Investing in biotech stocks is not for everyone as the nature of their business is risky. As a result, biotech stocks can be very volatile.
However, some exceptions are not nearly as risky. In fact, a few are virtually no-brainer choices for long-term investors. This is why I think Vertex Pharmaceutica (NASDAQ: VRTX) is the ultimate biotech stock you can buy right now with $500.
Many biotechnology companies do not have approved products on the market and therefore do not generate reliable revenues. From time to time they need to raise additional capital – often through the dilutive issuance of new shares. This poses one of the biggest challenges when investing in clinical-stage biotech stocks.
However, Vertex Pharmaceuticals already has four therapies for cystic fibrosis (CF) on the market. It also fuels the commercial launch of Casgevy, a gene-editing therapy that is a one-time treatment for the rare blood diseases sickle cell disease and transfusion-dependent beta-thalassemia.
The company’s revenue for the first nine months of 2024 totaled $8.1 billion, and Vertex expects to bring in about $10.9 billion for the full year. Sure, the major biotech leader posted a net loss of $1.45 billion in the first three quarters. However, this loss was due to the acquisition of Alpine Immune Sciences, an investment that is expected to yield rich returns.
Vertex typically delivers solid profits. The proof in the pudding is the company’s $11.2 billion in cash, cash equivalents and marketable securities. This stockpile of cash would have been even larger had Vertex not used some cash on the Alpine deal and to buy back shares.
One of the most important factors to consider with biotech stocks is their pipeline potential. What does Vertex’s pipeline look like? Exceptionally good, in my opinion.
Vertex is awaiting two approvals from the US Food and Drug Administration (FDA) in the next eight weeks. The FDA should announce an approval decision on the triple combination of Vertex vanzacaftor in the treatment of CF by January 2, 2025. The agency expects to announce its approval decision on suzetrigine in the treatment of acute pain by January 30, 2025.
I predict that both drugs will receive FDA approval and become huge blockbusters for Vertex. The vanzacaftor triple offers more convenient dosing (once a day) and is more potent than Trikafta, the company’s lead CF drug that currently generates nearly 93% of total sales. It also has a much lower royalty burden than Vertex’s other CF drugs, meaning it should be more profitable. Suzetrigine is a non-opioid pain therapy that should have significant commercial potential.
