Vertex Pharmaceuticals Incorporated (VRTX) Earnings Call Transcript & Summary

All right. Well, I think we can get started. Good morning, everyone. My name is Will Pickering. I cover U.S. biotech at Bernstein. I am privileged to be joined today by Vertex's CEO, Reshma Kewalramani and Reshma welcome.

Thank you so much, Will. Good morning.

Why don't we start with giving -- maybe Reshma, if you want to make a few kind of framing comments for the discussion and then we can shift over to the Q&A.

Sure. Sounds good. Well, good morning, all. It's nice to see all of you. We were just reminiscing about having met each other 10 years ago. And so maybe it's a good wave starting this. 10 years ago, so around 2015, Vertex was certainly a CF company. And you could see on the horizon the triple combinations like TRIKAFTA coming around the corner. Fast forward to where we are now in 2025. And I would say 3 important things to know about the company. We are now at a point where we have our fifth medicine in CF, ALYFTREK approved. It's launched in the U.S., and we can certainly talk about the early launch days and it's waiting approval around the globe. We have more work to do in CF. We have more regimens coming, and we also have the last 5,000 or so individuals that cannot benefit from our small molecule CFTR modulators and so we have programs to get to those. So there's more growth and more work to do in CF. Second, we have now diversified our revenues. We are diversifying our disease areas in which we work. CASGEVY is approved in sickle cell disease and beta thalassemia. It's the first CRISPR/Cas9-based therapy that has secured approval and while the patient journey is long, we are seeing really enthusiastic response from patients and physicians, and that program is catching momentum as it commercializes around the world. The next one is JOURNAVX. It wouldn't surprise me if you had a few questions on pain and how the acute pain launch is going. We're up and going on the Acute Pain launch, the neuropathic pain studies are underway. More molecules come beyond JOURNAVX and the next big data readout is going to be from the pain program is going to be from VX-993, which I do expect will be in the second half of this year. And then maybe the last thing to say is that the pipeline is now quite diversified, it's broad, it's deep, it's multiple modalities, many diseases, 5 programs that are either in or nearing Phase III and a company that we are continuing to grow so that we can ensure that these medicines that are making their way through the late stages of the pipeline can be commercialized and get them to patients. So that's sort of a state of the state and some nail of where we are.

Great. Thanks much. This being the Strategic Decisions Conference. I'd like to start with a kind of a strategic question of just across all of these irons that you have in the fire all the priorities, how are you personally allocating your time? And what's sort of the top priorities for you and your management team?

Yes. There are the priorities that we set. We are very long-term focused. And so as an example, in 2019, we set our 10-year plan that takes us to 2030. And so there's a lot of focus on this kind of 10-year horizon. And then there's what happens in reality and there's a lot just going on that you wouldn't have necessarily expected would be happening in 2025. The highest priorities for the 10-year horizon are to do what we did in CF and do it again and again and again in different disease areas. And that's to say, bring more medicines through Phase III and commercialize. We have an aspiration to complete this journey in CF, where we're working on that. And we're working very hard on organizing the company to be ready for this big wave of Phase III readouts. That has to do with ensuring supply in terms of manufacturing, setting up our offices around the globe as an example. We just set up our offices in the Middle East in 2023. So there's a lot of company building work. In the near term, we are focused on execution. This is a year for us to execute the biological risk in the pipeline has been brought down because we're already in Phase III. We have these 3 launches, a ALYFTREK, JOURNAVX, CASGEVY, that we're launching, and that's what we are focused on. In terms of how I spend my time, it's probably 1/3, 1/3, 1/3. 1/3 of my time is inside the company with our people. 1/3 of my time is outside the company, either with physicians or at places like this and 1/3 of my time is purely strategic.

Great. Great. Well, maybe on the tough macro environment right now, a lot of policy uncertainty. Would you like to just sort of speak to how you see Vertex as potentially exposed or not on some of these issues, MFN, tariff, FDA disruption? And what are some of your key messages to the administration as a policy influencer about what would be the right way to go?

