Vertex Pharmaceuticals (VRTX 0.50%) has made lots of investors quite happy in recent years. The biotech stock has more than doubled over the past three years and trounced the performance for the S&P 500 index in 2018.
Can Vertex continue to deliver smiles to its investors? It seems highly likely. But could Vertex Pharmaceuticals even be a millionaire-maker stock? That's a much tougher goal to achieve, even for a tremendously successful biotech like Vertex.
Fantastic growth prospects
There's no question that Vertex should have fantastic growth prospects over the next several years. The biotech's three cystic fibrosis (CF) drugs -- Kalydeco, Orkambi, and Symdeko -- have a lot of room for growth simply from targeting the current addressable market. Vertex says its drugs are treating around 18,000 CF patients. But there are roughly 39,000 patients eligible for treatment.
Vertex is also pursuing approvals to expand the labels for its CF drugs to reach younger patients. The company thinks succeeding on this front will increase the addressable market to 44,000 patients.
But the really big opportunity lies with Vertex's triple-drug combination therapies for CF. The biotech expects to file for regulatory approval for its first triple-drug combo by mid-2019. Vertex projects that its triple-drug therapies will open the door for treating another 24,000 patients, leaving only around 10% of CF patients without a corrective treatment.
Vertex has a plan for those patients, too. It's working with CRISPR Therapeutics to develop gene-editing therapies that could help the remaining CF patients who can't be treated by its current drugs or by triple-drug regimens.
In Vertex's Q4 conference call held earlier this month, CEO Jeff Leiden stated that CF presents an opportunity for the company to grow its revenue and earnings significantly in the middle of the next decade. However, Leiden also noted that Vertex isn't limiting itself to just the one indication.
The biotech hopes to advance experimental pain drug VX-150 to a pivotal late-stage study once a phase 2b dose-ranging study wraps up. Vertex also has several pipeline candidates that are either already in early-stage testing or should soon move to clinical studies. These candidates include CTX001, a gene-editing therapy that Vertex and partner CRISPR Therapeutics are evaluating in phase 1 studies for treating rare blood diseases beta-thalassemia and sickle cell disease.
Check out the latest Vertex earnings call transcript.
But a few hurdles, too
Don't think Vertex has a cakewalk ahead of it, though. One key hurdle is to secure reimbursement deals for its drugs. The company already is engaged in difficult negotiations in the United Kingdom that still haven't been completed because of a dispute over pricing for Orkambi. Vertex could face a similar challenge for its triple-drug therapy.
Vertex's results from previous clinical studies for its triple-drug combos indicate that it should have a great shot at winning regulatory approvals. However, these approvals are never slam dunks.
There's even a greater possibility of failure for Vertex's experimental drugs targeting indications other than CF. Based on historical data compiled by the Biotechnology Innovation Organization, pain drug VX-150 could have less than a 50% chance of going on to winning FDA approval if it advances to phase 3 testing. The odds against FDA approval of early-stage pipeline candidates are around 9-to-1.
And the risk of failure for the gene-editing therapies that Vertex is developing with CRISPR Therapeutics is even greater. No gene-editing therapy has yet won FDA approval.
Even if Vertex sails through clinical testing and the regulatory approval processes with all of its products, there's still no guarantee of success. The company faces potential competition in all of the indications it's pursuing.
Do Vertex's opportunities outweigh the hurdles it must jump? In my opinion, the answer is a resounding "yes." I even view Vertex as the best biotech stock on the market right now because of its tremendous growth prospects. Despite my optimistic outlook, though, I don't think Vertex is a millionaire-maker stock.
Sure, if you start out with a really large investment -- perhaps $500,000 -- Vertex could make you a millionaire. However, Vertex is very unlikely to turn a smaller initial investment of $10,000 or less into $1 million in a lifetime. The company would need a market cap of $4.8 trillion to be a millionaire-maker out of a person buying $10,000 worth of its stock. Possible? Maybe. Probable? No way.
The reality is that few stocks truly have millionaire-maker potential. But a combination of high-growth stocks and enough time could potentially make you a millionaire. Vertex is a great stock to own, but you'll need several more to reach that magic $1 million mark.