Vertex Pharmaceuticals Q1 2023 Earnings Call Transcript

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Provided by Quartr
May 1, 2023

There are 14 speakers on the call.

Operator

Good day, and welcome to the Vertex Pharmaceuticals First Quarter 2023 Conference Call. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Ms.

Operator

Susie Lisa. Please go ahead.

Speaker 1

Good evening, all. My name is Susie Lisa, and as the Senior Vice President of Investor Relations, it is my pleasure to welcome you to our Q1 2023 financial results conference call. On tonight's call, making prepared remarks, we have Doctor. Reshma Kewalramani, Vertex's CEO and President Stuart Arbuckle, Chief Operating Officer and Charlie Wagner, Chief Financial Officer. We recommend that you access the webcast slides as you listen to this call.

Speaker 1

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 cystic fibrosis 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 that we will review on the call this evening are presented on a non GAAP basis.

Speaker 1

In addition, the impact of foreign exchange is presented inclusive of our foreign exchange risk management program. I will now turn the call over to Reshma.

Speaker 2

Thanks, Susie. Good evening, all, and thank you for joining us on the call today. We're pleased to have opened with a strong start to 2023, as Q1 Global CF Product Revenues Grew 13% Versus the Q1 of 2022. In addition, we completed the Eksocell U. S.

Speaker 2

Rolling BLA submissions for sickle cell disease and beta thalassemia and secured U. S. Approval for Trikafta in patients 2 to 5 years of age. Now is an especially exciting time at Vertex, because within our 5 launches in 5 years or 5 in 5 goal, we see multiple programs with near term launch potential, including ExaCell in sickle cell disease and transfusion dependent beta thalassemia, the Vansacaftor triple in CF, and VX-five forty eight for acute pain. In total, we now have programs in 8 disease areas in mid and late stage development, 6 of which or past the proof of concept stage as depicted on Slide 5.

Speaker 2

With this breadth of compelling opportunities, we're investing accordingly to drive continued pipeline success, clinical trial progress and the build out of commercialization capabilities. In addition, beyond the 8 disease areas already in the clinic, the next wave of innovation is advancing through preclinical development, including programs in Duchenne's muscular dystrophy, myotonic dystrophy type 1, NAV1.7 for pain and gentler conditioning agents for use with Exacel. With a uniquely strong and durable CF franchise, multiple near term commercial opportunities, A broad and rapidly advancing pipeline, a strong balance sheet and an exceptionally talented and committed team, Vertex has never been as well positioned to deliver for patients and shareholders for years to come. With that overview, I'll Turn to the details of recent R and D progress starting with CF. Our next in class Vansacaftor triple combination has completed enrollment in its 2 Phase 3 clinical trials in patients ages 12 years and above, known as Skyline 102103 and is progressing well.

Speaker 2

Enrollment in patients ages 6 to 11, known as the RIDGELINE study, is also advancing rapidly. We continue to anticipate The completion of the SKYLINE studies by the end of this year, and I'm pleased to share we now project the completion of the RIGELINE study at approximately the same time as the SKYLYNNE studies. Recognizing the very high bar set by Trikafta, we have high Expectations for the Vansacaftor triple program based on the totality of the evidence generated to date and as was recently reported in Lancet Respiratory Medicine. Preclinically, our HPE assays, which have consistently proven to have robust translation from the bench Into the clinic showed greater restoration of chloride transport with the Vansacaftor triple than with Trikafta. In the Phase 2 clinical program, the Vansacaftor triple drove greater CFTR function and correspondingly lower levels of sweat chloride than has been seen with Trikafta.

Speaker 2

As such, we believe the Vansacafta triple has the potential for enhanced clinical benefit along with the convenience of once daily dosing. In addition, we expect XAVANZA triple to carry a substantially lower royalty burden. Another important study in our CF portfolio pertains to VX-five twenty two, our CFTR's mRNA therapy that we're developing in partnership with Moderna for the more than 5,000 CF patients who cannot benefit from CFTR modulators. We have initiated the single ascending dose or SAD study of VX-five twenty two and are actively enrolling and dosing CF patients. We anticipate completing the SAD portion of the study and initiating the multiple ascending dose portion of the study this year.

Speaker 2

Turning now to ExaCell, our gene editing program for severe sickle cell disease and transfusion dependent beta thalassemia. ExaCell holds the potential to be the 1st CRISPR based gene editing treatment to be approved as well as the promise to be a onetime functional cure for these diseases. This is our most advanced program outside of CF and we expect ExaCell to be our next commercial launch. Per our prior guidance, we completed our BLA submissions for both sickle cell disease and TDT in the U. S.

Speaker 2

At the end of last quarter. We now await acceptance of our filings and assignment of the PDUFA date. Our filings include requests for priority review, which if granted will result and an 8 month review by FDA from the time of submission. Internationally, as previously announced, both the EMA and MHRA have validated our ExaCell MAA submissions and those filings are under review. We see a significant opportunity for ExaCell.

Speaker 2

Stuart will comment further on the market opportunity and our launch preparations in just a few minutes. Turning next to our pain program, NVX-five forty eight, our novel, highly selective NaV1.8 inhibitor that holds the promise of effective pain relief without the side effects or addictive properties of opioids. We have confidence in the outlook for this program given, 1, NaV1.8 is a genetically and pharmacologically validated target. 2, we have multiple positive proof of concept results with our predecessor, NaV1.8 inhibitor, VX-one hundred and fifty across acute, neuropathic and musculoskeletal pain and with VX-five forty eight itself in acute pain and 3, our Phase III program with VX-five 548 in acute pain is substantially similar to the positive Phase II trials we have already concluded. VX-five forty eight has been granted Fast Track and Breakthrough Therapy designations for acute pain in the U.

