Analyst Conference Summary


Vertex Pharmaceuticals

conference date: April 30, 2019 @ 1:30 PM Pacific Time
for quarter ending: March 31, 2019 (firstquarter, Q1, 2019)

Forward-looking statements

Overview: Very strong revenue and earnings growth.

Basic data (GAAP):

Revenue was $857 million, down 1% sequentially from $868 million, and up 34% from $638 million in the year-earlier quarter.

Net income was $269 million, down 83% sequentially from $1.55 billion when there was a huge income tax benefit) and up 28% from $210 million year-earlier.

Diluted Earnings Per Share (EPS) were $1.03, down 83% sequentially from $5.97 and up 27% from $0.81 year-earlier.


Reiterated prior guidance.

Conference Highlights:

Jeff Leiden, CEO, said "Our goal is to develop transformative medicines for all people with CF and other serious diseases and to ensure all eligible patients have access to these medicines as quickly as possible. We have made significant progress toward achieving this goal by rapidly advancing our triple combination regimens through late-stage development, and we remain on track to submit a New Drug Application for one of these medicines in the third quarter of 2019. We also continue to advance our earlier-stage programs targeting AAT, pain, FSGS and sickle cell disease. In the first quarter, we again delivered strong revenue and earnings growth, which further enhances our ability to make significant investments in internal and external innovation."

About 34,000 patients are eligible for the currently available Vertex medicines. The triple combination regimen will raise tht to about 68,000. Gene editing could raise that to 75,000.

Non-GAAP results: Net income $296 million, down 12% sequentially from $337 million, and up 51% from $196 million year-earlier. EPS $1.14, down 12% sequentially from $1.30, and up 50% from from $0.76 year-earlier.

Revenue in Q1 was negatively impacted by higher gross-to-net adjustments and inventory issues. Outside the U.S. looking for payer agreements that allow all patients to be treated, with success in Germany and elsewhere.

Starting in Q1 2019 the company recorded a provision for income taxes on its pre-tax net income using an estimated effective tax rate that is expected to approximate statutory rates. This provision will include a significant non-cash charge due to the company's ability to offset its pre-tax net income against previously accumulated net operating losses. The company expects its cash paid for income taxes to increase significantly once all of its net operating losses have been utilized to offset its pre-tax net income. As of December 31, 2018, the company's federal net operating losses and credits were approximately $4.5 billion.

$ millions
Q1 2019 Q4 2018 Q1 2018 y/y % change
product subtotal
royalties & collaboration

Anticipates continued revenue growth in 2019. Triple combination regimens would drive growth starting in 2020. In 2019 non-cash tax rate could increase, but will continue to use NOLs.

Triple VX-659 & VX-445 triple combination (with tezacaftor/ivacaftor) regimens enrollment completed in Q4 2018 for the two Phase 3 studies of VX-445 in people who have one F508del mutation and one minimal function mutation and in people who have two F508del mutations. Data from these studies should read out in the secondt quarter of 2019. But just one will be chosen to take forward to commercialization, with application to the FDA in Q3 and EU in Q4.

Vertex started a Phase 2 dose-ranging study evaluating the once-daily potentiator VX-561 as a monotherapy as requested by the FDA. The study is designed to evaluate multiple doses of VX-561 to support potential Phase 3 development of VX-561 in a once-daily triple combination regimen. Vertex also initiated a Phase 2 study evaluating the next-generation corrector, VX-121, in combination with VX-561 and tezacaftor as a potential once-daily triple combination regimen

CTX001 for B-Thalassemia Phase 1/2 trial is ongoing, as is the sickle cell trial. FDA granted Fast Track Designation. This is a gene editing therapy.

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

Vertex is preparing a focal segmental glomerulosclerosis candidate for the clinic.

On January 29, 2019, the FDA granted Vertex a rare pediatric disease priority review voucher based on the February 2018 approval of Symdeko for the treatment of people with CF ages 12 and older who have two copies of the F508del mutation or who have at least one mutation that is responsive to tezacaftor/ivacaftor. A rare pediatric disease priority review voucher entitles the voucher holder to priority review of other human drug applications. Rare pediatric disease priority review vouchers can be transferred, including by sale, from one sponsor to another.

In December 2018 Vertex initiated Phase 1 clinical development of VX-814, its first medicine for alpha-1 antitrypsin (AAT) deficiency, a genetic disorder that is caused by mutations in a single gene that result in life-shortening systemic complications, primarily in the lung and liver.

In February 2019, CRISPR and Vertex announced that the first patient had been treated with CTX001 in a Phase 1/2 clinical study of patients with transfusion-dependent beta thalassemia (TDT). In April 2019, Vertex and its partner CRISPR Therapeutics announced that the FDA has granted Fast Track Designation for CTX001, an investigational, autologous, gene-edited hematopoietic stem cell therapy, for the treatment of TDT.

CTX001 for the treatment of sickle cell disease (SCD) received Fast Track Designation from the FDA in January 2019. In February 2019 the first patient was enrolled in a Phase 1/2 clinical study of for severe SCD and is expected to be infused with CTX001 in mid-2019

See also the Vertex Pharmaceuticals Pipeline page.

Cash and equivalents balance ended at $3.48 billion, up sequentially from $3.17 billion. No debt.

Cost of revenue was $95 million. Research and development expense was $339 million. Sales, general and administrative expenses were $147 million. Total costs and expenses were $582 million, leaving operating income of $277 million. Interest income net $1 million. Other income $43 million. Income tax $52 million.


The time needed to achieve reimbursement across the EU seems to be longer for Vertex? It has taken longer than we would have liked. But we have reimbursement in many countries around the world. It is hard to generalize about the time taken, every market is different. We have seem increased patient advocacy since the triple results have been released.

Talked about how Vertex was able to rapidly move multiple potential therapies from concept to proof in CF, including a focus on biomarkers. We don't think COPD does not offer the same scientific opportunity as CF.

Negotiations with England, France? We explained our position in England in March. We are now in new discussions with the NHS. We are in discussions with the French authorities, where we are getting paid for the early access patients. Cannot predict a timeline to completion in these countries.

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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. This is journalism, not advice.

Copyright 2019 William P. Meyers