Analyst Conference Summary

Biotechnology

conference date: August 1, 2024 @ 1:30 PM Pacific Time
for quarter ending: June 30, 2024 (second quarter, Q2 2024)

Forward-looking statements

Overview: Big IPRD (acquired in process R&D expense) hit of $4.45 billion skews results.

Basic data (GAAP):

Revenue was $2.65 billion, down 1% sequentially from $2.69 billion, and up 6% from $2.49 billion in the year-earlier quarter.

Net income was negative $3.51 billion, down sequentially from $1.10 billion and down from $1.16 billion year-earlier.

Diluted Earnings Per Share (EPS) were negative $13.92, down sequentially from $4.21 and down from $3.52 year-earlier.

Guidance:

Raised 2024 product revenue to $10.65 to $10.85

Conference Highlights:

Reshma Kewalramani, CEO, said "Vertex delivered another strong quarter of revenue growth coupled with outstanding execution across the business, and we are increasing our full year product revenue guidance. Our focus for the second half of the year remains on commercial execution in CF and the global launch of Casgevy, readying for the upcoming potential launches of the vanzacaftor triple in CF and suzetrigine in acute pain, while rapidly advancing a robust pipeline that is poised to deliver value for patients and shareholders for the long term."

Vertex is acquiring Alpine Immune Services, closing in Q2 for approximately $4.9 billion in cash. Alpine's povetacicept is a highly potent and effective dual antagonist of BAFF (B cell activating factor) and APRIL (a proliferation-inducing ligand). Ready for Phase 3 trial of povetaciceopt for IgAN autoimmune kidney disease. But revenue from that would be in 2028.

In Q1 2024 Vanzacaftor triple combo CF therapy three Phase 3 studies were reported as positive for cystic fibrosis. The NDA to the FDA and MAA to the EMA were filed in Q2 2024. PDUFA January 2, 2025. If approved will have a substantially lower royalty burden than current therapies.

Casgevy [formerly Exa-cel (Exagamglogene autotemcel)] for sickle cell disease and transfusion-dependent beta thalassemia received FDA approvals in January 2024. Pleased with Casgevy launch in Q2. 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. Making profress with payers, patients and doctors. Now has more than 25 activated centers. 20 patients already have cells collected (as of July 2024).

VX-548 for acute pain (now suzetrigine) completed enrolling Phase 3 trials in Q4 2023. Positive results were announced in Q1 2024. A rolling NDA was started and was completed in Q2 2024, then accepted by the FDa on July 30, 2024. The Phase 2 trial in peripheral neuropathic pain announced positive results in Q4 2023, with Phase 3 trial to begin in 2H 2024. Already making commercial plans. In Q3 2024 will start a Phase 3 trial in diabetic peripheral neuropathy. Believes addresses a multi-billion dollar market.

Work continues on VX-880 and VX-264 for Type 1 diabetes, with the first VX-264 patient dosed. VX-880 presented updated positive Phase 1/2 data in Q2 2024. VS-880 trial resumed in Q2 2024, expanding to 37 patients, and is fully enrolled, positive data presented a ADA.

Povetacicept (IgAN) Phase 3 study will initiate in Q3 2024.

VX-522, a CFTR mRNA therapy multiple ascending dose portion of Phase 1/2 is underway. Expects top line data in H1 2025. Partnered with Moderna. For about 5,000 CF patients who cannot benefit from CFTR modulators.

VX 993, the next generation Nav1.8 pain inhibitor, is in Phase 1 with an IV formulation, but will initiate a Phase 2 oral study in Q3 2024.

But Vertex decided to discontinue development of VX-634 and VX-668 for AATD.

Non-GAAP results: Net income negative $3.31 billion, down sequentially from $1.24 billion, and down from $1.01 billion year-earlier. EPS negative $12.83, down sequentially from $4.76, and down from from $3.89 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 $10.2 billion, down sequentially from $14.6 billion due to cash purchase of Alpine Immune. No debt.

Cost of sales was $372 million. Research and development expense was $967 million. Sales, general and administrative expenses were $372 million. Acquired in-process R&D $4.45 billion; Change in contingent consideration $0 million. Total costs and expenses were $6.16 billion, leaving operating income of negative $3.51 billion. Interest income net $147 million. Other expense $23 million. Income taxes $202 million.

Q&A selective summary:

Given 6,000 or so CF patients who have dropped therapy, is that a bolus for the triplet introduction? Vanzacaftor launch would not have a single bolus. But physicians are excited about the launch, including for current patients. Once a day is a big attraction.

VX-548? Ex US, landscape is similar to US. Abuse of opioids is less outside the US. Pricing dynamics would be different, so our first focus is the US. Data ASA fall conference 2024.

NAV 1.7 inhibitors? Preclinical progress is strong, in late development. Believe could be used alone for acute or neuropathic pain, or in combination.

VX-880, VX-264 regulatory path? VX-264 is in a full dose study, should have results in 2025. VX-880 is naked cells, completed enrollment and dosing in original study. Now doing a full dose, expanding to 37 patients. Regulatory discussions have been good. It is more like a Casgevy program rather than a small molecule program.

Biogen competitor? IgAN is rare, but over 130,000 patients in US alone. No specific therapy for underlaying cause to date. We are enthusiastic about povetaciceopt because it directly inhibits the underlaying cause of the disease. Subq dosing. So has the most transformational profile. Could also address other B-cell mediated diseases.

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