Vertex Pharmaceuticals Incorporated (VRTX) on Q2 2022 Results - Earnings Call Transcript

Operator: Good day, and welcome to the Vertex Pharmaceuticals Second Quarter 2022 Earnings Call. . I would now like to turn the conference over to Charlie Wagner, Chief Financial Officer. Please go ahead. Charles Wagner: Good evening. This is Charlie Wagner, Vertex' Chief Financial Officer. Welcome to our second quarter 2022 financial results conference Call. On tonight's call, making prepared remarks, we have Dr. Reshma Kewalramani, Vertex's CEO and President; Stuart Arbuckle, Chief Operating Officer; and myself. We recommend that you access the webcast slides as you listen to this call. Also, the call is being recorded, and a replay will be available on our website. We will make forward-looking statements on this call that are subject to the risks and uncertainties discussed in detail in today's press release and in our filings with the Securities and Exchange Commission. These statements including, without limitation, those regarding Vertex's marketed CF medicines, our pipeline and Vertex's future financial performance are based on management's current assumptions. Actual outcomes and events could differ materially. I would also note that select financial results and guidance we will review on the call this evening are non-GAAP. I will now turn the call over to Dr. Reshma Kewalramani. Reshma Kewalramani: Thanks, Charlie, and good evening all. Vertex continues to make strong progress towards our goal of reaching all CF patients eligible for our medicines. Based on the continued uptake of TRIKAFTA in the U.S. as well as in the international region, our Q2 CF product revenues grew 22% year-on-year to $2.2 billion. And based on this uptake as well as the new reimbursements recently secured, we are updating revenue guidance from $8.4 billion to $8.6 billion, to $8.6 billion to $8.8 billion. We're also making rapid progress in advancing our R&D portfolio with programs in 5 disease areas now entering or progressing through late-stage clinical development, and the next wave of innovation getting ready to enter the clinic. Our expanding leadership in CF, coupled with the broad, deep and advanced research and clinical stage pipeline brings Vertex to this new inflection point highlighted last quarter. This inflection point is rooted in our differentiated R&D strategy, which is designed to increase the odds of success in drug discovery and development. This strategy is working. First in CF and more recently, we have seen it deliver potentially transformative, if not curative therapies in multiple disease areas, including sickle cell disease, beta thalassemia, APOL1-mediated kidney disease, acute pain and type 1 diabetes, programs that are all now past the proof-of-concept stage. Each of these programs individually represents a multibillion-dollar market opportunity. And taken together, they represent enormous potential for patients and for Vertex. In addition, we continue to use our strong balance sheet to pursue external innovation that complements or accelerates our internal efforts. The Viacyte acquisition, for example, has the potential to accelerate development of our type 1 diabetes programs. The early stage assets from Catalyst and the Verve collaboration complement our internal efforts in sandbox diseases. With our strong revenue growth and rapidly advancing pipeline, we are continuing to invest in internal and external innovation, as you see us do today with the increase in OpEx guidance to $3 billion to $3.1 billion, and the multiple business development deals we've announced this quarter. Let me now turn to the pipeline and review some of our recent R&D progress. Starting with CF. For patients who can benefit from CFTR modulators, TRIKAFTA has set a very high bar. But if it is possible to develop more effective medicines, we are determined to be the ones who do so. Our next-in-class triple combination, VX-121/tezacaftor/VX-561, is now in Phase III development enrolling patients 12 years and older, and we remain on track to complete enrollment by the end of this year or early next. With the progress in the SKYLINE 1 and SKYLINE 2 trials, we've also recently initiated pivotal development of VX-121/tez/VX-561 in patients 6 to 11 years old. Lastly, for patients who do not make any CFTR protein and cannot benefit from a CFTR modulator, we're developing an mRNA therapy with our partners at Moderna. We are on track to file the IND for the mRNA program in the second half of this year. Moving to CTX001. Our most advanced pipeline program outside of CF is our exa-cel, or CTX001 gene editing program in severe sickle cell disease and beta thalassemia. In June, we presented data for more patients treated with exa-cel and with longer follow-up at the Annual Meeting of the European Hematology Association. These data, which included 75 patients with up to 37 months of follow-up continue to demonstrate that exa-cel holds the potential to be a durable, onetime functional cure for these patients and the safety data continue to be consistent with myeloablative conditioning and autologous bone marrow transplant. In terms of next steps, we have recently concluded our discussions on the filing package with EMA and MHRA and have reached agreement on the filing package. We remain on track to submit the MAAs in both sickle cell disease and beta thalassemia in the EU and the U.K. in Q4 of this year. We expect to wrap up our conversations with the FDA regarding the filing package, in particular, the number of patients and duration of follow-up, in the coming weeks, and we look forward to updating you after that. Turning now to inaxaplin, or VX-147 in APOL1-mediated kidney disease, or AMKD. Inaxaplin is a small molecule inhibitor of APOL1 that targets the underlying cause of AMKD. Based on the unprecedented Phase II proof-of-concept results, which showed a 47.6% reduction in proteinuria, inaxaplin received Breakthrough Therapy designation in the U.S. and Priority Medicines, or PRIME designation in the EU. The pivotal trial is a single adaptive Phase II/III randomized, placebo-controlled trial, and the primary endpoint is the reduction in the rate of decline of kidney function in patients who have been treated for approximately 2 years. Importantly, the study is designed to have a preplanned interim analysis at 48 weeks of treatment. If the interim analysis is positive, it will serve as the basis for us to seek accelerated approval in the U.S. We initiated the