Welcome to
the Vertex 3rd quarter 2018 conference call. This is Michael Partridge, Senior Vice President of Investor Relations for Vertex. Tonight, we will review our financial results, our continued progress to develop new medicines for all people with cystic fibrosis, and recent advances in our research and development pipeline. Doctor. Jeff Leiden, Chairman and CEO and Ian Smith, Chief Operating Officer, will provide prepared remarks this evening.
Stuart R Buckle, Chief Commercial Officer, and 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. This conference call is being recorded A replay will be available on our website. We will make forward looking statements on this call that are subject to the risks and uncertainties discussed in detail in today's press release, and our filings with the Securities And Exchange Commission. These statements, including, without limitation, those regarding Protex's Rocket CF Medicines, the ongoing development and potential commercialization of our triple combination regimens for cystic fibrosis, Vertex's 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 Leiden. Thanks, Michael.
Good evening, everyone.
I'm pleased to say that we have made tremendous progress across our business in 2018, and are well on and we're progressing rapidly toward the development of a single medicine to treat any CF patient with 1 or more F508del mutations. Approximately 90% of all people with the disease. In our development pipeline, we have initiated the 1st clinical study of CTX001 in beta thalassemia with our partner CRISPR Therapeutics and are progressing VX-one hundred and fifty for the treatment of pain. And in research, we're preparing to advance the first of our potential medicines for alpha-1 antitrypsin deficiency into clinical development by year end and to move other molecules into development in 2019. 1st, to our recent progress in cystic fibrosis.
CF is a progressive multi organ disease that is present from birth and a key part of our strategy is to treat patients as early as possible to slow or prevent the progression treat eligible children as young as one year of age with KALYDECO and as young as two years of age with ORKAMBI. With SYMDEKO, demand continues to be strong following the US approval in February. The launch of this medicine in the US has been a significant driver of revenue growth in 2018, as new patients initiate treatment. And we also plan to submit a supplemental new drug application to the FDA later this year to gain approval in eligible patients in young as six years of age. In Europe, we anticipate approval of this medicine before the end of this year, which will further increase the number of patients eligible to be treated with the medicine for the underlying cause of their disease.
We've also reached multiple important reimbursement agreements across the world to provide access to our CAMBI, enabling patients in many countries to treat the underlying cause of the disease for the first time. Many of these agreements, including those recently signed in Denmark and Australia, also provide a pathway to access and rapid reimbursement for certain future CFM Importantly, these portfolio agreements provide certainty to patients that they will have immediate access to future innovations and CF from Vertex. We remain in discussions regarding this type of agreement in other countries that have yet to reimburse or can be. We're also rapidly progressing our 2 phase 3 programs, evaluating 2 different triple combination regimens, but include a next generation corrector, either VX-six fifty nine or VX-four forty five. In September, we completed enrollment of the 2 phase 3 studies for the VX-six fifty nine triple combination regimen, and expect data from these studies in late 2018.
We expect to complete enrollment for the VX-four forty five phase Phase III studies this quarter and to report data from these studies in the first quarter of 2019. We will evaluate data from both pro programs for a triple combination regimen no later than mid-twenty 19. In parallel, we've also recently initiated studies of both of our triple combination regimens in patients ages six to eleven years of age, with the goal of gaining approval for this group of children as quickly as possible. We also continue to innovate and see F to develop even better regimens for the future, including potential once daily triple combination regimens with our potentiator VX 561, and regimens that contain other next generation correctors that may have enhanced profiles. We expect to advance 1 or more of these novel next generation characters into early clinical development in the coming months.
Beyond CF, our research strategy is well defined and focused on the development of transformational medicines for serious specialty diseases with large unmet medical need. And we're advancing a portfolio of such potential new medicines into the clinic. The diseases we are targeting all have well understood biology where we can use or create early clinical markers that support the potential for transformative benefit and rapid development timelines. We are establishing proprietary scientific insights into a number of these diseases, just as we did in CF and CFTR. And we are bringing significant resources to bear to both advance our development stage assets and also to bring other potential new medicines from research into early clinical studies.
With our partner CRISPR Therapeutics, we're advancing CTX001 is the 1st gene editing treatment for both sickle cell disease and beta thalassemia using the CRISPR Cas9 technology. This is a cutting edge transformational technology that holds great promise in the treatment of many diseases, and we're pleased with the rapid progress we are making together with CRISPR toward dosing the first patient with the CRISPR Cas9 gene editing therapy. Our pain program is another example of Vertex's innovative science translating to the clinic, where phase 2 data generated to date for VX-one hundred and fifty provided the first clinical validation for the sodium channel 1.8 mechanism in the treatment of acute and chronic pain. We expect to have phase 2 results for VX-one hundred and fifty in the 3rd type of pain, neuropathic pain in early 2019. We now also plan to initiate a phase 2b dose ranging study of VX-one hundred and fifty in acute pain following bunionectomy surgery that has the potential to support future pivotal development of this medicine in acute pain.
Acute pain represents a multibillion dollar opportunity where many of the conditions that lead II acute pain are treated by physicians that can be reached with a specialty sales force. Given significant need for highly efficacious pain medicines that do not have the addiction tolerability and abuse issues associated with opioids. Acute Pain is an opportunity that is well suited to inhibitors of the NaV1.8 sodium channel and we're also continuing to invest in the discovery of other potential pain molecules, including additional NaV1.8 inhibitors, as well as medicines targeting other new mechanisms. We're also advancing a portfolio of small molecule correctors for the treatment of Alpha-one antitrypsin deficiency or AAT. And I'm pleased to report that we expect to move the first of these compounds into clinical development later this year.
