Analyst Conference Summary

Biotechnology

conference date: May 26, 2018 @ 1:30 PM Pacific Time
for quarter ending: March 31, 2018 (first quarter, Q1, 2018)

Forward-looking statements

Overview: Product revenue was up 33% y/y, but a decrease in collaboration revenue caused overall revenue to drop 10% y/y.

Basic data (GAAP):

Revenue was $640.8 million, down 2% sequentially from $651.6 million, and down 10% from $714.7 million in the year-earlier quarter.

Net income was $210 million, up 109% sequentially from $100.7 million, but down 15% from $248 million year-earlier.

Diluted Earnings Per Share (EPS) were $0.81, up 108% sequentially from $0.39, and down 18% from $0.99 year-earlier.

Guidance:

Reiterated full-year 2018 revenue of $2.65 to $2.80 billion.

Conference Highlights:

Jeff Leiden, CEO, said "“During the quarter, the number of patients eligible for and being treated with our CF medicines continued to increase and drive revenue and earnings growth. We continued to make significant progress toward our goal of developing new and better medicines for the treatment of CF and other serious diseases. Our progress was marked by the U.S. approval of Symdeko for people with CF ages 12 and older and the initiation of Phase 3 development for VX-659 and VX-445 as part of two different triple combination regimens. We continued to advance our research and development efforts in other serious diseases, notably in pain and sickle cell disease.”

Revenue was down y/y because of the large collaboration revenue in Q1 2017. Product revenue continues to climb. Symdeko revenue was for 7 weeks of sales.

Non-GAAP results: Net income $196 million, up 24% sequentially from $158 million, and up 93% from $101 million year-earlier. EPS $0.76, up 25% sequentially from $0.61, and up 85% from from $0.41 year-earlier. Excludes stock-based compensation of $ million and $ million in other costs.

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

Symdeko (tezacaftor/ivacaftor, was VX661) for CF ages 12 and up received FDA approval on February 12, with EU approval expected later this year.

Results from Phase 3 Orkambi trial in children aged 2 to 5 were positive, so regulatory submissions made and PDUFA date is August 7, 2018.

Great data from both triple VX-659 & VX-445 triple combination (with tezacaftor/ivacaftor) regimen Phase 3 trials are now underway. Could cover 90% of the CF population. Positive Phase 2 data was reported today.

CTX001 for B-Thalassemia will start a Phase 1/2 trial in 2018.

VX-150 Phase 2 data reported "significant relief of acute pain." A Phase 2 study in neuropathic pain should have data in early 2019.

See also the Vertex Pharmaceuticals Pipeline page.

Cash and equivalents balance ended at $2.5 billion, up sequentially from $2.09 billion. No debt.

Cost of revenue was $71.6 million. Research and development expense was $310.6 million. Sales, general and administrative expenses were $129.8 million. Total costs and expenses were $511.9 million, leaving operating income of $128.9 million. Interest & other income $117.8 million. Income tax benefit $12.7 million. Income attributable to noncontrolling interest $17.0 million.

Q&A:

Reason not going ahead with 561? Was used in place of ivacaftor in two studies. Safety was similar to ivacaftor, efficacy improved. FDA is looking at 561 as a new entity, and we had not generated that data. We decided to move forward with 445 and Kalydeco, which the FDA has a lot of comfort with it. But we do want to continue to develop 561, we are going to discuss it with the FDA.

Symdeko reimbursement? We will build on the Orkambi successes, while we continue in some countries where Orkambi is still in process. Next step is EU approval. CF progresses rapidly, so we want to get Symdeko to patients rapidly.

Is it worth to develop more correctors to gain a small number of additional patients? We want molecules that are significantly better, which could be efficacy, dosing, etc.

Timeline for releasing triple combo data? We will let you know when we have the data.

Cases of rash in trials? 659 and 445 proof of concept trials treated 200 patients. Rash incidence was low, not serious, and disappeared after interuption or discontinuation. Very similar in incidence and quality to Orkambi and Kalydeco.

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