Is Vertex Pharmaceuticals Incorporated (VRTX) Positioned for Continued Success in Cystic Fibrosis and Beyond?
We recently published a list of Renaissance Technologies Portfolio: 10 Best Stocks To Buy. In this article, we are going to take a look at where Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) stands against the other best stocks to buy which are part of the Renaissance Technologies portfolio.
Renaissance Technologies is an American hedge fund that specializes in systematic trading and employs statistical and mathematical tools to drive its investment programs. As of March 2024, the fund managed discretionary assets over $89 billion, according to their Form ADV. It was founded in 1982 by Jim Simons, a mathematician who worked as a code breaker for the US National Security Agency during the Cold War.
Simons is considered among the pioneers of quantitative investing. At the time of his death in May 2024, he had an estimated net worth of $31.4 billion, making him the 51st richest person in the world. His use of mathematical models and algorithms to drive long-term investment returns earned him a legacy that rivaled the likes of Warren Buffet and George Soros.
His signature Medallion generated average annual returns of 66% for three decades between 1988 and 2018, earning more than $100 billion in profits during the period. The fund started with charging a 5% fixed fee and also had performance charges of 20%, which were later increased to 44% in 2002. Despite those cuts, Medallion earned annual returns of around 39% on average.
The fund was closed to outside investors in 1993 and has since then only been available to past and current employees, and their families. Renaissance Technologies does have other funds that are open to outsiders, such as Renaissance Institutional Equities Fund (RIEF) and Renaissance Institutional Diversified Alpha (RIDA).
Simons stepped down from active management of Renaissance Technologies in 2010 and resigned as its executive chairman in 2021. Peter Brown is the current CEO of the capital market company. He graduated with a B.A. in Mathematics from Harvard University and also holds a Ph.D. in Computer Science from Carnegie Mellon University. Brown’s father, Henry B.R. Brown, invented the Reserve Primary Fund in 1970, which was the first money market fund to be set up.
Brown is committed to the use of mathematical models to discover and unlock the value of stocks in the market. However, Renaissance hedge funds that are open to outside investors have been shrinking for some while. According to a recent report in the Financial Times, RIEF currently manages around $19.6 billion, significantly down from $35.8 billion in 2020. The collapse of RIDA and Renaissance Institutional Diversified Global Equities (RIDGE) has been even worse. The two funds were merged this year. In 2019, RIDA managed about $15 billion, while RIDGE had a portfolio of $14.3 billion. Today, the combined fund manages only $3.6 billion.
As a result, Renaissance’s external assets under management have declined from $65.1 billion in 2019 to $23.2 billion today. Much of the exodus happened following the coronavirus pandemic and was driven by a shock performance by the hedge fund as the stock market rattled. In contrast, the Medallion Fund, which is limited to past and current employees, gained 76% in 2020 despite Covid-19. This is because the fund indulges in high-frequency trading with a lower capacity, a strategy that is strikingly different from those applied for external funds.
However, the performance of external funds is beginning to stabilize after the lows over the last few years. RIEF is up 19.8% this year, while RIDA has also gained 17.4%. Though financial experts believe the improvement is owed more to the fund’s performance, rather than flows.
Methodology
We scanned Renaissance Technologies’ 13F portfolio, as of June 30, 2024 and picked the top 10 stocks according to their stake value. The figures were sourced from Insider Monkey Database.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
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Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX)
Stake Value as of Q2 2024: $734,197,383
Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) is an American biotechnology company that uses scientific innovation to develop transformative medicines for patients with serious diseases. It is headquartered in Boston, Massachusetts.
During Q2 2024, the company reported revenues worth $2.65 billion, up 6% from last year, driven by its cystic fibrosis (CF) treatments and a reduction in channel inventory in international markets. Revenue grew a solid 7% in the United States during the quarter amid strong demand for TRIKAFTA, a mixed dose medication used to treat CF. Outside the US, the company noted a 5% surge in sales, attributed to an increase in the use of KAFTRIO among children.
After the robust quarter, Vertex Pharmaceutical raised its product revenue guidance for the full year 2024 to between $10.65 billion and $10.85 billion, indicating a 9% revenue growth at the midpoint. The company anticipates upcoming commercial launches of new medicines to contribute to revenue growth in the quarters ahead. One of these is CASGEVI, which will be used to treat patients with beta-thalassemia and sickle cell disease (SCD). Vertex is also optimistic about the clinical benefits of Vanzacaftor, a new drug for the treatment of people aged 6 and above living with CF. It received FDA approval in July this year.
The biotechnology firm’s financial position also remains strong, as it ended Q2 with $10.2 billion in cash and equivalents. The bullish sentiment around the stock was further strengthened in April with the $4.9 billion acquisition of Alpine Immune Sciences, with which Vertex gained access to treatments for autoimmune diseases related to the kidney. PGIM Jennison Health Sciences Fund stated the following regarding Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) in its Q2 2024 investor letter:
Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) is a commercial stage biopharmaceutical with a core franchise of small molecule CFTR modulators for cystic fibrosis (CF), a genetic and progressively fatal respiratory disease. Vertex has built a unique and unrivaled market position as the dominant market leader in CF, having created and expanded the market into a nearly $10B franchise and growing. Later this year, we expect them to receive approval for their next-gen CF triple therapy, which we think will drive top-line growth and margin expansion in 2025 onwards. Vertex is also developing an acute and chronic pain franchise. Vertex reported positive Phase 3 data in acute pain and Phase 2 data in chronic pain earlier this year; the FDA filing in acute pain has been completed, and pending approval, Vertex expects to launch in acute pain in early 2025. Beyond CF and pain, Vertex has focused its pipeline around genetically driven diseases with the potential for a transformative clinical benefit. It currently spans 5 disease verticals: sickle cell/beta thalassemia, type 1 diabetes, APOL-1 kidney disease, IgA nephropathy (from the recent acquisition of Alpine Immune Sciences), and alpha-1 antitrypsin disease. Vertex has had a strong start to the year and has delivered positively on several clinical trial readouts, as well as beat Q1 revenue estimates and maintained what was a better than expected ’24 guidance. Vertex has a busy catalyst calendar in 2H24 which include next-gen CF approval, acute pain approval for their first-in-class pain drug, and additional data sets in chronic pain.
Wall Street analysts have consensus on the stock’s Buy rating and expect a share price appreciation of over 9%. It is one of the best stocks to buy from the Renaissance Technologies portfolio, with the hedge fund having a stake of $734 million in the company.
Overall, VRTX ranks 4th among the Renaissance Technologies Portfolio: 10 Best Stocks To Buy. While we acknowledge the potential of VRTX as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than VRTX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.