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.