Novo Nordisk(NYSE: NVO) is enjoying one of the best seasons in its history. Two of the company's drugs, Ozempic and Wegovy, have become household names. Novo's sales and profits are soaring. So is its share price, with the stock up around 150% over the last three years.
Some investors who didn't buy Novo Nordisk earlier could be considering jumping on the bandwagon now. I have an alternate idea. Forget Novo Nordisk and buy another magnificent pharma stock instead.
Different in several ways
Vertex Pharmaceuticals(NASDAQ: VRTX) doesn't share much in common with Novo Nordisk. For one thing, Vertex's market cap of $126 billion is only a fraction of Novo's market cap of over $450 billion.
The two companies' product lineups look very different, too. Novo Nordisk markets medications that target diabetes, obesity, growth disorders, hemophilia, and hormone replacement. All of Vertex's revenue (for now, at least) stems from its therapies that treat the underlying cause of the rare genetic disease cystic fibrosis (CF).
CF isn't Vertex's only focus, though. It's ramping up the launch of Casgevy, the first CRISPR gene-editing therapy to win U.S. Food and Drug Administration (FDA) approval. Casgevy is a one-time treatment for two rare blood disorders, sickle cell disease and transfusion-dependent beta-thalassemia.
Vertex also awaits FDA approval for suzetrigine (VX-548) in treating moderate-to-severe acute pain. The agency set a PDUFA review completion date of Jan. 30, 2025. Suzetrigine should have significant commercial potential as a non-opioid alternative for relieving acute pain.
Potential future competitors
Novo Nordisk and Vertex don't compete against each other now, but that could change.
The first clash between the two drugmakers could come in treating sickle cell disease. Novo Nordisk is evaluating etavopivat in a late-stage clinical study for treating sickle cell disease. It's also conducting phase 2 testing of the drug as a treatment for thalassemia. In addition, Novo Nordisk is working with EpiDestiny on a phase 2 program targeting sickle cell disease.
Arguably the biggest future rivalry between Novo Nordisk and Vertex, though, could be in the type 1 diabetes market. Novo markets several insulin products, including Fiasp, Levimir, and Tresiba. The company is also researching cell therapies that could someday cure type 1 diabetes.
But Vertex is ahead of Novo Nordisk in the race to cure the disease. The company already has two potentially curative type 1 diabetes programs in phase 1/2 testing. CEO Reshma Kewalramani said in Vertex's second-quarter earnings call that the company is in discussions with regulators "to finalize the requirements for pivotal development" of lead type 1 diabetes candidate VX-880.
Why Vertex is a better stock to buy now than Novo Nordisk
I've already discussed three of Vertex's potential growth drivers -- Casgevy, suzetrigine, and its type 1 diabetes programs. The company also awaits FDA approval for its vanzacaftor triple-drug combo that could be its most powerful CF therapy yet.
Vertex's pipeline features another promising late-stage candidate, inaxaplin, which targets APOL1-mediated kidney disease (AMKD). There are no current therapies approved for treating the underlying cause of AMKD, which affects more patients globally than CF.
The company plans to soon advance suzetrigine into pivotal testing for treating peripheral neuropathic pain. Vertex's acquisition of Alpine Immune Sciences added a "pipeline-in-a-product" with povetacicept. The experimental drug holds the potential to treat multiple autoimmune renal diseases with phase 3 testing already beginning for IgA nephropathy.
Vertex's price-to-earnings-to-growth (PEG) ratio is 0.79, much lower than Novo Nordisk's multiple of 2.4, indicating it's a better buy. I think Vertex is a better stock to buy now because its growth prospects aren't baked into its share price nearly as much as Novo's. Vertex's best season is yet to come.
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Keith Speights has positions in Vertex Pharmaceuticals. The Motley Fool has positions in and recommends Vertex Pharmaceuticals. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.
