At the moment, treatment options for cystic fibrosis are limited to drugs marketed by Vertex Pharmaceuticals Inc. (NASDAQ:VRTX), but a deep-pocketed drugmaker just took a big step toward entering the space. AbbVie, Inc. (NYSE:ABBV) recently acquired full control of a clinical-stage cystic fibrosis program from Galapagos N.V. (NASDAQ:GLPG).

Should Vertex investors be worried, now that the company's main challenger is a biopharma giant with nearly endless resources for developing competing treatments? Here's what you need to know.

Nervous-looking person in a business suit biting a thumb

Image source: Getty Images.

Reasons to stay calm

Galapagos recently reported preliminary results from an early-stage trial with its cystic fibrosis (CF) candidates; they didn't make a strong impression. During part one of the Falcon study, the dual combination of GLPG2451 and GPLG2222 led to a forced expiration volume (FEV) improvement of approximately 3% after two weeks.

We really shouldn't make direct comparisons without a head-to-head study, but Galapagos' two-week data from patients with two copies of the F508del mutation don't appear any better than results that supported approval of Vertex's drug Orkambi in 2015. Vertex's two-drug combination treatment led to a 2.6% FEV improvement at 24 weeks in one trial and a 3% improvement in another. While it looks like GLPG2451 plus GPLG2222 might be able to eventually compete with Orkambi, Vertex also markets Symdeko, which led to a 4% improvement for the same patient group.

Vertex is also miles ahead with two next-generation triplets. Adding VX-659 to tezacaftor plus ivacaftor (two drugs physicians are already familiar with) led to a 9.7% improvement in lung function, and adding VX-445 to the popular pair worked even better. Galapagos attempted a three-drug treatment by adding GLPG2737 to its combo, but investigators didn't notice any improvement compared to GLPG2451 plus GLPG2222 on their own.

The F508del mutation is the most common cause of cystic fibrosis, but hundreds of mutations in the CFTR gene have been shown to cause the disease. In order to speed treatment options to as many different patient groups as possible, Vertex spent $1.3 billion on research and development last year, and it intends to spend another $1.8 billion in 2018.

Vertex won't have any trouble paying the bills. The company recently reported third-quarter cystic fibrosis revenue that jumped 42% higher to an annualized $3.1 billion run rate.

Vertex's attempts at a three-drug CF therapy are miles ahead of AbbVie's phase 1 program. Late-stage results from a triplet containing VX-659 are expected before the end of the year, and we should also have data for a triplet containing VX-445 in the first quarter of 2019.

Smiling young person in a lab coat with a clipboard

Image source: Getty Images.

Reasons to be nervous

Over the past year Vertex has plowed 45% of the revenue its drugs generate right back into research and development, but that doesn't stop insurers from complaining about Orkambi's $272,000-per-year list price.

Vertex's pricing power depends on a lack of viable alternatives, as AbbVie has proven in the past. Gilead Sciences' (NASDAQ:GILD) sales in its hepatitis C antiviral franchise hit $19 billion in 2015 before AbbVie began fielding competing treatments at deep discounts in 2016. Based on the latest quarter, Gilead is on pace to record just $3.6 billion in annual hepatitis C antiviral sales.

A successful assault on Gilead's franchise taught us that competing drugs don't need to be better in order to take down a monopoly; they just need to be good enough. With this in mind, Vertex investors probably should be nervous about Galapagos' candidates now that they're in AbbVie's hands.

Colorful assortment of pills on a pile of $100 bills

Image source: Getty Images.

Not Vertex's first rodeo

More seasoned biotech investors remember Vertex's first drug, Incivek, a hepatitis C treatment that achieved blockbuster status briefly before getting knocked out of the lead by Sovaldi from, coincidentally, Gilead Sciences.

By all indications, Vertex has learned a great deal from its first experience with the biotech circle of life, and the company has what it takes to keep its bottom line climbing for many years to come. Operations generated $1 billion in free cash flow over the past year, which Vertex is using to fill its pipeline with tomorrow's potential blockbusters.

Vertex will begin a clinical trial in partnership with CRISPR Therapeutics later this year, and results from a midstage study with a novel, wholly-owned pain-relief candidate are due in 2019.

AbbVie has nearly endless resources, but it's going to be a long time before its CF program moves from phase 1 testing to a position where it could begin to threaten Vertex's franchise. With a growing pipeline of midstage candidates and money to develop them, Vertex probably won't be a one-trick pony when that time comes.

Cory Renauer owns shares of Gilead Sciences. The Motley Fool owns shares of and recommends Gilead Sciences. The Motley Fool owns shares of CRSP and has the following options: short November 2018 $78 calls on Gilead Sciences. The Motley Fool recommends Vertex Pharmaceuticals. The Motley Fool has a disclosure policy.