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Better Buy: Vertex Pharmaceuticals vs. Alexion Pharmaceuticals

By Keith Speights - Updated Aug 12, 2019 at 8:41AM

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Two great biotechs focused on rare diseases. But one of them gets the nod as the better pick.

Alexion Pharmaceuticals (ALXN) and Vertex Pharmaceuticals (VRTX 3.77%) rank as two of the most successful biotechs focused on rare diseases. The stock performances for both companies underscore that success: Both Alexion's and Vertex's share prices have more than quintupled over the last 10 years.

But which of these rare-disease winners is the better pick for long-term investors now? Here's how Alexion and Vertex compare in three key areas.

Three scientists with image of DNA helix

Image source: Getty Images.

Current lineups

Alexion's Soliris generated nearly $3.6 billion in 2018 treating rare diseases blood disorder paroxysmal nocturnal hemoglobinuria (PNH), atypical hemolytic uremic syndrome (aHUS), and generalized myasthenia gravis (gMG). Sales for Soliris continue to grow, rising 9% year over year in the second quarter of 2019. The drug also picked up a new approved indication earlier this year for treating neuromyelitis optica spectrum disorder (NMOSD).

In addition to Soliris, Alexion has three other approved drugs: Strensiq, Kanuma, and Ultomiris. Strensiq, which is approved as a treatment for hypophosphatasia (a genetic disease that affects the development of bones and teeth), is currently the biggest seller of the three with 2018 sales totaling $475 million. PNH drug Ultomiris, however, is likely to be an even bigger winner. Market researcher EvaluatePharma ranked Ultomiris as its top new drug launch of 2019 and projects sales of $3.5 billion by 2024. 

Vertex's current lineup includes three cystic fibrosis (CF) drugs: Kalydeco, Orkambi, and Symdeko. Kalydeco and Orkambi were blockbusters in 2018, racking up net sales of $1 billion and $1.3 billion, respectively. Symdeko is on track, though, to be the biggest winner this year.

Although Alexion's drugs have delivered impressive sales growth over the last three years, Vertex's trailing-12-month revenue during the period has more than doubled that of Alexion. I think the advantage in this category goes to Vertex based on this strong performance and continued excellent growth prospects for its current CF lineup.

Pipeline prospects

Alexion has several late-stage clinical studies for Ultomiris. It's evaluating the intravenous version of Ultomiris in treating aHUS, gMG, and PNH in children and adolescents under the age of 18, as well as a subcutaneous version of the drug in treating PNH and aHUS. The biotech plans to soon begin late-stage studies of the drug in treating NMOSD and hematopoietic stem cell transplant-associated thrombotic microangiopathy (HSCT-TMA). Alexion is also evaluating experimental drug ALXN1840 in treating Wilson disease, a rare genetic liver disorder.

The company's early stage pipeline includes six programs. Ultomiris is being investigated as a potential treatment for amyotrophic lateral sclerosis (ALS) and primary progressive multiple sclerosis (PPMS). Alexion's other early stage programs include two new experimental drugs that it developed plus two other drugs in collaboration with other biotechs.

Vertex's late-stage pipeline features a triple-drug combination of VX-445, tezacaftor, and ivacaftor that EvaluatePharma ranks as the most valuable pipeline candidate in development. The biotech filed for FDA approval of this combo in treating CF in July. Vertex thinks that, if approved, this new regimen could expand its addressable patient population by more than 50%.

The company has several other triple-drug CF combos plus experimental pain drug VX-150 in phase 2 clinical studies. In addition, Vertex is conducting earlier-stage studies targeting other rare diseases including alpha-1 antitrypsin (AAT) deficiency, beta-thalassemia, and sickle cell disease.

Both Alexion and Vertex appear to have strong pipelines. My view, though, is that Vertex's prospects for its triple-drug CF therapies gives it an edge.

Valuation

Alexion stock trades at only a little over 10 times expected earnings. Its price-to-earnings-to-growth (PEG) ratio is a really low 0.66. Vertex's shares trade at nearly 30 times expected earnings with a PEG ratio of 0.95. Both stocks are valued attractively, but Alexion appears to be the winner on this front.

Better buy

I don't think investors can go wrong buying either of these two biotech stocks. Which is the better buy? My vote is for Vertex. 

The probability for Vertex winning approval for its first triple-drug combo seems very favorable, in my opinion. Vertex should be able to continue growing rapidly based solely on the strength of its CF franchise. If it succeeds in any of the other indications that it's pursuing, the stock will perform even better.

I wrote in February that Vertex looked like the best biotech stock on the market. That's still my view.

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Stocks Mentioned

Vertex Pharmaceuticals Incorporated Stock Quote
Vertex Pharmaceuticals Incorporated
VRTX
$268.35 (3.77%) $9.76
Alexion Pharmaceuticals, Inc. Stock Quote
Alexion Pharmaceuticals, Inc.
ALXN

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