This is the year of biopharmaceutical stocks. The novel coronavirus has thrust previously obscure companies into the limelight — and launched their stocks as well. Take iBio (NYSE:IBIO), up 453% so far in 2020 on the strength of its IBIO-200 vaccine candidate. These stocks have tremendous potential, but also risk. They’re one failed vaccine trial away from returning to obscurity. Vertex Pharmaceuticals (NASDAQ:VRTX) is also putting up good numbers, but it’s doing so without chasing a Covid-19 cure. VRTX stock is up 31% so far this year, and that could be just the start.
Vertex is an A-rated stock that isn’t being dragged down by the coronavirus. The company also hasn’t bet the farm on finding a coronavirus vaccine.
Cystic Fibrosis and Trikafta
Vertex is a leading provider of drug treatments for patients with cystic fibrosis (CF), a genetic disorder with no known cure. It has been covering that market since 2012. However, there are multiple variations of CF. The treatment developed by Vertex was applicable to roughly 39,000 of the estimated 75,000 CF patients in the U.S., Europe and Australia.
Last October, Vertex received Food and Drug Administration approval for Trikafta. This new “triple combination therapy” is applicable to 90% of CF patients. It expands the Vertex market to about 68,000 patients.
That news lit a fuse under VRTX stock. With good reason, it turns out. In the first quarter, the company revealed that revenue had increased from $857 million to $1.52 billion. That’s a 77% year-over year increase. And Trikafta was responsible for $895 million of that. Vertex also revised its fiscal year 2020 guidance upward. The company is now projecting full-year revenue of $5.3 billion to $5.6 billion. If it hits the midpoint of the revised guidance, that would represent 36% growth over 2019.
Cell and Genetic Therapy
Cystic Fibrosis treatments are keeping the lights on at Vertex, and driving the growth of VRTX stock.
Vertex may not be entering the coronavirus fray, but the company is making some big bets outside of CF. And they come with a huge payday should they succeed. This is all part of the Vertex business model, which is focused on “creation of high-value transformative medicines for specialty markets.”
When successful, this approach aims to deliver revenue growth, high operating margins, significant cash flow, with limited sales and administrative expenses. Exactly what investors want to hear.
Last fall, Vertex spent $950 million to acquire Semma Therapeutics. The acquisition of the biotech company puts Vertex in the hunt for a potentially curative treatment for type 1 diabetes — a disease that effects over 1 million patients in the U.S. alone.
Vertex has also partnered with Crispr Therapeutics (NASDAQ:CRSP) on gene editing therapies. That collaboration has produced promising results, including CTX001. This is a potential one-time curative therapy for serious blood disorders sickle cell disease and beta thalassemia.
Vertex is also working on small molecule therapy. Included in this area of research is VX-147, which aims to treat FSGS, a rare disease that can lead to kidney failure.
Bottom Line on VRTX Stock
If you’re interested in biopharmaceutical stocks that show big promise — many of them because of their work on the coronavirus — then be sure to check out my feature “7 Top-Rated Biotech Stocks to Buy on the Hunt for a Vaccine.”
But if you’re looking for an A-rated biopharmaceutical that’s not tied to the coronavirus, Vertex is a standout. This isn’t a flashy company, but it has become dominant in the treatment of cystic fibrosis. In a time when many companies are slashing their guidance, Vertex revised its full-year revenue guidance upwards. While its Trikafta CF treatment will continue to mint money, Vertex also has big bets on type 1 diabetes and several rare blood disorders.
If one of those bets pays off, VRTX stock will take off. But in the meantime, it has posted impressive 31% growth so far in 2020. And that’s no fluke. VRTX shares have increased in value by 289% growth since 2017. The A-rating in my Portfolio Grader shows Vertex is a strong buy and worth considering for your portfolio.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.