Vertex Pharmaceuticals Is Racing Towards a New Blockbuster: Why the Stock Is a Smart Buy

There are several textbook arguments against monopolies. According to one of them, companies that control a market can lower the quality of their products with impunity.

However, Vertex Pharmaceuticals (VRTX 0.91%), a drugmaker with a monopoly in the cystic fibrosis (CF) market, hasn’t done that — quite the contrary. Since it launched its first CF product some 12 years ago, the biotech hasn’t stopped innovating and improving its lineup. And it still isn’t done. Vertex Pharmaceuticals is making steady progress toward earning approval for a new CF medicine.

Stellar clinical trial results

CF is a rare disease that disrupts the proper functioning of internal organs, including the lungs and the pancreas. Though standards of care existed before Vertex, the biotech developed the only medicines in the world that target the underlying genetic causes of the illness. Its success in the past 12 years directly results from this work, though many have tried to emulate it.

VRTX Revenue (Quarterly) data by YCharts.

So far, no other drugmaker has successfully challenged Vertex Pharmaceuticals in this area. And while others still struggle to produce positive clinical trial results in CF, Vertex Pharmaceuticals doesn’t have that problem.

In February, the biotech released data from several phase 3 studies for its next-gen CF therapy, vanza triple. The study pitted this newer product against Trikafta, which was itself a groundbreaking medicine capable of treating up to 90% of CF patients, approved in 2019.

During the trial, vanza triple showed non-inferiority against Trikafta in improving lung functions in CF patients. In layman’s terms, the trial candidate did not perform worse than the compared drug (in this case, Trikafta) by more than a pre-specified amount. Furthermore, the new therapy was superior in reducing sweat chloride, the presence of which, in high levels, often indicates CF.

Here’s the kicker: While Trikafta is taken twice a day, vanza triple boasts a convenient once-daily dosing. Vertex Pharmaceuticals recently announced regulatory submissions for vanza triple in the U.S., and in Europe for patients six years and older, with more applications on the way.

Looking beyond CF

Trikafta is currently responsible for practically all of Vertex’s sales. In the first quarter, the company’s revenue increased by 13% to $2.7 billion. Trikafta revenue accounted for 92% of that total. Vanza triple will likely attract many eligible patients and somewhat cannibalize Trikafta’s sales; according to some estimates, it could generate sales of $1.26 billion by 2028. Since this product will address a share of the market Vertex Pharmaceuticals already owns, it wouldn’t substantially improve its prospects.

But more importantly, Vertex Pharmaceuticals is once again flexing its innovative muscles and succeeding where others keep failing. The biotech is now expanding its areas of focus. It recently earned approval for Casgevy, a gene-editing therapy developed with CRISPR Therapeutics. It started a rolling submission in the U.S. for suzetrigine, a treatment for acute pain.

Vertex also kicked off a phase 3 study for inaxaplin to treat APOL-1 mediated kidney disease. This program looks particularly exciting. There are no approved therapies that treat the underlying causes of this disease. Yet Vertex Pharmaceuticals estimates that 100,000 patients suffer from it, more than the 92,000 CF patients in its target geographies.

Could Vertex Pharmaceuticals repeat the success it had in CF with inaxaplin? Maybe, but the company’s prospects don’t depend on a single product or pipeline candidate. The bottom line is Vertex Pharmaceuticals is a well-run, innovative biotech company that should continue delivering market-beating returns for a long time. The stock is an excellent investment for investors looking for a stable, but growing, business.