Investors love to see shares of the companies they own beating the market over, say, 10 years or more. But when that happens, there is always the worry that a corporation doesn't have much left in its growth tank.
Take Vertex Pharmaceuticals (VRTX -0.76%), a biotech that has delivered market-beating returns over the past decade. The drugmaker is still at it even amid the market downturn and currently sits near its 52-week high. Vertex has certainly been impressive, but are the company's best days already in the rearview mirror? Let's find out.
What made Vertex so successful
Most biotech giants market an impressive number of medicines typically diversified over many therapeutic areas. This approach makes sense. New clinical compounds must survive a long and gruesome journey through several clinical trials and regulatory obstacles. Many never earn approval at all.
Casting a wide net helps drugmakers mitigate the risk that some of their programs will never pan out. However, Vertex Pharmaceuticals has found tremendous success in the past decade by targeting just one disease: cystic fibrosis (CF), a rare genetic disorder affecting patients' internal organs.
The biotech succeeded where no other did by developing medicines that address the underlying causes of CF. Vertex Pharmaceuticals' first CF therapy earned approval in 2012. Although there aren't that many patients with this rare disease -- only about 83,000 in the U.S., Canada, Europe, and Australia -- the fact that Vertex has a monopoly in this market has helped it grow its revenue and profits year after year almost without fail for the past decade.
VRTX Revenue (Quarterly) data by YCharts
For Vertex Pharmaceuticals' success to continue, it must either have some room left in the CF market or develop new medicines for other diseases. Thankfully, Vertex Pharmaceuticals is on the right track.
Repeating the cycle
Vertex's current pipeline is diversified. But the company's approach remains the same. It seeks to develop novel therapies for rare or difficult-to-treat conditions for which few (if any) safe and effective treatment options exist. Some of the company's programs are making steady progress. It recently started a phase 3 clinical trial for VX-548 as a potential treatment for acute pain.
Here's why this is a solid target for the biotech. Pain treatments are available, but many have severe potential side effects. Consider the often-used Tylenol, whose generic name is acetaminophen. Excessive intake of acetaminophen resulting in overdose is the leading cause of acute liver failure in the U.S. Opioids can also be used as pain medications.
But they too come with severe side effects. The recent opioid epidemic has devastated communities. Vertex wants to develop a therapy that addresses acute pain but has less severe potential side effects; VX-548 could be it. The biotech is also looking to target neuropathic pain with this medicine.
Here's another promising treatment Vertex is working on: VX-880, which targets type 1 diabetes. While there are ways to manage this chronic illness, it still severely burdens patients who are forced to make significant life changes after being diagnosed, including taking insulin daily.
VX-880 is being developed to restore patients' ability to produce insulin, thereby solving a major problem for them. VX-880 is undergoing a phase 1/2 study. Vertex is also developing exa-cel in collaboration with gene-editing specialist CRISPR Therapeutics. Exa-cel targets transfusion-dependent beta-thalassemia (TDT) and sickle cell disease.
There are few treatment options for either blood-related disease. Meanwhile, it is costly to care for patients with these illnesses. Those with TDT need regular blood transfusions, for instance. Exa-cel is a potential one-time curative treatment for both. Vertex Pharmaceuticals and CRISPR Therapeutics are planning regulatory submissions in the U.S. and Europe by the first quarter of 2023.
All three of these programs are highly promising, and they aren't the only ones in Vertex's pipeline. Further, at the end of the first quarter, the biotech reported that more than 25,000 patients eligible for its CF therapies have yet to start treatment.
The company's most important CF medicine -- Trikafta, which can treat about 90% of patients -- will have patent exclusivity until 2037. So there is indeed plenty of room to grow within the company's CF market.
Buy at the high
It would have been great to purchase shares of Vertex Pharmaceuticals 10 years ago. But unless one has a time machine, that's no longer possible.
Fortunately, the biotech's prospects remain attractive. Vertex could continue delivering market-beating returns for years with a lineup of products targeting CF that is still performing well and a raft of other exciting candidates. That's why the company's shares remain worth buying even at their current levels.
