Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) could be the poster child of pipeline success in the biotech world. The company's cystic fibrosis (CF) therapies have steadily advanced through clinical studies with positive results and then on to commercialization. Incyte Corporation (NASDAQ:INCY), however, wouldn't show up on the poster, with a big pipeline setback earlier this year.

The pipeline ups and downs for these two biotechs are reflected in the performance of their respective stocks. But which is the better pick for investors now? Here are the top investing arguments for both Vertex and Incyte.

Scientist holding test tube with healthcare icons displayed in foreground

Image source: Getty Images.

The case for Vertex

Vertex essentially claims a monopoly in treating cystic fibrosis. The biotech's three drugs -- Kalydeco, Orkambi, and Symdeko -- are currently the only approved therapies that address the underlying causes of CF. 

The company could soon add to its CF juggernaut. Vertex should report results from a late-stage clinical study of a triple-drug combination featuring VX-659 by the end of this year. It also expects to announce results from another late-stage study of a triple-drug combo including VX-445 by early 2019. Look for Vertex to submit for regulatory approval by the middle of next year.

What's great about these triple-drug regimens is that they could expand Vertex's total addressable market by more than 50%. And the company still hasn't maxed out its current opportunity with Kalydeco, Orkambi, and Symdeko.

While Vertex continues to rock along in CF, it's also expanding beyond the indication. The biotech's pipeline includes four promising therapies targeting other areas. Vertex and partner CRISPR Therapeutics are evaluating gene-editing therapy CTX001 in a phase 1 study for treating rare blood disorder beta thalassemia. The two companies also plan to initiate another phase 1 study of CTX001 in treating sickle cell disease by the end of 2018.

Vertex also will soon begin a phase 2 study of VX-150 in managing post-operative acute pain and expects to announce results from another phase 2 study of the drug in treating pain caused by small fiber neuropathy in early 2019. In addition, the company plans to start a clinical study of a corrector for mutations causing rare genetic disease alpha-1 antitrypsin deficiency (AAT) by the end of this year.

With momentum picking up for its current CF drugs and more potential winners in its pipeline, Wall Street analysts project that Vertex will grow earnings by more than 50% annually over the next five years. The biotech is also increasing its cash stockpile and could make additional acquisitions to fuel future growth. 

The case for Incyte

The bad news for Incyte is that its once-promising IDO inhibitor epacadostat flopped in a clinical study earlier this year. The good news, though, is that Incyte continues to enjoy solid revenue growth thanks to its three approved products -- Jakafi, Iclusig, and Olumiant (which is marketed by Eli Lilly).

Jakafi is the biggest winner of the group. The JAK1/JAK2 inhibitor appears to be on track to rake in more than $1.3 billion this year. And that doesn't include royalties that Novartis pays Incyte on sales of the drug outside of the U.S.

Leukemia drug Iclusig doesn't contribute nearly as much as Jakafi, with sales likely to top $80 million in 2018. However, its momentum is gaining steam, with year-over-year growth so far this year for Iclusig even stronger than that of Jakafi.

It's still too soon to know how well Olumiant will fare. The drug received FDA approval for treating rheumatoid arthritis in June 2018 but its product label includes a black box warning for the risk of serious infections, malignancies, and thrombosis.

Despite the setback with epacadostat, Incyte's pipeline still includes several candidates with significant potential. Itacitinib is being evaluated in a couple of pivotal studies for treating acute graft-versus-host disease (GVHD) and chronic GVHD. Incyte is exploring the use of INCB50465 as a monotherapy and in combination with Jakafi in clinical studies targeting several types of cancer. Pemagatinib is another promising cancer drug for which Incyte expects to file for approval next year.

Thanks largely to the success for Jakafi, Incyte is in a great financial position. The company reported cash, cash equivalents, and marketable securities of $1.2 billion as of June 30, 2018. With its nice cash stockpile and growing sales, Incyte should be able to pick up additional pipeline assets to drive growth.

Better buy

Vertex should be able to rapidly increase its revenue and earnings with its current three CF drugs. Its prospects for approval of the triple-drug combos in pivotal studies appear to be very good. Over time, Vertex also has a decent chance of succeeding in other therapeutic areas beyond CF. 

Vertex's growth prospects, in my view, are clearly stronger than Incyte's are at this point. I think that makes Vertex the better choice for long-term investors.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.