Vertex Pharmaceuticals (VRTX 0.16%) was on track to become one of this year’s biotech winners, with the shares climbing 27% from January through a peak in November. The company, the global leader in cystic fibrosis (CF) treatments, has established a long track record of earnings growth thanks to this business — and in recent times has made significant progress on broadening into other billion-dollar treatment areas.
But in recent weeks, Vertex stock has declined, and last week it lost nearly 12% in one trading session after an element from a clinical trial report disappointed investors. Meanwhile, Vertex is heading for two pieces of news in January that could be enormous for the company.
Should you take advantage of recent losses to buy Vertex on the dip before the new year? Or is the recent clinical trial news a warning for investors? Let’s find out.
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Vertex’s cystic fibrosis empire
First, let’s consider the Vertex story so far. The company has built a CF empire, offering several treatments known as CFTR modulators. These products work by correcting a faulty protein that causes symptoms of the disease.
Different genetic mutations cause different problems with this particular protein — so CFTR modulators generally don’t work on every CF case. But Vertex’s newest blockbuster, Trikafta — approved in 2019 — made a splash when it entered the market because it can be used for about 90% of patients with the disease.
Vertex’s CFTR modulators, led by Trikafta, helped the company generate more than $9.8 billion in product revenue last year, and in the latest quarter, product revenue rose 12% to $2.7 billion. This success in CF has helped Vertex stock register long-term gains, advancing more than 80% over the past five years.
But investors have worried about the company’s ability to expand into other treatment areas. Vertex took this seriously and has put a focus on developing other key programs in recent years. It scored its first non-CF win last year when it gained approval for blood disorders treatment Casgevy, developed with partner CRISPR Therapeutics.
But Vertex hasn’t stopped there. The company also has brought suzetrigine, a candidate to treat the common problem of pain, into late-stage clinical trials. And Vertex has continued strengthening its presence in CF, developing a new CFTR modulator known as the vanzacaftor triple, or “vanza triple.”
Key dates in January 2025
And now, the company has two major moments just ahead, with enormous news that could represent billions of dollars in revenue over time. The U.S. Food and Drug Administration (FDA) is expected to issue regulatory decisions on the vanza triple by Jan. 2 and on an initial indication for suzetrigine by Jan. 30.
So, why have the shares declined in recent times? The movement that began in November may have been a case of investors locking in profits — considering the gains over five years I mentioned above.
Last week, though, one particular thing weighed on Vertex stock, and that’s news from a phase 2 trial of suzetrigine in sciatica patients. The trial met its primary endpoint, showing a significant, clinically meaningful drop in pain. But the placebo arm showed a similar performance. These results don’t impact the current regulatory review of suzetrigine, which is for moderate-to-severe acute pain.
Suzetrigine and placebo
Vertex aims to advance suzetrigine for sciatica into a phase 3 study based on the phase 2 data. But should we be concerned about the similarity of suzetrigine and placebo results?
Not necessarily. The placebo group’s responses varied greatly across trial sites — and in 40% of locations with low placebo responses, the results between the two groups had “greater separation.” So, the issue may be due to trial design, a point Vertex is studying and says it aims to work on for phase 3.
It’s also important to keep in mind that suzetrigine has produced solid results in moderate-to-severe acute pain, so there’s reason to be confident about the candidate’s potential.
Now let’s get back to our question: Should you buy Vertex on the dip before January? I’m optimistic about the current regulatory reviews and the opportunity for suzetrigine and the vanza triple down the road — whether decisions in January offer the stock an immediate lift or not. And that’s why now, on the dip, is a great moment to get in on this solid long-term biotech player.
Adria Cimino has positions in Vertex Pharmaceuticals. The Motley Fool has positions in and recommends CRISPR Therapeutics and Vertex Pharmaceuticals. The Motley Fool has a disclosure policy.