Speaker 2

S. We initiated pivotal development last year and enrollment and dosing across the 3 Phase 3 studies continue to progress nicely. These studies have been designed to support our goal of a broad, moderate to severe acute pain label that would enable prescribing and usage across multiple care settings, including at the site of care, post discharge and in the home. We continue to anticipate completing the acute pain Phase 3 pivotal program toward the end of this year or beginning of next, creating another potentially significant and near term commercial opportunity. In addition, we continue to enroll in dose patients in a 12 week Phase 2 dose ranging proof of concept study of VX-five forty eight in diabetic peripheral neuropathy, a form of peripheral neuropathic pain.

Speaker 2

I'm pleased to share we also anticipate completing this Phase II study towards the end of this year or beginning of next. Transitioning now to enaxypin or VX147, the first potential medicine to target the underlying cause of APOL1 mediated kidney disease or AMKD. In March, we were very pleased with the publication of the Phase 2 results for enaxyplim in the New England Journal of Medicine. Importantly, the paper was accompanied by an editorial and a feature on the science behind the study. We see this A bridge in the New England Journal of Medicine as underscoring the importance of the enaxypelin data and the medicine's potential.

Speaker 2

The Phase 2b dose ranging portion of the global Phase twothree pivotal study remains on track to complete this year. Recall, this study has a preplanned interim analysis at 48 weeks of treatment, which, if positive, could serve as the basis to seek accelerated approval in the U. S. With enaxaplin, we see the potential to bring a 1st in class treatment to the approximately 100,000 patients with AMKD in the U. S.

Speaker 2

And Europe and unlock a multibillion dollar market opportunity. Moving now to Type 1 Diabetes. There are more than 2,500,000 people with Type 1 Diabetes in North America and Europe alone, and we are committed to delivering a transformative, if not curative medicine for this disease. We have 3 programs in our Type 1 diabetes portfolio, all of which use the same fully differentiated insulin producing islet cells, which have already demonstrated proof of concept. Our first program or VX-eight eighty, the naked cell program uses standard immunosuppressants to protect the islet cells from the immune system.

Speaker 2

I am pleased to share that both Part A and Part B of the study are now fully enrolled and dosed. In both portions of the study, dosing of patients was staggered with Part A patients receiving half dose and Part B patients receiving the full target dose. The next step in the program is Part C, in which patients will be treated concurrently with the full target dose. This should facilitate faster timelines. We look forward to sharing VX-eight eighty data from more patients and with longer duration of follow-up at medical congresses this year, including the ADA Scientific Sessions in June.

Speaker 2

Our second program, VX264 or the Cells Plus Device Program encapsulates these same cells in a proprietary device that is designed to shield the cells from the body's immune system, and hence, There is no requirement for immunosuppressants. Both the IND in the U. S. And the CTA in Canada have cleared. Site activation and study initiation activities are underway in both the U.

Speaker 2

S. And Canada, and we look forward to enrolling and dosing patients in this Phase III study in the near term. 3rd, Our hypo immune program in which we edit the same cells to cloak them from the immune system. This would represent another path to mediating the need for immunosuppressants. In March, we expanded our collaboration with CRISPR Therapeutics into Type 1 Diabetes, and this new licensing agreement will enable us to use CRISPR Cas9 to edit the cells.

Speaker 2

This research stage program Continues to make progress. Lastly, also in the T1D portfolio, the ViaCyte VCTX-two 211 hypoimmune program using AvayaCyte cell line remains on track. This program has finished enrollment and dosing in Group 1 of the Phase onetwo study. Let me conclude with our Alpha-one antitrypsin deficiency or AATD program, which continues to enroll both the Phase 2 study for VX-eight sixty four and the Phase 1 study for VX-six thirty four. The Phase 2 program for VX-eight sixty four is a 48 week study in patients with AATD that will assess both liver clearance of Z Polymer and serum functional AAT levels.

Speaker 2

This study is projected to complete enrollment later this year. The Phase 1 healthy volunteer study of VX-six thirty four, The next in class molecule with multifold greater potency and better drug like properties is projected to complete this year. With that, I'll now turn over the call to Stuart. Thanks Reshma. From a commercial perspective, Our focus continues to be to reach all patients eligible for our CFTR modulators and maintain high levels of adherence among patients already on therapy, while also preparing for potential near term launches for ExoCell, VX-five forty eight in acute pain and the Vansacafta triple combination in CF.

Speaker 2

I'll first review our CF first quarter commercial results

Speaker 3

and then the longer term outlook for our CF portfolio. I will then comment on the ExoCell opportunity and our launch preparations given that we have now completed our regulatory filings in the U. S, Europe and the U. K. We had a strong Q1 with growth predominantly driven by bringing our medicines to younger patients, including Trikafta in children ages 6 to 11 in the U.

Speaker 3

S, plus Europe and Canada. And we remain confident in the growth outlook for 2023. Last week, as expected, we received FDA approval for Trikafta in the U. S. For children ages 2 to 5 years, which adds approximately 900 new patients who for the first time will have a treatment to address the underlying cause of their disease.

