Why Vertex Pharmaceuticals is My Top Pick for Growth Investment

Investors around the world have countless publicly traded companies to choose from when deciding where to invest their money. Each investor has their unique preferences based on various factors, such as risk tolerance, investment goals, and the time they can commit to investing. Due to this diversity in individual circumstances, it’s challenging to identify one stock that every investor should consider.

However, personally, I find the healthcare sector fascinating, and my top pick for a growth stock is Vertex Pharmaceuticals (VRTX). This article will explain why investing in Vertex could be a smart decision for many.

A Business That Thrives in All Environments

Market fluctuations can lead to challenges for many businesses. During economic downturns, consumers are generally cautious about spending, impacting the revenue of various sectors. However, companies that focus on lifesaving treatments, like Vertex, tend to have a degree of protection against these economic shifts. Even when times are tough, doctors still prescribe medications for critical illnesses like cystic fibrosis (CF), which can be life-threatening if untreated.

Since the early 2010s, Vertex has strongly focused on treating CF and is recognized for offering the only approved therapies that address the root causes of the disease. This unique position in the market gives Vertex significant pricing power, a substantial edge over competitors.

Even though Vertex has made remarkable progress in addressing the needs of the approximate 109,000 CF patients worldwide—nearly 94,000 in core regions like North America and Europe—there is still plenty of growth potential. Today, about 75% of CF patients in these primary markets have begun treatment with Vertex's most effective drug, Trikafta. In other parts of the world, that figure is around 33%.

Recently, Vertex gained approval for another CF medication, Alyftrek, which requires just one dose a day, compared to the two doses needed for Trikafta. The company is also working on new therapies targeted at the small portion of CF patients who don't respond to existing drugs, ensuring that Vertex can maintain its momentum in generating revenue despite economic obstacles.

Diversification for Future Growth

Vertex's existing CF drugs, Trikafta and Alyftrek, have patent protections that extend into the late 2030s. Nonetheless, there is always a risk that other biotech firms might develop competing treatments. To mitigate this risk, Vertex has been diversifying its product lineup. In 2023, the company received approval for Casgevy, a gene-editing therapy aimed at treating two rare diseases, developed in collaboration with CRISPR Therapeutics.

Furthermore, in January, Vertex's Journavx, a medication designed to manage acute pain, was also approved by the U.S. Food and Drug Administration. This expansion into different therapeutic areas shows that Vertex is actively working on innovation beyond its original focus on CF. The company has multiple candidates in its development pipeline, including phase 3 trials for inaxaplin, a potential treatment for APOL-1 mediated kidney disease, among others.

While not all these new product initiatives will succeed, Vertex is wisely venturing into diverse areas, which should result in at least some successful new therapies. Journavx and Casgevy's success already illustrates this strategy's potential payoffs, with more innovation expected in the upcoming years.

An Excellent Long-Term Investment

Vertex Pharmaceuticals may not be suitable for every investor. For instance, those seeking immediate income will be disappointed as the company does not pay dividends. On the other hand, investors looking to engage with a company poised for growth over the next decade or more may find Vertex appealing.

The company boasts strong medicines driving ongoing revenue growth, a business model that remains resilient in various economic climates, and a culture focused on innovation and breakthrough therapies. Therefore, if I could choose only one stock to invest in presently, it would undoubtedly be Vertex Pharmaceuticals.

Author has stock positions in Vertex Pharmaceuticals.

investing, healthcare, stocks