inaxaplin pivotal trial in late March, site activation, patient screening and enrollment are all ongoing. Moving to pain. And VX-548, a novel first-in-class NaV1.8 inhibitor. We have high expectations from this program because NaV1.8 is both a genetically and pharmacologically validated target across acute, neuropathic and musculoskeletal pain. And VX-548 demonstrated a very desirable benefit/risk ratio profile in Phase II. Additionally, the VX-548 program represents a near-term commercial opportunity. To recap, earlier this year, we shared positive proof-of-concept results from VX-548, which demonstrated statistically significant and clinically meaningful relief of pain in 2 Phase II studies of acute pain, one in the post-bunionectomy setting and one in the post-abdominoplasty setting. Based on these results, the VX-548 has received Breakthrough Therapy designation, highlighting the significant need for highly efficacious and well-tolerated non-opioid pain medicines. We are very pleased to have completed our end of Phase II meeting with the FDA and reach agreement on the VX-548 pivotal program in acute pain. The Phase III program will include 2 randomized placebo-controlled trials that will evaluate VX-548 post-bunionectomy and abdominoplasty. The exact same postsurgical acute pain settings we explored in Phase II. These trials are shortened duration, approximately 2 days of treatment followed by 14 days of safety follow-up. Both of these Phase III studies will also include an opioid treatment arm. A third single-arm study will evaluate the safety and effectiveness of dosing with VX-548 for up to 14 days across multiple other types of moderate to severe acute pain. We remain on track to initiate the pivotal development program by the end of this year. In addition, we have completed our preclinical studies to support initiating a Phase II dose-ranging proof-of-concept study of VX-548 in neuropathic pain towards the end of this year. Turning now to type 1 diabetes. In June, our VX-880 clinical data were featured in an oral presentation at the ADA Scientific Sessions. We've previously shared that we achieved proof-of-concept with the results from the first 2 patients who were treated in Part A with half the targeted dose. Both achieved glucose-responsive insulin secretion, improvements in hemoglobin A1C with concurrent reductions in or, as in the case of the first patient, elimination of exogenous insulin. The new data that we presented at ADA included glucose time and range measurements. Time and range is important because it gives much more granular and comprehensive data than hemoglobin A1C alone and is correlated with the risk of developing micro and macrovascular complications. Patient 1 achieved a glucose timing range of 99.9% at day 270 versus 40.1% at baseline and remained insulin-independent. Patient 2 showed a glucose timing range of 51.9% at day 150 versus 35.9% at baseline with a 30% reduction in exogenous insulin. The trial, which has remained open in Canada and resumed enrollment in the United States last month, continues to screen and enroll patients in Part B. To close, a word on the next wave of innovative therapies. These are programs in late preclinical development that are rapidly approaching the clinic. For the CFTR mRNA program, our cells and device program in type 1 diabetes and our next-generation AATD molecules, we expect to file INDs this year. Lastly, our gene editing program in DMD is in IND-enabling studies, and we plan to file the IND for this asset in 2023. With that, I'll hand it over to Stuart for a commercial overview. Stuart Arbuckle: Thanks, Reshma. I'm pleased to review tonight our continued strong performance in CF, the path towards future growth and the commercial opportunity and plans for some of the most advanced disease areas in our pipeline. I'll start with CF. Our CF business continued its rapid pace of growth this quarter, with impressive performance in both the U.S. and internationally. In the U.S., we continue to add new TRIKAFTA patients, with most of them being younger patients in the 6 to 11 age group, and persistence and compliance remain very high across all patient groups. Outside the U.S., we have seen rapid uptake of KAFTRIO across multiple European countries where we recently reached reimbursement agreements, notably France, Spain and Italy. We've now turned our focus in Europe to the launch of KAFTRIO in children ages 6 to 11. Additionally, the launches of TRIKAFTA in Canada and Australia are both off to a strong start. We began the year with more than 25,000 patients in North America, Europe and Australia who could benefit from a CFTR modulator but were not yet on therapy. These patients fell primarily into 1 of 3 categories. One, patients who had not yet initiated therapy, largely in countries where we are recently reimbursed and therefore, early in the launch curve. Two, patients in geographies where we are not yet reimbursed and three, younger age groups who will be addressed through ongoing label expansions. We are confident in our ability to reach the vast majority of these patients over time. We have made good headway securing new reimbursements and launching our medicines in the first half of 2022. Additionally, we continue to make important progress in expanding access to younger patients. For instance, we completed the study of TRIKAFTA in patients 2 to 5 years old with positive efficacy results on the endpoints of lung clearance index and sweat chloride and no new safety signals. We expect to present these data at a medical meeting later this year and are on track to submit global regulatory filings by the end of the year. Additionally, we submitted regulatory filings in the U.S. and Europe for ORKAMBI in patients 12 months to less than 24 months of age. The PDUFA date for this filing is September 4. We were pleased to present compelling long-term and real-world data on TRIKAFTA at the European Cystic Fibrosis Society's conference in June. These data underscore the outcomes with TRIKAFTA, specifically improved lung function, a 77% reduced risk of pulmonary exacerbations, an 87% lower risk of lung transplant and a 74% lower risk of death for patients with CF. Finally, in CF, as Reshma mentioned, we are developing a CFTR mRNA therapy to treat patients who do not make any CFTR protein and thus cannot benefit from a CFTR modulator. We estimate there are approximately 5,000 of these patients in North America, Europe and Australia. Outside of CF, we have made impressive