Vertex Pharmaceuticals Incorporated

Chief Operating Officer, and Charlie Wagner, Chief Financial Officer. Dr. Bastian Osana, Executive Vice President and Chief of Cell and Genetic Therapies at Vertex will join us for Q&A. We recommend that you access the webcast slides as you listen to this call. This call is being recorded. 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 review on the call this evening are non-GAAP. I will now turn the call over to Dr. Reshma Kewalramani.

Thanks, Michael. I'm very pleased to be here with you tonight to discuss Vertex's progress through the first three quarters of 2021. During this year, we've meaningfully increased our leadership in cystic fibrosis, both with our approved CFTR modulators and with the CF programs advancing in our pipeline. We've expanded and accelerated our R&D pipeline beyond CF, and these programs are now delivering clinical results. We have continued to demonstrate exceptional financial performance with significant growth in revenue, high operating margins, and increasing cash flow. Let me elaborate more on each of these three points, starting with CF. From a commercial perspective, third quarter product revenues were $1.98 billion, representing almost 30% growth year over year. This growth was driven by the performance of Trikafta in the U.S., including the launch in children ages 6 to 11 and strong uptake OUS, where Kaftrio has been reimbursed, including most recently in France and Italy. Based on the strong performance, we are again increasing our revenue guidance and now expect total product revenues for 2021 to be between $7.4 and $7.5 billion. As we look forward, we expect that our CF business will continue to show robust growth in the years ahead, as there are approximately 30,000 CF patients yet to be treated with our CFTR modulators. We've made important progress with our CF R&D pipeline programs this year as well. Based on strong preclinical and clinical results from our next-in-class triple combination regimen of VX121, Tezacaftor, and VX561, that demonstrate the potential for superior benefit to existing CFTR modulators, we've accelerated this program into pivotal studies. Both of the phase three studies are head-to-head trials versus Trikafta. Both studies are up and running and enrolling patients. And we are not stopping there. We have identified even more promising regimens in our labs, building on 20 years of success, translating our proprietary insights in CF biology into groundbreaking medicines. We are confident that these regimens will allow us to reach our longstanding goal of bringing all CF patients to carrier levels of sweat chloride. For the approximately 10% of people with CF who cannot benefit from a CFTR modulator, we're working on genetic therapies, including an mRNA approach. We and our partner, Moderna, have for some time now been able to synthesize mRNA constructs that restore CFTR protein function in vitro. The biggest challenge for us and for everyone in the field has been delivery of the mRNA to the target cells. I am very pleased to report that we and Moderna have made a significant breakthrough in delivery this past year. We have now demonstrated that we can efficiently deliver full-length CFTR mRNA to human bronchial epithelial cells in vitro to provide high levels of CFTR function and in vivo through the delivery of nebulized lipid nanoparticles to the bronchial epithelial cells in non-human primates. Based on these results, IND-enabling studies for our CFTR mRNA therapy are already underway, and we plan to file an IND and start clinical development in 2022. To close out on CF, I will note that just a few months from now, we will mark the 10th anniversary of the first approval of Kalydeco, our first CFTR modulator, and last month marked two years since the U.S. approval for Trikafta. From the Phase III clinical trials, our CF medicines have always been appreciated for their outstanding short-term benefits. not just significant increase in PPFEV1, but decreases in pulmonary exacerbations, increases in weight, and increases in quality of life. We're now in a position where we have tens of thousands of patient years of safety data, and we can appreciate more fully the breadth of clinical benefit with analysis of longer-term real-world data. What we find truly remarkable is that with Kalydeco, we now have data based on an average of six years of follow-up in patients six years and older. And that includes a 78% reduction in the mortality rate and an 89% reduction in the rate of lung transplantation compared to patients who were not eligible for treatment. With Trikafta, we now have data showing no decline in lung function after two years of follow-up from the pivotal trials. And this is a first for any CF medicine. I'd like to emphasize that from our perspective, it is these kinds of long-term data that ultimately determine physician and patient choice of regimens, particularly in CF, where patients take CFTR modulators chronically over a lifetime. Let me turn to our pipeline outside of CF. First, to our type 1 diabetes programs and the unprecedented clinical data we recently shared. The pathophysiology of type 1 diabetes is well known. It results from the autoimmune destruction of pancreatic islet cells. Daily injections of insulin have saved the lives of these patients, but patients still suffer from severe long-term vascular complications of the disease. resulting in premature mortality, and unfortunately, the treatment itself can lead to severe hypoglycemic episodes that can be associated with unresponsiveness, seizures, and even death. Therefore, the holy grail for type 1 diabetes for decades has been to replace the damaged pancreatic islet cells and restore insulin production. Early clinical studies using cadaveric islets have demonstrated the curative potential of this approach. The problem has been producing sufficient quality and quantity of islet cells to treat the millions of people with this disease. Vertex has developed a proprietary process to make industrial quantities of allogeneic, stem cell-derived, fully differentiated islet cells that could serve the more than 2.5 million patients with type 1 diabetes. The clinical data from this first patient treated in our VX880 program with these cells are truly remarkable. With a single infusion at half the target dose, combined with standard immunosuppression routinely used in transplantation, we observe substantial improvements across multiple measures of islet cell function that were rapid, robust, and durable through day 90. Our stem cell-derived islets produced basal levels of insulin and increased insulin secretion appropriately in response to glucose stimulation. And in the 90 days following infusion, there was a significant reduction in blood glucose as measured by hemoglobin A1c, despite a 91% reduction in exogenous insulin requirements. On the safety side, VX880 was generally well-tolerated. These cells are the product. They are the common denominator across our type 1 diabetes programs, and these results de-risk each of our three programs. In the Cells Alone program, we use standard pharmacologic immunosuppressants. In the next program, we're using our proprietary device for immunoprotection of these cells. The IND enabling studies for this program are already underway, and we plan to file the IND in 2022. And these same cells are the starting product for our gene editing program designed to produce hypoimmune islet cells that can evade the immune system. In cell and gene therapies, it is clear that the curative potential of these approaches is very high. And therefore, these therapeutics have potentially rapid paths to registration involving a reasonable number of patients and a reasonable amount of follow-up. It is with this in mind that we're working with urgency on the VX880 program. Moving on to CTX001. CTX001 is our non-viral ex vivo gene editing therapy that is designed as a one-time curative approach for sickle cell disease and beta thalassemia. It also stands out as a clear example of how we have accelerated our pipeline in 2021. CTX001 is our most advanced program outside of CF and continues to have strong momentum. We've now fully enrolled the target number of patients in both the sickle cell disease and beta thalassemia clinical studies. Based on the clinical data we've presented to date, physician and patient interest in these trials has been high, and we have additional patients beyond the target 45 in each trial who are now completing eligibility assessments and will be enrolled this month. We anticipate closing out our regulatory discussions in the near term and submitting regulatory filings for approval of CTX-001 by year-end 2022 based on these clinical results. We have high confidence that CTX-001 will be our next launched medicine. Stuart will comment on the progress of our commercial preparedness in his remarks. On to VX-147. where we will have results from the Phase II Proof of Concept Study this quarter. This Phase II study of VX147 is fully enrolled and focuses on patients with a form of FSGS that is mediated by ApoL1. Our goal is to establish ApoL1 inhibition as a new mechanism that can be used more broadly beyond FSGS in ApoL1-mediated non-diabetic pertinent kidney disease. Based on the human genetics, the strongly validated target, and the performance of VX147 across a number of in vitro and in vivo assays, we see our APOL1-mediated kidney disease, or AMKD program, as having a high probability of success. Some of the preclinical data from this program are the subject of a presentation at the American Society of Nephrology meeting taking place later this week. In this Phase II study, we're assessing the safety of VX147, and the key efficacy marker is reduction of pertinuria. Pertinuria is the clinically relevant endpoint and one that regulators have expressed openness to accepting in a homogeneous pertinuric kidney disease population. If our Phase II study in APOL1-mediated FSGS is successful, it would represent a first-in-class demonstration of proof of concept for an APOL1-mediated kidney disease and would propel us into pivotal development in the AMKD population, which includes but is not limited to FSGS. In total, this represents approximately 100,000 people with AMKD. I'll conclude the pipeline discussion with a few words on our pain program. We have high confidence in the NAV1.8 target for three main reasons. One, NAV1.8 is genetically validated. Two, NAV1.8 is also pharmacologically validated with our very own three positive Phase II proof-of-concept studies in acute, neuropathic, and musculoskeletal pain. And third, our lead molecule in the program, VX548, has the key drug-like properties that we are looking for, including high selectivity and potency. The two Phase II dose-ranging studies in acute pain, bunionectomy and abdominoplasty, with VX548, are well underway. Based on enrollment progress, we currently expect data from these studies in Q1 of 2022. With that, I'll now turn it over to Stuart to review the commercial progress.

