Vertex Pharmaceuticals (VRTX -0.06%) has climbed nearly 20% so far this year. And that leaves the stock trading a few dollars off its record high. It's not surprising Vertex has advanced. The company is about to erase investors' one big concern about its future: its dependence on one treatment area.
The company is known for its billion-dollar cystic fibrosis (CF) portfolio. But its next big product may be a treatment for blood disorders. Regulators are reviewing the candidate -- called exa-cel -- right now. And Vertex is advancing with other potential products too -- in the area of CF and beyond. Considering all of this, is Vertex a buy even at today's level? Let's find out.
The global leader in cystic fibrosis treatment
First, a bit of background. Vertex is the global leader in CF treatments. The company makes a line of therapeutics called CFTR modulators that correct the functioning of CF patients' faulty CFTR protein. This faulty protein is responsible for the devastating symptoms of the disease.
Vertex's products have been life-changing for many people, especially since the approval of Trikafta back in 2019. That's because Trikafta has the ability to help 90% of CF patients. CFTR protein problems are linked to specific genetic mutations and Trikafta can handle most existing mutations. Trikafta is a mega-blockbuster, with total sales of $7.6 billion last year.
And Vertex's expertise in the area of CF means it should stay ahead of potential rivals for quite some time. Vertex's latest CF candidate is involved in a pivotal trial right now and the company predicts it will maintain its leadership until at least the late 2030s.
In spite of this strength and the fact that CF products are bringing in billions of dollars in profit, investors had one big worry: that Vertex couldn't expand beyond its specialty area. But Vertex is proving that's not the case. The company and partner CRISPR Therapeutics have reported excellent data from trials of exa-cel and the U.S. Food and Drug Administration aims to issue decisions for the treatment in December for sickle cell disease and in March for beta thalassemia.
A new potential blockbuster
Exa-cel could be a big product for both companies as treatment options are currently limited for the blood disorders it addresses. And exa-cel is designed as a one-time curative treatment. That means patients and doctors could flock to it. Exa-cel sales may reach $1.7 billion by 2028, according to pharma valuation company Evaluate.
But Vertex isn't stopping there. The company also is advancing other compelling programs. I'm talking about a pain treatment candidate and candidates to treat type 1 diabetes (T1D). Vertex is testing the pain candidate in a phase 3 trial right now and expects to wrap up this pivotal program by early next year.
This represents a significant opportunity because options to treat pain are limited. You've got over-the-counter options like aspirin and acetaminophen and prescription opioids meant for more intense pain. The problem with both is side effects and opioids have been linked to addiction.
Vertex's non-opioid candidate could offer a much-needed alternative. The company is going for a moderate-to-severe acute pain label. This is a broad indication that would allow for use of the drug in many settings, including in the hospital and at home.
A functional cure for type 1 diabetes?
As for T1D, Vertex is pursuing three approaches, and these programs are in preclinical through phase 1/2 studies. The idea is to use stem-cell-derived, fully differentiated, insulin-producing islet cells to deliver the insulin patients need -- and this would represent a functional cure for the illness. The most advanced candidate has produced promising results in all six patients treated. Vertex recently said it's building a manufacturing facility dedicated to cell therapies for T1D -- a big sign of its commitment to this program.
So, it's clear that Vertex has many potential growth drivers ahead, as well as a CF program that it can count on for the long term.
Is the stock worth buying now?
Now, let's look at valuation. In spite of recent gains, Vertex shares still trade for only 23 times earnings estimates. That is a bargain considering the company's track record, prospects in CF, and the progress of pipeline candidates including exa-cel.
All of this means it's not too late to buy Vertex. Even if the shares don't extend gains in the near term, that's OK. Over time, Vertex has products and potential products that could deliver significant earnings growth. That should lead the shares higher, too, and that's excellent news for investors who buy today.
