Vertex Pharmaceuticals is the IBD Stock Of The Day as VRTX stock climbs higher on expectations for its next act in gene editing.
The company is partnered with Crispr Therapeutics on a gene-editing approach to sickle cell disease and beta thalassemia, two blood diseases.
Investors are watching to see what's next for Vertex. The company has a large pipeline.
Bastiano Sanna, the company's lead for cell and genetic therapies, says Vertex isn't necessarily focused on using CRISPR vs. another modality. Instead, Vertex employs a "sandbox" approach to drug development.
"We are not a platform company, we are not a technology company, we are not even a disease-area company," Sanna said in a recent interview. "We focus on particular diseases. CF was one of them. Our particular approach to a disease is we will go after a disease for which we understand the causality."
The cause of sickle cell and beta thalassemia is well understood. Due to a genetic defect, patients don't produce healthy red blood cells. So, Vertex and Crispr are using a gene-editing method called CRISPR to restore that ability. But the tech is less important, Sanna says. Vertex is focused on the disease. Still, VRTX stock has trended higher after the companies announced their plans to begin filing for Food and Drug Administration approval in sickle cell and beta thalassemia.
Vertex's approach is unusual in biotech. Many companies specialize in a technology or a disease area. For this reason, it's hard to put Vertex "into a box," Chief Operating Officer Stuart Arbuckle said in an interview.
VRTX Stock: Targeting Underlying Causes
When it comes to restoring hemoglobin production in sickle cell and beta thalassemia patients, CRISPR gene editing "is the best tool for the job," Arbuckle says. But he notes Vertex is modality agnostic.
Vertex's suite of cystic fibrosis drugs aim to correct specific mutations at the center of the disease.
It's also working on a treatment for APOL1-mediated kidney disease and Type 1 diabetes. In both cases, the company hopes to target the underlying causes of the diseases.
RBC Capital Markets analyst Brian Abrahams says VRTX stock is trading at a premium due to investor enthusiasm for its pipeline. This raises the bar for its near-term portfolio developments, including the potential approval in blood diseases, and data from kidney disease and diabetes. The company also has an early-stage effort in a liver disease called alpha-1 antitrypsin deficiency.
Meanwhile, Vertex's cystic fibrosis portfolio is maturing, he said in a recent report. The company's most recent drug, Trikafta, can treat roughly 90% of patients with the lung condition. But to continue to grow, Vertex will need to tap into new markets abroad.
"Having a near $9 billion franchise with 50% operating margins, no near-term competitive or generic threats, and an increasingly well-recognized research and development engine will continue to make Vertex difficult for quality-seeking investors to ignore," he said. But the stock's value bakes in "a lot of pipeline optimism," he said.
Abrahams has a sector perform rating on VRTX stock. He recently boosted his price target to 281 from 276.
Holding Up Well In A Flat Base
On the stock market today, VRTX stock dipped 1.1% to close at 295.23.
Shares are currently in a flat base with a buy point at 306.05, according to MarketSmith.com. Traditional breakouts have struggled this year, but VRTX stock remains above its 50-day moving line, and its base is a shallow 10%.
Bullishly, VRTX stock has a best-possible Composite Rating of 99. This means its shares rank in the top 1% of all stocks in terms of fundamental and technical measures, according to IBD Digital.
Its Relative Strength Rating of 95 puts Vertex stock in the leading 5% of all stocks when it comes to 12-month performance.
VRTX stock also is on IBD's Leaderboard, and features on two notable lists: IBD 50 and Tech Leaders.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