Thanks, Reshma. I'll begin by reviewing the Q3 revenue performance of our CF medicines, which reached nearly $2 billion in Q3. US revenues were $1.38 billion, an increase of 13% compared to the prior year, driven by the performance of Trikafta, including the launch in the 6- to 11-year-old population. The launch in the 6- to 11-year-olds is progressing rapidly, which is not surprising given the profile of the medicine and the recognition of the importance of early treatment of this relentlessly progressive disease. Outside the U.S., revenues were $601 million, an increase of more than 90% over the third quarter last year, driven by the ongoing launch of Caftreo in the 12-plus population. In particular, Caftreo is off to a strong start in France and Italy, two major markets where we achieved reimbursement in June of this year. We also signed a letter of intent for public reimbursement of Trikafta in patients 12 and over in Canada, and since then we've achieved multiple provincial reimbursement agreements, and some 90% of patients covered by government insurance now have reimbursed access to Trikafta. We have achieved reimbursement agreements for Caftreo Trikafta in more than 20 countries outside the U.S., just over one year since approval. And importantly, we've continued to achieve reimbursement at levels that reflect the high value of the triple combination regimen. As Reshma mentioned in her remarks, the profile of our CF medicines continues to be enhanced by long-term data. The start of the North American CF conference is tonight, and among several important abstracts are data from the ongoing 192-week open-label extension study of Trikafta. which shows there has been no loss of lung function during long-term follow-up. This is a first for any CFTR modulator to date, an important milestone for the field. All previous long-term data for our other medicines showed a slowing of lung function decline. In contrast, these data show no loss of lung function for patients on Trikafta after 96 weeks of follow-up. Real-world data also being presented at the conference on Kalydeco show, at an average of six years of follow-up, a 78% reduction in the mortality rate and an 89% reduction in the rate of lung transplantation compared to patients who were not eligible for the treatment. These data are very important for patients and the medical community because they more fully illustrate how our medicines address the long-term progression and complications of the disease. These data also have important implications for the future competitive landscape as they raise the bar in terms of what will be required to compete effectively. Now turning to some of the other opportunities in our pipeline beyond CF. Our commercial experience in CF provides foundational capabilities which we will be able to leverage to commercialize our next wave of transformative medicines. As Reshma mentioned, regulatory submissions for CTX001 are planned for the end of 2022, and so our launch preparation activities are well underway to ensure we are able to bring this potential medicine to patients globally immediately upon approval. We see CTX001 as a potential one-time curative approach to for the approximately 32,000 patients with severe sickle cell disease or transfusion-dependent beta thalassemia in the US and Europe. We've developed a deep understanding of the sickle cell and beta thalassemia markets, including where patients with these diseases are and the role that key referral and treatment centers will play to facilitate the treatment journey for patients. Consistent with our own internal market research, published physician surveys in the U.S. consistently indicate that they would expect a quarter to a third of their patients with sickle cell disease to be good candidates for a one-time curative approach using the current conditioning regimen, which is in line with the estimates of the numbers of patients with severe disease, approximately 25,000 sickle cell disease patients. We are focused on three key areas of launch preparation for CTX001. First, people. We've hired many of the key people who will support the launch. Second, manufacturing. This is an area we have focused on from the earliest days of our work on CTX001 to ensure we can supply a consistent and high-quality product to the large number of patients we believe will benefit from the medicine on day one of the launch. Importantly, we are using the same manufacturing sites and processes for commercialization that we are using for our clinical trials. And third, patients. Making sure we really listen, understand them and their experience, so we can provide them at launch with the information, resources, and support they need as they consider treatment with CTX001. Now, turning to pain. With our acute pain studies well underway, I thought I would remind you of the large market opportunity there. Acute pain accounts for 1.8 billion treatment days a year in the U.S. alone, and despite more than 90% of prescriptions being generic, this is still today a $4 billion market. At typical branded pain medicine pricing of approximately $10 a day, a new medicine that takes even a portion of the current treatment days has multi-billion dollar potential. In light of the unprecedented data for VX880, it's also worth highlighting the market opportunity in type 1 diabetes, which is very large. Let me start with the disease. Type 1 diabetes is a disease affecting more than 2.5 million people in the U.S. and Europe alone. It is a severely debilitating and life-shortening disease in which, due to autoimmune destruction of pancreatic islet cells, the body produces little to no insulin. There are two patient populations to consider. First, those with severe enough diabetes for whom the benefit risk profile is positive for the cells alone plus standard immunosuppressive therapy. And secondly, the broader population who would be candidates for the cells encapsulated in our propriety device or hyperimmune cells where immunosuppression would not be needed. There are at least 60,000 patients with type 1 diabetes in the U.S. and Europe who are potential candidates for the first approach with VX880. This group is made up of people who have severe, difficult-to-control forms of type 1 diabetes characterized by impaired awareness of hypoglycemia and severe hypoglycemic events that can be life-threatening. There are approximately 45,000 patients in this category. And then there are people with type 1 diabetes who have had previous organ transplants, primarily kidney, and so are already on immunosuppression. There are about 15,000 patients in this category. Cadaveric islet and whole pancreas transplants are already performed, albeit in small numbers of these patients. and give some sense of the value of this type of intervention in a patient with severe disease. For illustrative purposes, if you use the benchmark price in the U.S. for a pancreatic transplant of approximately $400,000 per patient as the price for a cell-based treatment, treating even a minority of the eligible patients would represent a multi-billion dollar opportunity. Beyond VX880, the Cells Plus Device program, which encapsulates the same cells for which we recently reported the unprecedented clinical data into our proprietary device that protects these cells from the immune system, could address the broader type 1 diabetes population, 2.6 million patients in the U.S. and Europe. In summary, I'm pleased with our continued progress in bringing our CF medicines to more patients around the world and excited about the many opportunities in our pipeline. And with that, I'll turn it over to Charlie.