strides with our clinical stage pipeline over the past 12 months. Today, I'd like to highlight the market potential for 3 of our late-stage clinical programs, exa-cel, inaxaplin and VX-548, and some of our pre-commercial activities. Each of these programs serves a very high unmet need and is a first-in-class or best-in-class approach, and each represents a multibillion-dollar opportunity. Beginning with our most advanced pipeline program, exa-cel. On our last few quarterly calls, we provided details on our launch preparation activities. So I'll briefly recap how we are thinking about the market size and our approach. There are approximately 32,000 patients who have severe sickle cell disease, or transfusion-dependent beta thalassemia in the U.S. and EU. Our initial launch will focus on these 32,000 patients with severe disease, of whom 25,000 are patients with severe sickle cell disease with the vast majority of them living in the U.S. A small number of centers of excellence in the U.S. and Europe will treat the vast majority of these patients. Our research suggests that about 90% of U.S. patients reside in 24 states, and more than 75% of patients in Europe reside in 4 countries. We have identified the potential treatment centers and their referral networks in all of these countries. We are confident that we'll be ready to launch exa-cel following approval. We have hired the launch teams, including medical science liaisons, medical affairs and access and reimbursement teams, and they are already active in the field. And finally, we are developing robust patient service programs to support patients throughout the treatment journey. Moving on to inaxaplin, or VX-147, which is in pivotal development for patients with AMKD. We've previously talked about a number of AMKD patients, which we estimate to be approximately 100,000 in the U.S. and Europe, with over 80% of them living in the U.S. Here, I'll touch on the work we are undertaking to raise awareness of AMKD. Awareness, diagnosis and genotyping of patients with AMKD are all low within the medical and patient communities, which is not surprising, given this is a newly defined disease without existing targeted therapies. To increase awareness of AMKD and of genetic testing options, we are working with the kidney disease community and with minority health organizations to support sponsored education campaigns and scientific workshops and seminars. Some examples of this work include: Sponsoring the American Kidney Funds APOL1 education campaign, which will launch this year to provide educational materials and digital engagement tools for patients and providers. And we are also educating people about AMKD at Black Health Matters Health Fairs and Summits, and through NephCure's Health Equity Initiative. In addition to these disease awareness and education efforts, we and others are also working on important policy initiatives to support AMKD diagnosis. Specifically, we are advocating for federal legislation introduced in the spring entitled the New Era of Preventing End-Stage Kidney Disease Act that would establish a rare kidney disease research center at NIH, investigate the role of genetic screening in improving kidney disease outcomes and address kidney health disparities in communities of color. And we're also advocating alongside the National Kidney Foundation as well as other stakeholders to increase kidney disease screening. You may have seen in the news recently that the U.S. preventive services task force has added chronic kidney disease screening to the list of services they have under active consideration. If recommended, patients would have access to screening at no cost, which would make a huge difference in improving availability and access to screening for AMKD patients. Additionally, we are exploring pathways with diagnostic testing companies to make genetic testing more accessible to patients. Finally, VX-548 in pain. Given we recently announced agreement with FDA on the pivotal development program for acute pain, I'd like to give you a summary of the market opportunity. There is a real need for effective, safe and well-tolerated pain medicines as there have been no novel pain medicines introduced in the past 20 years. We see utility for our NaV1.8 inhibitors in different types of pain, including acute, neuropathic and musculoskeletal. Today, I'm going to focus on acute pain. In the U.S., there are approximately 1.5 billion treatment days for acute pain each year, and approximately 2/3 or 1 billion of those are driven by hospital prescribing. This includes treatment for inpatient and outpatient visits and the patient's related pain management following discharge. Consistent with our business strategy, a small specialty commercial organization will allow us to reach a large proportion of this market, given the concentration of pain treatment driven by hospital prescribing. Today, oral treatment of acute pain is roughly a $4 billion market, even though over 90% of prescriptions are generic. Considering the price of a typical branded pain medicine is roughly $10 per day, a safe and effective new pain medication without addictive potential that captures even a partial share of that market represents a multibillion-dollar opportunity. Importantly, given the magnitude and severity of the ongoing opioid crisis in the U.S., the initiation of the Phase III studies for VX-548 later this year, and the relatively short duration of the trials, we will be working with urgency to build out our teams and go-to-market plans to bring this novel nonopioid pain medicine to patients. In closing, I'm excited about bringing TRIKAFTA to even more patients around the globe, and also commercializing multiple potentially transformative therapies outside of CF in the future. Now, I'll turn it over to Charlie. Charles Wagner: Thanks, Stuart. In the second quarter of 2022, Vertex continued to deliver strong financial performance. Second quarter product revenues were $2.2 billion, an increase of 22% compared to the second quarter of 2021. Our growth was again driven by an increased number of patients on therapy compared to the prior year, resulting from several approvals and reimbursements for TRIKAFTA/KAFTRIO over the last year as well as continued strong execution with market launches. Movements in foreign exchange had only a small impact on reported growth, primarily because of our active hedging program, which helps offset impact from currency movements. Our second quarter combined