Analyst Conference Summary


Vertex Pharmaceuticals

conference date: october 30, 2019 @ 1:30 PM Pacific Time
for quarter ending: September 30, 2019 (third quarter, Q3, 2019)

Forward-looking statements

Overview: Continued rapid revenue growth with a strong pipeline.

Basic data (GAAP):

Revenue was $950 million, up 1% sequentially from $941 million, and up 21% from $785 million in the year-earlier quarter.

Net income was $57 million, down 79% sequentially from $267 million and down 54% from $128 million year-earlier.

Diluted Earnings Per Share (EPS) were $0.22, down 79% sequentially from $1.03 and down 56% from $0.50 year-earlier.



Conference Highlights:

Jeff Leiden, CEO, said " With the historic approval of Trikafta, we are now one step closer to providing treatment for up to 90% of all people with CF. We've also had tremendous success bringing our CF medicines to more patients globally with reimbursement agreements recently reached in England, Spain, Australia, and Scotland, and through label expansions to younger patients. The rapid progress of our pipeline is expected to yield proof-of-concept data in multiple diseases in 2020, which will position Vertex for continued growth in the years ahead."

Trikafta was approved by the FDA last week (October 21, 2019). It combines elexacaftor/tezacaftor/ivacaftor and ivacaftor for the treatment of cystic fibrosis in people ages 12 years and older who have at least one F508del mutation. An estimated 18,000 potential patients in the U.S. A phase 3 trial to expand the label to children aged 6 to 11 is ongoing.

Non-GAAP results: Net income $322 million, down 2% sequentially from $327 million, and up 14% from $282 million year-earlier. EPS $1.23, down 2% sequentially from $1.26, and up 13% from from $1.09 year-earlier.

On October 10, 2019, Vertex completed its previously announced acquisition of Semma Therapeutics, a privately held biotechnology company pioneering the use of stem cell-derived human islets as a potentially curative treatment for type 1 diabetes.

$ millions
Q3 2019 Q2 2019 Q3 2018 y/y % change
product subtotal
royalties & collaboration

Vertex continued 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 continued 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. The study should complete in Q4 2019. 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.

Plans a Phase 2 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. Also has a Phase 1 trial underway for a second AAT therapy, VX-864.

CRISPR and Vertex continued CTX001 in a Phase 1/2 clinical study of patients with transfusion-dependent beta thalassemia (TDT). 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 $4.0 billion, up sequentially from $3.95 billion. But the Semma Therapeutics acquisition cash use will appear in Q4. No debt.

Cost of revenue was $132 million. Research and development expense was $556 million. Sales, general and administrative expenses were $160 million. Change in contingent consideration $3.0 million. Total costs and expenses were $850 million, leaving operating income of $99 million. Interest expense net $3 million. Other expense $32 million. Income tax $13 million.


Uptake expected in regions with recently approved reimbursement? There is a lag to get the process in place, for instance about 30 days in England. We expect to gain most of the eligible patients over time. In England there are about 5,000 potential patients, with the main rate limitation the capabilities of the specialty clinics for CF.

AAT cohorts, transition to registrational trial? The Phase 2 study will have about 50 people and a few dose cohorts. Will provide the dose for the Phase 3 study.

In the U.S., too, the capacity of CF centers will determine the rate of patient adds. Each center has a prioritization plan, but it varies by center.

The Semma product seems to be able to create islets and protect them from the immune response, essentially curing type 1 diabetes.

France? We are in discussions for a reimbursement agreement. There are about 1,100 Orkambi patients in France currently. When we land on a agreed upon price we will make an adjustment versus our earlier accounting for the current patients.

VX-147? FSGS disease is relentless, it is transplant or death. We are in Phase 1. We hope to do Phase 2 dose ranging in 2020, which would be with a small number of patients, with a proteinuria as an endpoint. We have other molecules to address this as well.

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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