Thanks, Stuart. In the third quarter of 2021, Vertex's long-term track record of strong revenue growth continued. Total product revenues were $1.98 billion, a 29% increase compared to the third quarter of 2020. Notably, Trikafta represented nearly 80% of third quarter revenues as most eligible patients have switched to Trikafta. Our third quarter revenues included $1.38 billion in the U.S. and $601 million outside the U.S. Ex-U.S. revenues for the quarter grew 92% over the prior year, driven by continued strong uptake for Keftrio. Our third quarter combined R&D and SG&A expenses were $561 million compared to $497 million for the third quarter of 2020, driven largely by investment in our clinical stage programs and our research pipeline. We expect our R&D investments will continue to be substantial as we advance our mid- and late-stage programs and make further clinical and regulatory progress across the pipeline. Our continued growth in revenues combined with disciplined growth in OpEx translates to a year-to-date operating margin of 59%. And with our strong revenue and profitability, we ended the second quarter with $7 billion in cash. Now to Guidance. We are again revising our 2021 guidance upward for total product revenues in the range of $7.4 to $7.5 billion. This increase reflects continued outperformance as well as the rapid uptake we have seen with new launches. Year over year, this guidance represents 20% growth at the midpoint. As Stuart highlighted, the 6 to 11 launch in the U.S. and the uptake in France and Italy are proceeding very rapidly. Even with the outstanding growth in the number of patients treated this year, we have approximately 30,000 patients left to treat with our CFTR modulators. Given our proven track record of securing new reimbursement agreements in additional markets, executing successful launches, and expanding access to younger age groups, we are confident that we will be able to reach the vast majority of these patients with our medicines. We are maintaining our non-GAAP OpEx guidance for full year 2021 at $2.25 to $2.3 billion. And for our non-GAAP tax rate, we continue to guide to a range of 21% to 22% this year. In conclusion, 2021 will be another year of rapid growth for Vertex, and we are confident in our continued growth trajectory in CF and our ability to lead in this therapeutic area over the long term. Tricapta is an exceptional medicine that sets a very high bar for efficacy and safety with IP that extends to the late 2030s. With the emerging profile of our next regimens beyond Tricapta, as well as the progress we are making in genetic therapies for CF, we are well on our way to fulfilling our vision for achieving carrier levels in all CF patients. The VX121-Tezacaptor-VX561 regimen is the only regimen with clinical data that shows the potential to meet or exceed the performance of Trikafta and is years ahead of any other regimens in development. Our pipeline beyond CF is both advancing and delivering. Progress with CTX-001 and more recently VX-880 continues to demonstrate the value we can create by investing in external innovation. We look forward to sharing additional data with you as ongoing trials come to completion in the coming months. We anticipate Phase 2 data for VX147 in APOL1-mediated FSGS and Phase 2 data for VX548 in acute pain in the near term. With growing revenues and margins at the top of our peer group, we will deliver strong cash flows as we continue to reinvest in internal and external innovation to drive future growth. We are confident that the execution of our business strategy will continue to drive exceptional results for patients and the medical community, as well as for our shareholders. We will now open up the call to questions.