There are many similarities between AAT and CF both in the biology of the disease and how we may target its cause, and to the potential to establish early clinical proof of concept and rapid development pathways for new AAT medicines. Like CF, AAT has a protein folding disorder caused by mutations in a single gene where more than 90% of patients have one common mutation that result in life shortening systemic complications, primarily in the lung, but also in the liver. We believe our scientific expertise in CFTR protein folding coupled with our development experience, position us well to rapidly advance our novel small molecule approach to the treatment of AAT. I look forward to updating you on this program as we enter development later this year and to providing additional insight into our research programs, including those in focal segmental glomerulosclerosis, and others as they progress in 2019. As we move our internal R and D pipeline forward, we're also continuously evaluating external opportunities where our research and business development strategies are fully aligned.
With our strong financial profile, we have increased ability to in license or acquire assets, or established scientific collaborations that provide access to unique product opportunities and technology platforms. We've completed a number of such transactions in recent years, and we've expanded our internal team devoted to finding and evaluating potential opportunities for scientific innovation, with the goal of further broadening our pipeline and scientific expertise in the future. We believe that it is a combination of our R and D strategy with our business model that truly differentiates Vertex as a biotechnology company with the potential for highly profitable long term growth based on a portfolio of transformative medicines for multiple serious diseases. This year has been marked by significant progress across research and development and in our efforts to bring our CF medicines to more patients globally, which has led to significant growth in our revenues and earnings, which Ian will now discuss in more detail. Thanks, Jeff, and good evening to everyone.
I'm pleased to review with you our third quarter 2018 financial results and to discuss our outlook for future financial growth as we approach 2019. Revenues first. Total CF product revenues of $783,000,000 in the third quarter of 2018 represent a 42% increase compared to the $550,000,000 we recorded in the third quarter of 2017. We continue to see significant revenue growth as we increase the number of patients treated with our medicines globally. The first quarter included $255,000,000 in revenues from the launch of SYMDEKO in the U.
S, which is the primary driver of the rapid growth in our total CF revenues. Demand for SYMDEKO remained strong, and we continue to receive positive feedback from patients and physicians and strong coverage for SYMDEKO across both public and private payers. Similar to prior quarters, demand for SYMDEKO has come from all groups of eligible patients. F508del homozygous patients initiating treatment for the fullest time, patients who discontinued ORKAMBI coming back to initiate therapy with SYNDEKO and also patients switching from ORKAMBI to soon to come. Combined R and D and SG and A expenses were $379,000,000 compared to $334,000,000 in the third quarter of 2017.
This increase was primarily due to the advancement of our portfolio of triple combination regimens for CF and the investment to support the treatment of patients with our medicines globally. Non GAAP net income for the third quarter of 2018 was $282,000,000, with an earnings per share of $1.09. Compared to non GAAP net income of $136,000,000 with an earnings per share of $0.53 for the third quarter of 2017. Our non GAAP net income and EPS has more than doubled compared to last year, largely driven by strong growth in the total CF product revenues. Ended the quarter with approximately $3,100,000,000 in cash, cash equivalents and marketable securities compared to $2,100,000,000 at the beginning of this year.
Today, we also reiterated our guidance for total CF product revenues of $2,900,000,000 to $3,000,000,000, and for combined non GAAP R and D and SG and A expenses of $1,500,000,000 to $1,550,000,000. We'll close with a few comments on our expectations for future financial growth and how we anticipate providing revenue guidance next year as well as how we may start to record non cash tax charges. We have already created a strong financial profile for our business and we anticipate that our revenues will continue to grow next year. In 2019, revenue growth will be based largely on the impact of SYMDEKO and SYMKEVI launches. The impact of label expansions across our CF portfolio and the recent completion of multiple reimbursement agreements.
The timing of further revenue growth from countries where we do not currently have reimbursement for ORKAMBI is unpredictable. Therefore, when we provide 2019 guidance for total CF revenues early next year, It will be based only on the geographies where we have established reimbursement agreements at that date. If we gain additional reimbursement agreements in 2019, we will update you on our guidance as appropriate. This is consistent with how we provided guidance at the beginning of 2018. Beyond 2019, continued revenue growth will be driven largely by the potential approval and launch of a triple combination medicine for the large group of patients with 1 minimal function mutation and 1 F508del mutation who are not eligible for our currently approved medicines.
Now to taxes. I would note that in 2019, we may begin recording a noncash tax provision and an effective tax rate in the low to mid 20s as a result of the improving profitability of our business and our future strong financial outlook. The vast majority of our tax provision would be a noncash expense until we fully utilize our net operating losses. This will be further discussed in our 10 Q filing. Its financial profile of our business is strong and the coming year will be important period to define our future growth and we obtain phase 3 data from our triple combination regimens for CF, provide access to each of our CF medicines to more patients globally.
Progress multiple new medicines in development and also to advance new approaches for the treatment of serious diseases from research into development. I look forward to updating you on our progress.
Questions. And our first question is from Phil Nadeau from Cowen and Company. Your line is now open.
Good afternoon. Thanks for taking my question and congrats on the progress. Just two questions for me. One on competition and one on the financial, guidance or financial comments that you just made. In in in your comments, you talked about 2019 sources of revenue growth.
Can you specifically talk about, the revenue growth outside the U. S, which I know you said was unpredictable, but which countries, could we drive as a growth where you recently got expansions? Which ones are possible for next year and which ones are our total wildcard
Yes. Thanks for the question, Phil. Thanks for the comment on the, the good quarter. I do want to kind of replay some of the comments I I just made, which is when we think about 2019, 1st of all, we see 2019 as being the continued growth year for our revenues. When we look over the previous years and we look over future years, I think what we're seeing here is between more patients, we're treating more patients globally.
