Shares of Vertex Pharmaceuticals (VRTX 0.58%) and Regeneron Pharmaceuticals (REGN 0.42%) are each up about 20% over the past year. The biotech companies have shown increased revenue and earnings per share (EPS) over the past three years and have burgeoning pipelines that should continue to drive growth.
Despite their profitability and potential, to me, they still trade below their long-term value, with Regeneron trading at a little over 16 times earnings and Vertex going for slightly above 23 times earnings. I think those numbers don't fully take into account some of the potential blockbuster therapies they have in the works. An investment in either is a solid choice for long-term investors. These companies have already shown steady revenue and EPS growth over the past three years and they have the products that will allow those metrics to continue to grow.
VRTX Revenue (Quarterly) data by YCharts
Regeneron's pipeline is growing
Regeneron reported fourth-quarter and full-year numbers on Feb. 3. While sales for the year were down 24% to $12.17 billion, when you exclude its COVID-19 therapies, REGEN-COV and Ronapreve, the company's revenues were up 17%.
The main reason for the company's growth in non-COVID therapies is its anti-inflammation drug Dupixent (dupilumab). Regeneron shares the drug's sales with partner Sanofi. Dupixent has been approved to treat eczema and asthma, long-term sinus inflammation in adults, eosinophilic esophagitis (an allergic condition in the esophagus) and prurigo nodularis, a skin disease associated with itchy lumps. The drug is also in phase 3 trials for atopic dermatitis, chronic spontaneous urticaria (a type of chronic hives), and chronic obstructive pulmonary disease (COPD).
Dupixent's 2022 global sales (recorded by Sanofi) rose 40% to $8.68 billion. Regeneron's yearly collaboration revenue from Sanofi for Dupixent was $2.85 billion, up 50% over 2021.
Regeneron also saw $6.26 billion in 2022 sales from eye drug Eylea (aflibercept), up 8% over 2021. The therapy is approved to treat several retinal diseases. The company is testing a stronger, longer-acting dose of Eylea and could launch it as early as this summer, helping it stave off competition from Vabysmo, produced by Roche Ag.
Regeneron has a sizable pipeline, with 40 candidates, including 10 in phase 3 trials.
The most promising drug in Regeneron's pipeline may be immuno-oncology therapy Libtayo. The drug was approved by the U.S. Food and Drug Administration (FDA) in November 2022 as a combination therapy with chemotherapy as a first-line treatment for adults with advanced non-small cell lung cancer. The European Commission also approved the drug in November as a monotherapy to treat recurrent or metastatic cervical cancer. In December 2022, Japan approved Libtayo to treat advanced or recurrent cervical cancer.
Regeneron hasn't yet put a dollar value on the drug's potential, but it sees many potential applications for the therapy, both as a stand-alone or as a combination therapy, meaning it could be a blockbuster drug. The company sees possibility for Libtayo to treat melanoma, prostate cancer, ovarian cancer and solid tumor cancers.
I see Regeneron as the type of company that can help set an investor up for life. It's already profitable, has a huge diversified pipeline, and a particular strength in profitable immuno-oncology drugs that can be approved for multiple maladies, extending their patent as well as their customer reach.
Vertex has the stability to expand
Vertex, once known only as a biotech that focused on cystic fibrosis (CF) therapies, has made the leap to cell and genetic therapies, thanks in part to its partnership with CRISPR Therapeutics.
Vertex has six late-stage therapies in its 19-program pipeline. This includes exa-cel, which it is developing with CRISPR as a therapy to treat transfusion-dependent beta thalassemia and sickle cell disease, both rare blood disorders caused by inherited genetics.
Vertex and CRISPR have begun the process of a rolling biologics license application (BLA) for exa-cel with the FDA, and it could be completed as early as this quarter, the company said. The drug has the potential to end the need for transfusions for those with the diseases, which affect 32,000 people in the U.S. and Europe.
Vertex is also developing VX-548 as a non-opioid alternative to treat acute pain, is looking at Inaxaplin as a treatment for APOL1-mediated kidney disease, and has a next-generation CF therapy in Vanzacaftor triple.
The company's finances are still driven by lead CF therapy Trikafta, which brought in $8.9 billion in 2022, up 18%, year over year. The drug's continued growth has helped to finance the company's research and development, which in turn has increased its pipeline. Vertex reported full-year 2022 revenue of $8.93 billion, up 18%, year over year and net income of $3.3 billion, up 42% over 2021.
Vertex has a stable of profitable CF therapies and a growing pipeline. If only a few of its therapies in testing are approved, the company should continue to grow revenue and share price, making it a good long-term choice and potentially helping set up investors for life.
