The operator welcomes participants to the Vertex Pharmaceuticals Fourth Quarter 2023 Earnings Call and provides instructions for the call. Susie Lisa, Senior Vice President of Investor Relations, introduces the speakers and notes that the call is being recorded. She also mentions that there will be forward-looking statements and that financial results and guidance will be presented on a non-GAAP basis. Dr. Reshma Kewalramani, Vertex's CEO and President, thanks everyone for joining the call.

Vertex had a successful quarter in 2023 and has started 2024 with strong momentum. They achieved 11% growth in CF product revenues and have received approvals for CASGEVY in sickle cell disease and beta-thalassemia. They are also working towards multiple commercial opportunities and have a strong clinical-stage pipeline with the goal of launching five new products by 2028. Additionally, they are advancing two new disease areas, including myotonic dystrophy type 1, into the clinic.

The company has initiated a Phase 1/2 study to assess both safety and efficacy in patients with a common genetic kidney disease. They also reported positive results from their Phase 3 program for cystic fibrosis, including meeting primary and secondary endpoints and showing non-inferiority to another treatment. The company's proprietary assays were also predictive in these trials.

The results of the SKYLINE 103 study showed that there was a negligible difference in ppFEV1 between the TRI and vanza-treated groups, with a slight advantage for vanzacaftor. The sweat chloride levels in the vanza-treated group were lower than those in the TRIKAFTA-treated group, with a statistically significant and clinically meaningful reduction. This was seen in all three key secondary endpoints, with a higher proportion of patients in the vanza-treated group achieving sweat chloride levels below 60 mmol and 30 mmol, compared to the TRIKAFTA-treated group. The difference in sweat chloride levels was more pronounced in the SKYLINE 102 study, which included patients with more severe disease, while SKYLINE 103 included patients with lower baseline sweat chloride levels.

The results of the RIDGELINE study showed that patients who took vanzacaftor had a three times greater likelihood of achieving sweat chloride levels below 30 mmol compared to those who took TRIKAFTA. This was even more pronounced in children ages six to 11. The primary goal of the study was to evaluate safety, but the results also showed that 95% of patients had sweat chloride levels below the diagnostic threshold for cystic fibrosis and more than half had levels below the carrier level threshold. This is significant because CF is a multi-organ disease, but the focus has traditionally been on lung function. With the success of TRIKAFTA, the goal of vanzacaftor is to improve CFTR protein function, as measured by lower sweat chloride levels, in addition to lung function. Sweat chloride is a direct measure of CFTR protein dysfunction, and higher levels are associated with more severe disease.

The ultimate goal of CF treatment is to restore sweat chloride levels to normal or close to normal, as this is associated with improved outcomes. Vertex's vanza triple therapy aims to achieve sweat chloride levels below 30, which is considered normal. The therapy was found to be generally safe and well-tolerated in studies. It offers the convenience of once-daily dosing and a lower royalty burden. The Phase 3 results show that the vanza triple has surpassed the high bar set by TRIKAFTA in treating CF, and early treatment with the vanza triple may prevent systemic manifestations of the disease.

Vertex Pharmaceuticals has reaffirmed their commitment to investing in scientific and serial innovation to bring all eligible CF patients down to carrier levels of sweat chloride, effectively eliminating the disease. They acknowledge the trust of CF patients in their clinical trials and the hard work of their research teams. They anticipate filing for approval of their new CF medicine by mid-2024 and will use a priority review voucher to expedite the process. They are also working on a potential one-time functional cure for sickle cell disease and transfusion-dependent beta-thalassemia, which could benefit thousands of patients around the world.

The paragraph discusses the commercial potential of CASGEVY and the progress made in launching the drug in multiple countries. It also mentions ongoing studies to expand the label to younger age groups for treating sickle cell disease and beta-thalassemia. The Pain program and VX-548, a potential medicine for moderate-to-severe pain, has shown positive results in Phase 3 trials for acute pain in different models. This includes statistically significant improvement in pain compared to placebo on the primary endpoint of SPID48.

