Vertex Pharmaceuticals Incorporated (VRTX)

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Vertex Pharmaceuticals Incorporated (VRTX)

June 11, 2013 1:00 pm ET


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


Terence C. Flynn - Goldman Sachs Group Inc., Research Division


Terence C. Flynn - Goldman Sachs Group Inc., Research Division

Great. Good morning, everyone. Thanks for joining us I'm Terence Flynn, one of the biotech analysts here at Goldman Sachs. We're very pleased to welcome this morning Vertex Pharmaceuticals. With us this morning from the company is Ian Smith, Executive Vice President and CFO. Thanks for your time, Ian. Definitely appreciate you guys taking a trip out here.

First, to start, we're required to make certain disclosures and public appearances about Goldman Sachs' relationships with the companies that we discuss. Disclosures relate to investment banking relationships, compensation received or 1% or more ownership. I'm prepared to read disclosures for any issuer now or at the end of this call, if anyone would like me to. However, these disclosures are available in our most recent reports available to U.S. clients on our firm portals. In addition, update to those disclosures are available by ticker on the firm's public website at www.gs.com/research/hedge.html.

With that, I think Ian wanted to make some opening remarks, and then we'll launch into questions.

Ian F. Smith

Yes, thanks, Terence. So just as Terence provided disclosures, we need to refer you to our Safe Harbor statement. Risks in our business are more fully disclosed in our SEC filings.

I just want to summarize, really, just the last 12 months of Vertex, and -- just very briefly, and then go to Q&A. I'll go back to about January, February of last year when we launched our second medicine. That was in the area of cystic fibrosis. That was our initial medicine to treat a subset of people with cystic fibrosis, and then since then, we progressed with that launch. We're looking to expand the label of that drug, that's KALYDECO, and treat as many people possible with cystic fibrosis around the world. And more recently, in the area of cystic fibrosis, we've had some very good results that suggest we're on the right track to get into a larger number of patients by using combination therapy to address certain kind of patients with cystic fibrosis. And then also, over the last 12 months, we're fast following in, in a disease area that is an older disease area for us, and that's the area of HCV. And we have a drug on the market right now that's doing very well financially for the company and also for the patient. But we're looking to maintain a presence in HCV by creating an all-oral regimen. It might be short duration and high viral cure. And we've made great progress over the last year in that area, too.

And then I'll just conclude by saying, financially, the company is strong. We have over $1 billion of cash on the balance sheet. And at this point in time, we're in the process of converting $400 million of debt into equity. And I anticipate we're going to be in a position where we have significant cash on the balance sheet with no convertible debt outstanding come the end of this quarter. So financially, we're in very strong shape. And it's been a rare period for the company and the progress that we've made for the disease areas and the patients, and it's been a lot of fun.

Question-and-Answer Session

Terence C. Flynn - Goldman Sachs Group Inc., Research Division

Great. Well, congrats on all the progress. And maybe to start, you mentioned you have launched 2 drugs within the last 3 years or so. And you've kind of been in the middle of this ongoing discussion about just drug pricing. There have been a lot of austerity measures across the globe here, pricing differential on U.S. versus Europe. Maybe just provide your perspective on kind of the future of drug pricing here in the industry and maybe how that relates back to innovation. And more specifically, on the orphan drug side, that has been an increasing area of focus, I think, among both companies and the investor base.

Ian F. Smith

So it's an interesting area, and it's a fascinating area right now as there is kind of like a challenging economic and geopolitical environment. And -- but I come back to the kind of principles of health care, which is the benefits of the drug for the patient. And my thought is that as you look into the future, you must be working in areas that have significant value to a patient to the health care system. That's what true innovation is. I'm happy to say that I believe that's where Vertex is focused, whether it was our first drug in hepatitis C significantly increasing cure rates or whether we're addressing cystic fibrosis, which is a disease that can affect young children and cause early death. And we're addressing these in highly innovative ways. And I think we're bringing a large amount of value or medical benefit to these patient communities. And to me, that's the future of health care. And if you're in an area that's outside true breakthrough medicines for patients, I do believe value capture is more difficult. And I don't think I'm saying anything that people don't understand, but I think days are gone when you can just price a drug and that's not the true benefit to the price. And so that's how we think about it. That's how we'll think about it going forward. And the fact that you're in an orphan disease indication or not an orphan disease indication, I just still think the principle is the value and benefit to the patient.

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