Analyst Conference Summary

Biotechnology

conference date: May 1, 2023 @ 1:30 PM Pacific Time
for quarter ending: March 31, 2023 (first quarter, Q1 2023)

Forward-looking statements

Overview: Revenue continues to grow, but GAAP profits down.

Basic data (GAAP):

Revenue was $2.37 billion, op 3% sequentially from $2.30 billion, and up 13% from $2.10 billion in the year-earlier quarter.

Net income was $700 million, down 15% sequentially from $819 million and down 8% from $762 million year-earlier.

Diluted Earnings Per Share (EPS) were $2.69, down 15% sequentially from $3.15 and down 9% from $2.96 year-earlier.

Guidance:

Unchanged.

Conference Highlights:

Reshma Kewalramani, CEO, said "Vertex delivered a strong start to 2023, with outstanding execution across our business. We continue to reach more patients globally with our cystic fibrosis medicines and progress our broad and diverse pipeline, most notably completing the rolling BLA submissions for exa-cel in the U.S. Over the course of this year, we look forward to continuing to expand our leadership in Cystic Fibrosis; preparing for near-term launches, including exa-cel; and advancing multiple potentially transformative medicines through mid- and late-stage clinical trials." A $3 billion share repurchase program was authorized on February 1, 2023. Given the promise of the pipeline, Vertex is conintuing to invest heavily in R&D., with higher-acquired R&D expense leading to lower earnings.

In April 2023 Vertex received a positive CHMP opinion for Orkambi for FC in children aged 1 to 2.

Exa-cel (Exagamglogene autotemcel) for sickle cell disease and transfusion-dependent beta thalassemia completed EU regulatory submissions in December 2022, and they have been accepted for review. The U.S. BLA is was submitted; waiting for PDUFA date. This is a CRISPR gene-edited therapy. Believes about 150,000 patients in U.S. or Europe. Believes acceptance of gene editing is growing. Preparing for commercial launch.

In April, 2023, Vertex received FDA approval for Trikafta in children 2 to 5 years old. Also filed in the EU. Kalydeco filed in US and EU for children under 4 months of age, with PDUFA May 3, 2023.

In March, 2023, the New England Journal of Medicine published results from preclinical studies and a Phase 2 study evaluating the efficacy and safety of inaxaplin (VX-147) on top of standard-of-care in people with focal segmental glomerulosclerosis (FSGS) and two APOL1 variants, a form of AMKD. The results from the Phase 2 study of inaxaplin demonstrated a statistically significant and clinically meaningful mean reduction in proteinuria of 47.6% at 13 weeks compared to baseline. Inaxaplin was generally well tolerated in the study. Vertex continues to enroll and dose patients in the pivotal program for inaxaplin, a single Phase 2/3 clinical trial in patients with AMKD, and expects to complete the Phase 2B dose-ranging portion of the study in 2023.

In Q4 2022, Vertex initiated a Phase 2 dose-ranging study of VX-548 in patients with diabetic peripheral neuropathy.

A better-than-Trikafta Vanzacaftor triplet has now completed Phase 3 enrollment.

Non-GAAP results: Net income $794 million, down 19% sequentially from $978 million, and down 12% from $907 million year-earlier. EPS $3.05, down 19% sequentially from $3.76, and down 13% from from $3.52 year-earlier.

I did not see or here a breakdown of revenue for Syhmdeko, Orkambi, or Kalydeco. Lumped them into Other CF.

See also the Vertex Pharmaceuticals Pipeline page.

Cash and equivalents balance ended at $11.5 billion, down sequentially from $10.8 billion. No debt.

Cost of sales was $267 million. Research and development expense was $743 million. Sales, general and administrative expenses were $241 million. Acquired in-process R&D $347 million; Change in contingent consideration $2 million. Total costs and expenses were $1.60 billion, leaving operating income of $779 million. Interest income net $111 million. Other income $1 million. Income taxes $192 million.

Q&A selective summary:

Exacel launch, time required after approval? It takes multiple months from inquiry to infusion. Then they have to stay in the hospital for several weeks.

Gene insertion competition (BlueBird Bio)? We are getting very good feedback from payers. They like our product profile. Working on getting access as close to approval as possible.

VX-548 for chronic pain? Three distinct areas for it: acute pain; neuropathic pain; muscle-skeletal pain. Phase 2 completed around end of year. Will start with acute pain, then neuropathic, then progress to musculo-skeletal.

My feedback on Exa-cel has been more negative than yours, what is the disconnect? We have very high confidence that there is signicant unmet need. Exacel transformative if not curative. We see enthusiasm from doctors, patients, payers. We are targetting just part of the market, the severe end, about 32,000 global.

If patient doing well on Trikafta, would you try to switch them? Vanzacaftor can prevent CF from developing. We are comparing the two therapies. Could be switches, could be patients who discontinued. Most discontinuations are not due to efficacy, but to adverse events. Will depend on the final data.

$12 billion in cash, use? Priority is internal and external investment. Looking broadly at disease areas. Share buybacks.

For acute pain we are sizing the market based on a broad label, not just for post-surgery.

VX-522 is for the 5,000 or so patients who cannot benefit from the current CF modulators. Expect SAD portion to be done by end of 2023, be well into the MAD portion.

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