non-GAAP SG&A, R&D and acquired IPR&D expenses were $750 million compared to $1.5 billion in the second quarter of 2021. The year-over-year decline was primarily related to the $900 million payment in the second quarter of 2021 for the amended collaboration agreement with CRISPR Therapeutics. This effect was partially offset by higher expenses resulting from our advancing pipeline, especially in CF, pain and type 1 diabetes as well as expenses for CF launches and pre-commercial activities for exa-cel. Our continued strong revenue growth, combined with our efficient operating model resulted in a Q2 non-GAAP operating margin of 54% and non-GAAP operating income of $1.19 billion compared to $71 million in the second quarter of 2021. This increase was primarily driven by strong product revenue growth and the year-over-year comparison to the second quarter of 2021, which included the $900 million payment to CRISPR. Our non-GAAP effective tax rate for the second quarter of 2022 was 22%. We ended the quarter with $9.3 billion in cash and investments, and our balance sheet profile remains very strong. As Reshma highlighted, on the external innovation front, we've recently announced multiple business development deals including the acquisition of Viacyte for $320 million in cash with closing subject to certain conditions, including the expiration of the Hart-Scott-Rodino waiting period. This transaction will bring us tools, technologies and assets that will accelerate our goal of bringing curative therapy to millions of people with type 1 diabetes. Now to guidance. We are raising our 2022 product revenue guidance to a range of $8.6 billion to $8.8 billion based on current exchange rates. The increase reflects the rapid uptake we have seen with new launches in geographies where we recently secured reimbursement for TRIKAFTA/KAFTRIO as well as continued performance in the U.S. Year-over-year, our updated guidance represents product revenue growth of approximately 15% at the midpoint. Now to OpEx. Our R&D strategy was designed to deliver disproportionate success and we are seeing that strategy play out with multiple programs now in mid- and late-stage development, each of which could drive significant future growth. With our strong financial profile, we expect to continue investing in both internal innovation with our rapidly advancing pipeline as well as external innovation that fits with our R&D strategy and complements our existing portfolio. As a result, non-GAAP operating expenses for the year are now projected to be in a range of $3 billion to $3.1 billion, an increase from our previous guidance of $2.82 billion to $2.92 billion. The increase is primarily due to incremental expenses resulting from the advancement of our pipeline programs into late-stage clinical trials, particularly in pain and AMKD as well as additional upfront and milestone payments. Finally, we continue to project a non-GAAP effective tax rate in the range of 21% to 22%. As we consider the second half of 2022 and into early 2023, we look forward to a number of important milestones to mark our continued progress, several of which are outlined on this slide. As Reshma discussed earlier in the call, Vertex is at a new inflection point. We're in our eighth consecutive year of double-digit revenue growth, and we've built a remarkably durable business with long-term leadership in CF delivering strong cash flow for years to come. We're also well on our way to diversifying the business and adding to our long-term growth potential with 5 disease areas now in late-stage development and multiple new medicines set to enter the clinic. We are developing these programs with the intent of creating transformative, high-value medicines, each of which represents a multibillion-dollar opportunity. Fueled by our success in CF, we can continue to invest in our advancing pipeline while also delivering exceptional profitability and cash flow. As always, we look forward to updating you on our further progress throughout the balance of the year. Let's now open the call to questions. Operator: . And the first question will come from Salveen Richter with Goldman Sachs. Salveen Richter: Nice quarter here. Just a pipeline question with regard to your program for beta cell and sickle cell, what does the FDA want with regard to number of patients? And what duration here, are they looking at a proportion out to 2 years similar to what we saw with bluebird? Just curious where you stand there. Reshma Kewalramani: Yes. Salveen, this is Reshma. With regard to the exa-cel program and what the FDA is looking for, it is down to these 2 areas for us to reach conclusion on the number of patients in the file and the duration of follow-up. We are -- we have been having conversations, very productive conversations with them over the last many months, and we are done in our -- in terms of the conversations for the preclinical package, CMC and manufacturing and all of the other modules. It is about these 2 areas. And we are expecting to wrap up these conversations in the coming weeks. So we don't have to speculate. We'll be able to update you after that. But it is really down to just those 2 points; number of patients they'd like to see in the file and the duration of follow-up. I will just reiterate that we've -- these are similar topics that we've been talking to the EMA and MHRA on, and we have come to conclusion on that. Operator: The next question will come from Michael Yee with Jefferies. Michael Yee: A question on, I guess, inaxaplin. You are enrolling the Phase II portion, and then it rolls into a Phase III. Could you comment on how the Phase II portion is going in terms of pace of enrollment, and whether you've data to talk about at the end of the year? I think that would give a good insight into how you would think about the Phase III because I know it is a challenging population to necessarily enroll. So maybe talk a little bit about that. And then, I guess, a follow-up to Salveen's question on exa-cel. If it is a 2-year requirement, how long does that push things out? Does that push the timing out by a year? Or just help us out with that dynamic? Reshma Kewalramani: Yes. Michael, there were two questions in there. One about AMKD and one about exa-cel. Let me just close out on exa-cel first. As we were just discussing, we are going to have our meetings with the FDA to wrap up these discussions in the coming weeks. And so we're not going to need to speculate. We'll be able to update you on the