It's easy to grasp how Vertex Pharmaceuticals (VRTX 0.10%) got to where it is today. A decade ago, the biotech's market cap hovered around $8 billion. Vertex's lead pipeline candidate was hepatitis C virus (HCV) drug telaprevir, which went on to win FDA approval in 2011. The drug was marketed under the brand name Incivek -- but only briefly. Vertex quit selling the HCV drug in 2014 because Gilead Sciences' HCV franchise was dominating the market.
However, Vertex had another program in development targeting cystic fibrosis (CF). Its first CF drug, Kalydeco, won FDA approval in 2012. The rest is history. Vertex went on to gain FDA approvals for three other CF drugs. It's now highly profitable with annual revenue approaching $4 billion. And its stock has skyrocketed more than 500% over the last 10 years.
Trying to predict where Vertex will be 10 years from now isn't as easy. But there are some clues from the present that point to the prospects for another highly successful decade for the biotech.
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A reigning juggernaut
The safest prediction of all for Vertex is that it will remain a juggernaut in CF in 2030. Vertex won FDA approval for its most powerful CF drug yet -- Trikafta -- in October 2019. European approval for the drug is likely on the way this year.
Vertex expects that Trikafta will expand the addressable patient population for its CF therapies by more than 50%. The company also has three other CF drugs in its pipeline, including two programs that, like Trikafta, are triple-drug combos.
Currently, there are no other approved drugs that treat the underlying cause of CF. AbbVie is evaluating a triple-drug CF combo that it picked up from Galapagos in a phase 1 clinical study, but it's way behind Vertex. Even if AbbVie's drug proves to be successful, it would at best be several years before the drug could win approval. By that time, Vertex will already have further entrenched itself in the CF market.
Although the patents for Kalydeco, Orkambi, and Symdeko will expire near the end of the decade, Vertex's patents for Trikafta won't expire until 2037. The company could face generic rivals for its older CF drugs, but there's no reason to expect that Vertex's CF franchise won't still be racking up huge sales.
Most likely additions
Vertex doesn't plan on being a one-indication company 10 years from now, though. The biotech has been busy expanding its pipeline and advancing the most promising programs.
The most likely addition to Vertex's lineup in 2030 will be a pain medication. Vertex has already completed phase 2 clinical studies for experimental pain drug VX-150. Chief Medical Officer and soon-to-be CEO Reshma Kewalramani said in Vertex's Q3 conference call in October that the company is "advancing multiple selective NaV1.8 inhibitors through late-stage research and early clinical development."
I think that Vertex and its partner CRISPR Therapeutics also have a good chance of launching a few years from now a gene-editing therapy that effectively cures rare blood disorders beta-thalassemia and sickle cell disease. The two companies are currently evaluating gene-editing therapy CTX001 in phase 1/2 studies targeting both indications and have reported encouraging preliminary results.
Another indication that could be a big winner for Vertex by the end of this decade is alpha-1 antitrypsin deficiency (AATD). Like CF, AATD is a rare genetic disease caused by misfolding proteins. Vertex has two experimental AATD drugs in early stage testing. My hunch is that the company's CF expertise combined with the similarity between AATD and CF could boost the odds of success for this program.
Vertex also has an early stage program targeting APOL-1 mediated kidney diseases. The biotech hopes to advance a drug to phase 2 testing this year. If all goes well, this could be yet another new arena for Vertex to dominate by the end of the decade.
A potential game-changer
Then there's the huge potential game-changer. Vertex acquired privately held Semma Therapeutics for $950 million last year. Semma is developing a drug that could cure type 1 diabetes.
Semma's approach is to turn pluripotent stem cells into islets that produce insulin in the needed amounts to keep blood sugar levels in check. This program is in its very early innings right now. So far, Semma has conducted promising lab tests but hasn't initiated any clinical studies in humans.
Curing type 1 diabetes presents an enormous opportunity for Vertex. Over 1.5 million people have type 1 diabetes in the U.S. alone. Vertex has had its eye on several companies in recent years that have made progress in addressing issues related to islet transplantation to treat type 1 diabetes. The big biotech thinks that Semma has a solution and is confident enough about its prospects to write a really big check to acquire the small drugmaker.
The future looks bright
Will Vertex really have successful drugs on the market that target five or more rare genetic diseases in addition to more common indications like pain and type 1 diabetes 10 years from now? There's no way to know for sure. Many promising early stage programs fail along the way.
However, there are some things we can be certain about with Vertex. It claims a commanding lead in CF. It has the expertise needed to develop therapies targeting other rare genetic diseases. It has plenty of money to continue investing in research and development and acquisitions. And it has multiple shots on goal. Not all of them have to pan out for Vertex to win.
My view is that Vertex is the best biotech stock on the market right now. I think that it's future looks really bright.