And therefore, driving our revenue line year on year and into the future. And so it's a really nice profile. As we think about more proximally in time. And we think about going from 2018 to 2019, we should continue to see growth even without reimbursement outside the U. S, and that growth would be driven by the continued launch of of SYMDEKO in the U.
S. And getting the full year's contribution to patients that are on drug. But then also outside of the U. S, Cindigo, which is known as some caveats out of the U. S.
Is also launching in certain markets where it is already reimbursed. So So we see baseline growth from already approved geographies. Most specifically to your question, as in where are the geographies that we could anticipate or possibly attain reimbursement approval to have an impact in terms of growth on our revenues it would have to be those larger markets. And principally that those would be either the UK, France, or Canada. I do want to replay, though, that this is unpredictable in terms of timing.
And in particular, in the UK, which is a it's probably a is the 2nd largest CF market. If we are to attain reimbursement over that, then we are launching the drug from a new. So we're in a launch in the UK. It's not that we're just switching on a large ball as a revenue. We have to launch the drugs in the UK.
We continue to make good progress with discussions with all three of those countries. However, resolution, whether it is in 2019 or whether it's in 2020, we'll update you as we progress.
That's really helpful. And then second on competition, after the close today, Gluck doesn't have to hit a couple announcements, some new data as well as a change to the collaboration. And per day stasis recently announced some data for their programs. I'm curious to get the team's updated thoughts on competition from those 2 parties how real is it? What do you say to the strengths and weaknesses?
Yes. Phil, this is this is Jeff. Thanks for the question. As you know, we don't typically comment on individual competitors of data. I think actually the data sort of speaks for itself.
But what I would like to comment on is sort of how we view our competitive position and our data. It's sort of where we are in the process. Yes, I think we've learned a lot over the last year. In fact, I think our competitive position has improved over the last year significantly One thing we've learned is that it's going to be a world of triples, and it's going to be a world of triples pretty quickly. And the reason for that is that in order to really get to all patients, particularly to have many patients who are so difficult to treat, it's a maximized benefit for the homozygous patients.
It's pretty clear now that you need triple. Any company needs a triple. And that doesn't always mean you have 3 components. It means you have 3 medicines that can be combined. Conformulated that have the right PK that can provide really superior efficacy.
And I think the bar and efficacy has gone up very significantly. We'll talk about that in a minute. And also importantly that they're tolerable and safe. These are medicines that kids are going to take for the rest of their lives. And we've learned a lot about our regimens in that regard in the last in the last year, we know that we have 2 different triple regimens that have not been in hundreds of patients, they are co formulatable.
They do have device PK, They raised the bar in efficacy very significantly into the double digits for the HETNIN patients and into the mid double digits for the homozygous patients. That's going to be the bar, I think, for the future. And most importantly to us, we're well into our Phase III trials which are rolling ahead of schedule to the point where we're very confident we'll be able to file one of those regimens no later than mid next year, which would allow us to launch those drugs and get patients on them pretty quickly in the coming years. And so I think from our perspective, we like where we are. We have multiple options.
And most importantly, we have clinical data both on efficacy and on safety with these drugs, which is a high bar, frankly.
Our next question is from Geoff Meacham from Barclays. Your line is now open.
Afternoon. Thanks for the question guys. Just have a couple. The first one is on the triple selection process, just for the NDA. When you guys think about it, you you likely won't have much in the way of mature data on exacerbations benefit or BMI when you pick the regimen.
So And that may matter, actually, over the long term. So is it just about safety tolerability and FEV 1 or are there other parts of the profile that that you think will be impactful at your that you're looking for?
Yes, Geoff. This is Jeff Liden.
You're right. I mean, I think that
at the point we can, we can pick these triples, the primary data that we'll base that on is FEV1 data and safety and tolerability data. As well as the whole profile resource. Remember, we have a lot of preclinical and early clinical data as well. I think the good news is that there hasn't been enormous disparity between many of those long term outcomes and short term outcomes. And what I mean by that is that at least in our experience, so far, drugs that have a very positive affect that FEV1 and a lowering sweat chloride that's significant, acutely, but also turned out to have these very profound long term effects in fact, as you know, one of the interesting things is that KALYDECO and Ceramic, which have a bit different acute profiles or can be being less potent acutely, actually have very similar long term profiles, which suggested that you can really hit CFTR effectively in these patients.
You will get the long term benefit. So I think the risk of a disconnect between an acute effect and a long term effect is rather small. But obviously, we will have the long term effects of both of these drugs within a relatively short period of time. But you're right. Probably not by the time you decide which one to follow.
Okay. And just to follow-up for Ian. And I know you haven't given a a 2019 outlook, but when you plan for OpEx spend, you'll have the triple launch pending the date, obviously. And and then a bunch of new programs and r and d. So how are you guys thinking about about that in the context of also showing some operating leverage?
Hey, Jeff. Thanks for the question. I really appreciate you pointing out that we've got this continued investment and commitment to CF. I just want to cover that because we do sometimes get asked the question whether when we deliver on these Phase III trials, are we are we declining our investments in CF. And I actually want to maintain the position that we're not.
We continue to invest in in CF. In fact, those patients that were in our Phase III studies will go over to open label studies. Those open label studies, we found to be incredibly important because we've got a longitudinal data to show the benefit of these medicines longer term. We're also doing studies in the younger patients and so we're able to treat these children as much younger ages of their lives. And so our commitment to investment to CFO, these medicines that we believe will be hugely beneficial to them, is maintained.
