Vertex Pharmaceuticals Incorporated (VRTX)

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Vertex Pharmaceuticals, Inc. (VRTX)

Credit Suisse Group Health Care Conference Call

November 9, 2011 10:30 am ET


Ian F. Smith – Executive Vice President & Chief Financial Officer


Adam D. Cutler – Credit Suisse


Adam D. Cutler – Credit Suisse

Good morning, everybody, and welcome to the Credit Suisse Health Care Conference. I’m Adam Cutler, one of the firm’s Senior Biotechnology Analysts. I’m very pleased to introduce our next presenting company, Vertex Pharmaceuticals.

It’s a very exciting time at Vertex having launched INCIVEK, which is proving to be one of the most successful drug launches of all time, and with an exciting pipeline of drugs for cystic fibrosis, rheumatoid arthritis, and other conditions.

Our speaker today is Ian Smith, Chief Financial Officer, and I believe he will be joined in the breakout session by Bob Kauffman, Chief Medical Officer; and Michael Partridge from Investor Relations. So, I’ll turn it over to Ian.

Ian F. Smith

Thanks, Adam, and good morning to everybody, and good morning to those joining us on webcasts. Before I start, I would like to refer you to the Safe Harbor statement. There are risks in our business and they’re more fully disclosed on our SEC filings.

So, over the last few days we’ve been to a number of different medical conferences up and down the West Coast. I think it’s a sign of Vertex is broader than hepatitis C. We’ve been forging ahead in hepatitis C, trying to improve regimen’s for patients, improve cure rates, and reduce durations of treatments for the patients over a number of years. And more recently, though, we’re emerging into another disease, and that’s cystic fibrosis. We’ve always been committed to building a global health sciences company at Vertex. It takes time, but we’re starting to arrive there today.

And I’m going to talk about a number of different medicines today. Clearly we’re going to talk about HCV and cystic fibrosis, but I’m also going to touch on a number of other medicines that we have in development.

A quick review of the corporate profile of Vertex. Well, firstly, we are primarily in hepatitis C and cystic fibrosis. We recently launched a drug named INCIVEK that’s created a new hepatitis C regimen that’s built around INCIVEK that has significantly improved viral cure rates in this disease, as well as shortening the duration of treatment.

We’ve recently filed another drug in the area of cystic fibrosis with the global authorities both in the U.S. and Europe. And I will talk a little bit about time-to-market, hopefully, for that drug. And then also, how we may expand in cystic fibrosis, which is a significantly large orphan disease, if that’s not an oxymoron, but it is a large orphan disease.

Today, we’re starting to develop a new asset within the company, and that’s financial strength. Over the years we have relied on your support to fund the company to build a franchise in hepatitis C and cystic fibrosis. But as of the third quarter, the company was cash flow positive and we continue to be so, depending on how we continue to sell INCIVEK into the market. But cash is an asset for the company, and I have made recent comments regarding the strength of the balance sheet and how we may use that cash in the future.

The pipeline’s broad; all to often it’s a focus on hepatitis C, but it’s much broader than hepatitis C. We are forging ahead, and we’ll talk about our portfolio of hepatitis C drugs and the priorities that we have there.

And cystic fibrosis, again, there’s a portfolio of drugs within the cystic fibrosis programs and how we intend to get to a broader set of patients. I also want to just note to you that there are other drugs; we can for now put these in the speculative area. It is important in a company that’s building itself around multiple diseases to have a pipeline of opportunities.

We could debate about the progression of these compounds and the time-to-market and the utility. It’s just a very important part of our business. Though we continue to follow the signs, build drugs in these serious diseases, and today rheumatoid arthritis, epilepsy, and flu are just a couple, or a few, of the other areas that the company is focused in.

So, let’s go to HCV and KALYDECO for cystic fibrosis. INCIVEK is the drug we launched in May of this year, and financially I think that’s a good mark to see how that drug’s doing. In just the first full quarter, our market, which is quarter three, we sold approximately $420 million of INCIVEK-based product, which is quite astounding. And we appreciate the recognition, Adam, of you acknowledging the success of the launch. And we anticipate that that will continue to move along, and we’ll focus today on how we broaden the application of INCIVEK to patients, and also broaden the prescriber base of the physicians that write for INCIVEK.

KALYDECO is a compound that’s – or a drug or medicine – for cystic fibrosis. It targets the underlying genetic disease for cystic fibrosis. And if this drug is working the way that we hope it is, while the patient is on KALYDECO, that patient might not actually be suffering the cystic fibrosis. And I’ll talk a little bit about that in a moment. So the early insights into the launch, the launch is going tremendously well. We’ve treated over 17,000 patients in just the first five months of launch, which is a tremendous penetration into this market. The physicians have received INCIVEK very, very nicely.

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