Analyst Conference Summary


Vertex Pharmaceuticals

conference date: July 29, 2014 @ 2:00 PM Pacific Time
for quarter ending: June 30, 2014 (second quarter, Q2, 2014)

Forward-looking statements

Overview: Revenue up sequentially, but still way down y/y; still a long way from profitability. But the next regulatory filings will address far larger CF populations than are currently served.

Basic data (GAAP):

Revenue was $138.4 million, up 17% sequentially from $118.5 million, and down 55% from $310.8 million in the year-earlier quarter.

Net income was negative $159.4 million, up sequentially from negative $232.5 million, but below negative $57.2 million year-earlier.

Earnings Per Share (EPS) were negative $0.68, up sequentially from negative $1.00, but down from negative $0.26 year-earlier.


Reiterated prior full year 2014 guidance. $470 to $500 million revenue from Kalydeco. However, failure to obtain reimbursement in Australia would be a risk to this estimate.

Conference Highlights:

"We have increased confidence in our scientific approach to treating the underlying cause of CF [cystic fibrosis]."

Kalydeco (ivacaftor) for cystic fibrosis had sales of $113.1 million. U.S. sales of Kalydeco were $63 million, international $50 million. Revenue growth was driven by the approval for 8 additional mutations in the U.S. International approvals continue, including in Australia in July. In June the CHMP (Europe) recommended approving Kalydeco for 8 additional mutations (following U.S. approval in February); approval anticipated before end of 2014. Vertex is also seeking approval for treating the R117H mutation.

Incivek for hepatitis C sales dropped to $9.3 million and were excluded from non-GAAP revenue number.

Non-GAAP results: net income negative $142 million , up sequentially from negative $151 million. EPS negative $0.61, up sequentially from negative $0.65.

Revenue, $millions
Q1 2014
Q2 2013
y/y % change
product subtotal

VX-661 (combined with Ivacaftor) twelve-week Phase II study is was initiated in the second quarter. May help 3 different populations.

A Phase III Kalydeco study of children age 2 to 5 with gating mutations was completed and data is expected to be reported this quarter (Q3). A Phase III study for patients with residual function mutations once agency discussions are completed.

Studies of Lumacaftor with Ivacaftor are underway or planned. The Phase 3 trial (Traffic and Transport) for the F508del mutation had positive data, so an NDA is planned for Q4 and the sales team will be built in anticipation of commercialization. But one Phase 2 exploratory study did not meet its primary efficacy endpoint.

See also the Vertex Pharmaceuticals Pipeline page.

Cash and equivalents balance ended at $1.22 billion, down $100 million sequentially from $1.32 billion. No debt. After the quarter ended Vertex borrowed $300 million in cash.

Cost of revenue was $9.6 million. Royalty expense was $7.6 million. Research and development expense was $224.8 million. Sales, general and administrative expenses were $77.4 million. Restructuring gain was $0.3 million. Total costs and expenses were $319.3 million, leaving operating loss of $180.8 million. Other income was $22.2 million. Income tax $0.7 million.

Has a strong financial position to provide for further development of CF therapies for future growth. Expects to spend cash to enter collaborations on CF. SG&A will increase to support the expansion of the sales team. R&D may decrease due to completion of the major Phase 3 trial.


Expanded access program for Lumacaftor - Ivacaftor? We are working to move forward on expanded access. We believe, however, we need to prioritize more experienced patients.

Today's data? It was not a surprise, but we wanted to make sure we understood this. We are making progress on our next-generation compounds that have even greater activity. We hope to bring one or two new compounds forward next year. It is likely this particular population will require a three drug combination to get efficacy, but some other 2 drug combination might work.

Heterozygous study details? We are still early in our data analysis.

Drug uptake for homozygous population? It is too early to provide launch guidance. Patients are waiting with great anticipation. It is a much larger population than we have been treating, which would pose a logistical challenge to CF centers. The vast majority of the patient population is well-characterized.

We believe we can make transformative medicines for other diseases beyond CF.

F508del prevalence in Europe? They are broadly spread; it is the most prevalent form of CF. That is why we will need to expand into new countries.

Residual function population length of trial for 661? We are learning a lot about length for the different combinations. We will have more on that later.

Payer discussions for combo launches? We have not had the discussions yet, but now that we have the data we are getting underway with discussions. The medicine has a really impressive benefit for patients, and they are anticipating getting it. Only 22,000 patients in U.S., Europe and Australia, so still an orphan population. Don't extrapolate too much from the reimbursement exceptions, which are Australia and Arkansas.

Quantitating Australia question? We are in discussions with them. G551D has about 200 patients in Australia.So could come in at the lower range of guidance.

Pricing of combination? Too early to comment.

About 100 G551D patients in Canada, about evenly split between those with private reimbursement and those with public.

OpenIcon Analyst Conference Summaries Main Page



More Analyst Conference Pages:



Disclaimer: My analyst call summaries may include both our condensations of statements made by company representatives and my own analysis. They are not covered by any warranty. I cannot guarantee anything said by company representatives is true. I try not to make errors, but it is possible. Before making or terminating an investment you should always verify any factual basis of your decision.

Copyright 2014 William P. Meyers