Q3 2022 Vertex Pharmaceuticals Inc Earnings Call

Good day and welcome to the vertex Pharmaceuticals third quarter 2022 earnings call. All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions to ask a question you May Press Star then.

One on your Touchtone phone and Swift your all your question. Please press Star then two please note. This event is being recorded I would now like to turn the conference over to MS. Susie Lisa. Please go ahead ma'am.

Good evening, all my name is Susie Lisa and I'm thrilled to have joined vertex as a new senior Vice President of Investor Relations welcome to our third quarter 2022 financial results Conference call.

On tonight's call, making prepared remarks, we have Dr. Erase my cable Rahmani for Texas, CEO , and President Stuart Arbuckle, Chief operating Officer, and Charlie Wagner, Chief Financial Officer, we recommend that you access the webcast slides as you listen to this call. The call is being recorded and a replay will be available on our website.

We will make forward looking statements on this call that are subject to the risks and uncertainties discussed in detail in today's press release and in our filings with the Securities and Exchange Commission. These statements, including without limitation. Those regarding vertex is marketed cystic fibrosis medicines, our pipeline and Bert Texas future financial.

<unk> are based on management's current assumptions actual outcomes and events could differ materially.

I'd also note that select financial results and guidance that we will review on the call. This evening are presented on a non-GAAP basis I will now turn the call over to Ray Smith.

Thanks, Susie we're delighted to have you on board.

Good evening, all and thank you for joining us on the call today.

Vertex continues to execute exceptionally well and make significant progress towards our goals of one reaching all patients with cystic fibrosis, resulting in strong sustainable growth two advancing our diverse mid and late stage clinical pipeline to develop.

Transformative medicines in multiple disease areas three preparing for our next commercial launches and for progressing the next wave of innovation towards the clinic.

In the third quarter global CF product revenues increased 18% year on year to $2 3 billion as more patients initiated treatment with our CFT our modulators.

Just on the strong performance, we are raising full year 2022 product revenue guidance from 8.6 to $8 8 billion to 8.8 to $8 9 billion. Despite the growing numbers of CF patients on CF GR modulators, we still have many more patients to reach and as you will hear from Stuart.

We're working with focus and urgency to reach all patients around the globe, who may benefit from our therapies.

As previously discussed we are at an important inflection point for the company each of our clinical stage programs sickle cell disease, and beta thalassemia acute pain, a M. K D type one diabetes and a a T. D is a first in class or best in class approach that holds the promise to transform the disease.

And each represents a multibillion dollar opportunity with a uniquely strong and durable CF franchise, a broad and deep R&D pipeline with multiple potentially near term commercial opportunities.

Strong balance sheet and the capacity to invest in both internal and external innovation and deeply talented people vertex is well positioned to deliver for patients and shareholders for years to come with that overview I'll turn to the details of recent R&D progress starting with C. L.

Try cactus sets, a very high bar in terms of safety and efficacy in the Registrational trials as well as in real World and long term studies that said if it is possible to develop even more effective medicines for CF patients. We are determined to be the company that does so.

Our next in class Triple combination be X one to one Tessa copter VX 561 holds that potential the.

The Triple now referred to as vans, the captor chassis caster and do Jive, a catheter or the vans. The CAFTA triple is progressing rapidly through phase III development with our studies in patients ages 12 and older now projected to complete enrollment this year as a reminder, this combination demonstrated.

Straightened greater activity in our human bronchial epithelium assay versus try CAFTA and greater clinical benefit in phase. Two then we have seen with any of our prior medicines. Additionally, it offers the convenience of once daily dosing and royalties in the low single digits versus low double digits for <unk>.

Chapter for the 5000 patients who do not make any C. F. T. Our protein we're working on an mrna therapy with our partners at Madonna, we've completed our IND, enabling studies and we remain on track to submit a 90 for this program this quarter with clinical trials starting thereafter.

And we're not done our work continues to identify even better potential therapies that could bring more patients with CF to carrier levels of sweat chloride.

Turning to extra Sal previously known as C. T exterior one our gene editing program for severe sickle cell disease, and transfusion dependent beta thalassemia or T. D T.

This is our most advanced program outside CF, and we expect extra cell to be our next commercial launch in June we presented data from 75 patients with up to 37 months of follow up for my pivotal trials of excess out the data demonstrated extra cells potential to provide a one time functional cure.

For these patients last month, we announced that in addition to having granted virtually all available U S regulatory designations. The F. D. A has now also granted extra sell a rolling review we plan to begin our BLA submissions for both sickle cell disease and beta thalassemia in the U.

Next month and complete the submission by the end of the first quarter of 'twenty 'twenty three in Europe . We previously shared that we reached agreement on the filing package with the EMEA and M. HRA in the EU and U K, respectively. We remain on track to submit these M E. A's by the end of this.

This year our teams are intensely focused on preparing these multiple complex submissions with three separate regulatory agencies in order to bring extra sell to patients as quickly as possible.

Given that priority, we will not be sharing new clinical data at ash, but instead look forward to sharing updated clinical data in the first half of 2020 three.