Yes. It has been an exceptionally complicated time because the potential policy changes have been coming fast and furious and they've been changing. So it's been difficult to keep up with what is real and what is a test balloon? What we have been talking about and what I would say to the group here is all of the administrative changes that we've gone through in our lifetime have a lot of activity in the first 100 days. That's completely normal to be expected. You might like some of it, you might not like some of it, but that part is normal. I would say that the pace and the breadth of the executive orders has been unusual. For us, as we think about FDA, I don't know Martin Carry, myself, but I know many people who've trained with him and who know him. And from everything I understand, he is a smart doctor. He's a person who is data-driven and he is someone who understands benefit risk and the framework. So I have no reason to believe that we're going to see anything but great regulatory science. We don't have a PDUFA in front of the agency. Our ALYFTREK medicine and JOURNAVX were already approved. So we don't have any of those. But in terms of regulatory engagements in terms of our meetings and the feedback, those have been business as usual, we have not seen anything different. With regard to the tariffs and MFN and such, it is just playing hard to give you a straight answer because it's not entirely clear where we are actually going. And so, what we have been doing is preparing and making sure that we communicate with you guys about what our exposure is and how we see our book of business. And to make sure we get through those numbers. For us, when you think about the EOs that may be related to pharma or the MFN as examples, what we're talking about is for the government-paid patients. So it's important to know, well, what does that look like? For Vertex, about 10% of our book of business is Medicare, about 23% is Medicaid. In Medicaid, a large bulk of those patients are less than 18, their kids. So many versions of what you hear and see, less than 18-year-olds are carved out. And another bulk of our patients are what are -- what is being called medically frail or medically complex, and those are also carved out. So that's sort of what I can tell you and maybe the last thing is, in the first Trump administration, there was also a thought of MFN. You might remember this, and there was an executive order. And so perhaps there's something to be learned from there. That one was specific to -- the one in 2020 was specific to Medicare Part B as in boy, top 50 medicines, and that's what it was focused on. It was never implemented, but that was the focus. For us, for our commercialized medicines, we don't have any Part B exposure.

Great. Great. And what about 340B exposure? There's been some questions around if this does impact Medicaid, then that could have some kind of a spillover effect depending on your 340B book of business?

Yes. That is a true point. There can be spillover into 340B. And as you know, 340B in and of itself is another exceptionally complicated beast. I would say for where we are right now, it's extremely hard to call. It's not entirely clear. As you know, whether what we're talking about with MFN is something that could go through and if it goes through, is it Medicare or is it Medicaid, those are not known. So I think second derivative possible impact is extremely hard.

Sure, sure, a lot of uncertainty.

Yes, that's fair.

Maybe we move over to CF, where you can talk in much more clear.

A little bit more certainty.

Yes, exactly, exactly. Yes, I would say that sell-side analysts, including me, have tended to model the growth tapering off faster than it actually has. And so where are we today in the maturity of the CF business? And sort of how long before this becomes more of a population growth, plus or minus pricing as a growth algorithm?

Top line, I continue to see growth in CF, and it's understandable that as various folks have tried to model out what the peak is, and I won't comment on peak or give you any kind of long-term guidance that people have underestimated with CF is. And I think it comes from a few different factors. The first is, as better and better medicines have come more patients have come forward to be known and to be included in registries. So the number of patients who actually are available and want to be treated is more than what the ambient number was. Patients are also living longer, and that has been additive. And the third is growth from the medicines reaching more kinds of patients with different mutations. As one example, TRIKAFTA is a great medicine. ALYFTREK treats 31 more mutations than even TRIKAFTA and in the U.S., that translates to hundreds more patients. So it's understandable that the expectations were different than reality, but I continue to see growth lower age groups, greater geographic presence as well as our last 5,000 patients who can't benefit from CFTR modulators.

And for ALYFTREK, maybe talk about how the launch is going so far. One of the questions I often get is what is the mix of the different patients that are starting this therapy is it switches? Is it newly eligible? Is it return to therapy? Yes.

