Biotech giant Vertex Pharmaceuticals (VRTX 3.13%) continues to grab headlines. Over the past six months, the drugmaker has earned important regulatory approvals and made excellent clinical progress. But the company isn't stopping. Vertex just announced a move that will help it expand its pipeline. The company will be acquiring a smaller clinical-stage biotech called Alpine Immune Sciences (ALPN 0.12%) for $4.9 billion.
Let's look more closely into this transaction and what it could mean for investors.
A potential pipeline in a drug?
Alpine Immune Sciences focuses on developing therapies for inflammatory and autoimmune diseases. The company doesn't have any products in late-stage clinical trials yet, so why is Vertex spending nearly $5 billion to buy it out? The answer is that Alpine's lead candidate, povetacicept, has looked highly promising so far. Povetacicept is a potential treatment for IgA nephropathy (IgAN). This rare disease is caused by a buildup of IgA proteins in the kidney, potentially leading to inflammation, damage, and kidney failure.
There are no approved therapies that treat the underlying causes of IgAN, but that's exactly what Alpine is looking to target with povetacicept. The clinical-stage company recently reported updated phase 2 results for its leading candidate in treating IgAN. In the study, povetacicept has reduced proteinuria, or excess protein in urine, which is associated with IgAN. Alpine plans to start a phase 3 study for this candidate in the second half of the year.
Vertex has made it a habit to develop therapies for rare diseases for which there are few, if any, approved medicines that address the underlying causes. So, adding povetacicept to its portfolio via the acquisition of Alpine fits right into its strategy. Furthermore, Vertex sees strong potential for povetacicept beyond IgAN. The medicine is being tested in several other indications. Vertex believes povetacicept has the makings of a "pipeline in a drug."
Medicines with that potential tend to be highly successful -- think Merck's famous cancer drug, Keytruda. That's not to say that povetacicept will be nearly as successful as Keytruda, but one can see why Vertex would dish out almost $5 billion to get its hands on this company, which features several other pipeline candidates.
There are better reasons to buy
Vertex Pharmaceuticals already has a promising late-stage pipeline. It recently released data from two phase 3 studies. The first was for VX-548, a potential medicine for acute pain. The second was for Vertex's next-gen cystic fibrosis (CF) medicine. Both were positive, so there is a good chance they will earn approval within a year or so. Vertex also recently started a pivotal study for inaxaplin, a potential therapy for APOL-1-mediated kidney disease.
Here, too, there are no treatments that target the underlying causes of the disease. So, it is another potentially promising program for Vertex. That's to say nothing of the company's most recent approval, Casgevy, a therapy for sickle cell disease and beta-thalassemia, two rare blood disorders. This gene-editing treatment could be a big deal for Vertex and its partner, CRISPR Therapeutics.
Lastly, Vertex's existing CF franchise continues to be strong. Let's not forget that the biotech still has a monopoly on therapies that treat the underlying causes of CF. Though it has been in this market for over a decade, Vertex's revenue and earnings continue moving in the right direction. So, even without adding povetacicept, the company's future looks promising.
That's an important point, since there is no guarantee that povetacicept will knock things out of the park in phase 3 studies. It could flop. There could be unexpected regulatory headwinds. Here's the bottom line: Vertex's business is more than strong enough. This most recent move is just icing on the cake. The biotech company remains an excellent stock to buy.