Speaker 3

Turning to the longer term outlook. We see continued growth in CF beyond 2023. As Reshma mentioned, at the beginning of this year, There were more than 20,000 people in North America, Europe, Australia and New Zealand with CF who could benefit, but were not yet being treated with our approved medicines. Beyond the key growth driver of reaching younger patients through new approvals, We also continue to make progress in securing additional reimbursements. This includes multiple agreements spanning our CF portfolio for younger patients in Europe and most recently also Australia and New Zealand.

Speaker 3

A second driver of CF product growth is the compelling portfolio of real world outcome studies, including model data, which validate the positive outlook for long term growth in the overall CF population due to improved survival. Model data related to projected survival and long term health outcomes were recently published in the Journal of Cystic Fibrosis and include a 33.5 year increase In median projected survival with Trikafta therapy versus the standard of care. A third growth driver for our CF portfolio will be our next generation Vansacaftor triple, which provides an opportunity to bring a new and potentially improved treatment option to patients, including those who've discontinued therapy with our other medicines. We estimate that there are approximately 6,000 patients who have discontinued one of our existing CFTR modulators. And longer term, a 4th factor to help drive extended growth in our CF portfolio is VX-five twenty two, which is designed to provide mRNA therapy for the more than 5,000 patients who cannot benefit from CFTR modulators.

Speaker 3

Shifting now to ExoCell, which holds curative potential for patients with sickle cell disease and transfusion dependent beta thalassemia. With the recent completion of our exocele regulatory submissions in the U. S, Europe and U. K, our commercial teams are preparing for the potential approval and launch of this multibillion dollar opportunity. Sickle cell disease and transfusion dependent beta thalassemia are neither silent nor undiagnosed diseases.

Speaker 3

Our initial launch will focus on the approximately 32,000 most severe patients in the U. S. And Europe. These patients have been sick their entire lives with a chronic, often disabling disease that carries a high burden of care. They could soon have the opportunity for a potential lifetime cure.

Speaker 3

Our launch preparations are informed by extensive market research and insight generation, including through direct engagement with patients, providers and payers to understand their perceptions of gene therapy and the potential uptake of a product like Exacel. We are encouraged by the strong interest and enthusiasm shown by all stakeholders for a genetic therapy that could provide transformative benefit for patients. Starting with patients, the journey for someone to receive in 3 key phases. 1, the pretreatment period where patients decide a genetic therapy is right for them and are referred to an authorized treatment center by their hematologists and begin the cell collection process. 2, the manufacturing period where a patient's cells are edited and become the ExoCell drug product and 3, the treatment period where a patient receives myeloablative conditioning, then their edited cells and is followed for successful engraftment.

Speaker 3

Survey data from sickle cell and beta thalassemia patients Indicate that more than a quarter strongly believe genetic therapy is the right choice for them. Of the balance, the vast majority want to learn more about Future treatment options through their own research and through the lived experiences of ExSL patients and their treating physicians. With providers, we've learned there is a clear recognition of the differences between various genetic therapy approaches and a strong preference for gene edited therapies like Exacel, over gene insertion approaches using lentivirus. Our market research suggests that approximately 70% of providers prefer a gene editing approach over other gene therapy mechanisms. Our teams are focused on providing access to key support and systems for both patients and providers to ensure the best possible treatment experience.

Speaker 3

Accordingly, we have made strong progress toward ensuring authorized treatment centers are administratively and logistically prepared to initiate the exocell treatment journey for patients upon approval. Approximately 50 U. S. Centers are actively engaged in the process to become an ATC located in those areas with the highest prevalence of patients. Similarly, in all 4 key European markets, all 25 targeted ATC sites are in process.

Speaker 3

Payers are another important area of focus. We are actively engaging with key commercial and government payers and policymakers in the U. S. And Europe. 1st, with regard to commercial payers in the U.

Speaker 3

S, our conversations are focused on the patient need and clinical profile of Exacel, including dramatic reductions in BOCs and hospitalizations for sickle cell disease patients and in transfusions for beta thalassemia patients. We are confident that payers will recognize XSL's value in patient populations where current lifetime costs of care can exceed $4,000,000 We are working with insurers to ensure broad access for the approximately 35% of sickle cell disease and transfusion dependent thalassemia patients who are commercially insured. Now to government payers. Approximately 45% of severe sickle Cell disease patients in the U. S.

Speaker 3

Are insured by Medicaid and thus we've also been working with state agencies to ensure Medicaid patients have broad access to ExaCell. We recognize that a critical element for adoption is ensuring a separate payment for the exocell therapy in addition to the reimbursement already in place for the transplant procedure costs. Encouragingly, many states are already providing access to cell and gene therapies with separate payment policies for the procedure and the therapy and we continue to engage with state agencies around payment models ahead of the launch. In addition, in February of this year, the Biden administration demonstrated their commitment to ensuring access to cell and gene therapies like Exacel through the announcement of a CMS demonstration project called the Cell and Gene Therapy or CGT access model. The CGT access model will be administered through CMS' Innovation Center, which has a total budget of approximately $10,000,000,000 for the exploration and testing of novel delivery methods and approaches.