specifics and give you a timeline in the near future. With regard to AMKD, the point that you make about the difficulty enrollment based on the patient population is a really good point. While the AMKD population shares many similarities with CF, genetically driven disease, about 100,000 patients, and our approach to treating CF is by targeting the CFTR protein, the underlying cause of disease. It's the same thing with AMKD. We're targeting the APOL1 protein. Where the big difference comes in is in diagnosis, disease awareness and genotyping. But recognizing this, we've inserted 3 initiatives into this Phase II/III program. The first is we're opening over 150 sites globally so that we have sites to close to where the patients are, and simply many of them. Second, we have an observational study ongoing. That's a genotyping study. People who genotype in with 2 APOL1 alleles are then eligible and could be enrolled in the randomized controlled trial. And lastly, as you heard Stuart discuss, we're working with patient groups and physician groups and the community as a whole to raise awareness. I will point out, Michael, that the beauty of the Phase II/III study is we do everything upfront. That is to say that the phase -- the trial sites that will be the Phase III trial sites, they're all being opened up right now as part of the Phase II/III study. Michael Yee: So you're committed to giving data on the Phase II? Will you say anything, or just move forward? Reshma Kewalramani: Yes. Sorry about -- you had a question on the data. When we are at the point of having selected our dose on the Phase II part, you should expect to hear from us. Operator: The next question will come from Phil Nadeau with Cowen. Unidentified Analyst: This is on for Phil. Congrats on the progress. Maybe just on 147. Potentially, could you give us an update on how you're thinking about potential baseline characteristics for the patients enrolled in the Phase II/III study now that it's targeting the broader AMKD population. Just curious how you're thinking about the potential differences in proteinuria and eGFR looking across the clinical sector of APOL1 . Reshma Kewalramani: Yes. I think the question is how are we thinking about the patients who would enroll and what do we think their baseline characteristics would be in this AMKD population? To reground the unifying entry criteria for the Phase II/III study are really threefold in terms of the key criteria. The first is 2 APOL1 alleles. The second is a reduced renal function. And the third is proteinuria that's greater than 0.7 grams. So all patients in this study will have those key criteria. Now of course, as you point out, there's going to be a spectrum of disease, and we fully expect patients to have diversity in terms of the range of proteinuria as well as the renal function. But the really important point is that this is a rather homogeneous population of 2 APOL1 alleles, proteinuria and reduced kidney function. Unidentified Analyst: Great. That's very helpful. And if I may, is there any chance that you'll release data from the observational study that you mentioned that you're enrolling? Just to get the genotyping data, et cetera? Reshma Kewalramani: Yes, it's a great question. I'm sure the teams are planning to share that data. That study because it is a very simple observational study that is genotyping people is already well into the hundreds of patients that we have screened and enrolled. I'm sure the IR team can give you specifics offline. Operator: The next question will come from Liisa Bayko with Evercore ISI. Liisa Bayko: I was wondering if you could give us any sense of what you're looking for in the SKYLINE 102 and 103 study specifically, to be able to follow on that. What are the benchmarks and clinical meaningfulness that you're looking for? Reshma Kewalramani: Yes. Sure thing, Liisa. So SKYLINE -- the 2 SKYLINE studies and now the RIDGELINE study, which is the study of 121/561 tezacaftor in the 6- to 11-year-olds, which is also ongoing. Here's what we're looking for based on every piece of data that we have, including our HBE assays, which you know is not only qualitatively but quantitatively predictive of what we see in the clinic. We expect to see greater sweat chloride than even TRIKAFTA. Based on the Phase II studies where we looked at sweat chloride and we looked at ppFEV1, we expect 121/561 tez has the potential to be even greater than TRIKAFTA. And at the end of the day, what we are really looking for here is ppFEV1, sweat chloride levels and, of course, the safety profile. From what we see preclinically and clinically in those Phase II studies that I described, I expect that 121/561 tez has the real potential to be superior to TRIKAFTA. And remember, when we talk about that, the best readout of the function of CFTR modulators is on sweat chloride. That's the most direct readout, the PD readout, if you will. And that has been consistently superior in HBEs, Phase I and our Phase II studies. Operator: The next question will come from Geoff Meacham with Bank of America. Geoffrey Meacham: Congrats on the good quarter. I wanted to ask on 548. When you consider the market opportunity and what could be a pretty broad program, I just wanted to get your perspective on what success looks like kind of at a high level. And then I wasn't sure if you've had pre-Phase III meetings with FDA, but how you're thinking about the size and scope of the pivotal that you'll start the second half of the year? Reshma Kewalramani: Geoff, sure thing. This is Reshma. Let me start, and then I'll turn it over to Stuart to talk about the market opportunity. This is one of the programs that I have very high enthusiasm for it, and we are -- we have high expectations for it. And the reason for that is, I've already talked about the genetic and pharmacologic validation, but the other reason for this is it really has potential across acute pain, neuroplastic pain and, let's call it, musculoskeletal pain, although the focus right now in terms of where the program is most advanced is in acute pain. The last reason I have such excitement for this program is the market opportunity is near term. Let me describe the pivotal program. And yes, we have completed our end of Phase II meeting with the FDA, and we have reached agreement on this program. So here's the program. It's about 2,000-or-so patients in 2 randomized controlled trials that look exactly like the Phase II trial, one in abdominoplasty, and one in bunionectomy and