If you would like to ask a question, please press star then 1. If your question has been answered and you'd like to remove yourself from the queue, press the pound key. Our first question comes from Salveen Richter with Goldman Sachs. Your line is open.

Good afternoon. Thanks for taking my questions. Two on the pipeline here. With regard to your collaboration with Moderna, I recognize that you're moving forward nicely with delivering mRNA via LNPs. Could you just talk about where you stand with using mRNA to explore the use of gene editing in lung cells? And then secondly, on the development plan in type 1 diabetes. Maybe you could touch base on the expanded collaboration with Arbor and how that fits into the outlook here.

Yeah. Hey, Salvine. This is Reshma.

Two questions in there. One about the mRNA program with Moderna. And another question, I think, on type 1 diabetes, but specifically with regard to our collaboration with Arbor and how we're thinking about the hypoimmune cell program. Let me break it up into two parts, and maybe I'll expand a little bit on type 1 diabetes even beyond the collaboration with Arbor. Let's start with Moderna. We are very excited about the recent breakthrough we made and that I shared in my prepared remarks on the mRNA program for the last 10% of patients with CF who simply don't make any CFTR protein, right? And when you step back and think about what do you really need to do to make a breakthrough here, it's really about three things. It's about the HBE cells. It's about the mRNA construct itself, and then for sure it's about delivery. And it's this last one, delivery, that's been a vexing problem for us in the field as a whole. And that's really the exciting news for today. With regard to the HBE cells, these have been the workhorse for the four medicines that we have brought forward already. And I say that because they are the only model that translates from the bench to the bedside, right? And it's not only qualitatively so, but quantitatively so. And it's these HPE cells that have also been the workhorse for the program with Moderna. The second is the mRNA construct itself. And a number of years ago, we struck up a partnership with Moderna, arguably the best company in the space of mRNA, And in all honesty, we have for some time been able to express full-length CFTR mRNA, the protein, and demonstrate its functionality. We've been able to do all that in vitro in HPE. But over the last several months, what we have now been able to do is demonstrate that we can deliver using nebulized LNPs to the appropriate cells. So that is to say to bronchial epithelial cells, and we've done this in small animals and large, and we can see that we've delivered the mRNA construct to the bronchial epithelial cells. No one else has claimed to do this, and certainly no one else has been able to do this. So that's the big advancement that allows us to go and start our GLP-enabling studies. Those are already underway, and I do expect the IND to go in next year. On type 1 diabetes, Salveen, there are the cells themselves, and then there are the mechanisms to cloak the cells, right? In the first program with VX880, we use simple off-the-shelf pharmacologic immunosuppressants. In the second program, it's cells plus device. Those IND studies are already underway, IND next year. The third program is using these same cells, and for the cloaking, we use or plan to use gene editing, for example, to make hypoimmune cells. I'm going to ask Bastiano to comment just a little bit more on the hypoimmune program. Bastiano?

Absolutely. Thanks, Reshman. Thanks, Alvin, for the question. So like Reshman said, the product is actually the cells, the fully differentiated allogeneic beta cells. Aiding cells to cloak them from the immune system is a complex and challenging challenge in general. Specific to type 1 diabetes represents even more complicated because, recall, type 1 diabetes is an autoimmune disease. So we have to cloak the cells from the general allogeneic response, but also from the autoimmunity. And, of course, it's fairly obvious that allogeneic rejection is something that has been worked on the past, let's say, two decades. And, of course, knocking out MHC class 1 and 2 is the usual place where most people will go, and we're doing that internally. There are other mechanisms we are exploring internally and through collaboration to be sure that we take care of both types of immunity, the allogeneic rejection and the autoimmunity.

