Vertex Pharmaceuticals Incorporated

Good evening. Welcome to the Vertex Third Quarter 2020 Financial Results Conference Call. This is Michael Partridge, Senior Vice President of Investor Relations for Vertex. Making prepared remarks on the call tonight, we have Dr. Reshma Kewalramani, Vertex's CEO and President, Stuart Arbuckle, Chief Commercial Officer, and Charlie Wagner, Chief Financial Officer. Dr. David Altshuler, Chief Scientific Officer, will join the Q&A portion of the call following the prepared remarks. We recommend that you access the webcast slides on our website as you listen to this call. This conference 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 our filings with the Securities and Exchange Commission. These statements, including, without limitation, those regarding Vertex's market at 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.

Thanks, Michael. I'll begin tonight with a few general comments across the business and then provide details on our R&D programs before turning it over to Stuart for a review of the commercial performance. First, starting with CF. 2020 continues to be a remarkable year for our growing CF business. Our performance through the third quarter was driven by the strong Trikafta launch in the U.S., and we are building on that progress as we launch Captrio, as the triple combination is known in Europe. Based on our year-to-date performance, we are again revising upward our 2020 product revenue guidance to $6 to $6.2 billion. There are two important aspects that characterize our outlook in CF, and I want to be sure to provide a perspective on both. The first is growth, which has been exceptional. 2020 is poised to deliver more than 50% growth in revenue over 2019, and we see significant top and bottom line growth beyond 2020, driven by three factors, expansion of the triple combination geographically, expansion of our medicines to lower age groups, and additional mutations, as well as the development of a treatment for the last 10% of CF patients who cannot benefit from CFTR modulators. There's two ways to think about this growth. Near term, even for the CF population who are currently eligible and reimbursed for our medicines, there are many patients who have yet to begin treatment. And beyond that, there are at least 20,000 more who we anticipate will become eligible through label, geographic, and reimbursement expansions. Stuart will go into more details on these growth drivers in a moment. The other aspect of our business I want to address is leadership. We have a strong leadership position in cystic fibrosis, and we believe this will last a very long time, into at least the late 2030s as a base case, when considering the high bar set by the significant benefit of Trikafta to patients and the patent coverage for this regimen. Turning to the pipeline. Our pipeline reflects a deliberate strategy of investing in serial innovation, both internally and externally, to develop first in class or best in class treatments for serious diseases. The diseases we pursue are selected based on the understanding of causal human biology, target validation, and biomarkers with high fidelity from bench to bedside. Once we begin working on a disease, we are relentless in our pursuit of a transformative therapy. Because drug development is an inherently high risk endeavor, we strive to increase our chances of success by advancing a portfolio of drug candidates for each disease so that we can bring the very best one to market. This strategy is working exactly as expected, and it is the reason for our success in CF. And this is exactly the same approach we are applying to every pipeline program. With this strategy, Vertex has advanced a broad and deep portfolio with first-in-class programs in the clinic in five different disease areas outside of CF. The programs in sickle cell disease, beta thalassemia, FSGS, and alpha-1 antitrypsin deficiency are already in patients, and the type 1 diabetes program is projected to be in patients next year. A number of these programs have the potential to read out important proof-of-concept data between now and the end of 21. Individually, each represents a potentially transformative treatment for a serious disease, and collectively, they represent a very large opportunity. Some compounds will inevitably fail, and some programs will not fulfill their early potential. In terms of the Vertex portfolio, not all of the molecules will succeed, and not all of them have to. Even if two or three of the programs succeed, and we firmly believe that they will, The return on investment for the innovations that emerge will create exceptional outcomes for patients and drive exceptional returns for our shareholders. That is our R&D and corporate strategy. Lastly, a few words about the AATD program. This program is an example of our portfolio approach at work. The recent discontinuation of VX814 is disappointing. but it is neither unusual nor extraordinary to have a clinical program discontinued in early or mid-stage development. This is a potential for any molecule, and it is anticipated in our overall strategy, hence our portfolio approach. That is to say, the advancement of multiple molecules in parallel through research and into early clinical development. Our enthusiasm for the AATD program is not diminished. and it does not change how we think about VX864 or our follow-on molecules. Let me now turn to reviewing some of our R&D programs in more detail and highlight some specific upcoming pipeline events. Starting with CF, we have completed the study of Trikafta in patients 6 to 11 years of age and are on track for filing this quarter with a potential approval in 2021. The Phase III study in Trikafta for 2- to 5-year-olds is also now underway. And lastly, we continue our efforts in nucleic acid therapies to bring forward a treatment to the last 10% of CF patients who do not make any CFTR protein and hence cannot be served by CFTR modulators. On this front, I'm pleased with our second collaboration with Moderna and the preclinical progress using mRNA to serve the last 10% of CF patients. Moving to AATD. The Phase II study of VX864 is ongoing and continues to enroll in dose patients. This Phase II study is a dose-ranging proof-of-concept study in approximately 40 people with AATD. The duration of treatment is 28 days, followed by 28 days of safety follow-up. We expect to see results from this program in the first half of 2021. We're also advancing additional small molecule correctors through preclinical development with a goal of at least one new corrector entering the clinic next year. Next, the CTX001 program. Our gene editing program in transfusion-dependent beta thalassemia and sickle cell disease is gaining momentum. As you will recall, data at the EHA conference in June included the results for two patients in the beta thalassemia study, which provided clinical proof of concept for CRISPR-Cas9 ex vivo gene editing in this disease. Results were also presented for one patient with sickle cell disease. Also in the summer, we updated you on enrollment and dosing progress, noting that a total of seven patients had been treated with CTX001, and all had successfully engrafted. Since then, we have enrolled and dosed additional patients across both studies. Given the progress across these trials, we look forward to reporting additional clinical data including more patients and longer durations of follow-up by the end of this year. With regard to the APOL1-mediated FSGS program, enrollment is ongoing in our Phase II proof-of-concept study of VX147, evaluating the safety, pharmacokinetics, and reduction in proteinuria over 13 weeks. We expect to obtain initial data from this study in 21. And with our cell therapy for type 1 diabetes, We have completed the required IND-enabling studies and manufacturing work, which were key priorities in the first half of the year, and we are on track to submit an IND application to the FDA before the end of this year. We expect the first study to focus on islet cells alone, and I am optimistic about the progress we're making. This program is important in so many ways, including the number of patients who are living with this disease and the approach. which holds the potential to truly transform this condition. In summary, we've made strong progress across the business in Q3, and we are well positioned for continued growth in CF and continued advancement of our portfolio of small molecules, cell, and genetic therapies across multiple different disease areas. And now, over to Stuart.

