Analyst Conference Summary

Biotechnology

conference date: February 5, 2024 @ 1:30 PM Pacific Time
for quarter ending: December 31, 2023 (fourth quarter, Q4 2023)

Forward-looking statements

Overview: Revenue ramp and positive trial results continued.

Basic data (GAAP):

Revenue was $2.52 billion, up 2% sequentially from $2.48 billion, and up 9% from $2.30 billion in the year-earlier quarter.

Net income was $968 million, down 7% sequentially from $1.04 billion and up 18% from $819 million year-earlier.

Diluted Earnings Per Share (EPS) were $3.71, down 7% sequentially from $3.97 and up 18% from $3.15 year-earlier.

Guidance:

Full year 2024 revenue expected between $10.55 and $10.75 billion.

Conference Highlights:

Reshma Kewalramani, CEO, said "2023 was a transformative year for Vertex as we continued our strong performance, including 11% revenue growth, combined with significant advancement across the business. We expanded our leadership in CF, diversified our commercial opportunity with Casgevy regulatory approvals in multiple regions, and rapidly advanced a broad pipeline with multiple additional near-term potential launch opportunities in disease areas outside of CF. Our progress in 2023 lays the foundation for the anticipated regulatory submissions for the vanzacaftor triple and VX-548 by mid-2024 and sets us on a path to expand our business in CF and beyond, beginning with the commercialization of Casgevy in multiple geographies." Well on way to goal of 5 launches by 2028. Priority for cash is business development, including external acquisitions.

Vanzacaftor triple combo CF therapy three Phase 3 studies were reported as positive today for cystic fibrosis.

Enrolling patients in Phase 2/3 trial of inaxaplin for Alpha-1 Antitrypsin Deficiency (AMKD).

Casgevy [formerly Exa-cel (Exagamglogene autotemcel)] for sickle cell disease and transfusion-dependent beta thalassemia received FDA approvals in January 2024. Also approved in Great Britain. Positive CHMP opinion in EU. All revenue will be booked by Vertex, the royalties to Crispr will be included in Cost of Goods sold.

In Q4 2023 inaxaplin Phase 2/3 trial for APOL1-mediated kidney disease (AMKD) completed enrollent.

VX-548 for acute pain completed enrolling Phase 3 trials in Q4 2023. Positive results were announced in Q1 2024. An NDA is planned for mid-2024. The Phase 2 trial in peripheral neuropathic pain announced positive results in Q4 2023, and other trials are ongoing or planned.

Work continues on VX-880 and VX-264 for Type 1 diabetes, with the first VX-264 patient dosed. VX-880 presented positive Phase 1/2 data in October 2023.

VX-522, partnered with Moderna, completed enrollment in a single ascending dose study for CF. Initiated a multiple ascending dose study.

Enrolling healthy volunteers with VX-634 and VX-668 for Alpha-1 antitrypsin deficiency.

Non-GAAP results: Net income $1.10 billion, up 4% sequentially from $1.06 billion, and up 12% from $0.98 billion year-earlier. EPS $4.20, up 3% sequentially from $4.08, and up 12% from from $3.76 year-earlier.

I did not see or hear 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 $13.7 billion, up sequentially from $11.9 billion. No debt.

Cost of sales was $368 million. Research and development expense was $825 million. Sales, general and administrative expenses were $369 million. Acquired in-process R&D $18 million; Change in contingent consideration $50 million. Total costs and expenses were $1.53 billion, leaving operating income of $989 million. Interest income net $169 million. Other expense $10 million. Income taxes $179 million.

Full year 2023 revenue was up 9% y/y to $9.87 billion.

Q&A selective summary:

First targets of next-gen CF therapy? Vanzacaftor will be an attractive option for both current patients and for new or discontinued patients.

Casgevy? Looking forward to working with CMS, but already working with many state Medicaid agencies. We do not believe there will be a signifcant delay due to the outcome based agreements, as only a few patients are expected to fail to respond.

Patients can roll over into open label extension studies with Vanzacaftor.

Sweat choloride testing use by doctors? In western world diagnosis is by gene testing, confirmed by sweat chloride testing. It is not followed routinely, but CF experts understand its relationship to the disease.

Pain trials, differences in results? 548 is actually quite conistent. There were small diffences in the Phase 2 v. Phase 3 bunyonectomy trials, and the abdominoplasty trial.

Switching patients when Tricafta is already so good? In the past we have seen rapid transitions of CF medicines, including to Tricafta. The study started with Tricafta, then randomized patients between Vancacaftor and Tricafta. Also the new therapy is given just once a day, and pricing will be similar.

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