Vertex Pharmaceuticals (VRTX 0.03%) has not performed well for most of the year, and the company's latest quarterly update did nothing to turn things around. However, the market may be overlooking some important catalysts that should jolt the stock over the medium term, making the company's shares a buy this month as they remain significantly down over the trailing-12-month period.
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Vertex's deep late-stage pipeline
Vertex Pharmaceuticals continues to generate most of its revenue from its cystic fibrosis (CF) franchise. The company's medicines in this field are undisputed leaders, driving solid top-line growth. However, many investors are worried that Vertex Pharmaceuticals is a one-trick pony. The drugmaker has tried to diversify its lineup in the past few years. In fact, it was successful. But newer products still aren't having a meaningful impact on its results.
That said, one of them, Journavx, was approved only in January. It has plenty of time to gain traction. Furthermore, there is an even more compelling reason to buy the stock right now: the company's promising late-stage clinical work. Vertex Pharmaceuticals has several phase 3 programs that could earn approval in the next few years, significantly boosting its revenue. The first is zimislecel, an investigational therapy for Type 1 diabetes (T1D).
This medicine could be a functional cure for eligible patients, restoring their ability to produce their own insulin. Vertex plans to submit regulatory applications for approval next year.
NASDAQ: VRTX
Key Data Points
Then there is inaxaplin, a medication for APOL-1 mediated kidney disease (AMKD). Vertex Pharmaceuticals' work in this field is right up its alley: The company seeks to develop drugs where there are high unmet needs. There are currently none approved to treat the underlying causes of AMKD, and Vertex could be looking at an addressable market of 250,000, which is well above the total for its highly profitable CF franchise.
Then there is povetacicept, an investigational medicine for IgA nephropathy (a kidney disease) that is also in phase 3 studies. Here too, there are no therapies that treat the underlying causes, and Vertex estimates a potential market of over a million patients. Significant clinical progress across the company's late-stage pipeline in the next few years -- leading to the eventual approval of brand-new products -- could be a significant catalyst for the biotech.
Why Vertex stock is a buy
In the meantime, Vertex's financial results should remain strong since it still has plenty of room for growth in its core CF market. And the company's other newer approval, Casgevy, which treats two rare blood-related diseases, should also make decent progress. Given its mid-term outlook, Vertex's shares remain attractive after having been beaten down over the past 12 months.
