Is Vertex Pharmaceuticals Stock a Buy?

Investors seeking relief from the stock market turbulence at the start of 2025 should take a close look at Vertex Pharmaceuticals (NASDAQ: VRTX). Compared to the S&P 500 index, which is down about 16% from its record high at the time of writing, Vertex shares have outperformed, up 20% year to date.

Vertex continues to capitalize on its leadership in cystic fibrosis (CF) treatments, where its blockbuster drug Trikafta is driving record sales. The company is also poised to benefit from two recent new drug approvals by the FDA, alongside several upcoming milestones in its extensive clinical pipeline portfolio.

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Will these developments be enough to sustain the rally? Let's discuss whether Vertex Pharmaceuticals stock is a buy now.

A diversifying biotech leader

The past year has been transformative for Vertex, marked by the launch of Casgevy, a groundbreaking treatment for sickle cell disease patients. This one-time, gene-edited cell therapy, developed with CRISPR Therapeutics, offers a revolutionary alternative to existing treatments that typically provide only temporary relief.

Heading into 2025, an even bigger game changer for the company may be Journavx, approved in January by the FDA as the first oral non-opioid painkiller in its class. Journavx taps into a massive market of over 80 million U.S. patients prescribed treatments for moderate-to-severe acute pain annually. The pill's arrival coincides with federal and state legislation, including the NOPAIN Act, effective January 2025, which supports Medicare incentives for non-opioid alternatives to curb addiction and overdose fatalities.

Casgevy and Journavx are poised to become significant growth drivers for Vertex Pharmaceuticals in the coming years, marking pivotal steps in the company's push to diversify its portfolio. With cystic fibrosis treatments – led by Trikafta (marketed as Kaftrio in Europe and other regions) -- currently accounting for over 93% of total revenue, these two potentially multibillion-dollar franchises underscore Vertex's ongoing effort to reduce its dependence on CF therapies by expanding into new therapeutic areas.

The company plans to seek expanded indications and entry into new markets for its existing portfolio of products while moving forward with clinical trials in areas like kidney disease and renal disease. Multiple data readouts expected this year could be a catalyst for the stock.

Image source: Getty Images.

A strong growth outlook

With cystic fibrosis therapies remaining the core business, Vertex has posted impressive growth trends. In 2024, total revenue reached $11 billion, up 12% year over year, with the pace accelerating into the fourth quarter. Although annual profitability was impacted by the acquisition of Alpine Immune Sciences last year, Vertex maintains a rock-solid balance sheet with $11.2 billion in cash.

For 2025, the company is guiding for revenue between $11.75 billion and $12.0 billion, representing a 9% annual increase at the midpoint. This includes expectations for continued growth in cystic fibrosis, alongside early traction in Casgevy, as Journavx sales ramp up in the second half of the year. According to Wall Street analysts, the estimated 2025 adjusted earnings per share (EPS) of $18.04, if confirmed, would surpass the previous company record of $15.23 set in 2023.

Worthy of a valuation premium

Vertex's sales runway extending into the next decade contrasts with biotech industry peers struggling to accelerate growth or facing uncertainties surrounding a patent cliff for their key drugs. Companies like Merck and Bristol Myers Squibb are grappling with a looming wave of generic drugs contesting their market share in high-profile blockbuster drugs.

This dynamic helps justify Vertex's valuation premium, with shares trading at 27 times its estimated EPS as a forward price-to-earnings (P/E) ratio. While the stock is pricier compared to companies like Gilead Sciences and Regeneron Pharmaceuticals, which trade at a forward P/E closer to 14, Vertex may have more earnings momentum in the coming years.

VRTX PE Ratio (Forward) data by YCharts

The big picture for investors

Vertex's strong growth prospects, ongoing drug portfolio diversification, and an industry-leading position make it a compelling investment opportunity. This is a case where investors should stick with a winning stock as the company is well supported by fundamentals. I'm bullish on Vertex Pharmaceuticals and predict more upside for its shares in 2025.

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Dan Victor has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AbbVie, Bristol Myers Squibb, CRISPR Therapeutics, Gilead Sciences, Merck, Regeneron Pharmaceuticals, and Vertex Pharmaceuticals. The Motley Fool has a disclosure policy.