Investors have experienced a difficult past 12 months in the market, and even many household names in the investing world haven't escaped the downturn. That goes for Cathie Wood, CEO of Florida-based investment firm Ark Invest. Most of Wood's actively managed funds have lagged the market this year.
But not all of her firm's stock picks have. For instance, biotech giants Vertex Pharmaceuticals (VRTX 2.35%) and Incyte (INCY 0.92%) -- both of which feature in Wood's Ark Genomic Revolution ETF -- have outperformed the market over the past year.
Let's consider why both of these Cathie Wood stocks can still deliver solid returns.
NASDAQ: VRTX
Key Data Points
1. Vertex Pharmaceuticals
It'd be hard to find a biotech giant that has performed better than Vertex Pharmaceuticals this year. The drugmaker's shares are up by 31% year to date, while the S&P 500 is down by 19%. What's behind these solid results? Here's the short version. Vertex Pharmaceuticals has the tools to continue producing stellar financial results in the short and long runs.
In the next year or so, Vertex Pharmaceuticals will continue to rely on its lineup of medicines that treat cystic fibrosis (CF), a rare genetic disease that causes digestive problems and affects patients' internal organs. Vertex Pharmaceuticals is the only game in town; it markets the only medicines that treat the underlying causes of CF.
Although it has made tremendous progress within this patient population over the years, it continues to go strong. The biotech's revenue and earnings have grown at a good clip over the past decade, something it owes to its CF medicines.
VRTX Revenue (Quarterly) data by YCharts
That's not about to stop.
Beyond Vertex's CF drugs, it is working on several promising candidates. The company expects exa-cel to be its next launch. This gene-editing therapy targets sickle cell disease (SCD) and transfusion-dependent beta-thalassemia (TDT), two rare blood-related genetic illnesses. Vertex is developing this medicine with its partner, CRISPR Therapeutics.
The two drugmakers expect regulatory submissions in the U.S. and Europe by the first quarter of next year. They plan to initially target 32,000 patients with TDT and SCD in the U.S. and Europe. That doesn't seem like a lot, but it's worth noting that the record for the most expensive therapies in the world was broken several times this year by various newly approved gene therapies.
These medicines aren't cheap, and exa-cel won't be either. Expect a price tag of several hundred thousand dollars at the very least. Vertex boasts other candidates, including some targeting pain, type 1 diabetes, and more. The company should register solid pipeline progress next year that will help it set a solid foundation for long-term success.
That's why Vertex Pharmaceuticals has been on fire this year, and it's also why investors should buy its shares even near its 52-week high.
2. Incyte
Incyte isn't exactly a well-known name in the biotech industry, but that doesn't make it a less attractive option. Although the company's financial results haven't always been stellar this year -- with its third-quarter revenue increasing by just 1% year over year to $823.3 million -- the drugmaker is riding the wave of new approvals that should help improve its earnings.
One of its most important new products is Opzelura, which first earned the green light in 2021; Opzelura is the topical formulation of Incyte's Jakafi, a cancer medicine. Jakafi has been Incyte's most important product and still makes up the lion's share of its top line. In the third quarter, this medicine's product revenue was $619.6 million -- an increase of 13% year over year -- and accounted for 75% of Incyte's total revenue.
Note that Jakafi's product revenue does not include the royalties that Incyte collects from Novartis, which holds the market rights to this medicine outside the U.S. The approval of Opzelura helps diversify Incyte's lineup. It is approved for atopic dermatitis (or eczema), and vitiligo.
Vitiligo, which causes loss of skin color in patches, affects more than 1.5 million people in the U.S., with between 150,000 to 200,000 seeking new treatment options, according to Incyte. Opzelura is the first treatment to specifically address repigmentation in vitiligo patients to be approved in the U.S. This medicine has a bright future targeting this patient population.
And Incyte can count on other new therapies, too, including cancer drug Monjuvi, first approved in 2020. It's also worth noting that Incyte's Olumiant has been losing ground lately. It is approved or authorized in various countries as a COVID-19 treatment, a market that has been up and down and has somewhat receded compared to last year.
The impact of coronavirus-related dynamics on Incyte's results should fade over time. Lastly, Incyte is working on plenty of pipeline programs that could lead to new approvals or label expansions. Look for this drugmaker to remain a market beater for a long time.
