Vertex Pharmaceuticals Incorporated

Good afternoon and welcome to the Vertex Pharmaceuticals second quarter 2023 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Suzy Lisa, Senior Vice President, Investor Relations. Please go ahead.

Good evening, everyone. My name is Susie Lisa, and as the Senior Vice President of Investor Relations, it is my pleasure to welcome you to our second quarter 2023 Financial Results Conference call. 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. We recommend that you access the webcast slides as you listen to this call. The 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 cystic fibrosis 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 that we will review on the call this evening are presented on a non-GAAP basis. In addition, the impact of foreign exchange is presented inclusive of our foreign exchange risk management program. I'll now turn the call over to Reshma.

Thanks Susie. Good evening all and thank you for joining us on the call today. After a strong start to the year, we saw continued momentum into the second quarter across all aspects of the company. Our CF business continues to grow and we are reaching more patients than ever. In the second quarter, this expanded reach drove 14% global CF product revenue growth versus the prior year period. And with this first half performance, we are raising our full year 2023 CF product revenue guidance to a revised range of $9.7 to $9.8 billion. As we continue to deliver in CF, we're also investing for future commercial excellence ahead of multiple potential near-term launches. In excess cell in both severe sickle cell disease and transfusion-dependent beta thalassemia, which we expect will be the first in our next wave of launches. In VX548 for acute pain, another multi-billion dollar commercial opportunity. And in our Vanzecafta triple combination therapy for cystic fibrosis, which provides the opportunity to further extend our leadership in CF. In addition to these four disease areas, our mid-stage clinical pipeline continues to develop rapidly and mark progress towards our five launches in five years' goal. Recent achievements include the VX147 or Anaxiplin pivotal trial remains on track to complete the Phase IIb portion of the study by the end of this year. in our Type 1 diabetes program. Both VX880, the naked cells, and VX264, the cells plus device programs, are now in the clinic and dosing patients. Additionally, we announced a strategic long-term manufacturing agreement with Lonza for our Type 1 diabetes cell therapy programs. And finally, an accelerated timeline for the VX548 Phase 2 study in peripheral neuropathic pain, where we now expect the study to complete by the end of 2023. In total, we're advancing programs in eight disease areas through mid- and late-stage development, six of which are now past the proof-of-concept stage, as detailed on slide 5. Beyond our clinical pipeline, we're also advancing the next wave of research stage assets, reflecting programs sourced from both internal and external innovation. This includes programs in Duchenne's muscular dystrophy, myotonic dystrophy type 1, the NAV 1.7 program for pain, and gentler conditioning agents for use with ExaCell. In the CF franchise, in R&D, and across the business, this quarter, Vertex has continued to make meaningful advancements to bring our CFTR portfolio to more patients around the globe and bring additional first-in-class or best-in-class, potentially transformative medicines to multiple new disease areas. With that overview, I'll turn to the details of recent R&D progress, starting with CF. while Trikafta delivers tremendous benefit for patients. If it's possible to do better, we're committed to being the ones who do so. And that is the goal for our next in class, vanzecaftor triple combination therapy. I'm pleased to share, we expect to complete all three phase three studies, Skyline 102 and 103 in patients ages 12 years and above, and the Ridgeline study in patients ages 6 to 11 by the end of 2023, and release results from these three studies in early 24. We have high expectations from the Vanzecafter triple program to lead to further improvements in CFTR function based on the totality of the evidence generated to date. The most direct readout of higher CFTR function is chloride transport in vitro and sweat chloride in patients. In vitro, our human bronchial epithelial cell assays with the vanzecafta triple showed greater restoration of chloride transport than with Trikafta. And in phase two, in patients, the vanzecafta triple clinical studies showed correspondingly lower levels of sweat chloride than in previous studies with Trikafta. We therefore believe the vanzecaftotriple has the potential to provide patients with enhanced clinical benefit, the convenience of once daily dosing, and additionally, the vanzecaftotriple carries a substantially lower royalty burden. Another important program in our CF portfolio is VX522, our CFTR mRNA therapy in development with our partners at Moderna for the more than 5,000 CF patients who cannot benefit from CFTR modulators. We have enthusiasm for this approach for three key reasons based on what we've achieved to date. First, the delivery of mRNA at high efficiency into HPE cells in vitro. Second, expression of CFTR protein leading to high levels of chloride transport. And third, successful nebulized delivery of mRNA in both small and large animals, resulting in expression of CFTR protein in the desired cells. We continue to enroll and dose CF patients in the single ascending dose or SAD study of VX522. And we expect to complete the SAD portion and initiate the multiple ascending dose portion of the study this year. Turning now to Exacell, our CRISPR-Cas9-based gene editing program for sickle cell disease and transfusion-dependent beta thalassemia, which targets the most severe patients and an estimated patient population of approximately 32,000. Exacell holds the promise to be a one-time functional cure for these diseases. On the regulatory front, the FDA has accepted our filings and granted priority review in sickle cell disease with a December 8th PDUFA date, along with a standard review in beta thalassemia with a March 30th, 2024 PDUFA date. The FDA has indicated an advisory committee will be held, and we look forward to the opportunity to discuss the high unmet need, share results from the XSL studies, and discuss the transformative potential XSL holds for patients. Outside the US, in the EU, and the UK, reviews for our XSL filings are also well underway. Our oral presentation at the most recent EHA meeting in June provided new data that were the basis of the EMA and MHRA regulatory filings. Both trials met the primary and key secondary endpoints with follow-up in some patients of more than 36 months. The XSL-EHA results continue to demonstrate