The current state of the equity markets and the broader economy is difficult to control. Things don’t look good. Inflation, a possible slowdown on the way, geopolitical tensions and supply chain issues are some of the challenges we face. With all this happening, it can be tempting to quit investing in stocks for now.
However, it is worth noting that some companies are doing fine in the midst of all these troubles. Let’s look at two such corporations in the biotech sector: Vertex Pharmaceuticals (VRTX 4.79%, And exelixis (EXEL 0.37%,, These drug makers have done an excellent job of averting the market sell-off this year, at least so far. That’s why they can proceed on that path.
1. Vertex Pharmaceuticals
Shares of Vertex Pharmaceuticals are up 24% year over year despite macroeconomic headwinds on their way. The biotech owes that to its dominance in the market for drugs that treat the underlying causes of cystic fibrosis (CF), an area in which Vertex is the only game in town.
Revenue and earnings continue to grow for Vertex thanks to its CF franchise. But the market is looking ahead. And the biotech’s long-term prospects beyond CF are also playing a key role in its performance this year. Vertex is developing several exciting drugs that could be highly successful.
Let’s consider two. First, there is VX-548, a potential treatment for acute and neuropathic pain (pain due to nerve damage). Although pain treatments do exist, they are limited. Opioids are a standard option for acute pain, but as we have recently learned from the opioid epidemic, their use and abuse can have serious negative consequences for entire communities.
Other drugs also suffer from drawbacks. Acetaminophen is a popular pain medication sold under several brand names, including the all-too-familiar Tylenol. Taking too much acetaminophen is the leading cause of acute liver failure in the US.
Vertex argues that there have been no major breakthroughs in this therapeutic area for decades, and that patients are in dire need of new options. The company plans to begin Phase III studies for the VX-548 in the fourth quarter.
Second, a potential treatment for type 1 diabetes is VX-880. It targets one of the underlying causes of the condition: the patients’ inability to produce insulin. Vertex has released encouraging data from two patients in an ongoing Phase 1/2 study of VX-880.
First patient’s glucose time in range (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, a point by which the patient has achieved insulin independence achieved. The second observed that the glucose TIR increased from 35.9% at day 150 to 51.9%, and the patient required 30% less external insulin. The VX-880 still has a long way to go, but targeting the underlying causes of a disease is an approach that has served Vertex well before.
In all likelihood, the company’s next launch will be X-Cell, a potentially outright curative treatment for sickle cell disease and transfusion-dependent beta-thalassemia, two blood disorders with few treatment options. Vertex plans to send applications for the X-Cell to the US and Europe by the end of the year, with potential launches in these respective markets sometime next year.
Within the next five years, the company expects to continue to generate revenue from its CF products while benefiting from new treatments. That means higher revenue, higher profits and a solid stock-price performance. These factors make Vertex Pharmaceuticals top stocks to buy now,
Exelixis is a biotech focused on cancer treatment. It’s not a bad place. While oncology is a highly competitive therapeutic field biotechnology industry — Along with many of the largest drug manufacturers in the region — it is one of the largest and fastest growing companies by total sales. The main product of Exelixis is Cabometyx, which treats kidney cancer and certain forms of liver cancer.
This single product has won one regulatory approval after another, and it continues to do so. Last year it earned a major new indication — as a first-line combination therapy for advanced renal cell carcinoma (a form of kidney cancer) — that was instrumental in driving Exelixis’ revenue and earnings upward.
There’s more out there than CaboMetics is undergoing dozens of clinical trials, either as a stand-alone therapy or a potential combination treatment. Last month, the company released positive results from a phase III clinical trial for its Crown Jewel.
Exelixis is looking to expand its revenue base. In June, it began a phase 3 clinical trial for its candidate XL092 as a potential treatment for metastatic colorectal cancer. This form of cancer is the third most common and third deadliest in the US, and it is challenging to treat once it has metastasized, which is when about 25% of cases are diagnosed.
Exelixis has other programs in early stage studies. Diversifying many therapeutic areas has its advantages, but Exelixis’ laser-focused approach to developing novel cancer treatments has been successful in the past, thanks to cabomitics. I expect the company to continue to reap the rewards of these efforts as its current programs eventually pay off.