The paragraph discusses the results of three studies on the drug VX-548 for acute pain and neuropathic pain. The studies showed that VX-548 led to rapid and clinically meaningful reductions in pain, with a 50% reduction from baseline in the VX-548 arms. The drug was also found to be safe and well-tolerated in all three studies. The positive results support a broad label for moderate-to-severe acute pain and the drug has already received Fast Track and Breakthrough designations. The company plans to file for FDA approval by mid-2024. In addition, the drug showed promising results in a Phase 2 study for diabetic peripheral neuropathy, and the company plans to start a Phase 3 program for neuropathic pain. A second Phase 2 study for lumbosacral radiculopathy is also ongoing.

The company is seeking a broad neuropathic pain label and believes they have a pathway to achieve it by studying two of the largest pain segments. They have seen promising results with their drug VX-548 in both acute and diabetic peripheral neuropathy (DPN) pain. They are also focused on expanding their portfolio and addressing the unmet need of 90 million pain patients. In addition, the company has recently achieved approvals for their drug in sickle cell disease and thalassemia and is entering a new era of commercial diversification. They delivered strong commercial results in CF and are focused on reaching more eligible patients and driving further growth with their vanzacaftor triple combination.

Vertex Pharmaceuticals is releasing positive Phase 3 data for their new vanzacaftor triple combination treatment, which is expected to be widely welcomed by the CF community. The company also anticipates growth from their mRNA program and an increase in the number of people living with CF due to improvements in care. They are also seeing high enthusiasm for their drug CASGEVY, which has been approved in some countries and is generating interest from physicians and patients. The company's sales, reimbursement, and access teams are actively working to ensure successful launch and patient engagement.

The company has seen positive reactions from payers and has established coverage for CASGEVY patients in the U.S., EU, and Saudi Arabia. They have a contract with Synergy and are actively engaging with other payers to finalize coverage. The CMMI Cell & Gene Therapy access demonstration model has been accelerated for implementation in 2025, which could provide additional access to Medicaid beneficiaries and address inequities in the sickle cell disease community.

Last week's update included federal funding for fertility support and efforts to engage with state Medicaid agencies to finalize policies for CASGEVY. In France, an early access program has been approved for TDT patients and discussions for reimbursement are also underway in the UK and other European countries. Progress is also being made in the Middle East, where there is a high prevalence of these diseases and efforts are being made to secure access and reimbursement for eligible patients. A local presence has been established in the region and efforts are being made to expand the number of treatment centers and infrastructure to meet patient demand.

The CASGEVY patient journey can be divided into three phases: pre-treatment, cell collection and manufacturing, and infusion of edited cells. The company is pleased with the progress of CASGEVY and plans to provide quarterly updates on the number of activated ATCs and patients in the cell collection phase. They are also excited about the potential of VX-548, a highly selective NaV1.8 inhibitor, to provide a new treatment option for acute pain. If approved, it will be the first new class of medicine for acute pain in over 20 years and could benefit millions of patients in the U.S. each year.

The market for acute pain medication is currently worth billions of dollars, despite the fact that most prescriptions are generic. VX-548 offers a solution to the unmet need for a safe and effective pain reliever. The company is actively recruiting a field force to promote the drug to hospitals and institutions. There is a growing push for non-opioid alternatives, and a recent bill introduced in Congress aims to make these alternatives more accessible and affordable for Medicare patients.

The NOPAIN Act, enacted in 2022, provides for an add-on payment for non-opioids and several states have pending legislation to promote education and remove financial barriers for non-opioid options. This shows momentum in Congress and across the U.S. to encourage the use of non-opioid therapies like VX-548. Vertex continues to see success in treating CF patients and is entering a new era of commercial diversification with the launch of CASGEVY and other potential launches, such as VX-548 for acute pain. In the fourth quarter of 2023, Vertex's revenue increased 9%, with 8% growth in the U.S.

