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Executives

Michael Partridge - Senior Director, Strategic Communications

Matthew W. Emmens - Chairman of the Board, President, Chief Executive Officer

Ian F. Smith - Chief Financial Officer, Executive Vice President

Peter Mueller - Executive Vice President - Global Research and Development, Chief Scientific Officer

Analysts

Rachel McMinn - Bank of America-Merrill Lynch

Geoffrey Porges - Sanford Bernstein

Ted Tenthoff - Piper Jaffray

Geoff Meacham - JPMorgan

Michael Aberman - Credit Suisse

Yaron Werber - Citi

Steven Harr - Morgan Stanley

Phil Madu (ph) - Cowen & Co.

Howard Liang - Leerink Swann

Maged Shenouda - UBS

Terence Flynn - Lazard Capital Markets

Tom Russo - Baird

Davis Bu - Goldman Sachs

Jason Zhang - BMO Capital Markets

Brian Abrams - Oppenheimer & Company

Alan Carr - Needham & Company

Brian Scorny - Bank Equity

Katherine Sue - Wedbush Securities

Presentation

Vertex Pharmaceuticals Incorporated (VRTX) Q3 2009 Earnings Call October 26, 2009 5:00 PM ET

Operator

Good afternoon. At this time I would like to welcome everyone to the Vertex Pharmaceuticals third quarter conference call. Today's call is being recorded. (Operator's Instructions) Mr. Partridge, you are ready to begin.

Michael Partridge

Yes. Good evening. This is Michael Partridge. Welcome to Vertex's third quarter financial results conference call. This quarter was characterized by continued progress in two Phase 3 registration programs targeting diseases of significant unmet medical need; that is hepatitis C and cystic fibrosis, as well as the completion of transactions that added to our financial strengths.

In the area of hepatitis C at AASLD later this week we will be present FTR data from Study C208. Study C208 is exploring telaprevir's potential to be dosed twice daily or every 12 hours. These will also be the first FTR results we report for a response guided trial design, which is how we are studying telaprevir in our Phase 3 program to potentially improve treatment outcomes for patients.

We also continued to make progress towards the start of the combination trial with telaprevir and VX-222 in patients as early as the end of this year, reflecting our strategy to sustain long-term leadership in HCV.

In the area of cystic fibrosis we're now enrolling patients in three studies within a registration program for our potentiator compound VX-770. We also recently announced that we had completed enrolment in the Phase 2 study of our corrector compound, VX-809.

Following me on today's call will be prepared remarks from Ian Smith, Dr. Peter Mueller, and Matt Emmens. I will remind you that information discussed on this conference call includes forward looking statements which are subject to the risks and uncertainties discussed in detail in our reports filed with the Securities and Exchange Commission, including our 10-K. GAAP and non-GAAP financial measures will be discussed on this call. Information regarding our use of non-GAAP financial measures and a reconciliation of those measures to GAAP is available in our third quarter 2009 financial press release which can be accessed on our website.

Unless otherwise noted, all 2009 expenses and guidance discussed in this call are inclusive of stock-based compensation and executive transition expenses, restructuring expense, acquisition related expenses, and loss from exchange of convertible debt.

Before I turn over the call to Ian I would like to remind those of you not attending the AASLD Conference that this coming, November 1st, we are planning to webcast our presentation to investors and analysts, and that presentation will be focused on new data for our HCV protease inhibitor telaprevir. We anticipate the webcast will begin at 7:00 pm Eastern Time and run for approximately one hour. Thank you, I will now turn the call over to Ian.

Ian F. Smith

Thanks, Michael, and good evening to everyone. I'm pleased to report that Vertex continues to operate from a strong financial position. For Vertex, at our stage of business we think the most important financial measure is our cash position balanced against the cash investment required to bring the company to cash flow positive. We're paying close attention to this while managing the disease, molecule, and geography opportunities within our business, and managing our common shares outstanding. This creates a healthy tension in our business right now as we continue to prioritize planning for the NDA submission and the potential of telaprevir launch.

As a marker of our financial strength, we finished the third quarter with a position of $857 million, reflecting $227 million in cash from the completion of transactions that added a total of $260 million to our balance sheet in 2009 to data. An additional $33 million from these transactions was received on October 1st and will be reflected in our fourth quarter cash position.

In summary, following the closure of our recent financial transactions and management of our net cash investment or loss, we expect to end the year with approximately $800 million in cash, cash equivalents, and marketable securities. This enables us to enter 2010 in a strong cash position and allows us to support the advancement of late-stage programs in HCV and CF as well as to initiate other proof of concept trials and continue our research productivity.

Now to the third quarter 2009 financial results. Third quarter 2009 non-GAAP loss before certain charges was approximately $127 million compared to a third quarter 2008 non-GAAP loss of approximately $150 million . The increase was primarily attributable to a reduction in collaborative R&D revenues and an increase in commercially focused investment to support advancement of telaprevir toward launch.

The GAAP net loss for the third quarter of 2009 was approximately $150 million, compared to a GAAP net loss of approximately $130 million in the third quarter 2008. Total revenues for third quarter of 2009 were approximately $25 million compared to $32 million for 2008. The principle contributors to revenue are driven by our collaboration agreements with J&J and Mitsubishi Tanabe Pharma.

Total R&D expense was approximately $132 million, which is consistent with the R&D expense in the third quarter of 2008. The investment into R&D continues primarily to support the development programs for HCV, cystic fibrosis, and new product creation from research. Our third quarter SG&A expense was approximately $37 million compared to approximately $25 million in the third quarter of 2008, an increase primarily resulting from our commercial activities as we prepare to launch telaprevir.

