Why Vertex Stock Is Soaring Today

Shares of Vertex Pharmaceuticals (VRTX 11.87%) are up by more than 11% headed into the latter half of Wednesday’s trading session, catapulted higher by the promising results achieved in a mid-stage trial of a non-opioid drug targeting peripheral neuropathic pain often suffered by diabetics. The drug, however, ultimately holds promise as a pain treatment stemming from other health problems.

Improving promise of a non-opioid painkiller

In phase 2 trials of its NaV1.8-inhibiting drug VX-548, Vertex Pharmaceuticals recorded average pain reduction on the order of 20% among diabetics exhibiting painful diabetic peripheral neuropathy. More than 30% of the trial’s participants reduced their pain levels by more than half, while over one-fifth of the phase 2 trial’s patients experienced a 70% reduction in pain levels.

Perhaps most notably, this mid-stage testing of VX-548 suggests it is safe to use, and results in modest side effects.

This is no meaningless success. The abuse of addictive opioid painkillers has evolved into an outright crisis here and abroad. The U.S. Department of Health and Human Services says around 10 million United States residents misuse prescription opioids in any given year, while the Centers for Disease Control reports over three-fourths of 2021 drug overdose deaths in the U.S. involved an opioid.

In addition to costing lives, the crisis is costing drugmakers as well as pharmacies billions in legal costs and punitive fines. All this means any effective alternative would be well received.

To this end, while VX-548’s other trials are rather limited in scope right now, Vertex Pharmaceuticals’ ultimate end goal is “changing the standard of care for neuropathic pain,” the company says. It may well end up achieving that goal, given enough time.

Right stock — but not quite the right time

The news didn’t catch investors entirely off guard. Vertex shares were already near the multiyear high they reached today, driven higher as much by the company’s cystic fibrosis drug portfolio as they were by the company’s non-opioid painkiller pipeline.

Indeed, with as much promise as VX-548 holds, it could be several more years before non-opioid pain therapies become meaningfully mainstreamed (if they’re ever going to be). Once Wednesday’s euphoria wears off, don’t be surprised to see this stock peel back from today’s highs.

If your portfolio needs more exposure to the healthcare sector, though — and to the pharmaceutical sector in particular — any dip from Vertex Pharmaceuticals shares is an entry opportunity into a quality stock. The profitable company is expected to report slow-but-steady growth for the foreseeable future, with annualized earnings growth of around 9% in the cards at least through 2027.

The forward-looking price/earnings ratio of 26.0 isn’t an outrageous price to pay, but with a little patience, you can probably get in at an even better price.