Speaker 3

Intended to accelerate and enhance broad Medicaid access for sickle cell disease The CGT access model will over time facilitate this in 2 important ways by creating a pathway for State Medicaid Agencies to delegate authority to CMS to coordinate and facilitate innovative payment models, including outcomes based agreements, or OBAs, with cell and gene therapy manufacturers like Vertex. And in addition, CMS has confirmed any outcomes based arrangement for inpatient therapies requires payment separate from the hospital inpatient bundle. We view this CGT access model as an important indicator of the understanding of the severity of these diseases and the need to provide broad access to potentially transformative therapies for these historically underserved patient populations. We are extremely excited about the potential for Exacel, our first commercial launch outside of CF in many years and look forward to updating you further on our launch preparation activities on future calls. I'm also looking forward to updating you on our continued progress to discover, develop and secure access to transformative medicines for all people living with CF.

Speaker 4

I will now turn the call over to Charlie to review the financials. Thanks, Stuart. Vertex's results in the Q1 of 2023 demonstrate our consistent strong performance and attractive growth profile regardless of macroeconomic conditions. Q1 2023 revenue increased 13% year over year to $2,370,000,000 Growth was led by a 33% year over year increase outside the U. S.

Speaker 4

On continued strong uptake of Trikafta CapTrio in markets with recently achieved reimbursement as well as label extensions into younger age groups. U. S. CF revenue grew 3% year over year with ongoing consistent performance. 1st quarter 2023 combined non GAAP R and D acquired IP R and D and SG and A Expenses were $1,200,000,000 compared to $687,000,000 in the Q1 of 2022.

Speaker 4

Q1 2023 results include $347,000,000 of acquired IPR and D charges compared to just $2,000,000 of such charges in the Q1 of 2022. Q1 2023 IPR and D Spences resulted from several new collaborations, which augment our internal innovation efforts as detailed on Slide 15, including collaborations with Entrata Therapeutics and DM1, ImmunoGen for gentler conditioning agents and the expansion of our relationship with CRISPR Therapeutics into Type 1 Diabetes. Aside from our investments in external innovation and the resulting higher acquired IPR and D charges, Operating expense growth was driven as expected by continued investment in research and our advancing pipeline, which includes mid and late stage clinical assets across 8 different disease areas. For example, these investments are directed towards clinical studies for the Vansacaftor triple Ncf VX-five forty eight in acute pain and Type 1 diabetes, as well as pre commercial build out activities for Exacel and other potential near term launches. Given the potentially transformative benefit to patients and multibillion dollar market opportunities for our programs, we will continue to invest appropriately.

Speaker 4

Q1 2023 non GAAP operating income was $902,000,000 in the quarter compared to $1,170,000,000 in the Q1 of 2022. 1st quarter adjusted earnings per share were $3.05 We ended the quarter with $11,500,000,000 in cash and investments as our cash flow generation and balance sheet remain very strong. Now switching to guidance. Given our Q1 results and our consistent There are no changes to our 2023 financial guidance as detailed on Slide 16. We continue to Expect product revenue guidance of $9,550,000,000 to $9,700,000,000 representing 7% to 9% growth year over year.

Speaker 4

Note that this guidance continues to include an expected approximate 1.5 percentage point headwind to our revenue growth, inclusive of our foreign exchange risk management program. As we mentioned in early February, given our years of experience in CF, we have strong visibility to our 2023 revenue guidance range, which is inclusive of expected new approvals like the Trikafta U. S. Approval in patients ages 2 to 5 and new reimbursements outside the U. S.

Speaker 4

Note too that 2023 product revenue guidance continues to reflect revenue from cystic fibrosis products only. Exacel is not included in guidance as potential approval and launch dates in the EU, UK and U. S. Are still to be determined. We are also reiterating our 2023 guidance for combined non GAAP R and D, acquired IP R and D and SG and A Expenses in the range of $3,900,000,000 to $4,000,000,000 Our 2023 non GAAP operating expense guidance now includes approximately $400,000,000 of and milestones from previously existing or recently completed BD transactions versus the $300,000,000 that was anticipated at the beginning of the year.

Speaker 4

Our operating expenses continue to be more than 70% allocated to R and D and are funding the significant continued progress of our multiple mid and late stage clinical development Additionally, we are funding the expansion of our commercialization capabilities in anticipation of the multibillion dollar market opportunities represented by our programs with near term launch potential. Our guidance for projected full year 2023 non GAAP Effective tax rate of 21% to 22% is also unchanged. In closing, Vertex performed exceptionally well in the Q1 of 2023. We delivered strong revenue growth, invested internally and externally, and We're also proud of our industry leading culture of innovation that we believe will continue to drive long term success. A few highlights from our recently published Corporate Responsibility Report are found on Slide 17.

Speaker 4

And as we continue to advance our programs in 2023, We anticipate further important milestones as highlighted on Slide 18 to mark our continued progress in multiple disease areas. We look forward to updating you on our progress on future calls and I'll ask Susie to begin the Q and A period.

Operator

And the first question will come from Salveen Richter with Goldman Sachs. Please go ahead.

Speaker 5

Good afternoon. Thanks for taking my question. With regard to the ExaCell launch, you discussed the 3 steps that need to occur for patient to get treatment here. Could you just speak to the overall time that will be required, in your mind after approval for a patient to actually be administered drug. And then secondly, the gene insertion competitor clearly has been doing work Karen, it's taken some time, but they've done foundational payer work.

Speaker 5

Just wondering what the read through is from all the work they've done to your Launch progress as well. And in the context of this, on the R and D and SG and A front, as we look to next year, How do we think about how that SG and A line might inflect in the context of not just this launch, But also the pain launch as well. Thank you.

