Three years ago, Wall Street analysts at Jefferies called Vertex the "cleanest growth story in biotech." The Boston-based company had just begun selling its third cystic fibrosis drug, and was quickly advancing a fourth that could treat a larger number of patients. Analysts envisioned that, if all went as planned, Vertex's annual revenue of about $2.5 billion could triple in the next three to five years.
If Vertex's latest earnings are any indication, those predictions appear to be coming true. On Monday, the company reported $6.2 billion in net product revenue for 2020, an increase of more than 50% that was tied to blockbuster sales from that now-approved fourth drug, known as Trikafta. Executives said that number should climb to about $6.8 billion for 2021 — reflecting another 10% increase which, while conservative for Vertex, would be ambitious for other biotechs of its size.
Compared to three years ago, "we are indeed in a different place," said Vertex CEO Reshma Kewalramani on an earnings call Monday.
Despite the growth, investors appear increasingly anxious about Vertex's path forward. Company shares traded at $219 apiece Tuesday morning, down 5% from the day prior and well off the $300 they went for this past summer.
That's because, while Vertex's cystic fibrosis business is booming, what its next big product will be is anyone's guess.
The company's most advanced program is an experimental gene-editing treatment for sickle cell disease and another rare blood disorder. While the treatment has shown promising results in a small number of patients, it has yet to generate the level of data that could win over regulators or ease some of the larger worries surrounding gene editing.
Behind that program, Vertex has been trying to develop treatments for a genetic disorder called alpha-1 antitrypsin deficiency, in which patients' bodies don't make enough of a certain protein, leading to lung and liver damage. Vertex already hit a major setback in this work last year, when its lead drug was shelved after safety concerns emerged in a mid-stage study. The company has two back ups, though, one of which should deliver proof-of-concept data in the first half of this year.
The rest of Vertex's pipeline consists of treatments for a wide assortment of illnesses, from kidney disease and pain to muscular dystrophy and Type 1 diabetes. The company argues these targets all fit a pattern: there's a clear understanding of their biology, new treatments could be transformational for patients, and they would further establish Vertex as a major player in specialty drugs.
Some aren't sold on that defense, however.
"Notwithstanding the company's catchphrases of 'cracking the biology' and 'pouring on the chemistry' ... [there are] inconsistencies between their portfolio and their strategy," wrote SVB Leerink analyst Geoffrey Porges in a note to clients.
With doubts bubbling up, Vertex has been pressed to use its massive cash reserves to expand through acquisitions. By the end of last year, Vertex held nearly $7 billion worth of cash and equivalents, giving it enough firepower to buy at least a couple assets or companies.
Vertex executives have entertained the idea of more dealmaking for a while. And over the last couple years, the biotech has been more active.
It bought Semma Therapeutics and Exonics Therapeutics in 2019, securing access to cutting-edge technologies like cell therapy and gene editing, and more recently teamed up with Skyhawk Therapeutics to research drugs that can modify RNA.
On Monday's call, leadership affirmed that Vertex remains interested in further building out its toolkit of technologies. And because of its cash position, the company said it's now more open to deals for mid- to late-stage assets, which tend to be pricier than the early-stage programs Vertex deals have focused on to date.
But beyond those details, Vertex hasn't been very specific about its future plans.
"The conference call suggests that the company will continue to avoid questions from analysts about their ability to deploy capital effectively, the amount of capital they need to invest, the balance they are aiming for between shareholder returns and portfolio expansion, the size of the pipeline they need and most importantly, the terminal size and value of their CF business," Porges wrote.