Extra sell holds the promise for a one time curative therapy for thousands of patients with severe sickle cell disease and transfusion dependent beta thalassemia. This therapy potentially the first CRISPR based gene editing treatment to be commercialized for patients with a genetic disease.

Also represents a near term and significant market opportunity.

Turning to be X 548 in our pain program VX five four it is a novel selective NAV 1.8 inhibitor that offers the potential of highly effective pain relief without the side effects or addictive potential of opioids NAV 1.8 is both a genetically and pharmacologically validated.

Good Rick.

Call that VX 150, and earlier generation Nap 1.8 inhibitor demonstrated positive proof of concept in acute neuropathic and muscular skeletal pain.

FIFO rate has been studied in two phase two placebo controlled acute pain studies and showed statistically significant and clinically meaningful pain relief compared to placebo and was generally well tolerated. The study also included an opioid reference arm just support the evaluation of the X 548.

With regard to the regulatory status VX five four it has been granted fast track and breakthrough therapy designation in the U S. We reached agreement with the F D. A and the design of the Phase III program in support of a broad label in moderate to severe acute pain and recently initiated the pivotal studies.

The phase III development plan for VX 548 in acute pain consist of two randomized controlled trials. The design of the R. C. Ts in the pivotal program is very similar to our phase two completed studies same pain states postponed connecting me and post abdominal plastic.

Pain treatment duration 48 hours and the same primary endpoint the sum of pain intensity difference or spin over 48 hours of VX 548 compared to placebo.

Third single arm study rounds out the phase III program. This study will enroll patients with multiple other types of moderate to severe acute pain with a treatment period of up to 14 days.

Given our experience in executing these types of trials efficiently the short treatment duration and the high unmet need for effective pain relief without the significant side effects or addictive potential of opioids, we view VX 548, as a near term and significant mark.

Opportunity. We also plan to study be X five four rate in neuropathic pain and remain on track to initiate a phase two dose ranging proof of concept study in patients with painful diabetic neuropathy towards the end of this year.

Moving to Enoxaparin or VX 147, the first potential medicine to treat the underlying cause of April while one mediated kidney disease or a M K D and.

Enoxaparin has breakthrough therapy designation in the U S and both prime and orphan drug designation in Europe .

Enoxaparin is being studied in a single adaptive randomized double blind placebo controlled phase two three pivotal trial and the primary endpoint is a reduction in the rate of decline of kidney function in patients treated with enoxaparin on top of standard of care compared to standard of care for approximately.

Two years importantly, the trial is a preplanned interim analysis at 48 weeks of treatment, which if positive could serve as the basis for accelerated approval in the U S.

This study is underway and enrolling patients. We now have more than 50 sites open for enrollment in the U S and internationally with a goal to open more than 150 sites in total we.

We look forward to updating you on the enrollment and study progress as the trial advances.

Next moving onto type one diabetes, we have been advancing three programs in our portfolio first VX 880, our stem cell derived fully differentiated insulin producing islet cell replacement therapy, which is in mid stage clinical development. In this program, we use standard immunosuppressive.

Therapy to protect the cells from the immune system. These same cells are the foundation for other two programs in type one diabetes.

Next the South plus device program, which encapsulates these fully differentiated IL itself and their proprietary device that shield the cells from the body's immune system and does not require immunosuppressants. We remain on track to file the IND for this program by the end of this year.

Lastly, in our hyper immune cells program, which is in preclinical development. We are editing the same fully differentiated insulin producing islet cells to cloak them from the immune system obviating the need for Immunosuppressants.

Earlier this year, we achieve proof of concept for VX 880 in type one diabetes with the first two patients dosed at half dose in part a of the study part B of the study which uses the full target dose is underway and enrolling patients.

The type one diabetes program holds enormous potential there are more than 2.5 million patients in the U S and EU alone with type one diabetes, who may benefit from a treatment with the potential to provide glucose control without the fear of hypoglycemia or the need for insulin.

We look forward to sharing additional data from more patients and longer duration of follow up at the appropriate time.

Last word on our type one diabetes programs.

Having recently closed the acquisition of Vies site I want to extend a warm welcome to our vice I colleagues let.

Let me close with our Alpha one antitrypsin deficiency or a a T D program.

Earlier this month, we announced that the I N D for VX six three for the first in a series of next wave a a T. Corrector has cleared and VX 634 has entered first in human clinical trials. We also announced a 48 week phase two study of VX 864.

Our first generation a a T correct or will soon initiate this study will assess the impact of longer term treatment on polymer clearance from the liver as well as on serum levels of functional a a T.

With those R&D highlights I'll hand, it over to Stuart for a review of our commercial progress.

Thanks restaurant I'm pleased to review Tonight, All continued strong performance in CF as well as the multiple near term commercial opportunities, we see across our business, including the strong outlook in C. F significant progress made to prepare for the commercial launch of X L and our view of the promising role of VX 548 in helping treat P.

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Starting with C S and the U S. Our focus is to maintain the very high persistence and compliance we have seen with our therapies and to extend the benefits of therapy to younger age groups.

