Rare diseases have proven to be gold mines for Vertex Pharmaceuticals (VRTX 0.71%) and Regeneron Pharmaceuticals (REGN -0.34%). Vertex's market cap of nearly $47 billion and Regeneron's market cap of close to $44 billion underscore the biotechs' successes in treating rare diseases.

Vertex was the bigger winner in terms of stock performance last year. So far in 2019, it's also narrowly beating out Regeneron. But which of these biotech stocks is the better pick for long-term investors now?

Scientist holding test tube with healthcare icons in the foreground.

Image source: Getty Images.

The case for Vertex 

Vertex absolutely dominates the market for cystic fibrosis (CF) drugs. The biotech has three approved CF drugs, Kalydeco, Orkambi, and Symdeko. Kalydeco and Orkambi are already blockbusters, while Symdeko should easily top the $1 billion sales market in 2019. The success of these drugs made Vertex the most profitable drugmaker in the S&P 500 last year.

The company estimates that around 39,000 of the 75,000 CF patients worldwide are eligible for treatment by its three drugs. Currently, though, only 18,000 of those eligible patients are on treatment. This presents a clear opportunity for Vertex to grow sales.

Vertex is also pursuing regulatory approvals for label expansions of its current drugs to treat younger patients. The company thinks that securing these approvals opens up an additional 5,000 CF patients who could be treated with Kalydeco, Orkambi, or Symdeko.

The big opportunity, however, is with triple-drug combination therapies. Vertex believes these triple-drug combos should boost the total number of eligible CF patients to 68,000 -- over 90% of all CF patients in the world. The biotech plans to file for U.S. approval of its first triple-drug combo in the third quarter of 2019 and file for European approval in Q4.

What about the remaining nearly 10% of CF patients? Vertex is working with CRISPR Therapeutics (CRSP -2.94%) to develop CRISPR gene-editing therapies that could treat patients who aren't eligible for its currently approved drugs or its triple-drug combos that should be on the way. 

Vertex and CRISPR Therapeutics have also teamed up to develop gene-editing therapies targeting rare blood diseases beta thalassemia and sickle cell disease. The two biotechs announced in February that the first patient had been infused with gene-editing therapy CTX001 in a phase 1/2 study for treating beta thalassemia with the first patient enrolled in another phase 1/2 study evaluating CTX001 in treating sickle cell disease.

In addition, Vertex has several other pipeline programs that target other diseases. The company advanced its first experimental drug for treating rare genetic disease alpha-1 antitrypsin deficiency (AATD) into a clinical study in December 2018. A phase 2b dose-ranging study is underway for pain drug VX-150.

Check out the latest earnings call transcripts for Vertex and Regeneron.

The case for Regeneron

Regeneron ranked No. 3 on the list of most profitable drugmakers in the S&P 500 for 2018. The primary driver of the biotech's financial fortunes is eye-disease drug Eylea, which racked up an impressive $4 billion in sales last year. 

The company's partnership with Sanofi (SNY 0.52%) has yielded five approved drugs so far. The most successful of these products by far has been asthma and atopic dermatitis drug Dupixent. Sales for cholesterol drug Praluent are picking up solid momentum and could increase even more with an expanded label that includes the drug's potential to reduce cardiovascular risk.

Libtayo is another drug in Regeneron's lineup that holds a lot of promise. It won FDA approval in September 2018 for treating metastatic cutaneous squamous cell carcinoma. Libtayo is one of several PD-1 inhibitors on the market now, but it could become another blockbuster for Regeneron and Sanofi.

Regeneron has quite a few programs in its pipeline with significant potential, most of which are being developed in collaboration with Sanofi. The partners are evaluating Libtayo in late-stage studies for additional cancer indications. They're hoping to add more indications for Dupixent, particularly in treating pediatric patients.

But not all of Regeneron's pipeline candidates involve Sanofi. Chief Scientific Officer George Yancopoulos highlighted the prospects for Eylea in treating diabetic retinopathy in Regeneron's Q4 conference call last month. The FDA is scheduled to make an approval decision on the additional indication by May 13, 2019. Regeneron is also evaluating evinacumab in a phase 3 study for treating rare genetic disease homozygous familial hypercholesterolemia (HoFH).

Better buy

Both of these stocks could be winners over the long term. However, I think that Regeneron faces more challenges than Vertex does.

The company lost to Amgen in a key court case in February over patents for Amgen's cholesterol drug Repatha, which directly competes with Praluent. Regeneron and Sanofi could see increased competition for Dupixent in the not-too-distant future. Small biotech Dermira recently announced great results for atopic dermatitis drug lebrikizumab and hope to advance the drug to a pivotal study by late 2019.

Meanwhile, Vertex continues to have the CF market all to itself. It's expanding beyond CF into other diseases. And the company is generating tremendous revenue growth. In my view, Vertex not only is the better buy over Regeneron, it's the best biotech stock on the market right now.