Speaker 2

Fabienne, thanks very much for the question. I'm going to ask Stuart to talk about the exocell timelines and a little bit about the launch. Stuart? Yes.

Speaker 3

So Salveen, as I outlined in my prepared remarks, this is a relatively extended process that takes multiple months from beginning to end. As I said, from the patient deciding with their physician that a genetic approach is the one that they would like to undertake through Mobilization in the manufacturing. And then very, very importantly is the last step, which is obviously the most important because When they are infused with their edited cells, because of the nature of that last step where the patient has to undergo myelobrative conditioning and therefore has a Multi week stay in the hospital whilst they're followed to see whether the product has engrafted before they are released in the hospital. They have to schedule that into their life. And so that is obviously a very significant undertaking for an individual.

Speaker 3

But of course, the payoff there is they're looking to get a potential lifetime cure for that multi month process. So it is a multi month process with that last step, obviously, being one that they need to schedule into their life, hopefully, then to receive a lifetime of benefit from Exacel. In terms of kind of what are we learning from the marketplace and our interaction with Payers, we're incredibly encouraged by the reaction we've had from payers, both their understanding of the severity of both sickle cell disease and transfusion dependent thalassemia and the very significant burden that it has on patients, their Families and, of course, the broader health care system and the costs associated with that. Also, we're very encouraged by their reaction to the product profile that Exacel has and how positive they appear to be to be working with us to try and ensure that there is as near as possible Access to Exacel is close to possible post approval. So we're really very encouraged by the response from payers across the continuum, commercial payers And very importantly for this population, both Medicaid and Medicare.

Speaker 3

I think you had a question on SG and A evolution. I think that's probably best handled by Charlie. So Charlie, do you want to take that one?

Speaker 4

Yes, Salveen, thanks. Given that we've just reiterated our 2023 OpEx guidance, you can expect I'm not going to have much to comment on about 2024. I will say that the growth in OpEx in 2023, of course, is driven by the advancements in the pipeline. We've got multiple programs mid and late stage, including a few that are very close to commercialization. Even with that, the majority over 70% of our OpEx Invested in R and D.

Speaker 4

Looking ahead, as we have more programs moving towards commercialization, you could see a little bit of a mix shift towards commercial spend. But importantly, with our model of focusing on transformative medicines in specialty populations, we always expect the G and A burden on the business would be quite low, gives us the ability to drive significant profitability over time.

Speaker 5

Thank you.

Operator

The next question will come from David Risinger with SVB Securities. Please go ahead.

Speaker 6

Yes. Thanks very much and thank you for the updates. So I was hoping you could talk about your vision for VX-five forty eight in chronic pain. So obviously, you're studying in DPN, but specifically, what I'm interested in is, assuming that You succeed in your Phase 2 neuropathic pain trial. How might Vertex pursue Phase 3 development?

Speaker 6

How do you see the target product profile for the product? And would you consider development in musculoskeletal pain as well? Thank you.

Speaker 2

Sure. Hi, Jade. This is Reshma. Let me take that one for you. We see 3 distinct Areas for a drug like VX-five forty eight.

Speaker 2

1 is acute pain. I'll put that aside for now and I'll come back to it. And instead of seeing the chronic market as one market, we actually see it as 2. The first being neuropathic pain And the second being, let's call it, musculoskeletal pain. In that chronic market, which we subdivide into 2, Our immediate area of interest and where we are already in Phase 2 in the update on today's call is that we are now projecting The completion of that Phase 2 proof of concept study by the end of this year early next, we see that as a very substantial market.

Speaker 2

And we're pursuing that first because, 1, there is high unmet need 2, because it fits our commercialization model, that is to say, a specialty market. I fully expect that VX-five forty eight and NaV1.8 inhibition in general will also be effective for musculoskeletal pain. And I say that not based on conjecture, but rather because the predecessor molecule VX-one hundred and fifty, we've already taken that into a form of musculoskeletal pain and it was positive there as well. So the way I see, our pain portfolio progressing is acute pain first. We're already in Phase 3.

Speaker 2

That Program will be completed towards the end of this year, beginning of next, and I see that as the first pain opportunity in terms of nearest to market. 2nd, the neuropathic pain program. And I do expect that 548 will work in musculoskeletal pain. I don't see that as a Vertexian disease because it requires a primary care outreach. But certainly, if the medicine can help, and I believe it will, We'll find a way to get it to patients, but that won't be through a Vertex commercialization enterprise.

Speaker 3

Thank you.

Operator

The next question will come from Mohit Bansal with Wells Fargo. Please go ahead.

Speaker 7

Maybe a question on XSL, one more question on that. So I know I mean You are excited about the opportunity and you're talking about 32,000 patients there and the drug clearly works. I mean, it's pretty amazing. But when we talk to doctors, they talk about maybe initial opportunity will be 5,000 to 10000 patients in the U. S.

Speaker 7

And they're a little bit worried about safety at this Point early on and investment community is also a little bit looking at it as a show me story. So Could you help us understand what we are missing in terms of when we talk to payers and prescribers? Where do you think the disconnect is? And how do you think, like what steps would need to happen for this disconnect to disappear? Obviously,

Speaker 2

Sure, Mohit, this is Reshma. I think your question is about exocell and what do we really see as the real potential. So, I have very high confidence in the fact that there is Significant unmet need. This is a disease that has really no therapy that can offer Purative potential, full stop. There is no debate on that.