Outside the U S. We have seen rapid growth driven by the uptake of Caf trio try CAFTA in countries with recent reimbursement agreements.

We've also seen strong uptake of Caf trio in children Ages six to 11 in countries, where this indication has reimbursed access.

Today, our medicines are approved and reimbursed in more than 30 countries benefiting tens of thousands of cystic fibrosis patients on five continents.

However, there are still thousands of CF patients who are not yet on treatment.

These patients fall primarily into the following categories.

One patients in countries, where we are early on the launch curve such as those with recently achieved reimbursement agreements or label extensions for younger patients.

Two patients in younger age groups for whom we continue to pursue label and reimbursement extensions.

And three to a lesser extent patients awaiting reimbursement for our medicines in a small number of countries.

We are confident that we will reach the vast majority of these patients over time, which will drive continued revenue growth in the near and long term.

We continue to make excellent progress expanding our label for our C. F T. Our modulators to younger age groups.

In September or can be was approved for children ages 12 months to less than 24 months in the U S.

We expect to file for U S. FDA approval of Kalydeco in children Ages, one month to less than four months before the end of 2022.

Similarly, we will submit to the U S and other global regulatory authorities for approval of Tri CAFTA in children two to five years old by the end of the year.

Finally in CF as restaurant mentioned, our C. F T. Our mrna program is progressing toward an I N D submission this year.

This program targets the underlying cause of disease in approximately 5000 and CF patients worldwide.

Beyond CF, we have a broad diverse and advanced R&D pipeline.

I will focus my comments on our commercial readiness efforts and the market opportunity for a potential next product launches extra cell and VX 548.

Extra sell host curative potential for patients with sickle cell disease, and transfusion dependent beta thalassemia, and we are making significant progress with launch preparation activities.

Treatment with extra sale is a process that takes months from start to finish and we fully recognize both the significant opportunities and challenges in offering such a novel potentially curative therapy for patients.

We are creating the infrastructure and support required for physicians and patients that we believe will lead to commercial success upon potential regulatory approvals.

Our commercial and medical Science liaison field teams are hired and trained in the U S.

These teams have been actively engaging with key treatment centers policymakers and Payors and similar efforts are ongoing in Europe .

Our initial launch of X L will focus on the estimated 32000 patients in the U S and Europe with severe forms of sickle cell disease and beta thalassemia.

Roughly 25000 of these 32000 patients are severe sickle cell disease patients the vast majority of whom reside in the U S. These.

These patients are highly concentrated in certain geographies and thus we believe they can be served effectively with a network of approximately 50 qualified authorized treatment centers in the U S and approximately 25 in Europe .

By way of context, we reached the vast majority of CF patients in the U S by calling on approximately 250 CF treatment centers.

These centers have the medical and technical expertise to support the potential future use of X yourself.

Our field teams are already engaging with the centers on the needed administrative and logistical capabilities as well as the treatment capacity to support the launch.

We've been encouraged by the early interest and engagement from the centers and their staff.

In parallel to engaging with these treatment centers, we have been working closely with policymakers and with payers to ensure that these stakeholders understand the significant burden of these diseases.

Payment models on our important consideration given the value that a one time potentially curative therapy like extra sell can bring to patients and the health care system.

We are continuing to work with various stakeholders to ensure patients who may be eligible for extra cell have access to this potentially curative therapy.

Turning to pain, we believe that VX 548 has the potential to play an important role across the pain spectrum, including an acute neuropathy and musculoskeletal pain.

With the recent initiation of the VX 548 phase III program and the short treatment period in these trials acute pain is now an exciting potential near term commercial opportunity.

I'll focus my remarks around three key aspects critical to framing the acute pain market for vertex.

One the opportunity is significant given the market today for acute pain in the U S is $4 billion, even though 90% of prescriptions are generic.

To prescribing is concentrated in the hospital setting unless addressable with our specialty commercial infrastructure that fits the vertex model.

And three there is a significant gap in the market for safe and effective treatment options for physicians and patients.

Firstly, despite 90% generic penetration the U S market is approximately $4 billion and patients receive some 1.5 billion treatment days annually for the oral treatment of acute pain.

Our highly effective and well tolerated new class of medicine, Therefore has multibillion dollar potential.

Secondly, roughly two thirds or 1 billion of these treatment days are driven by hospital prescribing following inpatient or outpatient procedures, such as surgeries or emergency room visits this.

This includes the prescriptions written and filled in hospital during the patient stay and those written discharged to provide the patient with a multi day course of medicine for ongoing pain management.

Given the concentration of pain treatment that is driven by hospital prescribing. We believe we can reach a large proportion of this market with a specialty sales and marketing infrastructure.

And a third key consideration of this marketplace is the significant side effects of opioid therapy.

Overdose deaths from opioids have continued to rise in the U S and opioid prescribing for the treatment of acute pain has been a clear contributing factor to the opioid epidemic.

In response hospitals physicians and state agencies throughout the U S have limited or attempted to reduce the use of opioids for the treatment of acute pain.