So if you could think about that as a kind of a steady state part of our R and D investment. And then as we think about advancing our pipeline and other disease areas beyond cystic fibrosis, we are happy to be letting you or bringing more up to date with how we're advancing new medicines into the clinic in these new disease areas that Jeff just referred to. Earlier. The investments in these disease areas is smaller in magnitude. It's only a stage, but it is additional investments.
And therefore, when you compare a 2018 operating expense profile to a 2019 operating expense profile, you should see a relatively small increase compared to the increase we anticipate on the revenue line. So Yes, we do anticipate offerings to increase. And then one last thing I would say is that you gotta remember, we're also launching medicines globally, not just where it's been in in the U. S. And therefore, there are launch costs that are being incurred outside of the U S.
Not significant because of the the nature of the disease and how we can reach these patients with our medicines, but there is investments there as well. So you should expect to see operating expense marginally increase in 2019 compared to 2018, but the key will be the revenue growth So we'll allow us to continue to generate more cash flow. Okay. That's helpful. Thanks, guys.
Thank you. Our next question is from Michael Yee from Jefferies. Your line is now open.
Great quarter as well. On, on the once daily, you made a comment that, you've had some positive feedback and are moving that forward. Can you just, I guess, clarify, the process going forward and why you're choosing gaining mutations as sort of the first move forward? And not maybe a broader population. How should we think about that?
And then the second question was more of a modeling finance question, which is that Obviously, the triples are advancing forward like you said, but ORKAMBIEN SYMDEKO are pretty big franchises. Over some period of time, is that expected conceptually to how those doublet drugs go away and the triple is basically the single line item. How do you think about that?
What would
the patients that actually would stay on double
Thanks. This is Reshma. Let me start by taking the first part of the question with regard to VX-five sixty one. As you know, and we've talked about this on previous calls, the FDA had asked us to do additional dose ranging before proceeding to Phase III. And part of that request was to study VX-five sixty one across these dose ranges in gating patients.
And We've had productive discussions with the agency and we're now at the point where we've designed our study. We've selected our doses And I expect that the study will get started next year, probably in the first half or so. Stewart?
Yes, Mike. And on the question of, what do we think the triple combinations might do to the doublets? Certainly, if we see the sort of result in Phase III that we saw in Phase II in the homozygous population, whereas we saw the triple combinations deliver very, very substantial increases in clinical benefit over and above a baseline of Tezacafta and ivacafta. If those results hold true, then our expectation would be that the vast majority of patients would be transferred to a triple combination rather than staying on rather than staying on a doublet, just given the significant benefit risk improvement that we saw in those phase 2 studies. Okay.
And just to clarify on 561, you have to test it in gaining patients first, but the full plan certainly is to move it to a broader population after that. Is that there?
You got that right. Okay.
Thanks so much.
Thank you. Our next question is from Robin Karnaus from Citi. Your line is now open.
Hi. Thanks for taking the question, and also congratulations. So I guess we asked about VX-one hundred and fifty. So you mentioned that you're dosing doing a dose ranging study that you've already done between trials and acute I was curious if this is, you know, to, get a drug that may be superiors like it in since the other doses were shown to be equivalent. And then, another question on that is, like, you talked about the acute market and some tech who's done suggest that that, you know, reimbursement might be challenging there because doctors may just give, you know, a, a cheap generic drug, you know, how what if your market would've told you what has to happen for a more extensive non addictive drug to have updated that then.
Yes, thanks for the questions, both good questions. Let me start with maybe your second one come back to your to the dosing regimen study divisions, which is pretty straightforward. With respect to reimbursement, you're correct. A large of the acute market is, has been generic. And as you know, a large part of that market is actually opioids, for acute, postsurgical planning, post autopayment, etcetera.
Obviously, we're sitting in the middle of an opioid epidemic and the number one objective that I think patients physicians and the government has is to find medicines that have essentially equivalent efficacy opioids without the abuse potential on the side effects of opioids. We believe that DS-one hundred and fifty based on the data we have so far has the potential to hit that profile. You saw that in the comparative trial that we did. If that's true, we feel that BS-one hundred and fifty is a very, very competitive drug to a generic opioid, and with just reasonable pricing, that market is a multi $1,000,000,000 opportunity, even if you only capture a portion of it. You may know in the US last year there were over 200,000,000 opioid prescriptions written, which is a truly astounding number.
Obviously not all of them for acute pain does go out of them. So does that answer the question in terms of reimbursement?
Yes. That's very helpful. Okay. Then
in terms of the S-one hundred and fifty, I'm sorry, go ahead. Did you have another question? Sure, Heather.
He's asking about the disc ranging. You know, if you're just a supplier, if you get a maybe show a superior profile and if you're studying, it's nice and make reimbursement even easier.
Yeah. Yeah. So you you may remember that the study that we did in acute cardiovascular, I would call it the proof of mechanism of study. Because it was the first time anybody had shown that it had a one point eight inhibitor couldn't work in acute pain. And so we actually used a fairly high dose there just to make sure we're getting up to a reasonable, exposure.
You also know that before you can move into phase 3 regulators, we'll require you do a dose ranging study, really to understand 2 things: 1, what is the PKPD profile of the drug? And frankly, 2, what is the lowest effective dose because really want to get the lowest fully affected dose. And so think of this as just the standard part of the phase 2 regulatory process where we need to identify the PKPD profile and the lowest effective dose. And that would then enable us to go to the agency with the plan for a pivotal trial, again, assuming that it's successful.
