The best biotech stock to invest $1,000 in right now

Investing in biotech stocks isn’t for everyone. A failed clinical trial can cause a huge decline. Competition is usually fierce. Volatility is almost always present.

However, some biotech stocks are exceptions to the rule. And one in particular looks like an excellent choice even for investors who would normally avoid biotech altogether. Here are three reasons why I think so Vertex Pharmaceuticals (VRTX -2.72%) is the best biotech stock to invest $1,000 in right now.

1. Resilience

Sure, Vertex Pharmaceuticals can show some volatility. But it is away less volatile than most biotech stocks. Vertex’s beta over the past five years is a very low 0.41.

I think this low volatility is largely due to the resilience of the company. Vertex holds a monopoly in treating the underlying cause of cystic fibrosis (CF). Vertex’s closest potential rival is only in phase 2 testing — years away from even being able to compete with its drugs.

Vertex expects to generate $10.75 billion in sales this year, most of which will come from its CF franchise. An economic downturn or major geopolitical crisis shouldn’t affect the company’s revenue much, if at all. Patients will still need his CF drugs, no matter what happens in the world.

The company’s strong financial position also enhances its resilience. Its cash stock totaled $10.2 billion as of June 30.

2. Growth prospects

While Vertex’s resilience allows investors to play defense, its growth prospects allow them to go on the offensive. And that growth should be spectacular.

The company’s launch of Casgevy, which treats sickle cell disease and transfusion-dependent beta-thalassemia, is in the early stages. Casgevy is the first CRISPR gene-editing therapy to win US regulatory approval and is expected to become a stunning commercial success over time.

Vertex is awaiting US Food and Drug Administration (FDA) approvals for two potential blockbuster drugs. The FDA is expected to announce its approval decision for the triple-drug combination vanzacaftor in treating CF by January 2, 2025. A decision on the approval of suzetregine for acute pain relief is expected later that month.

The biopharmaceutical company will soon advance suzetregin into a pivotal Phase 3 trial targeting diabetic peripheral neuropathy, a type of nerve damage that sometimes affects people with diabetes. It is also moving forward in the third quarter of 2024 with a late-stage study evaluating povetacicept in treating IgA nephropathy, a rare kidney disease.

Inaxaplin is already in a phase 3 trial to treat APOL1-mediated kidney disease. This indication would open up an even bigger market than CF for Vertex if the experimental drug wins approval.

Vertex’s pipeline also includes several promising programs in Phase 1 and Phase 2 testing. These include other target indications for povetacicept and suzetrigin, a next-generation non-opioid pain drug (VX-993), a messenger RNA therapy for CF (VX-552), and a therapy targeting myotonic dystrophy type 1. more important programs for Watch, however, are the company’s islet cell therapies, which have the potential to cure type 1 diabetes.

3. Evaluation

It wouldn’t be surprising if Vertex Pharmaceuticals’ valuation was priced high given all the positives the company has going for it. However, this is not the case at all when Vertex’s growth prospects are considered.

The biotech stock’s price-to-earnings-to-growth (PEG) ratio is a very low 0.58, according to the study. London Stock Exchange Group (LSEG). Any PEG ratio below 1.0 is viewed as an attractive valuation.

The bottom line

Vertex may have some clinical failures along the way. But with more late-stage programs—which have a higher likelihood of success because they’ve already passed earlier safety and efficacy hurdles—the Vertex risk doesn’t particularly concern me.

An initial $1,000 would allow you to pick up a few shares of Vertex Pharmaceuticals. I think an investment in this biotech stock will be profitable for the rest of the decade and beyond.