The stock of Vertex Pharmaceuticals Incorporated (VRTX Quick QuoteVRTX - Free Report) has declined around 1.2% in the past three months, losing almost $3 billion of its market value. A key reason for the stock price dip was the loss recorded by the company in the second quarter due to costs related to the $4.9 billion acquisition of Alpine Immune Sciences, which closed in May.

Vertex enjoys a dominant position in the cystic franchise (“CF”) market. Vertex’s CF sales continue to grow, driven by its triple therapy, Trikafta/Kaftrio. Vertex has additional near-term launches planned — suzetrigine in acute pain and vanzacaftor triple combination (vanza triple) in CF. It is rapidly progressing its mid- and earlier-stage pipeline, with multiple milestones expected in the next 12 months.

Let’s understand the company’s strengths and weaknesses to better analyze how to play the stock given the recent dip in price.

Consistent Rise in VRTX’s CF Product Sales

Positive regulatory approvals have led to an increase in the eligible patient population for Vertex’s approved medicines in the past 5-6 years. In the first half of 2024, Vertex’s revenues rose almost 10%, driven by the continued strong performance of Trikafta/Kaftrio, including in younger age groups. While in the near term, expansion to younger age groups should drive CF sales growth, the potential launch of Vertex’s fifth CFTR modulator therapy, vanza triple, should drive growth in the medium term.

Casgevy Diversifies VRTX’s Commercial Opportunity

Vertex and partner CRISPR Therapeutics’ (CRSP Quick QuoteCRSP - Free Report) one-shot gene therapy Casgevy was approved for two blood disorders, sickle cell disease (SCD) and transfusion-dependent beta-thalassemia (TDT), in multiple regions in late 2023/early 2024. Casgevy’s approval has diversified Vertex’ commercial opportunity. 

Vertex and CRISPR Therapeutics’ Casgevy is the first-ever CRISPR/Cas9-based therapy to be approved anywhere in the world. Vertex and CRSP believe Casgevy has the potential to be a one-time functional cure for SCD and TDT patients, with an estimated patient population of approximately 35,000 across the United States and Europe.

Vertex is securing reimbursement and access to Casgevy globally. Vertex expects to record Casgevy sales from the second half of 2024.

Vertex’s New Products on the Way

Vertex’s new drug application (NDA) seeking approval for suzetrigine (formerly known as VX-548) across a broad label in moderate-to-severe acute pain is under review with the FDA. The FDA has granted a priority review to the NDA, with a decision expected on Jan. 30, 2025.

Vertex’s NDA seeking approval for vanza triple, a next-in-class triple combination regimen for treating people with CF aged six years and older, is under review with the FDA. The FDA has granted priority review to this NDA, with a decision expected on Jan. 2, 2025. Vertex’s regulatory application for vanza triple is also under review in the EU and some other countries. Vanza triple is a combination of vanzacaftor, a CFTR potentiator, deutivacaftor, a CFTR corrector and tezacaftor. This new once-a-day oral combination medicine has the potential for enhanced patient benefit than Trikafta. It has the potential to become a new standard-of-care treatment in CF. It can potentially treat CF patients who have discontinued Trikafta or other Vertex CF medicines. It can also improve dosing (once daily) and lower the royalty burden.

Vertex also plans to initiate a pivotal phase III program of suzetrigine in diabetic peripheral neuropathy, a form of peripheral neuropathic pain caused by damage to nerves, this year. Vertex has rapidly completed enrollment in a phase II study of suzetrigine in patients with painful lumbosacral radiculopathy, another form of peripheral neuropathic pain. Data from this study is expected in late 2024. Vertex believes suzetrigine has the potential to transform the treatment paradigm of pain, both acute and neuropathic. Pain is an area with limited treatment options, mostly highly addictive opioid-based medications.

Vertex’s Robust Mid-Stage Pipeline

In CF, Vertex is evaluating its medicines in younger patient populations and aims to have small-molecule treatments for most people with the condition. Additionally, Vertex is developing an mRNA therapeutic, VX-522, in partnership with Moderna (MRNA Quick QuoteMRNA - Free Report) for approximately 5,000 people with CF who do not make CFTR protein and who cannot benefit from its CFTR modulators.

The Alpine acquisition added povetacicept to Vertex’s pipeline. Povetacicept is designed to target two proteins, namely BAFF and APRIL, which are jointly responsible for the cause of multiple serious autoimmune diseases. A phase III study on povetacicept for the treatment of IgA nephropathy is expected to begin this year. Povetacicept is also being evaluated in two phase II basket studies, one in renal diseases and the second in B cell mediated cytopenias.

Vertex has a rapidly advancing mid- to late-stage pipeline in other disease areas like APOL1-mediated kidney diseases, alpha-1 antitrypsin deficiency and cell therapy for type I diabetes. Many of these candidates represent multibillion-dollar opportunities. This year is expected to be a catalyst-rich year for Vertex. It has plans to advance inaxaplin, povetacicept and suzetrigine (for DPN) into phase III studies later this year. Several important clinical milestones are expected over the next few months in its CF and non-CF portfolio.

Valuation, Estimates and Price

Vertex’s stock has gone up by 146.4% in the past three years, mainly due to its solid pipeline progress and strong CF sales. The stock has been trading above its 200-day moving average for several months.

So far this year, Vertex’s stock has risen 15.5%, underperforming the industry’s 24.5% increase. The stock has, however, outperformed the sector as well as the S&P 500, as seen in the chart below.

VRTX Stock Performance

Image Source: Zacks Investment Research

The stock is trading at a premium to the industry, as seen in the chart below.

VRTX Stock Valuation

Image Source: Zacks Investment Research

The Zacks Consensus Estimate for 2024 earnings has declined from $15.93 to 36 cents per share over the past 60 days due to acquisition costs. For 2025, earnings per share estimates have risen from $17.20 to $18.03 over the past 60 days.

Image Source: Zacks Investment Research

Stay Invested in VRTX Stock

Declining estimates for 2024, a premium valuation and the recent price drop have made investors wonder if they should sell the stock. Though the stock has declined in the past three months, its performance has been consistently strong over the past few months. The declining earnings estimates for 2024 are due to the costs related to the Alpine acquisition. The acquisition will, however, eventually boost the company’s growth. Estimates are rising for 2025, indicating analysts’ optimistic outlook for growth.

Vertex is a good stock to have in one’s portfolio based on its strong overall financial performance and robust pipeline progress. Vertex faces minimal competition in the CF franchise. CF sales are expected to remain strong despite a slight slowdown in the growth rate. Casgevy and suzetrigine (if approved) will provide the necessary diversification from the CF franchise. Its dependence on just the CF franchise for growth was a concern for several analysts but the company is gradually resolving it. The new drugs will propel its top line in future quarters.

Though VRTX’s stock currently looks expensive, we don’t see any need to sell the stock as the company has growth potential. Those who already own the stock may retain it for some time to see if its CF sales continue to rise and how the Casgevy launch progresses. Vertex presently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Those who don’t already own the stock may consider buying it at the recent dip if they want to keep it for a longer timeframe.