Forget Centessa Pharmaceuticals: This Rare‑Disease Specialist Has a Superior Portfolio and Pipeline

Over the past year, shares of Centessa Pharmaceuticals (NASDAQ: CNTA) have significantly outperformed broader equities as the biotech has made tremendous progress with a promising pipeline candidate. However, it's worth wondering whether the drugmaker still has significant upside left after this run.

Maybe it does, but before buying shares of Centessa, investors should consider another larger, well-established biotech with (arguably) much better prospects: Vertex Pharmaceuticals (NASDAQ: VRTX).

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Centessa's strengths and weaknesses

Centessa Pharmaceuticals is developing a medicine called ORX750 for narcolepsy type 1 (NT1), narcolepsy type 2 (NT2), and idiopathic hypersomnia (IH). ORX750 is an orexin receptor agonist -- that is, it mimics the action of the orexin protein in the brain, which plays a role in regulating wakefulness (patients with narcolepsy, especially NT1, have a deficiency in orexin). ORX750 looks promising for at least two reasons.

First, there is its potential for broad applicability across NT1, NT2, and IH, as few medicines target all three (only one is approved for IH in the U.S). This could make ORX750 a foundational therapy in its niche. Second, ORX750 has a novel mechanism of action that could make it a best-in-class treatment for these conditions. It has already performed well in phase 2 clinical trials in patients with NT1 and NT2. So far, so good.

However, there are significant risks here. Centessa Pharmaceuticals has yet to demonstrate ORX750's efficacy in late-stage studies that can support approval. As a smaller biotech company without a single product on the market, generating no revenue and consistently unprofitable, significant clinical or regulatory setbacks could sink the stock -- or worse. Biotechs in this position sometimes go out of business if their late-stage candidates flop.

So, while Centessa Pharmaceuticals looks promising, investing in this company isn't for the faint of heart.

Why Vertex Pharmaceuticals is a better buy

Vertex Pharmaceuticals is a bit of a model for smaller biotechs. The company successfully revolutionized the standard of care in cystic fibrosis (CF), a rare lung disease. Vertex's medicines are the only ones on the market that treat the underlying causes of CF. The drugmaker generates consistent revenue and earnings as a result. That already makes it a safer option than the smaller Centessa.

However, Vertex is also working hard to expand its lineup, which it has done successfully in recent years. It launched Journavx, a medicine for acute pain. While there are plenty of pain therapies, many, including opioid-based ones, come with severe potential side effects. Vertex's goal was to market the first oral, non-opioid pain inhibitor. Mission accomplished. The company also broke new ground with the launch of Casgevy, a gene-editing therapy for a pair of blood-related diseases, as it was the first CRISPR-based medicine to receive regulatory approval.

What's next for Vertex Pharmaceuticals? The company's several late-stage pipeline candidates should make progress in the next few years and further transform its portfolio. There is zimislecel, a potential therapy for Type 1 diabetes. Vertex Plans to send regulatory approval requests this year, provided the data from ongoing studies are positive. So far, it looks good. Zimislecel has restored most patients' ability to produce their own insulin, something people with T1D normally can't do.

There is also inaxaplin, an investigational therapy for APOL-1 mediated kidney disease, and povetacicept, a potential medicine for IgA nephropathy. Both are in late-stage clinical trials. Both target conditions where there are no approved medicines that treat their underlying causes. Both have larger patient populations than CF, the area that made Vertex Pharmaceuticals hugely successful.

Now, Vertex might fail to earn approval for some of its late-stage candidates, but given its strong underlying business -- including its CF franchise -- and consistent profits, that won't be the end of the world for the company. All these things differentiate Vertex from Centessa. And it is why investors with average risk tolerance should take the former.

Prosper Junior Bakiny has positions in Vertex Pharmaceuticals. The Motley Fool has positions in and recommends Centessa Pharmaceuticals Plc and Vertex Pharmaceuticals. The Motley Fool has a disclosure policy.