Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX)

Barclays Global Healthcare Conference

March 12, 2013 1:00 pm ET

Executives

Stuart A. Arbuckle - Chief Commercial Officer and Executive Vice President

Analysts

Ying Huang - Barclays Capital, Research Division

Ying Huang - Barclays Capital, Research Division

[Audio Gap] for joining us today. My name is Ying Huang, I am the U.S. biotech analyst here at Barclays. Our next presenting company is Vertex Pharmaceuticals, and we're very pleased to have Stuart Arbuckle, the Chief Commercial Officer from Vertex, to join us. And I just want to let you know that whoever is seated in the audience today will also have this ARS system, which means we might have a couple of questions for you guys to answer. With that, let me turn the podium to Stuart.

Stuart A. Arbuckle

Well, thank you, Ying. Thank you to Barclays for the opportunity today. Good afternoon to those of you here in Miami. Also, good afternoon to those of you listening to us here on the webcast. What I'm going to do over the next 15, 20 minutes is talk about Vertex's strategy, what our priorities are, what progress we are making and some of the milestones that you can expect to look forward to in 2013.

Obviously, some of the statements I'll be making will be forward-looking. That's subject to risk and uncertainties which are covered in full detail in our SEC filings.

So our vision for our company is crystal clear. We're about creating transformative medicines. We're doing that through continuing to invest in scientific innovation, and we're focused on specialty markets. I just want to spend a little bit of time going through some of those key elements of the strategy to describe them to you in a bit more detail and why they're important to us.

So firstly, our focus on transformative medicines and specialty markets. Why is that important? It's really important for 2 reasons: the first one is by focusing on transformative medicines for patients with the more serious illnesses, we can bring the biggest value to the patients that we serve. Combine that with a focus on specialty markets, and we think we can generate significant value both to Vertex and for our shareholders.

Strategy is all about choices, and we've made clear choices, particularly around our late-stage development assets. And I'm going to talk about our development portfolio in more detail and the choices that we've made. One of the most important choices that we've made as a company is to invest in and protect our investment in research. We believe research is the lifeblood of our future innovative medicines. It's where the new INCIVEKs, it's where the new KALYDECOs will come from, and we want to make sure we protect our investments in that research, which we think is the key to our long-term earnings and growth. And largely due to INCIVEK, the company has developed enviable financial strength. And we're going to use that financial strength and our late-stage portfolio to create, we believe, sustained revenue and earnings growth.

So this strategy is going to be a journey. This schematic really talks about that journey. Today, you can really think of as 2012. 2012, we had INCIVEK on the market, we launched KALYDECO. We generated significant revenues, and that led to a strengthening of our financial position. And that has allowed us to continue to invest in innovation. Tomorrow is really 2013 and beyond. We're obviously going to be looking to maximize the revenue from our marketed products. We're going to see some really important data for our late-stage pipeline in 2013, and I'll talk more about that. We've made choices about our R&D investments, focus in certain therapeutic areas, and we are going to be conscious of maintaining our financial strength by investing with discipline. We're doing all this so that we can get to the future, a vision where we see us having multiple innovative marketed medicines in multiple markets around the world, that we'll continue to have that focus on investing in research. And we will be delivering, we believe, sustainable revenue and earnings growth.

So that's where we want to go. What are the priorities that we have? What are the things that we are focusing on to execute against that strategy? And they really fall into these 3 buckets: it's about our focus on our late-stage development assets; it's about that focused investments in research to create the transformative medicines of tomorrow; and it's about maintaining our financial strength so that we can deliver sustained revenue and earnings growth over time.

So what are those development priorities? We are focused on 3 therapeutic areas. The first one is cystic fibrosis, and our aspiration there is bold but one we believe is achievable. We want to provide a benefit to as many CF patients around the world as we can and to maximize the benefits we're providing for all. In hepatitis C, we're focused in the short term on maximizing the revenue from INCIVEK. But in the long term, in our development pipeline, we're focused on developing simple, all-oral, short duration regiments with high viral cure rates. And in autoimmune diseases, we have what we think is a valuable asset in our selective JAK3 program. So we're going to look to maximize the value of our assets by evaluating collaborative opportunities, and I'll explain a little bit more about why in subsequent slides.