So ALYFTREK is the fifth in our CFTR modulator portfolio. And the benefits are, one, it is -- it gets our patients to higher levels of CFTR protein function. That's the protein that doesn't work in patients with CF. The way you read out protein function is sweat chloride. So it produces better sweat chloride in our patients. And just to give you a sense of these numbers, the way a CF patient is diagnosed FCF is you have a genetic test at birth and then they do a CF test on sweat chloride. If your number is higher than 60, you have a definitive diagnosis of CF. You and me, we are less than 30. And that number 30 is the carrier threshold, 60 is the diagnostic threshold. So our drive here is with TRIKAFTA, some number of patients get to below 60 and 30, ALYFTREK brings many more patients below those thresholds. And if you look at the 6 to 11 data, 50-plus percent are less than 30. They're normal range and more than 90% are less than 60, so they don't even qualify as definitive CF. So that's what we're talking about. So 1 benefit is improved CFTR protein function as we read it out in sweat chloride. A second benefit, and I know Will and I have talked about this for many years, Yes. I didn't think it would be as big of a deal as it turns out to be is it's once daily dosing, TRIKAFTA is twice a day. And the third benefit is to the company, lower royalties on the ALYFTREK combination than on TRIKAFTA. As I said in my opening remarks, the approval is -- has come through for the U.S. We're pending in rest of world. Early days of the launch are as you would expect. We've always bucketed the patients that could go on to ALYFTREK in 3 buckets. The first is newly eligible or naive to CFTR therapy. Think about the additional 31 mutations, the 400, 500 or so patients. And those patients are getting a medicine for the first time that treats the underlying cause of their disease and so uptake is rapid. The second group is about 10% of patients with CF took TRIKAFTA at some point and then discontinued. So in that category, continued patients are coming back and coming back on to ALYFTREK the third group is the one you mentioned as well, which is the transitions. They're on TRIKAFTA. They're doing well on TRIKAFTA, but maybe they want to move on to the most advanced medicine and those we call transitions. The first 2 groups are the most rapid uptake, but there's uptake in all 3 segments.

Great. Great. And on the royalty benefit, there's -- I believe people were expecting that there's this potential controversy with royalty pharma and that we wouldn't get kind of an answer about that until there was an active potential claim that someone could file. I was wondering if you could just share if there's any kind of update on that and your overall level of confidence in your position?

Yes, sure thing. The potential controversy is that there is a contractual agreement between Vertex and the CF Foundation to pay royalties based on the components of what makes up any combination therapy. There's a time date stamp. And based on that, there's an allocation of royalty payment. It is not controversial to us. It is not confusing to us, and there is no dispute to us. It's a contractual obligation the medicines that are in the components that are in ALYFTREK have a lower royalty burden than the components that are in TRIKAFTA. So no real update or change from our perspective. It's been clear all along and it remains clear today.

Okay. Great. Great. In the first quarter, you had really great growth across all markets, except Russia was one which was a headwind. Could you share a bit of context on that and time line to resolution maybe?

Yes, yes. So, as we discussed, we are in Russia, and we talked about this in the quarterly earnings we were supplying TRIKAFTA in Russia and the situation is a bit of a perfect storm has arisen in that country between the war and a desire to drive towards local production, local manufacturing as well as an unauthorized copy of our medicine becoming available. And in that setting, that unauthorized copy has taken the place of what was TRIKAFTA. This is a limited to Russia situation. The war, the underlying potential for corruption and this inherent desire to make product locally has led to this situation occurring for other companies as well. We are very, very clear on the IP. This is not happening anywhere in the developed world in the western world. This is a Russia limited situation. In terms of resolution, we are fighting in the IP courts to ensure that IP is respected. The system in Russia is different. So what we have done is for the guidance that we provided, we have fully accounted for this situation in Russia. And you might remember that we increased the lower end of guidance last quarter.

Well, maybe we could shift over to pain. A lot to talk about here. Investors are very, very focused on the scripts numbers. And I think even in just the last few weeks, we've seen they've continued to ramp nicely and not really leveling off. But it seems like the most important thing is to see how do those scripts inflect as you continue to expand access and work through the P&T committees. And so maybe just kind of speak to some of your goals on the access and P&T front this year?

