Biotech Vertex Pharmaceuticals (VRTX 0.88%) is defying the stock market sell-off this year. The drugmaker's shares are up by an impressive 22% year to date. While that's great news for shareholders, it's essential to look beyond a mere six months' worth of stock market performances.
Those in it for the long haul will want to know whether Vertex is likely to keep up this pace. Fortunately, there are good reasons to think the biotech has what it takes to continue beating the market. Let's look at two of these reasons.
1. There is still room to grow in its core market
Vertex made its fortune by developing and marketing the only therapies on the market that treat the underlying causes of cystic fibrosis (CF). This rare genetic disease damages a patient's internal organs. The company's first CF therapy earned approval in the U.S. a little over 10 years ago. Since then, revenue and profits have soared, along with the share price.
Only 83,000 patients in North America, Europe, and Australia suffer from CF. While Vertex has made significant headway in this population in the past decade, there remains some room for growth. The Food and Drug Administration (FDA) approved Trikafta, a CF medicine from Vertex that can treat about 90% of patients, in late 2019.
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Meanwhile, more than 25,000 CF patients who are eligible for Trikafta or other therapies marketed by Vertex remain untreated. An additional 5,000 patients are not eligible for any of the biotech's current medicines, but it is developing new therapies to address their needs.
In other words, 10 years after launching its first CF medicine, Vertex Pharmaceuticals still hasn't reached roughly 36% of its target market, but it should continue to make headway in the CF market in the coming years.
2. Promising pipeline candidates
Vertex is also looking to diversify away from its CF franchise, and the company currently has several promising pipeline candidates. Its programs include a potential pain treatment called VX-548 and an investigational therapy for type 1 diabetes called VX-880. The former is undergoing a phase 2 study while VX-880 is in a phase 1/2 clinical trial.
NASDAQ: VRTX
Key Data Points
Vertex's most advanced candidates are VX-147, targeting APOL1-mediated kidney disease, and CTX001, a potential gene-editing treatment for two rare blood disorders called sickle cell disease (SCD) and transfusion-dependent beta-thalassemia (TDT). Vertex is developing CTX001 in collaboration with CRISPR Therapeutics, and it is arguably the most exciting of the bunch.
There are few safe and effective treatments for SCD and TDT, and patients typically have to resort to regular blood transfusions. These illnesses pose an immense burden on patients and their families, and as a one-time curative treatment, CTX001 could be highly successful. Vertex and CRISPR plan to file for regulatory approval by the end of the year.
CTX001 may hit the market in late 2023. By then, Vertex should be preparing other regulatory filings, too. The company's lineup should get even more robust within the next couple of years.
A bright future
Vertex Pharmaceuticals holds a monopoly in the CF market, which it has not fully addressed. Elsewhere, the company is working on other promising programs. In addition, the biotech's cash pile continues to grow. It ended the first quarter with $2.5 billion in free cash flow, which increased by 38% in the trailing 12-month period.
If all of its current candidates flop (which seems highly unlikely), the company will likely regroup and seek other avenues for growth while it continues to record solid revenue and earnings thanks to its existing lineup. In short, Vertex Pharmaceuticals' future still looks attractive. The biotech company isn't done delivering excellent stock market returns.