Any states as well as large hospital systems, such as Kaiser Permanente, and John Hopkins Medicine have enacted strict measures to reduce opioid prescribing.

In addition, beyond the addictive potential opioids have other negative side effects, including nausea, somnolence constipation and can result in increased length of hospital stay until these problems resolved.

These concerns on limitations with opioids create a significant gap in the market for the treatment of acute pain because of the lack of safe and effective treatment options for doctors and patients.

Therefore availability of a therapy like VX 548, a novel highly effective non opioid treatment that does not have the addictive potential of opioids no. Other significant side effect profile would be an extremely valuable new treatment option and could be used as the next step in a treatment strategy after prescription nsaids re.

Allocating opioids to being used only as a last resort.

I look forward to updating you further on our commercialization plans and pain, including our view of the opportunity in neuropathy pain over the coming months in.

In closing I'm excited about the opportunity to extend the benefits of our CF medicines to more and more patients around the globe.

And with the near term potential commercialized multiple transformative treatments for patients with serious diseases outside of CF.

I will now turn the call over to Charlie to review the financials.

Thanks Stuart.

<unk> third quarter and year to date 2022 results set us on pace for another year of exceptional financial performance and strong execution third quarter 2022 revenue increased 18% year over year to 2.3 billion led by 46% growth outside the U S. On continued strong uptake of trade.

Captor cap trio in markets with recently achieved reimbursement as well as label extensions into younger age groups U S. CF revenue was up 5% with ongoing consistent performance aided by penetration into younger age groups.

During the third quarter CF revenue growth also benefited from an approximately $75 million increase in channel inventory in certain markets. We do not expect these purchases to recur in the fourth quarter and this quarterly phasing as reflected in our updated full year guidance.

Third quarter 2022 combined non-GAAP R&D acquired IP, R&D and SG&A expenses were $758 million, an increase of 29% compared to the third quarter of 2021.

Throughout 2022 we've continued to invest in our R&D pipeline, which now includes seven programs five of which are in pivotal development. The year over year increase in Q3 reflects stepped up investments in these programs, notably pain, the new vans, a catheter triple and mrna N C F and tie.

On diabetes as well as the continued pre commercial build out activities for eggs itself.

Looking forward, we expect to continue to invest in research and our clinical stage pipeline as well as in commercial readiness activities for programs with near term significant commercial potential including eggs or cell and VX 548 for pain. We also remain committed to augmenting our internal research efforts with external innovation aligned with our R&D strat.

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Third quarter 2022, non-GAAP operating margin was 55% we.

We generated non-GAAP operating income of 1.3 billion in the quarter, an increase of 11% versus the prior year period.

Our non-GAAP effective tax rate in the third quarter of 2022 was 21%.

We ended the quarter with 9.8 billion in cash and investments as our cash flow generation and balance sheet remained very strong.

On the business development front, we closed the previously announced acquisition of buy a site for 320 million in cash and integration activities are underway.

Now switching to guidance, we are increasing our 2022 CF product revenue guidance by $150 million at the midpoint to a new range of $8 8 billion to 8.9 billion the increase.

It reflects the strong uptake of tried captor caf trio in markets with recent reimbursement agreements and continued performance in the U S.

At the midpoint the increased guidance represents full year 2022 revenue growth of approximately 17% versus 2021 and will mark vertex is eighth consecutive year of double digit revenue growth.

There is no change to our projected 20 twenty-two combined non-GAAP R&D acquired IP R&D and SG&A expense range of three to 3.1 billion.

There is also no change to our full year non-GAAP effective tax rate guidance range of 21% to 22%.

Finally, a comment on movements in foreign exchange the.

The impact of the significant strengthening of the U S dollar versus the euro and other currencies since the start of the year is partially mitigated by our foreign exchange risk management program for.

For the full year 2022 at current rates, we estimate the changes in foreign exchange net of program effects will have a negative impact of approximately 1% on a revenue growth and this is reflected in our updated revenue guidance range for the year.

In closing vertex is performing exceptionally well despite the challenging macroeconomic climate.

For the remainder of 2022 and into 'twenty twenty-three, we look forward to further important milestones to Mark our continued progress as highlighted on this slide.

As Richmond noted over the past year vertex has seen a significant acceleration in our R&D pipeline and we are well on our way to diversifying the company and adding to our long term growth profile.

As always we look forward to updating you on our progress on future calls, let me turn the call back to Susie to begin the question and answer period.

Thanks, Charlie Chuckling, you begin the queue. Please.

Yes ma'am.

We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone, if you're using a speakerphone. Please pick up your handset before pressing the keys and to withdraw. Your question. Please press Star then two and at this time, we'll pause momentarily to assemble our roster.

And the first question will come from Michael Yee with Jefferies. Please go ahead.

Hi, This is Dennis on for Mike.

That's on the progress in the quarter can you just please remind us the status of the ongoing.

Diabetes phase one VX 880.

And if we all get updated data this year and if you can comment on where that would be great.

And regarding the device program, if that's something.

We can see initial data in 2023.

