If past performance guaranteed future success, Vertex Pharmaceuticals (VRTX -0.06%) would be one of the best biotech stocks to invest in. The drugmaker has consistently outperformed the broader market in the past decade. However, investors are more interested in what will happen from here on out -- and Vertex's strong track record unfortunately is still no guarantee of what could lay ahead.
So is it too late to invest in this market beater, or does Vertex Pharmaceuticals still have what it takes to deliver outsize returns? Let's find out.
Vertex's core franchise can still grow
Vertex famously has a virtual monopoly in the market for therapies that address the underlying causes of cystic fibrosis (CF). This rare disease leads to lung damage, among other problems. There are only 88,000 CF patients in the U.S., Canada, Europe, and Australia. Vertex's most important product at the moment, Trikafta, can treat about 90% of this population.
This medicine continues to drive growth. In the third quarter, Vertex's revenue of $2.48 billion increased by 6% year over year. Trikafta's sales grew by about 13% year over year to $2.3 billion. Here's the good news. Vertex is developing another combination therapy, vanzacaftor, that could confer greater clinical benefits to patients while needing to be taken only once daily. Trikafta is typically taken twice a day.
Vertex is running several phase 3 studies for vanzacaftor, the results of which it should announce early next year. Further, Vertex is working with Moderna to develop VX-522, a potential mRNA-based therapy for about 5,000 CF patients who aren't eligible for any of its current treatments. Will any company challenge Vertex in this area anytime soon? That seems unlikely.
Many have tried and failed to do so over the past 10 years. The latest to give up on developing CF therapies altogether was AbbVie, in a testament to Vertex's expertise in this area. Three of the company's researchers recently earned a breakthrough award for developing transformative CF medicines. By the time any company manages to launch a competing treatment, Vertex will have substantially diversified its lineup.
Looking at Vertex's exciting pipeline
Vertex has several candidates outside of its core CF franchise. The most advanced is exa-cel, a gene-editing therapy for sickle cell disease (SCD) and transfusion-dependent beta-thalassemia (TDT) that it developed with CRISPR Therapeutics. Exa-cel is currently being considered for regulatory approval by various agencies worldwide. In the U.S., it could land its first green light in treating SCD in December, following a potential approval in TDT in March.
Management thinks exa-cel represents a "large commercial opportunity," one likely worth tens of billions of dollars. But it's not the only candidate in Vertex's pipeline.
The company is also developing a medicine for acute and neuropathic pain called VX-548. As the company argues, many existing pain treatments have significant drawbacks in terms of potential side effects. Opioid-based pain meds are a good example. VX-548 could help address a need in this area. Elsewhere, Vertex Pharmaceuticals is looking to develop a functional cure for some patients with type 1 diabetes.
It is also working to launch therapies for illnesses where none of the existing options address the underlying causes. Vertex Pharmaceuticals is looking to replicate the success it had with its CF medicines. Even if it doesn't, the company is casting a much wider net from here on out, and several of its candidates boast billion-dollar potential.
Vertex is a no-brainer buy
Vertex has been able to outpace the market for a while for a good reason. The company's ability to innovate, especially in developing treatments that seek to fill an unmet need, has been one of its most important assets. Vertex is again showing what it is capable of with its late-stage pipeline that should allow it to expand its lineup while still making progress within its CF business. Overall, Vertex Pharmaceuticals looks like a no-brainer stock for biotech investors.