Vertex Pharmaceuticals reported strong financial results for 2023, with 11% revenue growth and a 12% increase in revenue outside of the U.S. The company's primary revenue drivers were in line with expectations. Operating expenses increased due to continued investment in research and development, including pivotal studies for VX-548 and the vanzacaftor triple in cystic fibrosis. The company also invested in capabilities for its expanding pipeline and upcoming commercial launches. Additionally, increased costs from new business development contributed to the overall increase in operating expenses. Non-GAAP operating income remained consistent in the fourth quarter of 2023 compared to the previous year, but full year non-GAAP operating income decreased. The effective tax rate for the fourth quarter of 2023 increased due to an increase in U.S. R&D tax credits.

In Q4 of 2023, the company's effective tax rate was lowered, resulting in a 12% growth in non-GAAP earnings per share. The company ended the quarter with $13.7 billion in cash and investments and plans to prioritize investment in innovation and business development. For 2024, the company expects total product revenue to be in the range of $10.55 billion to $10.75 billion, with continued growth in CF and the commercial launch of CASGEVY. The company will book 100% of revenues for CASGEVY, with the profit share with CRISPR being recorded in cost of goods sold.

The paragraph discusses the projected operating expenses and investments for Vertex in 2024, including ongoing research and development costs. These expenses are expected to be around $4.3 to $4.4 billion, with a majority of the funds being allocated towards R&D for multiple mid and late-stage clinical programs. The completion of Phase 3 studies in 2024 will allow for new studies to be funded without significant growth in expenses. The company is also investing in commercial capabilities for potential launches in the near future. The projected non-GAAP effective tax rate for 2024 is 20% to 21%. Overall, Vertex had a successful year in 2023 with strong revenue growth, regulatory approvals, and positive trial results. Progress was also made in the early-stage pipeline with proof-of-concept for a new drug and plans to advance two more into clinical trials. Significant investments were made in both programs and commercial capabilities for upcoming launches.

The company anticipates important milestones in 2024 and plans to update on progress in future calls. The Q&A session will be longer due to positive updates this quarter. The first question is about the target patient for the next-generation CF program and the second question is about the launch of CASGEVY and how the Innovation Cell & Gene Therapy access demonstration model will be incorporated. The company plans to target both switch patients and naive patients for the next-generation CF program. Stuart Arbuckle will answer the question about vanza commercialization and the CASGEVY launch, with a focus on the CMMI question.

The speaker believes that vanzacaftor will be a popular treatment option for both current and former patients with CF, as it improves CFTR function and leads to better clinical outcomes. They also discuss their excitement about the opportunity to work with CMS for outcomes-based agreements for CASGEVY, stating that it will not cause delays as they are already working with state Medicaid agencies and the profile of CASGEVY is strong. The questioner then asks if SKYLINE or RIDGELINE can be followed in an extension.

An analyst asks about the differentiation between the new drug, vanza, and TRIKAFTA. The speaker, Reshma Kewalramani, explains that patients from both SKYLINE and RIDGELINE trials have the opportunity to roll over into open-label extension studies. She also mentions that the safety table shows less pulmonary exacerbations in patients on vanza compared to those on TRIKAFTA. She believes that long-term outcomes will be picked up as patients are followed in the open-label extension studies and existing registries for CF patients.

The speaker is responding to a question about the use of sweat chloride levels in medical practice. They explain that doctors primarily use sweat chloride levels for diagnosing cystic fibrosis (CF) and do not typically use it for prescribing treatments. They also clarify that the increase in cost of goods sold for a specific product is due to it being approved for commercial use. The speaker then goes on to discuss how sweat chloride levels are not routinely followed in clinical practice, but are understood to be a direct measure of CFTR protein function.

