Over the past decade, Vertex Pharmaceuticals (VRTX 0.46%) has delivered above-average returns. The secret behind the biotech's success isn't much of a secret. The drugmaker developed and marketed medicines -- the only ones in the world -- that target the underlying causes of a rare disease called cystic fibrosis (CF).
So far, Vertex's monopoly has remained intact despite many of its peers trying to break into this space. But could that change soon? Sionna Therapeutics, a privately held biotech, certainly hopes so.
A company with a mission
Sionna Therapeutics focuses on developing therapies for CF. It could be easy to dismiss this biotech as a potential challenger to Vertex Pharmaceuticals. Sionna is a newcomer to the biotech industry, created in 2019. Although it's a private company, it's hard to imagine that its market capitalization would be anywhere close to Vertex's if it went public, considering it has a pretty thin pipeline and no commercialized products. It's also not likely to have the funds and research experience in CF at Vertex's disposal.
Could Sionna succeed where so many other drugmakers, including some of the largest and most successful in the world, have failed?
To understand why Sionna Therapeutics' programs look promising, let's first go through the basics of CF. The disease is caused by mutations in the cystic fibrosis transmembrane conductance regulator (CFTR) gene, leading to faulty CFTR protein. This leads to thick mucus in the lungs and pancreas, which can cause severe lung and digestive problems. Vertex's most important medicine, Trikafta, works by correcting defective CFTR protein.
Sionna wants to go further. It's looking to develop therapies that target the most common mutation that disrupts the proper functioning of the CFTR gene and causes CF, thereby repairing CFTR function. This approach could result in better clinical efficacy for CF patients.
The drugmaker recently acquired some of AbbVie's former CF candidates that didn't perform as well as hoped in phase 2 studies. Sionna aims to study various compounds, combining its internally developed products with AbbVie's acquired products. Some of these combination treatments, according to Sionna Therapeutics, have already produced encouraging results in preclinical tests.
NASDAQ: VRTX
Key Data Points
Is Vertex Pharmaceuticals in trouble?
Sionna Therapeutics' approach looks promising. But it's far too early to write Vertex Pharmaceuticals' eulogy, since Sionna's programs still have a long way to go before making it to the market. If they make it that far, that could be a significant blow to Vertex's business -- but the company will rely far less on its CF franchise by then. Vertex recently earned approval for a gene-editing therapy called Casgevy that treats sickle cell disease.
Vertex's late-stage pipeline features suzetrigine, a medicine for acute pain that has already produced positive results in phase 3 studies. The company also started the phase 3 portion of a phase 2/3 clinical trial for inaxaplin, a potential therapy for a rare condition called APOL1-mediated kidney disease. And there are several more promising programs in earlier stages of development in the pipeline.
By the time any of Sionna's products make it to the market -- which would take a minimum of three years -- Vertex's portfolio of approved products will likely look completely different. Whatever threat Sionna poses is mild, especially when we consider Vertex's biggest selling point. That's not its success in CF, or its financial or stock-market performances over the past decade, although those have been impressive:
VRTX Revenue (Quarterly) data by YCharts.
What's much more important is that Vertex has proved to be an incredibly well-run and innovative biotech company, with a rich pipeline and the funds necessary to pursue its most exciting programs. Regardless of this challenge to its CF franchise, the company isn't going anywhere. It remains an outstanding stock to buy today.
