Turning $100,000 into $1 million in a decade requires a compound annual growth rate (CAGR) of almost 26%. That's miles above the market's long-term average. It's also even better than a company like Vertex Pharmaceuticals (VRTX 2.71%), an otherwise strong market-beater, has delivered over the past 10 years, with its outstanding CAGR of 18.2% during this period.
Could the biotech perform even better in the next 10 years, and turn $100,000 into $1 million by 2036?
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The challenge
A decade ago, Vertex Pharmaceuticals was a much smaller company and was much earlier in its quest to transform the cystic fibrosis (CF) market. It earned approval from the U.S. Food and Drug Administration for Kalydeco, the first medicine to treat the underlying causes of this rare disease, in 2012.
Vertex's CF franchise will remain a growth driver for the foreseeable future. There is still a meaningful number of patients to target, and its most important products won't run into patent cliffs until the end of the next decade. But the healthcare leader is now much larger and has a smaller patient population to address. Its CF business alone is unlikely to drive the kind of growth it needs to turn $100,000 into $1 million, or anything close to it, in the next 10 years.
NASDAQ: VRTX
Key Data Points
Vertex Pharmaceuticals could rely on its pipeline candidates. Two of them, inaxaplin and povetacicept, are aiming to treat the underlying causes of diseases for which there are currently no such medicines. But will that be enough, even if they earn approval? Part of Vertex's success in CF was because no rival developed competing CF medicines. For the company to perform even better than it has since 2016, it would need nearly flawless clinical execution, along with sustained leadership in these markets over the next decade.
Is that likely to happen? There is a precedent in the biopharma industry. Eli Lilly's CAGR over the past 10 years has been an outrageous 29.9%, but that came after Lilly developed a compound that, in only its third full year on the market, topped the list of the world's best-selling drugs (and could become the top-selling medicine of all time). Investors shouldn't bet on Vertex accomplishing a feat like that.
Vertex's stock is still a buy
Even if Vertex Pharmaceuticals can't meet such a lofty goal, there are great reasons to consider the stock. Vertex generates consistent revenue and earnings thanks to its CF products, and new additions, like Journavx for acute pain, will contribute. New approvals will also help boost the company's financial results.
Vertex may not achieve a 100% success rate with its late-stage programs, and it might eventually face competition. But unlike 10 years ago, the biotech will have a far more diversified lineup in the future. All those are good reasons to buy and hold the stock through the next decade.