a third single-arm study that takes all pain types, procedure-related as well as, for example, a fracture or a sprain or soft tissue injury. And the program is so designed so that we have a broad acute pain indication for the treatment of moderate-to-severe pain. That's really the beauty of this program. Stuart, I'm going to turn it over to you for market potential. Stuart Arbuckle: Yes, Geoff. And so why we're so excited about our agreement with the FDA and the broad indication it could lead to if the studies are positive, which we have a high level of confidence, they will be is because the moderate-to-severe acute pain market is incredibly large. So as I said in my prepared remarks, it's over 1.5 billion with the B treatment days a year in the U.S. alone. And 2/3 of those are about 1 billion treatment days a year are either initiated in hospital or influenced by hospital as a result of patients being discharged after either their inpatient or outpatient visit where they were given treatment for pain. So 1.5 billion treatment days, as you know, the vast majority of that market is currently genericized. But even so, it's a $4 billion market in the U.S. alone today. And so we know that if we bring to market a highly effective pain med that also has a great safety and tolerability profile, we should expect to be able to get a decent share of that market and then a branded oral pain medicine at price of around $10 a day. That is a very significant multibillion-dollar opportunity. And so that's why both Reshma and I have a high level of enthusiasm for this program. Operator: The next question will come from Evan Seigerman with BMO Capital Markets. Evan Seigerman: Congrats on the quarter. Kind of following up to Geoff's question on pain. I'd love to take a step back and really get some color on how you envision 548 fitting within the acute pain management paradigm? And I assume the goal would be to use 548 ahead of opioid therapy but still kind of have the option for opioid therapy if there's breakthrough pain. And with that, would you need to show a safety kind of perspective using both together? Maybe provide us color as to how you think about this fitting in. Stuart Arbuckle: Yes. Evan, it's Stuart here. I'll take that one. So the way acute pain is currently managed, obviously, if it were very, very mild, people might be taking kind of over-the-counter pain meds, then people would go to transition to kind of sort of nonsteroidal, then go through to opioids and then maybe something else. So what we're imagining here with VX-548 is essentially sort of a step therapy approach where we would be sort of inserting ourselves between those initial prescription NSAs and opioids. And we believe that's a realistic proposition based on the clinical profile that we've seen to date and our discussions with physicians, that's where they would see this kind of medicine fitting in. So that's how we would see it fitting into the treatment paradigm based on the sort of efficacy profile and safety and tolerability profile that we've seen. Reshma Kewalramani: Evan, this is Reshma. To add to what Stuart said, there is a raging opioid epidemic in this country. And it is a public health crisis. So I think the most recent CDC report indicated 75,000 deaths in this last year, which is a 35% increase over the past year. So this is not a historic issue. It's a current day crisis. And I think that this approach that Stuart described where there is a step from over-the-counter pain medicines and then to a drug like VX-548, which because it only works in the periphery, there are no central receptors. There is no addictive potential here, I think, has enormous potential. And from physicians and community groups and health care officials that we've spoken with, there is huge enthusiasm for this kind of mechanism. Operator: The next question will come from Colin Bristow with UBS. Colin Bristow: Congrats on the quarter. So on the Viacyte acquisition, the VX-880 program. Could you just walk us through just -- obviously, there's areas of program overlap. Just how should we think about prioritization here? And maybe just flesh out a little bit more about just some of the -- and how it augments the program for you overall? And then on VX-548, so it sounds like trial initiation before year-end and acknowledging that it's large population size, but it is a short primary endpoint. When do you think you'd be in a position to out topline for those trials? Reshma Kewalramani: Yes. Colin, let me just tackle the 548 question first, and then I'll get to Viacyte and the type 1 diabetes programs. The 548 programs are the pivotal program. It's really quite an efficient development program. These studies are quite short in duration. We know exactly how to do them. We've done them with VX-150. We did it again with VX-548. And the RCTs, the 2 randomized clinical trials, are very well understood surgical procedures, bunionectomy and abdominoplasty. I expect that these programs will progress quickly. With regard to the Viacyte acquisition. The real goal here for us in the type 1 diabetes program is to transform, if not cure, this disease. That is certainly what we are aiming for. And we have 3 programs internally aimed at exactly that goal, VX-880, let's call it the naked cell program. The next program, which is the same cells as VX-880 in a device to evade the immune system. And the third program is those same cells that we edit and we call them hypoimmune cells. We are well on our way to achieving this goal of transforming type 1 diabetes, which you can see from the first 2 patients dosed at half dose with VX-880. What we're doing and the value of the Viacyte acquisition is accelerating our ability to get there. Specifically, Viacyte brings us tools and technologies, IP capabilities in manufacturing in particular and talent that's going to accelerate our ability to get to this cure. If I double-click on that, what I'm really talking about are GMP cell lines, GMP manufacturing, access to a clinical-stage program with hypoimmune cells via the Viacyte CRISPR collaboration. And as we did with CF, our goal here -- and what we expect to do is move multiple programs in parallel and then choose the best one or ones to take the late-stage development and commercialization. Operator: The next question will come from David Risinger with SVB Securities. David Risinger: So I have a couple of questions about the AMKD interim that you have spoken to. Could you discuss your expectations for