It has been about a month since the last earnings report for Vertex Pharmaceuticals (VRTX Quick QuoteVRTX - Free Report) . Shares have lost about 2.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Vertex due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Q2 Earnings & Sales Beat

Vertex reported adjusted earnings per share (EPS) of $3.89 in second-quarter 2023, beating the Zacks Consensus Estimate of $3.85. The adjusted EPS rose 8% year over year driven by strong growth in product revenues, which were partially offset by higher research and development expenses.

The company reported total revenues of $2.49 billion, comprising entirely of cystic fibrosis (“CF”) product revenues. The figure surpassed the Zacks Consensus Estimate of $2.41 billion. Total revenues rose 14% year over year, primarily driven by higher international sales of Trikafta (marketed as Kaftrio in Europe).

CF product sales rose 7% year over year in the United States to $1.51 billion, while sales outside the United States surged 26% to $985 million.

Trikafta generated sales worth $2.24 billion, up 18.3% year over year. Trikafta sales beat the Zacks Consensus Estimate and our model estimate of $2.17 billion and $2.15 billion, respectively.

The upside was driven by the strong uptake in international markets and expanded use (aged between two and five years) in children with CF in the United States. In outside U.S. markets, continued strong uptake of Kaftrio in markets with recently achieved reimbursement as well as label extensions in younger age groups is driving sales growth.

Sales from other CF products, namely Symdeko/Symkevi, Kalydeco and Orkambi, were down 16.6% year over year to $252.8 million. Sales of these drugs were hurt by patients switching to Trikafta.

Symdeko/Symkevi registered sales of $31.2 million in the quarter, down 26.7% year over year.

Kalydeco recorded sales of $125.3 million in the quarter, down 9.7% year over year. Orkambi generated sales of $96.3 million in the reported quarter, down 20.8% from the prior-year quarter.

Costs Rise

Adjusted operating expense was $1.04 billion in the quarter, up 33.3% from the prior-year quarter’s levels.

Adjusted research and development (R&D) expenses rose 37.6% from the year-ago quarter’s levels to $708.4 million due to the expansion of the company’s mid- and late-stage pipeline.

Adjusted selling, general and administrative (SG&A) expenses increased 26.7% to $219.6 million in the reported quarter due to expenses for CF launches and pre-commercial activities for exa-cel.

During the fourth quarter, Vertex recorded acquired IPR&D costs of $110.5 million compared with $61.9 million in the year-ago quarter.

Adjusted operating income was $1.15 billion in the quarter, down 3.4% from the prior-year period.

2023 Guidance

Based on the solid uptake of Trikafta/Kaftrio in the first half, Vertex raised its 2023 guidance. Management expects total revenues from CF products in the range of $9.7-$9.8 billion compared with the prior expectation of $9.55-$9.70 billion. The raised guidance for 2023 suggests 9-10% year-over-year growth (previously 7-9%). The product revenue guidance reflects only revenues from cystic fibrosis products and does not include any revenues from exa-cel.

For the full year, management expects to record adjusted combined R&D, acquired IPR&D and SG&A expenses in the band of $4.1-$4.2 billion compared with the previous guidance of $3.9-$4.0 billion. This upside can be attributed to increased IPR&D expenses incurred to date, including the $70 million milestone payment to CRISPR Therapeutics. The adjusted operating expense guidance now includes approximately $500 million of upfronts and milestones compared with the $300 million projected at the start of the year.

The adjusted tax rate is expected in the range of 21-22% (maintained).

Currency headwinds are expected to have a negative impact of approximately 1.5% on revenue growth in 2023.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision.

VGM Scores

At this time, Vertex has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Vertex has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Vertex belongs to the Zacks Medical - Biomedical and Genetics industry. Another stock from the same industry, Bristol Myers Squibb (BMY Quick QuoteBMY - Free Report) , has gained 1% over the past month. More than a month has passed since the company reported results for the quarter ended June 2023.

Bristol Myers reported revenues of $11.23 billion in the last reported quarter, representing a year-over-year change of -5.6%. EPS of $1.75 for the same period compares with $1.93 a year ago.

For the current quarter, Bristol Myers is expected to post earnings of $1.83 per share, indicating a change of -8% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.8% over the last 30 days.

Bristol Myers has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.