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Better Buy: Vertex Pharmaceuticals vs. Galapagos

Keith Speights, The Motley Fool

For a while, Vertex Pharmaceuticals (NASDAQ: VRTX) and Galapagos (NASDAQ: GLPG) appeared to be headed for a showdown. Both biotechs were scrambling to develop triple-drug combination therapies for treating cystic fibrosis (CF). But not long after disappointing results for one of the key drugs intended for its combo CF treatments, Galapagos ended up handing its CF program over to its partner, AbbVie.

Although Vertex and Galapagos no longer will be direct rivals, they still compete in another way -- for investors' money. Which of these biotech stocks is the better pick? Here's how Vertex and Galapagos stack up against each other.

Three scientists with an image of a DNA double helix in the foreground

Image source: Getty Images.

The case for Vertex

Vertex basically enjoys a monopoly right now in treating CF. The company has two blockbuster CF drugs with Kalydeco and Orkambi plus another, Symdeko, that's on pace to top $1 billion in sales this year.

Significant growth should be achievable for Vertex with these three drugs alone. Around 18,000 patients currently receive one of the biotech's CF drugs, but there are around 39,000 patients eligible for being treated with Kalydeco, Orkambi, or Symdeko. As Vertex gains additional label expansions to treat younger patients, the target population is expected to increase to 44,000.

Of course, Vertex isn't content to rely only on its current three drugs for growth. The company expects to file for U.S. regulatory approval of a triple-drug CF combo in the third quarter of 2019, followed by submission for European approval later in the year. Vertex believes that its triple-drug combos will boost the eligible number of patients to 68,000, leaving only around 7,000 CF patients worldwide with no effective treatment for the underlying cause of their disease.

But Vertex is working with CRISPR Therapeutics to develop gene editing therapies for these remaining CF patients. It also teamed up with CRISPR Therapeutics on CTX-001, a gene editing treatment targeting rare blood diseases beta-thalassemia and sickle cell disease.

In addition, Vertex's pipeline includes a promising pain drug, VX-150, that is in a phase 2 dose-ranging clinical study. The biotech is evaluating VX-814 in a phase 1 study for treating alpha-1 antitrypsin deficiency, a genetic disease that Vertex CEO Jeff Leiden said in the company's Q1 conference call "looks and smells" like CF.

Thanks to its CF success, Vertex claims a steadily increasing cash stockpile. At the end of 2018, the company had $3.2 billion in cash on hand, up from $2.1 billion at the end of the previous year. Expect Vertex to put this cash to use in adding more pipeline assets that could fuel future growth.

The case for Galapagos

Although Galapagos isn't developing CF drugs now, the biotech claims one of the most promising immunology candidates around and a partnership with one of the biggest biotechs around. I'm referring to Galapagos' collaboration with Gilead Sciences (NASDAQ: GILD) on filgotinib.

Filgotinib demonstrated strong efficacy in multiple phase 3 clinical studies in treating rheumatoid arthritis. Gilead plans to submit the drug for approval in Europe later this year. What about U.S. approval? It's complicated.

Because of concerns about testicular toxicity, the FDA wants Gilead and Galapagos to complete a safety study evaluating filgotinib in adult males with ulcerative colitis. This study isn't expected to wrap up until 2022.

But new Gilead Sciences CEO Daniel O'Day said on his company's Q1 conference call that he wants to "accelerate some of the plans around filgotinib." Gilead plans to talk with the FDA. It seems possible that the big biotech could file for U.S. approval of filgotinib sooner than anticipated. That would be great news for Galapagos. 

Filgotinib isn't Galapagos' only promising pipeline candidate, though. The biotech is evaluating GLPG1690 in a late-stage study targeting idiopathic pulmonary fibrosis (IPF). It's working with French drugmaker Servier on a phase 2 study of GLPG1972 in treating osteoarthritis. In addition, Galapagos and partner MorphoSys are conducting phase 1 and phase 2 studies evaluating MOR106 in treating atopic dermatitis.

Better buy

Galapagos could be on its way to major success if filgotinib wins regulatory approvals. Analysts think the drug could eventually generate peak annual sales of up to $6 billion. But there's no question in my mind that Vertex will be the better stock over the long run.

Vertex's revenue and earnings continue to soar on the strength of its three approved CF drugs. It has an even bigger winner on the way with its triple drug combo. And its pipeline includes several promising candidates. I think that Vertex isn't just a better buy than Galapagos. It's probably the best biotech stock on the market overall

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Keith Speights owns shares of AbbVie, Gilead Sciences, and Vertex Pharmaceuticals. The Motley Fool owns shares of and recommends Gilead Sciences. The Motley Fool owns shares of CRISPR Therapeutics. The Motley Fool recommends Vertex Pharmaceuticals. The Motley Fool has a disclosure policy.