Analyst Conference Summary


Vertex Pharmaceuticals

conference date: October 27, 2022 @ 1:30 PM Pacific Time
for quarter ending: September 30, 2022 (third quarter, Q3, 2022)

Forward-looking statements

Overview: Revenue and EPS growing rapidly.

Basic data (GAAP):

Revenue was $2.33 billion, up 6% sequentially from $2.20 billion, and up 18% from $1.98 billion in the year-earlier quarter.

Net income was $931 million, up 15% sequentially from $811 million and up 9% from $852 million year-earlier.

Diluted Earnings Per Share (EPS) were $3.59, up 15% sequentially from $3.13 and up 9% from $3.28 year-earlier.


Increased 2022 guidance to $8.8 to $8.9 billion product revenue.

Conference Highlights:

Reshma Kewalramani, CEO, said "The third quarter marked another period of strong performance in the CF business and across the company. As we progress exa-cel towards global regulatory submission, initiate pivotal development of the acute pain program and continue the rapid advancement of multiple mid- and late-stage clinical programs, we are executing on our goal of serial innovation for patients, which will drive significant growth for the company for years to come." A better-than-Trikafta triplet is now in Phase 3.

on September 27, 2022, Vertex closed the acquisition of ViaCyte, a regenerative medicine company focused on delivering novel stem cell-derived cell replacement therapies as a potential functional cure for type 1 diabetes. In July, 2022, Vertex had entered into a definitive agreement to acquire ViaCyte, a privately held company focused on delivering novel stem cell-derived cell replacement therapies as a functional cure for type 1 diabetes, for $320 million in cash. The acquisition will closed in Q3. Also in July, Vertex entered into a research collaboration with Verve Therapeutics, focused on discovering and developing an in vivo gene editing program for a liver disease. In May, Vertex acquired Catalyst Biosciences' complement portfolio and related intellectual property for $60 million in cash.

Vertex began a Phase 1 trial of VX-634, a novel small molecule Z-AAT corrector, in Q4 2022. A trial of VX-864 is also planned to start soon. Both are for AAT Deficiency.

In Q3 2022 the FDA approved an sNDA for the use of Orkambi in children 12 months to less than 24 months old. A Marketing Authorization Application (MAA) with the European Medicines Agency (EMA) has also been filed.

Vertex completed enrollment in the Phase 3 study of Trikafta in children 2 to 5 years old. The Company anticipates filing a supplementary new drug application (sNDA) with the FDA before the end of 2022.

Reimbursement of Kaftrio for children 6 to 11 years old was approved in Italy in Q3 2022.

Vertex and its partner CRISPR Therapeutics are evaluating the use of a CRISPR gene-edited therapy for the treatment of transfusion-dependent beta thalassemia and sickle cell disease. In both studies for CTX001 target enrollment was achieved in Q3 2021. Plans an FDA rolling submission beginning in November 2022. EU submission in Q4 2022. Already preparing for launch. Believes about 150,000 patients in U.S. or Europe.

Non-GAAP results: Net income $1,039 million, up 12% sequentially from $930 million, and up 14% from $912 million year-earlier. EPS $4.01, up 11% sequentially from $3.60, and up 14% from from $3.51 year-earlier.

$ millions
Q3 2022 Q2 2022 Q3 2021 y/y % change

A Phase 3 study of VX-548 for pain study design has been approved by the FDA. In March, 2022, Vertex reported positive data from two Phase 2 dose-ranging acute pain studies with VX-548, one following bunionectomy surgery and the other following abdominoplasty surgery. Both studies met their primary endpoint. Vertex also intends to initiate a Phase 2 dose-ranging study of VX-548 in neuropathic pain by the end of 2022.

VX-147 for APOL1-mediated FSGS Phase 2 reported positive results in Q4 2021. Believes this is a multi-billion dollar opportunity. Now in a Phase 2/3 trial.

VX-880 for type 1 diabetes 150 day data was very positive; could be transformative. However, the FDA placed a clinical hold on the study in April 2022. In Q3 2022 enrolling patients again.

See also the Vertex Pharmaceuticals Pipeline page.

Cash and equivalents balance ended at $9.8 billion, up sequentially from $9.3 billion. No debt.

Cost of sales was $289 million. Research and development expense was $645 million. Sales, general and administrative expenses were $247 million. Acquired in-process R&D $29 million; Change in contingent consideration $3 million. Total costs and expenses were $1.21 billion, leaving operating income of $1.13 billion. Interest income net $32 million. Other income $17 million. Income taxes $246 million.

Q&A selective summary:

VX-880 timeline? There are three diabetes programs, starting with VX-880, which is in a clinical trial, data next year. Second program is cell plus device, with an IND submission later this year, data relatively quickly. Third same VX-880 cells edited for immune cloaking.

Approaching a plateau of effectiveness for CF for CFTR modulators? CF is a systemic disease, not just lungs. We don't know what the maximum benefit could be.

Diabetes device details? Devices in the past had known problems. Our device allows nutrients and oxygen to the cells, senses glucose and releases insulin. The hardest part is having fully differentiated, insulin producing cells.

Use of cash? Focus is on internal and external innovation. Share buybacks are only to offset dilution.

VX-548 opportunity in acute setting v. cheaper drugs? We see a significant acute pain opportunity. Currently 90% generic. We believe the unmet need remains significant. Acute use of opioids does contribute to the epidemic. Opioids are not very effective in the chronic setting.

AAT program timing? Doing the short term and long term therapies in parallel. We could have data around this time next year. We expect more AAT molecules to eventually enter the clinic. The small molecule approach is the only one that could treat both liver and lung manifestations.

CF mRNA program is for patients who do not make any protein and therefore do not benefit from CFTR modulators. About 5,000 potential patients.

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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 2022 William P. Meyers