Yes. Let's start at the highest level and then we can go wherever you'd like. So JOURNAVX is a NaV1.8 inhibitor, it is a medicine that targets this particular channel that has been called the holy grail of pain drug development. NaV1.7 and NaV1.8. We have programs in both JOURNAVX is a NaV1.8 inhibitor. The medicine is the first approved non-opioid for acute pain in more than 2 decades. When we were in the drug development phase of this and in the early launch, what the pushback was had nothing to do with we need non-opioid pain medicines everyone seemed to understand that. The understanding was equally high with regard to the downsize of opioids. The pushback was, go, gosh, no one's going to pay for this, go into access because opioids are cheap. They're pennies on the dollar for any branded medicine. So the important news to share with you is that concern has not proven to be true in the real world. So we're very early in the launch. Where just a couple of months in we have already secured a contractual agreement with 1 of the big PBMs. We're working with the other 2, and I have high confidence that we will get there with those. P&T committees have started their work. And for those of you who've worked with medicines that need to get approved through P&T committees for hospital use, you know that it's a long process. I'm very pleased to see that people are making efforts to shorten that process. They want this medicine on formulary, and they're working hard on their end to make that process go faster. So the top line is we expect and we see volumes to increase in the first half of this year. And as reimbursement and access kick in, we expect to see revenues increase in the second half of this year. Just to give you a sense for the marketplace, we are seeing about 2,000 or so hospitals and their affiliated medical practices. That ladder up to 150 or so IDNs. And we are doing this with a specialty sales force, which is why we're focused on the high-density acute pain patients. Generally speaking, it's not specifically true, but it's good enough for government business, and it will help you remember the numbers, about 50% of the acute pain scripts are, let's call it, completely in retail. About 50% are these hospital associated. In the hospital associated, we expect 15, 1 5 to be prescribed in the hospital used in the hospital, and we expect about 35% to be prescribed in hospital, but you fill it in retail pharmacy. And that's kind of how the world is playing out, albeit very early days.

And are you seeing sort of faster growth in the hospital segment or the retail segment at this point?

It's -- we had expected it to be in the retail segment because in the hospital, there is lesser uses as we discussed, but also because the P&T committee process takes a little bit of time whereas retail is easier.

Got it. And you have a really robust patient support and assistance program for this drug. One of the challenges for investors is like, when are we going to know the gross to net drug? So maybe share a little bit on that.

Yes, it's not today because I'm not telling you. In the first half at least of this year, but for some time, our goal and our strategy has been to make sure that if a doctor writes for JOURNAVX and a patient takes that script to their pharmacy that the script is filled. Remember, we're talking about acute pain. There isn't time here to go back, redo, I'll fill it tomorrow. So for our launch, it's been really important to make sure that JOURNAVX is on every major retail pharmacy shelf that's happened. And it's really important that if the patient goes that they are able to pick up JOURNAVX. So we have a very robust patient support program to make sure that whether we have reached a agreement, their insurance company provides access or their government pay patient, whatever the situation is that when they show up to the pharmacy that they should be able to pick up their medicine. And that's why gross to net is very difficult to figure out now. And that is what we expect will improve, and that's why revenues go up in the second half as we secure these reimbursements.

Great. Great. On the commercial model, I mean, historically, Vertex has been served very well by the specialty model, but this is a really, really big market opportunity. Is there ever a point at which you might say, "Hey, look, we need to really ramp up the sales force even larger than we had ever considered to really maximize the value of this drug?"

