Welcome to the Vertex Full Year And Fourth Quarter 2018 Financial Results Conference Call. This is Michael Cartridge, Senior Vice President of Investor Relations for Vertex. Tonight, we will review our continued efforts to develop new medicines for all people with this fibrosis, recent advances in our research and development pipeline, and our 2018 financial results and 2019 guidance. Taking prepared remarks on the call tonight, we have Doctor Jeff Liden, chairman and CEO Stuart R Buckle, chief commercial officer, And I would like to welcome to the call, Paul Silva, Vertex's Interim Chief Financial Officer. Paul has been Vertex's Corporate Controller and chief accounting officer since 2008.
And he and his team have worked closely with the investor relations group since that time. Following prepared remarks from Jeff Stewart and Paul, Doctor Reshma Kewalramani, chief medical officer, will join us for Q And A. We recommend that you access the webcast slides on our website as you listen to this call. The conference call is being recorded and a replay will be 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 our filings with the Securities And Exchange Commission.
These statements, including without limitation, really, regarding Vertex's marketed CF medicines, the ongoing development and potential commercialization of our triple combination regimens for cystic fibrosis, protecting other programs, and Vertex's future financial performance are based on management's current assumptions. Actual outcomes and events could differ materially. I will now turn the call over to Doctor Jeff Lyon. Thanks, Michael. Good evening, everyone.
Over the past several years, I shared with you Vertex's strategy to create multiple transformative medicines for different serious diseases by continuing to leverage our long track record record of serial innovation. I'm pleased to agree with you this evening, the significant progress we made in 2018 on executing this strategy, and to discuss the important growth drivers that we expect in 2019, which will include many important clinical, reimbursement, and commercial milestones with Capps, as well as clinical data from across our research and development pipeline. In CF, we expect you're paying the phase 3 data for the VX 445 triple combination this quarter and remain on track to submit a new drug application for a triple combination regimen no later than midyear. We also expect to see more patients initiating treatment with our medicines throughout 2019 as a result of global label expansion, and from key reimbursement agreements reached in 2018, which will drive further revenue growth this year. In our non CF pipeline, data expected in the first half of twenty nineteen from our phase 2b dose ranging study of VX 150, to inform our plans for potential phase 3 development in pain.
In our AAT program, we are advancing a portfolio of small molecule correctors including our first molecule and Enter phase 1 development in late 2018, and a second that is expected to enter clinical development this year. And in sickle cell disease and beta thalassemia, we have now initiated enrollment of both of our phase 12 studies of the gene editing treatment of CX CTX001. I will briefly review each of these pipeline programs with you this evening. 1st, assist the fibrosis. Today, approximately half of all people with CF are eligible for a Vertex CF medicine.
And we stand on the verge of yet another dramatic advance in the treatment of this disease with a triple combination regimens to hold the potential to treat up to 90% of all people with the disease. Our progress in CF in 2018 was marked by 2 important achievements. First, we saw a significant increase in the number of patients being treated with our approved medicines. This was the result of the successful SYMDEKO launch in the US, multiple label expansions for Glydeco and ORKAMBI, and the completion of key reimbursement agreements around the world, which Stuart will review in a moment. And second, we made excellent progress in advancing our 2 combination regimens through phase 3 development.
It was on this call 1 year ago. We announced our plan to initiate phase 3 development for 2 different triple combination regimens that include the next generation corrector, either VX 659 or VX 445. In just one year, we can see this enrollment of approximately a 1000 patients throughout the 4 phase 3 studies and obtain the 1st phase 3 data for the VX-six fifty nine studies. These data showed clear and compelling evidence of the dramatic benefit that this regimen may offer patients 1 FAA tell me patient and 1 minimal function mutation, as well as a significantly enhanced benefit for the triple combination regimen may provide to those with 2 F508 L mutations who are already being treated with SYMDEKO or ORKAMBI. We will obtain data for the VX 445 triple combination regimen in the first quarter of this year, which will enable us to choose the best regimen to submit for regulatory approval.
We remain on track to submit a new drug application for a triple combination regimen no later than mid 2019. We set a high bar with the triple combination data, but we're also committed to creating even better CF medicines for the future. Including 1 daily triple combination regimens and regimens that contain other next generation correctors that may have enhanced profile. We have multiple molecules in preclinical and clinical development that may provide future improvements for the treatment of CF. Now to our recent progress outside of CF, we are rapidly advancing its portfolio of potential new medicines through late preclinical and early clinical development across a range of serious diseases with large unmet medical needs.
I'll start with our AAT program where we recently initiated clinical development of our first small molecule corrector. The similarities between our AAT and CF programs are striking. We believe that we will be able to apply many of the lessons learned in our CF discovery and development efforts to accelerate and derisk our activity targeting AAT. We believe that measurements of the circulating functional AAT protein in people with alpha-180 and deficiency will provide us with an early and important marker for the potential of our medicines to treat the cause of this disease. Just as the biomarker of some chloride did for us in CF.
Turning to our recursion development program in pain. We recently announced positive phase 2 results for BS 150 showing a significant reduction of pain in people with small fiber neuropathy. These data marks the 3rd positive proof of concept study for BS 150 in 3 different pain conditions and further validate potential role of NaV 1.8 inhibition in the treatment of pain. A phase 2b dose ranging study of VS-one hundred and fifty and acute pain following threatening surgery is now fully enrolled, and we expect data from this study in the first half of this year. Positive data from this study could support pivotal development of VX 15 in pain.
