Among the qualities a biotech company needs to be successful, being innovative is one of the most important. It’s easy to understand why.
Although drugs and vaccines benefit from patent protection for some time, this will eventually run out, at which point the invention enters the public domain, inviting the challenge of cheaper generics and biosimilars. So, long-term performance requires drugmakers to develop newer products continuously. When looking for biotech stocks to invest in, it’s useful to start by looking at those that seem to have a good track record in this department.
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Let’s consider two examples: Vertex Pharmaceuticals(NASDAQ: VRTX) and Moderna(NASDAQ: MRNA). Here’s why these biotechs are worth investing in this month.
Vertex Pharmaceuticals is at an inflection point of sorts. The company has been a terrific performer over the past decade due to its work in the market for drugs that treat the underlying causes of cystic fibrosis (CF), a rare disease that affects patients’ organs. Plenty of drugmakers have tried but failed (so far) to develop competing medicines, which speaks volumes about Vertex’s innovative abilities.
However, the biotech is expanding its lineup well beyond its core area of expertise. It’s not because its CF franchise is running out of steam. In the third quarter, the company’s revenue of $2.77 billion increased by 12% year over year, a strong performance for a biotech giant. The company’s best CF treatment yet, Trikafta, accounted for almost all its sales.
So, things are going well in that department for Vertex, and they are about to improve. The company is awaiting approval for a next-gen CF therapy that can be taken once daily (Trikafta is taken twice daily). About 20,000 CF patients out of 92,000 where Vertex operates are eligible for its current medicines, but have yet to start treatment. So, this franchise will remain a key growth driver.
Elsewhere, Vertex will earn new approvals. In fact, it has already done so. Last year, it got the nod for Casgevy, a gene-editing treatment for two rare blood disorders: transfusion-dependent beta-thalassemia and sickle cell disease. Gene-editing therapies are complex to administer. That’s why Casgevy isn’t yet contributing to Vertex’s results, but it will eventually.
The company is also awaiting approval for suzetrigine in treating acute pain. Many current pain treatments come with severe potential side effects. That’s the problem Vertex Pharmaceuticals is trying to solve. Further, its phase 3 pipeline features an investigational medicine for APOL-1 mediated kidney disease called inaxaplin, and another for IgA nephropathy called povetacicept.
Vertex’a portfolio of approved drugs will look different in five years. But one thing likely won’t change: the company’s ability to deliver excellent financial results and market-beating performances.
Moderna surged to prominence during the pandemic. It did the world a tremendous service by developing an effective mRNA vaccine against COVID-19, playing an important role in our moving past the worst stages of the outbreak. However, Moderna’s revenue and earnings have fallen off a cliff over the past two years.
MRNA Revenue (Quarterly) Chart
That said, the company’s dominance in the coronavirus arena has allowed it to lay down the groundwork for future success. Thanks to its expertise in the relatively new field of mRNA vaccines — the first of which were approved during the pandemic — Moderna will successfully expand its lineup in the coming years. It has already earned its first approval, that of mRESVIA, a vaccine against the respiratory syncytial virus (RSV).
It reported positive late-stage results for a combination coronavirus/flu vaccine. Right now, patients have to get two shots to get inoculated against both diseases (I did; it’s not fun). A single shot would be attractive to many, provided it did not sacrifice safety or efficacy. Moderna’s vaccine didn’t seem to do that, based on the data it released.
One of the company’s other highly promising candidates is a personalized cancer vaccine it is developing with oncology giant Merck. This candidate is currently in phase 3 studies.
Moderna’s pipeline has many more programs in various stages of development. The company’s shares are down by 31% in the past year and by 81% in the past three, but its long-term prospects look attractive. Investors should seriously consider investing in Moderna this month.
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Prosper Junior Bakiny has positions in Vertex Pharmaceuticals. The Motley Fool has positions in and recommends Merck and Vertex Pharmaceuticals. The Motley Fool recommends Moderna. The Motley Fool has a disclosure policy.