transformative, consistent, and durable benefit for patients as measured by freedom from severe vaso-occlusive crises for 94% of SCD patients and transfusion independence in 89% of TDT patients. The safety profile was generally consistent with busulfan conditioning and bone marrow transplantation. Another significant opportunity for XSL is in younger patients, and the pediatric trials in both sickle cell disease and beta thalassemia are underway. We have enrolled more than half the target number of patients in both pediatric studies and have dosed multiple patients. This is an important area of focus given the opportunity to intervene earlier and potentially prevent organ damage and other complications before they ever occur. As the PDUFA dates approach in the U.S. and reviews come to conclusion in the U.K. and E.U., we look forward to bringing this one-time potentially curative therapy to thousands of patients with severe sickle cell disease and transfusion-dependent beta thalassemia. Turning next to our pain program and VX548, our novel, highly selective NAV1.8 inhibitor that holds the promise of effective pain relief without the side effects or addictive properties of opioids. In a coupane, I am pleased to share that all three Phase III studies, two randomized control trials, and a single-arm safety and efficacy study will complete by the end of this year, with results available in late 2023 or early 2024. The pace of this Phase 3 program has been rapid, which we see as indicative of the high unmet need and strong interest in an efficacious non-opioid acute pain therapy. We have high confidence in the outlook for these Phase 3 studies given, one, the genetic and pharmacologic validation of the target, two, multiple proof-of-concept trials with the predecessor molecule, and with VX548 itself, and three, the similar methodology, design, and endpoints of our Phase 3 studies compared to the Phase 2 program. Closing on acute pain, recall that the Phase 3 program has been designed to support a broad, moderate to severe acute pain label, which would enable prescribing and usage across multiple care settings, including in hospital or the ambulatory surgical center, post-discharge, and in the home. We're also studying VX548 in diabetic peripheral neuropathy, or DPN, a type of peripheral neuropathic pain that represents yet another significant area of unmet need and another multi-billion dollar market opportunity. We've previously delivered positive proof-of-concept data in peripheral neuropathic pain with the predecessor molecule, VX150. The current study in DPN with VX548 is a 12-week phase 2 dose-ranging proof-of-concept study. I am pleased to share the timeline for this DPN study has accelerated, and we have recently completed enrollment. This study will complete by the end of this year, and we expect to share results in late 2023 or early 2024. Moving now to type 1 diabetes, where we're evaluating stem cell-derived, fully differentiated, insulin-producing islet cells for people with type 1 diabetes. Our goal is to develop a functional cure for the millions of people living with type 1 diabetes, including the more than 2.5 million patients in North America and Europe alone. The VX880 program is our foundational cell therapy program for T1D, in which we have already demonstrated proof of concept. In the VX880 trial or the naked cell program, patients take standard immunosuppressants to protect the islets from the immune system. We presented updated clinical data on Parts A and B of the study at the recent American Diabetes Association meeting. The presentation at the ADA showed that all six patients treated with VX880 engrafted islet cells, produced endogenous insulin, and had improved glycemic control while reducing or eliminating exogenous insulin use. Importantly, the two patients with at least one year follow-up saw a complete elimination of severe hypoglycemic events, maintained hemoglobin A1Cs below 7%, and were insulin independent. Further, patients who were earlier on their course of therapy were on a similar trajectory as the two patients with long-term follow-up. Based on these results, the VX880 trial has now advanced to Part C, where patients are treated concurrently at the full target dose. And as part of our global study plan, we've now opened clinical trial sites in Europe, in addition to those already open in the U.S. and Canada. Our second program, VX264, or the Cellsless Device Program, encapsulates these same cells, which have already demonstrated proof of concept in a proprietary immunoprotective device. And hence, there is no requirement for immunosuppressants. I am pleased to share that enrollment in the VX264 study has initiated and we have already dosed the first patient. The third program is our hypoimmune program in which we edit the same fully differentiated cells to cloak them from the immune system. This represents another path to obviating the need for immunosuppressants. In March, we expanded our collaboration with CRISPR Therapeutics into type 1 diabetes to use CRISPR-Cas9 to make these edits, and we continue to make progress in this research stage program. Transitioning now to enaxiplin or VX147, the first potential medicine to target the underlying cause of APOL1-mediated kidney disease, or AMKD. a genetically defined disease that affects approximately 100,000 patients in the U.S. and Europe alone. Recall, the Anaxipline Pivotal Program for patients with AMKD is a single, adaptive Phase 2-3 study with a pathway to accelerated approval in the U.S. The Phase 2b dose-ranging portion of the study continues to enroll and dose and remains on track to complete this year. We also continue to work to enhance AMKD disease awareness and genetic testing availability to support diagnosis, including through partnerships with Natera, a leader in genetic testing, and Arcana, a leader in renal pathology services. To close, an update on our Alpha-1 Antitrypsin Deficiency, or AATD program. Our small molecule approach targets both the lung and liver manifestations of this disease that affects an estimated 100,000 people in North America and Europe. Our program is exploring two hypotheses. First, longer treatment duration with VX864, and second, a more potent molecule with VX634. The Phase II program for VX864, a 48-week study in patients with AATD that assesses both liver clearance of Z polymer and functional plasma AAT levels, is ongoing and is anticipated to complete enrollment later this year. VX-634, the next-in-class molecule with multifold greater potency and better drug-like properties, is projected to complete its Phase I trial by the end of this year. Overall, the AATD program remains on track, and we look forward to sharing results in 2024. With that, I'll turn it over to Stuart to provide a commercial update, including details on our launch preparations for XSL.