the control arm's eGFR rate of decline at 48 weeks. That's a short period of time and the control arm patients, I think, will be well taken care of on the standard of care, which is not always the case in the real world. So it would be helpful to understand what you're expecting for the control arm's decline. And then assuming that you do succeed in handing on the interim, has the FDA suggested that it would be supportive of an early filing on just the positive interim data? Reshma Kewalramani: Yes. Sure thing. With regard to the question around the interim analysis, and is the agency supported of an accelerated approval based on the interim analysis. Unambiguously, yes. This is one of the points of agreement that we reached at our end of Phase II meeting, which is one of the very important points that we were driving to ensure we had conclusion on. The reason for that is the following: APOL1-mediated FSGS or APOL1-mediated kidney disease as a whole is a different ball of wax than non-APOL1-mediated kidney disease. In other words, those who have 2 APOL1 alleles have very aggressive disease. We're talking about rate of declines annually north of 5 CCs per year. That is a very significant reduction in kidney function. Unfortunately, there are no specific treatments for AMKD, and they certainly are no targeted treatments. So even though patients are often on standard of care medicines, this decline that I talked about is continuing. So with regard to our program, we have designed it to have this interim analysis after 48 weeks of treatment, where we will be able to assess the proteinuria difference between those treated with VX-147 versus the standard of care as well as the decline in renal function. And because these patients are so fit and the progression is so fast, it offers the opportunity to make this assessment at 1 year, which is not always the case in non-APOL1-mediated kidney disease. That's why it usually takes longer because the rate of decline is just playing slower. Very, very different in AMKD. Operator: The next question will come from Mohit Bansal with Wells Fargo. Mohit Bansal: Congrats on the quarter. I have a question and a clarification for Charlie. So the clarification is, are we including $300 million of Viacyte acquisition in IPR&D at this point for your guidance? Number one. And the question is for R&D and SG&A combined, it looks like -- I mean you're in a good situation of having so many programs which are entering into pivotal phase. Keeping that in mind, how sustainable is this a mid-50% operating margin profile going forward for the next couple of years, given that you are investing heavily in R&D. Charles Wagner: Sure. Good question. As we mentioned, the success that we've had in the pipeline recently really is unprecedented. And so not surprisingly, with the great data and several multibillion-dollar opportunities, we are investing behind the success of these programs, and that really is what drives the OpEx increase in recent quarters and in our guidance. Specifically in the guidance I would highlight the success in pain and AMKD as the biggest drivers of the change in the OpEx guidance. And importantly, all of the increase, 90-plus percent of the increase is in R&D. So it's certainly very, very good news from our perspective, and we'll continue to invest. In terms of the ability to sustain margins, we have a fantastic model. When you develop transformative medicines for serious diseases, there's tremendous value unlocked there, which allows us to consistently reinvest in innovation. And so we believe that with this model, we can sustain very, very attractive operating margins for the foreseeable future. Your specific question around Viacyte. That is not in the guidance yet as we are in the Hart-Scott-Rodino waiting period and can't accurately forecast a close date for the transaction. That is not included in the guidance. And when we know the transaction close date, we'll update accordingly. Operator: The next question will come from Olivia Brayer with Cantor Fitzgerald. Olivia Brayer: Congrats on the great quarter. I wanted to follow up on CTX001. I know you're still in conversations with FDA, but are there any metrics beyond number of patients and duration of follow-up that could be different between the agreed upon EMA and MHRA submission packages versus what you might have to file in the U.S. And then just a quick clarification question on the filings. It looks like in the press release, you guys mentioned you're on track to file in Europe and the U.K. by year-end but it doesn't specifically call out the U.S. So I just wanted to clarify to see if there's any change to your assumptions there. Reshma Kewalramani: Yes. Sure thing. We have been having conversations, and we're really fortunate because we have every designation offered by regulators on this side of the pond and the other that allow us to have frequent conversations with them. And so we've been having these conversations with MHRA, EMA and FDA for many months. The topic of conversations have evolved because over time, we've settled out the preclinical package. We've settled out on CMC and manufacturing and all of the other modules. The conversation with EMA and MHRA towards the end as we were concluding those discussions, we're on the same point as with FDA. And that was around number of patients in the filing and duration of follow-up. We have come to conclusion. We have reached agreement. And therefore, I can say that we are on track, and we fully expect to get our filing in towards the end of this year. With regard to the FDA, we simply haven't hit that milestone yet that we have with MHRA and EMA. We simply haven't concluded our discussions on the number of patients and the duration of follow-up. I do expect we will do so in the coming few weeks, and I look forward to updating you after that. Operator: The next question will come from Hartaj Singh with Oppenheimer. Hartaj Singh: A really nice quarter. Not to -- Reshma, to talk about a little bit of about memory from a year or two years ago, but AATD looks like you're going to be bringing a couple more molecules into the clinic this year. And previously, you had mentioned that you're trying to increase the potency of these molecules and get them at higher concentrations to do the tissue of interest. So how are you thinking about that with the approach for these molecules in the clinic this year? And then assuming you get them in the clinic this year, when could we see a readout