Got it. And second question on alpha or anti Tristan. So you mentioned the foot forward. Sorry. It's more foot forward.
If you see your afternoon, it was so efficacy, but I do have flashbacks from foot forward before Cammy. I think not correlating with FEV. In this indication, is it more straightforward? But if you see a reduction, you're gonna see an improvement in efficacy, what help us understand a little bit the the disease?
Sure. Sure. Yeah. Let me maybe give you a little context about the disease. If you don't mind, like, taking a minute, because one of the remarkable things about AAT is how similar it sort of smells and works.
It's not like CF in many, many different ways. It's a genetic disease. It affects somewhere between 60100,000 people in the U. S. And probably about another 50,000 to 60,000 outside the U.
S. It's caused by 1 major mutation and more than 90% of people. And it's a protein folding facility, as it turns out, just like CF is which still remarkably similarity. In this case, the normal protein AAT is made in the liver and is normally secreted into the blood where it travels to the lung it protects the lung against auto digestion essentially by endogenous enzymes. So, in the disease, the mutant protein has 2 problems.
1, it doesn't fall correctly, it accumulates in the liver, and so it causes significant liver disease actually up to 30 on above the patients. And 2, obviously, is not secreted into the blood, so it's unable to go to the line, the protectorate line. And so the lung gets out of digestive in these patients suffer from early onset and emphysema. So that's the disease. The challenges for us was to, could we make a correct or a small molecule corrector of AP, just as we have for CFTR that would essentially refold protein in the liver.
So it would be secreted from the liver and therefore, presumably help treat the liver disease And more importantly, that would succeed functionally into the cloud where we go to the lung and protect a lot. That was the challenge. It's a very hard problem. I can tell you biological problem. I think we've cracked that problem now.
We've made a series of small molecule correctors that clearly do both of those things. They refill the protein, so it's accretive. And then it's accretive in a functional form. That it could protect the lung. One of the really nice things of this disease is that there's both a cell or several cell models there's also, in this case, an animal model, which we didn't have in the CFO, which for human mutations been engineered into animal.
And so we've been able to test these molecules, both in cells and then the animals, and they do what we thought they could do. They refold the protein. It's accretive from the cells. In the animals, they produce, secreted AAT at levels that would be sufficient to essentially be preventative and curative in the disease. The other thing that's very similar to CF is the nice biomarker, which simply, the circulating levels of AAT and the serum.
You can treat the patients for several weeks and just measure both levels and function of the AAT and the serum. And we know from human experiments of nature essentially that if you have a certain level of AAT and the serum, you don't get the disease. And so we know exactly what we're shooting for here, and we can measure it very easily. And so the plan is take this into normal healthies by the end of this year, the first of these molecules, and we have a whole series of them, just hope we get the CFTR parameters. And then if they are safe and low power, once we and if you can't take them into patients.
And again, with relatively small numbers of patients treated for relatively short periods of time, simply measure AT and T and then you know exactly where you are.
Alright. Thanks a lot. Thank
you. Thank you. Our next question is from Jeffrey Porsch from Leerink. Your line is now open.
Thank you very much. I appreciate taking this question. First, if you mentioned a mid teens, a PD-one improvement now being the hurdle core triples for competition. Can you give us your sense of what the bar is for sweat chloride, relative and absolute Homes, I guess, and Hetman's. So we kind of know how to appraise all these competitors coming along.
And then, just wondering, Stuart, could give us a sense of where you are in the eligible Delta F508 penetration, in the US between SYMDEKO and ORKAMBI. You've sort of mentioned that you had quite a few discontinuations in patients who never started on ORKAMBI. And have you caught all those patients up yet, or are you still substantially below the penetration you've achieved with KALYDECO in the eligible populations
Yes. Jeff, thanks. I'll answer the first part. I'll answer the second part. And the first part, if you want to just correct.
Well, it may have been
a misimpression of what I said or maybe I said a wrong thing, but I want to be very clear. I don't think mid teens is the bar, for instance, for hepman pace. I think the bar that we've said, as you know, from the data is somewhere between 9.8% 13.8% in our phase 2 data for headwinds. And for homozygous patients who already have an effect from doubles that we believe for tezide for instance is around 4%. We showed an additional 9.6% or 10% improvement, which is how I get to that mid teens.
So just want to be clear that I'm not suggesting that 15 is the bar that you need for headwinds to get to be successful. With respect to sweat chloride, yes, I think these are a process the numbers, but I think when you reach what chloride, the approach of carrier levels, which is our, our sort of goal, let's say, 40 to 50, that's probably the goal that you know you're there with the triple. And, so I think, those are the two numbers we look at. In most cases, but not in all cases, they correlate pretty well. And at the end of the day, as you know, the regulatory in place is going to be the FEV1.
Jeff, it's Stuart here. Just commenting on the SYMDEKO launch in the U. S. So, as you suggested one of the most important things for us for SYMDEKO was the ability to get patients who were not being treated by ORKAMBI onto a CFTL modulator, and that was really 2 populations. 1 was those who were completely naive, have never been exposed to ORKAMBI.
And we've seen a good uptake in that population. And the 2nd population was those who had its continued or can be often because of the respiratory adverse events. And we've also seen a good uptake in that patient population as well. We've also seen a number of patients switch from ORKAMBI to SYMDEKO. So we've seen strong uptake in all those patient populations.
We're certainly not done with the launch whilst we've seen good uptake Jeff, what we're certainly not done, we haven't flattened out on SYMDEKO uptake in the U. S. Yet. So we still have some ways to go, but we're certainly pleased in how the launch has gone so far.