Great. Thank you.

Our next question comes from Michael Yee with Jefferies. Your line is open.

Hi, good morning. Good morning. Good afternoon. I had two questions. It's been a long day. One is actually the announcement this quarter that you had moved your new CF program into phase three. And I would like for you to comment about it in the context of how much clear differentiation you're confident it is from Trikafta, but also in the context of the fact that everybody knows there's a competitor with data coming and how we should interpret that in the context of your data that you put out in a press release and how differentiated they could be. The second question is more a question around the fact that you had commented about M&A earlier this year. In fact, Reshma had commented even about areas like Huntington's. And I just wanted you to refresh that view in the fact that you haven't really commented about that so much like you did earlier this year in the recent prior quarters. Thank you.

Sure. Hey, Michael. Good afternoon. Let's do the CDF question first, and then I'll come to capital allocation and M&A. So, We have obviously established ourselves as a leader in CF over the last decade plus. And over the recent few years, we've expanded that leadership first with TriCaster that can serve up to 90% of people with CF. And then with the specific program that you're asking about, VX121-561-TEZ, which preclinically in these HPE cells that are a model that translates from bench to bedside have demonstrated the potential to have even better efficacy than Trikafta. And in the clinical program from the phase two results that we shared earlier in the year, where it looks that 121561 test has the ability to provide even more benefit than Trikafta. Now, make no mistake about it, Trikafta sets an incredibly high bar. It's an extraordinary medicine with a very high benefit-risk profile. But 121, frankly, is the competitor to Trikafta. It's years ahead of anything else in the field. If I just stand back and look at this, Mike, we have the best medicine for CF today in the form of Trikafta. We have the best medicine for CF tomorrow in the form of 121561 Tesecaptor. And as I look long-term, when you really think about CF, a chronic disease, children are born with this disease. They're going to take medicine for a lifetime chronically. You're going to need long-term data, the kind of data that Stuart talked about in his prepared remarks. Mortality. lung transplantation, rate of decline. And to be clear, the only company that has the short-term data and the long-term data is Vertex. With regard to capital allocation, Charlie, I'll ask you to comment on that one.

Yep. Thanks, Reshma and Mike. Thanks for the question. Listen, it's very clear to us that innovation is the greatest driver of value in this industry. And we have shown that in CF, that innovation that leads to transformative medicines for a serious disease creates tremendous value both for patients and for shareholders. And we hope to do that in a number of other disease areas that are represented across our broad pipeline. So, when it comes to capital allocation, our primary focus is on reinvestment in innovation, both internally and externally. You can see in the numbers, we've never invested more internally than we are today. And you can also see in the pipeline the benefit of some of the smart external investments that we've made over the last couple of years. I would call out CRISPR and SEMA specifically, but there are many others. And so from a capital allocation standpoint, that reinvestment in innovation will continue to be the top priority. You know, we've not commented specifically on types of deals because we're not looking for a certain type of deal. We're looking for tools and technologies and assets that fit and are well aligned with our research strategy. And as we identify those, you can expect there will continue to be discipline and move quickly when we see an opportunity.

Thanks, guys.

Our next question comes from Phil Nader with Cohen & Company. Your line is open.

Good evening. Thanks for taking our questions. Two from us, if that's okay. One commercial, one pipeline. On the commercial side, The growth quarter-over-quarter was pretty impressive. Could you give us some sense of where you think you are in penetrating the 6- to 11-year-olds in the U.S. and then those ex-U.S. markets that you highlighted, like France, Italy, and Canada, and whether the type of growth that we've seen this quarter could continue into future quarters? And then second, on the pipeline and FSGS, as the data approaches, we're just curious to hear your most recent thoughts on what would be proof of concept for the molecule and what gives you confidence to go from the narrow FSGS population to the broader APOL1-mediated kidney disease population based on this initial data. Thank you.

Yeah. Hey, good afternoon, Phil. I'm going to ask Stuart to comment on the question around CF and how we see growth, and then I'll come back and tell you a little bit more about the FSGS program.

Stuart? Hey, Phil. Yeah, thanks very much for the question. And yeah, I'm enormously proud of our execution in this third quarter that led to the results that you commented on and led us to increasing our revenue guidance today. It's hard to comment specifically on kind of quarter on quarter what a growth rate is going to be, but I'll give you a sense for where we are in our overall growth trajectory. As you said, we got the approval for the 6 to 11-year-olds for Trikafta in June, so just prior to this quarter starting. We also secured new reimbursement agreements in important markets like Italy and France, and also most recently in Canada. And the launches there are underway. What I can tell you is that the Level of enthusiasm for the 6 to 11-year-old Trikafta here in the U.S. and overseas for Caftrio is exceptionally high in line with that that we've seen in every other market where we've launched Trikafta, Caftrio. So those launches are off to a strong start. Obviously, we're in the first few months of those launches. So looking ahead, what do I see? Despite the fact that we've had really successful launches for Trikafta and Caftreo, we're still actually only treating today about half of all the patients with CF who could benefit from our medicines overall. And specifically for CFTR modulators, there's about 30,000 patients yet to go in terms of patients who could benefit from our medicines. You might ask yourself, who are those patients? Well, those patients are patients in countries where we have reimbursement, where we're early in the launch sequence, some of the markets I just described. They're in countries where we have regulatory approvals, most of the world now, but where we have yet secure reimbursement agreements. And they're in younger age groups, obviously, 6 to 11-year-olds outside the U.S. We don't yet have an approval. And also, we're going to be pursuing approvals for Trikafta, Kaptrio, down to even younger age groups, as we have done with Kalydeco and or Canby. Given our track record in securing approvals, getting reimbursement, and successfully launching, I have no doubt that we're going to get to the vast majority of those 30,000 patients over the coming years. And so I see substantial growth for our CF franchise. between now and the middle of the next decade. And then, as we announced today, we've also made great progress with our mRNA program, which has the prospect of developing a medicine for the 10% or so of patients who don't respond to CFDR modulators. So I think we've got substantial growth runway yet to go in CF. And Reshma, back to you.