going forward? Reshma Kewalramani: With regard to the AATD program, AATD remains a disease of high interest, and one that fits the Vertex strategy like a glove. I'm excited that the next wave of molecules are about to enter the clinic, and I do expect the IND for at least 1 to go in this year, but there are many molecules, more than 1 in this next wave. We have been able to dial up the potency. The doses are low. I expect that we're going to fully explore the dose range. And I expect that we'll have results that we can talk about by next year. So the programs are progressing and the opportunity here, Hartaj, just to remind others, is to tackle both the lung and liver manifestations of this disease. That's why the small molecule approach is so inviting to us, and why we're so eager to pursue it. All the other approaches out there simply don't tackle both manifestations of disease. And in my mind, therefore, are not transformative. So that's really what we're looking for. And next year, we should have results that we can all look at and evaluate. Operator: We have time for one more question, and that will come from Brian Abrahams with RBC Capital Markets. Brian Abrahams: As you approach the filings, I'm curious where you stand with respect to CTX001 manufacturing and supply? I know you recently posted a bridging study. I'm curious how that might help you ultimately expand manufacturing and scale up? And then relatedly, where do you see the field with respect to next-generation or conditioning regimens? And how much would that be potentially helpful for expanding that long-term opportunity? Reshma Kewalramani: Yes. I'm going to ask Stuart to comment on the opportunity, the near-term opportunity with busulfan in the long term, and I'll come back and tell you a little bit about manufacturing. Stuart Arbuckle: Yes. So Brian, thanks for the question. So across the U.S. and the EU, across sickle cell and TDT, we think there's approximately 150,000 patients who have sickle cell disease or beta thalassemia. Our initial launch is going to focus on those that have more severe disease, similar to the patients that are being included in the clinical trial, those that are likely to consider going through this treatment given the current busulfan conditioning regimen. We think that population is probably around 32,000 patients, about 25,000 of those are sickle cell disease patients and the majority of those are in the United States. So that's the initial launch population. In terms of what the opportunity could look like if we can get to a truly gentler conditioning regimen, which may turn this kind of much more towards an outpatient procedure. Reshma will comment on it technically. But in terms of opportunity, we think that would significantly expand it beyond the 32,000 well into the 150,000 population. Maybe not all the way there, but certainly expand it significantly. It would become a procedure that a significantly higher number of people would consider having. Reshma Kewalramani: And with regard to the manufacturing, in the grand scheme of things, this is an easier manufacturing challenge than other diseases that are being tackled with CRISPR-Cas9, for example. And I say that because this is ex vivo gene editing. And in essence, what we're talking about is a guide RNA and Cas9. The second point to make here is that -- and credit to our partners at CRISPR, we've thought about the commercial manufacturing of this therapy from the get-go. I mean that in terms of the process development. I also mean that in terms of the actual manufacturing sites. It's fundamentally the same process that we are using in the clinical trial space, that is what we will be using in the commercial space. And it's actually the exact same manufacturing sites as well. So we feel really good about where we are with the commercial manufacturing of CTX001. And as I said, in the grand scheme of things, it's an easier challenge because it's ex vivo gene editing, and it is Cas9 and guide RNA, and that's it. Charles Wagner: Yes, I was just going to say thank you, to everyone, for tuning into the Q2 call tonight. If you have additional questions, please reach out to the Investor Relations team who are available in the office this evening. Good night. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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Vertex Pharmaceuticals' Potential Breakthrough and Market Position

  • Vertex Pharmaceuticals (NASDAQ:VRTX) receives a "Buy" rating from Citigroup amidst a potential drug breakthrough.
  • The stock's resilience is evident with a current price of $494.61, indicating investor optimism for the drug's approval.
  • Despite strong competition, Vertex's substantial market capitalization of $127.38 billion underscores its significant presence in the biotech industry.

Vertex Pharmaceuticals (NASDAQ:VRTX) is a prominent player in the biotech industry, known for its focus on developing innovative therapies for serious diseases. The company is currently under the spotlight due to a potential breakthrough drug that is under regulatory review. This development could significantly enhance Vertex's market position and financial prospects, as highlighted by StreetInsider.

On November 13, 2024, Citigroup upgraded Vertex to a "Buy" rating, with the stock priced at $494.61. This upgrade comes at a time when Vertex is on the verge of a potentially transformative opportunity. The regulatory review of its new drug could lead to its approval and commercialization, marking a significant milestone for the company.

Vertex's stock has shown resilience, with a current price of $494.61, reflecting a 0.94% increase. The stock has traded between $491.24 and $498.25 today, with a 52-week range of $341.90 to $519.88. This performance indicates investor optimism, possibly driven by the anticipated drug approval.

In the Medical - Biomedical and Genetics sector, Vertex competes with companies like Gilead Sciences (GILD). According to Zacks Investment Research, Gilead holds a Zacks Rank of #2 (Buy), suggesting a stronger earnings outlook compared to Vertex's Zacks Rank of #3 (Hold). This indicates that while Vertex has growth potential, Gilead may currently offer better value.

Vertex's market capitalization stands at approximately $127.38 billion, with a trading volume of 962,866 shares today. This substantial market cap reflects the company's strong position in the biotech sector, bolstered by its innovative pipeline and potential for future growth.