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Better Buy: Vertex Pharmaceuticals vs. Biogen

By Prosper Junior Bakiny – Jan 7, 2022 at 1:37AM

Key Points

  • Vertex Pharmaceuticals maintains its leadership in cystic fibrosis, and it's targeting other diseases as well.
  • Biogen is pinning much of its future hopes on its Alzheimer's disease medicine, Aduhelm.
  • One of these biotechs seems on a clear path to a comeback, while the other is struggling.

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In this battle of biotech giants, one emerges as the clear winner.

2021 is now in the rearview mirror, and the broader market had yet another solid year. Unfortunately, not every company can say the same. Here's a pair of biotech giants that had a year to forget: Vertex Pharmaceuticals (VRTX 0.93%) and Biogen (BIIB 1.05%).

Both of these companies have challenges and opportunities. And given the beating they've endured in the trailing-12-month period, it may be worth considering their shares now, provided a rebound is in the cards.

But which of these two companies is more likely to perform well in 2022 and beyond? Let's compare these two drugmakers and decide which is the better buy today.

VRTX Chart

VRTX data by YCharts.

The case for Vertex Pharmaceuticals

Vertex Pharmaceuticals is best known for its portfolio of drugs that treat the underlying causes of cystic fibrosis (CF), a rare genetic disease that affects patients' lungs and other internal organs. It has held a monopoly in this market for nearly 10 years, but there's still room to grow. Vertex Pharmaceuticals' current lineup can treat up to 90% of the 83,000 CF patients in North America, Europe, and Australia. Yet, only 50% of this patient population is being treated. As Vertex continues to make headway into this market, expect its revenue to keep growing.

The company has several promising pipeline candidates, too. It's currently working on a potential therapy for type 1 diabetes called VX-880. There's also VX-147, an investigational treatment for a rare kidney disorder called APOL1-mediated focal segmental glomerulosclerosis. VX-147 recently produced encouraging results in a clinical trial.

Also, Vertex Pharmaceuticals expects to file for approval for CTX001 by the end of this year. CTX001 is a potential gene-editing therapy for two difficult-to-treat blood disorders called sickle cell disease and transfusion-dependent beta-thalassemia. Vertex is developing CTX001 in collaboration with CRISPR Therapeutics.

Vertex Pharmaceuticals also generates loads of cash -- it ended the third quarter with $7 billion in cash and cash equivalents, compared to the $6.2 billion it had at the end of the third quarter of the previous fiscal year. That gives Vertex plenty of money to expand its pipeline by purchasing promising clinical compounds from smaller biotechs. Growing revenue, combined with the clinical and regulatory wins it could record this year, could help Vertex Pharmaceuticals turn things around.

A smiling pharmacist hands a bagged purchase to a customer.

Image source: Getty Images.

The case for Biogen

Biogen made a lot of noise last year when it earned approval for Aduhelm, a therapy for Alzheimer's disease (AD). The regulatory nod came with plenty of controversy as many experts -- including some affiliated with the U.S. Food and Drug Administration (FDA) -- worried that the data was not convincing enough to support Aduhelm's approval.

Still, the treatment is now on the market, and Biogen hopes that it will help the company turn things around, both in its financial results and on the stock market. The company's top line has been declining, especially since its multiple sclerosis (MS) drug Tecfidera started facing competition from biosimilars.

Biogen's total revenue dropped by 18% year over year to $2.8 billion in the third quarter, a poor performance the biotech owed in part to Tecfidera's decline. Sales of the MS drugs plunged by 47.7% year over year in the third quarter to $498.6 million.

Aduhelm is the first novel AD treatment approved by the FDA since 2003. And with an average price tag of $56,000 per patient -- and a potential target market comprising more than a million people -- Biogen could generate strong sales thanks to Aduhelm. Beyond the AD medicine, Biogen boasts more than two dozen pipeline programs -- including nine ongoing phase 3 clinical trials. Investors can expect the company to expand its lineup of drugs over time.

The verdict

It's instructive to compare key metrics from these companies' financial results:

VRTX Revenue (Quarterly) Chart

VRTX Revenue (Quarterly) data by YCharts.

Looking at the graphs above, there are only two categories in which Biogen looks better than Vertex Pharmaceuticals. One is the drugmakers' respective revenue figures. However, these are misleading because Vertex Pharmaceuticals' top line is increasing while Biogen's continues to decrease. In the third quarter, Vertex Pharmaceuticals' revenue jumped by 29% year over year to $1.98 billion, compared to Biogen's 18% year-over-year decrease.

Furthermore, Aduhelm doesn't look like it will save the day for Biogen, at least not anytime soon. The initial launch of the medicine was very disappointing: It generated a meager $300,000 in sales in Q3, well below the $14 million analysts had projected. Aduhelm's skeletons seem to be weighing on its performance on the market.

That's why it makes sense that Vertex Pharmaceuticals' forward price-to-earnings ratio is higher than Biogen's: The former company looks much more likely to perform well in the next year. Is there any reason to prefer Biogen? One could make the argument that Biogen's late-stage pipeline looks better; it currently boasts three times as many late-stage pipeline programs as Vertex Pharmaceuticals.

Brand-new drugs or label expansions for existing ones could certainly help Biogen. But, there remains a lot of uncertainty surrounding the company's current lineup. In contrast, Vertex Pharmaceuticals has a solid portfolio of current medicines that will continue to drive top-line growth, in addition to promising pipeline candidates. That's why Vertex Pharmaceuticals is the better biotech stock to buy right now.

Prosper Junior Bakiny owns Vertex Pharmaceuticals. The Motley Fool owns and recommends CRISPR Therapeutics and Vertex Pharmaceuticals. The Motley Fool recommends Biogen. The Motley Fool has a disclosure policy.

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