Analyst Conference Summary


Vertex Pharmaceuticals

conference date: January 28, 2015 @ 2:00 PM Pacific Time
for quarter ending: December 31, 2014 (fourth quarter, Q4, 2014)

Forward-looking statements

Overview: Not a good quarter, with Incivek wiped out but Kalydeco not ramping well yet.

Basic data (GAAP):

Revenue was $144.6 million, down 19% sequentially from $179.0 million, and down 58% from $341.2 million in the year-earlier quarter.

Net income was negative $176.7 million, down sequentially from negative $170.1 million, and down from $44.3 million year-earlier.

Earnings Per Share (EPS) were negative $0.74, down sequentially from negative $0.72, and down from $0.19 year-earlier.


For full year 2015, Kalydeco revenues are expected to be between $560 and $580 million. Non-GAAP R&D and Sales, General and Administrative operating expenses for the year are estimated between $1.05 and $1.10 billion. The increase is largely due to preparing to launch lumacaftor in combination with ivacaftor and Phase 3 trials for VX-661.

[WPM: Full revenue would depend on approvals and their timing]

Conference Highlights:

Made progress in 2014 for sustainable growth. Believes Vertex is a leader in "precision medicine."

Kalydeco (ivacaftor) for cystic fibrosis had sales of $124.4 million, down 2% sequentially from $126.8 million. Believes there will be label and geographic expansion in 2015. The number of patients eligible could be 3,700 by the end of 2015.

Incivek for hepatitis C revenue shrank to $0.6 million as it has been essentially driven out of the market by newer therapies.

Non-GAAP results: revenue $140.6 million. Net income negative $131.9 million, down sequentially from negative $86.2 million, and worse than negative $128.4 million year-earlier. EPS negative $0.55, down sequentially from negative $0.37, and down from negative $0.56 year-earlier.

$ millions
Q3 2014
Q4 2013
y/y % change
product subtotal



The PDUFA date for approving (or not) Lumacaftor + ivacaftor is July 5, 2015. An accelerated European application was made in November, with possible approval in Q4. This could treat over 20,000 patients if approved.

See also the Vertex Pharmaceuticals Pipeline page.

Cash and equivalents balance ended at $1.39 billion, down $90 million sequentially from $1.48 billion. Debt $295 million.

Cost of revenue was $11.3 million. Royalty expense was $2.7 million. Research and development expense was $201.5 million. Sales, general and administrative expenses were $78.5 million. Restructuring expense was $4.2 million. Total costs and expenses were $298.2 million, leaving operating loss of $153.6 million. Interest expense $21.2 million. Other expense was $3.8 million. Income tax $2 million.


661 data, what population is eligible for it plus Kalydeco? Heterozygous in two buckets. Patients stable on Kalydeco saw a 6% improvement when 661 added, in the population with 508 on the other allele. The other bucket is the "min" who have a 508 and a non-Kalydeco responder on the other allele. That is the hardest to treat population. 809 plus Kalydeco does not work for them. We are going to try them with 661 + Kalydeco. If we can see an effect, then we can get that to patient quickly. But what they really need is a combination including a next-generation corrector. Those are in lead optimization, and the studies will take significantly longer.

The strategic plan is to bring the best benefit we can to patients. We saw benefit to adding 661, which is why we moved quickly to a pivotal trial.

Business development? We look at the CF therapy landscape to see if something could be combined with our therapy. We look to see if there are technologies beyond small molecules that we need to get involved in. We also look to diversify our pipeline, including our success with licensing non-core assets, or bringing in therapies from outside. But CF remains our number one priority.

Efficacy of Phase IIa 661 data? Just interim results, cannot comment on them yet. It was the prior data that had the signals we are talking about. 661 should be thought of the basis for multi-drug regimens going forward because of its pharmaceutical properties.

ATR DNA repair pathway, disrupting that should potentiate the radiation or chemo to kill the cancer cell.

We should have top-line data on the 12 week 661 study by the end of the quarter, but it will be mainly safety data. The Phase III trial results would not come in until 2016.

Each of our neurology and oncology programs is a strategic asset, but we won't make decisions about how to commercialize them until we see Phase 2 and 3 clinical data.

Futility analysis reflects the low probability for the population with the 2 drug combination. We will enroll about 120 patients and collect data (by independent DMC) to assess probability that it is unlikely that the combination will be beneficial. If they cannot conclude futility, we will enroll more patients. Either way we won't know if the outcome is positive until all the data is in. There is no disclosure even if the futility analysis is positive.

Timing of 6 to 11 aged data for ivacaftor + lumacaftor? Mostly specialty patients require prior authorization, so access is unlikely without an FDA approval. We don't have a timeline for the filing, it depends on how fast patients can be enrolled.

We have a hedging program and so don't see a big foreign exchange impact to our revenue in 2015.

In 2016 and 2017 we see relatively little increase in operating costs over 2015. We like the level of our research spending, and clinical trials should be timed to move towards a steady state of expense.

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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 2015 William P. Meyers