Yes. It's an excellent question and insofar as its Strategic Decisions Conference. No. Vertex is not going to be a company that commercializes in a primary care setting or using a primary care like sales force. So I do not see us having thousands of sales reps doing acute pain. What I do see us doing is working with our specialty model. Today, we have about 150 reps if that ends up being 130 or 180, it's in that ballpark of what we consider to be a specialty sales force. And we do a lot of work in the policy realm to ensure that there are good policies in place for a drug like this, which is a non-opioid and a medicine that society can benefit from separate from the individual and also work with data, technology, digital and so that's our approach. It's the same for us in neuropathic pain. If you think about pain overall, most people divided into 2 parts, acute and chronic, we divide it into 3 parts for this reason around strategy and a specialty sales force. Acute is acute. And for us, there's a neuropathic pain where we intend to develop and commercialize on our own. And then there is a third component of, let's call it, musculoskeletal pain or osteoarthritis or low back pain. That is the primary care cell, and we expect that our drug will work and I say that not out of hubris, but because the predecessor molecule, VX-150 was already tested in osteoarthritis, and it's already shown to be effective, so that's why I think it will work. But that commercialization will be with a partner who can do a great job commercializing in primary care. So that -- I'll put it on in the corner, we'll get to those patients first, neuropathic and acute.

Great. Great. We have a question from the audience, and it may be a little bit tough to speak to this one, but I'm going to ask it anyway. Chronic pain patients are very excited about JOURNAVX. Doctors are saying patients are asking for it. What is the off-label prescription potential?

Yes. It's a fair question. We are bound by certain rules and regulations, and we're not allowed to promote in the chronic setting because it's not approved for chronic pain yet. So a doctor can prescribe the medicine for whatever they choose to, but I don't have a breakdown for chronic pain, and we certainly don't promote in that segment. When the drug is approved, if that happens, we certainly will be promoting and then I'll be able to give you data.

Great. Great. And so maybe we shift over to chronic pain a little bit. Would you like to kind of frame what the company's development strategy is? And I know you have the DPN trial ongoing and then sort of thinking about some of the different options beyond DPN to get that broad pain label.

Yes, certainly. Okay. So now moving from acute pain to 1 of those 2 segments of chronic pain that's neuropathic. What we're talking about here is PNP, peripheral neuropathic pain. And to give you a sense of the market, this is about 10 million Americans, 2 million Americans have diabetic peripheral neuropathy or DPN. 4 million have something called LSR lumbosacral radiculopathy and the remainder 4 million have a variety of other neuropathic pains, think herpetic neuralgia, think small fiber neuropathy, think trigeminal neuralgia. So that's the last bit. It's conventional to do drug development in DP in diabetic peripheral neuropathy. There have been many studies that have been done, and there are many medicines that have been approved. -- our big idea here is to get an indication in peripheral neuropathic pain. To be clear, that's never been achieved in the U.S., but that is our big ambition. Our big idea here is we'd like to get an indication in peripheral neuropathic pain by doing studies in DPN diabetic peripheral neuropathy plus LSR. And the idea here is dieback peripheral neuropathy plus LSR taken together is more than 50% of the peripheral pain market. Second, given the specificity of how this medicine works, that should be acceptable. And third, based on mechanism of action and biology, it makes sense that all of peripheral neuropathic pain should be able to be treated different than some of the medicines that are approved, right? Right now, we are using and medicines that are approved for DPN our antiepileptic medicines, antidepressant medicines, which are obviously not specific. So that's our idea. We have initiated these conversations with the FDA, but we haven't concluded them. We're going to have our end of Phase II meeting this summer, and I expect to be able to report to you how those conversations go. It is reasonably easy to understand what it takes to do a DPN indication. 2 DPN studies, you get a DPN indication. So there's no lack of understanding there. The question is what does it take? And is it possible to get a P&P indication, and that's our strategy and that's what our approach is.

And then how is the DPN enrollment going?

I'm not at a point where I can tell you about where we are and forecast for you when the studies will conclude its enrollment. But what I can tell you is it's up, it's running, the enrollment is going really well. I'm pleased with how it's enrolling, dosing is ongoing. But I expect that in the second half of this year, we'll be able to -- we'll have enough data so we can project and tell you when we see this study concluding. It's 1,100-ish patients and 24 weeks of follow-up.

And is that 1,100 in each of the 2 trials or it's across the total.

The single trial that's up and running. Yes, yes.

And then you have a few successor molecules. You talked about 993. We have some data this year. Maybe just speak to the overall objectives of those successor molecules. And as you think about your portfolio approach, is there anything different about that approach in pain versus the approach you've taken in .

