Analyst Conference Summary


Vertex Pharmaceuticals

conference date: July 31, 2019 @ 1:30 PM Pacific Time
for quarter ending: June 30, 2019 (second quarter, Q2, 2019)

Forward-looking statements

Overview: Very strong revenue and earnings growth. Increased guidance.

Basic data (GAAP):

Revenue was $941 million, up 10% sequentially from $857 million, and up 25% from $752 million in the year-earlier quarter.

Net income was $267 million, down 1% sequentially from $269 million and up 29% from $207 million year-earlier.

Diluted Earnings Per Share (EPS) were $1.03, flat sequentially from $1.03 and up 29% from $0.80 year-earlier.


Increase 2019 guidance to revenue between $3.60 and $3.70 billion.

Conference Highlights:

Jeff Leiden, CEO, said "Our business is outperforming on multiple fronts. In CF, we submitted a New Drug Application to the FDA for our VX-445 triple combination regimen, which we believe has the potential to treat up to 90% of all CF patients in the future. We continue to focus on ensuring all eligible patients have access to our CF medicines as early as possible. Additionally, we have rapidly grown our pipeline beyond CF, advancing seven new potential medicines across five disease areas, including beta thalassemia, sickle cell disease, alpha-1 antitrypsin deficiency, APOL1-mediated kidney diseases and pain. And through our expanded collaboration with CRISPR Therapeutics and acquisition of Exonics Therapeutics, we have now established a leading gene editing platform for the treatment of Duchenne Muscular Dystrophy and Myotonic Dystrophy Type 1. "

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 $327 million, up 10% sequentially from $296 million, and up 34% from $244 million year-earlier. EPS $1.26, up 11% sequentially from $1.14, and up 34% from from $0.94 year-earlier.

VX-445 new clinical data for CF were very strong, so we submitted our NDA quickly to the FDA. Approval is possible in Q1 2020. May be able to treat up to 90% of CF patients.

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
Q2 2019 Q1 2019 Q2 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.

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 started a Phase 1 study of VX-147, the company's first investigational oral small molecule medicine for the treatment of APOL1-mediated focal segmental glomerulosclerosis (FSGS) and other serious kidney diseases. VX-147 is designed to inhibit APOL1 function, which is a causal genetic factor in FSGS and other proteinuric kidney diseases. Vertex is also advancing multiple other APOL1 inhibitors through preclinical development.

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.

The Phase 1 clinical trial continued for 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 $3.95 billion, up sequentially from $3.48 billion. No debt.

Cost of revenue was $136 million. Research and development expense was $379 million. Sales, general and administrative expenses were $157 million. Total costs and expenses were $671 million, leaving operating income of $270 million. Interest income net $3 million. Other income $54 million. Income tax $60 million.


What drove uptick in Q2 revenue over Q1? Ongoing launch of Symdeko in U.S. plus launch in Germany. It did take a bit away from Orkambi, but we are also adding new Orkami patients under the expanded label.

VX-814 profile? For AAT we completed the Phase 1 study. Safety and tolerability look good. PK looks good. We will have discussions with regulators about Phase 2. We will measure AAT levels and activity.

814, would liver histology be required? We know the infusion therapies that are approved used AAT levels. This is a small molecule oral corrector. We expect to evaluate liver biopsies in Phase 2. AAT is both a lung and liver disease. Our small molecule, we hope, will treat both liver and lung. Existing approaches treat one of the other, while we treat both.

We do expect to do more and perhaps larger deals with the cash on our balance sheet and that we generate.

Pain program? VX150 has advanced through Phase 2b with positive results. We are looking to bring forward a portfolio, as we are taking VX961 to the clinic. We will pick the best to take to late-stage development. We are focused on acute pain, not chronic. We believe we can provide an alternative to opiodes. We think we can have opium like effectiveness without addictive potential [WM: and thats what they said about OxyContin. And morphine. And heroin].

EU negotiations on CF? We have made progress in various nations around the world for severl CF drugs. A high priority is countries where we don't currently have access.

VX-147? About 10,000 Americans have this, mostly Afro-Americans. We have a very good understanding of the disease and the resulting proteinuria.

VX-445 combination potential patients? Yes, patients could transition from Symdeko or Orkambi, given the efficacy.

We believe mRNA for CF is difficult mainly because it has to get to the lung cells, which is incredibly difficult. But CF affects many organs of the body. An inhalation therapy would only treat the lung. We are very interested in RNA therapies, but we think this is a very hard probelm.

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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. These are my personal notes, not advice.

Copyright 2019 William P. Meyers