Key Points

  • Vertex Pharmaceuticals and Amgen recently posted strong clinical trial results for promising candidates.

  • Both companies have robust businesses and strong medium-term prospects.

  • 10 stocks we like better than Vertex Pharmaceuticals ›

Vertex Pharmaceuticals (NASDAQ:VRTX) and Amgen (NASDAQ:AMGN) have both outperformed the broader market this year as of this writing. However, it might not be too late to invest in these stocks. Recent developments highlight that these drugmakers have strong pipelines and attractive medium-term prospects. Here's some recent news from Vertex Pharmaceuticals and Amgen, and why investors should seriously consider buying shares of both drugmakers.

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1. Vertex Pharmaceuticals

Vertex Pharmaceuticals' business looks healthy. The company generates consistent revenue and earnings thanks to its medicines that treat the underlying causes of cystic fibrosis (CF). This rare, lifelong illness damages patients' lungs and digestive systems. There is no cure for CF, and Vertex's products are the standard of care. Patients need to take them indefinitely. That grants Vertex strong pricing power and a somewhat predictable revenue stream.

In the second quarter, the company's top line increased by 12% year over year to $3.33 billion, while its earnings per share climbed 8% year over year to $4.31. However, Vertex has been slowly diversifying its lineup. That makes sense. If another drugmaker launches competing CF medicines, it could be catastrophic for Vertex. No biotech has managed to do so yet, but that doesn't mean it won't happen. Vertex has launched products such as Casgevy, a gene-editing therapy for two blood-related diseases, and Journavx, a medicine for acute pain.

It could also earn approval for povetacicept, a treatment for IgA nephropathy, by the end of November. And another one of Vertex's pipeline candidates, inaxaplin, is looking increasingly promising. Recently, Vertex posted results from a Phase 2b study of inaxaplin in patients with APOL1-mediated kidney disease (AMKD) and modest proteinuria (excess protein in urine), or with AMKD and type 2 diabetes. Inaxaplin helped reduce the urine albumin-to-creatinine ratio, a measure of proteinuria, in both patient populations.

Inaxaplin is undergoing a Phase 2/3 study in patients with AMKD and severe proteinuria. But these Phase 2 results highlight a potentially large opportunity across a broader population of AMKD patients. Of course, there is a long way to go before Vertex earns approval for inaxaplin, but between this and other exciting pipeline candidates, the potential launch of povetacicept relatively soon, and its core CF franchise that won't run out of patent exclusivity anytime soon, the stock looks attractive.

2. Amgen

Amgen started facing biosimilar competition in the U.S. for denosumab, a medicine approved for several bone-related conditions, last year. Denosumab was, at its peak, an important growth driver for the biotech, but Amgen is navigating that patent cliff rather well. In the second quarter, the company's revenue increased by a healthy 10% year over year to $10.1 billion.

As management noted, 22 of its products posted at least double-digit sales growth during the period, and 17 had an annualized revenue run rate exceeding $1 billion. In other words, Amgen's lineup is significantly diversified. That's a big reason why, even though denosumab's sales are dropping off a cliff, it continues to perform fairly well. And the company could continue to do so over the medium term as it adds new drugs to its portfolio.

Amgen has several exciting pipeline candidates, one of which is dazodalibep, which is being developed to treat Sjögren's disease, a chronic autoimmune condition. In a Phase 3 study of dazodalibep in certain patients with Sjögren's disease, the medicine significantly reduced disease activity. Some analysts expect dazodalibep to generate well over $1 billion in sales at its peak, so it could become a meaningful contributor for Amgen.

Another one of the company's exciting candidates is MariTide, a GLP-1 medicine being developed for obesity and some obesity-related conditions. MariTide is undergoing several Phase 3 studies, and positive results could jolt the stock. Unlike the current leaders in the weight-loss market, MariTide could be administered once monthly (or even less frequently), potentially attracting a meaningful share of patients.

All of that paints a rather bright picture for Amgen's future. The company could continue delivering solid returns as it expands its approved lineup and maintains consistent revenue and earnings growth.

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