Michael Partridge - Vertex Pharmaceuticals, Inc. Jeffrey M. Leiden, M.D., Ph.D. - Vertex Pharmaceuticals, Inc. Reshma Kewalramani - Vertex Pharmaceuticals, Inc. Ian F. Smith - Vertex Pharmaceuticals, Inc. Stuart A. Arbuckle - Vertex Pharmaceuticals, Inc..

Geoffrey C. Porges - Leerink Partners LLC Geoffrey Meacham - Barclays Capital, Inc. Michael J. Yee - Jefferies LLC Ying Huang - Bank of America Merrill Lynch Terence Flynn - Goldman Sachs & Co. LLC Brian Abrahams - RBC Capital Markets LLC Phil Nadeau - Cowen & Company Matthew K. Harrison - Morgan Stanley & Co.

LLC Shawn Fu - JPMorgan Securities LLC Dane Leone - BTIG LLC Carter Gould - UBS Securities LLC Alethia Young - Credit Suisse Securities (USA) LLC Robyn Karnauskas - Citigroup Global Markets, Inc..

Good day, ladies and gentlemen, and welcome to the Vertex Pharmaceuticals First Quarter 2018 Conference Call. As a reminder, today's conference may be recorded. There will be a brief pause and then the conference will begin..

Good evening. This is Michael Partridge, Senior Vice President of Investor Relations for Vertex. Tonight we will discuss our first quarter 2018 financial results and our continued progress to build long-term leadership in the treatment of cystic fibrosis. Dr. Jeff Leiden, Chairman and CEO; Dr.

Reshma Kewalramani, Chief Medical Officer; and Ian Smith, Chief Operating Officer, will provide prepared remarks this evening. Stuart Arbuckle, Chief Commercial Officer, will join us for Q&A. We recommend that you access the webcast slides as you listen to this call. The slides are available for download on our website.

This conference call is being recorded and a replay will be on our website starting later tonight. We will be making forward-looking statements on this call. These statements are subject to the risks and uncertainties discussed in detail in today's press release and our filings with the Securities and Exchange Commission.

These statements, including without limitation, those regarding Vertex's marketed CF medicines, the ongoing development and potential commercialization of any triple-combination regimen for cystic fibrosis, Vertex's other programs and Vertex's future financial performance are based on management's current assumptions.

Actual outcomes and events could differ materially. I will now turn the call over to Dr. Jeff Leiden..

Thanks, Michael, and good evening, everyone. 2018 is an important year for Vertex, and in the first few months of this year, we have continued to build on our established track record of innovation to discover, develop and deliver transformative medicines to more people with CF.

The approval of SYMDEKO, our third disease modifying CF medicine, offers many patients an important new treatment option. In particular, for those F508del homozygous patients who never started or who discontinued ORKAMBI. The SYMDEKO launch is off to a strong start in the U.S. and we anticipate approval in the EU in the second half of this year.

Today, the number of people eligible for one of our approved CF medicines has grown to 34,000 worldwide and about half of these patients are currently on treatment.

With the launch of SYMDEKO as a new treatment option and the completion of additional reimbursement agreements outside the U.S., we are positioned to see continuing significant revenue and earnings growth in 2018 and beyond.

Our belief that we can treat many more patients in the future as well as to further enhance the benefit of CFTR modulators is based on our rapid progress in developing triple-combination regimens that include a next-generation corrector.

Earlier this year, we announced that we had initiated Phase 3 studies to evaluate VX-659 in triple combination with tezacaftor and ivacaftor in two groups of patients, those with one F508del mutation and one minimal function mutation, and those with two F508del mutations.

The first sites are open for the Phase 3 study in patients who have only one minimal function mutation, and we have begun to dose patients in that study.

Today, we also announced the start of Phase 3 development for our second next-generation corrector, VX-445, as part of a triple combination regimen in the same groups of patients that we're evaluating with VX-659.

This marks important progress toward our goal of advancing two different next generation triple-combination regimens to allow us to choose and bring forward the best regimen to people with CF as quickly as possible. We're also making important progress in our research and development pipeline beyond CF.

We are preparing to begin clinical development of CTX001, an investigational CRISPR/Cas9 Gene Editing Treatment in two devastating diseases, beta-thalassemia and sickle cell disease with our partner, CRISPR Therapeutics. We also continue to make important progress with the selective NaV1.8 inhibitors VX-150 and VX-128 for the treatment of pain.

We look forward to generating additional data from ongoing studies of these potential pain medicines to inform future development plans. In 2018, we also expect to move one or more potential medicines from our internal research programs into clinical development in other disease.

I look forward to updating you on our continued progress during the year. Tonight on the call, I'm pleased to have with us Dr. Reshma Kewalramani, our newly appointed Chief Medical Officer.

Reshma joined Vertex in 2016 and her depth of medical knowledge, paired with her experience and proven track record as a clinical leader, make her an ideal successor to Dr. Jeff Chodakewitz, who will remain with us through early 2019 as a senior adviser as he transitions to his planned retirement.

I'd like to personally thank Jeff for his extraordinary leadership and dedication to improving the lives of people with CF and other serious diseases. I'll now turn the call over to Reshma to review the status of our CF clinical programs in more detail..

Thanks, Jeff, and good evening, everyone. Tonight, I'm very pleased to review our progress in advancing VX-659 and VX-445 triple combination regimens into Phase 3 development and to share the initial results for once-daily triple-combination regimens that include VX-561, a once-daily potentiator. First, to the VX-659 triple-combination regimen.

During the first quarter of 2018, we announced the initiation of two Phase 3 studies of VX-659, tezacaftor and ivacaftor, as an investigational triple combination regimen for people with CF.

The first study is evaluating the VX-659 triple-combination regimen versus placebo in approximately 360 patients ages 12 and older who have a minimal function mutation. A schematic of this design is shown on slide seven.

The key feature of this study is that the efficacy assessments at four weeks and a safety assessment through 12 weeks will form the basis of a potential NDA submission. The 24-week assessment will generate data on key secondary endpoints as well as safety. But these data are not required to complete the NDA submission.

As Jeff mentioned, sites are open, patient enrollment in the study has begun and the first patients have been dosed. A second study will evaluate the VX-659 triple-combination in approximately 100 F508del homozygous patients ages 12 and older. The design of this study is shown on slide eight.

The key features of this study are a four-week run-in where all patients receive tezacaftor and ivacaftor and then a primary efficacy assessment after four weeks of additional dosing where VX-659 or placebo is added to tezacaftor and ivacaftor.

To support a regulatory submission in the U.S., to treat the F508del homozygous population, we anticipate using the four-week efficacy data from this study in conjunction with 24-week safety data from the study in F508del minimal function patients.

Data from these studies of VX-659 will also be used to support planned regulatory submissions in Europe and other regions. Turning to VX-445. Today, we announced the initiation of two Phase 3 studies of the VX-445 triple-combination regimen for patients with CF.

The study designs are similar to the Phase 3 program I just discussed for VX-659 and are shown on slides 9 and 10, respectively. We recently obtained results from the non-clinical toxicology studies for VX-445, and we expect the FDA's review of these data prior to the start of our Phase 3 studies.

Initiating Phase 3 studies with both VX-659 and VX-445 gives us the opportunity to generate data for two different triple-combination regimens and pick the best regimen to bring to patients as quickly as possible.

In addition to evaluating each triple-combination regimen in the studies I just discussed, we also plan to evaluate each of these triple-combination regimens in patients who have a gating or residual function mutation.

Earlier this year, we announced Phase 2 results from VX-445 in F508del minimal function patients that support advancing VX-445 into Phase 3 studies for that population. Today, we are reporting the initial Phase 2 data for VX-445 in triple combination in F508del homozygous patients.

Once again, the efficacy observed was impressive and the safety profile of VX-445 was similar to that observed in previously reported parts of this study. This Phase 2 study evaluated VX-445 or placebo in combination with tezacaftor and ivacaftor for four weeks after a four-week run-in of tezacaftor in combination with ivacaftor.

In the patients who received this triple combination, we observed a significant improvement in lung function of 11 percentage points over what was obtained with tezacaftor and ivacaftor alone. This improvement was evident by the second week of the treatment period and sustained through the four-week dosing period. These data are shown on slide 11.

The VX-445 triple combination was generally well tolerated and the safety profile is consistent with what we've learned previously with this regimen. Today, we are also reporting the initial results for the once daily potentiator, VX-561.

When dosed as part of a triple-combination regimen with VX-659 or VX-445 and tezacaftor in people with one minimal function mutation.

In these Phase 2 studies, mean absolute improvements in ppFEV1 of 11.7 and 12.2 percentage points from baseline through week four of treatment were observed for the VX-445 and VX-659 triple-combination regimens, respectively.

The once daily triple-combination regimens were generally well tolerated and the safety results were consistent with what we have observed in triple combination studies that included ivacaftor.

While we believe that the results clearly support the hypothesis that VX-561 has a role in future once daily triple combinations, the FDA has requested additional dose ranging for VX-561, including potential evaluations of monotherapy before allowing evaluation of VX-561 in late-stage development.

We look forward to updating you on our progress with our triple-combination regimens as we advance these programs. I'll now turn over the call to Ian..

Thanks, Reshma and good evening to everyone. 2018 is off to a strong start and tonight, I'm pleased to review our first quarter 2018 financials, the SYMDEKO launch in the U.S., and our 2018 full year financial guidance.

Revenues first, total CF product revenues of $638 million in the first quarter of 2018 represent a 33% increase compared to the $481 million we recorded in the first quarter 2017. Our total product revenues have continued to grow each quarter as we increased the number of patients treated with our approved medicines.

Today, we estimate approximately 34,000 patients are eligible for our medicines of which about half are being treated. We expect the eligibility in the number of patients we treat to continue to grow throughout 2018, and therefore continue to drive revenue growth. I'll make some brief comments on SYMDEKO launch in the U.S.

Since the FDA approval on February 12, we have been educating healthcare providers on the medicine, and working with payers to secure reimbursement. We are seeing broad coverage and access to SYMDEKO, as the majority of commercial and government payers are reimbursing for the medicine.

For the first quarter 2018, we reported SYMDEKO revenues of $34 million, which reflects the initial seven weeks of sales. We continue to prepare for the anticipated approval of this medicine in the EU in the second half of 2018.

Our first quarter 2018 non-GAAP R&D and SG&A expenses were $360 million compared to $313 million in the first quarter of 2017. This increase was primarily due to the advancement of our portfolio of triple-combination regimens for CF and the investment to support the treatment of patients with our medicines globally.

Non-GAAP net income for the first quarter of 2018 was $196 million compared to non-GAAP net income of $101 million for the first quarter of 2017. The increase in non-GAAP net income was largely driven by the strong growth in total CF product revenues.

During the first quarter 2018 we also strengthened our balance sheet as we ended March with approximately $2.5 billion in cash, cash equivalents and marketable securities compared to $2.1 billion at the beginning of this year.

Now turning to the guidance, we continue to expect full year 2018 total CF product revenues in the range of $2.65 billion to $2.8 billion comprised primarily of combined revenues from countries where our three approved medicines are currently reimbursed.

The midpoint of this range represents approximately 26% growth over 2017 driven by the launch of SYMDEKO and an increased number of patients treated with our approved medicines. As we have commented on previous calls, we are focused on total CF product revenues in our guidance, given that some patients on KALYDECO and ORKAMBI will switch to SYMDEKO.

The timing and the amount of the switching is not yet known. We believe the overall growth of CF product revenues is the most important metric because it reflects revenue growth from treating more and more CF patients. We also continue to expect combined non-GAAP, R&D and SG&A expenses of $1.5 billion to $1.55 billion.

The key investment drivers are the execution of pivotal studies for two triple-combination regimens, supply chain investment for the potential commercial success of a triple-combination regimen and the incremental investment to support the launch of SYMDEKO. Our financial profile has strengthened significantly over the past two years.

Our continued execution across all parts of our business has positioned us to deliver sustainable revenue and earnings growth and to continue to expand our operating margin in 2018 and beyond as we significantly increase the number of patients we treat with our medicines. With that, I will open the line to questions..

And our first question comes from the line of Geoffrey Porges with Leerink. Your line is open..

Thanks very much for taking the question, and congratulations on the strong results. The only surprise really is that you're not going ahead with a pivotal trial with VX-561, and I wonder if you could give us a little bit more understanding as to the basis for the FDA's decision.

It seems a little unusual given that it's just one of the isomers of – well, actually it's only a deuterated version, I beg your pardon, of KALYDECO.

What's the basis for that caution? And should we assume that that same standard of single drug dose finding is going to be applied to every potentiator that might potentially enter the class?.

Hey Geoff, it's Ian. Maybe we could actually separate that question into two parts, which maybe we have Reshma talk about the data and Jeff Leiden talk about how we intend to incorporate VX-561 into our regimen as we go forward. I would remind you, back in earlier this year, we look forward to getting results from VX-561.

It was pending data and pending discussions with the FDA and maybe we can give you a little more insight into that.

So Reshma, do you want to talk about the data first, and then Jeff on the strategy to incorporation?.

Sure, sure. So, as you know, in both the VX-659 and the VX-445 proof of concept studies, we had one part that included VX-561 in place of ivacaftor. And let me walk you through the results in terms of efficacy and safety.

On the efficacy side, as you heard in the prepared remarks, we had an improvement in ppFEV1 of 11.7 and 12.2 percentage points, respectively, for VX-445 and VX-659. Really impressive results that we were very pleased with. On the safety side, the results were remarkably similar to what we've seen in our ivacaftor studies.

And when we looked at these results, both on efficacy and safety, we were very impressed with what we saw and impressed with the consistency of the safety profile.

Jeff?.

Yes. So Geoff, as you said, we've got those results, and obviously, you need to have the Phase 2 results before you go and discuss Phase 3 design with the FDA, which we did over the last several weeks and months.

And it became clear to us that the way the FDA was looking at VX-561 despite the fact that, as you say, it's really a deuterated version of KALYDECO is that's a new chemical entity.

And the kinds of information they're asking for, for instance, some of the dose ranging and potential monotherapy is exactly the kinds of things that they would typically ask for a new chemical entity, particularly before it goes into a combination regimen.

And so our decision was – because our goal has always been to get the best regimen to patients as quickly as possible, we decided to move forward with VX-445 with KALYDECO because that's the quickest route and we didn't want to take a delay.

Having said that, I also think that the decision was probably a bit influenced by the fact that KALYDECO has been so well studied in so many thousands of patients and, frankly, it set a very, very high bar, both in terms of efficacy and safety.

And so they have a lot of comfort with it, and that made it, I think, easier to enable us to move forward more quickly with that regimen. Having said all that, as Reshma said, the data for VX-561 is quite compelling. We do plan to take it forward into a once a day regimen.

We're still in discussions with the FDA about exactly what data they are going to need in some of these, Phase 1 and Phase 2 studies. But we think that's highly doable, we just don't want to wait.

So as soon as we know that, we'll progress those studies and we'll work out a bridging strategy that allows us to bring VX-561 along with either VX-659 or VX-445 whichever one we choose to patients..

Okay. Thanks for that background. I appreciate it. I'll get in the queue..

Thank you. And our next question comes from the line of Geoff Meacham with Barclays. Your line is open..

Hey guys and thanks for the questions. I just have a commercial one and then a clinical one. For SYMDEKO, when you look across the O-U.S.

approval trajectory including Europe and Australia down the road just what are lessons to be learned from ORKAMBI? Can you help maybe abbreviate the process, reimbursement process I'm speaking about, and then I have a couple of follow-ups on the clinical side..

Hey, Geoff. Thanks for the questions. So on SYMDEKO ex U.S. what can we learn from our experiences with ORKAMBI. Obviously, in many countries we've been successful with getting ORKAMBI priced and reimbursed and, clearly, we'll be looking to build on those successes.

In some of the markets where we haven't yet secured reimbursement for ORKAMBI, which we continue to very, very actively pursue, we have also begun discussions with some of those authorities about potential portfolio like agreements where we may be able to get accelerated access for patients to SYMDEKO.

Obviously, those discussions with ORKAMBI are very, very active, and obviously, with SYMDEKO they'll pick up more steam, when as we anticipate we get the approval ex U.S. certainly in Europe in the second half of this year.

What I would stress though, Geoff is that we're not kind of waiting for SYMDEKO, and then only really going to try and get reimbursement for SYMDEKO. That's not how we're thinking about it. As you know, patients with CF have a relentlessly progressive disease.

We know that treating them as early as possible is incredibly important, certainly with disease modifying agents like ORKAMBI. And so, we're continuing to pursue with every degree of urgency that we can, reimbursement for ORKAMBI.

The other thing to remember, which I think is an important point, is that the SYMDEKO approval is likely to be for people 12 and over. And as you know, in recent years we've expanded the indications for ORKAMBI first to six to 11, hopefully subsequently down to two to five.

So ORKAMBI is going to continue to play a very, very important role for those younger children with CF..

And then just on the – that's helpful. Thanks Stuart.

And then on the pipeline side, when you think about the future triples, beyond VX-659 or VX-445, I get the strategy with VX-561, but what would be the real objective here? Are you guys still actively pursuing more novel combinations in Phase 2? I'm trying to figure out if you have an assay as predictive of FEV1, is it worth it to go into larger studies for just a few points of FEV1? In other words, is there an upper end that's kind of worth your investment or not?.

Yeah. It's a great question, Geoff. As I said before, we have now reasonably large number of additional next-gen correctors that are flowing through research and into late preclinical development.

And so the decision that we're going to make, and we'll have to start making it soon because some of those are moving along quickly is, are they significantly better, do we believe than the two that are currently moving forward, VX-445 and VX-659.

And significantly better is really the whole profile of the medicine, right? So it's certainly efficacy, but it's also once a day formulatability, dose, for instance, potency. All those things will go into our decision.

But at the end of the day, the decision will be if we feel we have a molecule that's significantly better than the other two, we'll take it forward into Phase 1, and certainly into early Phase 2. That's easy and quick to do. If we don't, we won't..

Got you. Okay. Thank you..

And our next question comes from the line of Michael Yee with Jefferies. Your line is open..

Great. Thanks. And congrats on the good SYMDEKO launch as well to start off. Two, two part question, I guess. Just to follow up on the whole concept of more dose ranging studies needed for VX-561. I mean, I guess it would seem to be an important read-through to what the regulators are saying on novel compounds. So just to clarify.

You're implying that you need to actually prove it out as a full potentiator and run it as a monotherapy program and prove that it's an active potentiator for new compounds. Just wanted to clarify that. And then the second question was on the Phase 3s that are ongoing, and it sounds like you started dosing patients.

I mean I presume that would be pretty fast. So while I wouldn't want you to necessary guide on data, would you actually announce data when it's done after four and 12 weeks, or do you need to file? Just what would be your disclosure policy beyond these Phase 3s that we're all looking forward to? Thanks..

Yeah, Mike. This is Jeff. I'll take the first part. Maybe Ian will take the second one, was your disclosure question. With respect to the first part, I never comment on what the FDA is going to want for other people's programs.

I do think it's informative that they view VX-561 as a new chemical entity, because as Geoff Porges mentioned, it's quite similar to KALYDECO, but clearly different. So I don't think it's unreasonable.

Obviously, as compounds get more and more different and newer and newer, I think that they're going to have the same expectations for new chemical entities pretty much across the board, but obviously that's up to them..

And Mike, to your question on disclosure, I don't really want to design the disclosure and what we include in that at this point in time. So it will be – we'll complete the study, we'll gather the data, what does the data inform us in terms of a filing strategy. And I think that's what you could imagine us disclosing.

And the timing to that, we'll let you know when we're further into the studies. But as usual, it will be what can we do with the data and we'll provide you that action and we'll provide you the data that supports it. And we'll let you know when we have that..

Okay, thanks..

Thank you. Our next question comes from the line of Ying Huang with Bank of America Merrill Lynch. Your line is open..

Hi. Thanks for taking my questions. Maybe ask one on the clinical trial designs for the Phase 3s. You are testing the Phase 3 for homozygous patients in about 100 patients, while you are testing the I guess triple combo in the heterozygous patients in – I mean, sorry – the 180 patients for the het/min trial.

So I was wondering if the trial for homozygous patient is sufficiently powered to show superiority in efficacy or it's most likely a supplemental trial to compare the efficacy. And then secondly, maybe commercial side on the SYMDEKO launch.

Can you tell based on early experience, who are the patients taking SYMDEKO today? Are those mostly patients who were not tolerant of ORKAMBI before, or you're seeing also some other patients switching to SYMDEKO? Thank you..

Hey, Ying, just before Reshma gives you the answer, I just want to correct one of your points, and we are obviously doing two different Phase 3 trials, one in het/mins, one in 508, 508 patients. The het/min Phase 3 study does have 360 patients in, and the 508, 508 Phase 3 study has 100 patients in.

And now maybe Reshma can help you understand how the het/min study will lead and how 508, 508 would follow..

Sure, sure. So for each of our programs, VX-659 and VX-445, the programs are actually very similar. So I'll use VX-659 as an example but it's very similar to VX-445. In each program, there's going to be a study of 360 patients total for het/min patients and 100 patients total for homozygous F508del patients.

Now the 360 patients for het/min, that comes from a desire that we have to look at things like pulmonary exacerbation which is going to take more patients. With regard to the 508 homozygous study, that is well powered.

Indeed, if you just look back at our proof of concept studies, you can see the fairly substantial improvement in things like sweat chloride, ppFEV1 and even CFQ-R..

And Ying, on the SYMDEKO launch, obviously we're just seven weeks into the launch at the end of Q1, but we are able to tell in this early stage of the launch where those patients are coming from. And we're seeing a mix.

We are certainly seeing patients transition from ORKAMBI and KALYDECO based on the strength of the clinical data, but perhaps more importantly, we're also seeing use in patients who were not being treated with CFTR modulator prior to the approval of SYMDEKO, and that's really in two areas.

One you mentioned, which is those homozygous who had been initiated on ORKAMBI but unfortunately had to discontinue the medicine. And then we're also seeing use in patients who were naïve, who had never been initiated on a CFTR modulator, and we're also seeing SYMDEKO being used in those.

And obviously, those last few patients groups are incredibly important because those are patients who were not being treated with a disease modifying agent prior to the launch of SYMDEKO..

Got it. Thank you..

Thank you. Our next question comes from the line of Terence Flynn with Goldman Sachs. Your line is open..

Hi, thanks for taking the question. Maybe I was just wondering if you could give us a little bit more detail on the couple cases of rash that you saw in the triple combo Phase 2 that you just closed.

And just any idea of what sort of agent it might be tied to, and anything you can say on that front? And then, a question for Ian, just on SYMDEKO, can you quantify any inventory for the quarter? Thanks..

Sure. So let me start with the question that you had on the clinical side. Where we are right now is that we've completed our proof of concept studies for both VX-659 and VX-445, and what that means is we've treated about 200 patients. In that 200 patient experience, we have a low incidence of rash overall and the low severity.

We have no serious events. These rashes have resolved with discontinuation of treatment or interruption. And interestingly on that latter point we've had a couple of cases where patients have interrupted their therapy for a period and then restarted and completed their course without trouble.

To give you some context for this, KALYDECO and ORKAMBI, the rashes that we're seeing in our next-gen program are very similar in incidence and quality is what's been seen there, and you can look in the USPI and you'll see ORKAMBI is about 7%, and KALYDECO is about 13% or so..

Terence, to your question on SYMDEKO, I'd first draw you to the kind of the top line revenues, CF total revenues and comment on that, which is the inventory in the channel at December 31, 2017, was similar to the inventory in the channel at March 31, 2018.

So what that tells you is that the channel has remained even between those two periods, and therefore, the revenue number is real demand in Q1. As to your question to SYMDEKO, there was some slight channel build, but that was offset to some channel decline on KALYDECO and ORKAMBI from December 31 period.

In summary, total CF revenues in Q1 were the real demand and it was not channel build..

Great. Thanks a lot..

And our next question comes from the line of Brian Abrahams with RBC Capital Markets. Your line is open..

Hi. Thanks very much for taking my questions. I guess, first off, on the triple combo Phase 3s. Obviously, a lot of enthusiasm amongst sites, and we're hearing about sites needing to really filter patients as to who is eligible for the study.

So, I guess, my first question is really how are you managing that, operationally, the potential for healthier or more highly motivated patients to come into these Phase 3s and maybe perhaps skew the results or reflect the different population studied in Phase 2. And then I had a quick follow-up on VX-561..

Sure. So you know we have the benefit of having worked with CF patients in this community for some time now and executing not only Phase 2 studies, but Phase 3 studies as well, in the patient populations that we're studying now in VX-659 and VX-445.

And the inclusion and exclusion criteria, the discussions with sites, the way that the sites are screening patients and such, are fairly well described, and what we're doing in Phase 3 is similar to what we ourselves just completed in Phase 2.

So I feel very good about how the operations are running and the timelines on which we are enrolling these studies..

Great. And then, actually maybe a question on VX-445. You mentioned you're awaiting the FDA review of non-clinical tox. Just wondering if you could say whether there was any – were any notable observations there or if that's just a box check? Thanks..

Sure. You know that the preclinical talks, the chronic talks results are standard fare. We've looked at it. We don't see anything in there, but of course, the agency has to review that..

Thanks so much..

And our next question comes from the line of Phil Nadeau with Cowen and Company. Your line is open..

Good afternoon. Congratulations on the progress and thanks for taking my question. First, one question on VX-445 and the homozygous data. It did look like there were some liver enzyme elevations in that study.

Is there anything to be concerned about there? Or are those rates similar to what you've seen for other agents in the past?.

Sure. So we've looked at the safety, as you can imagine, in great detail. And no, we don't see anything interesting or different there, very much what we've seen with our other trials..

Okay. And then, second on the QD regimen and when it can move forward.

Do you have a rough sense of how long the dose exploration that you need to do will take? Is that something that you think you could finish in 2018, or is this possibly a multi-year process?.

Yeah, thanks. We're still in discussions with the agency, and so it's a little too early to give you a precise answer. I think we'll know very soon. And when we do, we'll let you know what the plan is. But most of what we're hearing about is fairly straightforward so far.

But until we finalize those discussions, I don't want to give you precise timelines..

Great. Thanks for taking my questions..

Our next question comes from Matthew Harrison with Morgan Stanley. Your line is open..

Hey, great. Good afternoon. I thought I'd change it off and ask about the CRISPR program for a second. So you've mentioned and I think CRISPR has mentioned that you filed the CTA, you've gotten one approved. It sounds like some are still pending.

Can you just talk a little bit about what the next steps are in terms of starting dosing and what items are left pending to get the other CTAs approved and open some more sites?.

Yeah, Matt. This is Jeff. Thanks for the question. Maybe just to give folks a little background. I know you're aware of this. We're actually planning to study CTX001 in two related but different diseases, beta-thalassemia and sickle cell disease. Beta-thal, we submitted multiple CTAs, as you mentioned, for beta-thal, one of those has been approved.

And we expect to begin dosing later this year for beta-thal in Europe. In the U.S., we are on track to file an IND for sickle cell disease and we'll also file outside the U.S. And again, depending on exactly when we do that, we anticipate starting dosing soon thereafter.

So my hope is we'll be dosing in both diseases this year, and that should allow us to start to generate some data in patients..

Thanks..

As you know, it will likely be the first gene editing trials in people. We're pretty excited about that..

And I would just actually add to it. We are very excited that it's the first gene editing trials in patients. But I'll also say that this one came from a collaboration with CRISPR Therapeutics.

Part of, let's say expansion and growth opportunity is how we form these collaborations and give us product opportunities, and I just want to say that we're very happy with that collaboration with CRISPR Therapeutics, the progress we've made there, and the partnership to progress this opportunity towards the clinic is, pretty exciting for us at this stage in a very different disease than CF..

Thank you. Our next question comes from the line of Cory Kasimov with JPMorgan. Your line is open..

Hey, guys, this is Shawn on for Cory. Congrats on the quarter and thanks for taking my question. Just another one maybe on the once daily.

So understanding that the absolute difference for VX-445 and VX-659 was similar, but when looking at the placebo adjusted data for VX-659, it looks to be quite a bit better, at least on ppFEV1, since the placebo did quite poorly. Maybe if you could just comment on that.

And then, did this contribute at all to the decision not to move directly forward with VX-445 in the once daily.

Just kind of thinking that given the 240-milligram dose for VX-659 is being used for the other trials, was there maybe a desire to look at the specific dose rather than the 400 before making the final decision in addition to all the things that the FDA is asking for?.

Yeah, thanks for the question. Actually, as we look at the data, the thing that's impressed us most, Shawn, is the consistency of the data.

It's pretty remarkable to me to see four to six different Phase 2 trials with different agents and different combinations that are all generating almost identical results, not only in terms of ppFEV1, by the way, but in terms of sweat chloride, in terms of CFQ-R, et cetera.

And it's obviously very important that these are placebo-controlled studies and that we're seeing statistical significance in very small numbers of patient. So I guess, our interpretation is what's remarkable is the consistency across the board between different regimens. We don't see a difference between VX-561.

Any of those small differences are really just due to the patient numbers. And so, no, that didn't drive any of our decision-making nor do I believe it drove the FDA's decision-making about how to proceed with VX-561.

It's really just a matter of their view that this is a new chemical entity and their desire to have the appropriate early data set before we move into Phase 3 and we'll get that..

Okay, great. And then sort of just a modeling question. Can you maybe refresh our memories on the breakdown for the number of residual function patients worldwide? It looks like the number of residual function mutations listed on their KALYDECO and the SYMDEKO labels are about the same, 16 for KALYDECO, 17 for SYMDEKO.

So kind of just based on your announcements in conjunction with the approvals for KALYDECO in residual patients, it looks like there should be about 1,500 patients that are currently covered ages 2 plus for KALYDECO in the U.S.

Just wondering roughly how many patients is this for SYMDEKO given that this in 12 plus and then how many additional residual function patients are there O-U.S.?.

So Shawn, we'll get back to you after the call. You did ask for the – just want to make sure what your ask was. You want to know the total RF patient population. We'll get back to you after the call on that..

Okay. Fair enough. Okay. Thank you, guys..

And our next question comes from the line of Dane Leone with BTIG. Your line is open..

Hi. Thank you. Congrats on starting the studies. I wanted to ask kind of follow-up to an earlier question. Regarding the rash appearance generally in your commentary about seeing it in around 13% of patients with KALYDECO.

I was just curious, could you elaborate any more in terms of the safety profile that you're seeing with VX-561? And is there any reason to think that the extended half-life of the molecule could exacerbate some of the safety profile that we've seen with KALYDECO? Thank you..

Sure. So when we looked at the data from VX-561 in either the VX-659 program or the VX-445 program, what we see is real consistency with regard to efficacy as well as a safety profile..

And just to be clear, as Reshma said before, both the incidence and severity of rash are very low here. They're similar to what we've seen with the other medicines. And as you know, that hasn't in any way affected the uptake or utility of those medicines. So we're very pleased with the overall benefit of this profile..

Thank you..

Our next question comes from Carter Gould with UBS. Your line is open..

Good afternoon. Congrats on the quarter results and impressive data. I guess two, I guess, for Jeff.

Now that you got clarity on the Phase 3 design and entering a little bit more of a execution phase right now, any shift in focus or attention on the BD front? And then just on the VX-445 once a day combo, just the quality of life data, the placebo arm looked a bit anomalous. Maybe you could just add some context around that.

The active arm seemed relatively consistent with the prior studies. Thank you..

Yeah, thanks for the questions, both good questions. First one on BD. Really, there isn't a shift. As Ian said in his prepared remarks, we have been accelerating, revving up our BD efforts for the last several years with the same consistent strategy around CF platforms and early-stage transformative products.

We continue to look and be very active in that space. You can expect to see us to do more deals similar to the ones that we've done already, say, with a CRISPR or Moderna, Parion, et cetera. And because we have more firepower, we have more flexibility in terms of the size of those deals.

And so some of them may be even larger than the ones we've done already. So I don't think there's really a change, but there's certainly a very active effort. It's just part of our focus on diversifying our pipeline beyond CF, both through internal research and external collaborations or acquisitions.

Maybe, Reshma, do you want to comment a little on the placebo arm and the CFQ-R?.

Sure. So as we looked at the CFQ-R results across VX-659 and VX-445, actually across all the doses that we studied, and in all the populations that we studied, what you see is big double-digit improvements in CFQ-R. In the study, the one VX-445 study, you rightly point out that there's anomaly in the placebo group.

In essence, there are two patients that are just plain different and that difference is what drove that CFQ-R value there. But you're right. It's an anomaly and it comes from two patients out of eight, small numbers..

Thank you..

Thank you. Our next question comes from Alethia Young with Credit Suisse. Your line is open..

Hey, guys. Thanks for taking my questions and congrats on all the progress. One on the NaV1.8, the VX-150, I just wanted to talk a little bit more about your strategy there. I know you have the data.

Where do you plan on presenting it, and how do we think about moving forward in the Phase 3 and commercializing? And then just kind of also, can you just talk about if there's a preference at this point between true M&A or kind of doing more partnerships like you've done in the past. Thanks..

