Vertex stock was already floundering even before Thursday when the company's non-opioid pain drug underperformed expectations in a midstage study. Then investors hammered shares of Vertex Pharmaceuticals.
The biotech stock plummeted as much as 15.6%, undercutting its 200-day line in huge volume, according to IBD MarketSurge. Analysts say the future of Vertex's suzetrigine is now in doubt. Researchers tested suzetrigine in patients with a common cause of lower back and hip pain. But, while patients showed improvement in pain levels, there was little difference from the placebo group.
The results "raise considerable risk around suzetrigine's potential across multi-$B chronic pain indications," RBC Capital Markets analyst Brian Abrahams said in a client note. "Given these data and high multiples which assumed pipeline successes that would drive growth, we expect meaningful stock downside on today's news."
Vertex Pharma is one of the biggest names in biotech. In terms of market cap, it ranks third behind Amgen and Gilead Sciences.
The company is working hard to break out of its cystic fibrosis focus. It now has an approved gene-editing drug in partnership with Crispr Therapeutics and is trying to move ahead in pain treatment. But, given how long it takes to prepare patients for gene-editing treatments, uptake has been incredibly slow for it Crispr-partnered Casgevy treatment. And the non-opioid pain drug has faced two high-profile setbacks.
So, is Vertex stock now a sell?
Vertex Stock: Trikafta Drives Growth
Vertex is best-known for its cystic fibrosis treatment, Trikafta. During the third quarter, Trikafta generated $2.77 billion in sales, up 12% compared to the same three months last year. Trikafta accounted for more than 93% of Vertex Pharmaceuticals' third-quarter sales.
The third quarter also featured the first revenue from a patient with sickle cell disease infused with the gene-editing drug, Casgevy. But Vertex doesn't break out those sales. It simply lists "other products." Those brought in $186.9 million in revenue.
For the December-ending quarter, analysts polled by FactSet expect Vertex Pharmaceuticals to report adjusted earnings of $4.05 per share on $2.79 billion in sales. Earnings would fall almost 4% as sales rise nearly 11%.
The company guided to $10.8 billion to $10.9 billion in product sales for the year. That number doesn't include revenue from licensing or other deals.
Shares Undercut 200-Day Line
From a technical standpoint, Vertex stock dropped markedly below its 200-day moving average on Wednesday and continued falling on Thursday. Shares were already below their 50-day line, having crossed that mark on Nov. 15.
The stock successfully broke out of a flat base with a buy point at 510.63 on Nov. 8. But shares later undercut that entry. Now that Vertex stock is below its moving averages, it will have a hard time recapturing that buy point.
Shares also have a middling IBD Digital Relative Strength Rating of 51. This means Vertex stock ranks only narrowly in the top half of all stocks when it comes to 12-month performance.
Vertex stock has a slightly better Composite Rating of 79. The CR is a 1-to-99 measure of a stock's fundamental and technical performance.
Mixed News For Vertex Stock
Recent news has been mixed for Vertex stock.
The pain drug news rocked shares, which fell 11.4%. Vertex Pharmaceuticals tested suzetrigine in patients with lumbosacral radiculopathy, also known as LSR or sciatica. On an 11-point scale, patients who received the pain drug had a 2.02-point improvement in pain levels. But that was similar to a 1.98-point improvement for the placebo.
Though the study met Vertex's goal, investors were disappointed with the comparison between the drug and the placebo. But Vertex noted the study wasn't set up to compare the two. Further, some sites had higher placebo responses, the company said.
It's still planning to move suzetrigine into Phase 3 testing. The company is already running a final-phase test of the pain drug in patients with diabetic neuropathy. It will likely need both to succeed to win approval for suzetrigine as a chronic pain treatment.
In acute pain, suzetrigine showed promise in patients who received a tummy tuck, but was inferior to opioids in patients who'd had a bunion removed. The Food and Drug Administration is expected to make an approval decision on suzetrigine for acute pain treatment in January.
Promisingly, Vertex unveiled long-term safety data for Casgevy in patients with sickle cell and beta thalassemia. Both are blood diseases related to the formation of hemoglobin, a protein that helps red blood cells carry oxygen throughout the body. The longest term follow-up is now five years.
In sickle cell disease, 39 out of 42 patients, or 93%, no longer experienced vaso-occlusive crises after Casgevy infusion. Vaso-occlusive crises are episodes of extreme pain that occur when the sickled red blood cells get trapped in the blood vessels.
Out of 54 patients with beta thalassemia, 53 didn't need any blood transfusions for at least a year following treatment with Casgevy.
Is Vertex Stock A Sell?
By at least one metric, shares were a sell when they definitively undercut their 200-day line on Wednesday and continued their downfall on Thursday. Some investors will undoubtedly get trapped in a hold-and-hope spiral. But The IBD Methodology, of which risk management is one of four key pillars, would suggest selling shares and looking for a new entry later down the line.
But investors who haven't sold on market jitters could hold onto shares in the hopes of a better readout in diabetic neuropathy.
It will be key to watch how Vertex Pharmaceuticals progresses in pain treatment, and whether the Crispr-partnered gene-editing drug can gain steam.
The latter could eventually face competition from other gene-editing drugs. Beam Therapeutics and Verve Therapeutics are also testing gene-editing approaches to sickle cell disease.
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Follow Allison Gatlin on X, the platform formerly known as Twitter, at @IBD_AGatlin.
