Vertex stock advanced Tuesday as analysts debated the company's pain drug, VX-548, with one saying it could eventually be worth up to $11.4 billion in sales.
The renewed pain drug debate follows Vertex Pharmaceuticals' first quarter report. The company beat forecasts and kept its outlook for the year. Vertex also noted it has begun a rolling submission to ask the Food and Drug Administration to approve VX-548 in patients with moderate-to-severe acute pain. It expects to complete the submission later this quarter.
But analysts disagree on whether Vertex's pain drug will succeed commercially. It works by blocking a key pathway that sends pain signals to the brain. Vertex hopes its drug will eventually become an alternative to opioids, which carry the risk of addiction and other side effects.
Estimates range from $400 million in peak sales to $11.4 billion in 2032 sales, according to various reports. RBC Capital Markets analyst Brian Abrahams says the chronic pain market will be key for Vertex to crack. But the bar is high and Vertex doesn't expect to have the results from its ongoing study until 2025.
On today's stock market, Vertex stock rose 1.9%, closing at 410.24. That put shares in line with their 50-day moving average. Shares are forming a flat base with a buy point at 448.40, according to MarketSurge.
Vertex Stock: Mature CF Franchise
Vertex is the de facto leader of the market for cystic fibrosis treatments. In the first quarter, sales rose 13% to $2.69 billion. Earnings rocketed 56% to $4.76 per share on an adjusted basis. Both topped the Street's forecast for $2.58 billion and $4.08 per share, respectively.
But the pipeline is key for Vertex as its cystic fibrosis franchise matures. It's true that sales grew and beat projections, but that was partially due to inventory stocking outside the U.S. This is expected to reverse in subsequent quarters, William Blair analyst Myles Minter said in a report.
This "does likely reflect the maturity of the U.S. franchise," RBC's Abrahams said in a client note.
Vertex reiterated its outlook for the year, calling for $10.55 billion to $10.75 billion in sales of its drugs. In comparison, Vertex stock analysts forecast $10.72 billion in product sales.
The Pain Drug Debate Continues
The pain drug debate has been ongoing since January when Vertex unveiled the results of its non-opioid pain treatment in patients following abdominoplasty or bunionectomy — also known as a tummy tuck or bunion removal, respectively.
Among tummy tuck patients, VX-548 proved it wasn't inferior to opioids, but Vertex's drug did look inferior to opioids in controlling the pain of bunionectomy patients.
Risinger, the Leerink analyst, expects the pain drug to pull in $4.4 billion in 2032 sales to patients with acute pain and $7 billion in patients with neuropathic pain. The latter group generally takes Lyrica or Neurontin. Last year, there were 86 million prescriptions written for those drugs in the U.S., he said in a report.
"We continue to believe that the investment community significantly under-appreciates the unmet needs in acute and neuropathic pain, and Vertex's ability to serially innovate," he said.
He has an outperform rating on Vertex stock and took his price target to 529 from 511. Abrahams, the RBC analyst, on the other hand, has a sector perform rating on Vertex shares. He also took his price target up, from 417 to 424.
What's Next For Vertex's Pipeline?
Beyond pain, Vertex is working on a next-generation cystic fibrosis treatment, dubbed vanzacaftor. Like Trikafta, an already approved Vertex drug, vanzacaftor is a triple regimen expected to treat most patients with cystic fibrosis.
David Song, an investment partner at Tema ETFs, says vanzacaftor could further bolster Vertex's sales as the company's older medicines give way to Trikafta. Tema holds Vertex stock in its Obesity and Cardiometabolic exchange-traded fund and the Tema Neuroscience and Mental Health ETF.
"Over the next 12 to 18 months, investors are evaluating whether Vertex can sustain its CF franchise for several years and expand upon it through internal pipeline development, as well as business development," he said in an email to Investor's Business Daily.
Vertex has already asked the FDA and the European Medicines Agency to approve vanzacaftor for cystic fibrosis patients.
RBC's Abrahams noted Vertex has also resumed testing a type 1 diabetes treatment after two patients died. A committee of independent experts determined the deaths weren't due to the treatment. Vertex has also restarted testing a treatment for myotonic dystrophy following an earlier clinical hold.
"Pipeline largely remains on track," he said.
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