Key Points

  • Thanks to its most recent acquisition, Vertex now has some promising products in the field of hormone disorders.

  • These could eventually become meaningful growth drivers for the company.

  • Vertex’s core business outside of that remains strong.

In 2012, Vertex Pharmaceuticals (NASDAQ: VRTX) earned approval for the first medicine that targeted the underlying causes of cystic fibrosis (CF), a rare disease that harms patients' lungs and pancreases. Since then, the biotech has launched several more medicines, become the undisputed leader in this field, and delivered excellent stock market returns.

However, Vertex Pharmaceuticals is entering a new era with a more diversified portfolio of approved products. And recent developments could enable the company to generate significant sales in the hormone disorder market over the medium term. Here's what investors should know.

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The largest acquisition in Vertex's history

In September, Vertex Pharmaceuticals closed its acquisition of Crinetics Pharmaceuticals for about $10 billion in cash. This was the largest acquisition in Vertex's history, and the company got several exciting assets in the process. Crinetics, which focuses on developing medicines for rare endocrine diseases, had one approved product called Palsonify. This medicine was approved in the U.S. last year and is indicated for the treatment of acromegaly, a rare hormonal condition in which the body produces too much growth hormone, causing patients' bones and organs to grow larger than they should.

If left untreated, acromegaly can be life-threatening. Surgery is typically the first option for patients with this disease. But Palsonify was approved as a first-line treatment in patients who are not eligible for surgery, or for whom surgery did not work. Its broad indication and fairly convenient once-daily oral dosing (the first once-daily oral pill for acromegaly) could make it a competitive option.

Vertex estimates that there are 20,000 patients diagnosed with acromegaly in the U.S., and another 35,000 outside the U.S. And according to the company, only 40% to 50% of patients achieve durable remission after surgery. So, there is an opportunity to target those who aren't so lucky. Palsonify wasn't the only exciting asset Vertex got its hands on thanks to its Crinetics acquisition.

The biotech giant also inherited Atumelnant, a medicine being developed to treat congenital adrenal hyperplasia (CAH) and Cushing's syndrome, both of which are rare hormonal disorders. Atumelnant is undergoing Phase 3 studies in CAH, and Phase 2 trials in Cushing's syndrome.

Vertex Pharmaceuticals has estimated that Palsonify and Atumelnant could eventually generate peak revenue exceeding $5 billion. Note that this is slightly less than half of the $12 billion in revenue the company reported last year. But sales growth within Vertex's core CF franchise has slowed in recent years. Meanwhile, Palsonify hit the market about a year ago, and Atumelnant could do so within the next couple of years, provided clinical trial results are strong. If these two medicines prove as successful as Vertex expects, its hormone disorder franchise could become a meaningful growth driver over the medium term.

Beyond CF and hormone disorders

Of course, Vertex won't rely solely on this new franchise for top-line growth. In recent years, the company has earned approvals for such products as Casgevy, a gene-editing medicine for two rare blood diseases, and Journavx, a therapy for acute pain.

Neither is contributing meaningfully to top-line growth yet, but they should in time. Further, Vertex Pharmaceuticals is racing toward other brand-new launches. The company's povetacicept, a medicine for IgA nephropathy (a kidney disease), could earn approval by the end of November.

Vertex also has several exciting pipeline candidates, such as inaxaplin, an investigational drug for APOL-1-mediated kidney disease, among others. Amid all these diversification efforts, Vertex's core CF franchise should continue delivering consistent revenue, perhaps until the company loses patent exclusivity for its most important CF drugs in the late 2030s.

All that to say, Vertex's business looks robust. The company could make important clinical and regulatory progress over the next few years, leading to improved financial results and strong stock market returns. That makes Vertex a top healthcare stock to buy for long-term investors.

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Prosper Junior Bakiny has positions in Vertex Pharmaceuticals. The Motley Fool has positions in and recommends Vertex Pharmaceuticals. The Motley Fool has a disclosure policy.