2 Top biotech stocks challenge the bear market
It is difficult to smooth over the current state of stock markets and the broader economy. Things don’t look good. Inflation, a potential recession down the road, geopolitical tensions, and supply chain issues are just some of the challenges we face. With all that said, it can be tempting to give up investing in stocks now.
However, it should be noted that some companies are doing quite well, even amid all these problems. Let’s take a look at two of these biotech companies: Vertex Pharmaceuticals (VRTX 4.79%) And the Exelixis (EXEL 0.37%). These drugmakers have done an excellent job of challenging the sell-off in the market this year, at least so far. Here’s why they can continue down this path.
1. Vertex Pharmaceuticals
Vertex Pharmaceuticals shares are up 24% year-to-date, despite macroeconomic headwinds on its way. Biotech owes this in part to its dominance in the drug market that treats the underlying causes of cystic fibrosis (CF), an area where Vertex is the only game in town.
Revenue and profits continue to grow for Vertex thanks to its CF franchise. But the market is looking to the future. The long-term prospects for post-television biotechnology also play an important role in its performance this year. Vertex is developing many exciting medicines that can be very successful.
Let’s think of two. First, there’s VX-548, a potential treatment for acute pain and neuropathic pain (pain caused by nerve damage). Although there are pain treatments, they are limited. Opioids are a standard choice for acute pain, but as we have learned from the recent opioid epidemic, their use and misuse can have profound negative consequences for entire communities.
Other medications have drawbacks, too. Acetaminophen is a common pain medication sold under many brand names, including the very familiar Tylenol. Taking too much acetaminophen is the leading cause of acute liver failure in the United States
Vertex argues that there hasn’t been much progress in this therapeutic area for decades, and that patients desperately need new options. The company plans to begin a phase three study for the VX-548 in the fourth quarter.
Second, there’s VX-880, a potential treatment for type 1 diabetes. This targets one of the underlying causes of this condition: patients’ inability to produce insulin. Vertex has released encouraging data from two patients in an ongoing phase 1/2 study of VX-880.
The patient’s first patient glucose time (TIR) - how long a person’s blood sugar remains within certain parameters – increased from 40.1% before treatment to 99.9% after 270 days of treatment, the point at which the patient achieved insulin independence. The second saw the glucose TIR increase from 35.9% to 51.9% at day 150, and the patient required 30% less exogenous insulin. The VX-880 still has a long way to go, but targeting the underlying causes of illness is an approach that has served Vertex before.
In all likelihood, the company’s next launch will be exa-cel, a potential one-off treatment for transfusion-dependent sickle cell disease and beta-thalassemia, two blood disorders with few treatment options. Vertex plans to send exa-cel orders in the US and Europe by the end of the year, with a possible launch in these respective markets sometime next year.
Within the next five years, expect the company to continue generating revenue from cystic fibrosis products while taking advantage of newer treatments. This means higher returns, higher profits and strong stock price performance. These factors make Vertex Pharmaceuticals one of the best stocks to buy right now.
Exelixis is a biotechnology focused on cancer treatments. This is not a bad place to be. While oncology is a highly competitive field of treatment in the biotechnology industry – with many of the largest pharmaceutical companies in the field – it is also one of the largest in terms of total sales and one of the fastest growing. The main product of Exelixis is Cabometyx, which treats some forms of kidney and liver cancer.
This single product has received regulatory approvals one after another, and continues to do so. It was a major new indication it acquired last year — as a first-line combination therapy for advanced renal cell carcinoma (a form of kidney cancer) — that was instrumental in increasing Exelixis’ revenue and profits.
There’s more where that comes from as Cabometyx is undergoing dozens of clinical trials, either as a standalone treatment or as a potential combination therapy. Last month, the company released positive results from a phase 3 clinical trial of its crown jewel.
Exelixis is looking to expand its revenue base. In June, the Phase III clinical trial of its candidate XL092 as a potential treatment for metastatic colorectal cancer began. This type of cancer is the third most common and third most deadly in the United States, and is difficult to treat after it has spread, when about 25% of cases are diagnosed.
Exelixis has other programs in early stage studies. Diversification into several therapeutic areas has its perks, but Exelixis’ laser-focused approach to developing new cancer treatments has been successful in the past, thanks to Cabometyx. I expect the company to continue to reap the fruits of these efforts as its current programs are finally paying off.