Fill on the question of the VX147 program. Okay. So on that one, I have high confidence in the phase two proof of concept study. And I say that for really three reasons. The first is the human genetics for ApoL1-mediated kidney disease are strong. In fact, they're very strong. People who have kidney disease, who have proteinuria, have two ApoL1 alleles, they have universally poor outcomes. And the target, therefore, is really exceptionally well validated. The second is our in vitro and in vivo studies. We've done a portfolio of studies in vitro as well as in animal studies. We find good potency, good selectivity, and really strong reductions in proteinuria. And the third is that VX147 is all of the drug-like properties that we seek. As a nephrologist, I find this opportunity really very exciting for the following reason. So in phase two, we're studying APOL1-mediated FSGS. That is one kind of APOL1-mediated kidney disease. It's a very aggressive form of renal disease, about 10,000 people who have that. But APOL1-mediated FSGS, proteinuric, let's say primary proteinuric kidney disease, I know it's a mouthful, there's about 100,000 people who have that. And if the phase two study is positive in FSGS, what that really tells you is that we have now, for the first time, found a small molecule that interdicts on ApoL1 and can potentially be a therapy for the broad FSGS not only FSGS, but the broad AMKD market. So the full 100,000. And then with regard to what would we consider successful? Okay. So the phase two study is in FSGS, right? And the entry criteria is such that it's a very severe population. It's APOL1-mediated FSGS with a high burden of proteinuria. And we allow stable doses of standard of care therapy. So these patients are already on ACEs, ARBs, immunosuppressants, and steroids. So in that kind of patient population with an aggressive disease, with high levels of proteinuria, already in standard of care therapy, double-digit improvements in proteinuria, that would be impressive. Now, of course, higher is better, but double-digit improvements in proteinuria, that would not only be important, it would be something that we've not seen before.

That's perfect. Thanks for taking our questions.

Yeah, yeah. Our next question comes from Brian Abrahams with RBC Capital. Your line is open.

Hey, guys, congrats on the quarter, and thanks for taking my questions. We'd love to learn more about the mRNA program, and I guess I'm curious how translatable non-human primate lungs are to human CF lungs, especially given, I guess, the mucus layer. Do you have any sense of what the, I guess, the half-life or the resident time in the lung would be in terms of what type of frequency of administration one might look at or a general range? And might you see any opportunity down the line for this to be usable, perhaps in combination for the other 90% of patients who don't have non-sentence mutations, but with CF? Thanks.

Yeah. Hey, Brian, really important questions on the mRNA program, and there's a few different questions in there, so let me parse it out. There's a question in there about... the dose, targeting it to the right cells, and how translatable the model is. And then there's another question in there about how do we think about the 90%. Okay, so I'm going to be circumspect with my comments. The insights are commercially sensitive, but here's what I can tell you. We have been very, very diligent and deliberate about dose and making sure that the mRNA transcript and protein expression are in the right cells. I would say that in drug development in this area, that's the most important part that many others have not gotten right. And that's specifically why I talked about the HPE assays in vitro and the small and large animal studies and the targeting of the mRNA construct to the relevant cells, which are the bronchial epithelial cells. And I feel very good about the dose selection, about the schedule of dosing, and the targeting to the appropriate cells. Now, with regard to the question about down the line, do we think this could be extended to the other 90%, I would actually look at it the other way. CF is a systemic disease. it's not only a lung disease. And so the real value of small molecule correction of the CFTR protein is that you get systemic benefit. So in the setting of the last 10%, what I would contemplate is If we are successful with our mRNA program when we're in the clinic next year, it's combining the mRNA with a small molecule. We're obviously the only ones who could do that, and I think the opportunity to bring benefit to the last 10% is therefore tremendous.

Thanks so much, Reshma.

Our next question comes from Robyn. Karnoskos with Truist Securities. Your line is open. Great. Thanks for taking my question.

So two quick ones. So for patients under CAPT, you showed that great data showing lung stability. In the real world, what percentage of the population would benefit from, you think, the new drugs that you're developing, meaning that their sweat chloride levels are below the normal range and you might be able to put them into that bucket? And second question I've had is for your device for diabetes, How does the device, I know that you've talked about how getting the cells in, they go to the liver and then blood vessels form, and that's how they interact with the liver to function. How does the device not only protect the cells from being attacked by the immune system, but also allow them to have the interaction with blood vessels to work and function? How does it work? I was just wondering if it might not be able to interact with the blood vessels because it's in a device. Thank you. Yeah, yeah.

There are two different questions in there, Robin. One about type 1 diabetes and the device, and then a separate question about how we think about VX121561-TEZ, and maybe I'll expand that to the next, next generation of CFTR modulators. Let's do CF first, and then let's do type 1 diabetes next. So, Robin, you know this. The Trikafta, Kaftrio medicine can treat up to 90% of people with CF, and it has really extraordinary efficacy. And what we see is that large numbers of patients, as you saw in the clinical trials program, get benefit in the double-digit improvements in PPFEV1, significant improvements in sweat chloride, in weight, in quality of life. Now, what we are trying to do in our long-term goal is to get all CF patients to carrier levels of sweat chloride. And the reason we want to do that is because carriers really manifest almost no disease. And what I can tell you is 121561-TEZ in our preclinical experiments in these HBE cells that have this quantitative and quantitative relationship to what we see in the clinic, the 121561-TEZ 561 has the potential to be even better than Trikafta in that dimension, but we've already identified another generation of molecules that in our HPE assays look like they're going to get us to that ultimate goal of getting all patients with CF, the 90% to carrier levels. With regard to the device program, I'll ask Bastian to comment, but Here's the important thumbnail sketch of the field and what the real breakthrough that we have made. The problem with device historically has been foreign body reactions or fibrosis, and the second challenge with devices has been vascularization. Both of those challenges are what we tackled with our program and what we do not see with our device. So what we do not see is fibrosis or foreign body reaction. And what we do see is really excellent vascularization. I'll ask Bassiano to comment about the materials and the geometry and the configuration of the device that allows us to have the kind of effects that we have. Bassiano.

Thanks, Reshma. And Robin, I just want to maybe start with making clear that this is a completely novel device that is made with different materials, different geometry, different configuration from everything else that has been described by others in the field. It was specifically designed, rationally designed, to exactly address the causes of failure in the field of encapsulation, like Reshma said, which is foreign body response, and vascularization. It's called channel array device for that particular reason. It's proposed design to really minimize fibrosis and to allow the device to integrate in the body, allow vascular beds to form throughout the device, on top and the bottom, so the cells are always optimally distanced to a source of oxygen and nutrients, allowing for insulin and glucose, of course, to be exchanged. This is completely different from what was in the field, and we have evidence in our preclinical models that we do not see for a body response. We see robust neovascularization. We see rapid insulin responsiveness and immunoprotection, even in immunocompetent animals.

Great. Thank you.

Our next question comes from Lisa Baco with Evercore ISI. Your line is open.

Hi, thanks for taking the question. I wanted to ask about CTX001. So when you file at the end of next year, can you talk about sort of how much data and follow-up data you'll have on how many patients? And then I also want to ask just a commercial question. As you're doing a lot of your commercial prep, Can you maybe describe, like, what the – how many patients per year can be treated in the U.S.? You know, in kind of – given that it's, you know, a hospital environment and all that kind of stuff. So how should we think about kind of what – at time of launch, what that will look like, and then, you know, how that may evolve over time? Thank you.

Lisa, I think you're asking about how we see commercial launch for CTX001.

Yeah, I kind of wanted to know, like, what the throughput of patients, like, capacity-wise is, you know, is there some upper limit on that that we should think about? You know, as we think about the population, it's quite a big population, in fact, but I'm trying to understand, you know, what the capacity is in the United States, at least, and how you think that may evolve over time. But I from the onset, you know, what that would look like.

Yes, yeah, sure thing. Let me ask Stuart to comment on how we see the CTX001 launch and the launch dynamics, taking into account questions specifically about whether there are capacity constraints and such. And I'll come back and tell you a little bit more about how we see the filing. Stuart?

Yeah, thanks Lisa for the question. So let me start at the highest level with the overall opportunity and then I'll get to your question about the kind of launch dynamics or our views on them at this kind of early stage. So in terms of people who have severe sickle cell disease and beta thalassemia, between the U.S. and the E.U., we think there's about 32,000, we estimate, patients who have severe disease in both of those, in the combined populations of sickle cell and beta thalassemia. In sickle cell, it's about 25,000, and because of the nature of the disease, the vast majority of those are in the United States. And that number is kind of validated by external physician surveys, which would indicate that they think they would treat between 25% and a third of all of their sickle cell disease patients with a one-time curative approach with the existing conditioning regimens. So we think that's about the order of magnitude of patients who might be eligible for this initial phase of a gene editing curative treatment. In terms of launch dynamics, it's really going to be a function of probably four things. The first one is sort of physician and patient interest in the technology. And based on the results that we've seen today and enthusiasm we've seen in the field, particularly as it translates into interest in our clinical trials, we expect the enthusiasm from the community to be high. At the other end, it's going to be a function of our ability to manufacture. And as you can imagine, we're working diligently on our manufacturing processes to make sure that we have capacity to treat patients. But the bottleneck is likely to be in treatment centers. And as you know, the treatment is going to be administered in transplant centers. There's a limited number of those in the U.S., and they also have competing priorities with malignant hematology conditions. And so that is likely to be the rate-limiting step. We're obviously in the initial throes of evaluating those treatment centers and working with them. Again, we do think that enthusiasm to treat these patients is going to be high given the very significant unmet need in sickle cell disease and thalassemia and the outstanding results we've seen to date. Without commenting specifically, because I wouldn't know the exact answer to that at this early stage, Lisa, those are likely to be some of the pinch points, as it were, in terms of the launch dynamics. What I can tell you, though, is we are expecting demand to be very, very substantial amongst those 32,000 patients, given the unmet need and the results we've seen.