We have a portfolio of multiple additional NaV-one hundred and twenty eight inhibitors in late preclinical development and expect to advance the first of these molecules into clinical development in 2019. We are also continuing to the discovery of additional potential pain molecules targeting other new mechanisms given the significant need for new pain Moving on to the sickle cell disease and beta thalassemia programs, where, with our partner, Christopher therapeutic, should now initiate the clinical studies of CKS001 for both of these important diseases. These studies represent first clinical trial to evaluate gene editing treatment using the CRISPR Cas9 technology in these 2 serious diseases. As we advance these on the efforts, we are constantly evaluating new external opportunities that could provide access to new technologies, platforms, or development assets. We have entered into multiple agreements in recent years that are aligned with our strategy, including our collaboration with Christopher Therapeutics, as well as recently announced collaborations with Arbor Biotechnology, Merck KGaA, Genomics, PRC, and Excan.
We entered 2019 with increased flexibility to do more deals that would further broaden our pipeline and enable us to continue to explore serious diseases with multiple modalities and technology. As we look for future years, Vertex has the potential for significant revenue and earnings growth through the mid 2020 based solely on treating more patients with our approved and future CF medicines. Importantly, we also have a lab of the advancing portfolio of potentially transformative medicines for other serious diseases and the ability to enhance our internal R and D efforts with external innovation to drive long term future growth. To protect, we believe that real value for patients and shareholders is created through scientific innovation, and I'm pleased that Vertex continues to be at the forefront of transforming the treatment of CF and other serious diseases. I will now turn the call over to Stewart to review our commercial progress.
Thanks, Jeff. I'm pleased to review with you this evening, our strong commercial performance of 2018, driven by the launch of SYMDEKO in the US and also our revenue guidance for 2019. Which shows continued revenue growth as we treat more patients with our approved medicines globally. Approximately 18,000 patients are currently being treated with RCF medicines, and this resulted in CF current revenues of $868,000,000 in the 4th quarter. The fourth quarter included $294,000,000 in revenues from SYMDEKO in the US, which was the primary driver of the significant growth in CF revenues in the order and throughout 2018.
Our full year 2018 CF Revenues were $3,040,000,000, a 40% increase compared to the $2,170,000,000 for 2017. Which is a direct result of treating many more patients globally. In the US, we saw a large number of patients initiate and remain on treatment with SYMDEKO in 2018. Demand for SYMDEKO has come from all eligible groups of patients including those who previously discontinued or never initiated or can be and those who switched from or can be or collided with 2 SYMDEKO. Given the profile of SYMDEKO, we had expected that persistence and compliance rates might be greater than those seen previously with autonomy.
And we are pleased to see this play out in the real world.
While we are now well into the
launch of SYNBCO, we do anticipate additional patients to initiate treatment throughout 2019, including patients ages twelve years older, as well as younger patients following potential approval in children ages 6 to 11, which we anticipate during 2019 and is reflected in the guidance I will discuss in a moment. July to go revenues for 2018 were $1,010,000,000, an increase of 19% compared to 2017. The increase in KALYDECO revenues is a direct result of treating more patients in the US based on label extensions received in 2017. Outside the US, we reached important reimbursement agreements for our CF medicines in Australia, Sweden, and Denmark in 2018. Adding to the multiple agreements previously reached in Germany, Italy, Netherlands, Ireland, and other countries.
These new reimbursement agreements allows patients to have access to medicines that treat the underlying cause of their disease for the first time. And provided a contribution to revenue growth for 2018. These agreements will also contribute to revenue growth in 2019 and beyond. Given the recent EVU approval of SYMKEVI known as SYMDEKO in the US and our rapid program, in developing triple combination regimens. Our ongoing reimbursement efforts remain focused on obtaining long term quarterly agreements.
That not only provide immediate access to our approved medicines, but also a pathway to access and rapid reimbursement of future CF medicines. We've reached these types of agreements in multiple countries and view these agreements as win wins for patients and governments as they provide certainty to patients that they will have immediate access to current and future innovations in CF and Vertex and budget certainty to governments for the foreseeable future. Our progress in 2018 in launching Simlico expanding the labels to Kallydeco and all candy, and achieving important reimbursement agreements for our medicines outside the US, has positioned us for continued revenue growth in 2019. Our 2019 guidance for CF Product Revenues is 3.45to3.55000000000 dollars, which at the midpoint reflects approximately 15% growth over 2018. At the timing of when we achieve future reimbursement agreements is not entirely in our gift, our 2019 revenue targets only reflects anticipated revenues from regions where our medicines are currently reimbursed.
Receiving additional reimbursement agreements in 2019, could provide upside to our revenues, and thus, we would update our guidance as appropriate at that time.
I would note that we expect to
see a negative impact in the first quarter of this year from channel inventory build of approximately $10,000,000 that occurred at the end of 2018 and from higher gross to net adjustments, which we typically experienced in the first quarter. We expect that these dynamics may more than offset revenue growth from new patients and that 3rd quarter CF product revenues could be sequentially lower than the fourth quarter of 2018. Despite our expectation for continued revenue growth for the full year, as noted in our guidance, I'm pleased with the continued progress we have made in bringing our CF medicines to many more patients globally. Which has resulted in strong revenue growth to support our investments in creation of new medicines for CF and other diseases. I look forward to talking further with you throughout the coming year, and we'll now turn the call over
to Paul to further review our financial results and guidance. Thanks, Stewart. Good evening, everyone. Vertex's financial performance in 2018 was marked by 40% growth in CF revenues, coupled with disciplined investment into our business, which drove significant increases in our operating margins, operating income, and cash flow. In addition to Stewart's comments on 2018 revenues and 2019 revenue guidance, I will provide additional remarks this evening regarding our 2018 financial results.