And like how should we think about the level of data disclosure for that program. Given you only disclosed a single patients worth of data for VX eight Eddie Thank you.

Okay. Thanks very much for that your question is about our type one diabetes program and just to ground everyone.

There are actually three programs within our type one diabetes portfolio. The first is VX 880, and that one is actually in phase one two so it's a program that's already in patients.

The program in which we've already achieved proof of concept based on the first two patients treated importantly, with half the targeted dose that program is now continuing we are enrolling and dosing patients at a full targeted dose and we do expect to share data next year at the appropriate conference.

Or venue.

The second program in that portfolio is the cells plus device program.

That program has its eye and be on track for later this year with regard to what you should expect from that in terms of data disclosures and when we might be able to see data I would think about the.

Type one diabetes programs, whether itself alone or south plus device closer to see T X years, you're one and less similar to our small molecule programs and what I mean by that is we go right into patients.

And with a reasonably small number of patients because youre right into patients with this potentially onetime curative therapy, we can tell a lot about the treatment effect and the emerging profile.

It's a little bit too early to comment on exactly when we'll see data, but I would think about the program closer to CTX than to small molecules and then lastly, just to round out the type one diabetes program, that's third vertical where the third pillar and that program is the same exact sells these VX 880 cell that I've already demonstrate.

The benefit in the clinic, we are editing those cells in order to cloak them from me from the immune system and that would allow us to not have to use immunosuppressants.

Next question please.

The next question will come from Mohit pencil with Wells Fargo. Please go ahead.

Great. Thanks for taking my question and congrats and welcome to Susie Lisa Susie Lisa from my side as well.

So.

Maybe one question on AR on the FTE benefit with these potentiate. This incorrectly that you can extract the maximum benefit and there was one expert who mentioned that probably are at 14 percentage point and grew when you track after you're getting to the higher end and maybe at three.

<unk> four percentage by more you could be getting to a plateau.

What is the maximum you can achieve with these kind of therapies.

So assuming that next generation combo does get there.

Do you think do you agree with that statement that this is probably the maximum you can get to these kind of therapies. Thank you.

Yeah, Hey, Matt Thanks.

Thanks for the kind words.

My question is about C. F T. Our modulators in general and what can we expect in terms of benefit let me just blow out that question, a little bit more and broaden it when you think about the benefit of GR modulators. It's important to realize that CF is a disease is a systemic disease.

So the only manifestation is not the long it is a very prominent manifestation, but it's not the only manifestation. So what do I mean by that CF patients also have difficulty with liver disease. They also have difficulty with endocrine and exocrine pancreatic disease and you know about the difficulty in gaining weight.

Turning heights and living a high quality life in the absence of CFT, our modulators. So the real benefit of <unk> modulators and we've seen this with kalydeco to start with all the way up to try Kafka is certainly an improvement in lung function and the way we measure that acutely is indeed P. P. F E V. One.

Now your specific question is 14%, which is what <unk> seen is that the Max and I think the jury is still out on what the maximum a P. P. F. E V. One benefit could be but I will tell you that the next in class combination that's the VX one to one test the cap.

And 561 combination in the phase two study it had certain populations get up to 20% and benefits. So I think the jury is still out and we have the next wave of molecules to look forward to and just to close out. The benefits are there are some abstracts coming out at NACS.

See that include data from Tri CAFTA and some of our other <unk> modulators and it's really encouraging to see that this benefit on P. P. F. E V. One also translates to benefit in terms of mortality lung transplantation hospitalizations and pulmonary exacerbations.

Thank you.

Lisa.

The next question will come from Salve enriched or with Goldman Sachs. Please go ahead.

Good afternoon, and thanks for taking my questions just two for me here one on the type one diabetes program can you help us understand how that fully protects the cells from the immune system, but simultaneously maintains the integrity of the cells and the device and then secondly, you have about 10 billion and cash here.

And so if you arent and I guess your thoughts here, but if you if you aren't going to do value, creating business development should we expect you to start to return that via stock buybacks or look to issue a dividend. Thank you.

Okay. Thanks Avi.

Let me start with the type one diabetes question I'll just frame the capital allocation question and I'll I'll I'll ask Charlie to give you more details.

The type one diabetes program and the self plus device combination.

We have worked long and hard and all credit to the semi team that worked on this even prior to the acquisition.

There has been a long history of trying to use our devices in this context and the traditional trouble that people have run into or are the following one sufficient.

Oxygenation and nutrients for the cells.

To prevent a foreign body reaction and three to have the cells protected where the nutrients and oxygen can get in but not the immune cells and also to ensure that the sensing of glucose in the release of insulin can occur.

The proprietary device that we have that will be used with the VX 880 cell has the features to account for and address those issues, namely protect the south but allow the flow of nutrients and oxygen to in all of our preclinical studies, including in large animal studies.

We see no foreign body reaction and three to have the ability to sense glucose and release insulin.

I will say solving the most challenging part of the type one diabetes program is actually having cells that are fully differentiated insulin producing and that part of this we know we have gone past because of the proof of concept achievement in those.