Susie, you told me that it's a 12-week study, not 24. Thank you. I'm adding patients, and I'm adding weeks of study. Thank you. . On the follow-on molecules. So -- if you're -- 1 thing to make sure that we talk about at the beginning is why are we doing this at all? And the answer to that is we do this across all of our programs. Our approach, our strategy is to not only innovate. That's not what we're actually interested in. We're interested in serial innovation in every single one of our disease areas in which we work. CF is an exemplar. We start -- and then if it's humanly possible to do better, we're committed to be the ones who do it. So think KALYDECO, ORKAMBI, SYMDEKO, TRIKAFTA, ALYFTREK 828, et cetera, et cetera. And that exists across the entire portfolio. So for pain, it starts with JOURNAVX VX-548. The one right behind that is VX-993. It's more potent and we're able to dose higher. So it's another way of saying we're able to get greater exposure. That is in 2 Phase II studies. The first is in acute pain post bunionectomy that's going to read out in the second half of this year. The second is in diabetic peripheral neuropathy. That one is underway. Behind that one is a molecule called VX-993, and there's more behind that. I also want to make sure that you know that we have medicines in the NaV1.7 inhibitor class that we're working on. Those NaV1.7 inhibitors are in late preclinical development and I'm excited to see those alone, but I'm really excited for the possibility of combining a NaV1.7 with a NAV1.8 because biologically, it makes a lot of sense to me, 1.7's initiate the action potential NaV1.8 perpetuate that, it makes so much sense to me that if you put them together, you should expect a great efficacy. So more to come in this one.

Great. And then earlier this week, we saw Eli Lilly was acquiring SiteOne. And any kind of reflections on that. And I also believe that Vertex at one point had announced a collaboration with SiteOne back in 2022. So any kind of implications?

Good memory. Yes. We know SiteOne very well. We collaborated with SiteOne on NaV1.7. And obviously, through that collaboration, we have access to the NaV1.7s we worked on and the derivatives of those. I feel really good about where we are with JOURNAVX. Obviously, it's already a commercialized medicine and then 993, 973 and all of the medicines that come beyond that. So what I would say is we know them well. And I'm really happy with the molecules we have.

Great. Maybe we could shift over to pove. Let's do it Okay. So far, I'm sure there's a bit of framing comments you'd like to make. But I guess, on my end, one of the questions is the data looks great, but it's such a kind of a crowded space. So how are you thinking about that competitive environment when you're deciding to go ahead with the deal and the market share number you put in your deal model I don't expect you to share the number, but how are you thinking about it?

Right, right. I won't share the number. I think you know that I happen to be a nephrologist by my background. It is not the reason we did the deal, but it does have special significance. As we thought about the potential for Alpine, what it really went back to was what we call our sandbox. So the way we do our strategy in R&D is not by platform. We're not an mRNA company. We're not a cell company. We're not a gene editing company. We use whatever modalities available to tackle the disease of interest. We are neither a therapeutic area company. We're not pulmonary disease or neuroscience or cardiovascular. We're a disease first company. So IgA nephropathy was in our sandbox, but it was on what we call the bubble. That is to say we're interested in it. It fits all of our criteria. It fits our strategic intent to go after diseases with high unmet need validated targets, human biology, causal human biology is known efficient development and regulatory pathway specialty markets, it fit all that. But we didn't have an approach that we thought could be transformative, enter Alpine we think very highly of APRIL/BAFF inhibition based on what we were seeing emerge. We didn't have an APRIL/BAFF inhibitor, which is why we went looking -- we -- the one thing you can count on with Vertex is we analyze everything. We look at everything deeply, and we consider the data extensively from all of the preclinical and clinical data available, pove and Alpine look to be the best in terms of the preclinical data that we saw, which has to do with binding affinity as well as potency. The clinical data at that point, there was some Phase II data, protein reduction, hematuria reduction. And then I really liked what Alpine was doing. They're very, very smart in their approach. They put 2 basket studies together. So they were studying 7 indications. That breadth of indications was extremely helpful because we could see emerging data in membranous nephropathy beyond IgAN in lupus nephritis as well as an anchor associated disease, not to mention an entire basket of heme diseases. So that's the reason we decided of all of the available APRIL/BAFF, that's the one we wanted to go after. We also thought that the people there were incredible and the cultural fit was very sound. You'll remember, we bought Aurora Biosciences in like, I don't know, the early 1990s or so, the people from Aurora are still here. They're the ones who discovered all 5 of our CFTR modulators, and they're also the same group that discovered JOURNAVX. So people is really important to us. When I put this all together and say, okay, here we are today, what are we really looking at and how do we think we're going to compete. I do not believe we're going to be first to market, to be clear. There are others in front of us, but I believe we have the potential to be best-in-class. This is not a medicine or a therapeutic modality where you can only use it once and then you have to stick with that one thing that you picked. You can switch. Think of it more like a psoriasis market or a rheumatoid arthritis market. And I think what's going to win is best efficacy and safety, the best breadth of indications. I do not believe a nephrologist wants to use 1 medicine for membranous and a completely different medicine for IgAN and work on something else for another B-cell-mediated disease. And I think that the formulation and presentation for the chronic biologics market is really important. That's to say a convenient auto injector once monthly dosing is better than once-weekly dosing. Clearly, subcu is better than IV, small volume, not painful, those kinds of features. And I believe pove has all of that. So I'm really excited about this one. To conclude on pove, we're done with the enrollment for the interim analysis cohort for the potential accelerated approval which means that we are set up for a filing in the first half of next year if the results are supportive.