Yes, this is Jeff, Alethia. Thanks for the questions. With respect to pain, as we said before, we don't really think about pain as one disease. It's multiple diseases that are a little bit different, inflammatory, acute, neuropathics, et cetera. Nor does our pain program have one compound in it.

We have VX-150, as you know, for which we have positive data in both OA and in acute pain. We have VX-128, which is a fast follower that we're also very excited about. And I'd also remind you that in pain, both oral formulations and IV formulations are important, particularly for acute pain.

So this is sort of a complicated chess game where we have to decide what's the best medicine for the best indication and the best formulation out of our pipeline, which is growing. And the way we're doing that is to do some exploratory studies in Phase 2 in these multiple indications.

And I think we should have the data from those later this year and early next year. And that would allow us to make a decision about how to move forward.

And I know some folks have asked me, wasn't that going to slow you down, actually assertion would be it's going to actually speed us up, because if we do Phase 2 correctly and we really understand the right dose, right medicine, right disease, and right formulation, it's going to allow us to move much more quickly in Phase 3.

And we're particularly excited about that because, obviously, in areas like acute pain, we're sitting in the middle of this horrible opioid epidemic. And if we can demonstrate new oral agents, for example, that have the potency of opioids without the addictive potential, we think there's going to be a very favorable regulatory environment.

But we want to make sure we have all the data. We need to take advantage of that..

Alethia, I'll take your second question, which is I'll first say that M&A versus licensing, we just view those as a tactic in terms of execution. And so, as Jeff said earlier, we have three broader strategies in how we think about the outside world to Vertex and that is look at everything in CF to see whether it complements our own approach.

Secondly, to have the possibility of expanding our scientific footprint beyond small molecules and maybe beyond gene editing now. And then secondly – thirdly, sorry, what product opportunities are there. And if those product opportunities come in the way of licensing or M&A, again, that's just a tactic of how you incorporate those into the company.

To Jeff's comment earlier, also, we do have more capital available today. As you saw in first quarter, we added close to $500 million of capital. We went from $2.1 billion to $2.5 billion of cash. We have no debt. So we do have more capability today to add to our pipeline.

The question is also, do you think you're going to get involved in large M&A, and utilization of our own share count? No, we don't believe that. We're focused on more earlier stage, high science ideas.

As a company, we have lots of growth in front of us with CF, and that's what our focus is in trying, in terms of driving revenue growth and capital accumulation. And we'll look at earlier stage opportunities in other disease areas..

Operator, this is Michael Partridge, we have time for one more question..

Certainly. And our last question will come from Robyn Karnauskas with Citi. Your line is open..

Hi, guys. Thanks for taking my question, and don't worry my kids are not in the closet this time..

We look forward to that on every call, Robyn..

I know even though there's bring your kid to work days, I saw that ironic. So I guess, the first question is just a follow-up, where you were asked about what exactly, when will we see the data. You're saying when you complete the study, you'll assess.

When you say complete, is that four weeks or could that be 12 or could that even be 24? Just a sense of like what do you find as complete? And how do you keep those placebo patients on the triple placebo for het/min? And the other question I had was, you had a great quarter of SYMDEKO, what are you thinking about in the back end like reasonable assumptions can get you above your guidance.

So I was just kind of thinking when you see a great, strong, robust seven weeks of sales, how can you temper expectations going it to the back of the year? And that's the reason why you didn't raise guidance this quarter?.

Thanks, Robyn. I'll echo that I'm glad you didn't lock your kids in the closet again. So firstly to – your first question, just to remind you that the het/min study, which is the lead study with VX-659, our anticipation is that we'll provide you the data based on what we expect to file upon.

And so when you look at the design of that study as a four-week efficacy endpoint to the 12-week safety endpoint. So we would want it to run through the 12 weeks because that's the basis of the filing. So you'd anticipate that we would run through that period of at least 12 weeks. We would collect the data. We have to obviously analyze it.

And we'll provide a disclosure on the VX-659 study in the het/min patients, which would complete using the four and 12-week data. As to your question regarding revenue expectations, we reiterated our guidance on the call tonight, $2.65 billion to $2.8 billion. We did have a strong first quarter. We've got to see how the year progresses.

We have built in growth into that guidance. The main growth, we do anticipate, will come from those markets that we see that are already reimbursed from all three products and the main growth in terms of adding patients we see will be through SYMDEKO.

And so we're holding on our guidance at this point in time, and we'll see how the year goes and potential drivers of growth outside our guidance could be getting some of the markets where we're not currently reimbursed, actually reimbursed and launching in those markets, and we'll update you at that time..

Great. Thank you..

Thank you and this concludes today's question-and-answer session. I would now like to turn the call back to Mr. Michael Partridge for closing remarks..

Thank you, Chelsea. Thank you, everybody for turning in to the call this evening. The Investor Relations team will be available tonight for any follow-up questions that you have. Have a good night..

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. And you may all disconnect..