Speaker 2

With regard to the potential of our medicine, All of the data that we've showed to date show that this medicine has transformative, if not curative potential. And I'm going to ask Stuart, to comment on what we've heard from patients, from payers and from stakeholders in general about their level of understanding and enthusiasm for this product. And I'll also ask Stuart, to remind what we see as the market size, what I'll say is that in the U. S. And Europe, There are 150,000 people with sickle cell and beta thalassemia.

Speaker 2

We are not targeting that full set with this Busulfan based conditioning exacel program, we're targeting 32,000. Stuart?

Speaker 3

Yes. As Russel said, the 32,000 are those patients who are sort of the severe end of the spectrum, essentially Patients very similar to those that were enrolled in our clinical trials. These are patients who are having multiple veno occlusive crises per year for our sickle cell disease population and multiple transfusions a year for those in the transfusion dependent thalassemia patient population. So these Our patients whose lives are very, very significantly impacted by their disease and it really impacts all aspects of their life, impacts their loved ones, impacts their ability to work, and they have a very, very significant Burden of disease and also a very significant burden for the healthcare system. So in the discussions that we've had with both patients, Payers and physician groups, the unmet need is very, very clearly well understood.

Speaker 3

The potential For curative one time therapies is very, very much something that people are looking forward to. I think with any new technology and with any new Product, there are always going to be some questions that people will have around things like safety as these are really transformative and innovative therapies. And To some extent, for some people, that's something that can only get solved over the course of time and with their own lived experience. But certainly, The level of enthusiasm we're seeing from all stakeholders is very, very high, and we're very optimistic about this being a multibillion dollar opportunity.

Speaker 7

Thank you.

Operator

The next question will come from Geoff Meacham with Bank of America. Please go ahead.

Speaker 8

Afternoon, everyone. Thanks for the question. Just have a couple. Stuart, on the Vansacaftor triple, Just curious on your updated view as to differentiation, obviously beyond dosing. Just assuming that a patient is doing well on Tri Capa, would the argument be to switch or I think you mentioned in the prepared remarks that patients have been have discontinued Trikafta, What's the logic and then maybe responding to the new Vanta Capital Triple?

Speaker 8

And then Secondly, Charlie, Arishma, you guys have almost $12,000,000,000 in cash, pretty good pipeline and no real urgent need for BD. So should we think about capital investments in areas that are probably need even more of a build out like gene or cell therapy. I'm just curious about uses of cash going forward. Thanks.

Speaker 2

Sure, Jeff. Let me ask Stuart to tackle Vansacapita first, and then I'll ask Charlie to comment on capital allocation. Stuart?

Speaker 3

Yes. Hey, Jeff. So on bancakaparib, just to remind everybody on the call, our goal in cystic fibrosis is to get as many people as possible to carrier levels of chloride transport as we can carrier levels of sweat chloride, pardon me, as we can, because we believe if we We will essentially be able to prevent CF developing in people as we know it today. As you know from our in vitro assays but also from our clinical data with the Vancorakta triple combination, we believe we can get to even higher levels than we've even been able to Established with Trikafta, which as you know sets a very, very high bar. And so the study that we have ongoing both in 12 plus but also in our 6 to 11 We aim to do just that, to compare Trikafta with vantacafta, and obviously, we were looking forward to seeing the data when those studies read out.

Speaker 3

As you identified, I think there's really going to be sort of 2 treatment opportunities for the Vansacafta triple combination. If the efficacy is superior to what we see with Trikafta. I think it's going to be a really exciting new treatment option either for those people who are currently being treated with one of our existing CFTR modulators or the patients who have discontinued one of our CFTR modulators. And I said in my prepared remarks, Globally, there are about 6,000 of those patients now. Now your question is why might they On to vansacaster, if they haven't responded to our other medicines, actually the major reason for discontinuations is not lack of efficacy.

Speaker 3

Our products are amazingly efficacious in just about every patient. It tends to be for things like adverse events. And so I do think it's going to be an attractive treatment option for people to consider who may have discontinued one of our previous CFTR modulated. So obviously, the data will be very influential to all of this. We're looking forward to seeing that now that the So these are fully enrolled and ongoing.

Speaker 3

And so we're looking forward to seeing that data, but I do think Vansa has the potential to be an even better treatment option for many patients

Speaker 4

And then Jeff on capital allocation, no change at all in our strategy or priorities. Our priority continues to be investment in innovation, both internally and externally. You saw that we were active with BD in the Q1. While it may be true that if you look back over the last 18 months or so, we've done a number of BD Transactions in cell and gene therapy, I don't think you have to project forward that that's the only place we're focused. As you know, we've got a sandbox of disease areas and we are modality agnostic and we'll do the deals that make sense for our program areas and fit our strategy.

Speaker 4

Lastly, I guess I would be remiss to point out we do have an ongoing share buyback program as well. We've been at that for about 5 years or so, And that program continues to be a part of our capital allocation strategy. Great. Thank you, guys.

Operator

The next question will come from Phil Nadeau with Cowen and Company. Please go ahead.

Speaker 9

Hi, good afternoon. Thanks for taking our questions. A few on VX-five forty eight in acute pain. Can you talk a bit more about your target product profile? What level of analgesia do you want to achieve with how many side effects?

Speaker 9

Then maybe As a follow on to that, could you discuss the target patient population? Who would be the ideal patient for non opioid option? And how many procedures per year approximately does that Patient group have. Thank you.