I will also discuss our 2019 financial guidance for R&D and SG and A expenses and for our effective tax rate. All the results and guidance I will discuss are non GAAP. As Stuart noted, we saw a significant increase in fee product revenues driven primarily by the launch of SIM to occur in the US. Pilatic O label extension also contributed to the revenue growth in 2018. For Kalydeco revenues reached 1,000,000,000 for the first time since its approval in 2012.
This underscores both the important role that Kalydeco plays in the thousands of patients around the globe, and the continued strong demand for the medicine is we expand its label to new and younger patients. Our fourth quarter 2018 combined R and D and SG and A expenses were $400,000,000 compared to $355,000,000 in the 4th quarter 2017. Our full year 2018 R and D and SG and A expenses were 1.53 $1,000,000,000 compared to 1.3 2,000,000,000 for 2017. The decrease in these expenses was primarily due to the advancement of our portfolio of triple combination regimens and investment to support the use of our medicines globally. The significant growth in CS revenues in 2018 resulted in full year operating margins of 37% compared to 26% for 2017.
As well as operating income of 1.11000000000 dollars, 97% increase compared to 2017. Net income for the fourth quarter of 2018 was $337,000,000 compared to a $158,000,000 in 2017. For full year 2018, net income was $1,050,000,000 compared to $495,000,000 in 2017. The significant increase in our quarterly and full year net income was a result of the strong growth in product revenues. We also ended the year with approximately $3,170,000,000 in cash and marketable securities compared to 2,090,000,000 the end of 2017.
We expect to continue to generate significant cash in 2019 and beyond. Now for our 2019 guidance. Today, we are providing financial guidance to see our product revenues as Stewart discussed. As well as your combined R and D and SG and A expenses in our anticipated effective tax rate. We expect combined R and D and SG and A expenses of 1.65 to $1,700,000,000.
The increase compared to 2017 primarily reflects CF development efforts incremental investments to support the potential launch of a treatment combination regimen, and investments to support the expansion of our pipeline into additional diseases. Now to tax guidance. On a GAAP basis, we recorded a $1,500,000,000 non cash benefit in the fourth quarter of 2018 based on the reversal of evaluation allowance related to our net operating losses. Following the release of this valuation allowance, we will also begin reporting a tax provision in 2019 and expect our full year gap and non GAAP tax rates to be 21 to 22%. The tax rate will fluctuate quarter to quarter this year with the highest rate occurring in the fourth quarter, the vast majority of our tax provision will be non cash expense until we fully use our net operating losses.
As Jeff noted, Vertex has a unique, long term growth outlook that is based on continued revenue growth in QF, resulting in expanding operating margins and increases in earnings and cash flow. I look forward to updating you on our progress. With that, I will turn the call back
to Jeff. Thanks, Paul. In closing, 2018 was a highly successful year of commercial, and clinical execution across our business. Our achievements over recent months have positioned us for continued growth in revenue and operating income in 2019 and beyond, and for important near term milestones across our R and D portfolio, both in CF and other diseases. Our strategy of creating transformative medicines through serial innovation is working exceptionally well as evidenced by the rapid progress seen across our business.
And I look forward to updating you over the coming year. With that, I will open the line for questions.
Thank you. Ladies and gentlemen, if you have a question at this time, please press star then 1 on your customer's cell phone. If your questions have been answered or you wish to meet yourself on the queue, please press the pound key. If you have any background noise, yes, please place your line on mute on question has been stated. Our first question comes from Michael Yu of Jefferies.
Your line is now open.
Hey. Thanks for that. Question and congrats on that on a great quarter. 2 topics I thought you could address. One is, giving the streets some comfort about obviously, what's been in the news recently with UK, and and it's more broadly speaking the confidence that that region, we're working out and see specific whether it's just a pair of pharmacoeconomics that your drive will solve that equation.
And the second question is a pipeline question you talk very nicely about, AAT. You did say there's a second one coming in. Are those combinable? Are they similar? That's more potent?
You can talk about having 2 catches regular 1 or maybe I haven't been ahead of myself. Thanks so much.
Hey, Mike. It's Stuart. I'll take the first question on the on the UK. I mean, before we go to the UK, I do want to reference here. We made great progress from a reimbursement point of view in 2018, and that's reflected in the results we were able to showed you today important agreements in places like Australia and Sweden and Denmark.
South Kim, we've continued that momentum into, 2019 where we have secure view agreements in in places like Israel and Luxembourg and the a pricing agreement for, or can be for six or eleven year old kids in in Germany. So we continue to make great progress, getting, access for patients around the world. Where we have been successful in large part is due to those countries using what we would consider to be appropriate in epidemiology to discuss the value of these he can transformative medicines. And because I was able to get access to Laurel's for patients, we're continuing to pursue that with every bit of energy we can in in the in the UK, I think the problem is what the UK is you can probably note, Mike, it is a health care perspective, the UK is is managed as a developed company. So each country has its own process.
So In Scotland, we've made great progress. We've reached an agreement with them about, how they are going to assess, our medicines, and we've submitted or on the verge of submitting your candy and some heavy to the Scottish government, and we're hoping that it will get access there, you know, hopefully in 2019. In England, unfortunately, we are yet to reach an agreement with them on on what we would consider to be an appropriate methodology, but we're certainly not gonna give up on that. We are gonna continue to fight to get access to patients in England. We have the patients around the rest of the world.
