Vertex Pharmaceuticals (VRTX -0.04%) has long been known for its expertise in treating cystic fibrosis (CF). The biotech is the market leader, bringing in billions of dollars in revenue and profit annually from its CF drugs. And that's likely to continue thanks to solid technology and a late-stage candidate that might even beat Vertex's current products in efficacy.
But Vertex is no longer just about one treatment area. The company last year won approval for a blood-disorder treatment, Casgevy, along with partner CRISPR Therapeutics. And just recently, it made two big moves that could advance its position in other high-potential areas.
Considering this, is the stock a buy right now? Let's look at each of these Vertex moves and find out.
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1. Advancing a potential blockbuster to treat pain
Vertex's next big opportunity involves treating one of the most common problems: pain. The company decided to address this market because of the current lack of treatments beyond over-the-counter medicines, which sometimes lack efficacy, and opioid painkillers, which are linked to addiction. So there's clearly room for an alternative.
The biotech recently launched a rolling submission of suzetrigine (earlier known as VX-548) to the U.S. Food and Drug Administration (FDA) and expects to complete the filing by the end of this quarter. A rolling submission allows a company to submit data over a period of time and work closely with the FDA through the process.
The FDA earlier offered the candidate Fast Track and Breakthrough Therapy designations. This should speed up the review process, meaning Vertex could receive a decision before the standard 10-month period. The agency grants these designations to companies developing potential products that address areas of great need.
Regulators are reviewing suzetrigine for moderate to severe acute pain right now, and in the second half of the year, Vertex will launch a phase 3 trial for the candidate in pain linked to diabetic peripheral neuropathy.
This opens the door to the treatment of chronic pain, a market set to reach $140 billion by 2030, according to Spherical Insights.
Vertex has suggested suzetrigine has the potential to become a multibillion-dollar product.
2. Acquiring a company in a high-opportunity treatment area
Vertex has a strong internal pipeline, but thanks to its solid cash position -- more than $13 billion at the end of last year -- the company is growing through acquisitions, too. Earlier this month, Vertex said it is buying Alpine Immune Sciences (ALPN -0.02%) for $4.9 billion in cash.
Alpine's lead candidate, povetacicept for IgA nephropathy (IgAN), is set to enter phase 3 trials in the second half. IgAN is an autoimmune disease that damages the kidneys, and today treatment options are limited. There isn't an approved drug that targets the underlying cause of this condition, which affects about 130,000 Americans.
Though other companies are exploring IgAN candidates -- even in late-stage trials -- if all goes well, Vertex still could score a win in this area. The treatment market is growing in the double digits and could reach more than $400 million by later this decade, according to Knowledge Sourcing Intelligence.
Povetacicept also holds the potential to address other serious diseases of the kidneys, so this candidate might offer Vertex more than one revenue opportunity down the road.
The company's acquisition of Alpine is expected to close in the second quarter of this year.
So, is Vertex Pharmaceuticals a buy?
It's time for a look at valuation. Vertex shares today trade for about 23 times forward earnings estimates, down from more than 26 earlier this year. This looks cheap even if we consider Vertex's CF business alone, which is likely to continue growing throughout this decade and into the next.
If we add to this the pain treatment opportunity and the potential of povetacicept as well as Vertex's other pipeline programs, the stock really looks like a steal right now. The shares might not take off overnight, and even if they do, considering the exciting earnings potential of this company, you won't want to abandon this story too early.
Instead, it's a great idea to buy and hold this biotech stock so that you can possibly win big as Vertex Pharmaceuticals expands its winning treatment portfolio over time.
