Vertex Pharmaceuticals Just Found Its Newest Blockbuster Drug. A $41 Billion Market Awaits

Every big pharma company relies on a roster of just a few blockbuster drugs -- medicines that reliably bring in more than $1 billion in revenue every year -- to fund its core efforts, and to deliver solid returns to investors. So when a business like Vertex Pharmaceuticals (NASDAQ: VRTX) releases some new data on a potential blockbuster that could be just a few months away from being approved for sale, it's a big development.

On that note, let's dive in and investigate how the bull thesis for buying Vertex stock just got even stronger.

This pain reliever might reshape the market

Vertex's push to diversify its portfolio of medicines away from its traditional wheelhouse, drugs for cystic fibrosis (CF), looks like it's on the verge of bearing fruit once again. On Oct. 20, the company presented new information about its non-opioid oral analgesic candidate, suzetrigine, at the annual meeting of the American Society of Anesthesiologists (ASA).

Suzetrigine is particularly promising for a few reasons, the first of which is that it has a very large addressable market. Per a report by Grand View Research, the global market for analgesics was worth nearly $41 billion in 2023; by 2030, it'll be worth approximately $61 billion. But not too many painkillers are both non-opioid, making them less likely (or not at all likely) to cause addiction, and also effective at treating moderate to severe pain, the kind patients might experience while recovering at home from minimally invasive surgeries or outpatient procedures.

One of the standard interventions in those contexts is a combination pill commonly known by the trade name Vicodin, which features a small dose of an opioid painkiller, hydrocodone, as well as a larger dose of a non-opioid painkiller, acetaminophen. Hydrocodone, while efficient at relieving pain and typically safe when used as prescribed, is sharply habit-forming when used consistently. It's also less than ideal for treating patients with cardiovascular or respiratory difficulties, as it slows both heart rate and respiration rate.

Vertex presented data at the conference showing that suzetrigine was at least as effective as the hydrocodone-acetaminophen combination at reducing pain intensity in the 48 hours after patients underwent abdominoplasty, and almost as effective as the combination in the 48 hours after bunionectomy. The implication is that its candidate could potentially steal at least some of the market share currently held by generics like hydrocodone-acetaminophen if it's approved for sale.

Importantly, suzetrigine also appeared to have a similar and slightly more tolerable side-effect profile. One other benefit is that due to its different mechanism of action, it could theoretically be administered alongside small doses of opioid pain relievers, thereby providing more relief without incurring as many risks.

In short, there's more than one reason that suzetrigine is likely to be a blockbuster drug if it gets approved. The candidate just recently wrapped up its phase 3 clinical trials, and the company has already submitted its request for approval to regulators at the Food and Drug Administration (FDA); it should hear back by the end of January 2025.

This win isn't set in stone just yet

Now, let's put these positive findings into the context of the investment thesis for the stock, and take a moment to appreciate the obstacles that may crop up in the next few years.

Vertex's trailing-12-month revenue totaled $10.3 billion. Per an estimate formulated by GlobalData, by 2030 the new analgesic drug is expected to bring in around $1.4 billion annually. That would produce a 13.6% annual increase in the top line compared to today; that's quite significant, especially considering that the company has many other programs in its pipeline which might be approved and generating plenty of additional revenue between now and then. And that's another reason to buy the stock.

But suzetrigine's approval is not guaranteed. Nor is it guaranteed that the size of its market share will be as large as investors are hoping for right out of the gate. Remember, it wasn't proven in the phase 3 clinical trial to be superior to the standard of care for moderate to severe pain across the board. Further research and development (R&D) work, in the form of post-approval trials to clarify the niches in which it's most effective, will likely be necessary to fully unlock the candidate's value. And that will take time.

Still, all indications point to Vertex receiving approval next year. And given the high medical demand for non-opioid analgesic medicines, suzetrigine's status as a soon-to-be-blockbuster is hard to dispute. That's bullish for the stock.

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Alex Carchidi has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Vertex Pharmaceuticals. The Motley Fool has a disclosure policy.