A lot that I'll thank you is that We know what the results will look like even if we put the triple combination regimen through the existing knife methodology, even if the results are as good as you're sure with 59 in the phase 3 study that we released in November. And even, those results and put into the the nice model doesn't come out with evaluation, which we think in any way that's close to valuing the transformative nature of these medicines. And so even for the trouble, we are gonna continue to need to work with England to to change the assessment methodology for our medicines. Okay. On the other AC question, I think I'll have another address.
I like it. So, thanks for the question on AC. You know, many ways, I think you you can think of this as a very important lesson that we've learned from our CRTR next gen And we still have the same here for it to crack the biology than 4 on the chemistry. We we believe we have cracked the biology fee of the of AAT, we have multiple correctors that can refer to the protein and and probably speak to patients with themselves and and in a functional form. And so we started deploying on the chemistry about a year, year, and a half ago and to create multiple molecules.
And and the reasoning is just to our experience as with the PRD. I'm actually interested to get better and better, and we'd like to take more than one molecule into the clinic process a portfolio risk mitigation strategy, if you will. And I just need to advise you of customising through the application have to have the right teacher to have to have the right person or option that's been tolerable. And so our strategy with AT and T with most of the programs you'll be pursuing forward in front of me before we come to Huron, create multiple mild fuel, greenhouse cord in the clinic, and compare them in early small settings, and we put pretty quick idea of which of the best molecules. And so these 2 AD modules, we don't think of them as additive.
We really think of them as and give them a call if we're gonna compare. And by the way, you should be surprised to see us bring a third one for a load as well because Yeah. They said we just continue to go through the dialer and dialer problems.
Got it. Thank you so much.
Thank you. Perfect. And transfer the 3 4 digit of hearing. Your line is now open.
Thank you very much for taking the questions. And congratulations also on your great results. So throughout the 18,000 patients, could you give us a sense of how many come from the US? And ideally, how many comes from Europe? Effectively, could you give us the breakout for Pilatic Oil Sandy and and Tobacco by the main geography?
And just a question for you, Paul, if possible that we should model that 21 to 22 percent tax rate, and I'm always going forward beyond 2019. I think that's what you suggest if you want to settle that back to me.
Yes. I'm sure. I'll take the first couple of questions there. On the 18,000 patients who are actively insured, you guys are about 2 thirds in the US and about one third ex US. Alright.
In terms of the breakdown of the geographies in terms of the products, for Q4, but all Q4 revenues, the commodity that US is a 164,000,000. Ex US is 95,000,000. But what can be the US is 225,000,000, and X US is 90. And the soon to go in the US, it was 280 6,000,000, and US was 8,000,000,000 largely reflecting the, the launch that we tripped against the Excuse in Germany. That's the breakdown for the call.
But if you wanna have the handy one, they'll be happy to catch up with you after the call. Great.
Thanks very much. Hey. Hey, Jeff. It's Paul. Thanks for the question.
And and I'm gonna give
a little bit more detail than your specific questions just to kinda let you know how we're thinking about past is. So in 2019, we expect the effective tax rate to be 21 or 22 percent for the full year, and it's primarily driven by a noncash US Federal Tax Division. And in future years, we expressed that the rate could actually go lower due to being rough ticks of income and our revenues continue to grow and our business advances globally. I'm not gonna actually be able to give you what that rate is until we find that visibility of reimbursed Tamara.
And then the other point I
just wanna make for everyone is that, the majority of the guidance on the effective tax rate is noncash, and we practicing only approximately $25,000,000 of cash taxes in 2019 compared to the $15,000,000 that we're gonna pay in 2018. Yes, sir. Very much. Good afternoon. Thanks for taking my question.
Just a a couple on on revenue growth drivers. So in the 2019 guidance, you give us some sense of how much of the revenue growth is coming from traditional geographies with existing labels and versus how much is coming from label expansions that you expect to get in 2019. And the second question on that portfolio agreements that you referenced, can you remind us which country is currently a portfolio agreement. And how do you go about negotiating portfolio agreements and the additional price scores? Do you have to wait an approval, or is it something you do proactively before, for example, the the trickles are
true? Thanks.
2019 guidance. That reflects really 3 things. 1 is, the sort of analyzing of the syndrome launched in the US into 19. Also, the annualizing effect of the label expansion which we saw Kawatico and ORKAMBI in 2018, and a contribution from countries where we we're able to receive new in business agreements in 2018. In 2019, we are not affecting a large contribution from new launches because we don't have as many of those in 2019, probably the most notable that we are receiving within our guidance is for the signature in page and pages 6 through 11.
And so that that would be a a new label expansion there. But the vast majority of it is coming from, patients for whom we are labeled to get today. It's about to reiterate as well. It also assumes only revenues in geographies where we have reimbursement agreement today. What if we were able to get significant new reimbursement agreements in 2019 and if they were material, then we would and I potentially have an upside to our revenue and update our guidance at that time.
Typically, companies have portfolio agreements if you've seen one for voting, you've seen one for the agreement. So so it would be, difficult to describe them all, but we have, for instance, places like Ireland. We have an agreement in Australia where we have a path to getting SYMDEKO when it approved by the TGA, Denmark, the Netherlands. And so there is a number of different portfolios that they're all slightly different. In terms of do we need to have, regulatory approvals to to to get court programs?
