Common-Size Income Statement
Vertex Pharmaceuticals Inc., common-size consolidated income statement
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
The financial data reveals several notable trends and changes in key profitability and expense ratios over the five-year period.
- Revenue Composition and Gross Profit
- The product revenues consistently represent nearly 100% of total revenues, indicating a stable revenue base concentrated in product sales. Other revenues are minimal and diminish to zero by the latter years. The cost of sales as a percentage of revenues exhibits a gradual increasing trend, rising from -11.86% to -13.89%, which exerts downward pressure on gross profit margins. Consequently, the gross profit margin declines steadily from 88.14% in 2020 to 86.11% in 2024, reflecting rising production or procurement costs relative to revenues.
- Research and Development (R&D) Expenses
- R&D expenses represent a significant and growing portion of revenues, increasing from -26.51% in 2020 to -32.94% in 2024. Fluctuations are also observed in acquired in-process R&D expenses, which spike notably in 2021 (-14.7%) and in 2024 (-42%), indicating major investments or acquisitions in those years. The pronounced increase in these expenses suggests an intensified focus on innovation and product pipeline development, although it may also be impacting overall profitability.
- Selling, General, and Administrative (SG&A) Expenses
- SG&A expenses display some variability but generally remain within a moderate range, fluctuating between -10.58% and -13.29%. After a decrease in 2021 and 2022, a rise is evident again in 2024, reaching the highest level in the observed period. This increase may be related to expanded sales efforts or higher overhead costs.
- Operational Profitability
- The income from operations shows volatility, with a peak at 48.23% in 2022 and a significant decline into negative territory (-2.11%) by 2024. The negative operations income in 2024 strongly contrasts with previous years, signaling a substantial shift in operational performance and efficiency. This sharp deterioration is aligned with increases in cost of sales, R&D, and SG&A expenses as a percentage of revenues.
- Interest and Other Income/Expenses
- Interest income shows an increasing trend, rising substantially from 0.36% in 2020 to a high of 6.23% in 2023 before a slight decrease to 5.43% in 2024. Interest expenses decrease steadily over the period, indicating reduced financing costs or debt levels. Other income (expense), net varies widely, with positive contributions early on (4.78% in 2020) turning consistently negative in recent years, which may have exerted a drag on profitability.
- Pre-Tax and Net Income
- Income before provision for income taxes aligns closely with operational income trends, peaking at 50.22% in 2020 and declining markedly to 2.25% in 2024. The provision for income taxes fluctuates moderately without a clear trend. Net income follows the pre-tax income pattern, peaking at 43.7% in 2020 and decreasing to a net loss position of -4.86% in 2024. This negative net income in the final year indicates overall financial underperformance driven primarily by the operational challenges and increased expenses.
In summary, the company experiences increasing cost pressures and higher investment in R&D, which, together with rising SG&A expenses and negative shifts in other income, lead to a severe decline in profitability by 2024, culminating in a net loss despite favorable interest income trends.