With all the ups and downs that pharmaceutical and biotech companies go through, be it trials succeeding or trials failing, it’s not all that usual to find one whose stock seems to be on a consistent uptrend. But although it’s had its fair share of haircuts and volatility, on the long term chart that’s exactly what shares of Vertex Pharmaceuticals (NASDAQ: VRTX)
have been doing for most of the last decade
They’re up 700% from the start of 2010, 74% from the start of 2019, and 35% since the start of 2020. Even the 20% trimming they took during the coronavirus crash of Q1 did little to upset their momentum. By the middle of March they’d put in their low and by the first week of April were back above pre-COVID levels and at fresh all-time highs.
This kind of performance isn’t built on hopes and dreams either but reality, almost tangible drivers. Vertex’s area of specialty when it comes to its available treatments and its development pipeline is cystic fibrosis. Its flagship drug in that space is Trikafta which has been an absolute knock-out since launching late last year. The company believes Trikafta will eventually be used to treat upwards of 90% of the world’s cystic fibrosis patients and in the meantime, its sales are more than doubling year on year.
In their Q1 earnings report, released at the end of April, overall revenue was up 76% year on year, in large part thanks to Trikafta’s performance. EPS blew analyst expectations out of the water and was up more than 120% from the same time last year.
While companies across all the industries were slashing annual forecasts if not completely writing them off in the wake of coronavirus, Vertex was actually revising its estimated revenue from its cystic fibrosis treatments upwards. The only real impact that was felt from coronavirus was in its ongoing clinical trials, some of which had to be halted or slowed in the national effort to contain the spread. In the grand scheme of things, not a big deal.
Jefferies analyst Michael Yee in particular highlighted the company’s ability to maintain its scorching pace throughout Q1 with only minor turbulence as unemployment soared, economies shut down and equities were dumped. Yee was also bullish on upcoming data from the company’s clinical trials, due in the second half of the year. In a note to clients after the Q1 earnings report, he said positive results here "could break the stock out to a new level."
In a similar vein, only two weeks ago the European Medecine’s Agency advisory group, CHMP, took on a positive opinion of Vertex’s other cystic fibrosis treatment, Kaftrio, in a formal review and will be recommending its approval for use in Europe. Investors getting involved this summer can buy into the ongoing growth and expansion of Trikafta as well as the promising future additions to its lineup.
To be sure, new investors had better be prepared for the typical volatility that comes with owning a pharmaceutical or biotech company. Even with a $75 billion market cap, Vertex’s shares are no stranger to regular pullbacks of 5-10% or more. With this in mind, the technical trader will see the solid uptrend that the stock has been following since March’s low and this could be used as a good way to time an entry.
Compared to the benchmark biotech index, IBB (NASDAQ: IBB), Vertex shares have a solid 35% to their name for 2020 already while IBB is struggling to pass the 20% mark. With a flagship product like Trikafta plowing away and an exciting pipeline of treatments potentially coming online over the next couple of months, it's all to play for and there’s no reason to think that level of outperformance will stop anytime soon.
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An insider trade occurs when a corporate executive (such as a CEO, CFO or COO) that has non-public information about a company buys or sells shares of that company's stock. Company insiders are required by law to regularly report their stock purchases and sales to the SEC.
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