Vertex Pharmaceuticals Just Made a $10 Billion Move. Is the Stock a Buy?

Vertex Pharmaceuticals (NASDAQ: VRTX) is a biotech company that has steadily delivered growth to investors, thanks to its dominance in cystic fibrosis (CF) treatment. The company's portfolio of CF drugs has transformed the lives of patients and helped Vertex's earnings soar well into the billions of dollars. This is likely to continue as Vertex's solid intellectual property extends its leadership through at least the late 2030s.

And in recent years, Vertex has made moves to make this story even brighter. This is by broadening its presence into other areas, with launches of a gene editing treatment for blood disorders and a pain management drug. The company has also used acquisitions to grow, and this brings me to the recent $10 billion move.

Vertex this week announced its acquisition of Crinetics Pharmaceuticals (NASDAQ: CRNX), a company that may add $5 billion in peak annual revenue to Vertex's top line. With this deal taking shape, is Vertex a buy? Let's find out.

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Vertex's CF leadership

First, let's take a look at Vertex's portfolio and general situation prior to the Crinetics move. As mentioned, the biotech is the global CF leader, specializing in CFTR modulators. These therapies correct the malfunctioning protein that causes symptoms of the disease. Since genetic mutations result in different problems with the protein, one CFTR modulator may not work for every patient. But Vertex's top drugs, Alyftrek and Trikafta, cover a lot of territory: They have the potential to treat more than 90% of the CF population.

Meanwhile, the company continues to work on possible treatments, in partnership with Moderna, for patients who can't be treated by the company's CFTR modulators. And Vertex is also developing its next generation of CF therapies. Considering the company's expertise in this area and deep pipeline, there's reason to be optimistic about leadership lasting well into the future -- and fueling steady growth. And an advancing pipeline in serious rare diseases, as well as the more common area of pain, should further bolster growth over the long run.

This expansion into other treatment areas is already bearing fruit. Earlier this year, the biotech predicted that non-CF products would contribute at least $500 million to 2026 revenue. The company has established a long track record of growth, with revenue climbing more than 600% over the past decade to $12 billion in the latest full year. And profit has also advanced, reaching more than $3 billion.

A recently approved drug

Now, let's consider the Crinetics move. Vertex is buying the company, which offers it access to the recently approved Palsonify for acromegaly, a chronic disorder caused by the overproduction of growth hormone. About 20,000 Americans are living with this disorder today. Palsonify could stand out because it's the first daily, oral treatment -- a more convenient option than the current infusions. The companies say early uptake of the drug has been strong.

Along with a pipeline of candidates and research, the deal also gives Vertex phase 3 asset atumelnant for congenital adrenal hyperplasia (CAH). The disorder, impacting 17,000 people in the U.S., involves excess androgen production that results in a variety of serious symptoms. Atumelnant could reshape the treatment landscape for this disease and also holds potential to treat Cushing's syndrome.

Together, these treatments may bring in peak revenue of $5 billion, and Vertex says this would support its goal of producing sustained revenue growth in the double digits.

A $10 billion deal

Vertex is paying $10 billion, or $85 per share, in an all-cash deal. This is two times the projected peak sales figure -- and this level of sales isn't necessarily guaranteed since atumelnant hasn't yet reached the regulatory approval stage. So, this isn't a dirt cheap price, and the intended goals aren't guaranteed. This means some risk is involved.

Still, it's a fair price considering the strength of the late-stage pipeline and a wise move for Vertex as Crinetics fits nicely into its portfolio. Crinetics' specialty in rare endocrine disorders resembles Vertex's focus on CF: Both companies prioritize serious diseases within a specialty area and with significant unmet need. And these diseases involve well-understood biology that may be targeted to transform their treatment. Vertex is also entering this story at the right time, shortly after the Palsonify launch, so that it may apply its commercialization expertise early on. And this adds an important new specialty area to the Vertex portfolio.

Though this deal may not generate enormous results overnight -- it's expected to be accretive to non-GAAP operating income in 2029 -- I think it's worth the wait. And that makes Vertex a fantastic biotech growth stock to buy and hold.

Adria Cimino has positions in Vertex Pharmaceuticals. The Motley Fool has positions in and recommends Moderna and Vertex Pharmaceuticals. The Motley Fool has a disclosure policy.