There is no single recipe for building wealth over the years. There are several ways to achieve this goal. However, a particularly effective one is recognizing solid businesses that deliver revenue and profit over time.
You can easily find many excellent candidates in the biotechnology and healthcare world. Actually, a lot of biotech stocks have managed to outperform the struggling market this 2022.
One name that emerged virtually unscathed from the onslaught of economic, political, and financial crises is Vertex Pharmaceuticals (VRTX).
Admittedly, the market downturn has yet to end. That means the company could still experience the effects of macro headwinds and tensions in the near future.
With that said, Vertex is one of the few companies equipped with the right tools to deliver excellent returns in the long run.
One of the reasons Vertex is at the top of the list in the biotech world is its history. The company has been generating solid returns for investors for quite a while now.
In fact, it has impressively surpassed the S&P 500 Index in the past 10 years.
Apart from that, Vertex continues to boost its revenue and profits courtesy of its monopoly in the market for treatments that target the underlying reasons or causes behind cystic fibrosis (CF).
Vertex is the market leader in the CF space worldwide. The company sells four therapies targeting this condition.
The company’s latest approval in this segment was for Trikafta, which received the green light in 2019. By 2021, Trikafta was already able to rake in over $5.6 billion in revenue.
Trikafta can be used as a treatment for up to 90% of CF patients. This number goes beyond any of those delivered by other Vertex products. More importantly, Trikafta will keep its patent exclusivity until the late 2030s.
That provides Vertex with plenty of time to make headway and expand the application of the product to cover previously untapped markets—a strategy that the company has been perfecting over the years.
Vertex has been busy winning approvals in new age groups and more reimbursements in several countries to ensure longer-lasting dominance in this segment.
Recently, the biotech has launched its Phase 3 trials for a candidate that may be an even better product than Trikafta.
While details have been kept under wraps, Vertex shared that the product would be a one-time curative treatment. Needless to say, this would translate to a massive payday for Vertex.
If everything goes according to plan, this new candidate might be launched by the first quarter of 2023.
At the same time, the biotech has been working on promising candidates for much-needed treatment areas, projected to generate billions of dollars in revenue.
This move is aligned with the strategy Vertex has been using over the years: target diseases with only a handful (if any) of safe and effective therapy options.
Among Vertex’s promising but ambitious programs is VX-880, a potential treatment for Type 1 diabetes.
While this could be a long shot, Vertex’s decision to buy ViaCyte for $320 million speaks volumes of the biotech’s seriousness about the endeavor. For context, ViaCyte is a private company focused on developing a functional cure for Type 1 diabetes.
This acquisition enables Vertex to add researchers who have been working on the same goal for years to contribute their expertise to the pipeline. Plus, ViaCyte can bolster Vertex’s manufacturing expertise for cell-based therapies targeting Type 1 diabetes.
Of course, there’s the work with CRISPR Therapeutics (CRSP) to develop gene therapies. Combining this collaboration with ViaCyte’s pipeline, which includes gene-edited cells created to evade the immune system, means Vertex could design a program eliminating the necessity for immunosuppressive therapy.
Meanwhile, there are other solid candidates in the biotech pipeline.
So far, Vertex has been having discussions with the FDA. The company has recently provided proof of concept data for its candidate for Exa-cel in sickle cell disease and transfusion-dependent thalassemia. Given the progress, the product should be slated for release by early 2023.
Another is VX-147, which is a kidney disease candidate that’s currently in crucial development. To date, the product is on track for accelerated approval and could start generating sales by late 2024.
On top of these, Vertex has been working on alternatives for opioids to avoid overdoses. Amid the growing concerns and data on the addictiveness of opioids, these continue to be prescribed as treatments.
This epidemic shows no signs of slowing down, with the CDC’s recent estimate increasing to 75,000 Americans dying from an overdose. According to the CDC, over 2 million Americans are addicted to opioids.
One explanation for this issue is that there is no effective alternative. While Vertex’s initial candidates failed to show an optimal profile, its latest candidate may very well be the answer.
The new candidate, VX-548, was created based on observations and research on families in Pakistan with the rare ability not to feel or experience any pain.
Due to this particular genetic abnormality, members of these families are able to walk on hot coals, get stabbed with knives, and jump from heights, and experience absolutely no pain at all.
The genetic mutation stops the peripheral nervous system from sending pain signals to the brain.
Vertex and other developers like Biogen (BIIB) are attempting to develop drugs that mimic the pain-blocking ability resulting from this genetic mutation.
If successful, VX-548’s greatest asset is its non-addictive potential, thereby making premium pricing more likely justified.
The current market for acute pain treatments annually is $4 billion, and that number is for generic pricing.
Considering that the pricing of a branded treatment would probably be at least double, then the commercial potential is massive.
Over the next 10 years, Vertex is expected to launch new biotech treatments which, combined with its current CF franchise, will propel its earnings, profit, and share price to even higher heights.
It’s currently facing the bear market without so much as breaking a sweat, with stock prices climbing by roughly 28% so far this 2022 compared to the market’s 19% decline. I suggest you don’t wait too long to buy into Vertex, as this is a top-tier biotech.
