Over the past decade, Vertex Pharmaceuticals (NASDAQ:VRTX) stock has tripled in value, thanks in large part to the success of its core cystic fibrosis drug franchise. With this biotech's shares now trading at a sky-high forward price-to-earnings ratio of 41, however, it might be the perfect time to look elsewhere for more attractive growth opportunities.

Our contributors, for instance, think Amicus Therapeutics (NASDAQ:FOLD), Intercept Pharmaceuticals (NASDAQ:ICPT), and Alexion Pharmaceuticals (NASDAQ:ALXN) may all be gearing up for a Vertex-like run moving forward. Read on to find out why.  

A graph showing an upward trend is drawn on a blackboard.

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This rare-disease drugmaker is following closely in Vertex's footsteps

George Budwell (Amicus Therapeutics): Companies like Vertex that specialize in developing treatments for rare diseases have done exceedingly well over the past decade. So-called orphan drugs, or medicines for indications with rather limited patient populations, tend to come with jaw-dropping profit margins, extended periods of exclusivity, and generally less push-back from payers.   

So if you're looking for a relative newcomer to this high-value pharma niche that might be able to mimic Vertex's growth trajectory, I think the mid-cap biotech Amicus Therapeutics is worth checking out. 

Amicus' stock has been heating up lately because of the European approval -- and perhaps forthcoming Japanese approval -- of its oral Fabry disease drug Galafold. Fabry disease is a rare genetically based condition that results in the deposition of a certain type of fat along blood vessels throughout the body.

Although Galafold isn't the only drug approved for this indication, and although its commercial prospects remain murky because the FDA has given it the cold shoulder so far, the more important issue is that Amicus has now crossed over the threshold from the clinical to the commercial realm of the biotech landscape. That's not an easy feat to accomplish. Most clinical-stage biotechs, after all, fail to ever get even a single product on the market.  

So with one orphan-drug approval already in hand and its experimental epidermolysis bullosa therapy, SD-101, close to a pivotal readout later this year, Amicus seems to have the pieces in place to follow in Vertex's footsteps. 

A first-in-class drug could hit pharmacy shelves in 2020 

Sean Williams (Intercept Pharmaceuticals): When I think Vertex Pharmaceuticals, I think of a company that's successful because it's operating in cystic fibrosis, a niche in which few other companies have had success. So, my choice to be the next Vertex would be Intercept Pharmaceuticals, which is working on what could be a first-to-market nonalcoholic steatohepatitis (NASH) drug known as Ocaliva (scientifically, obeticholic acid).

NASH is a nasty disease. This is a fatty-liver disease that affects anywhere from 2% to 5% of all U.S. adults, and it can lead to scarring of the liver (fibrosis), liver cancer, or perhaps even death. There are no Food and Drug Administration-approved therapies on the market to treat NASH at the moment, and it's on track to become the leading cause of liver transplants by next decade.

Thus enters Ocaliva, which is currently approved by the FDA to treat primary biliary cholangitis, a disease of the small bile ducts in the liver. Ocaliva made its presence known in a big way in the phase 2b FLINT trial back in 2014. In that trial, 46% of patients taking Ocaliva demonstrated a 2-point reduction or greater in their NAFLD Activity Score, compared with just 21% for the placebo. Also, 35% of patients on Ocaliva had a mean score benefit in liver fibrosis, compared with only 19% for the placebo.

Right now, Intercept is working on enrollment for its phase 3 REGENERATE trial that should be on track to deliver top-line results in 2019. Enrollment should be completed by mid-2017. More importantly, in February, Intercept announced alterations to its REGENERATE trial that are actually quite favorable. Its primary endpoint is now fibrosis improvement or NASH resolution, as opposed to both fibrosis improvement and NASH resolution, as the study was first written. This lowers the bar for meeting its primary endpoint, but it provides a differentiating factor from competing therapies in development should Ocaliva hit the mark for both indications.

If approved, Ocaliva could see peak sales of more than $8 billion -- in a utopian scenario. It's probably not best to count your chickens before they're hatched, but there's a major market opportunity that Intercept could seize by 2019 or 2020, if approved.

A biotech powerhouse shrouded in controversy

Brian Feroldi (Alexion Pharmaceuticals): Just like Vertex, Alexion Pharmaceuticals is a highly successful biotech that focuses on rare diseases. Alexion's stock has been a monster winner over the past decade, thanks to limited competition and huge pricing power for its cash-cow drug Soliris. However, the recent news out of Alexion hasn't been great, which is why shares have fallen more than 40% from their recent high. The combination is providing brave investors with a chance to buy a proven winner at a discount.

So what's caused the market to lose faith in Alexion? Last November, the company's board launched an internal investigation to take a closer look at the company's sales tactics related to Soliris. The inquiry led to delayed SEC filings and the ousting of the company's longtime CEO and CFO. When adding disappointing clinical news to the picture, it isn't hard to figure out why Wall Street has thrown in the towel on this company.

The company has since hired a new management team and made a few key changes to its board. Alexion also recently submitted a label-expansion claim for Soliris to regulators in the U.S. and Japan, which promises to keep the company's growth engine humming along. When adding in the conclusion of its internal investigation, it looks as if the company's troubles are finally in the rearview mirror.

Looking ahead, market watchers still believe that Alexion's bottom line is well positioned for growth. Between label expansion claims for Soliris, growth in sales of its metabolic franchise drugs, and its $1 billion share-repurchase program, analysts are projecting that Alexion's EPS will grow in excess of 18% annually over the next five years. With shares trading for less than 19 times forward earnings, there are ample reasons to believe patience will pay off for Alexion's long-term shareholders.

 

Brian Feroldi owns shares of Alexion Pharmaceuticals. George Budwell has no position in any stocks mentioned. Sean Williams has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.