Vertex Pharmaceuticals Incorporated

On tonight's call, making prepared remarks, we have Dr. Reshma Kewalramani, Vertex's CEO and President, Stuart Arbuckle, Chief Operating Officer, and Charlie Wagner, Chief Financial Officer. Dr. Bastian Osana, Chief of Vertex Cell and Genetic Therapies, and Dr. David Altshuler, Chief Scientific Officer, will join for Q&A. We recommend that you access the webcast slides as you listen to this call. This call is being recorded, and a replay will be available on our website. We will make forward-looking statements on this call that are subject to the risks and uncertainties discussed in detail in today's press release and in our filings with the Securities and Exchange Commission. These statements, including without limitation those regarding Vertex's marketed CF medicines, our pipeline, and Vertex's future financial performance, are based on management's current assumptions. Actual outcomes and events could differ materially. I would also note that select financial results and guidance we will review on the call this evening are non-GAAP. I will now turn the call over to Dr. Reshma Kewalramani.

Thanks, Michael. Before we begin, as this will be Michael Partridge's last quarterly call with us, I'd like to take a moment to recognize Michael for his outstanding service and contributions to Vertex. For 25 years, he has been the face of Vertex with analysts and investors, and with his calm and steady approach, Michael has led our IR team through countless milestones and many evolutions of the company. More recently, Through the launch of all four of our marketed cystic fibrosis medicines and the emergence of our broad mid and late stage pipeline, Michael has been an integral part of the Vertex leadership team, helping share our story with the world. Michael has shown a true passion for Vertex and the patients we serve. We are grateful for his dedication, and I want to personally thank Michael for all that he has done for Vertex. On to the quarterly review. Vertex is off to an excellent start across the board, with strong performance in the CF business, rapid advancement of the pipeline, and continued operational excellence. Q1 CF product revenues grew 22% year-on-year to $2.1 billion, reflecting continued growth in the number of CF patients treated globally. And despite continued significant investment in internal and external innovation, our non-GAAP operating margins remained industry-leading at 56%. We maintained a rapid pace of progress in research and across the clinical stage pipeline with a half a dozen programs now post the POC stage. And we finished the quarter with a strong balance sheet and $8.2 billion in cash and investments. CF has been the exemplar of our R&D strategy. The last six to 12 months have made it clear our R&D strategy is proving itself beyond CF. with the discovery and development of small molecules and cell and genetic therapies across a number of disease areas. This serial innovation enables the potential to transform, if not cure, multiple diseases and in so doing help more patients and drive long-term growth for the company. Fundamentally, The goal of our strategy, grounded in causal human biology, validated targets, and biomarkers that translate from bench to bedside, and all the way through pivotal development, is to increase the odds of success in drug discovery and development. With the data we've generated in CF, in sickle cell disease, and beta thalassemia, and now in rapid succession with positive proof of concept in APOL1-mediated kidney disease, pain, and type 1 diabetes, our clinical stage pipeline has never been broader in terms of the number of disease areas, more diverse in terms of modalities, or more advanced. The company is now at a new inflection point with continued growth in CF, the advancement of our broad clinical pipeline with six programs in mid and late stage development representing multi-billion dollar opportunities, and the potential from the next wave of therapies approaching the clinic. In this next group of programs that have initiated IND-enabling studies is our mRNA program in CF, the cells plus device program in type 1 diabetes, the next wave of small molecule correctors in AATD, and our in vivo gene editing program in DMD. A number of these programs are on track for IND filings later this year, with clinical trials beginning thereafter. Our R&D strategy combined with our business model positions us well for continued innovation and sustained growth as we work to bring additional transformative medicines to more patients around the globe. With this as context, I'll now review the R&D highlights for the quarter. Looking to our future in CF, we continue to strengthen our leadership for the long term. Our real-world experience with Trikafta continues to accumulate. and as Stuart will discuss, raises the bar for any regimens in development. That said, if it is possible to outperform Trikafta, we're determined to be the ones who do so. Our next-in-class triple combination of VX121-Tezacaptor-561 is rapidly progressing through pivotal development. More than 180 clinical trial sites are open and enrolling patients in our Skyline Phase III program. We expect to complete enrollment by late 2022 or early 2023. As a reminder, VX121-tezacaftor-561 has the potential for greater clinical benefit than Trikafta and is a more convenient, once-daily treatment that carries a lower royalty obligation for Vertex. For the more than 5,000 patients who do not make any CFTR protein and cannot benefit, therefore, from a CFTR modulator, we are developing an mRNA therapy together with our partner, Moderna. IND-enabling studies for this program have been completed. And we remain on track to submit an IND in the second half of 2022, with clinical development starting thereafter. Turning to the pipeline beyond CF. starting with CTX001, our gene editing approach designed to provide a potential functional cure for sickle cell disease and beta