Few things can jolt a pharmaceutical company's shares like positive results from highly anticipated clinical trials. Even so, long-term investors should have a balanced approach to potentially positive data readouts. Putting aside the fact that it's impossible to predict the outcome of a clinical trial beforehand, even when the results are up to Wall Street's standards, it's hardly worth investing in the company unless there are other good reasons to think it will perform well over long periods.
That's why you may want to take a closer look at Eli Lilly (LLY 1.78%), Summit Therapeutics (SMMT 0.04%), and Vertex Pharmaceuticals (VRTX 1.63%). All three drugmakers should release results from key clinical trials within the next 18 months, and all three have strong prospects for the next five years at least.
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1. Eli Lilly
In April, Eli Lilly reported positive phase 3 results for its oral GLP-1 candidate, orforglipron. While the market reacted positively to this development, the study in question focused on diabetes patients and used A1c reduction as its primary endpoint. All eyes will be on the company's ongoing late-stage studies for orforglipron in obesity; it should release data from at least one of those clinical trials within the next year.
Eli Lilly's work in weight management has taken center stage in the past few years. The pharmaceutical leader could, once again, make a breakthrough by being one of the first to launch a highly effective oral GLP-1 anti-obesity drug. Since current options are administered subcutaneously, you can expect orforglipron to reach a reasonable level of success on the market -- but that's only if it performs well in phase 3 obesity studies. If it fails to do so, Lilly's shares could plunge.
Even so, the stock should still be a buy. True, orforglipron would strengthen Lilly's already robust lineup. But even if it falls short of expectations in late-stage studies, the company has several other candidates in development, including retatrutide, which is also in phase 3 trials.
Meanwhile, Lilly continues to generate consistent financial results. Revenue and earnings have been growing at a good clip, and that should continue for the foreseeable future.
Lastly, Eli Lilly is an excellent dividend growth stock. Although results from phase 3 trials for orforglipron in obesity will be important to monitor, the stock should perform well over the long run, regardless of the outcome of these trials.
2. Summit Therapeutics
Summit Therapeutics is developing ivonescimab, a cancer medicine it licensed from Akeso, a China-based biopharma. Ivonescimab is already approved in China; however, Summit needs to conduct clinical trials elsewhere to support approval in the U.S., Europe, and other regions where it holds marketing rights.
At least one of these studies will be of particular interest to investors. Summit is testing its crown jewel in a late-stage trial against Merck's Keytruda in patients with non-small cell lung cancer (NSCLC), in a study called Harmoni-3. Enrollment in the study is ongoing, and there is a good chance we'll see top-line data from it by the end of next year.
Summit's stock soared when it reported that ivonescimab did better than Keytruda at reducing the risk of recurrence or death in NSCLC patients, in a study conducted in China. However, reproducing this result elsewhere could, once again, jolt the stock price. On the flip side, Summit's share price will move in the wrong direction if the results aren't what Wall Street expects.
Should you buy the stock? To me, Summit Therapeutics' prospects for the next five years seem attractive. Ivonescimab is being tested across a range of different cancers, and it looks highly promising in NSCLC, which could be its most important market.
Even with the possibility that it may not perform as well in studies outside of China, having already been approved by regulatory authorities in one region reduces the risk of significant clinical and regulatory setbacks. Ivonescimab looks like a potential pipeline in a drug. And if you invest in Summit Therapeutics now, you might reap the benefits of its leading candidate's potential.
3. Vertex Pharmaceuticals
Vertex Pharmaceuticals is a proven innovator. The company's strategy is to develop breakthrough medicines where there's a high unmet need. One of Vertex's new targets is type 1 diabetes (T1D). There are no cures for this chronic disease, but the biotech's candidate zimislecel could be a functional cure, in the sense that it could recover patients' ability to produce their own insulin -- something that people with T1D can't do.
In the phase 1/2 portion of an ongoing phase 1/2/3 clinical trial, 10 of 12 patients who received zimislecel were insulin-free after a one-year follow-up. All 12 were free of severe hypoglycemic events after 90 days.
Vertex should have data from the late-stage portion of this ongoing clinical trial within the next year. Positive results will be well received. The company also aims to submit regulatory applications for this product sometime in 2026. Zimislecel should be a nice addition to Vertex's portfolio.
The biotech remains the leader in the market for drugs that treat the underlying genetic causes of cystic fibrosis, a business that is still helping it drive strong revenue and earnings growth. Furthermore, Vertex has added several medicines to its portfolio over the past five years, including Journavx for acute pain and Casgevy for two rare blood-related disorders.
Vertex Pharmaceuticals' pipeline also has promising programs beyond zimislecel. Well beyond the announcement of clinical-trial results for this promising T1D therapy, the stock will be in an excellent position to perform.
