Has famed investor Cathie Wood lost her touch? The CEO Of Ark Invest and her team crafted exchange-traded funds (ETFs) that destroyed the broader market during the early days of the pandemic, but over the past year, it's been the other way around. Still, it's far too premature to give up on Wood's ETFs, and it's also worth noting that some of her stock picks are performing better than most this year. Let's look at two examples: Vertex Pharmaceuticals (VRTX -0.76%) and Incyte (INCY -1.08%).
1. Vertex Pharmaceuticals
Vertex Pharmaceuticals is close to hitting a new all-time high as the drugmaker's business is firing on all cylinders. The biotech's existing cystic fibrosis (CF) franchise, where it holds a monopoly, is still helping it deliver growing revenue and earnings. During the second quarter, Vertex Pharmaceuticals' top line jumped by 22% year over year to $2.20 billion.
On the bottom line, Vertex Pharmaceuticals' adjusted net earnings per share (EPS) came in at $3.60, compared to the adjusted EPS of $0.17 reported during the year-ago period.
In fairness, last year's bottom line was negatively affected by a $900 million payment Vertex Pharmaceuticals made to CRISPR Therapeutics in connection with their partnership in developing exa-cel, a gene-editing treatment for transfusion-dependent beta-thalassemia (TDT) and sickle cell disease (SCD), both of which are rare blood disorders.
Still, the point is that Vertex Pharmaceuticals' financial results are excellent. And they will likely improve in the coming years. Vertex Pharmaceuticals' newest CF medicine is Trikafta, which can treat about 90% of patients with CF. Of the 83,000 people with this illness in the United States, Canada, Europe, and Australia, more than 25,000 of the 78,000 eligible patients have yet to start treatment -- that's about 32%.
Vertex Pharmaceuticals is working on a new therapy that could be even more effective than Trikafta. It is also developing options for the 5,000 patients who aren't eligible for its current treatments.
Meanwhile, the biotech recently announced plans for regulatory submissions for exa-cel. The company will initiate rolling reviews for the therapy in treating SCD and TDT in the U.S. in November, with an expected completion date during the first quarter of 2023. Vertex plans to complete submissions to regulatory authorities in Europe for the gene-editing treatment in the fourth quarter.
Exa-cel targets illnesses that impose a heavy burden on patients and their families and for which very few safe and effective treatment options exist. Exa-cel could be highly successful for those reasons. Vertex Pharmaceuticals has other programs in the pipeline, including a potential therapy for acute and neuropathic pain, VX-548, for which it plans to start phase 3 clinical trials in the fourth quarter.
There are other programs for which Vertex will release clinical trial results in the next 12 months.
And within five years, the biotech should market newer therapies. When that's added to its current lineup and the potential launch of exa-cel next year, things look good for Vertex Pharmaceuticals. Investors can purchase shares of this Cathie Wood favorite in confidence.
2. Incyte
Incyte is a biotech that focuses primarily on oncology and immunology, the two largest and fastest-growing areas in the pharmaceutical industry. The company's stock is in the red this year, but it has still performed better than the broader market.
Incyte's financial results have also been solid. During the second quarter, the company's revenue jumped by 29% year over year to $911.4 million. Incyte's adjusted earnings per share jumped by 26.3% year over year to $1.01. Incyte's best-selling product continues to be Jakafi, which treats a type of bone marrow cancer, among other illnesses. Novartis holds the rights to this medicine outside the U.S., and it pays Incyte royalty revenues in exchange for these rights.
In the second quarter, Incyte's sales from Jakafi came in at $597.7 million, 13% higher than the prior-year quarter. The company's royalty revenue climbed by 2% year over year to $83.7 million. Incyte has sought to diversify its lineup with newer approvals. The company's new portfolio includes Opzelura, the topical formulation of Jakafi, which first earned approval in September 2021.Opzelura is indicated to treat atopic dermatitis and vitiligo.
Incyte also expanded its oncology lineup with Pemazyre and Monjuvi, both of which got the green light in 2020. Incyte recently announced it was acquiring Villaris Therapeutics, a company that focuses on developing treatments for vitiligo. The transaction will cost Incyte an upfront payment of $70 million, with additional milestone payments that could reach up to $1.36 billion.
Villaris' lead candidate is auremolimab, which could start undergoing clinical trials next year. Beyond that, Incyte has plenty of other clinical programs that could help it strengthen its lineup before Jakafi starts losing patent protection in 2027. Incyte currently has 24 candidates in its pipeline, including some brand-new compounds.
Given the biotech's newer approvals, a rich pipeline, and a lineup that continues to deliver solid results, Incyte looks like a stock worth buying.