So let's look at cystic fibrosis. As I said, our aspiration in cystic fibrosis is a bold one. We want to address the vast majority of patients with cystic fibrosis and maximize the benefit we're delivering for those patients. And we've taken the first important step to doing that with KALYDECO for G551D patients, about 4% of CF patients around the world. But our focus in our development pipeline is trying to reach the other 96% of patients. First thing we're looking to do is expand the KALYDECO or ivacaftor monotherapy label by focusing on patients who can benefit from ivacaftor monotherapy. Those are patients with the R117H mutation, which accounts for about 3% of CF patients in the U.S.; other gating mutations, which account for about another 1% of patients in the U.S. We're looking at developing the product for pedriatric patients, those between 2 and 5, to expand our indication for those younger patients, and we're also looking at patients with residual CFTR functions. In total, we think ivacaftor could be used in patients between 10% and 15% of the total CF patient population.

We're also embarking on combination therapies with ivacaftor, but also correctors like VX-809. There, we're looking to address the 508del homozygous population, the most common mutation in CF patients, which accounts for up to 50% of the 70,000 patients worldwide who have cystic fibrosis. We recently announced the commencement of a Phase III program for 809 in combination with ivacaftor, and this is a program which received breakthrough designations from the FDA.

And lastly, we're looking to move to the heterozygous patients. These are patients who have the 508del mutation on one allele but a different mutation on the other allele. These are some of the more difficult patients to treat. And we think, with a combination of first-generation correctors and second-generation correctors in combination with KALYDECO, we have the opportunity to potentially treat those patients as well.

So schematically, this is what we are trying to achieve. We're trying to transform the treatment of patients -- or the vast majority of patients with cystic fibrosis, starting on the left-hand side with our current indication for G551D patients and over time, moving to try and treat up to 90% of CF patients.

I just want to touch on our recently announced Phase III program for VX-809, our corrector with ivacaftor. We recently announced that we will be doing 2 pivotal programs for VX-809 and ivacaftor. The primary safety and efficacy evaluation will be at 24 weeks. In total, these 2 studies will account for approximately 1,000 patients. The primary endpoint is superiority for either 2 doses of VX-809, as measured in terms of relative FEV1 change compared to placebo. As I've said, in homozygous 508del patients aged 12 and over, evaluating 2 doses of VX-809. 600mg once a day, and 400mg twice a day in combination with ivacaftor. We're using fixed-dose combinations. So ivacaftor will be given -- or 809 will be given with KALYDECO or ivacaftor. And these 2 studies will support regulatory filings in both the U.S. and the EU, and we believe we'll be in a position to file in the U.S. with the FDA in 2014.

To talk to you on some of the outcome measures we're looking at, as I've said, the primary efficacy measure is the relative change in FEV1, or either of the 2 active arms compared to placebo. We'll also be looking at important secondary endpoints such as change in BMI and weight, pulmonary exacerbations, absolute change in FEV1 and also measures of patient quality of life. Obviously, we'll also be measuring safety. And as I say, these studies have just commenced and we anticipate being in a position to file with the FDA in 2014.

Moving now to hepatitis C. Hard to believe, it was less than 2 years ago that INCIVEK was launched. And I think, also hard to remember, what a transformation INCIVEK was, both for the many, many patients that it has cured over those less than 2 years, but also it's been transformative for us as a company. It's generated over $2 billion worth of net sales for Vertex in just less than 2 years, and that has given us the financial strength to do much of what we are currently doing in research and development.

But our focus in the future is on a new generation, and particularly with our late-stage development asset, VX-135, our nuke. What we're looking to do there with the VX-135 is a number of things. We're looking to generate 12-week safety and efficacy data this year in 2013. We're also looking at combining VX-135 with assets from other companies, and we have 2 Phase II collaborations in place: one with J&J and Medivir for their compound TMC-435; and one with GSK for their NS5A inhibitor, and we'll be doing combination studies with both of those 2 agents. And what we're trying to do there is generate data to allow us to choose which do we think is the best regiment or regiments to be taking forward so that we can enter into a clinical -- a pivotal Phase III clinical development in 2014. As you all know, this is a fast-moving market. Speed is of the essence, and we want to be in pivotal development in 2014.

Turning to our third development priority, that's autoimmune diseases. And we have the selective JAK3 inhibitor. We think this is a great asset. This has the potential to be effective in multiple large markets around the world. But the key to being successful with this asset is really 3 things. First one is speed to market. This is a very, very competitive marketplace. We need to move quickly. Second thing is we need to develop multiple indications in parallel to be competitive in this marketplace. And the third one is we need to be developing and commercializing this asset globally, because much -- the majority of the market for these agents is outside of the U.S. Those 3 things, we think, dictate that we find a partner to collaborate with on our JAK3 program, one that brings both capabilities in terms of scale and infrastructure and skills, and one also that brings funding to help us fund the Phase III programs, which will be large and expensive, and also to help us with the commercialization of this asset. So whilst this is a great asset, it's one that we believe to take forward. And to maximize the value of that asset, we need to find the right partner, and we're on -- in ongoing discussions with potential partners.