In closing, we are fortunate to have a strong cash position to support our late stage programs. As we move into 2010 we will remain focused on the balancing of our cash position, capital structure, and the investment to support the company to being cash flow positive. Peter, over to you.

Peter Mueller

Thank you, Ian. With my prepared remarks I want to briefly update everyone on the status our two key registration programs in HCV and cystic fibrosis. I'll start with CF because our compounds VX-770 and VX-809 were prominently highlighted two weeks ago at the North American Cystic Fibrosis Conference in Minneapolis.

I know most of you were not able to be there, but I will tell you, there is a strong enthusiasm from the medical community about the potential for these compounds to address the underlined defective protein responsible for this disease. In May this year, we initiated the Phase 3 registration program for VX-770. The program consists of three ongoing separate trial; STRIVE, ENVISON, and DISCOVER, which have been defined to evaluate the utility of VX-770 across different age groups and genotypes, including children as young as six years of age. In the registration program, VX-770 is being dosed as a single tablet twice daily.

Clinical sites are up and running and patients are being dosed in all three trials. We expect to complete enrolment in the first quarter of 2010 in the STRIVE trial, which will be a marker of progress in our comprehensive registration program. We look forward to providing additional updates as appropriate as these studies progress.

Now turning to VX-809, our second compound, targeting disorphaned disorder. Last week we completed enrolment in the Phase 2A trial with VX-809 on the investigation of CFTR corrector compound that targets patients with the delta F508 mutation. The Phase 2A trial is primarily a safety study, however it is also designed to assess the potential effect VX-809 has on biomarkers of CFTR function including sweat chloride, to measure potential difference.

Any trend towards improvement that indicates that VX-809 could help to increase CFTR activity would be very encouraging for further development of VX-809 alone or in combination with VX-770. Based on rapid enrolment within the study, we now expect to have data from the Phase 2 trial in the first quarter of 2010.

Now to HCV, this week as you heard, we are preparing to present data at AASLD, the major US based liver meeting. And I know that this is of high interest to investors and many of you are focused on this meeting.

At AASLD we will be providing SVR data from the study C208, our twice daily dosing study, which also will be the first (inaudible) from our response guided trial defined as similar, but a design being used in the ADVANCE and ILLUMINATE Phase 3 registration trials.

We believe a response-guided therapy has the potential to improvement treatment outcomes and shorten the duration of therapy for the majority of patients. We can't talk about the data yet — and you will hear much more about telaprevir in both treatment naïve and treatment failure patients in the coming weeks.

What I will therefore do is spend a little time talking about our registration trials and our STAT-C combination plans. The telaprevir Phase 3 program is advancing with an outcome that we hope will result in a strong product profile for treatment naïve and treatment failure patients. The majority of treatment naïve patients in our Phase 3 registration program are now in the post treatment follow up phase or beyond. We expect to have SVR data from ADVANCE and ILLUMINATE in treatment naïve patients in the first half of 2010 and from the realized study in treatment failure patient in mid 2010.

Turning to our STAT-C combination plans, we are concluding that three day viral kinetic study evaluating four different doses of VX-222 as a monotherapy. We initiated a drug-drug interaction study with telaprevir in the third quarter. Depending on our discussions with regulatory authorities and on data from these trials, we are planning to initiate the first combination study in patients with telaprevir as early as the end of this year.

This could put us in a position to have proof of concept with the telaprevir VX-222 combination by mid-2010. In regards to the CMC, chemistry manufacturing of controls part of telaprevir development, today actually we are producing commercial inventory. We are manufacturing at metric ton scale. We have run all the registration validation campaign of telaprevir API which is the active pharmaceutical ingredient, and drug product, and are preparing for our (inaudible) as we go forward.

Everything is aligned with our commercial launch timelines at this time. The commercial product we are manufacturing is actually the same as the product we are using in the Phase 3 program. J&J also have put in place a supply chain to meet their territory needs, which also will provide a backup supply chain for us in North America if required.

In summary, with the data we have today we have begun to prepare the NDA documents for telaprevir and expect to have data from our Phase 3 program and CMC package complete for the NDA's submission in the second half of 2010.

Before I close I'd like to highlight also VX-509, our selective inhibitor for JAK3. We announced last month that we expect to advance VX-509 into a proof of concept drug in the first quarter of 2010. It will be a double-blind randomized placebo controlled trial. The key focus will be on safety tolerability and clinical activity. We anticipate dosing for 12 weeks compared to placebo. Also, we will announce the design of the study at the time of initiation and we are planning to measure ACR 20s, 50s, and 70s, as indicators of clinical benefit, and obviously the safety profile will be very important.

In summary, we have made significant progress since the start of the year by achieving critical milestones according to our set timelines in both HCF and CF registration programs, and we continue on track as we move closer to potential regulatory submissions in two major diseases.

I will now turn the call over to Matt.

Matthew W. Emmens

Thanks, Peter. As you have just heard from Ian and Peter, we are continuing our work towards building a fully capable biopharmaceutical company. We're keeping a keen eye on our cash position while we invest in development opportunities and maintain our discovery activities that are ongoing. Today we have two late stage programs in HCV and CF, and we have the potential to gain data from several proof of concept studies that represent future growth potentials in 2010.

In building the company, we need to be very thoughtful as we evaluate each program and launch a compound. We will target serious diseases with potentially transformative therapies. We believe we are in a strong position with the product profile we have shown to date for telaprevir. We could have the first compound to address the unmet need of the treatment failure population and also the first twice-daily STAT-C agent to treat HCV. We are focused on the completion of the telaprevir Phase 3 registration program and are on track to submit an NDA in the second half of next year.

With telaprevir, we think we are in the right place and at the right time heading into 2010, and we are well positioned in working towards addressing the treatment needs of HCV patients and the increasing number of patients that are looking for new treatment options. We see opportunity to sustain leadership in HCV well into the future as treatment evolves. That's why we're also focusing on initiating combination treatment with telaprevir and our VX-222.