Again, that varies country by country, but actually, many countries are well aware of how quickly our portfolio is advancing, and how impressive the results look for our triple combination regimens. And so there's a significant interest from, from governments to be looking at these portfolios, even even in advance of, regulatory approval. Indeed, you know, one of the countries we were talking about early on, England has, you know, been one of those markets that's expressed an interest in those portfolio agreements. And remember the the key to those is that there are a win win win for us for patients and for the government. The win for us is that we would like to be able to have reimbursed agreements which kick in as soon as regulatory approval has been agreed.
For a win for sufficient information, we may get to choose the best person as soon as they're approved, and there are a win for government because they give them a level of terms of certainty in treating their CF patients.
Yes, sir. Well, maybe just one follow-up on the portfolio agreement. You mentioned I recommend in Denmark and Netherlands. So if we model the 2019 since heavy sales, would it be reasonable reasonable to expect revenue from those 4 territories as well as Germany?
So, in countries in the EU where we have a regular reapproval for 12 plus where those portfolio agreements are in place, we will be able to get access relatively quickly. I would remind you though, that Kim Rodson Chevy is indicated for the same population as ORKAMBI, and in places like Ireland, Britain, and Netherlands, we've seen very impressive uptake of all county and very high persistence rate. So patients and positions will have a choice. Essentially, they'll be trading off, which is they think is the, is the best one. No problem.
Thank you.
Thank you. Our next question comes from Alicia Young of King 4 60 Okay. Is there anyone here? Alicia, you're off of can you hear me?
I'm Can you hear me now?
Hear me? Yeah. Okay. Cool. I just went around my headset.
Sorry. I apologize. I just wanted you to talk a little bit about, you know, kind of difficult from the M
and A.
I mean, you have
a pipeline that's coming together, you know, obviously internally. Do I just want to talk a little bit about what you might think it's supplemental and interesting around doing external M and A or anything like that. And then also, you know, is that kind of delayed until you kinda figure out the CFO position as well? Thanks.
Alicia, this is Jacqueline. I'll take those. Yeah. As you know, for the last couple of years, we've been talking about a consistent what I call external motivation strategy, not just on the name of licensing collaboration, etcetera. It's already focused around 3 areas.
First is, obviously, see that where, you know, anything that we feel would be complimentary or out of it to our current measurements would be of great interest to it. Honestly, we're seeing less and less in that particular bucket, simply because we've set up extra hard fire now with the triple combination data. The second one I want is what I'll call, technology and tool. And we've had a very concerted effort to build a complete toolbox of technologies that we think would allow us to address the kind of serious diseases and the kind of functional medicine visas that that we're interested in in our pipeline, and you've seen us do a number of those deals. So Christopher Arbor as a genomics field.
And those are all deals that you should think of as acquiring different tools that will let let us optimally address the diseases that we're interested in. You should expect the CDR to continue to add in areas of interest. Looks like after therapies, gene therapies, etcetera. And then the 3rd area would obviously be pipeline assets. And those pipeline assets would be constrictive with our overall strategy of transformative medicine for serious diseases, specialty markets.
Are you sure to back to see us do some of those if you time an insure. It would be earlier stage development process, but we think we can add value through our clinical development regulatory and commercial groups. What you won't see us doing is, deals for on market or late phased products that are essentially there to buy revenue growth over the next 5 to 7 years simply because you don't need that revenue growth, you have to sort of provide that And so you can you can accept to see us continue to do deals around those repurchase areas. I would say that we're obviously building financial financial fire power to do more of those fields, and we've ramped up our external elevation group to to allow us to do that. And so I do think it's fair for you to expect to see us complement our very rapidly addressing the internal pipeline with with Conesto innovation as well.
It's lot 0. Same. You. Then our next question comes from Justin Summer Park, please. Your line is now open.
Hi, guys. Thanks for the question.
I know the plan is still obviously to select the NDA for the for the triple coming up in the first half. I just wanted to ask if if your points of differentiation between the two or the the metrics have changed at all. In other words, like, you could fill out FEV 1 and maybe less about, pulmonary dash patients or or the like. And then, also, when you look at the the part of the package, is there anything that has yet to be done in terms of nonclinical or that could be, you know, perhaps, a gating factor or something, that that could push you to the second half of the year versus the end of 2Q in your guidance. Can I have one follow-up?
Hi, Jeff. This is Jeff. I'll take the first part and and, Rachel, maybe you can take the second part With respect to how they're gonna compare the 2 assets, again, just I know you noticed, but just a quick review, we how does the the 445 travel fully enrolled? We have a very good line of sight to, the timing of when we expect seen the top line data there, which is in the first quarter. And I'm feeling very confident that we'll have that kind of data that we can compare we've noted that we've already reported for 6 59.
You know, as I've said before, the way we're gonna look at your two assets is is the complete profile, if you will, of course, programs. And that goes all the way back to preclinical work. It includes things like prepaid, to the tolerability, drug drug interactions, as well as, of course, the efficacy, measurements we talked about with Stephanie. He won, but also things like Select. So I do have a very complete review of those assets.
We're in a nice position of having an ITC file on both assets once you get the 445 data, and I think we'll be able to then take the best assets to to move forward. Again, we're very much on track to do that in the first quarter with confidence that we will be able to make that decision, on schedule in the first quarter. This will allow that midyear in the Avon, but I'll
I'll let Reshma address the second part of the question and discuss the package and stuff there. Sure. Sure. Thanks, Scott. So, regardless of whether the selection is for VX 659 or for VX 445, we're going to have all the data that we need in Q1.
