Analyst Conference Summary


Vertex Pharmaceuticals

conference date: January 25, 2017 @ 1:30 PM Pacific Time
for quarter ending: December 31, 2016 (fourth quarter, Q4, 2016)

Forward-looking statements

Overview: Continued strong revenue growth driven by Orkambi. Positive net income both on a GAAP and non-GAAP basis.

Basic data (GAAP):

Revenue was $459 million, up 11% sequentially from $413.8 million, and up 10% from $417 million in the year-earlier quarter.

Net income was $33 million, up sequentially from negative $41.8 million, and up from negative $74 million year-earlier.

Earnings Per Share (EPS) were $0.13, up sequentially from negative $0.17, and up from negative $0.30 year-earlier.


For 2017 aims at CF revenue of $1.79 to $2.01 billion. Non-GAAP combined R&D + SG&A expense $1.25 to $1.3 billion. $1.1 to 1.3 billion Orkambi revenue, depending on completion of European reimbursement agreements. $690 to $710 million Kalydeco revenue, as most potential patients are already taking it.

Conference Highlights:

Jeff Leiden, CEO, said "As we enter 2017, we anticipate continued revenue and earnings growth and additional important progress toward our long-term goal of treating all people with CF."

Orkambi (lumacaftor+ivacaftor) sales were $277 million, up 18% sequentially from $234 million, and up 26% y/y. Now approved for use in children aged 6 to 11. Believes 2017 revenue growth will mainly come from Europe, where reimbursement discussions are still underway. Reached an agreement in Germany.

Kalydeco (ivacaftor) for cystic fibrosis had sales of $177 million, up slightly sequentially from $176 million but down 2% y/y from $181 million.

On January 11, 2017 Vertex entered a license agreement with Merck KGaA, for four oncology programs, and expects to receive $230 million in up-front payments in Q1.

Non-GAAP results: Net income $88 million, up 120% sequentially from $40 million, and up 100% from $44 million year-earlier. EPS $0.35, up 119% sequentially from $0.16, and up 94% from from $0.18 year-earlier. Excludes stock-based compensation of $59 million and $4 million in other adjustments, as well as Incivek revenue and costs.

$ millions
Q4 2015
y/y % change
product subtotal

VX661 (Tezacaftor) (+ ivacaftor) Phase 3 trials for CF are complete, except for gating mutations. First data could be in early 2017. Vertex hopes to submit an application to the FDA for approval in 2017, with potential approval in 2018.

Vertex has moved two next-generation correctors for cystic fibrosis, VX-152 and VX-440, into clinical development. Phase 2 data is expected before the end of 2017.

ENaC with Orkambi continued a Phase 2 study.

VX-659 for CF Phase 1 data is expected in 2017.

VX-445 Phase 1 trial is planned to begin this quarter.

Vertex is exploring other therapies for CF and other indications including cancer and pain, including VX-970, a kinase inhibitor, for solid tumors.

See also the Vertex Pharmaceuticals Pipeline page.

Cash and equivalents balance ended at $1.43 billion, up sequentially from $1.13 billion. Debt $300 million.

Cost of revenue was $59.6 million. Royalty expense was $0.8 million. Research and development expense was $248.5 million. Sales, general and administrative expenses were $109.9 million. Restructuring expense was $0.2 million. Total costs and expenses were $419.1 million, leaving operating income of $39.6 million. Interest & other expense $19.3 million. Income tax benefit $7.5 million. Loss attributable to noncontrolling interest $5.2 million.

As revenues grow, Vertex plans to keep costs growing at a slower rate, and so improve its margins and profitability.


VX-150 development? Pain is an enormous indication. Addresses NAV channels. Large unmet need. In the study was a potentially significant reduction in pain in 124 patients with chronic pain. We will do more exploratory studies in other types of pain.

Why not move 150 ahead in OA right now? We want to understand it better.

661 data when you get it? It has 3 goals, one is a better profile than Orkambi due to respiratory effects. Then residual function patients in combination with our other therapies. It is also the basis for the triple regimen, with a next gen corrector.

When we get a good Phase 2 new corrector, we will continue to generate new candidates.

Is 661 as effective as Orkambi? We are doing the study to see if it is more effective than Orkambi, as the Phase 2 results would indicate.

Business development, late vs. early stage drugs? Three pronged approach: we look at everything involved with cystic fibrosis. The Moderna and Crispr deals give us new opportunities. As to acquiring companies or therapies, the focus is on early stage development.

Re Moderna and Crispr, when we are ready to move products to the clinic, we will update you.

France reimbursement works like other European countries, we are talking specifics about pricing.

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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 2017 William P. Meyers