Okay. Thanks very much.
And Jeff, maybe just to add one thing that I know you're aware of. If you talk about the efficacy side of these triples for clearly tolerance and safety of side of the equation and long term tolerability of safety, not 1 week or 2 weeks. And so I think that's going to be an important thing that we'll all look at as these trials progress. Thank you.
Our next question is from Terence Flynn from Goldman Sachs. Your line is now open.
Hi, thanks for taking the question. Congrats on all the progress. Was just wondering first, you might not comment on this yet at this point, but just with respect to the triple combo, can you maybe just give us an update on the different inputs you're thinking about with respect to pricing. And then, Ian would just love your latest thoughts on capital here. I know, Jeff, you made some comments in your opening remarks, but you do have $3,000,000,000 on the balance sheet.
That might be the most you guys have ever had. So just curious how you're thinking about that as that continues to grow here into next year? Thank you.
Year here on pricing for the triple. Obviously, much too early to make any specific comments, but we'll be taking into account the same is that we always do. That'll be the magnitude of the clinical benefit that we're able to deliver patients. It'll be the the label that we get approved for, and that obviously leads into what's the eligible patient population. So those are really going to be the the inputs that we take into consideration and obviously we'll get more information on those in the coming months And as far as capital allocation is concerned, it's really interesting.
Can tell you that being in the company has invested mainly and been about capital preservation for a long period of time. And then in the last 3 years, we're now a cash accumulator and creator and it's about capital allocation. It is an interesting philosophical change for the company, but I'd like to start by saying the revenue line is the main source of cash. And because after that, we then allocate inside the company on our internal programs. It's often not thought of that until the capital allocation, but the main source of the capital is our revenue line.
And then we allocate that internally. And as you can hear, in terms of the questions you asked on operating expense earlier, we still allocated a good amount of capital towards cystic fibrosis or cystic fibrosis medicines, but also now with starting to allocate capital to diseases that are beyond cystic fibrosis. And we're really happy about that. Some of those opportunities that are beyond sotaglifrosis are our next order priority, which is we're allocating capital outside the company towards collaborations and towards medicines that we can accelerate into development. And some of the the opportunities we have in, with beta thalassemia and also stem cell have been a product of a very successful and nice collaboration with CRISPR Therapeutics, and we're really excited to be going into the clinic very shortly, with these medicines, for sickle cell and beta valve.
And, and we anticipate that there will be others to follow. The medicines for FSGS, for example, was something that we we unlicensed from a very early stage a couple of years ago. And but what it allowed us to do is to really reignite a research effort in that that area is now providing the opportunity to go into the clinic in a very short period of time for very important medicine. So it's a high order priority for it to allocate capital outside the company to do collaborations to give us opportunity with more modalities and more more medicines for diseases that we would be interested in. And I would say there is also a consideration for how we may also One of the increase of our share count, our share count outstanding shares does increase year by year.
Based on the issuance and exercise of options and restricted stock. And so we like to think of ways that we may limit that that creep in outstanding shares. And we've been doing that throughout this year. We did announce earlier this year that we entered in a $500,000,000 share buyback program, and we have been buying shares back throughout this year. And that's been very successful for us as well.
And therefore, is limited to the creeping outstanding shares, which obviously helps us with a small amount on the dilution. And so that's how we think about capital allocation is very important, very close to us, and we're happy that we have the opportunity to prioritize it in this way.
Thank you. Our next question is from Alicia Young from Cantor Fitzgerald.
Hey, guys. This is Eleon for Alethia. Thanks for taking the question. Just on the earlier side of things on the r and d front, you recently did a deal with genomics. So could you talk a little bit more about this and sort of how having this particular discovery engine will sort of enhance your R and
D efforts? Yes, thanks for
the question. We're actually quite excited about that collaboration. As you know, one of the principles of our research effort is to really only work on what we call highly validated targets. There's really 2 major ways to validate targets, one is pharmacologically with medicines, That's actually the minority, by the way. And then second, in tumor genetics where mutations either gain a function or loss of function tell you a lot about the role of specific targets.
A beautiful example of that is MAT1.7 and MAT1.8, which was validated by human genetics, obviously CFTR, etcetera. The collaboration with Genomics, who we believe is being leading this small company in the world, working on this kind of IP with human genetics, will allow us to screen for new targets on the one hand through large scale data analysis of human genetic databases. But also it'll allow us to ask questions, for instance, about the potential side effects of hitting a specific target because you can screen a human population for mutation from that target which are loss of function, for example, and ask are those people normal or not? Do they suffer from any mechanism based side effects? A very important means to know that we can fit targets and develop small molecules.
So think about it as a way of tapping into the human genetic data resource have both helped pick targets and help screen for safety. And that collaboration is off to a very nice start with a number of different degrees.
Got you. Thanks. And then just another one in terms of early stage development. Can you just tell us a little bit more about the preclinical models for AT? I mean, obviously with CF, you guys are very successful in optimizing these preclinical models.
But could you tell us a little bit sort of about your thoughts on what you think the best preclinical model for AAT is and also sort of your thoughts on how predictive these models might be. Thanks.
Thanks for the question. There's 2 kinds of models that are generally used. These are not, by the way, necessarily proprietary products. One is a set of cell based models in which either derived from patients who derive from engineered cells with the human z mutation of them, which is the major AT mutation. And in those cells, the mutant protein is made, it's misfolded.