First two patients treated have dose on the capital allocation question you know our strategy on capital has not changed the focus is on innovation, both internal and external Charlie anything you wanted to add to that.

You said it very well the priority continues to be investment and innovation and I think we've been very active over the last few years and it shows if you look at our pipeline now 40% of the programs in the pipeline has benefited from BD that we've done in recent years.

And so we continue to maintain an active function looking at external innovation to support our internal efforts that will continue to be the priority. We have also maintained a share buyback program in recent years just to offset dilution.

But the focus and the primary purpose is investment in innovation.

Thank you.

Thanks, Toni next question please.

The next question will come from film to do with Cowen and company. Please go ahead.

Good afternoon, and thanks for taking my questions I wanted to ask about the Enoxaparin.

53 trial and specifically on the phase two portion of the phase two three what is for Texas. Most recent thinking on whether data from that phase two portion will be disclosed and then maybe more generally can you remind us what criteria by which you choose.

The dose that's advancing into phase III, what measures will you be looking at to make that determination.

Sure Hey, Phil.

The Enoxaparin trial, that's the VX 147 trial in a.

A M Kt or April one mediated kidney diseases. The program that's the adaptive phase two three.

Study <unk>.

And the criteria for dose selection, Phil really centers around measures of efficacy seen at 12 weeks and what that really means is proteinuria remember proteinuria, we can see change within that 12 week period that is not possible for.

The change in GFR.

Now the there is a.

Committee that can look at the data to make that decision that is done in the appropriate way given the need to maintain trial integrity.

But I would assume that we would share. The fact that we've gotten past that important phase two milestone and that a dose has been selected but we are going to have to be careful about maintaining study integrity. Given that there are patients that are in the trial and we'll be continuing to the phase.

Three portion.

That's helpful. Thank you.

Yeah.

The next question will come from.

Yes, ma'am will come from Evan Tigerman with BMO. Please go ahead.

Hey, guys. Thank you so much for taking my question and really congrats on the strong quarter I'd Love for you to provide you some more color as to what you saw with ethics floor to re initiate a clinical trial with this asset and can you also highlight why victory for it might be more successful than its predecessors. Thank you.

Yeah, Hey, good afternoon, Evan So the question is on our Alpha one antitrypsin deficiency or a T D program.

Let me take one step back and remind everyone. Why we are so interested in this disease. So a a T D fits the vertex strategy, our R&D strategy like a glove is a disease, where we understand the causal human biology, we have a validated target and we all.

So have a biomarker that translates from bench to bedside. There are about 100000 people in Europe , and the U S who have this disease and by the way it happens to be a pulmonary disease that is a disease of protein Misfolds <unk>, something we know a little bit about given our work in cystic fibrosis. So that's why this disease.

Just fits us perfectly.

What we saw with the VX 864 phase two trial now 864 is the first generation correct or for a a T.

Is for the first time, a small molecule was able to raise functional <unk> levels that has never been demonstrated before.

And in the exploratory analyses, we were also able to see a more than 90% reduction in serum polymer levels.

When we put that altogether, here's where we are.

One approach that we're taking and we're taking both of these approaches in parallel is to bring forward more potent medicines.

8864 that is VX six three for its multi fold more potent it had better drug like properties and it has initiated its phase one study.

And in parallel we're also advancing VX 864, because we have chronic tox coverage to study this molecule in a longer term study and in a longer term study, we can assess liver clearance of polymer. This goes back to the serum polymer clearance that we saw so we're looking for liver polymer clearance.

And the long term impact on functional a a T. We're driving both of these programs forward in parallel and you know I don't know maybe around this time next year, we'll have the data that we need to assess which molecule or molecules should advance further so that's really where we are with the a T D program.

Thank you.

Next please.

The next question will come from David with finger with SBB Securities. Please go ahead.

Thanks, very much and let me add my congrats on the results as well, particularly given the.

The speculation today in the markets are so my question is regarding VX 548.

Uh huh.

My take is that the product's opportunity in chronic pain is clearly tremendous since patients cannot be administered opioids long term, but could you help us understand your view of the acute market opportunity in the context of DRG codes and hospital system sensitivity.

Basically the question is will hospitals replace inexpensive generic drugs in patients who are not likely to be at risk of opioid addiction. If they are prescribed opioids for less than a week unless of course, they have a preexisting addiction issue.

Thank you.

David I'm going to ask Stuart to tackle the question on acute pain and I'll come back and just say a word on chronic pain Stuart yes.

Yes. So thanks for the question David Yeah. So in terms of the market for acute pain as I said in my prepared remarks, we do see this as a very significant opportunity for a number of reasons one the treatment of acute pain today is a very sizable market I referenced the fact that there's 1.5 billion treatment days a year and much of that is concentrated in the hospital.

Ireland disc.

Despite the fact that the market is over 90% generic as you as you referenced.

$4 billion market today. So the real question is what is the unmet need here and the unmet need is actually very very significantly.

In contrast to your comments actually the acute use of opioids is a very prominent and well recognized contributor to the opioid epidemic and as a result of that there have been significant constraints put in place on the use of opioids in many states and in many hospital systems and that has substantially reduced the use.