Do you know the Bureau you shared the data to be at 659? Late last year. The exact same package, the same amount of the data and the same kind of data, we're gonna get, very shortly for 445. And with regards to packaging that up, making sure that we have the CTV complete the NDA, the NDA file, that's going to happen by mid of this year. That is something that we are very much on track for, and, I have high confidence that's gonna happen.
And then just a a follow-up. I know this was asked about the reimbursement, OUS. So I know in the in the past, you guys have had a pretty defined strategy of you know, allowing kind of patient community to to sort of to to escalate and maybe put some pressure on on payers, and this obviously has been the case in the UK and and in France. So I wanted to ask you
for the triple. Is there Is there a different methodology?
Is there something you can do differently maybe to help accelerate, you know, reimbursement, you know, look to know US? You just do things
a little bit differently that that could help speed up your process. Yeah, Jeff. It's Stuart here, and I wouldn't scale that it's our strategy to to get patients to put pressure on people. As you know, our development plans in the fibrosis, I know, secret to anybody that the community is very well aware of the progress we're making very well aware of the the clinical benefits to to products look like they are, delivering. And so I think quite rightly, they are calling on their elected officials to get access to these medicines.
I would refer back to what I said earlier. The key here from a, you know, health technology assessment point of view is that the methodology needs to be appropriate for these types of medicines, which are gonna be used very early in people's lives, hoping to restore them to normal levels of chloride transport and deliver benefits over the very, very long term. And and frankly, the assessment methodologies are not really fit for purpose to assess those types of medicine. So My health technology assessment point of view, that is what we are continuing to work on and where we've done that, which is in many, many countries around the world. We can we've been successful.
And then the other thing that I think is an important component of this is where we've been successful. I think in a a substantial portion of the time is because senior government ministers have taken an interest in this issue being able to see our our portfolio and how fast it's developing and the kind of benefits it could bring to their population. So for me, those are 2 of the most important the best practices in in the UK and everywhere else around the world.
To come from Tallahassee from Sequo. Your line is now open. Great.
Hi. Thank you so much for taking my questions. Some part question on EX150. I guess first of
all, can you guys talk about
the logic of doing more just changing work here? Given that you have a few positive phase 2, a low age rate, and then the 2 of them that need for help you with alternative, I'm just wondering why one of them through through the phase 3. And then secondarily, I was wondering if all strategic options of CS150 are still on the table And have you confirmed that you'll take this toward yourself at least through a targeted subset or or is an out licensing still still a possibility? Thanks so much.
Sure, James. This is Rachela. Let me take the first half of your question, and then I'll ask on the address of the second half of your question. So with regards to VX-one hundred and fifty, which is our NAFL.0.8 inhibitor that you, pointed out we've had now 3 out of 3 studies in osteoarthritis in small fiber neuropathy as well as in noninectomy. The reason that we're doing dose ranging is really 2, 2 very simple points.
1 is regulatory. Regular is expected to do based dose ranging and really what they're looking for us to do is to find the lowest efficacious dose. And so what is just a very practical point around the regulators? The second point is around Houston's drug development. What we did in order to get a proof of mechanism readout is we chose a high dose.
Now what we need to do is to figure out what is the exposure response relationship Of course, that has important implications for picking, not only the lower suffocation code, but also what the dose will be, which is form code size, and that inform COGS and all those such things. So that's really what we're doing. I do wanna let me know that the update on that one is the phase 2b is now fully enrolled. So, we're gonna be in a good spot to understand all those pieces of information in the near future.
And maybe I'll make the second part, the question is really a commercial strategy question, I think. Yeah. As I said before, we we don't take a pain as a single commercial market. We we think of it as multiple markets as an example acute pain, which is essentially post surgical, post procedural pain, mostly in hospitals outpatient surgery centers or data process in and itself a multi $1,000,000,000 opportunity typically, you'd like to have both an IV and an oil form of a new analgesic in that market. That's very much a specialty market.
You think you can address large parts of that market ourselves, and it would be our plan assuming we have the date of birth to to pursue development and commercialization in that market as well. Small fiber neuropathy, similarly, the market is typically in, a set of of paying specialists, offices It's a market that can be addressed as a specialty market, and it's one that, yep, again, with appropriate data, we feel that we could to develop and commercialize ourselves. You're very, very different from the chronic inflammatory pain, that's OA low back pain, etcetera. That's predominantly a primary care market. And from our perspective, it's not a market that we would wanna build a commercial presence that may develop, and that's that's one where you might see us build with a partner You have had a fair amount of interest, as you might imagine, given that you're the 1st year of new collective analgesics from partners who have a lot of experience in these community bank markets.
Did I answer your question about, a commercial strategy? Yep.
Thank you very much. Sure.
Thank you. Our next question comes from the parent of William Stein. Your home is now open.
Hi. Thanks for taking the question. I was just wondering if you can at all help us quantify the impact of improved persistence on SYMDEKO relative to ORKAMBI. Maybe how compares to Clotix. I was recognizing you have a lot more data on Clotix on that.
I think you've been out, you know, 5 years plus. Yeah. That's we don't get any of the exact specifics and and kind of the the exact numbers to, you know, these things acuate over time and obviously seem to go. We're, you know, 12 months into the launch or can be bought on before I go to a more like 6 years. Certainly, the persistence we've seen on on SYMDEKO is, as we anticipated higher than we saw with ORKAMBI, it's not quite at the level that we saw with with Kalaika, which were the highest person I've ever seen for any mention in the many years after doing this.
So somewhere between Old County and Calabrio, but, Centenco certainly is, above all Camry.