It's not secreted. So one can test molecules on themselves as to help rebuild the proteins accretive as a function, etcetera. The other one is that there's a transgenic mass, which I we're expressing the human mutant protein. Again, that protein is not treated well as accumulates in the liver of those mice. And once it dose those mice with medicine, it actually proceeds treated as a functional, what levels do you reach, etcetera.
So two very nice models, which we feel actually will be highly predictive because they do actually study the human mutation, not sign off service invitation.
Got you. Thanks very much. That's helpful.
Our next question is from Ying Huang from Bank of America Merrill Lynch.
First one maybe on, again, competition. We have seen some data from proteostasis. I was wondering if you guys have done any work in the lab about the role of Amplifier, you have an review on that or not. And then secondly, maybe for us, do you, can you tell us, by when you might see SYMDEKO pretty much reaching a full penetration in the U. S.
Market, given what you're seeing in the market today?
Yeah, this is Jeff. I'll take the first one in terms of the amplifier. Again, we've really done comment on other people's specific molecules. One of the things that we like about our triple is and our correctors are, we know that they're quite specific for the CFTR protein which is I think one of the reasons it's quite selective, if you will, they don't hit other proteins. One of the reasons why they've been so tolerated.
And so I think as we look at it, as you look at other molecules, that issue is, but simplicity and potency is very important thing to look And then in terms of the SYMDEKO uptake, obviously, we're very pleased with how it's gone to date. Predicting exactly where it's going to reach full penetration is hard to do, but you can rest assured that when we get supported giving 'nineteen guidance, we'll be including our expectations in that for how SYMDEKO is going to perform in the U. S. And then Also, hopefully, by then, we'll have the approval of SYMKEVI in Europe as well, and we'll incorporate all that into our 'nineteen guidance.
Our next question is from Brian Abrahams from RBC Capital Markets. Your line is now open.
Hi, there. Thanks very much for taking my questions and congrats on all
the progress. In the NACF data, we saw more specifics on the rate of cough for
the triple combo. I know these weren't classified as bronchoconstriction. I was wondering if you could give us any more details on the quality, severity, and duration, remind us is this should we think about this as related to the initial mucus clearance, and how it might compare it with Kandi? And then just to follow-up on the on the pain program, obviously, some really testing phase 2 data. Wondering if there are ways you might be able to further improve upon the bio availability and potency of VX-one hundred
and fifty. Should we assume 1 to
8 is no longer being pursued? Thanks.
I think the question you're trying to get after the triple, but correct me if I'm wrong, is, you're already seeing bronchoconstriction as you saw with Air Canada. The answer is no. We've seen that and we've actually measured that specifically not only in terms of cough or anything else. So we do not see Bronco constriction with the triple and we did not see it with Teva as you remember. But I think the more important point, right, Brian, is just looking at the total tolerability and safety profile of these drugs now, in a couple of 100 patients.
What we're seeing there is they're quite clean. They look a lot like the earlier drugs, or can we accept this? They don't have to buy the prescription. Intimate very well tolerated and very safe so far. Did that answer your question?
I just want to make sure that was the question you're asking
Yeah. That's very helpful. Yeah.
Just wanted to contextualize that. Yeah. Yep. And then the other question was about 150128. Yes.
Yeah. So why don't you maybe just again, let me take a step back and remind you that that the approach that we're taking in pain and actually not unlike the approach we and CF and the approach we're taking in AT is to create a portfolio of molecules, not 1, not single rifle shots, but multiple molecules They've had different properties, both with respect to things like potency, but also with respect to things like PK bio distribution, drug drug interactions, etcetera. And then take those molecules forward in the early stage, clinical development to understand their profiles more fully. Obviously, 150, we have the most data on. We know that it's well tolerated.
We know that it has efficacy at least with these higher doses in acute pain and osteoarthritis. And we'll get a readout on the 3rd kind of pain, neuropathic pain early next year. To the 150. We discontinued development in 128 in phase 1 and healthy volunteers because it didn't have the PK profile of our billing improvement. That we were hoping to see over 150.
We have multiple additional 1.8 inhibitors coming behind that, and so you should expect to see us bring other inhibitors into early clinical development the same way trying to optimize these molecules. Remember, acute pain limiting these molecules that are highly efficacious and also highly safe and highly tolerable. There's, there's we don't want to create molecules that have liabilities like opioids.
That's really helpful. Thanks so much Jeff.
Our next question is from Paul Matteis from Stifel. Your line is now open.
Hey, thank you so much. This is Ben Burnett on for Paul. I wanted to ask another question about VX-one hundred and fifty. Wonder if you could provide a little bit more color on the phase 2b study, in acute pain. I guess specifically what are you looking for?
And what is the efficacy hurdle that you need to advance this pivotal program? And then the second question, just sort of more at a high level, I guess across these different pain indications, the acute, I know, neuropathy is ongoing as well as osteoarthritis related pain, you have some data there. What is sort of the ultimate vision for program? And I guess, under what scenarios would you want to commercialize this yourself? And is it, is there a scenario where a partner might be involved in that aspect of it?
Thank you.
Yes, Ben. Thank you.
I'll take the second part actually first. I'm sorry because it's
a little more strategic. Maybe it'll give you some context and then later we'll take the first part of it, which was about the VX-one hundred and fifty Phase 2b trial. I said this before, but maybe just to give you some context we think about pain both, from a commercial standpoint and from a scientific standpoint, not as lung disease, but it's actually multiple diseases. So an easy way to divide it, for instance, is acute pain, that's the kind of post surgical pain with down pain we have an acute injury. That's one segment.