thalassemia. We plan to submit for U.S. and EU regulatory approvals for CTX001 for beta thalassemia and sickle cell disease by the end of 2022, and we expect this to be our next commercial launch. Enrollment in both Phase III studies is complete, and we have now dosed more than 75 patients across both programs. We look forward to sharing more clinical data on CTX001, including longer-term follow-up and more patients at medical forums this year. Moving on to VX147, our first-in-class small molecule inhibitor for people with APOL1-mediated kidney disease, or AMKD, which has made rapid progress into pivotal development. In December, we reported unprecedented Phase II proof-of-concept results. In patients with FSGS, a particular kind of APOL1-mediated kidney disease, treatment with VX147 led to a 47.6% reduction in proteinuria compared to baseline. VX147 was generally well tolerated. There were no SAEs related to VX147, and all AEs were mild to moderate in severity. In late March, we initiated pivotal development of VX147 following agreement with FDA and the design of the program which included, one, a single adaptive phase 2, 3 study design in people with 2APOL1 mutations, pertinuria, and decreased renal function. Two, evaluation of VX147 in the broad AMKD population, representing approximately 100,000 people in the U.S. and Europe with this disease. And three, the ability to conduct an interim analysis, which if positive, could provide a pathway to accelerated approval in the U.S. Transitioning now to our pain program. In late March, we announced that VX548, a novel first-in-class non-opioid NAV1.8 inhibitor, achieved statistically significant and clinically meaningful relief in two Phase II studies of acute pain, meeting our high expectations. In the two studies, one following abdominoplasty and one following bunionectomy, VX548 at the highest dose tested showed a rapid, sustained, and consistent decrease in pain intensity compared to placebo on the primary endpoint of SPID48, a time-weighted sum of the pain intensity difference from time of first dose to 48 hours. In assessing the SPID48 score, it's important to note higher scores indicate greater pain relief. VX548 was superior to placebo with a statistically significant mean SPID48 of 37.8 in abdominoplasty and 36.8 in bunionectomy. In the reference arm of the study, standard of care opioid therapy showed a mean SPID48 difference from placebo of 12.5 and 14.7, respectively. From a safety and tolerability perspective, VX548 was well-tolerated at all doses. There were no serious adverse events related to VX548, and the majority of adverse events were mild or moderate. Given the high unmet need for an efficacious and well-tolerated non-opioid pain medicine, we are working with urgency to advance VX548. Our goal is to bring forward a novel class of pain treatment with the potential to provide effective pain relief without the addictive potential or adverse side effects of opioids. We plan to advance VX548 into pivotal development for acute pain in the second half of 2022, pending discussions with regulators. I'll conclude with the type 1 diabetes program and VX880, our stem cell-derived, fully differentiated, islet cell replacement therapy that could offer a functional cure for people living with type 1 diabetes. In the U.S. and Europe alone, type 1 diabetes affects more than 2.5 million people. As we announced earlier this week, the VX-880 program has been placed on clinical hold in the U.S. by the FDA, and we're working with urgency to understand more. At that time, we also shared the safety and efficacy data from the first three patients treated to date. To recap, the first patient who was treated with half the target dose of cells has achieved insulin independence at day 270 with a hemoglobin A1C level of 5.2%. The second patient, also at half-dose, had positive results through day 150. The patient achieved robust increases in measures of pancreatic islet cell function and improved glucose control while simultaneously experiencing a 30% decrease in exogenous insulin use. Taken together, the results from patients 1 and patients 2, both treated at half-dose, demonstrate proof of concept for VX880. The third patient, who is the first to receive a full dose of VX880, has reached the day 29 milestone. As of day 29, the patient showed encouraging early indications of efficacy with increasing C-peptide levels and improving glycemic control. The first detailed assessment of pancreatic islet function and glycemic control for patients in the study occurs at the day 90 visit. Across the program, in the three patients dosed to date, there are no SAEs related to VX880. The majority of adverse events are mild to moderate, and the overall safety profile is consistent with the immunosuppressive regimen used in the study and the perioperative period. These are the data to date. Of course, all three patients will be continued to be followed per study protocol. We look forward to working constructively and expeditiously with the FDA, to understand and address their questions so that we can resume the trial as soon as possible in the U.S. To close out on type 1 diabetes, a quick word on our cells plus device program. We continue to make progress with our cells and device approach. In this program, instead of using immunosuppression to protect the cells from the immune system, the immunoprotective device is designed to serve that function. We remain on track for an IMD filing for this program later this year. In summary, Vertex continues to deliver significant growth in CF. We're making rapid progress with programs in six disease areas in mid- and late-stage development, including five programs that are already in or entering pivotal development, with another wave of programs on track to enter the clinic starting later this year. We have a strong financial profile and balance sheet that enables continued investment to drive serial innovation. With that, I'll turn it over to Stuart.

