Of the qualities a biotech company needs to be successful, being innovative is one of the most important. It’s easy to understand why.
Although medicines and vaccines benefit from patent protection for a while, this will eventually run out and the invention will enter the public domain, bringing with it the challenge of cheaper generics and biosimilars. Long-term performance thus requires drug makers to continually develop newer products. When looking for biotech stocks to invest in, it’s helpful to start by looking at the stocks that appear to have a good track record in this area.
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Let’s look at two examples: Vertex Pharmaceutica (NASDAQ: VRTX) And Modern (NASDAQ: MRNA). Here’s why these biotech companies are worth investing in this month.
Vertex Pharmaceuticals is at something of an inflection point. The company has achieved tremendous success over the past decade thanks to its work in the market for drugs that treat the underlying causes of cystic fibrosis (CF), a rare disease that attacks patients’ organs. Many drug companies have tried and failed (so far) to develop competing drugs, which speaks volumes about Vertex’s innovative capabilities.
However, the biotech is expanding its range far beyond its core area of expertise. It’s not because the CF franchise is running out. In the third quarter, the company’s revenue of $2.77 billion rose 12% year over year, a strong performance for a biotech giant. The company’s best CF treatment to date, Trikafta, accounted for almost all of its sales.
So things are going well in that department for Vertex, and they are about to improve. The company is awaiting approval for a next-generation CF therapy that can be taken once a day (Trikafta is taken twice a day). About 20,000 CF patients of the 92,000 where Vertex operates are eligible for current medications, but have yet to begin treatment. This franchise will therefore remain an important growth driver.
Elsewhere, Vertex will earn new approvals. In fact, she has already done this. Last year it got the nod for Casgevy, a gene-editing treatment for two rare blood disorders: transfusion-dependent beta-thalassemia and sickle cell disease. Gene editing therapies are complex to administer. Therefore, Casgevy is not yet contributing to Vertex’s results, but it will do so over time.
The company is also awaiting approval for suzetrigine in the treatment of acute pain. Many current pain treatments have serious potential side effects. That’s the problem Vertex Pharmaceuticals is trying to solve. Furthermore, the Phase 3 pipeline includes an investigational drug for APOL-1-mediated kidney disease, called inaxaplin, and another drug for IgA nephropathy, called povetacicept.
Vertex’s portfolio of approved drugs will look different in five years. But one thing likely won’t change: the company’s ability to deliver excellent financial results and market-beating performance.
Moderna rose to prominence during the pandemic. It has done the world a huge service by developing an effective mRNA vaccine against COVID-19, which has played a major role in overcoming the worst phases of the outbreak. However, Moderna’s revenue and earnings have fallen off a cliff over the past two years.
That said, the company’s dominance in the coronavirus space has allowed it to lay the foundation for future success. Thanks to its expertise in the relatively new field of mRNA vaccines – the first of which were approved during the pandemic – Moderna will successfully expand its range in the coming years. It has already received its first approval, that of mRESVIA, a vaccine against respiratory syncytial virus (RSV).
It reported positive late-stage results for a combination coronavirus-flu vaccine. Currently, patients must receive two injections to be vaccinated against both diseases (I did that; it’s not fun). A single injection would be attractive to many, provided it does not come at the expense of safety or efficacy. Moderna’s vaccine did not appear to do that, based on the data it released.
One of the company’s other promising candidates is a personalized cancer vaccine that it is developing together with the oncology giant Merck. This candidate is currently in Phase 3 study.
Moderna’s pipeline includes many more programs in various stages of development. The company’s shares are down 31% in the past year and 81% in the past three years, but the long-term prospects look attractive. Investors should seriously consider investing in Moderna this month.
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Prosper Junior Bakiny holds positions at Vertex Pharmaceuticals. The Motley Fool holds positions in and recommends Merck and Vertex Pharmaceuticals. The Motley Fool recommends Moderna. The Motley Fool has a disclosure policy.
2 Biotech Stocks to Buy on Hand This Month was originally published by The Motley Fool