We are also focused on building a commercial infrastructure that enables us to develop the market and establish market leadership. I enjoy connecting with the commercial end of the business. It's an area I know well and the potential to launch telaprevir and build a highly effective and focused sales forces is what I'm most excited about today.

In addition to the sales force, we are focused on bringing in an internal commercial talent to the company, including a new chief commercial officer. The ability to discover and subsequently develop important medicines is the basis of our business, and in addition to telaprevir, we have another opportunity with our cystic fibrosis program.

There is no therapy right now to address the underlying defective protein responsible for cystic fibrosis. Having previously worked in specialty pharmaceutical market area, I recognize that VX-770 and VX-809 have opened the door to potentially address another significant unmet need and help grow our company.

In building Vertex, I'm working with Peter, Ian, and others, to strive the right balance between disease areas where we believe we can make the most impact with development of important molecule, while a the same time, funding our business and managed our capital structure due to positive cash flow.

To me this is exciting and it is the fun I love. I believe we have the effective strategy in place. We are executing in all aspects of the business, and importantly, we have the time to complete our build prior to launch of telaprevir.

In summary, I think we're in a great position. This is a rewarding business and I think and you look forward to seeing a number of you at AASLD next week. Michael, back to you.

Michel Partridge

Thanks, Matt. We will now open up the call to your questions.

Question-and-Answer Session

(Operator's Instructions) We'll go first to Rachel McMinn with Bank of America-Merrill Lynch.

Rachel McMinn - Bank of America-Merrill Lynch

Thank you much for taking the question. You've mentioned that data from combination studies where telaprevir and 222 could be available by mid-2010. I know you're not prepared to talk about specifics of the trial design there, but what kind of data are you talking about? Is this RVR data?

And then secondly, are regulators requiring any type of combination in animal tox data prior to starting these studies, and if so, do you have that data?

Ian F. Smith

Thanks, Rachel. It sounds like more of a disclosure so I'll let Peter give you some background of how we're thinking of the trial and the second question of the tox data. But by mid-2010, given the trial that we're currently contemplating and discussing with the regulatory authorities, we should have interim data that will give us an understanding of the biokinetics and also when we say biokinetics it's not just the log drops, but also whether we have viral breakthrough over a duration and over duration for the study.

We need to understand what kind of duration we can conduct the study at. As we think about the study it will be all different forms of combination with telaprevir and 222 and it'll include with and without ribavirin and we hope to have data mid-2010 specifically in the viral kinetics and breakthrough and initial safety profile.

Peter Mueller:

So in terms of the tox studies and the regulatory requirements around those, what's important to understand is we have already a complete safety package for telaprevir and there is 2,500 patients included. I think we should, first of all, mention that. And secondly, we have completed 12 week nonclinical tox studies with VX-222 that would allow us to go at least go in a three-month regimen.

Now, in terms of requirements given the least movement, what is required for the regulatory agencies is that you have at least for each of your experimental drugs which telaprevir is not really see as that any longer, but in general a 12 week type of tox study and then you can move forward. What I step away from and make it a little earlier in these early, more experimental phases is that you don’t have to provide a combination tox study with both compounds in animals provided up front. So we are in discussions with regulatory agencies as we speak and we will be keep you updated as to when we get feedback and can talk about it.

Rachel McMinn - Bank of America-Merrill Lynch

Well okay, then just to close the loop there, what's the negating factor to starting that study?

Ian F. Smith

Feedback from the regulatory authorities to move ahead with a trial design that we've currently submitted. You should see more clarity on the trial design and the start of this study towards the end of the year.

Rachel McMinn - Bank of America-Merrill Lynch

Perfect, thanks very much.

Operator

And we'll go now with Geoffrey Porges with Sanford Bernstein.

Geoffrey Porges - Sanford Bernstein

Thanks very much. Just to probe a little bit more on that trial first, Peter. Can you give us a sense — from your comments, should we assume that you will be able to have at least one arm of just 222 and telaprevir without total administration of interferon and/or ribavirin or post subsequent administration of interferon and ribavirin. And then just a question for Matt as well. Matt, could you talk a little bit more about filling out your management team? What should we anticipate there in terms of beefing the company up to prepare to become commercial? Thanks.

Peter Mueller:

So thanks, Geoff, for the question. As you can imagine, theoretically we plan for such a thing, but I think it's all hinging on discussion that can't be ongoing with regulatory agencies in the world. So if everything comes down the way we want to, we will have such an arm.

Matthew W. Emmens

Okay, Geoff. And as far as your question regarding filling out the commercial, obviously I have a tight timeframe I think we can work within. I've had in excess of 37 unsolicited offers of interest in that chief commercial job and we've got another eight or so from our recruiters so I think that that's going to be a selection from a very, very high calibre list of people. And I would like to have it done by the year-end. Then at the same time we are continuing our search for the head of sales and I can tell you I have had a pretty in-depth review over the last couple of weeks here of where we stand with everything — we are in great shape. A lot of companies don't start commercial build out until a year prior to launch and we started, as you know three years.

So I think our strategy's solid, in place, and it's a matter now of getting that chief commercial officer in place, but mostly it comes to the ales implementation side — a place where I’m vey comfortable. I've built — I've literally built four or five from scratch in my career and we're in great shape for that. Ours is a little bit configured differently, but nothing that's that challenging as far as getting interested people. And the company's pretty well known right now. We've having a lot of interest by people all over the industry. And some of the very good people — I think people would be surprised as who applies for jobs. Sometimes it's amazing to look at the list of who's who. So we're in a good shape.

Geoffrey Porges - Sanford Bernstein

Okay. Thanks very much.

Operator

Our next question comes from Ted Tenthoff with Piper Jaffray.

Ted Tenthoff - Piper Jaffray

Great, thank you very much for taking the question. Two quick ones just sticking with the HCV side for now; what are your thoughts about potentially doing studies in combination with EPO either prior to, just to explore the impact there, and whether or not the FDA may require that? And then what can you tell us about the new NS5A compound and when should that come into the clinic?

Peter Mueller:

So at this given point in time, as you know, our Phase 3 study is without EPO to have a clean label and we have no plans right now to engage in any EPO driven trials.

The 5A program we have is in preclinical stage as you know, and my hope is that in the course of the first half of 2010 we can record more about start of preclinical development.

Ted Tenthoff - Piper Jaffray

Great. And is there a chance that we'll get preclinical data at (inaudible) next year?

Peter Mueller:

For 5A?

Ted Tenthoff - Piper Jaffray

Yes.

Peter Mueller:

Probably too early.

Ian F. Smith

It's a little early to call that, Ted.

Ted Tenthoff - Piper Jaffray

Great. Excellent, thank you.

Operator

And we will go next to Geoff Meacham of JPMorgan.

Geoff Meacham - JPMorgan

Thanks for taking my question; question for you on 208. Any updates for you on the regulatory strategy there? I know you guys have talked in the past about doing a PKA study to support labeling, but I'm wondering if you can actually rule out having to do a formal 48 week TID versus a BID study at this point?

Peter Mueller:

Yeah. So there is a huge variety of options that you can consider, so we believe that telaprevir has the potential to be dosed twice a day. We are working with (inaudible) to basically figure out what the right strategy is. In the most extreme case, you could anticipate from regulatory agencies to have another, let us say a 600-800 patient study. That is the most extreme on the one end and the other one will be on the other hand that you can have a strategy around draft level discussions and PKPD arguments which also have been applied in former years in different indication errors like HIV which also could give you a nice way into it, but you would not have to do a lot of studies and there's everything in between.

And so we are currently preparing for a dialogue with the agencies and we will come back to it when we know what the response is.

Geoff Meacham - JPMorgan

Any guess as to which one at this point feels more likely on the strength of the 208 data?

Peter Mueller:

I think you can read the crystal ball, nobody knows what HD will do.

Geoff Meacham - JPMorgan

And last question, for the NDA you'll have obviously well over 2,000 patients, and have you guys ever had a discussion with the FDA with respect to an expanded access program prior to approval and what would be the consideration?

Peter Mueller:

So far we didn't.

Geoff Meacham - JPMorgan

Okay. Thanks.

Operator

We'll go next to Michael Aberman with Credit Suisse.

Michael Aberman - Credit Suisse

Hi, thanks for taking the question. I'll also turn to C208, you guys have mentioned on the press release and again on the call about this being the first time that we'll see data with the response driven protocol that you use in the Phase 3. Can you help us understand why you think that's important in terms of what our expectations should be and how that looks compared to the earlier trials that you’ve had?

And also, we've seen differences between the interferons. Presumably there's different interferon in this trials a well. How should we be thinking about — as we had into AASLD, how should w be thinking about the results in relation to the different interferons, as well as looking at the BID versus TID.

Ian F. Smith

So thanks, Michael, I am going to take the first part of the question because we are using this phase frequently, “response guided therapy”, so I just need to explain what we mean by that and then Peter can you help you understand a little bit further about how conducing the Phase 3s and the outcomes that we're hoping may result from the protocols that we set in the Phase 3. So when we talk about response guided therapy, we're trying to help people understand that the results that we've shown so far in our Phase 2 program was not under a response guided regimen. What we mean by that is there is a number of patients that do not achieve an RBR. If you do not achieve an RB then you did not stay on six month therapy — you actually went to 48 weeks of the regimen. And those patients may have achieved an SVR. However, the SVRs that we've actually shown in the past were actually only for those — those patients that achieved RVR in the PROVE 1 study.

So as we thinking about response guided therapy, and the protocol that we're using in Phase 3, we are giving non-RVR patients a chance to achieve an SVR in the Phase 3 protocol. So we are trying to make that distinction that that is the Phase 3 protocol, and we're hopeful that it may achieve better outcomes than what we saw in the Phase 2 program. Now I'll hand it over to Peter as think about more broadly the Phase III protocol design?

Peter Mueller

Well, there's not a lot more to be added other than that you have here a clear inroad to keep more patients in a situation that they might achieve, as we are. That's number one. The other thing is that you could also have a brief statement in terms of data that gives you a chance to make a decision whether a person has to stay on for 24 weeks on regimen. And I think chances are that you will find that the majority of patients will benefit from (inaudible) regimen and I think that's hard of the trial design that keeps you basically at this option.

Operator

And we'll take our next question from Yaron Werber with Cit.

Yaron Werber - Citi

Hey, thanks for taking the question. Ian and Matt, it's a question for you. I know you've not given guidance for next year, but just maybe help us understand a little bit your R&D plans. Because on the one hand, the fairly sizable telaprevir Phase 3 program is going to end, but on the other hand it sounds like ramming up you RCF program and my understanding is the cost per patient is a little bit higher. There are fewer patients, but still the cost is going to be higher and then you're also taking a baby program potentially forward. I mean, there is a great pipeline here, but just help us understand a little bit, should we think of R&D as being flat next year or should we think of R&D maybe even going up next year: Are we thinking about this the right way?

Ian F. Smith

Yaron, thanks for the question. So I'm firstly going to start by saying I can't answer your question directly because I'd be giving guidance for 2010 and we’re actually in the midst of our planning cycle for 2010 so I can't give you the specific answer to your question.

However, I can help you understand how we're thinking about R&D next year in terms of the clinical programs and what are we trying to achieve with our R&D investments. So number one, with research and for the last few years, we have run research investments at a relatively constant level. That will continue into 2010.

Secondly as we look at the two key T2 disease areas, we have HCV, which you are correct, will hopefully be concluding our registration program, but we are hopeful that we will be expanding on our combination, STAT-C combination program So as one comes down, there is one that will increase. I don’t' want to give the relative numbers, but there is an expanded effort with the STAT-C combination programs.

And then into cystic fibrosis, in 2009 we've been predominantly focused on a small scale Phase 2 program with VX-809, the corrector compound, and the registration study for VX-770. As we look into 2010, VX-770 should be going along full steam. This year it's just been starting up. And 809 we're hopeful will come to conclusion, but we're hopeful that we get a good result out of the 809 study then allows us to progress into combination therapy within the cystic fibrosis.

So those are the two areas of thrust in the ACV and cystic fibrosis. And then we have, as mentioned earlier; we have a Phase 2 program that we want to run with our JAK 3 inhibitor so that will be running along. And then we have some earliest digestants. The research output continues to be strong and we think that we'll have some preclinical and early clinical work on compounds that continue to come out of our own research.

Yaron Werber - Citi

Yeah, fair enough. And then just a follow on for Peter, and let's assume — it sounds like the BID data is going to look good with telaprevir, can you clarify? Is there any chance that you are actually going to move to STAT-C combinations with 222, using telaprevir BID, or would you want to keep the TID just because that's how the approval is going to happen.

Peter

So I think this is something we should like to debate after AASLD, when you have seen all the data.

Yaron Werber - Citi

Great, thank you.

Operator

We'll go next to Steven Harr with Morgan Stanley.

Steven Harr - Morgan Stanley

Just a question on the second generation protease inhibitors as they've kind of been in Phase 1 here for awhile and just wanted a little update of where they are and when we might see some data.

Peter Mueller:

Okay. So Steve, basically we are talking about two compounds, VX-995 and VX-813, and our belief is in terms of prioritization we have to basically put more emphasis on 222 right now, however, I think we will come to a conclusion with those two molecules somehow in the middle of next year or so as this is approximately when we have enough biokinetic data and other type of things that make us and give us solid foundation to make the best decision about what to keep in the portfolio and what not and what to mix with what and all those types of things. So middle of next year is probably a good time to talk about those. It's still ongoing.

Steven Harr - Morgan Stanley

And what is it exactly you're looking for on the profile? Is it side effect profile, dosing profile, resistant profile — what would make you go forward here?

Peter Mueller:

So first of all you have to understand, telaprevir has really set a super high bar. It's very hard to beat that. And so because of that, I think what you have to understand is the second generation molecules are more molecules seen maybe in a different light and that's the light of combination therapy going forward and whether they have the right features, PKYs, metabolism, (inaudible) also from an efficacy potency point of view that they can fulfil those.

The other thing is if you have something like that and it is clean and edible, then you can also go a different market that we currently have some restrictions being partnered with J&J and Mitsubishi.

Steven Harr - Morgan Stanley

Thanks.

Operator

And we'll go next to Phil Madu (ph) with Cowen & Co.

Phil Madu - Cowen & Co.

Good evening, thanks for taking my question. It's also on the C208 trial. Could you give us some idea of what your current thinking is and how much efficacy would you be willing to give up for safety? So what kind of decrement in SVR rates between twice daily and three times daily would begin to cause a problem for the twice daily regimen in your current opinion?

Peter Mueller:

Thanks for the question. So with this being four or five days before AASLD, any questions related to C208 we look forward to answering those on — well, I guess after the embargo which is 5:30 on Sunday night we'd be happy to take your questions regarding 208 and how we will proceed forward and we'd be happy to see you on the Sunday night where we'll have an investor presentation where we'll cover the data in depth.

In terms of answering questions at feel — you know, to be honest, to feel that they're kind of reversing into how do you feel about the results? We'd rather take those at AASLD later this week.

Phil Madu - Cowen & Co.

All right, that's fair enough. And then, Ian, just a financial question for you. In the $17 million in the collaborative and R&D revenue line, were the Mitsubishi payments amortized in that or are those amortizations just going to start in future quarters?

Ian F. Smith

Oh, Mitsubishi is in the September quarter numbers. I can't remember the precise data we completed the transaction, but there was some amortization of the Mitsubishi numbers. When we file a 10-Q there is a breakout of revenue from the contributing partners so you'd be able to see the contribution on in our 10-Q when we file it.

Phil Madu - Cowen & Co.

Okay great, thanks.

Operator

And we'll go next to Howard Liang with Leerink Swann.

Howard Liang - Leerink Swann

Thanks very much. I have two questions regarding the CF program. Now that the STRIVE trial is expected to complete enrolment in the first quarter, do you have a better idea of the filing timeline for 770? I guess my question also is would ENVISION be needed for filing and approval and have you completed part one of ENVISION?

Peter Mueller:

In terms of the filing timelines, I think we cannot make any definite answers right now. It needs to be debated with regulatory agency because they have different scenarios, a 24-week scenario versus a 48-week scenario and at this point in time it's unclear what different agencies in the world will basically allow for and they might be not even the same outcome in different agencies. So I think it's a little too early to make any predictions there. So that's the first thing. What was the other part of your question please?

Howard Liang - Leerink Swann

Is ENVISON needed for filing and have you completed part one of ENVISION?

Peter Mueller:

I think yeah, it is needed because of what agency wants is a broader picture about the use of VX-770 in different mutations and age groups and so you have to basically do that.

Howard Liang - Leerink Swann

So just to the question, it is required for the six to 11-year olds in the 551 mutation?

Peter Mueller:

Yeah. That's what I mean with the age groups. Because everybody knows in the CF program, I think the most benefit you can achieve is when you dose as early as possible, and therefore I think there's a high level of interest to basically see data in six-year olds and older to be at least able to address those patient populations that have the best, or at least relatively speaking, the best chance to benefit from the drug in a long term regimen.

Howard Liang - Leerink Swann

Have you completed the single dose PK study for ENVISION?

Ian F. Smith

In New York we talked about being in that part of the study.

Peter Mueller:

We are in the midst of the study.

Howard Liang - Leerink Swann

Okay great, thanks very much.

Operator

And we'll go next to Maged Shenouda with UBS.

Maged Shenouda - UBS

Sure, hi. Thanks for taking my question. Most question have been answered, but maybe you can just discuss your current thinking about sales force side and commercial infrastructure? And then also, since the hepatitis C landscape is changing so quickly with so many products in development, what are you currently thinking about our post-clinical trials support, and how is that going to factor into expenses?

Matthew W. Emmens

I'll take the first part and I'll ask Peter for the second part. It's a relatively targeted market. In fact, very targeted for the size of it. We know we've done a lot of segmentation work in terms of where we need to focus both personal and non-personal promotion and I would say from an infrastructure, you're looking at 200-250 people including the sales force which is very, very efficient given the size of the market. And number tow, in terms of segmentation there is some different players here. We have a government focus to try to get HCV better diagnosed and treatment recommendations which are not there now which could be a huge impact. So there's kind of a promotional activity or you can lobbying or whatever you want to call it, but basically it's unbelievable that this is four times as prevalent as AIDS, and we have this little recognition of diagnosis in treatment. It's just really something that gets anybody 's attention when we show them the data.

So small commercial infrastructure, some different types of players — it's not all about rattling the cages of treaters, although we will see them, it's also about finding patients, getting patients treated, getting the therapy paid for, and changing the push from the government as far as the importance of this disease in terms of the way the CDC will use it. So it's small, it's focused, it's multisegment, and it's aimed at getting that two thirds of people that don't know they have the disease treated. And the other part is fairly obvious. The first part of this is people that have failed treatment are waiting to report new products to treat them faster and at a higher SVR rate.

So we have all those segments, we have people that are going to address those segments, and all have to do now is put the infrastructure in place. Peter, did you want to comment on any post-marketing studies? Can you clarify that question for me?

Maged Shenouda - UBS

Well, I am just thinking that most products need a lot of post-marketing clinical trials support and have you started thinking through how you're going to move in that direction?

Peter Mueller:

So absolutely we have a strategy. As you will note there's different populations that need basically to be addressed and governed forward. So in fact if patients, for example, HIV, HCV, or HPV HCV, they might be the HCV population — there is also lifecycle management in terms of tablet formulation and other type of things that we are considering, and all those types of things. So yes, we have a well thought-out strategy in place and we'll act like that. And then at the end of the day obviously, the STAT-C program which is obviously the biggest way forward because that might change and revolutionize if it works the landscape substantially and would telaprevir anti-HCV treatment regimen a long duration and sustainability on the market.

Maged Shenouda - UBS

Thank you.

Operator

We'll go next to Terence Flynn with Lazard Capital Markets.

Terence Flynn - Lazard Capital Markets

Hi. Thanks for taking the question. Just two questions on the telaprevir 222 combo trial. Just wondering first what geography that you guy were planning on running that study in?

Ian F. Smith

We're not being specific on the geographies right now. We can tell you that we are in discussion in parallel with a number of regulatory authorities and we're hopeful that we'll proceed ahead before the end of this year. Clearly the intent is to also be in Europe and the US at some point with this initial combination study. That is our intent. Let's see how those discussions go, but we're still on track to commence this study before the end of this year.

Terence Flynn - Lazard Capital Markets

Okay. And then the second question is just can you remind us the route of metabolism of telaprevir and 222?

Peter Mueller:

Yes. The route of metabolism, that's a good question. That's why we actually picked those two compounds and selected 222 because what you have to do is you have to find a metabolism that is not interfering negatively with each other if you combine two molecules. So telaprevir is mainly metabolized by the (inaudible) means 3A4 is the main metabolism P450 enzyme whereas 222 is mainly metabolized by elimination and by the bile and the kidney.

And so I think that is the nice thing that we have basically a complimentary metabolism that doesn't lead to induction on the (inaudible) drug-drug interaction problem. That's basically what it is.

Terence Flynn - Lazard Capital Markets

Okay. Thanks a lot.

Operator

We'll go next to Tom Russo with Baird.

Tom Russo - Baird

Good afternoon. In CF you started whetting appetites a little bit for other Class 4 and 5 populations besides 551D where 770 might work by itself, and I was just wondering if we're at a point where you could start giving more detail around your plans there and timing for any results and regulatory strategy?

Peter Mueller:

So obviously yes we can say something at least at this point in time. We haven't debated all those trials with agencies at this point in time so you have to be a little patient until we have that, but from a strategic point of view, we have about 1,600 mutations as you know, and what the strategy is, is to basically go in all of those mutations that have at least a considerable number of patients available that you can have clinical trials done with. Because if you have only two patients in the world, it's a little hard.

And so the idea is basically not just to go for the Class 4 and 5 mutations, but also what we are doing already, go for Class 2 mutations, meaning put those on (inaudible) homozygotes and heterozygotes and to get ac complete picture about the main mutations that are available to make the argument regulatory wise that you can do a leap of faith that it also might work in other mutations that you never can test.

