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No stock has generated more buzz in recent weeks than Space Exploration Technologies (SPCX +2.69%), more commonly known as SpaceX. That's understandable, considering the space technology and artificial intelligence (AI) innovator conducted the largest initial public offering (IPO) in history.
But buzz doesn't always translate to great returns (as many who bought SpaceX shares after its post-IPO surge are finding out). While SpaceX gets the headlines, some smart investors are loading up on another stock instead -- Vertex Pharmaceuticals (VRTX +6.13%).
Image source: Getty Images.
Greater market dominance than SpaceX One key reason investors have been attracted to SpaceX is its commanding position in the satellite internet services and rocket launch markets. However, Vertex arguably has greater market dominance in its core arena than SpaceX.
Only five therapies have been approved for addressing the underlying genetic cause of cystic fibrosis (CF), a rare genetic disease that affects an estimated 105,000 people worldwide. Vertex markets all of them, giving the drugmaker a virtual monopoly in the CF indication.
SpaceX will soon have a formidable competitor to its lucrative Starlink business from Amazon (AMZN +0.55%) Leo. Meanwhile, Vertex has little to worry about from challengers at this point. The most advanced experimental therapies that even have a shot at challenging Vertex's blockbuster CF franchise are only in Phase 2 clinical testing. No patent cliff is in sight that would open the door to serious generic threats, either. Vertex's key U.S. and European patents for its most powerful CF drug, Alyftrek, don't expire until 2039.
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CF isn't Vertex's only area of focus. The company has two other products gaining market momentum -- CRISPR gene-editing therapy Casgevy and non-opioid pain medication Journavx. These two therapies together generated roughly 25% of Vertex's product revenue growth in its latest quarter.
Importantly, Vertex's market dominance is much more profitable than SpaceX's. The big biotech company posted adjusted earnings of $4.7 billion last year, compared with SpaceX's net loss of $4.9 billion.
Transformative launches potentially on the way SpaceX completed 167 launches last year with its Falcon 9 rockets and Starship reusable spacecraft. However, Vertex has some potential launches of a different sort on the way that could be transformative.
The U.S. Food and Drug Administration (FDA) is scheduled to make an approval decision for povetacicept in the treatment of immunoglobulin A nephropathy (IgAN) by Nov. 30, 2026. IgAN affects around three times more patients in the U.S. and Europe alone than CF does worldwide. Vertex is also evaluating povetacicept in Phase 2 studies targeting primary membranous nephropathy and generalized myasthenia gravis, which together affect around three times as many patients in the U.S. and Europe as CF does worldwide.
Patient dosing in a late-stage study evaluating zimislecel in treating severe Type 1 Diabetes has resumed after a temporary delay while Vertex performed a manufacturing analysis. It seems likely that the company will file for global regulatory approvals of the therapy next year, assuming the Phase 3 results are positive.
Two other launches could be around the corner as well. Vertex expects to complete patient enrollment in two Phase 3 studies of suzetrigine (Journavx) in diabetic peripheral neuropathy (DPN) by the end of this year. Eventual approval in treating DPN would open up an additional patient population of around 2.5 million for Journavx.
And that's not all. Vertex's pipeline features another late-stage candidate, inaxaplin, which targets APOL1-mediated kidney disease (AMKD). This disease affects around 250,000 people, and there aren't any approved treatments for it.
Risks vs. rewards Every investment comes with potential risks and rewards. Vertex's approved products and promising pipeline offer clear rewards over the next few years. However, the company faces several risks, notably the possibility of regulatory setbacks and clinical failures.
But many investors could reasonably conclude that Vertex's overall risk-reward proposition is more appealing than SpaceX's. That's especially true given each stock's valuation. SpaceX's shares trade at a whopping 56.7 times projected 2026 sales. Vertex's forward price-to-sales multiple is around 10x.
Investing in SpaceX is tantamount to placing a bet on a future that hasn't arrived yet, with that future already baked into the space stock's valuation. Buying Vertex Pharmaceuticals, on the other hand, is more like betting on a future supported by prior clinical results that inspire confidence, with a share price that reflects some uncertainty. The latter seems like the smarter wager.