Thanks, Reshma. I'm pleased to review tonight our continued strong commercial performance in CF, our clear path towards future growth in CF, and our plans for expansion into additional disease areas. Vertex's CF business continues to grow at a rapid pace, driven by consistent performance of Trikafta in the U.S., and the continued robust uptake of Trikafta-Cavtrio outside the U.S., following significant reimbursement progress internationally over the past year. Q1 CF product revenue of $2.1 billion grew 22% year over year, as more patients have come on therapy. U.S. revenues grew 9% to $1.37 billion in the first quarter of 2022, driven by additional patients starting treatment with Trikafta, most notably children ages 6 to 11, following the mid-2021 approval. Revenue outside the U.S. increased 55% over the first quarter of 2021 to $729 million, driven by rapid uptake of Trikafta-Caftreo in countries where we reached reimbursement agreements. We started the year with more than 25,000 patients in North America, Europe, and Australia who could benefit from a CFTR modulator but were not yet on therapy. These patients fell primarily into one of three categories. One, patients who have not yet initiated treatment, largely in countries where we are recently reimbursed and therefore are early in the launch curve. Two, patients in geographies where we are not yet reimbursed. And three, younger age groups, who will be addressed through ongoing label expansions. We are confident in our ability to reach the vast majority of these patients over time. Trikafta CAF Trio are now available and reimbursed in more than 25 countries. We have continued to reach new reimbursement agreements, with the most notable recent example being Australia, where Trikafta is now reimbursed for eligible patients ages 12 and above. We also continue to make progress extending treatment to younger patients. In January, we secured approval for Caftreo in Europe and the UK for children ages 6 to 11. And in April, Health Canada granted marketing authorization for Trikafta for the same patients. In the U.S., we recently submitted an SNDA for approval of Orkambi for children ages 1 to less than 2 years. We also completed enrollment in the Phase 3 study of Trikafta in children ages 2 to 5 and anticipate submitting for U.S. approval for this age group before the end of 2022. As Reshma mentioned, powerful real-world and long-term experience with Trikafta further strengthens the clinical value proposition of this combination. We have previously shown evidence that treatment with our medicines, Kalydeco or Camby and Symdeco, slows lung function declines. one of the hallmarks of disease progression for CF patients. We now have data that compares lung function over time for patients treated with Trikafta to untreated matched controls. And these data show that patients on Trikafta, on average, do not lose any lung function over a two-year follow-up period. Generally, CF patients lose 1% to 3% of lung function every year. We will be presenting these important new data at an upcoming medical forum. As Reshma noted, The last 6 to 12 months have been a remarkable period for Vertex, as multiple programs reached late-stage development. I would like to provide a few thoughts on two programs in late-stage development that could be among our next commercial opportunities. Starting with CTX001, our CRISPR-Cas9-based gene editing therapy for hemoglobinopathies, which we plan to file for regulatory approval before the end of this year. Commercial and launch preparation activities for sickle cell disease and beta thalassemia are well underway. Over the past year, we have developed a deep understanding of the sickle cell and TDT markets, including where patients with these diseases are concentrated, the physicians who would refer them for treatment, and the key treatment centers that will facilitate the patient journey. With our submissions planned for later this year, our launch preparation activities are progressing rapidly. Key leadership positions and teams are in place across multiple functions, including medical, commercial, and manufacturing. A small number of centers of excellence in the U.S. and Europe will treat the vast majority of severe sickle cell and thalassemia patients. Our research suggests that about 90% of U.S. patients reside in 24 states, and about 75% of patients in Europe reside in four countries. We have identified the potential centers and their referral networks in these countries. We are already engaging with public and commercial payers in the US and EU, and we are developing robust patient service programs to support patients throughout the treatment journey. We continue to see tremendous potential for CTX001 to help patients, and we look forward to the possibility of bringing this groundbreaking therapy to those living with sickle cell disease and beta thalassemia. Finally, with the recent completion of the two phase two studies in acute pain and the positive POC results in both studies, As Reshma noted, we now plan to advance VX548 into pivotal development in acute pain in the second half of this year. Let me review with you briefly the market opportunity we see in pain. There is a vast unmet need in the treatment of moderate to severe pain, and especially for medicines with an improved benefit-risk profile, including avoiding the side effects and addictive qualities of standard-of-care opioids. To give you some perspective on the market for acute pain, which is our initial target market for VX548, every year there are more than 1.5 billion treatment days for acute pain in the U.S., with a large proportion of these including a prescribed opioid. It is an unfortunate fact that some of these scripts result in addiction problems for some patients and contribute to the opioid epidemic in the U.S. Provisional data from the CDC's National Center for Health Statistics for the latest 12-month period ending April 2021 recently estimated that there were more than 75,000 overdose deaths from opioids in the US, an increase of 35% compared to the prior 12-month period. A novel, highly effective class of medicines that does not have these safety concerns would therefore have tremendous potential. For instance, one can imagine a step therapy paradigm in which a patient is started on NSAIDs, escalated to a NAV1.8 inhibitor, and only as a last resort, prescribed an opioid. The first indication we are pursuing for VX548 is moderate to severe acute pain, and we see this segment of the market as a specialty market that fits the vertex commercialization model well. But the mechanism is applicable to other types of pain, as demonstrated by VX150, which showed positive POC across acute, neuropathic, and musculoskeletal pain. We look forward to discussing plans in these indications on future calls. I am very excited about our continued progress in bringing our CF medicines to more patients globally and about the promise of our late-stage pipeline. I will now turn the call over to Charlie.

Thanks, Stuart. Vertex is off to an excellent start in 2022 as our R&D pipeline continued to deliver significant milestones, and we again delivered strong financial performance in the first quarter. First quarter total product revenues were $2.1 billion, an increase of 22% compared to the first quarter of 2021. Our growth was again primarily driven by new patients coming on therapy compared to the prior year, including continued robust uptake of Caftreo internationally and following expanded reimbursement access in a number of geographies over the past year, as well as continued growth of Trikafta in the U.S. Our first quarter 2022 combined non-GAAP R&D and SG&A expenses were $687 million compared to $531 million in Q1 2021. The year-over-year increase in expenses was driven by increased research costs and investments in our advancing pipeline, with multiple programs now in mid- and late-stage development. Additionally, we continue to make investments in CTX-001 pre-commercial activities in anticipation of regulatory filing by the end of this year. Starting in the first quarter of 2022 and going forward, consistent with reporting practices that have been recently adopted by peer companies, we no longer exclude from our non-GAAP results research and development charges from upfront or contingent milestone payments in connection with collaborations, asset acquisitions, or the licensing of third-party IP. We have also updated prior year reported non-GAAP figures to be consistent with the new basis of presentation. This change in reporting affects only our non-GAAP numbers, and the impacts on reported results for Q1-22 and Q1-21 were not material. Our continued strong revenue growth combined with our efficient operating model resulted in Q1 non-GAAP operating margin of 56% and non-GAAP operating income of $1.17 billion, an increase of 16% year-over-year. Our non-GAAP effective tax rate for the first quarter of 2022 was 22%. We ended the quarter with $8.2 billion in cash and short-term investments as we continue to maintain a very strong balance sheet profile. Now to guidance. We are maintaining our previously issued guidance for full year 2022 CF product revenue and non-GAAP effective tax rate. We are adjusting our guidance for combined non-GAAP R&D and SG&A expenses to reflect the change in reporting of upfronts and milestones as I described moments ago. Specifically, Our guidance for total CF product revenue remains at $8.4 to $8.6 billion. At the midpoint, this is a year-over-year increase of approximately $1 billion, or 12% growth. Non-GAAP operating expenses are now projected in a range of $2.82 to $2.92 billion, including potential upfront and milestone payments from existing or ongoing collaborations. Finally, we continue to project a non-GAAP effective tax rate in a range of 21% to 22%. As we look out to the remainder of the year and into 2023, we have a number of important pipeline milestones that will demonstrate our continued progress, and these are shown on slide 16 of the webcast. In summary, we are on track for our eighth consecutive year of double-digit revenue growth in 2022. The CF business is strong, and we have invested to maintain leadership in CF for the long term. At the same time, we are now going through an inflection point as a company, well on our way to diversifying Vertex into new disease areas beyond CF, as the broad pipeline of potentially transformative medicines advances. As a result, our unique business strategy, which enables significant reinvestment in internal and external innovation while sustaining high profitability, leaves us exceptionally well positioned for further significant value creation over time. We look forward to updating you further as we progress through the year. Let's now open the call to questions.

Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. And to withdraw your question, please press star then 2.

And at this time, we'll pause momentarily to assemble our roster. And the first question will come from Corey Kasimov with JP Morgan.

Please go ahead.

Great. Good afternoon. Just want to say thanks to Michael, first of all, for all his help over the years. It's obviously been very much appreciated. So my question is on your phase three trial for VX147 and AMKD. And I'm curious about your confidence in the potential for an accelerated filing at the 48-week time point based on the predictive nature of a reduction in proteinuria materially impacting the slope of EGFR curves at that time. Thank you.

Yeah. Hey, Corey. With regard to the 147 program, the key features of the study design are that it's a singular phase 2-3 study. It is a study that will enroll the broad population, so the full 100,000 patients that could be eligible for this drug, And the third feature of the study, the one you asked about, we have built in a pre-specified interim analysis at the 48-week time point, and if that analysis is positive, that provides the pathway to accelerated approval. The relationship between proteinuria, that's what we studied in phase two, is very tight, high correlation, with EGFR, which is a measure of renal function. And the reason I have such high confidence in the interim analysis is because the reduction in proteinuria that we saw in phase two is an unprecedented 47.6% in this very specific and a very aggressive form of AMKD called FSGS. So with that 47.6% reduction in proteinuria and you do the translations to what you would expect in terms of GFR, what I come out with is a high confidence level for the interim analysis. That was why it was so important that these three features that I mentioned were agreed upon with the agency when we went to them at the end of phase two meeting.

Very helpful. Thank you, Reshma.

