Vertex Pharmaceuticals (VRTX -0.06%) soared 85% over the past two years as it headed into a new era of growth. The company already has been a giant in the area of cystic fibrosis (CF) treatment for years, bringing in billions of dollars in earnings. But now Vertex is proving it could expand beyond that specialty area to excel elsewhere, too.
Investors bet on Vertex's ability to develop a gene editing treatment for blood disorders -- and they won that bet in recent weeks as Vertex gained regulatory approval for Casgevy. On top of this, Vertex aims to file regulatory requests for two more potential blockbusters this year, meaning catalysts for share performance could be on the horizon. Today, Vertex shares trade for about $423 after rising to a record of $446 last month. Could they climb to $500 this year?
Image source: Getty Images.
The cystic fibrosis market leader
First, a bit of background on Vertex. The company is the market leader in CF treatment, specializing in CFTR modulators, or therapies that correct the function of a key protein. This protein regulates the flow of water and chloride in cells lining various organs -- when it doesn't do the job, a layer of mucus builds up, resulting in the devastating symptoms of CF.
Vertex's CFTR treatments have been game changers, increasing life expectancy and quality of life for patients. The latest, Trikafta, even has the ability to address 90% of those with CF thanks to its efficacy in cases involving the most common CF genetic mutation.
Vertex CFTR modulators, led by Trikafta, brought in more than $9.8 billion in revenue last year, an 11% increase. Trikafta's dominance could continue -- or it may be unseated by an up-and-coming treatment. But don't worry: Vertex's new candidate may be even better than its biggest blockbuster.
Called "the vanza triple," this combination of vanzacaftor, tezacaftor, and deutivacaftor showed it's just as good as Trikafta in improving lung function and even better than Trikafta when it comes to lowering levels of sweat chloride. These levels are high in CF because the body has trouble clearing chloride from the cells, so it's often used as a measure of disease.
The vanza triple is also a once-daily pill compared with the twice-daily Trikafta, which should appeal to patients from a practical point of view.
Vertex aims to file a regulatory request for the vanza triple by the middle of this year. Clinical trial data are strong so there's reason to be optimistic about the outcome, and considering Trikafta's revenue, it's clear this potentially better treatment could become a blockbuster, too.
A billion-dollar opportunity in pain management
The company also aims to file by the middle of this year for the regulatory review of its non-opioid pain candidate, VX-548. Today, treatment options are limited for the very common problem of moderate to severe acute pain. Over-the-counter products often aren't efficacious, and prescription opioids come with the risk of addiction. VX-548, which has delivered strong clinical trial results, could offer an excellent alternative and bring in more than $5 billion in peak sales or more annually, analysts predict.
Meanwhile, Vertex's Casgevy for blood disorders sickle cell disease and beta thalassemia will start generating revenue this year, expanding the company's revenue sources beyond the CF specialty.
An 18% gain from today's level
Now, let's get back to our question: Could Vertex's shares reach $500 this year? It's possible. This would represent an 18% gain from today's level, which isn't a huge distance to travel if Vertex continues to report high single-digit or double-digit revenue growth -- and if the company makes progress with Casgevy sales and its regulatory submissions.
All of these elements represent important catalysts for the company's long-term earnings, so any positive news could significantly lift the shares. On top of this, it's important to remember that even though Vertex shares have climbed recently, they still remain very reasonably priced. In fact, trading at only 25x forward earnings estimates, they actually look dirt cheap considering the company's long-term earnings potential across treatment areas.
This means it wouldn't be surprising to see Vertex stock rise to $500 this year, and even if it doesn't, this top biotech company still has what it takes to gain considerably over time, making it a terrific long-term buy.
