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In the wake of the opiod epidemic, brought on in part by the success of Oxycodone, a new exceptional drug is being developed by Vertex Pharmaceuticals (NASDAQ: VRTX). With the intention of providing relief from severe pain without the addictive properties of opioids, Vertex’s new drug could be on track to replicate the success of Oxycodone – making VRTX stock one to watch this year.
It recently aced clinical trials, and as a result, the company is setting its sights on obtaining FDA approval for this revolutionary drug. If Vertex wins approval, it could add a massive $1 billion to its revenues each year from sales.
This new drug could push Vertex to the forefront of the painkiller market and the pharmaceutical industry as a whole. But Vertex has a number of other catalysts that could propel Vertex Pharmaceuticals toward a multi-billion dollar future.
VRTX’s Experimental Painkiller
Vertex Pharmaceuticals is a biotech company specializing in developing and selling medications for treating cystic fibrosis, a life-threatening disease affecting the lungs and digestive tracts. The company’s treatments for this disease include best-selling drugs like Trikafta, which brought Vertex $6.6 billion in just the first nine months of 2023. Now, it’s making a significant move in the painkillers market and adding another game-changer to its product offerings.
Recently, the company said that its experimental painkiller, which is being tested as an alternative to addictive opioids, significantly decreased post-surgery pain in late-stage trials. This new drug works by blocking pain signals at their origin before they reach the brain. In two late-stage studies on more than 1,000 patients, it was effective in reducing the intensity of pain after 48 hours.
Thanks to this news, VRTX stock had a mini rally of 2%, and the price increased to around $435.82. Still, this was enough to outpace the flat-lining S&P 500.
Even though it had impressive results, the drug, known as VX-548, didn’t work better than an opioid. But, with the opiod epidemic raising concerns for many Americans, Vertex could capitalize on the desire for an effective, and truly non-addictive painkiller.
The Opioid Epidemic
You probably know of Oxycodone, the most infamous opioid of all time. It was developed by a company called Purdue Pharma in the 1990s. The company promoted the opioid as a non-addictive drug, and Purdue Pharma incentivized many doctors to start prescribing Oxycodone to their patients across the USA.
Sadly, many Amercians became addicted to the drug they were told was non-addictive, leading to widespread abuse of Oxycodone. As a result, Purdue Pharma made more than $31 billion from it as of 2016.
But it came at a high price, in fact, 500,000 people died from overdosing on prescription and illicit opioids from 1999 to 2020. As you’d expect, Purdue Pharma was heavily criticized for its role in the epidemic. Purdue Pharma filed for bankruptcy in 2020, but oxycodone is still on the market leaving consumers and regulators are searching for a safer alternative to Oxycodone. This is where Vertex’s new painkiller steps in.
By the middle of this year, Vertex plans to file for FDA approval of VX-548 for the treatment of moderate-to-severe acute pain. This could be a game-changer for the company if it wins approval, and could also be a huge catalyst for VRTX stock.
According to Wall Street analysts’ estimates, sales from VX-548 could exceed $1 billion if it gets FDA approval. Comparatively, Purdue Pharma made around $3 billion in revenue each year since 2002, mainly from sales of OxyContin.
With time, VRTX could see similar revenue from sales of VX-548. Since the drug is not physically addictive like OxyContin, sales may never match that of Purdue Pharma’s, however its worth noting the impressive size of the pain relief market. Around 80 million patients are prescribed medicine for moderate-to-severe acute pain every year in the US and the chronic pain market is valued at more than $2.5 billion. According to estimates by RBC analysts, Vertex’s drug could earn between $300 to $400 million annually from this market.
VRTX Stock Catalysts
Besides VX-548, VRTX has two other catalysts that could make VRTX stock one to watch in 2024. The first is Exa-cel.
In 2015, Vertex entered into a strategic research collaboration with CRISPR Therapeutics (NASDAQ: CRSP). Together, they developed Exa-cel, a gene-editing therapy for sickle cell disease and beta thalassemia.
Fast forward to January of 2024, the FDA gave Exa-cel early approval, making it the first-ever gene therapy developed to treat rare blood disorders. But, the general public turned against the two companies as soon as they revealed Exa-cel’s price tag. It’s not unusual for gene therapy to be expensive, as the average cost of a gene therapy is between $1 million and $2 million per dose. Exa-cel’s price, however, is above the average at $2.2 million.
Clearly, the vast majority of the people affected by sickle cell disease and beta-thalassemia won’t be able to afford this treatment. Still, Vertex was quick to defend its pricing by comparing it to the cost of a lifetime of treatment for a sickle cell disease patient.
A lifetime of treatment for a patient with severe sickle cell disease can cost $4 million, and go up to $6 billion. On the other hand, a lifetime of treatment for a beta thalassemia patient ranges from $5 million to $7 million.
This is the argument that the two companies plan to present to health insurers, hoping to persuade them to reimburse Exa-cel. But, this won’t be an easy process, since health insurers are usually skeptical of new treatments and need to confirm whether patients will be cured, or if they may have to be re-treated down the line.
Despite these issues, Exa-cel still offers a good opportunity for Vertex, as there are 100,000 patients suffering from sickle cell disease in the U.S., and around 20 million other patients worldwide. Even if Vertex and CRISPR treat just 1% of this 20 million population, they’d gain $400 billion in sales of Exa-cel. The two companies intend to market Exa-cel globally and have already secured approval for the treatment in Saudi Arabia, Bahrain, and the UK.
European Commission Approval
Exa-cel aside, there’s another catalyst that could contribute to the company’s future growth. Vertex’s best-selling drug, Trikafta, and another drug called Kalydeco recieved approval in November 2023 from the European Commission for treatment of children ages 2 to 5 with cystic fibrosis. Thanks to this approval, both drugs will now have a much wider market in Europe.
VRTX Stock Forecast
Expecting VRTX to match the success of Purdue Pharma with OxyContin is unrealistic, however VX-548 could add notable revenue growth to the company given the market for painkillers and the search for a non-addictive alternative. As is, the company plans to apply for FDA approval for its painkiller by the middle of 2024, which could be a huge catalyst if the FDA gives VX-548 the green light.
The announcement that VX-548 had passed two Phase 3 trials sent VRTX stock to its 52-week high, and FDA approval could push VRTX stock to new highs. Looking at the daily timeframe, VRTX has been in an uptrend since 2022 – increasing 104% over this period. This steady growth is another reason to be bullish on VRTX.
Other catalysts like additional revenues from Exa-cel if health insurers agree to provide coverage for it and approval for Trikafta and Kalydeco by the European Commision are other reasons to be bullish on VRTX stock even if VX-548 does not recieve FDA approval.
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