Got it. Got it. And do you see any risk that the FDA might close the AA pathway based on there being an available therapy that's gotten full approval or from a timing standpoint that might not be an issue?

I don't believe that that's going to be an issue from a timing standpoint. And as far as I'm aware, today, the renal division, who we work with are the same people. And so I don't have reason to be concerned.

Great. And then you recently, I believe, announced a new indication PMA that you're starting the Phase III. So would you like to kind of frame out the opportunity for that one?

So we just finished up our end of Phase II conversations with the renal division and delighted with the agreements that we've reached. It's 170, 180 patients Phase II/III adaptive design, and we're doing this adaptive design to test both 80 and 240 in terms of the doses and a complete response in terms of what the endpoint is. super excited. So this one doesn't have any approved medicines yet. And I think it's going to be a really nice portfolio of potential renal B-cell mediated diseases that this drug can treat. So that study should start this half.

And is there any reason to think that, that one has either more or less clinical development risk compared to IgAN?

Maybe -- I guess it depends on how you think about risk. IgAN has, I don't know, maybe 20, 30, 40 people in the 80-milligram dose, another 20, 30, 40 in the 240 dose, so I would say we've studied more patients in that. The membranous study, I think, has a dozen or so patients in that basket study. So there's less patients. But if you think about safety, there's no real difference between a -- to me, there's no real difference between an IgAN patient and a membranous patient. Frankly, there's no difference to me between any of the potential patients because the way it works is the same, it depresses B cells. You certainly have to be concerned about safety from the perspective of infections because you're tamping down the B cells. But I would say there's less data on membranous.

Maybe we switch to CASGEVY. I see that we're rapidly approaching the end of our time. I believe you said that last year was going to be a foundational year for CASGEVY and we're starting to see revenues pick up now. Maybe just frame how you see the timing of this launch and kind of time to peak sales for this one?

Yes, so CASGEVY is -- that approval was absolutely historic. The technology is exceptionally innovative and the outcomes for patients are dramatic. We're talking about VOCs being absent in 90-plus percent of patients in the pivotal trial and patients with beta-thalassemia having no need for infusion. So it's a really important medicine in our way of thinking, we want to make only transformative, if not curative medicines, and this certainly fits the bill. The important thing to know about CASGEVY is it is a long patient journey and even Vertex cannot make that patient journey shorter. There's patient identification. Those patients go from their hematologists to the transplanters and then they can be considered, evaluated, go through the preparatory work to have CASGEVY. The CASGEVY process is long. You need to have phoresis, that's to say take the cells out of your body. Then we manufacture it. And the number of pheresis sessions is not consistent across patients. It's less in beta-thalassemia and it's more sessions in sickle cell disease. The reason for that is we use dual mobilization agents in beta-thalassemia, but we're not able to do that in sickle cell disease. You can only use 1 mobilization agent. So that whole process is a multi-month process. That's why we describe 2024 as foundational to get patients identified, referred, initiated and go through the process and that worked as we had predicted. This year, you're seeing the momentum in more and more patients getting referred. There are -- I think we commented on the earnings call 90 patients who have had their cells collected they have at least their first collection and double that number who have started the process. That's really looking good now. The process is going to continue to be long. But once you have the process moving, then, of course, there's people in different parts of the journey, we recognize revenue once infused. So now we're at that part where there's sufficient number of people who've had their first collections and if needed, second and more so that you can start to see the revenues come in?

