

 

(1.9

)

 

 

(7.5

)

Acquisition-related costs (3)

 

2.8

 

 

 

2.8

 

Non-GAAP operating income

$

902.3

 

 

$

1,166.5

 

 

 

 

 

 

Three Months Ended March 31,

 

 

2023

 

 

 

2022

 

GAAP net income

$

699.8

 

 

$

762.1

 

 

 

 

 

Stock-based compensation expense

 

122.4

 

 

 

130.3

 

(Increase) decrease in fair value of strategic investments

 

(6.4

)

 

 

75.6

 

Decrease in fair value of contingent consideration

 

(1.9

)

 

 

(7.5

)

Acquisition-related costs (3)

 

2.8

 

 

 

2.8

 

Total non-GAAP adjustments to pre-tax income

 

116.9

 

 

 

201.2

 

Tax adjustments (1)

 

(22.7

)

 

 

(56.2

)

Non-GAAP net income

$

794.0

 

 

$

907.1

 

 

 

 

 

Net income per diluted common share:

 

 

 

GAAP

$

2.69

 

 

$

2.96

 

Non-GAAP

$

3.05

 

 

$

3.52

 

Shares used in diluted per share calculations:

 

 

 

GAAP and Non-GAAP

 

260.3

 

 

 

257.9

 

 

Vertex Pharmaceuticals Incorporated

Condensed Consolidated Balance Sheets

(in millions)(unaudited)

 

March 31, 2023

 

December 31, 2022

Assets

 

 

 

Cash, cash equivalents and marketable securities

$

10,414.1

 

$

10,778.5

Accounts receivable, net

 

1,547.8

 

 

1,442.2

Inventories

 

535.1

 

 

460.6

Prepaid expenses and other current assets

 

468.7

 

 

553.5

Total current assets

 

12,965.7

 

 

13,234.8

Property and equipment, net

 

1,111.7

 

 

1,108.4

Goodwill and intangible assets

 

1,691.6

 

 

1,691.6

Deferred tax assets

 

1,359.9

 

 

1,246.9

Operating lease assets

 

336.3

 

 

347.4

Long-term marketable securities

 

1,081.5

 

 

112.2

Other long-term assets

 

427.5

 

 

409.6

Total assets

$

18,974.2

 

$

18,150.9

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

Accounts payable and accrued expenses

$

2,649.2

 

$

2,430.6

Other current liabilities

 

377.0

 

 

311.5

Total current liabilities

 

3,026.2

 

 

2,742.1

Long-term finance lease liabilities

 

417.6

 

 

430.8

Long-term operating lease liabilities

 

371.6

 

 

379.5

Other long-term liabilities

 

726.5

 

 

685.8

Shareholders’ equity

 

14,432.3

 

 

13,912.7

Total liabilities and shareholders’ equity

$

18,974.2

 

$

18,150.9

 

 

 

 

Common shares outstanding

 

257.5

 

 

257.0

Notes and Explanations

1: In the three months ended March 31, 2023 and 2022, “Tax adjustments” included the estimated income taxes related to non-GAAP adjustments to the company’s pre-tax income and excess tax benefits related to stock-based compensation.

2: The difference between the company’s full year 2023 combined GAAP R&D, Acquired IPR&D and SG&A expenses and combined non-GAAP R&D, Acquired IPR&D and SG&A expenses guidance relates primarily to $440 million to $575 million of stock-based compensation expense. Unless otherwise noted, the guidance regarding combined GAAP and non-GAAP R&D, Acquired IPR&D and SG&A expenses does not include estimates associated with any potential future business development transactions, including collaborations, asset acquisitions and/or licensing of third-party intellectual property rights.

3: “Acquisition-related costs” in the three months ended March 31, 2023 and 2022 related to costs associated with the company’s acquisition of Exonics.

Contacts

Investor Relations:
Susie Lisa, CFA, 617-341-6108

Manisha Pai, 617-961-1899

Miroslava Minkova, 617-341-6135

Media:
617-341-6992

mediainfo@vrtx.com

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