Speaker 2

Sure. Let me comment on the Target product profile a bit and then I'll ask Stuart to comment on the market size both in terms of patient numbers and dollar potential. So Phil, if we recapitulate the results that we saw in Phase 2, which you'll recall It's substantially similar to what we're doing in Phase 3. That is to say a study in abdominoplasty as a form of a soft tissue model and bunionectomy as a form of a hard tissue pain model, that would be a home run for us. What I mean by that is efficacy, pain relief that's quick and durable, a benefit risk profile that is quite attractive and by mechanism of That is to say the way 548 works is on the peripheral nervous system, not centrally, no addictive potential.

Speaker 2

That is an absolute home run. I'm going to ask Stuart to comment on market size in terms of dollars and patients. Stuart?

Speaker 3

Yes. Thanks, Reshma. So the study program that we've got this we designed, which Reshma just commented on, is designed to secure for us a label for moderate to severe acute pain. In contrast to a number of other relatively recent Approvals in acute pain, which have been related to post surgical pain and linked to certain procedure types, that's not the label we are We are seeking a label for moderate to severe acute pain writ large, could be postsurgical, and that's Indeed, the nature of our studies, but that is not the label we're seeking. So we are not sizing the market based on the number of procedures Well, remember, it's a surgery.

Speaker 3

It is for the broad treatment of acute pain, which can't be controlled with kind of standard NSAIDs and things like that. When you look at that market In the U. S. Alone, it's roughly 1,500,000,000 treatment days of medicine are utilized. And despite 90 plus percent of those prescriptions being generic, therefore very, very cheap, it is a $4,000,000,000 market in the U.

Speaker 3

S. Alone today. So we see a very, very significant commercial opportunity for VX-five forty eight if it has the profile that Reshma described.

Operator

The next question will come from Michael Yee with Jefferies. Please go ahead.

Speaker 10

Andrew, it's Tye on for Michael. Thanks for all the updates. So I wanted to follow-up on the acute and chronic pain study. So the first question we have is, do you think acute pain should have read through to chronic pain and vice versa? And then second question for us is for your Phase 1 CF program with Moderna.

Speaker 10

We understand this is a sad data set coming up later this year. But just curious when we can expect to see longer term MAD data. Is it possible that could come out later this year or should we be ruling out that scenario? Thank you.

Speaker 2

Sure. Let me take the mRNA question first and then I'll come back around to With regard to the program we have ongoing with Moderna, that's the VX-five twenty two program. It is a program for the Approximately last 5,000 patients or so who simply can't benefit from CFTR modulators. It is a sad, mad program with the sad portion of it going on right now. When we did KALYDECO and Trikafta, for example, our patients used to tell us that they knew from the first day that they were on placebo or active therapy.

Speaker 2

So I can't rule out when we will know whether we have efficacy. But in terms of time lines and what you can plan for, we expect to be done with the FAD this year and we expect to be well into the MAD this year. So those are the timelines we're looking forward to. With regard to the pain studies and what you could expect there, I don't really see Read through from acute to chronic, neuropathic pain or vice versa, what I do see read through is from the Phase Two studies to Phase 3. And I also see read through from the MAV1.8 class that is to say DX150, which already showed efficacy in acute neuropathic and musculoskeletal.

Speaker 2

So as I look forward to the VX-five forty eight pain Study results and the VX-five forty eight dose ranging Phase 2 neuropathic range neuropathic Study results, that's where I'm looking to for precedence. The Phase 2 program in 548 itself in acute pain And the VX-one hundred and fifty program across the 3 pain types.

Speaker 10

Very clear. Very helpful. Thank you.

Speaker 2

Sure.

Operator

The next question will come from Will Pickering with Bernstein. Please go ahead. Hi. Thank you for taking my question. Another one on pain.

Operator

For the neuropathic pain study, could you talk about reasons to be Optimistic that this drug will compare favorably to existing treatment options based on your experience with the X150. And then very quickly on sickle cell and the CGT access model, how does the timeline for that

Speaker 2

Sure. The first question on, how do we think about VX-five forty eight in neuropathic pain and what are our expectations? As I shared with you earlier when we were waiting on the acute pain Phase 2 results, I had high expectations for the PIFO-eight program in general and that extends to neuropathic pain. And the reasons for that are multifold, but here are three reasons. 1, NaV1.8 as a target, has often been called the Holy Grail, in the pain setting because Pain signals go through the NAV1.8 channel and that's how these signals are propagated.

Speaker 2

So they are central to the perception of pain. That is for acute and that is the same for neuropathic. 2, VX-one hundred and fifty, the predecessor molecule already delivered positive proof of concept in neuropathic pain. That study had patients the 150 study had patients with something called small fiber neuropathy and it also had patients with diabetic neuropathy. That's the study we're doing now, diabetic neuropathy.

Speaker 2

And 3, the VX-five forty eight molecule is multifold more potent and has better drug like properties, which is why we went on to seek another molecule despite the success with 150. You put that all together and that sort of gives you a sense for why we have our high expectations for this. I think you had a second question on PDT. Let me ask Stuart, to comment on that.

Speaker 3

Yes, Will. So on the CGT access model, I would consider this kind of complementary to our ongoing efforts with both government and commercial payers to secure Access for XSL is close to approval as we possibly can. The model has only just been announced. And so it's obviously going to take a while for that to be fleshed out and then implemented. We're certainly not relying on that to be in place for a successful launch of Exocell.

