A key challenge in the pharmaceutical industry these days is the staggering amount of drugs losing their patent protection. Back in November 2011, Pfizer’s (NYSE: PFE) Lipitor — the company’s all-time best-selling drug, which reported annual sales in excess of $10 billion at its peak — lost its patent protection. In 2012, least branded drugs with $20 billion in 2011 sales will face competition from generic drugs.

#-ad_banner-#The vast majority of pharma companies face significant headwinds to replace this lost revenue. With every loss of a drug that achieves more than $1 billion in annual sales, companies must find a new one just to stay even. For most in the industry, this has meant taking a step backward, which, in turn, requires two steps forward and multiple blockbuster releases just to have any chance at growing again.

With so many mature drug companies struggling to grow, it is refreshing to find younger companies not saddled with the wave of patent expirations. There are many such firms out there, but it is extremely difficult to say with certainty which of their compounds will successfully make it through the three mandatory stages of clinical trials. After all that, they still have to submit the new drug to the Food and Drug Administration (FDA) to receive market approval in the United States. This same process must be repeated in other countries to garner approval from their local regulatory agencies.

But there’s a company that truly stands out, despite so many strenuous processes and harsh industry competition: Vertex Pharmaceutical (Nasdaq: VRTX).

First, Vertex doesn’t have any drugs facing patent expiration. In fact, it recently launched what is quickly becoming the company’s first blockbuster drug, Incivek. Remarkably, Incivek can help cure patients from the hepatitis C virus (HCV), which HCV can end up destroying the liver and even lead to cancer, if not treated. The drug was approved by the FDA in May 2011. By the end of December 2011, Vertex had quickly logged $951 million in Incivek sales. For 2012, projections are even better, with estimated sales between $1.5 billion and $1.7 billion.

There is huge potential for Incivek. About 170 million individuals across the world are chronically infected with HCV, according to the World Health Organization. Vertex sells the drug domestically and receives royalties from overseas sales, and with an estimated cost of around $49,000 for the entire treatment, there is the potential for Incivek to bring in tens of billions of dollars in annual revenue.

Finally, Vertex has another drug that recently received FDA approval. In early January, Kalydeco was approved to treat cystic fibrosis in the lungs, in one of the fastest approvals ever granted by the FDA, according to Vertex. The company hasn’t provided any sales guidance for Kalydeco, but says it expects total operating expenses for 2012 of between $1.03 billion and $1.13 billion.

Analysts have put this into their models and currently anticipate earnings of $3.23 per share. This would be a significant achievement because it represents the first time Vertex will ever achieve positive and sustainable profitability.

Vertex also has other promising drugs in its pipeline that will target other treatments for cystic fibrosis as well as for rheumatoid arthritis, epilepsy and influenza. There are literally billions of dollars in potential revenue that Vertex is just starting to capture, so the sky is quite the limit.

Risks to Consider: Interestingly enough, overall market volatility and risk aversion on the part of investors has tempered the current share price performance of Vertex. Its stock is currently trading at $37, well below the level near $60 it experienced just as Incivek received FDA approval. But investors shouldn’t be overly concerned about further price drops, because this has sent the forward price-to-earnings (P/E) multiple firmly into value territory at 11.5. This simply doesn’t make sense for a company with Vertex’s potential.

Action to Take –> It’s difficult to model Vertex’s future with complete certainty, but it is fair to assume sales and profits could grow at a 25% annual clip for many years to come. And with an earnings multiple so low, and that kind of growth, I think it’s perfectly reasonable to expect this stock to double from current levels, up to about $80, within a couple of years. And with a couple of years of 25%-plus growth under its belt, the stock could take off even further.