While biotechs have played a vital role in the fight against COVID-19, the sector seems to be struggling in the stock market, as measured by the performance of the SPDR S&P Biotech Index. But some of the major players in the industry have escaped this downturn.
That's the case for Amgen (AMGN 1.04%) and Vertex Pharmaceuticals (VRTX -1.03%), two biotech giants that have easily outperformed the broader market this year. What could the future hold for these two drugmakers? Let's find out.
Longevity does not necessarily indicate that a business is worth your hard-earned money today. Still, there is something to be said for companies like Amgen that have successfully navigated the heavily regulated biotech industry for several decades. Amgen has been in business since the 1980s and has consistently developed and marketed innovative medicines.
True, Amgen has faced increased competition for some of its products in recent years, in addition to patent cliffs. Aranesp, an anemia treatment, and Neulasta, which helps the body make white blood cells, are struggling partly due to biosimilars eating into their market shares. Thankfully, Amgen has a pipeline of over 50 ongoing programs, and the company is more than capable of delivering new approvals or label expansions.
The company has earned important regulatory nods over the past few years. Some of its newer products include migraine treatment Aimovig, approved in the U.S. in 2018; Evenity, approved in the U.S. in 2019 for treating osteoporosis; and cancer treatment Lumakras and asthma therapy Tezspire, both of which first earned the green light in the U.S. in 2021.
Lumakras and Tezspire are especially promising. The former targets a mutation found in 13% of non-small-cell lung cancer patients, and it is the first and only approved cancer medicine in the U.S. (and elsewhere) in this narrow niche. Meanwhile, Amgen's management expects Tezspire to become a "significant growth driver" for the company given that many current asthma treatments are inadequate.
These medicines will allow Amgen's revenue to continue increasing as it develops newer ones. Amgen also looks like an attractive option for income-seeking investors. The company currently offers an above-average yield of 3.14%, and it has raised its payouts an impressive 69% in the past five years. Solid dividend stocks such as Amgen can be excellent investments in a bear market. That's just one more reason to invest in this biotech stock.
2. Vertex Pharmaceuticals
Biotech companies often benefit from patent protection for their products, which grants them some degree of pricing power. Patents can be a powerful source of a competitive edge, especially when a company markets the only drugs that target an illness. That's the situation in which Vertex Pharmaceuticals has found itself for the past decade.
The company holds the rights to the only therapies that address the underlying causes of cystic fibrosis (CF), a rare genetic disorder that causes damage to patients' internal organs. Leadership in this area has helped Vertex outperform the market in the past 10 years, but there is more to look forward to for the healthcare giant.
One of Vertex's newest products is Trikafta, which earned approval in the U.S. in 2019. Trikafta can treat up to 90% of CF patients. Vertex still has some room to grow in the pool of CF patients worldwide. Meanwhile, the company is looking to develop brand new therapies for the remaining 10% of CF patients it currently can't treat as well as other rare or severe illnesses.
Vertex Pharmaceuticals expects its next commercial launch to be for CTX001, a potential gene-editing therapy for sickle cell disease and transfusion-dependent beta-thalassemia. Both are rare blood-related disorders with few treatment options that cause severe hardships to patients and their families. Vertex is developing CTX001 in collaboration with CRISPR Therapeutics. The two entities expect to submit applications for the medicine by the end of the year.
Vertex Pharmaceuticals has proven its ability to introduce innovative therapies for rare illnesses. The company hasn't always been successful -- no drugmaker is. In late 2020, safety issues in a clinical trial forced the company to discontinue the development of VX-814, which it was developing as a medicine for alpha-1 antitrypsin deficiency (a genetic disorder that may cause lung or liver disease).The drugmaker's shares dropped substantially on the heels of this news.
But since that incident, Vertex Pharmaceuticals has performed tremendously well. Expect the company to boast a richer lineup of drugs in the coming 10 years -- and its share price to be substantially higher than its current levels.