Speaker 3

As I said in my prepared remarks, we've been having extensive discussions with both government and commercial payers for the last few months and will continue to up to and post the approval of Exacel. And so we are working with Then they're not relying on the CGT access model for a successful launch. What I do think it is a signal of though is just how important Payers consider getting innovative therapies like XSLTV's Traditionally underserved patient population. So to us, it's a real indicator of a groundswell of opinion that people want

Operator

The next question will come from Jessica Fye with JPMorgan. Please go ahead.

Speaker 11

Hey there. Good evening. Thanks for taking my question. I have a commercial question on BX-five forty eight. I believe the randomized Phase III trials have Primary analysis against placebo, but there's also an opioid comparator arm.

Speaker 11

How do you think about the commercial implications if the pain efficacy looks better or worse than the opioid arm. Thanks.

Speaker 2

Yes, this is Reshma. You're right about the Study design, it is, a study that has a primary endpoint of VX-five forty eight versus placebo, just like the Phase 2 study. And there is a secondary endpoint with regard to the opioid comparator arm. And you'll remember in the Phase 2 study, we also had an opioid arm, but in the Phase 2 program, given the reasonably Efficient study design, it was not for comparison, but for context. But I will point you to the press release that we put out to give you If you want to get a sense for what the magnitude of the treatment effect was and how it compares, and I'll just say that it compares favorably.

Speaker 2

Of course, It was not there for comparison. Let me turn it over to Stuart to comment on the commercial implications.

Speaker 3

Yes. So Jessica, If you offered people today a medicine which had opioid like efficacy but without all of the associated baggage, including addictive potential, They would tell you that, that is a very, very attractive treatment option for them to be considering. If we were superior to an opioid, then clearly that would be additionally beneficial and something that we would obviously be very pleased about. However, I don't want you to take away anything other than if you have opioid like efficacy without the baggage, That is a very, very attractive treatment option, and I think that would be a very commercially successful option.

Speaker 11

Thanks. And if I could just sneak in a follow-up, are there any side effects that we should be keeping an eye out for with this mechanism as we We approach that Phase 3 readout.

Speaker 2

Jeff, this is Reshma. If you look at the Phase 2 data, both In abdominoplasty and bunionectomy, the benefit risk profile looks very good. And when you look specifically at safety and tolerability, it compares very, very well to placebo. So a really good looking side effect profile.

Operator

The next question will come from Collin Bristow with UBS. Please go ahead.

Speaker 12

Hey, good afternoon and congrats on the quarter and all the progress. Maybe first on the pipeline and CRISPR based DMD therapy. Could you give us any more color on the progress of the IND filing? And is it reasonable for us to expect any clinical data in 2024? And then second one, VXA AT, what should we expect to see at ADA in terms of patient numbers and cohorts?

Speaker 12

And then just a follow on from that with regards to 264. Now the IND is cleared, could you give us any more color in terms of the materials or the Thank you.

Speaker 2

Sure. Colin, there were a couple of questions in there. Let me talk about the Type 1 diabetes questions first and then I'll come Around to DMD. With regard to the Type 1 diabetes portfolio at Vertex, we really have We programmed the first is VX-eight eighty, that's the naked cell program that uses off the shelf immunosuppressants. That's the program that has completed and I'm very pleased to share completed Part A and Part B And that's the program where we're going to share the results at multiple congresses through the year starting with ADA.

Speaker 2

What you should expect there is, the full cohort of Part A and Part B patients, and you should expect That is to say more patients' worth of data than we've previously shared and longer term data, including some patients that are out more than a year. Those same cells, the VX-eight eighty cells are the foundation for Program 2, which is the cell plus device program and those same cells are the foundation for program 3, which is the hypo immune program. And that's really important Because as you know, there are 2 parts to this. The first is having cells that are fully differentiated and insulin producing. We've got that.

Speaker 2

And the second is how to evade the immune system. In the 2/64 program, we evade the immune system with a device. I'm not going to share any more details than we have in the past, but I will say that it's a proprietary device that has particular materials, geometry and structure that allow for oxygenation and nutrient transport as well as sensing of glucose and release of insulin without worry of the immune system coming into the cells. And from what we've Seen to date in large animal models and small, no fibrosis. And of course, the third is the cells with the edits so that the edited cells evade the immune system.

Speaker 2

With regard to when we can see data from VX-two 2 64, we haven't guided to that, but we are very pleased with the clearance of the CTA and IND, and we expect the trial to start dosing patients in the near future. With regards to the DMD program, you'll recall that our approach is different than the approach being taken by many in the field. That is to say, our approach is grounded in human genetics. And what we see is that if you have near full length or full length dystrophin, which is the goal of our program, You have a very mild version of the disease. There is no such human genetic validation for an approach using microdystrophin.

Speaker 2

We're excited about the program. It is in its IND enabling studies and we are on track to complete those studies and get the IND filed towards the second half of this year.

Speaker 13

Thanks, Collin. Chuck, that brings us to time. So can you wrap it up, please?

Operator

Yes, ma'am. That will conclude our question and answer session as well as our conference call for today. A replay of today's event will be available shortly after the call concludes by dialing 1-eight seventy seven-three forty four-seven thousand five hundred and twenty nine or 1-four twelve-three seventeen-eighty eight. And you can use the replay access code 8384,718. Everyone have a great day.

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Earnings Conference Call
Vertex Pharmaceuticals Q1 2023
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