And do you have any visibility as to whether any patients are dropping out of the funnel or it's primarily a cycle time kind of issue?

Certainly, people will drop out of the funnel. Unfortunately, especially our sickle cell disease patients are very, very sick. There are patients who might want to start the journey, get the referral to transplant and then die. It's that serious of a disease. So certainly, patients -- not every patient who gets referred and starts the journey will end the journey. I think in our clinical trial, it was something like 10%, 15% in that neighborhood, if you try to think about, well, how many patients. So the vast majority of patients complete the journey, but our patients are quite sick.

For the Middle East, this is one that investors have gotten pretty interested in. I think that you have a lot of credibility here because it's just not something that we hear a whole lot about from other companies. And so I guess you have many people figure, well, it must be true. So you just kind of share a little bit about that opportunity.

Yes. So let me go back to CF for a moment. CF is not only a genetic disease. It's a genetic disease with a founder effect. It's a disease that's only really found in Northern and Western Europe and then where those people migrated. Sickle cell disease is similar. It has just a different geographic pattern. So beta-thalassemia, for example, is very prevalent in Italy. Sickle cell disease and beta-thalassemia are prevalent in the Middle East for this reason, it's where the genetics take you. We recognize that early and to give full credit to CRISPR Therapeutics, our partner in this, they recognized it early. And so we decided in '23 to open up our own offices there. I do believe that the first patient in the world who was treated with CRISPR in the commercial setting was in the Middle East. So it tells you that it's not only true that there are a lot of patients there, but it's also true that the medical infrastructure is very advanced. The patients want access to this kind of advanced therapy, physicians are able to do what is essentially a bone marrow transplant and there's a willingness to provide access and provide reimbursement. I've been very pleased with our team in the Middle East. We are extremely young in our endeavor there, we're probably not even 2 years old at this point. But I've been -- I've visited our office and I visited the sites that are qualified and are part of our ATC network. It's a very impressive system -- and the prevalence of sickle cell disease, in particular, is high in the Middle East, not only in KSA, but also in UAE and Bahrain and we have approvals and reimbursement in KSA, Bahrain, UAE as we come to all of the countries there. It's -- I won't remember the exact number, but it's thousands of patients. It's probably second only to the United States in terms of prevalence of disease that qualify -- the serious disease that qualify for our treatment.

Great. Great. maybe just in the last couple of minutes, we zoom out. And could you articulate the company's capital allocation philosophy and how you think about the right mix of internal versus external versus capital return to shareholders?

Yes, sure thing. I am going to sound like a brokered record on this. No change in our approach to capital allocation. What we believe in deeply is cracking open entirely new disease areas and then serially innovating in there. When we do that internally, that's terrific. If we do it with external innovation of BD equally good. That is the primary deployment of our capital, innovation. Right now, our pipeline is about 40% external innovation and about 60% internal innovation. We didn't do that design or intent, but it is a reflection of how we think and that innovation wherever it comes from is what we are driving for. We have a share buyback program. You saw that we put out an announcement to continue that. And that's what you will see us do you didn't ask it directly, but sometimes it's asked very directly about dividends and what do I see? My crystal ball only goes out so many years. And as far as I can see in my crystal ball, I don't see it.

Great. Great. Well, I think that that's a great place to leave it. I'd like to thank you so much for joining us and great discussion. Thank you.

Will, thank you so much.