The second segment is chronic inflammatory pain things like osteoarthritis, lower back pain, A third segment is neuropathic pain. That's pain like diabetics neuropathy. They have different commercial channels, obviously, but they also potentially have different pain mechanisms both important to study them separately because some drugs were working 1, and some drugs were working 2, and frankly, some drugs might work in all three. So that's the approach that we've taken with our portfolio. We've done separate trials in acute pain using bunionectomy as the model.
We've done separate trials in chronic inflammatory painies in oasis, the model, osteoarthritis, and we're doing a third set of trials in neuropathic painies and small fibrotoropathy as the model. And As you know, what we've seen so far just to remind you is a high level of efficacy in acute pain, a high level of efficacy in osteoarthritis chronic pain, and we're still waiting to see the data from the neuropathic trial, which is due early next year. So that's where things sort of stand from the scientific standard.
Now again, if I take a
step back, remember that, there's a very large need for a new class of pain that to really have infinity class for over 50 years. And the reason is that we have opioids on the one hand, which have high efficacy but are burdened with all of the, I think, there's other side effects. And then we have drugs like Aspen, Tyler LN, which have lower see also, by the way, have some of their own side effects, which are not trivial. And so the target for us is really, can we find a new mechanism of pain that approaches opioid like efficacy without the liabilities of gifted and other liabilities opioid. And so far based on phase 2 data, what we're seeing is VX-one point eight looks like such a target.
VX-one, VX-one point eight looks like such a target VX-one hundred and fifty is the first medicine that does look like it hits in both of those 2 pain indications and the third one we're waiting to see. And the final part of your question is what about commercializing that? It turns out acute pain, as I said, is a multi $1,000,000,000 opportunity, and at least many, not all of us are that many of the channels in the acute pain market can be addressed by a specialty sales force, that's something that we will develop and commercialize ourselves. Contrast that with, say, OA pain or low back pain, that's clearly not a specialty disease. That's a community disease that requires primary care sales force.
And while we may take the science and phase 2 trials forward, we would certainly not develop our own primary care sales force and commercialize that, that would be done with a partner. Nevertheless, we think if we have such a molecule, it's a very valuable asset for us to partner. And then there arepathic pain lies somewhere in between. It can be covered by a rather large specialty disc, which is meaning 100 to 150 reps probably country. So you'll see most embedded specialists.
And it really depends on the quality of the data that we're going to see there in the 1st part of the year. Terms of deciding what we do with respect to further development and commercialization. And that can be sort of the lay of the hand of how we're thinking about it.
Absolutely. Makes sense. Appreciate it.
Okay. Reshmael.
It's Reshmael. With regard to the VX 150 Phase 2 study that we are, going to be initiating shortly. It's a fairly standard Phase 2 dose ranging study. This is going to be in a bunionectomy acute pain model. And in essence, it's going to be several doses that we study to get a full dose exposure range, you'll remember that the bunionectomy study that has the positive results from early in the year was a high dose study because that we were really the proof of mechanism in that one.
The endpoint is going to be SPID 24, SPID 48, which is a pretty standard endpoint for the bunionectomy model. And with regard to the treatment effect, we were very pleased with treatment effect we saw in the bunionectomy study. And now we need to explore the full dose range and exposure to see what the most effective dose is going to be. And that's really what we're studying here.
Thank you. Our next question is from Cory Kasselo from JP Morgan. Your line is now open.
Hey. Thanks for squeezing me in. 2 for me as well. I in your prepared remarks, you mentioned we'll have some enhanced next gen correctors moving into the clinic in the coming I'm wondering if there's any additional information you can provide about these in terms of how they might be further differentiated from what you already have. And then my second question, is with regard to the clinical hold per CTX001 in sickle cell now being lifted in initial trials slated to begin.
How much data do you ideally want to accumulate before you're potentially comfortable providing an update? And will this be something that's your responsibility or Yes,
Chris, it's Jeff. Maybe I'll take part 1 and then I'll talk about disclosure in part 2 of your question. With respect to the enhanced next gen directors, I would say what we're looking for here is 2 things. 1, I think we've shown you the chart forward. As we've gone through the last 4 years, it's really remarkable to see how we've been able to improve the potency and efficacy of these next gen correctors.
With the current molecule 659445, we're close to getting all patients to carrier levels, but not quite there. And so the goal would be to find a next gen corrector that could get all patients in the headwinds in particular, as well as Thomasitis patients, the carrier levels, of chloride transport because we believe if you can get there, particularly in young patients, you'll either prevent or greatly, greatly less than the severity of the disease. The other goal of that program is to continue to diversify the, the chemotypes. We always like to have multiple chemotypes of any medicine that we're making. And so we've been able to explore alternative genotypes and we're working on those as well.
So those are the 2 kinds of molecules that you can expect to see entering the clinic. We already have examples of both. And so the first ones of those, I do expect one with the clinic early next year. And you you can probably see some more as the year goes along as well.
Does that
answer your question about the enhanced NextGen. Correct?
Yep. Perfect.
Okay. Before I add to your disclosure question, when we just started recruiting patients, for these studies, And, I think the next disclosure we'll provide you would be kind of an update of where we are on the recruitment. So we'd anticipate those in 1st patient probably around it towards the end of this year, early next year. And then once we have a number of patients in the study, we'd anticipate a disclosure of data from this study later on next year, but that would probably be times with multiple patients in both studies. And so being on on therapy or let's say have cut the procedure for a certain duration of time.
Thank you.
Rocky, well, that will conclude the call.
The Investor Relations team is in the
office tonight to answer any further follow-up questions.
Thank you very much for joining the call, and have a good evening.
Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect.