Investing can sometimes require a significant amount of upfront cash. For example, you might need a lot of capital to buy real estate properties or launch a new business. However, even individuals without much money can invest in stocks.
If you have $500, you should check out Vertex Pharmaceuticals (NASDAQ: VRTX). Here's why this biotech stock is a great candidate to buy and hold forever.
By the numbers
Let's talk numbers. First, Vertex's share price currently stands below $450. You could buy one share with $500 and still have enough money left over.
When some people think of biotech stocks, a mental image of a small, risky company might come to mind. That doesn't describe Vertex, though. Its market cap is around $115 billion. The drugmaker has been in business since 1989 and went public in 1991.
Vertex expects to generate revenue this year of between $10.8 billion and $10.9 billion. Nearly 93% of the company's sales come from its cystic fibrosis (CF) drug Trikafta/Kaftrio -- for now.
The big biotech company is usually highly profitable. For example, Vertex reported earnings in the third quarter of 2024 of around $1.05 billion, reflecting a strong net profit margin of almost 38%. Granted, it posted a loss in the second quarter. However, this anomaly was due to the company's acquisition of Alpine Immune Sciences.
Despite that major acquisition, Vertex still has a big cash stockpile. At the end of September, its cash, cash equivalents, and marketable securities totaled $11.2 billion. The company can easily afford another tuck-in acquisition or to continue its stock buybacks.
Vertex's tremendous potential
As solid as Vertex's financial numbers are, the more important reason to buy this stock is its tremendous potential. Vertex should soon further solidify its monopoly in treating the underlying cause of CF with the anticipated U.S. Food and Drug Administration (FDA) approval of the vanzacaftor triple-drug combination therapy by Jan. 2, 2025. I predict this combo will become the company's most successful CF therapy yet.
Meanwhile, the commercial launch of Casgevy is gaining momentum. The gene-editing therapy effectively cures sickle cell disease and transfusion-dependent beta-thalassemia. Vertex had 45 authorized treatment centers globally as of mid-October.
Another FDA approval could also be right around the corner. The agency is scheduled to make its approval decision on suzetrigine for treating moderate-to-severed acute pain by Jan. 30, 2025. Vertex is also evaluating suzetrigine in a late-stage clinical study targeting peripheral neuropathic pain. As a safe and effective non-opioid pain reliever, the drug should have a huge market opportunity.
In addition, Vertex's pipeline features three other programs in pivotal development. Inaxaplin targets APOL1-mediated kidney disease (AMKD). Povetacicept is in a late-stage clinical trial for treating IgA nephropathy, an inflammatory kidney disease. VX-880 holds the potential to cure type 1 diabetes (T1D). While its market potential could be limited due to the need for lifelong immunosuppression, Vertex has another T1D candidate in phase 1/2 testing that doesn't have this limitation.
Buy and hold forever?
Biotech stocks might seem unlikely choices to consider buying and holding forever. They can be highly volatile. Clinical setbacks present constant threats. Approved drugs eventually lose patent protection. Competition can be fierce in some cases.
However, I think Vertex's robust pipeline anchored by several promising late-stage candidates reduces its risk. Its dominance in the CF market should be secure for years to come, with U.S. patents for Trikafta/Kaftrio in force through 2037.
Importantly, Vertex is attempting to expand its horizons by targeting indications with larger patient populations than CF. Acute pain, neuropathic pain, and type 1 diabetes present especially big market opportunities.
Most biotech stocks aren't great picks for investors to buy and hold forever. But Vertex Pharmaceuticals is an exception.
* The content presented above, whether from a third party or not, is considered as general advice only. This article should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments.