Okay. And then any more details you can give us
on the patient's success in DECCO. And if you guys seen any warehousing in the US ahead of
the triple combo central launch, you think?
So in terms of the update, we've actually seen broader uptake for SYMDEKO across all of the patient groups that you would expect. It's been, saving up rapidly in in points you've never been on ORKAMBI, those who were discontinued from ORKAMBI, and then we've also seen a fair number of patients switched from either law can be to, to Calabrio. So we've really seen, uptake broadly across all of the eligible patient population. K. Thanks a lot.
Thank you. Our next question comes from Robert Purnos, a city. Your line is open. Hi. Thank you guys for asking my questions.
So, I see. Take your call for us. This message is from Gekko. What are you learning about organizing pieces of life that they keep pushing on the tobacco and thinking that there's a longer cut, like, the tobacco and the triple going forward? Are you saying you're switching to finance applications?
Do you think that it'll be top at this point? The second question is just a follow-up and Alicia section. It seems like it's changed get you more than, like, you might look externally for pipeline assets. Remember, did you more than you discussed? Could it be more for a platform to develop your to get the time to help me drive.
Are you just paying for me in the market, or are things looking cheaper? What kind of change or how are you thinking about it differently?
Sean, it's Stuart here.
I'll take the first question and then, then Jeff can take the, the the pipeline and external innovation question. So in terms of what we're seeing with patients who switch from Proylico to SYMDEKO or happy to SYMDEKO, you know, those patients have a a great experience, we we aren't seeing any of those patients by the disability or or kind of go back to their, original, medication that they know from the the date there is the RS population, you saw a tender gap there as substantial clinical benefit on top of either Catherine. So, you know, that I think is what's driving the majority of people who are making that transition obviously, with with Symbic General County, we don't have as much in the way as direct comparison data, but I think it's the overall benefit risk profile of of SYMica that I think people are our finding attractive and and so that that transition is going in line with our in line with our expectations. Then in terms of the HMO Innovation, I'll I'll have that back to Jeff. Hey, Robert.
It's Jeff. You know, maybe just one other point on on your question to sort of about the switching. It's obviously, you know, this is relevant as well for the triples, and and some extent data on the label and lots of other things. But but I do think the the strategy here is to continue to provide better and better medicines for more and more patients, including the patients who are not addressed. And so assuming that, you know, the data we're seeing now is 6 59.
It's just recently started, as you know, even in, diploma education, we do expect over the long term, the vast majority of these patients will switch over to triple. So that's just a a sort of sideline for the future. With respect to that, the pipeline of the BBU strategy, I apologize if I miscommunicated that you even more than that, it is good. No, I I try to do a different thing all along. So so the 3 buckets of CF I do plan out technology and tools, and certainly we've done a lot of those fields, and we'll continue to do them.
But we always been interested in early stage pipeline assets that we are set, meaning they're potentially transformative drugs for serious diseases. As you know, they're they're not that easy to sign, but we continue to look for them. Certainly, if we sign them and if these is registered for them, you should expect us to see I do do realize you're saying an acquisition yield. I'm most currently paying taxes. Great.
I do.
Thank you. Our next question comes from Brian Abrahams of RDC Capital Markets. Your line is now open.
Hi. Thanks very much for taking my questions, and congrats on the quarter. I was wondering if you could give us a little bit more color on the contribution of up taking two and five year old to Orkambi revenues, maybe relative to background, the background dynamic of adult switching to SYMDEKO. And then separately on
the triple, as you get more data in hand, I'm
I'm curious what type of translational or the educational work you'll need
to do to bridge the shorter term mutual benefits from Bay Green up to the long term outcomes that you've seen with other treatments, like the LACCO that's dosed over the course of years. And whether you had any preliminary payer discussions or feedback on that front. Thanks.
So, Brian, I'll take the first question on, on all can be. So we have seen a strong uptake, with ORKendi and the the 2 to five year old patient groups. And, and you might imagine that's kind of help do you leave the road strong quarter for ORKAMBI, and did it, you, like, kinda compensate the fact that there are a number of patients who are switching from or can be the syndicate. As you know, we could have these dynamics with the white populations and the same being approved and, in those same patient populations. That's why we've really gone to getting total CS product guidance now because it's hard to be specific about each and every one who's taking calculations exactly how many people are gonna be on each medicine.
And so that's why we've gone to total CFO of revenues now. And then in terms of the, triple day draw on that of the restaurant.
Sure. So with regard to, triple combination, as you know, the primary endpoint in both the 445 and 659 programs, for the FS study called PPPD 1 at 4 weeks. And in the SMS studies, the interim analysis at 4 weeks CCF ED 1. Now what's very interesting in that is the reason we decided to go forward with a CTF ED 1 in 4 weeks is because As you can imagine, we have a treasure trove of data looking at PPF EV 1 over time through our col radical experience for candy and SYMDEKO what you see is that there is a very consistent relationship with what you see with CFTR modulators at week 4. And what you see later on, for example, at week 24 or week 52.
And so I think that relationship is actually reasonably well understood amongst position, as well as patients. The other interesting thing to note is, of course, in the SMS studies for both five 9 and four wheel drive. We're going to have the 24 week PPS EV 1 so we can start to do some analyses of rate of decline and such. And we are also going to have how many exacerbations BMI fits more. So that's sweet.
Quite a bit of data that's coming, And, I've been very, impressed with how well these studies have been understood by the community, not just the physicians, but the patients as well.
Thanks very much.
