Analyst Conference Summary


Vertex Pharmaceuticals

conference date: October 25, 2017 @ 1:30 PM Pacific Time
for quarter ending: September 30, 2017 (third quarter, Q3, 2017)

Forward-looking statements

Overview: Big GAAP loss due to an impairment charge.

Basic data (GAAP):

Revenue was $578.2 million, up 6% sequentially from $544 million, and up 40% from $413.8 million in the year-earlier quarter.

Net income was negative $103.0 million, down sequentially from $18 million, and down from negative $38.8 million year-earlier.

Earnings Per Share (EPS) were negative $0.41, down sequentially from $0.07, and down from negative $0.16 year-earlier.


Raised 2017 guidance to:

Orkambi revenue $1.29 to $1.32 billion. Kalydeco revenue $810 to $830 million.

Non-GAAP operating expense (R&D + SG&A) $1.33 to $1.36 billion.

GAAP R&D + SG&A expense $1.79 to $1.93 billion.

Conference Highlights:

Jeff Leiden, CEO, said "We expect this financial trajectory to continue, driven by our pipeline of transformative CF medicines. . . We look forward to continued progress in 2018 with the anticipated approval of our third CF medicine, and advancement into pivotal development of our portfolio of triple combination regimens, which have the potential to treat nearly all CF patients in the future."

Non-GAAP results: Net income $136.4 million, up 38% sequentially from $99 million, and up 216% from $43.1 million year-earlier. EPS $0.53, up 36% sequentially from $0.39, but up 212% from from $0.17 year-earlier. Excludes stock-based compensation of $74 million and $165 million in other costs.

The impairment charge of $255 million was for the Parion's pulmonary ENaC platform. That resulted in an income tax benefit of $126 million.

$ millions
Q3 2016
y/y % change
product subtotal

Vertex has applied to the EMA for approval of Orkambi for children 6 to 11 with CF the two copies of the F508del mutation.

Results from Phase 3 Orkambi trial in children aged 2 to 5 were positive, so regulatory submissions are planned for Q1 2018.

Following Phase 3 results, "Vertex does not plan to seek regulatory approval for tezacaftor/ivacaftor combination for people with gating mutations." Most of that class is eligible to receive Kalydeco.

VX661 (Tezacaftor) (+ ivacaftor) Phase 3 trials for CF (without gating mutations) are complete with positive data. submitted for approval in Europe and USA. PDUFA date is February 28, 2018. Approval in Europe is expected in the second half of 2018.

Two next-generation correctors for cystic fibrosis, VX-152 and VX-440, showed positive proof-of-concept results. Phase 2 data is expected before the end of 2017.

ENaC (VX-371) with Orkambi Phase 2 study did not meet its efficacy endpoint.

VX-150 for acute and neuropathic pain started Phase 2 studies.

VX-659 for CF Phase 1 data was positive.

VX-445 Phase 1 CF trial began this quarter.

VX-371 in combination with Orkambi Phase 2 study was negative.

Triple combination regimen trials may start in 2018. Could cover 90% of the CF population.

CTP-656 was purchased from Concert Pharmaceuticals. It is a CFTR potentiator. It could be used in a combination regiment. On closing Vertex paid $160 million in cash for worldwide rights. $90 million more in milestones are possible.

See also the Vertex Pharmaceuticals Pipeline page.

Cash and equivalents balance ended at $1.81 billion, up sequentially from $1.67 billion. No debt.

Cost of revenue was $72.2 million. Royalty expense was $0.7 million. Research and development expense was $454.9 million. Sales, general and administrative expenses were $120.7 million. Restructuring expense was $0.3 million. Total costs and expenses were $904.2 million, leaving operating income of negative $326.0 million. Interest & other expense $91 million. Income tax benefit $125.9 million. Loss attributable to noncontrolling interest $188.3 million.


Milestones in 2018 for non-CF pipeline? The real value is created in scientific investment. Our internal pipeline of non-CF drugs are advancing quite nicely. Some will enter the clinic in 2018. We will talk about them in more detail at that time. We are also looking to bring in external early-stage products. A couple of years ago we were in capital-preservation mode, but now we have cash and cash flow. We have to invest to create. We look at everything in CF. We think it is time to go beyond small molecules. We do not expect to see data on the spinal cord asset in 2018.

French cash and conversion to reported revenue? We do not record revenue in France, but accumulate it on the balance sheet. We do not have a definitive price yet, and may have to give some back. It is about $130 to $140 million, and would be recorded when a price is agreed to. But revenue recognition rules change for 2018. At that point you don't get to record the backlog as revenue. It all goes to retained earnings.

Are triple medicines one-size-fits-all? We have changed our thinking with the results we are seeing from the triple. We believe the Phase 2 data suggests that 90% of patients will be treatable. The remaining 10% don't make any protein, so would need gene therapy or gene editing.

Countries are looking at portfolio type arrangements like we have in Ireland. We are open to that, at a fair price. We don't want to slow down access to Orkambi.


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 2017 William P. Meyers