#9: Vertex Pharmaceuticals
Vertex Pharmaceuticals (VRTX) is a case study in the volatility of development-stage pharmaceutical companies.
Though VRTX is bleeding cash as it races to research treatments, investors are so pleased with the prospects of what they see that they are willing to buy shares hand over fist even though the profits haven’t materialized yet.
Vertex specializes in “small molecule” drugs. Without getting too technical, that means Vertex treatments bind to cells in the body either to activate or inhibit certain cell functions. Right now its treatments are intended to target hepatitis, cystic fibrosis and epilepsy among other conditions.
After its potential cystic fibrosis drug saw strong results in a clinical trial, shares shot up from about $50 to $80 in April. The drug pipeline has been quiet since then, so Vertex has mostly moved sideways … but the big jump and the leap of faith by investors should show you the optimism some have about Vertex.
Of course, one bad trial could reverse those fortunes. So investors need to remember that a stock like Vertex, which operates in the red and is banking on future profits, can sour just as fast if things don’t pan out.