Thank you. Our next question is from Matthew Harrison of Morgan Stanley. Your line is open.
Great. Thanks very much. I guess, Paul, I was wondering if you could talk a little bit about the operating margin progression. He's obviously moved up on a 7 or 8 points this year. And how could we think about that relative to the revenue growth you're talking about?
2.19 and and John. Thanks very much. Yeah. Hi, Matt. It's John.
Actually, maybe I'll take a little little more of a strategic question for giving me the guidance for for 2019. So, like, as we look forward, and as you've seen over the last couple of years, there's a pretty consistent trend here of growing revenues considerably faster than operating expenses, which obviously results in operating margin expansion increases in operating income think as Paul mentioned, as we look forward, to next year, we expect to see our current status of 15% top line revenue growth the 21% growth in operating margin, reflecting exactly the same pattern going forward in 2019, obviously, with the triple that only accelerated because revenue growth even faster than after the triple launches and operating expenses, you know, we've maintained a pretty distance from the probe. So think as you think about this long term without giving you long term guidance, you should think about continuing operating margin and cash and operating income, increases such as result in the cash flow, but at all, mentioned. So I can get enough detail and sort of how we think of it going forward. Yeah.
No. That's great. I'll come in. If I can just check one a lot of people have asked about a US reimbursement on the call. I was wondering if you could just typically address some of the news around compulsory license payments and some some things about concrete and what you see is the path forward there or the likelihood of of anything happening there?
Yeah. So my insured here, I mean, supposed to realize this issue is is probably most recently been discussed in the, UK, yes, there. There was a debate on on Crown Used to take forward in the UK. Yeah, I think it's the government itself in that debate recognized that this is a very complicated issue. It's it's a not entirely a viable option for multiple reasons, including, but it's inconsistent with their desire to talk there was vibrant lifetime to the ecosystem.
We certainly agree with their perspective on that. I would say we're not really focused on if we concern, frankly, account, compulsory licensing, what we're focused on is finding pollution in the short term. For patients to provide access to your county as soon as we can, and our pipeline of future mentions as soon as they're approved. Thank you very much. Thank
you. Our next question comes from Cory Kaskala with JPMorgan. Your line is now open.
Hey. Good afternoon, guys. Thanks for taking my question. I wanted to ask you about AAT and wondering if you can talk about the potential cadence of initial clinical data why you might start to learn from healthy volunteers. And then I realized this is putting the car before the horse a little here, but Assuming the early clinical stage work goes well, what might a registrational pathway for this indication potentially look like him curious.
Would you expect it to be biomarker or outcome driven just kind of to help me understand what this program may encompass. Okay?
Sure. This is Rachel. Let me let me take those off of that question. With regard to, the case of the trial, So, let me just describe the child's a very typical and small molecule approach that we're taking here that's really sending those followed by manual fully sending dose. That's gonna be done in healthy volunteers.
And, as soon as we went through that, we're gonna be ready to go into patients. The the good news on this program is that it's going to be a reasonably efficient program. I don't know if it's 40, 40 people, but a reasonably efficient program for us to be able to see whether my knowledge was going to have the intended effect which is elevations in AAC level and in activity. This is a very standard readout so we expect to have that in hand in in the near future as soon as we get through our health care studies. With regards to the registration process, we're we're only insured.
What I can tell you is that the existing therapies, which, you know, are often patient therapy associated infusion of the protein. Those were approved and about 4 of them available on the market, and those were approved based on a a t levels. We have one data point that, you have to start with. We have to go through our conversations with regulators to to see what do phase 3 registration enabling endpoint within each year, but but I do think that's an important data point to to look at.
Alright. That's helpful. Thank you.
Thank you. And our next call, she's calling to work hard as being a spouse and company. No. I'm still open.
Great. Thank you for my question. Just a question on, on the 2 triplets. I know that in January, you'd also indicated you know, you have 12 week data and 26 week data with 6.9 and drawn proof. Can
you just give us an
update as to how you report that, the safety data also for both the the product just, as you have to see, Rita, or coming up. Thank you.
Sure. So So if I went back to our 6, like, 9 movies from late last year, I think that you do a very good template for how you can expect to hear or share the data for 4 45, which, would be coming this quarter in terms of both AC and efficacy. On the efficacy side, you're gonna hear or tell you about the PCFED 1 at 4 weeks for both the FS and the SMS card. And with regard to safety, now on this one, we're gonna give you the top line with regard to sort of continuations, the overall tolerability we're gonna be very, very, thoughtful about maintaining study integrity, and we're not gonna go very far beyond that. It looks like you saw do with 659.
Offering it right now for one hour mark. So, we will have time for one more question.
And our last question comes from Lisa Bayko of GNC Security. So I need to open Hi. Well, a lot of my questions have been asked, but I did wanna ask about the triple and, sort of, if you could describe the patent life around the triple, that'd be helpful. Thank you.
Please, but thank you
so much for asking that because of that.
So as you know, a plan is to co formulate these, you know, into a single pill, in which case, the patent life around the medicine is actually determined by the longest patent life of the ingredients single ingredients. And in the case of VX 659 and 425, we always have any patent application The patent expiry granted will be 2037 in both the US and Europe.
And, any expenses on that, or is it gonna be just
the freight?
That's, like, 2037. I'm gonna be way too early to pick up Thank you. Now we're we're we're, you know, obviously, we're we're pleased with that patent life and, we really can't speculate on any extension of the system.
Alright. Thank you very much. I'd like to run a good order.
Happy to do any further follow-up questions.
Thank you. Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone, have a great day.