Vertex Pharmaceuticals (VRTX 1.84%) has built a cystic fibrosis (CF) treatment empire that brings in billions of dollars in earnings annually. And just recently, the company demonstrated it could successfully expand beyond this specialty when it won approval for a gene-editing treatment for blood disorders. Casgevy, for beta thalassemia and sickle cell disease, may become another source of billion-dollar revenue for Vertex and partner CRISPR Therapeutics.
Investors have rewarded the biotech giant by piling into the shares, helping them rise to a record high. Over the past year, Vertex stock has climbed almost 50%. Now you may be wondering if, after those gains, it's too late to get in on this exciting biotech story. Well, I've got good news for you: It isn't. In fact, there are three reasons to load up on Vertex shares right now.
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1. Billion-dollar pain prospects
Vertex isn't done expanding beyond its CF specialty area. The biotech recently reported positive pivotal trial data on VX-548, a candidate to treat one of the most common problems around: pain. Vertex aims to file a regulatory submission by midyear, so if all goes smoothly, we could be looking at a new -- and significant -- revenue opportunity in the near term.
VX-548 is a non-opioid pain candidate, acting on a sodium channel that plays a key role in pain signaling. This potential treatment could be big because, today, pain treatment options are limited. Over-the-counter medications often aren't strong enough, and prescription opioids carry the risk of addiction. VX-548 could fill the gap, offering patients a compelling option -- and eventually reach peak annual revenue of at least $5 billion, according to analyst forecasts.
Vertex hopes to win regulatory approval with a broad moderate-to-severe acute pain label and in the future gain approval in chronic pain, too. So, this could be a key growth product for the biotech.
2. A new wave of dominance in the cystic fibrosis market
Vertex sells a portfolio of therapies that have improved the quality of life and extended the lives of CF patients. And this portfolio is led by blockbuster Trikafta, which helped Vertex generate more than $9.8 billion in revenue last year.
But there may be competition ahead, and this competition comes right out of Vertex's laboratories. The company recently reported pivotal trial data for a candidate known as "the vanza triple," a therapy that tops even the superstar Trikafta. In trials, it did a better job than Trikafta at lowering sweat chloride levels in CF patients. These levels are typically high in those with CF because these patients have trouble clearing chloride from the cells.
The vanza triple is a once-daily pill compared to the twice-daily Trikafta regimen, making it a more attractive option.
Trikafta's patent implies CF dominance through 2037, but if the vanza triple wins regulatory approval, investors could expect an even longer period of leadership in this billion-dollar market. Vertex plans to file for regulatory review by the middle of this year.
NASDAQ: VRTX
Key Data Points
3. An attractive valuation
As mentioned above, Vertex shares have climbed, even touching a record high in recent weeks. In spite of the gains, though, Vertex's valuation still looks reasonable -- the stock trades for 25x forward earnings estimates -- considering its near-term revenue growth drivers, mentioned above, and long-term prospects.
It's important to remember the new potential products for pain and CF, as well as Casgevy, could drive significant revenue growth for a number of years. And today's valuation, even based on forward earnings estimates, doesn't take all of that into account.
As for the coming five years, Wall Street predicts the company will deliver double-digit annual growth.
All of this means that right now, even after the stock's gains and even as it trades close to record high levels, Vertex remains a bargain for the long-term investor. And that's a great reason to buy this top biotech like there's no tomorrow.
