Analyst Conference Summary


Vertex Pharmaceuticals

conference date: April 29, 2015 @ 2:00 PM Pacific Time
for quarter ending: March 31, 2015 (first quarter, Q1, 2015)

Forward-looking statements

Overview: Rapid revenue growth on a small base, with hopes that label expansion and newer therapies will improve the situation.

Basic data (GAAP):

Revenue was $138.5 million, down 4% sequentially from $144.6 million, and up 17% from $118.5 million in the year-earlier quarter.

Net income was negative $198.6 million, down sequentially from negative $176.7 million, but up from negative $232.5 million year-earlier.

Earnings Per Share (EPS) were negative $0.83, down sequentially from negative $0.74, but up from negative $1.00 year-earlier.


For full year 2015, Kalydeco net revenue is expected between $560 and $580 million. Combined SG&A and R&D expense will be about $1.05 to $1.10 billion on a non-GAAP basis.

Conference Highlights:

Expanding Kalydeco sales and preparing for launch of Orkambi.

Kalydeco (ivacaftor) for cystic fibrosis had sales of $130.2 million, up 5% sequentially from $124.4 million and up 31% y/y. Believes there will be label and geographic expansion in 2015. The number of patients eligible could be 3,700 by the end of 2015. Ramping in Australia, where 200 patients may be eligible. In the U.S. the first children under the age of 5 have begun treatment.

Incivek for hepatitis C revenue shrank to $0.7 million as it has been essentially driven out of the market by newer therapies.

Non-GAAP results: Net income negative $148.4 million, down sequentially from negative $131.9 million, but better than negative $151.4 million year-earlier. EPS negative $0.62, down sequentially from negative $0.55, and but improved from negative $0.65 year-earlier.

$ millions
Q4 2014
Q1 2014
y/y % change
product subtotal

The PDUFA date for approving (or not) Orkambi (lumacaftor + ivacaftor) for CF patients with two copies of the F508del mutation is July 5, 2015. An accelerated European application was made in November, with possible approval in Q4. This could treat over 20,000 patients world wide if approved, including about 8000 in the U.S. Preparing to meet initial expected strong demand.

See also the Vertex Pharmaceuticals Pipeline page.

Cash and equivalents balance ended at $1.18 billion, down $210 million sequentially from $1.39 billion. Debt $295 million.

Cost of revenue was $9.4 million. Royalty expense was $2.9 million. Research and development expense was $215.6 million. Sales, general and administrative expenses were $85.9 million. Restructuring benefit was $3.3 million. Total costs and expenses were $310.5 million, leaving operating loss of $172.0 million. Interest expense $21.3 million. Other expense was $5.1 million. Income tax $0.3 million.


How fast can you go from having second corrector to proof of concept with 661 and the corrector? We have several molecules in late-stage pre-clinical development. The first goal is to get one into the clinic this year, to be followed by several others. They will go through the typical development process with Phase 1 mostly about safety and dosing. Whether we do single agents or combinations depends on discussions with regulators.

Will budgets play a roll given the larger number of patients for Orkambi? The reimbursement approval process varies by country. We will push the severity of the disease and the unmet need, and the small size of the disease population.

Second generation correctors, gating factor to getting an IND underway? We have shown the combinations have higher chloride transport rates. The question is can these molecules be made into effective medicines, which has to do with their biochemical properties.

Profitability thoughts? We believe we will be similar to our larger cap peers, given our anticipated high margins. Orkambi approval should accelerate revenue growth. We hope to keep operating expenses in control, and at some point the revenue will overtop the expenses. In 3 or 4 years we should be in a very strong position financially.

We are having ongoing and productive discussions with payers about Orkambi.

Expanded access program? Enrolled about 50 patients in U.S. with FEV values falling below the level required for trial.

Orkambi induction curve expected in U.S.? We anticipate physician and patient demand to be very high, given community knowledge of the clinical profile. So we expect rapid uptake. The sheer volume of new patients and administrative needs may result in a slower uptake relative to Kalydeco, but still very fast.

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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