Analyst Conference Summary


Vertex Pharmaceuticals

conference date: October 28, 2014 @ 2:00 PM Pacific Time
for quarter ending: September 30, 2014 (third quarter, Q3, 2014)

Forward-looking statements

Overview: Revenue increased rapidly sequentially, but still is down y/y due to Incivek sales collapse.

Basic data (GAAP):

Revenue was $179.0 million, up 29% sequentially from $138.4 million, but down 19% from $221.7 million in the year-earlier quarter.

Net income was negative $170.1 million, down sequentially from negative $159.4 million, and down from negative $124.1 million year-earlier.

Earnings Per Share (EPS) were negative $0.72, down sequentially from negative $0.68, and down from negative $0.54 year-earlier.


Revenue guidance for full 2014 narrowed to $525 to $535 million on a non-GAAP basis, of which $460 million is Kalydeco revenue (assumes $120 million in Q4). Non-GAAP operating expenses expected between $910 and $920 million.

In 2015 Vertex expects to treat a larger number of patients, and increased SG&A and R&D to support that.

Conference Highlights:

An FDA advisory committee voted to recommend that Kalydeco be approved by the FDA for cystic fibrosis patients aged 6 and over who have the R117H mutation. In Australia Kalydeco is expected to be generally eligible for reimbursement starting December 1.

Kalydeco (ivacaftor) for cystic fibrosis had sales of $126.8 million. U.S. sales of Kalydeco were $ million, international $ million.

Incivek for hepatitis C sales rose slightly sequentially to $10.3 million, but dropped 88% from $85.6 million year earlier due to competition from more effective therapies.

Non-GAAP results: revenue $165 million. Net income negative $86.2 million , up sequentially from negative $142 million, but worse than negative $74.4 million year-earlier. EPS negative $0.37, up sequentially from negative $0.61, but down from negative $0.32 year-earlier.

Revenue, $millions
Q2 2014
Q3 2013
y/y % change
product subtotal



VX-661 plus Kalydeco/Ivacaftor (VX-770) is expected to go into a pivotal Phase III trials in the first half of 2015. The 12 week F508del homozygous study is fully enrolled with data expected in early 2015. Believes this combination could achieve a broad label.

Studies of Lumacaftor (VX-809) 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, possible in mid-2015.

An NDA for Kalydeco/Ivacaftor (VX-770) monotherapy for gating patients aged 2 to 5 was submitted after Phase III data was submitted. An FDA advisory committee recommended approval for ages 6 and up, with a PDUFA date of December 30, 2014. For residual CFTR function a Phase 3 study is planned to start in the first half of 2015.

See also the Vertex Pharmaceuticals Pipeline page.

Believes the number of patients eligible for Kalydeco will expand from 2,600 presently to near 4,000 by the end of 2015.

Cash and equivalents balance ended at $1.48 billion, up $260 million sequentially from $1.22 billion. Debt $300 million, which was acquired during the quarter.

Cost of revenue was $10.2 million. Royalty expense was $4.0 million. Research and development expense was $190.9 million. Sales, general and administrative expenses were $75.2 million. Restructuring expense was $40.8 million. Total costs and expenses were $321.2 million, leaving operating loss of $142.2 million. Interest expense $20.4 million. Other expense was $4.0 million. Income tax $3.4 million.


Age range filed for R117H in Europe? Filed for greater than 18. They think differently about pediatrics. Eventually we will discuss under 18 patients there.

Dosing will be 100 mg VX-661 with 150 mg twice daily for Ivacaftor.

VX-661 minimum threshold for success? We are looking for confirmation of the 4 week data. The longer duration would also confirm the favorable safety profile. There is no one number to hit. After we have the 12 week data we will talk to the FDA.

Launch into larger CF population, prepartions to avoid flow problems? The CF centers won't be seeing more CF patients than usual, but there are steps to working up and getting reimbursement for a new therapy. That is why we have expanded our case management team in the U.S. We want CF centers to triage patients onto therapy as quickly as they want to.

There is a very low level of discontinuation of Kalydeco, and compliance is around 80%, which is very high for a chronic condition.

We have multiple next-generation compounds in house that work in various ways and might be combined with Lumacaftor, Kalydeco, or VX-661.

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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