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.