Vertex made less than half the revenue that Regeneron did over the last 12 months, but its market cap is higher than Regeneron's is. It's not surprising that Vertex stock has climbed more than 20% so far in 2018, while Regeneron's share price is in negative territory year to date.
Investors are clearly excited about Vertex's new cystic fibrosis drugs. They don't appear nearly as enthused about Regeneron's current products and pipeline, though.
But is the conventional wisdom right that Vertex is the better pick? Or could Regeneron be a sleeping giant about to awaken?
The case for Vertex
For all practical purposes, Vertex enjoys a monopoly in treating cystic fibrosis (CF). The company's three products -- Kalydeco, Orkambi, and Symdeko -- are currently the only approved therapies that address the underlying cause of the genetic disease.
There are around 75,000 CF patients in North America, Europe, and Australia. Vertex's current drugs can help many of these patients, but more than 40% of them have mutations existing therapies can't treat. And not all of the patients that could be helped by Kalydeco, Orkambi, or Symdeko currently receive treatment. That gives the biotech a big runway for growth.
Vertex appears to be in great shape to capitalize on the opportunity. The biotech recently reported great late-stage results for a triple-drug combination of VX-659, tezacaftor, and ivacaftor. Vertex also has a couple of phase 3 studies of triple-drug combos of VX-445, tezacaftor, and ivacaftor in progress. Results from those studies should be available in the first quarter of 2019.
Those VX-659 combo results were good enough to use in an FDA submission. However, Vertex is waiting to see if the VX-445 combo works even better. The bottom line is that the biotech is in a great position to file for approval of a triple-drug combo no later than mid-2019. Whichever combo wins, Vertex should be on track to treat an additional 24,000 patients in the not-too-distant future.
That leaves around 9,000 CF patients with no treatment. Vertex teamed up with CRISPR Therapeutics (NASDAQ:CRSP) to develop gene-editing therapies to help the remaining patients as well. The two companies are also working together on gene-editing therapies for blood disorders beta-thalassemia and sickle cell disease.
And Vertex is aiming to expand into other indications. The biotech expects to report results from a phase 2 clinical study of pain drug VX-150 in early 2019. It also plans to soon begin a phase 1 study evaluating a candidate in treating rare genetic disease alpha-1 antitrypsin deficiency (AAT).
The case for Regeneron
Regeneron already claims a successful blockbuster with Eylea. The drug has been approved for treating three eye diseases: age-related macular degeneration, diabetic macular edema, and retinal vein occlusion.
While Eylea continues to generate lots of cash, Regeneron also has several newer products that are generating sales growth. The most important of these is Dupixent. Regeneron and Sanofi (NASDAQ:SNY) co-market the drug, which is currently approved for treating atopic dermatitis (eczema) and asthma.
Sanofi also teamed up with Regeneron on several other drugs. Cholesterol drug Praluent got off to a slow start, but sales are beginning to pick up considerably. Momentum should really kick in if the FDA approves the addition of positive results from a cardiovascular outcomes study to the drug's product label. In addition, the alliance between Sanofi and Regeneron produced rheumatoid arthritis drug Kevzara and cancer drug Zaltrap.
Regeneron and Sanofi won yet another FDA approval in September 2018. Libtayo became the first -- and, for now, only -- approved drug for advanced cutaneous squamous cell carcinoma (CSCC), the second-most-common skin cancer behind melanoma.
The biotech has several late-stage clinical studies in progress in hopes of gaining additional indications for already-approved drugs, including Eylea and Dupixent. In addition, Regeneron is collaborating with Teva and Mitsubishi Tanabe Pharma on late-stage candidate evinacumab in treating rare genetic disease homozygous familial hypercholesterolemia (HoFH).
Which of these two biotech stocks is the better choice? My colleague Todd Campbell likes Regeneron, picking it as his favorite large-cap biotech stock to buy a couple of months ago. Todd's optimism was based on FDA approvals for Dupixent in asthma and for Libtayo in CSCC (both of which subsequently happened), the potential addition of the cardiovascular outcomes data to Praluent's label (expected by April 2019), and a growing market for Eylea.
I agree with Todd that Regeneron could see some better days ahead. However, my view is that Vertex is the better alternative between these two biotech stocks.
In my opinion, Vertex is on track for much stronger growth than Regeneron is over the next several years. Even though Vertex has a forward earnings multiple of nearly 44, I continue to believe that this stock isn't nearly as expensive as it looks because of those growth prospects.