During a conference call, Phil Nadeau congratulates the members on a positive pivotal program and asks two questions. The first question is about the sweat chloride levels in patients taking TRIKAFTA and whether there is data showing better outcomes for those who reach low levels of sweat chloride. The second question is about the pain data released last week, specifically why the bunionectomy Phase 2 trial showed less potency compared to previous studies. Reshma Kewalramani responds by stating that the consistency of VX-548's performance is remarkable, and the small differences in results between trials are not as significant.

The author discusses the effectiveness of VX-548 in treating pain after bunionectomy and abdominoplasty surgeries. They note that the results from Phase 2 and Phase 3 studies were virtually identical and positive against placebo. They also mention the difficulty of conducting pain trials and the consistency of results across different measures. The author also addresses a question about sweat chloride levels in relation to the disease and genetics.

The speaker discusses data on residual function patients and interventional data on ppFEV1, sweat chloride, and long-term evidence, comparing TRIKAFTA to KALYDECO. They believe that the vanzacaftor triple will show long-term benefits and have the highest achieved CFTR protein levels. The next question is about commercialization and how the company will motivate people to switch from TRIKAFTA to the next drug. The speaker mentions that their experience is different, but does not go into detail.

The speaker discusses the rapid transitions seen in the adoption of new medicines for cystic fibrosis, specifically mentioning the successful transition from KALYDECO to TRIKAFTA. They also mention the design of the study, which provides evidence of successful transitions from TRIKAFTA to vanzacaftor. The speaker believes that the benefit-risk profile and once-a-day dosing of vanzacaftor will motivate the CF community to consider it. When asked about payer and government attitudes in Europe, the speaker mentions their long track record of working with them and their understanding of the disease.

The speaker discusses the expected launch of the vanzacaftor triple combination and how it will likely have a similar label to TRIKAFTA, making it less of a budget impact for payers. The next question asks about the expected cadence of patients initiating the CASGEVY journey, to which the speaker explains the multiple phases involved and how revenue will be recognized at the point of infusion.

The company expects its latest cystic fibrosis drug launch to be more traditional, but still sees it as a foundational year for building momentum. They believe the drug will be used in thousands of patients and represent a multi-billion dollar opportunity. During the Q&A session, they discussed the potential for patients to switch from TRIKAFTA to the new drug, with approximately 6,000 patients currently not on TRIKAFTA but still under the care of a CF provider. The company believes these patients could potentially switch back to the new drug during their regular doctor visits.

The conversation between doctors and patients about the new drug, vanza, is expected to focus on its safety and efficacy. Patients with CF are highly educated and interested in the most effective treatment options. The potential for vanza to improve life expectancy is attractive to both physicians and patients. Access and transplant center capacity are potential barriers to uptake of CASGEVY. The royalty differential for vanzacaftor has been described by the company.

The speaker asks about the plans for TRIKAFTA and vanzacaftor in terms of leverage improvement and whether there are plans to put guardrails around the royalty differential. The CEO responds that there are no known capacity or reimbursement issues for CASGEVY and that payers have had a positive reaction to the clinical data and value-based pricing. The COO adds that they have made progress in activating treatment centers and have a positive label for the drug.

The company is encouraged by their conversations with payers and expects to secure great access for sickle cell disease and TDT patients. They also mention that the blended royalty rate for their current CF portfolio is just under 10%, but will be lower for the vanza triplet. They have three follow-on pain assets in the clinic and their strategy is to take a portfolio approach to every disease in their sandbox and improve on their assets.

The company is pursuing both oral and IV dosing for their medicine 993, which is a NaV1.8 inhibitor. They believe this presents a real opportunity for patients to receive pain relief both in the hospital and at home. The company also has a pipeline of NaV1.7 inhibitors in preclinical development and is exploring the possibility of combining them with NaV1.8. The first commercial patients for their medicine CASGEVY are expected to start soon, but the company will not disclose details about them. A replay of the conference call will be available for those who missed it.

This summary was generated with AI and may contain some inaccuracies.