Tom Russo - Baird

Okay. And then with regard to the PROVE 3, the data that we're going to see at the meeting this weekend, besides the reassurance that there's no late relapse, is there any regulatory significance to the SVR48 data? Does that have any — was that recently submitted to the agency and is there any kind of impact from that?

Ian F. Smith

So we continue to follow patients post 24 (inaudible) at the request of the agency and we continue to measure those patients. Additionally with PROVE 3 we followed them through practically an SVR 48 and we want to provide that data at AASLD, just a confirmation of the good results that you once saw back in PROVE 3 earlier this year.

Tom Russo - Baird

Okay, thanks.

Operator

And we'll go next with Davis Bu with Goldman Sachs.

Davis Bu – Goldman Sachs

Thank you for taking the questions. The first – most of my questions have been asked. But a little, on 222 so you’ll complete the three-day and the drug interaction study, is that something that we’ll see the data for this year or at a future conference? I was just wondering what the disclosure on that one might be?

Ian F. Smith

In terms of disclosure, David, thanks for your questions, we’ll provide the data on 222 dose ranging and DDI, maybe, the data on the DDI study. But certainly the dose ranging study for 222 when we’re closer to providing you with an update on our strategy to do the study. We hope that will be before the end of this year. So we’ll be back to you with that data at that time.

Davis Bu – Goldman Sachs

Thanks. And just want to also clarify, with regard to the response guided results for C208, without sort of discussing the results, I was just wondering, are we going to be able to see what the results would have been without the response guided therapy to create more of an apples-to-apples comparison to Prove 1 and Prove 2?

Ian F. Smith

You’re asking a very detailed question at the time where – so you got to – I think you should talk to the investigator and after that data they’ll help you understand it.

Davis Bu – Goldman Sachs

Sure, thanks.

Operator

We’ll go next to Jason Zhang with BMO Capital Markets.

Jason Zhang - BMO Capital Markets

Thanks. I wanted to go back to the combination study 222 and to lab results. I think its gated sciences this year that EMEA has new documents requesting three months combination parks data before actual studying human. I’m wonder whether similar requirement from the FDA or if there are requirements are you still confident about going into combination study by the end of the year? Do you have that data already, or not?

Peter Mueller

There might be two comments to be made. First of all, I think we are here not comparing apples and apples. The Gilead; compound in whatever they want to mix it with are experimental molecules that are looked at regulatory agencies across the world with different eyes. When you have compound that’s basically completed Phase 3 from a dose regiment you are playing in a different ballpark. So rules are not exactly the same. So that’s the number one thing.

Now, to the second point with the EMEA, it is true that Europe has a different view on what you have to provide to a certain extend and not the FDA. The FDA lately, that is really just really lately, means a couple of months ago, started announcing in different meetings where they presented that they ease up the way into compilation trials by not requiring the combination tox right up front. Doesn’t mean that you never have to do that. You have to provide a three-month toxicology package for each of the compounds that you want to combine. That’s number. And then you have to, to do the combo-tox is to go forward. This is just to give you in a small number of patients a quick read of a potential group of concepts.

Jason Zhang - BMO Capital Markets

Okay. Very well, thank you. And also another question is, for the pivotal trial that the two people trial in both (inaudible) and a failure population, I guess before next year’s easel you should have complete dosing for other patients that including the background therapy. Is it possible you will presenting just the safety data as a medical median or you don’t think you’ll present that data at all before you submit to the FDA?

Ian F. Smith

There’s data at a future conference, Jason, always like to provide safety and benefits in combinations. So, it’s unlikely that we’re going to carve out just safety information. As we wouldn’t carve out just efficacy information. So, like to give a balance information, so presented at an appropriate medical conference. And there maybe a top-line that comes before that, as we do in certain cases.

Jason Zhang - BMO Capital Markets

But certainly not at AASLD?

Ian F. Smith

No, not at AASLD regarding 222. It’s too early.

Jason Zhang - BMO Capital Markets

Okay.

Peter Mueller

But not this – you mean (inaudible) combination of.

Jason Zhang - BMO Capital Markets

Okay. Thank you.

Operator

We’ll go next to Brian Abrahams of Oppenheimer & Company.

Brian Abrams - Oppenheimer & Company

Hi, thanks for taking my question. Just wanted to follow up on the safety profile for 222. I think at Easel you reported a couple mild side effects from the initial multiple dose study but nothing clearly drug related. Just wondering now that you have further explored the doses up and down and conducted part of the drug interaction study what’s your level of confidence in the safety of the agent at this point? And secondarily, where do you stand on potentially pursuing a parallel path to the drug as a stand alone agent plug peg-IFN base the (inaudible) not in combination with the laborer?

Peter Mueller

So, in terms of the confidence, the confidence is high. It remains high as it was when I presented to you about earlier pre-clinical data in New York and whatever the spring time frame. So I think there’s no sever (inaudible) that we have to report so far. And that gives me a good feeling that we are on a solid track. That’s in terms of safety.

In terms of thinking about 222 as a base line therapy in combination with ribavirin and pegylated interferon, yes, we are thinking about that as a potential. And we’ll let you know when we know more about how we want to go and do it.

Brian Abrams - Oppenheimer & Company

Okay. So your sense is that those initial signals from the multiple dose study were probably just noise?

Ian F. Smith

So, we’re not sure what you’re talking about with the initial signals, Brian. But more broadly, we’re on track to commence this combination study before the end of the year. And we’re looking forward to giving you the aspects of the trial design. And we’re currently in discussion with the regulatory authorities. I’m hopeful that that helps you understand our confidence towards initiating this trial. As you refer to specific concerns, we’re not actually aware of those.

Brian Abrams - Oppenheimer & Company

Okay. Fair enough, thank you.

Operator

We’ll go next to Alan Carr with Needham & Company.

