Analyst Conference Summary


Vertex Pharmaceuticals

conference date: January 31, 2018 @ 1:30 PM Pacific Time
for quarter ending: December 31, 2017 (fourth quarter, Q4, 2017)

Forward-looking statements

Overview: Strong revenue growth. Announced a $500 million stock repurchase program, but it is mainly to balance dilution from the employee equity program.

Basic data (GAAP):

Revenue was $651.6 million, up 13% sequentially from $578.2 million, and up 42% from $458.7 million in the year-earlier quarter.

Net income was $100.7 million, up sequentially from negative $103.0 million, and up 206% from $32.9 million year-earlier.

Diluted Earnings Per Share (EPS) were $0.39., up sequentially from negative $0.41, and up 200% from $0.13 year-earlier.


"Combined GAAP R&D and SG&A expense in 2018 will be in the range of $1.80 to $1.95 billion and combined non-GAAP R&D and SG&A expense will be in the range of $1.50 to $1.55 billion."

Revenue guidance will be provided in late February or early March. "But you should expect significant CF revenue growth in 2018." Operating margins are expected to expand.

Conference Highlights:

Jeff Leiden, CEO, said "As we look at 2018 and beyond, Vertex's scientific expertise and financial strength position us to advance key pipeline programs in CF, including our triple combination regimens, and to bring forward potential new medicines in multiple other serious diseases."

Non-GAAP results: Net income $158 million, up 16% sequentially from $136 million, and up 80% from $88 million year-earlier. EPS $0.61, up 15% sequentially from $0.53, and up 51% from from $0.35 year-earlier. Excludes stock-based compensation of $ million and $ million in other costs.

$ millions
Q4 2016
y/y % change
product subtotal

The EU granted approval of Orkambi for children 6 to 11 with CF the two copies of the F508del mutation on January 10, 2018.

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

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

Great data from both triple VX-659 & 445 combination regiment Phase 2 trials. Triple combination regimen trials may start in first half of 2018. Could cover 90% of the CF population.

"On December 12, 2017, Vertex and CRISPR Therapeutics announced that the companies will co-develop and co-commercialize CTX001, an investigational gene editing treatment. CTX001 represents the first gene-based treatment that Vertex exclusively licensed from CRISPR Therapeutics as part of the collaboration. For CTX001, CRISPR and Vertex will equally share all research and development costs and profits worldwide."

See also the Vertex Pharmaceuticals Pipeline page.

Cash and equivalents balance ended at $2.09 billion, up sequentially from $1.81 billion. No debt.

Cost of revenue was $83.7 million. Royalty expense was $0.3 million. Research and development expense was $306.7 million. Sales, general and administrative expenses were $134.8 million. Restructuring expense was $0.4 million. Total costs and expenses were $525.9 million, leaving operating income of $125.7 million. Interest & other expense $13.2 million. Income tax $10.3 million. Income attributable to noncontrolling interest $1.5 million.

Full year 2017 revenue was $2.49 billion. GAAP net income was $263 million, for EPS of $1.04. Non-GAAP net income was $495 million, EPS $1.95.


51% swept chloride response vs. 39%, indication 659 is more active? We want to get the best regimen to patients as quickly as possible. That is why we are advancing two forward into Phase 3. Plan is 659 with Iva, but 445 with other. Just in case a problem arises with one of the other. Next gen drugs in general have remarkable swept chloride results, showing we are getting at the source of the disease. At the number of patients reported the difference between the drugs is not that great, should be looked at in context.

Dose response and tolerability of the programs? We have looked at four regimens and two doses. The responses are consistent. 445 100 mg dose looks similar to the 50 mg dose, then response jumps at 200 mg. Exposures overlap for 50 and 100 mg. It is well-behaved if you look at exposure vs. response. Tolerability is excellent at all doses for all compounds.

Because these drugs will be given to children and dosing may continue for their lives, so safety and tolerability are very important to us.

This may be the last time anyone can do a placebo-controlled trial of a CF therapy.

If you are a carrier you have about 80% functionality, which is acceptable. With the triple regimens we hope to get most of the CF patients to the level of carriers.

Pulmonary type side-effects in triple combo studies? Like Kalydeco, like cough and sputum, more an effect, but reported as adverse events.

If Tez/Iva (661) is approved, we would expect to see switching from our current drugs. So when we give 2018 revenue guidance it will be for the total CF franchise.

Sickle Cell IND filing? This year, exact timing not available yet. Beta-Thal program will be done mainly in Europe, sickle cell mainly in the U.S.

The totality of the data determined the choosing of which triple regimens to take to Phase 3. All four were good enough. On factor was preferring a combination that would work with one daily pill.

2018 tax rate? As we work through the NOLs (net outstanding losses) we will start paying taxes. It would be in the low 20s.

"We need to finish this journey in CF." We continue to work on even better next gen correctors. And 10% of CF patients won't be amenable, will need a genetic approach, but that is considerably further out. What is beyond CF? We have an innovation engine that can create drugs for a variety of diseases. We want to use revenue to put into external development or acquire external assets. We would stick to specialty markets.

Launch curve for 661 Tez/Iva? We have lots of experience with CF launches. The team is ready.

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 2018 William P. Meyers