Tech Investor Notes Promising Growth Prospects in Pharmaceutical Stocks

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Tech investors have identified several large-cap stocks in the pharmaceutical industry that show great potential for growth. While opinions may vary, one standout company is Vertex Pharmaceuticals.

Veteran analyst David Risinger is optimistic about Vertex’s future. In a recent note, he revised his price target for Vertex shares upward by 10% to $442, representing a significant 20% increase from the current price of $365. Risinger is particularly interested in a pain relief drug currently being tested by Vertex and has given the company’s shares an Outperform rating.

Vertex Pharmaceuticals, headquartered in San Diego, has established itself as a leader in treating the inherited disorder known as cystic fibrosis, generating nearly $10 billion in annual sales. Additionally, the company is on the verge of receiving approval for a groundbreaking gene-editing treatment, developed in collaboration with Crispr Therapeutics, aimed at red blood cell disorders such as sickle cell disease.

According to Risinger, many large-cap biopharma companies are expected to face patent expiration issues in the coming years. However, Vertex’s cystic fibrosis products are protected until at least the mid-2030s, and the company has a robust pipeline of drugs currently in development.

Vertex’s success has not gone unnoticed in the investment community. The company’s stock has risen by 25% this year, outpacing the 18% gain of the S&P 500 index. With a market capitalization exceeding $90 billion, Vertex has garnered a significant following.

Risinger believes that Vertex’s stock will experience further growth once investors fully comprehend the potential of its pain relief franchise. This heightened recognition is anticipated to occur towards the end of the year, coinciding with the release of clinical trial results for Vertex’s innovative nonnarcotic pain medication known as VX-548.

Under the codename VX-548, this promising drug blocks pain signals in the peripheral nerves without affecting the central nervous system. Its mechanism of action is similar to that of the topical drug lidocaine, although lidocaine can impact the heart when taken internally. VX-548, on the other hand, appears to be safe for oral administration and does not carry the addiction risk associated with opioids due to its lack of impact on the brain.

Vertex’s Pain Drug: A Promising Breakthrough in Pain Therapy

Vertex is leading the way in pain therapy with its groundbreaking pain drug. The company is currently sponsoring two large Phase 3 trials to evaluate the drug’s efficacy in surgeries to remove bunions and tummy-tucks, which are common cosmetic procedures. In addition, they are also conducting Phase 2 studies to assess the drug’s potential in treating peripheral neuropathy—a painful condition affecting the nerves in the hands and feet.

Although the history of pain therapy has been marked by disappointments, Vertex’s pain drug has shown great promise. However, some investors remain skeptical due to the industry’s track record of failed attempts at developing nonaddictive painkillers. Furthermore, there are concerns regarding whether insurers will be willing to cover the costs of this expensive branded pain drug when cheaper generic opioids and other neurology drugs are readily available.

Nevertheless, experts like Risinger believe that insurers will support Vertex’s non-opioid product due to political and public relations pressures. Risinger projects that as Vertex’s product gains traction and replaces opioid prescriptions, the company could generate annual revenue of $5 billion by 2032. This substantial growth would contribute to Vertex’s overall sales, projected to increase from $9.8 billion this year to an impressive $23 billion by 2032. Such figures justify Risinger’s raised expectations and his confident price target, representing 29-times his forecast for this year’s earnings. Additionally, when factoring in Vertex’s $42 per share in cash, Risinger claims that its valuation becomes more reasonable.

Referring back to Lilly’s success last summer, where investors who initially thought the stock was expensive ended up missing out on substantial gains, Risinger draws parallels with Vertex. He sees Vertex as another stock on the cusp of significant growth.

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