On the question on where are we with our filing and how are we thinking about the size, the data set size, I'll just step back for one moment to remind that we have had the benefit of having virtually every regulatory designation known both here and in the EU with RMAT and ORPHAN and PRIME. That's allowed us to have a number of engagements with the agency and to be able to address a number of their questions. We're really at the tail end of those conversations, and the two areas on which we're wrapping up our discussions are, one, what is the sample size that they will require, and two, what's the duration of follow-up. I expect we're going to finish those discussions in the next couple of months, and I do expect that the filing will go in towards the tail end of next year.

Okay, thanks. Operator, we'll take two more questions.

Okay, our next question comes from Corey Casimow of JPMorgan. Your line is open.

Hey, thanks. Good afternoon, guys. I wanted to follow up as well on CTX001, and just to piggyback on the filing, I recognize we should get more clarity in the coming months, but can you talk about your comfort level on the regulatory front when it comes to addressing any CMC requirements we see You know, frequently see delays there with regards to cell and gene therapies. And then also you speak about the 32,000 patients between the U.S. and Europe. Wanted to ask about your comfort level with Europe as we recently saw Bluebird back out of that market with lentiglobin for beta-thal based on the fact that they couldn't come to agreements on pricing. So your comfort level that you can get around this. Thank you.

Hey, Kurt, let me start with telling you a little bit more about the regulatory process and comment a little bit more on manufacturing, which is your specific question. And then I'll ask you to comment on Europe. Obviously, we have the opportunity, not only in Europe, but we have the opportunity, certainly including Europe, to lead from the front with our CT experience for both countries. beta thalassemia, and sickle cell disease. Okay. On the regulatory filing, because of these designations, we've had the benefit of multiple conversations with the agency and, as I said earlier, been able to address most of their questions, and we're really now wrapping up conversations around two clinical points, which is how big is the database and what's the duration of follow-up. On the manufacturing side, we are using the same processes and actually the same sites as we did for the clinical trials for the commercial product. And in the grand scheme of things, when you think about what we are doing with CTX001, it's ex vivo gene editing. And really, it's the Cas enzyme and the guide RNA And in the grand scheme of things, that's just simply an easier manufacturing situation than other manufacturing challenges. So I feel very good about our conversations with the agency. We've been able to de-risk by addressing their questions along the way. And we are using the same processes and the same sites that we used in the clinical trials for the commercial product. Stuart, a couple of comments maybe from you about Europe and CTX001.

Yeah, Corey, thanks for the question. You know, I feel very confident in the team that we have on the ground in Europe and their ability to secure reimbursement and access for patients who have rare diseases for transformative medicines like this. I think they've got a demonstrated capability. to capture and describe the unmet need in these types of conditions to gather and generate evidence on the both economic and clinical benefits of our medicines, translate those into value propositions which make sense to payers, and then work creatively with payers to develop bespoke solutions country by country to secure reimbursement and access for our medicines. I think we've demonstrated that very, very successfully in CF, and I'm looking forward to us being able to use those same capabilities to get access for patients with sickle cell disease and beta thalassemia in Europe.

Great. Thank you, guys.

Our next question comes from Jeff Meacham with Bank of America. Your line is open.

Hi, guys. This is Olivia Brayer on for Jeff. Thanks for the questions. I've got two follow-ups on the NextGen triplet program. First is, can you give us a better sense for when we might start to see those Phase III data now that both of those trials are up and running, and whether there could be an opportunity for an earlier look at one or maybe both of those trials as we get into next year? And then I know you guys have talked about moving forward even more NextGen triplets at some point. So are there specific areas where you're maybe more focused on when you think about the optimization or differentiation of those newer assets? And just as a follow-up to that, could there be some, you know, potential ways to accelerate development timelines once those agents move into the clinic?

Yeah, hey, good afternoon. With regard to your questions, which really center around the next wave, whether it's 1, 2, 1, 5, 6, 1, which is already in the clinic in phase 3 clinical trials, or the molecules that we've identified in San Diego that are going to be coming into the clinic. How are we thinking about this? How quickly can we go? What's the overall goal? So to be clear, the goal here is to bring all patients with cystic fibrosis to carrier levels of sweat chloride. That is our long-stated goal, and that is what we are aiming for. And I feel really good about where we are with 121561-KEZ based on the preclinical results that I shared and the Phase II results that we shared earlier this year. And the next wave of molecules look like they can be even better. So we are well on our path to bringing forward therapies that can bring all CF patients to carrier levels of sweat chloride. With regard to speed and how fast can we go, right? I don't think that... Anybody can go faster than us in cystic fibrosis for a couple of reasons. One, we've already demonstrated that we can do this very quickly. In Trikafta, we went from the bench, so first synthesis of the molecule, to US approval in less than four years. Outside of oncology, it's one of the fastest drug development programs ever. The second reason I say that we do this really fast is we have a lot of experience in this, right? We've already done it with four medicines on the market, the fifth one being 1, 2, 1, Tez, 5, 6, 1. And with regard to when should we expect results and such, remember the trials for Trikafta, we enrolled in about six months, so... That's a benchmark for the last set of clinical trials we did. I expect us to continue to use what we know and our experience to move fast with 121561-TEZ and the molecules behind that.

Okay, great. Thanks so much.

Thank you all for tuning in to the call tonight. If you have additional questions, please reach out to the Investor Relations team. We are in the office tonight and happy to follow up. Have a good evening.

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