Alan Carr - Needham & Company

Hi, good afternoon everyone, thanks for taking my question. Follow up on 770 trials, it looks like you got a pretty good sense for the first trial as it’ll finish enrollment in first quarter of 2010, I think you said. So, do you have a sense of when the second and third one might finish enrolling in it? And the other part to this question is, in terms of announcing results, will you announce results after 24 weeks, at the end of the – when you have the efficiency end point or will you wait until the full 48 weeks, when you finish safety component?

Peter Mueller

So in terms of, let’s say, data announcement end (inaudible) we’ll say something. I answered the first part of your question which is do we have a feeling how enrollment will come down and when we’ll be done. So the answer is, enrollment in those trials even though very much appreciated by patients and doctors equally, it’s hard to predict. Because it’s a difficult patient population. And I think it’s not a linear process. So I think we cannot necessarily even so it’s currently going very well, necessarily conclude that it goes all the way down. It might, might not. So I think it’s very difficult to predict this. That is what it is. So we -

Ian F. Smith

And Brian, thanks for the question. Given that we’ve recently, I think, tonight we’re announcing the completion of enrollment. That the progress for enrollment for 809 and then also the progress for enrollment for 770. We anticipate, we’re still guiding to announcing data from the 48 week endpoint from that study. Which would take it into beginning of 2012, first half of 2012. We actually don’t want to move off that at this point. As Peter mentioned earlier on this call, to provide data at an earlier point because as you’re aware there is a week 24 interim look for efficacy, pending the data we get at that point and the discussion we then have with regulatory authorities there may be an earlier opportunity to provide data to yourselves. If not, the study will remain blinded through the week 48 analysis period at which takes it into the first half of 2012.

Alan Carr - Needham & Company

Okay. Thanks very much.

Operator

We’ll go next to Brian Scorny with Bank Equity

Brian Scorny - Bank Equity

Yes, guys. Thanks for taking the call. Just one real quick question. When we’re looking kind of toward the future of combination STAT-C therapy, Gilead on their call last week kind of indicated that they may be looking to move both of their experimental drugs into one Phase 3 trials as a combination rather than getting each one approved separately. And I was just wondering what your take is as far as moving to telaprevir in combination with the Virocam molecular forward. Obviously telaprevir will get on the market as a STAT-C plus standard of care. But would you anticipate having to do a similar trial for 222 or do you think that after some level of phase 2 data you could just move right into a pivotal phase 3 combining the two?

Peter Mueller

So I think, nobody knows what the world will bring. But I think I think like it would given pervious experiences, I think we have not to complete development of 222 with all phase 3 data and whatever have you. I think you can do, but if you have one (inaudible) stuck out there or even if you are late, like we are, in the late stage phases you can add in other components. And if to aid data are convince it’s all a data driven discussion, they will allow you to continue this type of combination going forward. So you have enough to do a separate 222 development all the way through, then combine.

Brian Scorny - Bank Equity

Great. Thank you.

Operator

And we’ll go next to Katherine Sue with Wedbush Securities.

Katherine Sue - Wedbush Securities

Hi, good afternoon. You said you have 12 week animal tox data for 222 already. Would you mind commenting on that? Any signals seen at all?

Ian F. Smith

Katherine, actually we provided a lot of the pre-clinical tox information earlier this year, back in the spring in 222, which was effectively done two species and we didn’t find anything that would concern us. And we’ve advanced into a dose ranging study. I’ll be happy to get you that data in detail that we provided to folks back in the spring. So just contact Michael Partridge following the call.

Katherine Sue - Wedbush Securities

Okay, great. Thanks for that. Another question is, more of a general strategy kind of question. What do you think of the approach of having a nuke in the combination apparently due to the high genetic barrier to resistant and also pangeotypic activity, versus your chosen combination of a PI and a non nuke?

Peter Mueller

Okay. So this is an interesting story that is somehow cruising around in the outer world. So, I think theoretically speaking, you can add everything to a combination, including a nuke. Now, I think I want to just say something about resistance pressure. I think the argument that a nuke is better because you have a different resistant pressure as compared to non-nukes, is in a way a mute point. And the reason why I’m saying that is because there’s tons of preclinical data in vitro data available right now that show that variants that are produced by one inhibition mechanism gets taken care of if you combine it by the other product that is combined into the mix. And so, for example, variants produced by telaprevir get taken care of 222 and vice versa. And what that means is at the end of the day that the entire resistant argument is sort of, I would say less of a problem. So I think this is the first thing I want to say.

And then the second thing what I want to say is in my life at least and this is happening in the biology field quite awhile, most nukes, and not necessarily always the case, but most nukes are more difficult to deal with because out of one simple reason that basically they act at the active site of polumerators which is the most concerned active site in the system on the planet. And that means electivity is a big issue. And polumerators are all over the body, in the gut, in the heart, in the eye, everywhere. And chances are that you will see more side effects and that’s what you’re seeing. And that’s why a lot of those nukes are never saw the light of the day. And they’re one of the other (inaudible), so yeah, there is a potential but I would say the resistant argument is sort of a mute point, okay. And when it comes down to safety and travel ability and I think the non-nukes are better. And any other mechanisms might be better. And so therefore I’m not a big fan. But it is a doable thing and if somebody will give me tomorrow a nuke that is clean, I would maybe try it. But I haven’t seen one.

Katherine Sue - Wedbush Securities

Thanks.

Operator

And that’s all the questions that we do have. I’d like to turn the call back over to management for any additional or closing remarks

Matthew Partridge

Thanks. We appreciate everyone for joining us tonight. We will be in the office for a few more hours if anybody has follow-up questions. And we certainly look forward to seeing you at AASLD this Sunday. Thanks a lot.

Operator

That does conclude today’s conference. Thank you for your participation.

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