Drug and biotech is a good sector to invest in as biotechnology has boomed over the past few years. Big drug and biotech stocks are profitable companies and these profits provide regular funds for innovation, which is the lifeline of biotech companies.
In this defensive sector,
Vertex Pharmaceuticals Incorporated ( VRTX Quick Quote VRTX - Free Report) is a good stock to own even though it has underperformed the industry this year.
Vertex’s stock has declined 20.3% this year so far compared with a decrease of 1.2% for the
industry. Image Source: Zacks Investment Research
There are several reasons to own the stock.
Good Rank and Rising Estimates: Vertex has a Zacks Rank #1 (Strong Buy). You can see . the complete list of today’s Zacks #1 Rank stocks here
Earnings estimates for Vertex’s earnings have risen by 10.2% for 2021 and 7.1% for 2021 over the past 60 days.
Strong CF Portfolio: Vertex’s main area of focus is cystic fibrosis (CF). The CF market represents huge commercial potential. With its four CF medicines, Vertex is treating around half of the 83,000 patients living with CF in the United States, Europe, Canada, and Australia. Meanwhile, the company is making progress in terms of reaching 30,000 additional patients in these regions through label expansions of its medicines.
Trikafta’s (triple combo CF medicine) early approval and launch in 2019 in the United States was the most significant milestone for Vertex. In the EU, Kaftrio was approved in August 2020. Trikafta and Kaftrio added access to another 16,000 eligible patients. Additional reimbursement approvals of Kaftrio in EU countries and approval for younger patient populations could bring additional Trikafta/ Kaftrio revenues in the second half of 2021.
Vertex is also evaluating a triple combination of VX-561, a CFTR potentiator, VX-121, a CFTR corrector, and tezacaftor in a mid-stage study. This new once-a-day combination medicine has the potential for enhanced patient benefit than Trikafta. It is expected to enter phase III development in the second half of 2021.
Consistent Rise in CF Product Sales: Consistent positive regulatory approvals have led to an increase in the eligible patient population for Vertex’s approved medicines in the past 2-3 years. With consistent expansion in patient population, Vertex’s CF product revenues rose 29% in 2017, 40% in 2018, and 32% in 2019. Vertex’s revenue growth of 49% in 2020 was driven by Trikafta, the launch of Kaftrio as well as higher international revenues due to additional ex-U.S. reimbursement arrangements.
In 2021, the approval of Trikafta/Kaftrio in additional geographies, additional reimbursement agreements for Kaftrio in EU countries, and approval of all CF medicines for additional mutations and younger patient populations are bringing additional revenues for Vertex with the trend expected to continue in the second half.
Upside Potential from Non-CF Pipeline: While Vertex’s main focus is on the development and strengthening of its CF franchise, the company also has a rapidly advancing early-stage portfolio in five additional diseases beyond CF like pain, sickle cell disease, beta-thalassemia, APOL1-mediated kidney diseases, and cell therapy for type I diabetes.
Vertex is co-developing a gene-editing treatment, CTX001 in partnership with
CRISPR Therapeutics ( CRSP Quick Quote CRSP - Free Report) in two devastating diseases — sickle cell disease and thalassemia. Phase I/II studies of CTX001 in adult transfusion-dependent b-thalassemia in Europe and sickle cell disease in the United States are ongoing.
Enrollment is underway in a phase II study on VX-147, its first oral small molecule medicine in APOL1-mediated focal segmental glomerulosclerosis (FSGS). Data from the study is expected in the second half of 2021.
Vertex has separate phase II studies ongoing for VX-150, a NaV1.8 inhibitor, in three different pain conditions: acute post-surgical, chronic neuropathic, and chronic musculoskeletal pain. VX-548, a selective NaV1.8 inhibitor, advanced to a phase II study for acute pain (following bunionectomy and also in abdominoplasty) in July.
A phase I/II study was initiated on VX-880 for the treatment of type I diabetes (T1D) in March. Initial data from the study is expected in 2022. VX-880 is the first of the two investigational programs for the transplant of functional islets into patients. VX-880 is for the transplantation of islet cells alone, using immunosuppression to protect the implanted cells. The second program will involve the implantation of the islet cells inside an immunoprotective device.
Collaborations Broadening Pipeline: Vertex’s success in CF has given it the financial strength to invest in both internal and external innovation. Vertex has entered into multiple agreements in the past couple of years to provide it with access to new external scientific technologies, programs ,and expertise in multiple diseases to complement its internal pipeline. It has such collaborations with CRISPR Therapeutics, Moderna ( MRNA Quick Quote MRNA - Free Report) , Affinia Therapeutics, Skyhawk Therapeutics, Molecular Templates, Arbor Biotechnologies, and Kymera Therapeutics ( KYMR Quick Quote KYMR - Free Report) , among others. Vertex plans to pursue more business development transactions to bolster its pipeline for serious diseases with multiple modalities and technologies. Conclusion
Vertex’s dependence on just the CF franchise for commercial revenues is a concern. It needs a growth opportunity outside CF with recent disappointment for the alpha-1 antitrypsin deficiency candidate. Vertex’s two candidates for alpha-1 antitrypsin deficiency (AATD), VX-814 and VX-814, have failed.
Nonetheless, Vertex’s CF sales continue to grow despite the impact of the pandemic. Consistent rise in CF sales, the rapid progress of non-CF pipeline candidates, minimal competition in its core CF franchise, and regular business development should keep the stock afloat, going forward.