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

Hi, this is Jason on for Jeff. Thanks so much for taking our questions. Congratulations on the quarter. And again, I want to extend our congratulations to Michael. A few quick, if I may, could you discuss how the pain programs fit in strategically within the commercial portfolio, you know, given the focus on rare diseases? You know, basically, is this an asset you're potentially thinking about partnering with as it advances, or are you kind of looking at maybe establishing the necessary commercial infrastructure? And then, you know, it does sound like the clinical hold on 880 was a bit of a surprise, but then again, regulators have seemingly started operating with... I guess an abundance of caution for gene and cell therapies. Do you see any potential negative read-throughs to the upcoming CTX001 submission or have regulators seem fairly comfortable with the safety and efficacy package as is? Thanks so much.

Hey, Jason. There's a few different questions in there. Let me try to parse it out into pain and how we see CTX001. On CTX-001, we've been very pleased with the momentum that we've seen in the study. As I said in my prepared remarks, the enrollment is complete. We've dosed more than 75 patients. We've secured really every regulatory designation available, prime, RMAT, orphan, here and in Europe. And we are planning forward for our filing towards the tail end of this year. On the pain program, let me make two comments and I'm going to turn it over to Stuart to give you some more color. We see acute pain and neuropathic pain as fully vertexian. I don't feel the same way about musculoskeletal pain or something like back pain or knee pain or some such pain that we'll categorize as musculoskeletal. That being said, based on the pharmacologic validation with our own VX150 and the genetic validation, I do expect this mechanism to be effective across the three pain states. Stuart, a little more color on the commercialization.

Yeah, and Jason, I think there is a bit of a misconception about us a company that we're a rare or an orphan company, and as Reshma described, that's not how we define ourselves. Our research strategy is to focus on specific diseases and where we understand the human biology, where there are validated targets, as Reshma said, either genetically or in the case of NAV1.8, now pharmacologically, and they're in markets where we can access them with a specialty infrastructure. And we think pain fits that description perfectly. As Reshma said, there's various different segments of the pain market that you can think about, acute, neuropathic, and the chronic kind of musculoskeletal. The commercial opportunity in the acute pain segment is enormous. Acute pain accounts for over $1.5 billion with a B treatment days a year in the U.S. alone. And despite more than 90% of those prescriptions being generic, the market is valued at $4 billion. So if we are able to bring forward an asset that has opioid or better efficacy without the side effect liability of opioids and other pain medications, we think the opportunity is very, very significant in acute pain, multi-billion dollar in acute pain opportunity. And as Reshma said, similarly in neuropathic pain, multi-billion dollar opportunity, that's also a specialty market that we could service through a specialty infrastructure.

Perfect. Thanks for the color. The next question will come from Robin Karnoskis with Truist Securities.

Please go ahead.

Hi. Thank you so much. And Michael, I'm sad to see you go, but congratulations on all the hard work you put in at Vertex. So two quick ones. Welcome. So two quick ones. Based on the inclusion criteria for your phase three trial for AMKD, how challenging do you think the enrollment might be? You know, you've indicated there's 100,000 patients. How many are actually genotypes or seeking treatment? Do you have to do more work to actually get them genotypes? And second question is really on CTX001. Could you just give us some more color as you've been talking to more of the centers, maybe buckets of patients that would be the initial most likely to go on drug and what their characteristics are, and are you creating a registry or a list of patients who might be willing to start therapy? Thanks.

Sure. I'm going to start on AMKD, and then I'll ask Stuart to provide some color on the patients for both sickle cell disease and beta thalassemia for the CTX001 program. Robin, the key criteria for entry into the AMKD study is pertinuria, reduced renal function, and two APOL1 alleles by genotyping. The actual genotyping test is fairly simple. It's a simple blood test, but you are right that it is not commonly performed. And the reason it's not commonly performed is because before now, we didn't really have anything to offer our patients who had APOL1-mediated kidney disease. Recognizing that, we've added some features into our Phase 2-3 clinical trial to ensure that we will have the kind of enrollment that we seek and that we can bring this medicine forward with speed. The first is it's a global study with many sites up and running in the US and in the EU. The second is all patients are on standard of care. So there is no patient who is going to have to go on to placebo to be part of the study. This is a study where one arm gets standard of care plus VX147 and the other arm gets standard of care. And third, we have a concurrent genotyping study up and running where patients can get genotyped and they can, if they wish, then enroll in the Phase 2-3 study. I think that those measures are going to be very helpful as we make progress on the enrollment. Stuart, I'm going to turn it over to you for CTX001 and patients that you see.

Yeah, Robin, thanks for the question. So, As we've commented previously, there's about 150,000 patients who have sickle cell disease or transfusion-dependent thalassemia in the U.S. and the EU. However, as you can imagine, we don't think that that is the entire population who's going to be eligible for CTX001 given the current conditioning regimen. So based on the inclusion criteria with our study, but also our research and other people's research, talking to physicians about the types of patients that they think are likely to be potential candidates, we think that's around 32,000 of the 150,000. Of that 32,000, about 25,000 of those are sickle cell, the majority of which are here in the U.S., So that is the patients that we think are likely to be potential candidates for CTX001 with the existing Bucel fund-based conditioning regimen.

Thank you. The next question will come from Salveen Richter with Goldman Sachs.

Please go ahead.