Looking to the third priority, this is our focus on research. As I've said, we are looking to invest and protect our investment in research, because we believe it is the lifeblood of the next generation of transformative medicines like INCIVEK and KALYDECO. Our focus really can be described in 3 ways. One, is it's about the disease and therapy areas that we focus on. Diseases like Huntington's, diseases like progressive MS. Serious, serious genetic or hereditary diseases, where we believe we can make a substantial difference to patients. We're also looking to use the research platforms that we have developed over time, such as our understanding of protein folding that we've used to such a good effect in the development of our programs in cystic fibrosis. And the third element of our strategy is not to believe that we can do it all internally. We have a wide variety of academic partnerships and networks to try and draw on the best science that is available. But unlike other companies that have pulled back from research, we see continuing to invest at around about the same levels that we've invested in the past as the key to driving long-term sustainable revenue and earnings growth for us at Vertex.

Lastly importantly is our financial strength. How we're going to use that financial strength to position ourselves for future revenue and earnings growth. As I say, we think we have a strong financial position. We have multiple revenue streams. INCIVEK clearly has been the major revenue driver for the past 2 years, generating in excess of $2 billion. We have KALYDECO revenues in the U.S. and growing KALYDECO revenues in Europe, within our existing indication. And we also have other revenue streams from the relationship we have with J&J, who commercialized telaprevir, or INCIVO, outside the U.S.; and also other collaborative revenue streams. Those revenue streams in total have allowed us to build a cash and cash equivalents position at the end of 2012 of $1.3 billion. We are prioritizing our investment. We have to make choices and hopefully, I've managed to describe the clear choices we're making in our late-stage development pipelines to deliver the revenue and earnings growth we aspire to. And we are committed to maintaining discipline and matching our investments with our revenues so that we can continue to deliver earnings and revenue growth in the future.

So I've talked a little bit about some of the progress that we've made. Probably the biggest announcement we have this year was the initiation of our Phase III program for 809 in combination with ivacaftor. But there are multiple milestones that we think that you should pay attention to in 2013 as you are tracking the progress of Vertex against the strategy that we've outlined. We've been very public with these as our milestones. As you'll see, we've achieved some of them in the first half of 2013. We have additional data in the first half of 2013 in CF. We will have additional data in the second half of 2013 in our HCV area and also with our JAK3 program. So we believe there are multiple ways you can measure our progress against that strategy to create transformative medicines.

So I've managed to outline what our strategy is, what our priorities are, the progress we've made to date and the milestones that you can use to monitor our progress. I think we've got time for maybe a couple of questions in here, and then I think we have a breakout immediately after this where I can take any other questions people have got. Thank you.

Question-and-Answer Session

Ying Huang - Barclays Capital, Research Division

So can we get the slides up for the ARS questions for the audience? [Operator Instructions]

All right. I guess I'll read out the first question here. So how much revenue will INCIVEK generate in the U.S. this year in 2013? First choice is less than USD 600 million, second is USD 600 million to USD 700 million, third answer is USD 700 million to USD 800 million, and the fourth answer is, I guess, greater than USD 800 million.

[Voting]

Okay. So the answers are in, I guess. Majority of the audience here -- actually 50% of our audience chose this USD 600 million to USD 700 million, and I think that's actually where the consensus is. All right. That's the work laid out for Stuart for this year, I guess.

Stuart A. Arbuckle

$650 million I think is -- around about $650 million I think is the current consensus, something like that.

Ying Huang - Barclays Capital, Research Division

Okay. So we're [indiscernible]. Can we bring the slide for the second question for the audience? Well, this is a little tricky, I guess. Do you think VX-661 day 2 data will be positive or not? Yes for 1, no for 2.

[Voting]

Well, I guess, again, you got a positive response from the audience. 74% of the audience sitting in this room actually chose yes.

Can we bring the -- I think it's the last question maybe. The question is do you think the Phase III trial of VX-809 and also KALYDECO combination in homozygous F508del mutation patients will meet the primary endpoint? Answer is yes for 1, and 2 for no.

[Voting]

Well, interesting. So again, it's 60% yes, 40% no, but it's less positive than what we saw from 661, though. All right. Great. I guess that concludes the presentation part. Thank you for everyone's participation here. Thank you. Thanks again, Stuart.

Stuart A. Arbuckle

Thank you. You're welcome.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Vertex Pharmaceuticals' Management Presents at Barclays Global Healthcare Conference (Transcript)
This Transcript
All Transcripts