Vertex Pharmaceuticals (VRTX -0.06%) has made a fortune developing medicines for cystic fibrosis (CF), a rare disease that causes damage to the lungs. However, the biotech is now seeking to delve into new therapeutic areas. The company is awaiting approval for exa-cel -- a therapy for the blood disorder sickle cell disease -- which it developed in combination with CRISPR Therapeutics.
Recently, these two longtime partners announced a new deal to target another disease, type 1 diabetes (T1D). Let's find out what investors should take away from this new development.
Don't change a winning team
On March 27, Vertex Pharmaceuticals announced a collaboration agreement with CRISPR Therapeutics to use the latter's CRISPR/Cas9 gene editing technology, which allows researchers to modify an organism's DNA, to develop potentially curative therapies for T1D. Vertex will issue an upfront payment of $100 million, with potential additional research and development milestone payments of up to $230 million.
Why did the biotech giant decide to strike this deal? Vertex saw firsthand the potential of CRISPR Therapeutics' gene editing capabilities with exa-cel, a medicine that the gene-editing specialist originally created before Vertex helped accelerate its development thanks to its much stronger financial position. The biotech giant has also seen CRISPR's technology in action in the narrow field of T1D.
In September 2022, the drugmaker acquired ViaCyte, a company looking to develop a functional cure for T1D, for $320 million in cash. ViaCyte's VCTX211 is a potential T1D therapy that was initially developed through a collaboration with CRISPR Therapeutics; it's currently in a phase 1/2 clinical trial. Vertex Pharmaceuticals has two other investigational medicines that target T1D, called VX-880 and VX-264.
The opportunities in the T1D market
T1D results in an inability to create insulin. It is typically diagnosed in children. Overall, it affects far fewer people than its type 2 close cousin. According to the U.S. Centers for Disease Control and Prevention, 90% to 95% of diabetes patients are of the type 2 variety. Still, considering there are 422 million people with this chronic illness worldwide, that still leaves up to 42 million people with T1D -- not an insignificant number.
Vertex Pharmaceuticals has made a fortune targeting CF, an illness that affects just 88,000 people, in key markets. Furthermore, T1D patients spend a lot of money on drugs and various other tools such as blood glucose meters to help manage T1D. Some estimate the market was worth roughly $7.59 billion last year and will register a compound annual growth rate of 7.6% through 2030, partly driven by the increased prevalence of the disease.
However, the current standards of treatment are limited. That's where Vertex Pharmaceuticals comes in. The biotech is looking for curative therapies. The company's VX-880 has already produced encouraging results in the clinic. Last year, Vertex presented data from two patients treated with it. The first reached insulin independence at day 270, while the second had a 30% decrease in exogenous insulin use at day 150.
The company's potential medicines in this area still have a long way to go. A substantial portion of clinical compounds in the early stages of development never make it to the market, even when there are promising results early on. By entering into a new collaboration with CRISPR Therapeutics to develop new T1D gene editing therapies, Vertex hopes to multiply its chances of getting at least one of its candidates to the market.
What it means for the stock
Will Vertex Pharmaceuticals achieve success in its quest to cure T1D? It's too early to tell, so it's not a good idea to invest in the company's stock just because of this recent collaboration with CRISPR Therapeutics or its early stage T1D candidates.
However, the company is again showing its commitment to developing medicines for diseases that are either rare or difficult to treat, or for which there are few safe and effective treatments. That's how it found tremendous success in CF. Now, it is on the verge of earning approval for exa-cel, which could also be massively lucrative. The company is running clinical trials for other key candidates as well. It expects five new drug launches in the next five years.
Vertex Pharmaceuticals' innovative capabilities are one of the key reasons it is among the most attractive biotech stocks on the market. That's why investors should consider the stock now.