Of opioids, however, what hasn't gone away is moderate to severe acute pain for those patients and so there was a significant gap left in the marketplace with something that provides effective pain relief, but without the addictive potential and other side effects of opioids. So in the hospital setting both in terms of the inpatient.

<unk> stay which is probably on average two three or four days something like that we think there's a substantial unmet medical need and then obviously those patients are discharged with a multi day prescription for ongoing pain management, which they then fill in the retail setting. So overall, we're very very excited both about the profile of the export.

Bye for rate, but also the opportunity to make a real difference in the treatment of acute pain and then rest of it back to you on chronic yeah, David I agree with you on the opportunity in chronic pain. In addition to a very substantial opportunity in acute pain and the reason for the opportunity in chronic pain is is two fold one is.

Is.

What you indicated around not wanting to use opioids over a chronic period frankly, not wanting to use opioids, even over an acute period, but second opioids are actually not very good at all in terms of efficacy in the chronic setting and sort of.

For example, in neuropathic pain and I just wanted to close by letting you know that the phase two dose ranging study of VX 548 in diabetic neuropathic pain will also initiate this quarter and we have a high confidence for this one not only because of.

The genetic validation of the target, but because of the pharmacological validation on neuropathic pain with the predecessor molecule VX 150.

Thank you.

The next question will come from Robin Cornwell Hesketh with Truth Securities. Please go ahead.

Hey, guys. Thank you for taking our question this is coupon for Robyn.

I just had one question on the 80 program. When do you think you can move from the phase one into phase two trial, how long do you think it will take to do the healthy volunteer study and you had previously talked about how can how you can maybe do really short trials to see activity.

Given what you're doing with VX 864 has that thinking changed in any way.

And another question on the mrna program in C. F. You said the I N D will go in later this year. What's the earliest you see going into the clinic is there given that this is a new modality is that any reason to anticipate delays for the I N D acceptance. Thank you.

Sure. So two separate questions in there one about the mrna program in cystic fibrosis, and then about a E. T. So let me tackle mrna in cystic fibrosis first.

So the approach here is to use an mrna inhaled therapy for those 5000, or so patients who don't make any C. F T. Our protein and therefore cannot benefit from CF TR modulators, the IND, enabling.

These are complete the R&D will go in this year and you're right. It is a more complex product than a small molecule and in the Grand scheme of things, we've only been working on nucleic acid therapies and cell therapies for the last let's say five to eight years, whereas we've been working on small <unk>.

Molecules for many decades.

That all being said <unk> is a very serious life shortening disease and I do think that all parties involved are motivated to make sure that medicines that could bring benefit get to patients rapidly of course, we'll be able to update you on the progress in future calls, but I'm very pleased with the progress.

Yes, and I'm pleased to see that we are on track with the IMD to go in this year.

A T program.

We are doing two things in parallel one is advancing VX 634 into the first in human study and to studying be it VX 864 for a longer duration of time and we're doing this in parallel because we can that is to say we have sufficient toxicology coverage to study.

<unk> 86 for over an extended period and I do think you need that extended period to evaluate liver clearance for this mechanism, but in terms of the first in humans, you've seen our track record we tend to move at a good clip I would say you know lets say around this time next year or so we'll have the data from our first in human studies with.

634, we'll have our data from the phase two longer term study and I fully expect more molecules behind 634 to enter the clinic. So I feel really good about where we are and we're executing on the strategy of serial innovation had in having a portfolio approach exactly as I would.

Like in in all of our programs, but particularly in a a T.

Thank you so much.

The next question will come from Jessica Fye with J P. Morgan. Please go ahead.

Hey, there thanks for taking my question Nice results Tonight.

It's following up on an earlier question.

Got it.

Just to make sure I understand are you generating this longer term data with 864 to evaluate liver polymer clearance just to sort of further de risk 634, which has better drug like properties and then second with the trials in patients age 12 and up for the new Triple set to complete enrollment by year end can you set expectations for when we should expect.

Top line data factoring in any analysis time that might be required. Thank you.

Yes.

Jessica on the.

New Triple combination the vans the caster Triple combination that's one to 1561 Tesla Captor, we do project enrollment in that program. Both studies in 12, plus will complete before the end of this year. As a reminder, these studies are one year in.

So we will have all of the dosing complete at some point next year and you know it does take a little bit of time, but we're pretty quick with closing out the study and having results thereafter, but the important point to notice that that's a one year treatment duration.

With regard to the 864 program and a a T D. What are we really trying to accomplish there.

Here's the important thing to keep in mind with 864, what we saw for the first time ever with a small molecule corrector is increases in functional a a T level. The magnitude of the treatment effect was insufficient for us to move that to phase III, but that gave us proof of.

Biological activity.

The reason, we want to study 864 for polymer clearance in the liver is because that post hoc analysis of phase II showed us is 90% decrease in serum polymer levels, leading us to believe that longer term treatment would indeed lead to clearance of the liver that's the hyper.

Offices, we're testing there and we're also going to evaluate where the longer term treatment leads to elevations and functionally a a T.