Thank you for taking my questions. And, Michael, it has been a pleasure working with you. You'll be very missed here.

Thank you, Salveen.

Two clinical questions. One, on CTX001, on the commercial front, how much precedent has been set on the payer front globally by Bluebird, particularly given their difficulty with the EU? And then secondly, on the Duchenne gene editing program, could you just provide some details on the construct, and is this in partnership with CRISPR? Thank you.

Salveen, I'm going to start with the DMV question, and then I'm going to turn it over to Stuart to talk through CTX. The DMV program is one I know, Salveen, you've asked me about before. In just one second, I'm going to turn it over to Bastiano. We have made really nice progress on that program. This is a gene editing-based program, and we are in IND enabling studies with the IND plan for next year. Bassiano, can I ask you to give a little bit more color on this?

Sure. So our approach to D&D is a little bit different than all the other gene therapy approaches. because we have deliberately actually chosen to go with like a near full-length exon-skipping dystrophin approach, which is based on human genetics, because as you know, patients with Becker dystrophy, for example, have a near full-length dystrophin, and therefore they have very mild disease. The gene therapy approaches that are, you know, used by, you know, in other contexts, they only deliver a truncated version of the dystrophin of various lengths, but it's called microdystrophin for a reason. Gene editing is actually the only approach that has the potential to deliver the near full length protein, which is required for what we believe is going to be a durable transformational and functional cure. You remember that this program came to us through the acquisition of Exonix. And since then, we have worked really, really hard on both analytical and process development for our technology. Because given what has happened in the field, we really paid close attention to those, purity and other things like analytical development and process development to be sure that we have the best product available. Technology-wise, as opposed, together with science. So we feel very optimistic about our approach, and as Lesha said, very pleased to be in IND-enabled studies, and we aim to fire the IND in, you know, in 2023, and begin clinical development soon thereafter.

Yeah, and Salveen, on transformative therapies and you know, payment models, which I think was the basis of your question. You know, I don't think what's happened with Bluebird has set a precedent that transformative one-time functional cures are never going to get paid for in the EU or elsewhere. Clearly, there's disappointment in the community about the license withdrawal. However, you know, we as part of our pre-launch planning are engaging with payers both here in the U.S. and overseas. And based on the capabilities that our team has demonstrated in securing reimbursement for CF, given the transformative potential that CTX001 holds, I'm optimistic that we'll be able to bring that medicine to patients around the world pending license approval.

Operator, we're ready for the next question.

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

Thanks for the question, and thanks to Mike as well. We really appreciate it. We have two questions on APOL1-mediated kidney disease. The first question was just around your confidence in enrolling the Phase II portion and whether or not you expect to have data at the end of the year and what you can say about that. So it goes back to sort of the follow-up in terms of identifying these patients and speeding confidence of getting these people enrolled. And the second question relates to the phase three portion, which is on EGFR and whether or not you have a good idea around the slope of decline over a time period for these patients and whether or not there's any heterogeneity between the different diseases within AMKD and what you're assuming for in the phase three on decline. Thank you.

Yeah. Mike, with regard to enrollment, it is really simply too early to comment on enrollment dynamics for VX147. We presented and shared the Phase 2 data just in December, and the Phase 3 started just three months after that in March. So a little too early to call, but as I commented earlier, I think the genotyping study, the number of trial sites that we are opening around the globe, and the fact that this is a study where both arms get treatment will help with enrollment. On the GFR question in the Phase III portion, this group of patients, those with two APOL1 alleles, have a very rapid decline. And when I say that, I mean north of five cc's per year. And when you have that kind of rapid decline, it gives you the opportunity to assess the impact of your drug, which is why this one year accelerated endpoint potential is really important. So what we demonstrated in phase two is reduction in pertinuria. That was the approximately 50% reduction, 47.6. That is very tightly correlated with the EGFR, the measure of kidney function, and the measure of kidney function in people with 2APL1 alleles. regardless of whether you call it FSGS or you call it another disease, is very high. So I feel very good about where we are in terms of getting the clinical trial up and running and very good about the way we've designed the endpoint on both proteinuria and EGFR.

Okay, thanks.

The next question will come from Phil Nadu with Cowan & Company. Please go ahead.

Good afternoon, Michael. Let me add my thanks for all your help over the years. Best of luck in your next adventures. You're certainly going to be missed here. Two questions from us. First, brief commercial and then VXA80. On the commercial, last quarter you called out inventory build. You haven't mentioned inventory yet on the call, so curious where inventory stands and where there is the stocking in the quarter. The second on VXA80, appreciating it's still early days since the clinical hold was initiated, but Do you have any sense of why the FDA is not convinced? I think in the press release you mentioned they didn't believe the benefit risk was positive. Is that because they don't think you need more benefit, or is there some risk they're worried about? And then second on VX80, you have one ex-U.S. trial site. Any desire to increase the numbers to continue enrolling patients while the U.S. hold is instituted? And last, of course, if you have any preliminary thoughts on what you'll need to do to release the hold, we'd all be curious to hear. Thanks.

