Please ensure Javascript is enabled for purposes of website accessibility

Buying Vertex Pharmaceuticals Stock Now Could Double Your Money Within 5 Years: Here's How

By Keith Speights – Aug 16, 2021 at 5:55AM

Key Points

  • Vertex appears to be in a great position to add significant market share in cystic fibrosis.
  • The company has several promising pipeline candidates with potential near-term catalysts.
  • Vertex faces risks that include potential competition and pipeline setbacks.

Motley Fool Issues Rare “All In” Buy Alert

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The big biotech has a clear path to growth if it executes well.

If you bought shares of Vertex Pharmaceuticals (VRTX 0.33%) in August 2016 and held them, you'd have a gain of 92% right now. That's not a bad return. However, it lags behind the performance of the S&P 500 index, which soared 104% during the same period.

With valuations so high, I don't expect the S&P 500 to continue delivering similar returns. However, I think that buying Vertex stock now could realistically double your money over the next five years. Here's how.

Test tubes on a rack with increasingly higher levels of green liquid in each test tube, and a green line with arrow sloping upward in the background.

Image source: Getty Images.

Blocking and tackling

Football coaches sometimes describe the key to their team's success as focusing on blocking and tackling. The idea is that players simply have to execute well to win. I think that's the main thing that Vertex has to do to produce a win for its shareholders over the next few years.

The company estimates that there are around 83,000 individuals with cystic fibrosis (CF) in the U.S., Europe, Australia, and Canada. Vertex's four approved CF drugs currently treat around half of them.

These approved therapies could benefit another 30,000 CF patients. Chief commercial officer Stuart Arbuckle said on Vertex's Q2 conference call that "We remain confident we will be able to reach the vast majority of these patients."

How can Vertex add most of these 30,000 patients? To use the football metaphor, by blocking and tackling. The company already has regulatory approvals and reimbursements in several key markets where its commercial launches are just starting. If it executes well in these markets, Vertex will pick up significant additional market share.

The company also continues to work to secure reimbursement deals in other European Union countries where it already has regulatory approval. It's probably only a matter of time before those agreements are finalized.

Finally, Vertex must gain additional regulatory approvals for its newest CF drug, called Trikafta in the U.S. and Kaftrio in Europe, in younger age groups. The company was successful in the past in winning approvals for Kalydeco and Orkambi. It should be able to do so with Trikafta/Kaftrio as well.

Pipeline possibilities

Investors know that Vertex will almost certainly continue to dominate the CF market. The biotech stock has fallen this year, though, because of concerns about its pipeline -- especially with another setback in June for the company's alpha-1 antitrypsin deficiency (AATD) program.

But I think that Vertex's pipeline could be key to driving the stock at least 100% higher over the next five years. Most importantly, Vertex and its partner, CRISPR Therapeutics, hope to file for regulatory approval of gene-editing therapy CTX001 in treating beta-thalassemia and sickle cell disease within the next 18 to 24 months.

The company has other potential catalysts that could come even sooner. Vertex should report results later this year from a phase 2 study of VX-147 in treating APOL1-mediated focal segmental glomerulosclerosis, a genetic kidney disorder. Results are expected in early 2022 from a phase 2 study of VX-548 in treating acute pain following bunionectomy surgery.

There's also a possibility that an earlier-stage program could get investors excited about Vertex. The company should announce initial results next year from a phase 1/2 study of cell therapy VX-880 in treating type 1 diabetes. CEO Reshma Kewalramani sounded optimistic about the program in her comments during Vertex's Q2 call.

Double trouble?

To be sure, Vertex isn't a slam dunk to double your money over the next five years. It's possible that AbbVie, Galapagos, and/or Eloxx Pharmaceuticals could achieve success with their CF candidates currently in phase 2 testing, and present a threat to Vertex's monopoly. The company could experience more pipeline failures.

I'm not too worried about Vertex's competitive position, though. Vertex has a big head start over potential rivals. The company also isn't resting on its laurels: It has another late-stage CF candidate that could be even better than Trikafta/Kaftrio.

On the other hand, I do think that it's possible Vertex could have additional pipeline setbacks. The company doesn't need all of its candidates to be successful, however. Only one or two wins would set Vertex up to expand beyond CF in a major way.

Don't overlook Vertex's growing cash stockpile. The company could (and probably will) put some of its money to use by bolstering its pipeline. My view is that this gives Vertex a powerful wild card that improves the odds of its stock doubling over the next five years.

Keith Speights owns shares of AbbVie and 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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Vertex Pharmaceuticals Stock Quote
Vertex Pharmaceuticals
$316.33 (0.33%) $1.03

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

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/30/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.