Thank you, Reshma. I am pleased to review with you this evening our continued strong commercial performance. It is amazing to think that Trikafta was first approved in the U.S. just a little over a year ago. The response to the product has been incredibly positive. Payers recognized the value of the medicine and provided almost immediate access for eligible patients. The CF community enthusiastically welcomed the approval and CF centers have worked tirelessly to initiate treatment for patients even during the disruption caused by the COVID-19 pandemic. As a result, today, the vast majority of eligible patients in the US are now being treated with Trikafta. Total CF product revenues for the third quarter were $1.54 billion, reflecting this impressive uptake in the US. We continue to observe that patients are maintaining the relatively high levels of personal inventory that they built up at the beginning of the pandemic. Moving forward, we are focused on maintaining the high rates of patient persistence and compliance that have been important factors contributing to our revenue performance in the year to date. In late August, we were delighted to receive an earlier than expected approval for CAF TRIO in Europe. We have begun to execute what is our first fully remote launch. Despite the challenges posed by COVID-19, which continues to surge in Europe, our team has enabled patients to access CAF TRIO in multiple countries. Germany, which provides immediate access to new medicines, and other countries where we secured reimbursement for the triple combination ahead of approval, including England, Ireland, Scotland, Wales, and Denmark. We are also working to secure reimbursement and access for all eligible patients in countries where we don't yet have agreements in place. As in the U.S., enthusiasm in the CF community is high. And over time, we expect the vast majority of patients will be treated. We expect the impact of the CAF TRIO launch to become a significant driver of growth starting in the fourth quarter. All of these factors and their potential impact on results for the fourth quarter and full year of 2020 are reflected in our revised revenue guidance, which Charlie will review in more detail. I am pleased by the progress we've made in bringing our medicines to patients to date. Our teams are working hard to ensure that we are able to reach all eligible patients with CF as quickly as possible after regulatory approval, and we expect to see continued revenue growth in CF beyond 2020. Our goal remains, as it has always been, to treat the 90% of all CF patients who might benefit with our CFDR modulators. While we have made great progress towards this goal, our job is far from done. Today, there are still many patients who, although they are eligible and have reimbursement and access to our medicines, have yet to start treatment. These patients are primarily in Europe, and our teams are working toward treating all of these patients. As we think about our CF business heading into 2021 and beyond, there are more than 20,000 patients who we believe will become eligible for our medicines as we achieve additional regulatory approvals and secure future reimbursement agreements. The key expected drivers for our near and long-term growth in CF include, first, reaching reimbursement agreements for CAF TRIO in additional countries in the EU. Next, regulatory and reimbursement approvals for the triple combination in additional geographies, such as Australia. Third, regulatory approval and reimbursement of the triple combination in children ages 6 to 11. And finally, continued label expansions and reimbursement in younger age groups, and additional mutations for our portfolio of CF medicines. We remain steadfast in our belief that we will be able to treat 90% of all CF patients with our CFTR modulators in the years to come, and we look forward to continuing to update you on our progress. I am very grateful to the CF teams at Vertex in both the U.S. and internationally for who have delivered tremendous results during these challenging times, all in service of our shared dedication to patients living with this life-shortening disease. It is because of this commitment to delivering for our patients that I have high confidence in our ability to reach all eligible patients with our CFTR modulators. Finally, I would like to thank once again the CF community for their commitment to collaborating with us to reach our shared goals. Charlie will now review our third quarter results and financial guidance. Thanks, Stuart.