If you're asking is it possible that 864 as the molecule that moves forward into later stages of development based on this longer term treatment. Yes. That's possible is it possible that VX six three for the molecule, we select because it's more potent in its better drug like properties, yes, that's possible and that's why we're running Bo.

These programs in parallel ultimately then maybe the most important thing to take away is that the small molecule approach to this disease a a T. D is the only approach that holds the potential to treat both the liver and lung manifestations of this disease and this.

Pathway that we've drawn out allows us to assess both of those in parallel.

Thanks.

The next question will come from Geoff Meacham with Bank of America. Please go ahead.

Hi, This is Joe on for Jeff I had a question on excess L. Can you walk us through how we should be thinking about the eventual commercial rollout.

You're filing in the EU and U S. What is the rough timeline for first revenues should we be thinking late 2023 or is that more early 2024. Thank you.

Sure, let me start with where we are today and the immediate next milestones that we're working towards and then I'm going to ask Stuart to comment on the Prelaunch Act.

Activities.

So we are intensely focused on getting our filings in for the EU The U K and the U S. We are on track to start the rolling submission in the U S. Next month in November and we're on track for our EU and U K.

Actions to complete by the end of this year Stewart do you want to talk a little bit about our prelaunch activities and.

From there, yes, John so much of our prelaunch activities is focused in two areas, one is with policymakers and payers and the other one is with the.

The authorized treatment centers, who would be the ones, who would be actually administering ex yourself with payers and policymakers as you can imagine a lot of this is about making sure that the right conditions are in place. So that patients can get as early as possible access the extra cell pending oversee regulatory approval. This is a disease of <unk>.

<unk> unmet need that's well recognized by the payer and policymaker community and so the discussions we've been having with them have been really very productive and fruitful on the authorized treatment center side. It really is identifying authorized treatment centers, which are close to where patients are concentrated in patients are concentrated and relatively.

Screen geographies in about 25 states here in the U S about 90% of the patients are located.

In the EU about 75% of patients are in four countries, the U K, France, Italy, and Germany, and so we're looking at the potential to establish treatment centers about 50, or so here in the U S about 25 or so in those four countries in Europe , which we think is.

The vast majority of patients as I say pending regulatory approval again, our engagement with the centers has been very positive that clearly very excited about the prospect of something like X L, which has the potential to provide a one time functional cure to their patients.

Great. Thank you have time for one more please.

The next question will come from Colin Bristow with UBS. Please go ahead.

Hi, This is he hung on for Colin Thanks for taking our questions and congrats on the strong quarter and pipeline progress. So we have two questions. The first one is only a SaaS based business. So how do you deal with the competitive threat from Applebee's.

Test AAA it based assay to Cracker just appeared on the clinical trials Gov.

And the second question is on the CRISPR based at the empty therapy. So you'll have already noted the I N D. Farthing will be next year. So when do you think we could see the first clinical data for the program are would.

Would you consider something more like releasing those single patient data as you have already done Mr. They asked if it is the auto program for diabetes. Thank you.

There are two questions in there one on CF and one on D. M. D. Let me take the D. M. D question first so to.

To give everyone a little bit of a quick backgrounder recall that our approach to D. M. D is different than most of the approaches out there which focus on micro dystrophin.

Our approach is an in vivo gene editing approach that is centered on exon skipping and producing full length, if not near full length dystrophin and the reason we believe in this approach is because of the human genetics that we.

We see so for example, becker's muscular dystrophy, where where patients have near full length dystrophin that disease is a much much milder form of DMD. The micro dystrophin approach simply doesn't have that kind of human genetics behind it.

I'm really pleased with the progress of the program. We are in our IND, enabling studies now we expect to finish those up and file our I N. D. Next year. There was a question in there about when you could expect data really a little bit too early to call, but I would think about this program in that cell and gene space. So.

With a reasonably small number of patients over a reasonable amount of time very similar to CTX herzer, one very similar to the type one diabetes program, we're going to know a where we are.

On the CF business you know we've talked about this many times in the past tried CAFTA has set an enormously high bar it can treat up to 90% of patients with this disease. We have already advanced. The next program. This is the bands of character.

Program, it's going to complete phase three enrollment this year, if it is possible and it is a tall order, but if it is possible to be better than try character. The vans. The captor Triple program holds that potential it has better chloride transport then tried CAFTA in our human bronchial.

Epithelium essays and in Phase two studies you have to do some cross study comparisons but in phase III studies. It looks like it is potentially even better than try CAFTA and we are now on the brink of bringing the mrna therapy for the first time, having a therapy.

The last 5000 patients with CF, we've never had more patients benefit from ICF TR modulators and we've never been in this position of being right on the cusp of having something for all patients I like our hand, and I'm looking forward to sharing more data.

This concludes our question and answer session I would like to turn the conference back over to MS. Susie Lisa for any closing remarks. Please go ahead.

Thank you Chuck and thanks, very much everyone for their questions and we look forward to taking your follow up and meeting with you soon.

Okay.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

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Yes.

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