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Better Buy: Vertex Pharmaceuticals vs. Regeneron

By Keith Speights - Jul 17, 2020 at 7:02AM

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Which stock wins in a battle of two big biotechs?

Vertex Pharmaceuticals (VRTX 0.72%) and Regeneron Pharmaceuticals (REGN 2.02%) stand out as two of the best-performing big biotech stocks of 2020 so far. Vertex is up more than 30% year to date, while Regeneron's shares have skyrocketed close to 70%.

It's easy to see why investors like Vertex and Regeneron. But which stock is the better pick? Here's how the two biotechs stack up against each other.

Scientist holding two test tubes

Image source: Getty Images.

The case for Vertex

Vertex's revenue jumped 77% year over year in the first quarter to $1.52 billion, and earnings soared 124% to $603 million. Vertex is on pace to generate sales in the ballpark of $5.5 billion this year, thanks to its super-successful lineup of cystic fibrosis (CF) drugs.

The company's biggest winner is its newest product, Trikafta. In Q1, Trikafta raked in $895 million in U.S. sales. That's remarkable, considering that it was the drug's first full quarter on the market. Vertex is awaiting approval for the drug in Europe, where it hopes to commercialize it under the brand name Kaftrio.

Perhaps the most compelling argument for Vertex is that it doesn't have any real competition right now in the CF market. The company's CF drugs are the only approved therapies that treat the underlying cause of CF. There are a handful of potential rivals in clinical testing, but Vertex enjoys a huge head start.

Vertex's CF franchise has enabled the company to amass a big cash stockpile of $4.2 billion, and the company hasn't been shy about using its cash to make deals. Last year, it acquired Semma Therapeutics for $950 million to gain the privately held biotech's promising gene-therapy program that could cure type 1 diabetes.

Several other therapeutic areas also look promising for Vertex. The biotech's pipeline includes three programs in phase 2 testing (in addition to two CF candidates) targeting pain, alpha-1 antitrypsin deficiency (AATD), and APOL1-mediated kidney diseases. In addition, Vertex and partner CRISPR Therapeutics are evaluating gene-editing therapy CTX001 in phase 1/2 studies for treating rare blood disorders beta-thalassemia and sickle cell disease.

The case for Regeneron

Regeneron posted some impressive numbers of its own in the first quarter. Revenue rose 33% year over year to $1.83 billion. Earnings jumped 36%. The company seems likely to achieve full-year revenue of at least $7.5 billion.

Eye-disease drug Eylea continues to rank as Regeneron's top moneymaker, with Q1 net product sales of $1.17 billion. Cancer immunotherapy is also a fast-rising star for the biotech, with sales soaring 179% year over year in Q1 to $74.8 million.

The company's collaborations with Bayer and Sanofi kick in even more revenue. In Q1, Regeneron made over $281 million from its Bayer partnership, primarily stemming from Bayer's sales of Eylea outside the U.S. It made nearly $247 million from its Sanofi collaboration, with immunology drug Dupixent the primary contributor.

Regeneron ended the first quarter with cash and marketable securities totaling $7.24 billion. It's added to that cash position since then with a stock offering selling part of Sanofi's stake in the company that generated more than $6.6 billion. However, Regeneron also used $3.5 billion of its cash plus $1.5 billion in bridge financing to buy back some of the shares owned by Sanofi.

The biotech's pipeline includes eight late-stage programs. Most of these target additional indications for already-approved drugs. However, Regeneron has a couple of new late-stage candidates -- fasinumab targets osteoarthritis pain and REGN-EB3 targets Ebola virus infection.

Regeneron's COVID-19 programs have also garnered significant attention. The company is developing an experimental antibody cocktail therapy that potentially could help prevent infection by the novel coronavirus, as well as treat patients who are already infected. However, a late-stage study evaluating arthritis drug Kevzara in treating COVID-19 wasn't successful.

Better buy

I think both of these biotech stocks could generate attractive returns. However, I think that Vertex is the better pick. While Regeneron faces competition in most of its markets, Vertex doesn't. I'm also optimistic about Vertex's prospects of duplicating its CF success in other areas, especially in AATD.  

Keith Speights owns shares of Vertex Pharmaceuticals. The Motley Fool owns shares of and recommends CRISPR Therapeutics. The Motley Fool recommends Vertex Pharmaceuticals. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Vertex Pharmaceuticals Incorporated Stock Quote
Vertex Pharmaceuticals Incorporated
VRTX
$290.11 (0.72%) $2.08
Regeneron Pharmaceuticals, Inc. Stock Quote
Regeneron Pharmaceuticals, Inc.
REGN
$626.00 (2.02%) $12.39
Sanofi Stock Quote
Sanofi
SNY
$49.14 (-1.15%) $0.57
Bayer Stock Quote
Bayer
BAYR.Y
$13.49 (-0.99%) $0.14
CRISPR Therapeutics Stock Quote
CRISPR Therapeutics
CRSP
$81.61 (0.26%) $0.21

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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