Let me ask Charlie to start with your question on the inventory for the quarter. Charlie, do you want to talk a little bit about revenues for the quarter and how you see inventory?

Yep. Thanks for the question. As we've mentioned previously, it's not at all uncommon for us to see channel inventory and patient inventory fluctuations quarter to quarter on the order of magnitude of $20 million to $50 million. We called out an inventory increase in the fourth quarter. We did see some destocking in the first quarter, just didn't call it out specifically.

And with regard to your questions on VX-880, Phil, what we shared earlier this week is what we know. By regulation, the agency has 30 days to provide us their list of questions or their information requests. We are highly confident in this program and deeply committed to type 1 diabetes, and we're looking forward to constructively and expeditiously working with the agency to resume the trial in the U.S. as soon as possible. The trial is up and running, as you rightfully point out, in two regions right now, in the US and in Canada. The trial remains up and running in Canada. We have not received any word from Health Canada for any questions or concerns that they have. And with regard to opening up additional sites, that's always been in the plan. It has nothing to do with the hold in the US, and we intend to have more sites coming on in time.

That's very helpful. Thank you. The next question will come from Klein Bristow with UBS. Please go ahead.

Hey, thanks. This is Colin. Good afternoon. Congrats on the quarter. Michael, thank you for the help and all the best in the future. First of all, from Reshma, we had previously spoken before the AbbVie readout, and you talked about the amount of competitive intelligence work you had done And this ultimately gave you confidence that the AbbVie triplet would not be a threat. Katie, this was on point. I'm curious if you had any early thoughts or insights into the next-gen TG corrector. I think it's AbbVie 576 that they plan to advance into the clinic. And then also on the competition side, there was some press recently about Siona Therapeutics, which have assets targeting the MBD1 domain. So I'd be curious to get your take on this approach also. Thanks.

Yes. Hey Colin, I'll start and I'm going to ask David to add a little comment. Colin, I won't speak directly to any competitor, you know, that's not my practice, but let's talk about CF in general. Over the years, we've established a leadership position in CF and we've not only sustained it, but we've expanded it. And our goal of out-innovating ourselves is And if possible, even bringing more efficacious medicines forward than Trikafta. And absolutely, in the case of the last 5,000 patients, bringing forward a nucleic acid therapy for them, that remains unchanged. Trikafta is the standard of care today. And the closest competitor to Trikafta has been and remains today our own VX 121561 tesacaftor. I'm going to ask David to just give you a few comments on why we have so much confidence in our molecules and the HBE assays, which are really the workhorse and the translational element of what we do. David, a few comments from you on our confidence and why we know when we have something in the lab, it translates into the clinic.

Absolutely, Reshma. As you've seen over the years, the vertex deployment of the HBE assay has proven itself over and over again to be translationally relevant and predict clinical outcomes. And that's been true through Glideco or Camby, Symdico, VX445, Trikafta, and also with VX121, that tripled, where we saw improved chloride transport in the HBE assay. We also, as you remember, did a phase two study that showed improved sweat chloride and other very promising attributes, such as the FEV1 change. So we really believe in that assay, and we've proven it out. We do continue to work on small molecules to outdo not just Trikafta, but VX121, which is in Phase 3. And we do follow everything that goes on, and we believe that the most promising molecules that could possibly challenge VX445 are our own 121 triple and those things we might bring beyond it.

Thank you. The next question will come from Mohid Bensoul with Wells Fargo.

Please go ahead.

Great. Thanks for taking my question. And again, my congratulations and thank you very much for Michael as well. So maybe a couple of questions on the diabetes program. Could you comment on the C-peptide levels? For the first patient at day 270, was there an increase after day 150? And when do you expect to see a plateauing effect for C-peptide? And last one related is that do you have a target C-peptide level for these patients that might lead to insulin independence eventually? Thank you.

Yeah, Mohith, really good questions. I'm going to reframe the question a little bit and ask Bastiana to comment, but I want to make sure I explain this well. The way you know that a patient is insulin independent actually is by a very strict criteria. And that strict criteria is they don't take insulin any longer, exogenous insulin. their fasting glucose level is less than 126, and their postprandial, that's to say after food, glucose level is less than 180. And the reason we're able to declare patient number one as insulin independent is because they meet all of those criteria. Now, you ask a good question about what do we expect in terms of durability of effect, and I'm going to turn it over to Bastiano to talk about the experience with cadaveric transplants, the quantity and quality of our cells, and why we think that our approach is a durable, long-term durable approach. Bastiano?

Thanks, Reshma. It actually allows me to talk about what is really important in this program, which is the quality and the nature of our cells. Our cells are fully differentiated, undistinguishable from naturally occurring beta cells, so they share a common biology. What we know about the biology of beta cells is that at birth, they're pretty much all set when it comes to their numbers and their differentiation, which means that they last a lifetime. That is what is known about the cells. That is actually consistent with what has been learned over the years with cadaveric islets, where when the patients are compliant with immunosuppressive therapy and the transplant is, therefore, successful, these cells can last for a very, very long time. So, ourselves, we believe that being of the same biology and in the context of a similar therapeutic approach, being an islet transplant, we believe that there is the potential for the cells to last as long as the natural beta cells do, which is a lifetime. When it comes to the... I think that was Mo's question.

