Analyst Conference Summary


Vertex Pharmaceuticals

conference date: October 29, 2020 @ 1:30 PM Pacific Time
for quarter ending: September 30, 2020 (third quarter, Q3, 2020)

Forward-looking statements

Overview: Unusually high revenue growth due to Trikafta rollout.

Basic data (GAAP):

Revenue was $1.54 billion, up 1% sequentially from $1.52 billion, and up 62% from $950 million in the year-earlier quarter.

Net income was $667 million, down 20%% sequentially from $837 million and up 10X from $58 million year-earlier.

Diluted Earnings Per Share (EPS) were $2.53, down 20% sequentially from $3.18 and up over 10X from $0.22 year-earlier.


Full 2020 product revenue guidance increased to $6.0 to 6.2 billion.

Conference Highlights:

Reshma Kewalramani, CEO, said "Our R&D strategy contemplates the high-risk nature of drug development and therefore includes a portfolio approach to each of our disease areas of interest. In AATD, while disappointed by the VX-814 outcome, we look forward to the VX-864 Phase 2 proof-of-concept data in the first half of 2021. Our pipeline spans multiple diseases, and multiple important clinical readouts are expected from now through the end of 2021, each of which we expect will hold transformative potential for patients and further growth for Vertex."

Trikafta (Kaftrio in EU) Phase 3 trial to expand the label to children aged 6 to 11 reported positive data. Filing planned for Q4 2020. In July 2020 the majority of the approximately 18,000 eligible U.S. patients have now initiated treatment with Trikafka. Launch in EU starting well. Believes Trikafta can treat about 90% of CF patients.

The COVID-19 pandemic has not had an impact on Vertex's supply or distribution systems.

Non-GAAP results: Net income $697 million, up 1% sequentially from $687 million, and up 116% from $322 million year-earlier. EPS $2.64, up 1% sequentially from $2.61, and up 115% from from $1.23 year-earlier.

Vertex plans to advance its cell therapy program for the treatment of type 1 diabetes into clinical development in late 2020 or early 2021.

$ millions
Q3 2020 Q2 2020 Q3 2019 y/y % change

Vertex is developing a cell therapy designed to replace insulin-producing islet cells in people with T1D. Two opportunities exist for the transplant of these functional islets into patients: 1) transplantation of islet cells alone, using immunosuppression to protect the implanted cells and 2) implantation of the islet cells inside a novel immunoprotective device. Vertex plans to submit an Investigational New Drug (IND) application to the FDA for the islet cells alone program in the fourth quarter of 2020.

In April 2020, Vertex entered into a collaboration with Affinia Therapeutics to gain access to a novel library of AAV capsids that will bolster ongoing research and development work in genetic therapies. The goal is to develop genetic therapies for people affected by Duchenne muscular dystrophy (DMD), myotonic dystrophy 1 (DM1) and CF.

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

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. 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.

In October 2020, Vertex discontinued the Phase 2 study of VX-814. But has a Phase 2 trial underway for a second AAT therapy, VX-864.

Vertex and its partner CRISPR Therapeutics provided new clinical data at the European Hematology Association Congress from the two ongoing Phase 1/2 studies of the investigational CRISPR/Cas9 gene-editing therapy CTX001 in patients with transfusion-dependent beta thalassemia and in patients with severe sickle cell disease. Data from additional patients expected in Q4 2020.

See also the Vertex Pharmaceuticals Pipeline page.

Cash and equivalents balance ended at $6.15 billion, up sequentially from $na billion. No debt.

Cost of revenue was $186 million. Research and development expense was $493 million. Sales, general and administrative expenses were $185 million. Change in contingent consideration $2 million. Total costs and expenses were $866 million, leaving operating income of $672 million. Interest expense net $11 million. Other income $84 million. Income tax $78 million.


VX-814 v. VX-864? Findings molecule or mechanism specific question. Our understanding is molecule specific problems with 814 on lfp bindings, but we do not know for sure. VX-864 has a different molecular structure. In mouse models with human disease AAT gene we see no evidence of hepato toxicity. 864 is multifold more potent than 814.

AAT third generation? After VX-864 we have multiple scaffolds and molecules that have differentiated and improved features.

mRNA and CRISPR programs? Last year we did over $1.25 billion in business development activity. We are interested in CF; in tools; assets for diseases in our sandbox. The thing that has changed is our growing financial strength. Moderna mRNA collaboration is going well to get last 10% of CF. The CRISPR programs are going well so far.

Defended the value of the pipeline post the 814 failure.

Pricing in EU for Kaftrio likely to be in the same narrow range as prior products.

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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 2020 William P. Meyers