Vertex Pharmaceuticals (VRTX 1.25%) defied 2022's bear market thanks to its tangible business progress. Over the course of the year, the biotech company and its partner Crispr Therapeutics brought their treatment candidate for blood disorders toward the commercialization finish line. They completed regulatory requests in the U.K. and Europe. And they're set to complete the request for U.S. Food and Drug Administration approval in the first quarter.
Vertex has started off this year with gains too, and its winning streak may be far from over. In fact, there are five reasons to buy Vertex right now -- and hold on for the long term. Let's take a closer look at why this biotech stock is likely to deliver earnings and share price performance well into the future.
A new era of growth
So, what are the five reasons to buy Vertex? Five potential product launches over the coming five years. It's as simple as that. Vertex's strong late-stage pipeline has what it takes to deliver a whole new era of growth. And this growth won't depend on one single treatment area. This is significant because, in the past, some investors worried about Vertex's dependence on its core cystic fibrosis portfolio.
This new wave of growth may begin with exa-cel, its candidate treatment for the blood disorders sickle cell disease and beta-thalassemia. About 32,000 patients in the U.S. and Europe suffer from severe forms of these illnesses.
Treatment options for them today are limited. And exa-cel is a one-time treatment that provides a functional cure for them. So, this could be a true breakthrough product for patients -- and for Vertex and Crispr. Vertex predicts exa-cel will be a multibillion-dollar opportunity. And as part of the partners' agreement, Vertex will keep 60% of profits.
Another pipeline candidate that holds the potential for blockbuster revenue is VX-548, a treatment for acute pain. This could be an enormous opportunity for Vertex for two reasons.
First, unfortunately, pain is an extremely common problem. Second, treatment options today are largely limited to over-the-counter medicines like aspirin and acetaminophen, or prescription opioids. The over-the-counter choices often aren't sufficiently potent when pain is severe. And the biggest problem with opioids is the risk of addiction.
Efficacy without addiction
VX-548 is intended to offer efficacy without addictiveness or extreme side effects. Vertex aims to win approval for the drug as a treatment for moderate-to-severe acute pain. And even though there are plenty of generic painkillers in this $4 billion market, Vertex could dominate.
Here's why. Medical staff at hospitals prescribe about two-thirds of painkiller prescriptions today. And all 50 states have put into place guidelines for prescribing opioids. As such, doctors aren't exactly encouraged to prescribe them. This means they would be more likely to opt for a treatment like VX-548 first if it was appropriate for a particular patient.
Vertex plans to finish its phase 3 trials for VX-548 later this year or early next year. If all goes well, this candidate could represent another billion-dollar near-term revenue source.
Other potential launches in the next five years include treatment candidates for APOL1-mediated kidney disease and a new cystic fibrosis candidate that may be even better than Vertex's current top-seller, Trikafta. And Vertex isn't stopping there. The company says it has multiple candidates involved in clinical trials now that could launch by 2030.
A transformation ahead
This could be transformational for Vertex. Today, it's a successful cystic fibrosis company, generating billions of dollars in revenue and profits annually. And its innovation in the field should help it maintain that leadership through the late 2030s, according to management's forecasts. But a few years from now, Vertex could become a company known for treatments in a variety of disease areas -- and that could drive major earnings growth.
Next, let's consider Vertex's valuation. The stock trades for 18 times forward earnings estimates. This is well below the biotech industry's average forward price-to-earnings ratio of about 34, according to NYU's Stern Business School. At the same time, Vertex's revenues continue to rise.
All of this makes Vertex look extremely cheap even after its 2022 winning streak. That means it's still a great stock to add to your portfolio today. You'll get in ahead of potential product launches -- and benefit from the earnings growth and stock performance that should follow.