Thank you. Sure thing.

The next question will come from Evan Sigerman with BMO Capital Markets. Please go ahead.

Hi, all. Thank you so much for taking my question, and I'll just add, Michael, thank you for everything over the years. You will be missed greatly. Charlie, one for you. I'd love it if you could speak to the impact of FX on OUS sales. I don't think you mentioned anything in your prepared remarks. Did that factor into your decision not to raise guidance despite expanded reimbursement? I'm pointing to kind of what you announced in Australia recently.

Yeah, Evan, thanks for the question. Again, just to remind folks, the reiterated guidance for revenue, $8.4 to $8.6 billion, sets us up for another really strong year. That's a billion dollars above 2021 and 12% growth. As we reiterated the guidance, we considered a number of puts and takes. Australia, of course, is good news that we've had this year. We also considered things like inventory fluctuations and FX, which is a very modest headwind. all of that taken together we feel is accurately captured in the $200 million range between the low end and the high end of guidance. Excellent.

And then no real impact on FX or kind of, can you speak more to that?

Yeah, it's pretty modest. You know, two-thirds of our revenues are in the U.S., one-third ex-U.S. We have a very active and very effective hedging program that blunts some of the impact of foreign exchange changes. And so for us, Again, with sort of a baseline 12% growth rate, the relative impact of FX is pretty modest and very small compared to some of our peers.

Excellent. Thank you for that call. I appreciate it. Operator, we have time for one more question.

The next question will come from Lisa Baco with Evercore ISI. Please go ahead.

I guess we'll be the last one to thank Michael for all of his hard work, and we'll hope you'll keep in touch with us. You bet. Thanks for coming. I just wanted to see if we could get a little more detail on some of the type 1 diabetes metrics. Like, for example, we don't have some of the, you know, HbA1c number for patient 2 at day 90. And it would just be nice to see how that's tracking. I know there was a reduced exogenous insulin use, so that's good. And then some of the other, I guess if you, are you saying if you didn't mention the C-peptide, maybe it hadn't reached an appropriate level yet? I'm just curious because the peak simulator wasn't shown either for some of those end points, those time points. So just curious to fill in some of the holes here.

Yeah, sure thing. Lisa, we shared a fair amount of data on all three patients dose to date, the first two patients at half dose and the first full dose patient who is at the day 30 milestone. across all of the patients in terms of efficacy, we see really good efficacy. And we've shared now out to date 270 on patient number one, who is insulin independent. You're right. We haven't shared all of the details at all of the time points across the patients, but you should expect us to share all of the details in terms of hemoglobin A1C, C-peptide levels, stimulated and fasting as well as the cgm that's the continuous glucose monitoring data and of course all safety at upcoming congresses this year so you will see all of the data on the patients with all of the follow-up okay great and then just one more question if i may um

Sorry, I might have missed this earlier, but for CTX01, have you finalized what you need to file with FDA? And then if you could give us an indication of where you're going to present the data, the next data update, that'd be great. Thank you.

Yeah. On CTX01, we shared last data on, I believe, 22 patients last year at the European Hematology Meeting. We now have dosed over 75 patients, so we have substantially more information, and you should expect to see that at upcoming congresses this year. With regard to the data package for the agency, What we need to do, as we've discussed, is complete our discussions with them, and the two outstanding areas of discussion are the number of patients and the duration of follow-up that they would like to see in the filing. You know we have all of the designations like RMAT and orphan and such, so we've had the opportunity to have

conversations that bring us to this point it's now wrapping up those conversations with both the US and the EU to wrap up on the discussion of numbers and duration right and it seems like you've done a bunch of work on you know sort of the market and it looks like the markets are relatively concentrated do you have any sense of sort of capacity and how we should think about you know how many patients could be treated in the current scenario on a yearly basis.

Yeah, Lisa, I think you're asking about in the US and EU, how do we see bed capacity for patients to be able to come in and have the procedure for CTX001? And since we're out of time, I'll just take it really quickly. Stuart and the team have mapped this out. It is very concentrated. The overwhelming majority of patients in the EU who qualify for this therapy are concentrated in four countries. The overwhelming majority of patients in the U.S. who qualify for this therapy are concentrated in less than 25 states. And we have mapped out the centers where they would be treated. And yes, we see that the numbers of patients that we expect to be treated are going to have a way to have that done in centers with the right expertise.

Thank you very much.

This concludes our question and answer session. I would like to turn the conference back over to Mr. Michael Partridge for any closing remarks. Please go ahead.

Thanks, Operator. Thanks, everybody, for joining the call tonight. Thank you also for all of your kind words. Very much appreciated. It has been an honor and a privilege to represent Vertex, and it's also been fun to always interact with all of you. As always, the team and I are in the office tonight. If you have additional questions, take care and have a good evening.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.