Cathy Wood remains optimistic. ARK Invest’s exchange-traded funds (ETFs) have seen shares continue to recover during a sharp decline this year.
But he’s clearly not optimistic about all of his ARK holdings. Wood sells a high-flying stock. Here’s why you should buy it instead.
Trimming is a big winner
wooden Ark Genomic Revolution ETF Shares sold by (ARKG 0.92%) Apex Pharma (VRTX -1.65%) earlier this month. However, she has not fully resigned from the post. ARKG still owns more than 135,000 shares of the biotech stock.
We don’t know exactly why Wood decided to sell Vertex. Perhaps the most likely reason is that the stock is taking some gains off the table after climbing more than 70% year-to-date.
It should be noted that Wood also holds a significant stake in Vertex’s partner, CRISPR therapeutics (CRSP -0.78%). The gene-editing biotech is ARKG’s fifth-largest holding. Wood may not have seen the need to pour big bucks into two companies with partially correlated prospects.
However, one of the wisest rules of investing is to let the winners run. I suspect that Wood will regret his decision to sell these Vertex shares in the near future.
what is in the way of vertex
Vertex and CRISPR should have good news along the way. Both companies expect to file for regulatory approval of AXA-CL in the EU and UK for the treatment of sickle cell anemia and beta-thalassemia by the end of the year. A submission to the U.S. Food and Drug Administration (FDA) for approval is expected in the first quarter of 2023.
There is no such thing as a slam dunk in winning regulatory approval for a new drug. However, EXA-CEL’s clinical data to date gives investors plenty to be optimistic about. Vertex is already preparing for commercialization.
The company is also planning a marketing strategy for the VX-548. Vertex is currently in a key late-stage clinical trial evaluating the drug for the treatment of acute pain. VX-548 holds particularly great potential as a non-opioid pain reliever amid an opioid crisis.
Vertex expects to complete its late-stage clinical trial of enoxaparin (VX-147) for the treatment of APOL1-mediated kidney disease by mid-2026. The wait can be worth it. APOL1-mediated kidney disease represents a larger patient pool than cystic fibrosis (CF), an indication Vertex has been highly profitable in treating.
Speaking of CF, Vertex should be able to continue driving growth at its existing CF drugs for years to come. The company believes it can secure additional reimbursement agreements and regulatory approvals for its top drugs in younger age groups. The closest potential competitor is only in phase II studies. In the meantime, Vertex has a triple combo candidate in late-stage testing that may be its strongest CF therapy yet.
The biotech also has three other programs in its pipeline. VX-864 is advancing into Phase 2 testing for the treatment of Alpha-1 Antitrypsin Deficiency (AATD). Vertex has another AATD candidate, VX-634, in Phase 1 testing. The company is also pinning high hopes on its type 1 diabetes program, with a phase 1/2 trial ongoing and another pending.
two other big pluses
Vertex CEO Reshma Kevalramani said on the company’s third-quarter earnings call that each of the company’s clinical-stage programs “represents a multi-billion dollar opportunity.” The CF franchise is already approaching $8.9 billion on an annualized basis.
There are also two other big pluses for the Vertex. First, the company has a massive $9.8 billion in cash on hand. Check out more business development offers and share buybacks. Second, Vertex’s valuation is attractive given its tremendous growth prospects. The stock trades at a price-to-earnings-to-growth (PEG) ratio of just 0.42.
Perhaps Wood plans to reinvest ARK Invest’s money into an even more promising opportunity. However, I don’t think there are many better stocks to buy right now than Vertex Pharmaceuticals.
Keith Speights has positions at Vertex Pharmaceuticals. The Motley Fool has positions in and recommends CRISPR Therapeutics and Vertex Pharmaceuticals. The Motley Fool has a disclosure policy.