Vertex Pharmaceuticals Incorporated (VRTX) Earnings Call Transcript & Summary

Great. Thank you very much for joining us today. It's right before the lunch session probably. My name is Mohit Bansal. I'm one of the biopharma analysts here at Wells Fargo, and I'm joined by Vertex team today. We have Susie Lisa, Head of Investor Relations; and we have Manisha Pai, she's Executive Director of Investor Relations at Vertex. Thank you very much for being here.

Thanks for having us.

Awesome. So maybe like -- before we get started, I mean, there's a lot to talk here. Can you talk a little bit about the -- to set the tone with like what is the discussion topics right now? And what you are excited about for next 6 months or 6 to 12 months, which investors should be focusing on?

Sure. So I think that it feels like it's always an exciting time at Vertex to be honest, right? Right now, we are executing very well, I think, on 3 ongoing launches with ALYFTREK, our fifth marketed CF medicine with CASGEVY for sickle cell disease and beta thalassemia, where we continue to make very nice steady progress. And then the early days of the JOURNAVX launch, the first non-opioid for pain, the first new therapy for pain -- acute pain in over 20 years, really exciting in terms of the progress we made, and I'm sure we'll get into that in some more detail. So it's this new era of commercial diversification and commercial execution, which I think is off to a very good start, that combines with our historical excellence, I think, in terms of R&D execution and pipeline execution, right? So as I mentioned, fifth CF medicine, now diversified into 3 additional disease areas. And we have 4 ongoing Phase III studies as well as a fifth to start soon. So expanding into kidney diseases with two ongoing Phase IIIs for -- inaxaplin for APOL1-mediated kidney disease with Pove in immunoglobulin A nephropathy. We also are close to completing the enrollment and dosing in our Phase III study for the zimislecel, which is the old VX-880 for type 1 diabetes with truly outstanding effect. And then we have our ongoing DPN Phase III studies for expanding into peripheral neuropathic pain indication. Then there's a pipeline behind that with products soon to be or currently initiating Phase II study, proof-of-concept studies in ADPKD, autosomal dominant polycystic kidney disease, as well as ongoing work in myotonic dystrophy type 1 in patients in the clinic and then more behind that. So I think combining those two areas of excellent execution, both in terms of R&D and our differentiated strategy focusing on sandbox diseases where we understand the causal biology and hopefully leads to greater rates of success as well as what is the early days of commercial and revenue diversification. It's a really exciting time.

Awesome. So maybe -- look, I mean, there's a lot going on. So I can go in any direction, but let's just begin with the second quarter call here. So there were two different topics, which kind of made people a little bit nervous and we saw that in the stock reaction as well. Can you talk a little bit about the regulatory discussions where, I mean, it was like again, you were discussing with the FDA that is there a path there, but can you talk a little bit more about for the investors like what you were discussing and how the discussions unfolding there...

Sure. I would say a big dislocation in the stock after the Q2 call. I think regardless really of the very good early data on our launches commercially and a really good financial quarter execution-wise. But I think the main disappointment that investors heard from the call was the fact that our next steps in terms of reaching the market commercially in the U.S. for peripheral neuropathic pain will be through a DPN, diabetic peripheral neuropathy indication and that we're starting imminently a second Phase III study there. There are 10 million patients, 10 million-plus peripheral neuropathic pain patients in the U.S. And our goal is still ultimately a broad neuropathic pain label. But at our end of Phase II meeting at the end of July, the FDA had invited us in to talk about that potential. They have only ever previously granted single indications in peripheral neuropathic pain. We came in and had an excellent robust discussion, but it was clear that they weren't there in terms of granting a broad label with our proposal to do one DPN Phase III and one lumbosacral radiculopathy or LSR study, that would not lead to a broad PNP label. They're still thinking more in terms of etiology, right? There are many different causes of peripheral neuropathic pain, toxins, cancer and metabolic diseases, et cetera. And so -- although we feel strongly that our mechanism of action addresses all these different causes and hence, our goal of a broad label, the FDA is not there yet. And so what was clear from that discussion is that doing as per their past history, two studies in one indication will lead to a label with that indication. And then subsequent follow-on studies, single study could lead to add-ons to that label. So hence, our decision to not proceed next with a Phase III in LSR but instead do a second Phase III in DPN to get that indication as quickly as possible and then add on from there. We don't yet know the next steps. The FDA may be open pending additional considerations to smaller basket studies, maybe polyneuropathy or mono neuropathy or it may just make sense for us to go and do a single study in the next indication. That's the work that we're still ongoing. But we ultimately do see potential for the whole 10 million patient population, but very near-term focus on the 2 million plus that have diabetic peripheral neuropathy, and executing on those studies, which are well understood, well-trained clinical sites, understand the treatment effect, how to manage placebo effect, et cetera. And what we said is that we -- our plan is to complete enrollment in both of those Phase IIIs in DPN next year in 2026.

Got it. So the path for the broad indication is not closed yet, but you need the DPN as an anchor indication and then just build on that? Is that...

That's exactly right. And with high visibility on the pathway to DPN, which I think is some of what got lost. People felt that the feedback had been anti-suzetrigine or something, and that is in no way the case. And we have high visibility on the pathway in DPN and are going right about executing that as quickly as possible, with a goal still for the broader population over time, pathways still to be determined.

Got it. So again -- so that brings us to the second question. So how do you think about the -- like what you are doing to make sure that you have the highest probability of success in DPN trials given that if you look at Lyrica's history, it was hit or miss because the problem with these subjective trials is that placebo can be strange here. So what are you doing to make sure that it can -- you can -- you have the highest possibility...

Yes. Good question. I think that DPN is much better understood than say, LSR, which had never been a Phase III study in LSR, for example. There have been multiple Phase III studies in DPN. There are clinical trial sites that are well trained in the condition as well as how to manage placebo. There is a very well-understood magnitude of treatment effect for the active agent as well as the placebo arm. And by using these well-trained sites and established protocols and confidence in our mechanism of action, that's what leads us to high confidence in the probability of success for our studies.

Got it. So you have one trial which has actual control, but the other one is just placebo control, right?

That's correct. The second Phase III will be a little bit smaller because it will just have the placebo arm as per FDA protocol and what's required for the indication.

Got it. So can I talk a little bit about the time lines of this? Because one trial you have started earlier and then the second one, you are starting now. And I think we chatted before that, I mean, there is this trial conduct issue because you don't want a subjective trial to read one trial to read out us versus others. So how should we think about the time line at this point? Can you just make them together versus?

Sure. I don't have a full answer for you yet. All we have said is that we do expect to complete enrollment in both DPN Phase IIIs next year. The first one, you're correct, as you said, actually began in December of '24 and has been enrolling at a very fast pace. We're pleased with that. The second one will be slightly smaller. But we will be using -- to your prior question, we will be using the same well-trained sites to ensure probability of success. So at some point, it becomes a decision as to which trial to allocate patients to. We may decide to accelerate and complete one. We may decide to manage them both at the end on a similar time frame, so you don't have to worry about ultimate results impacting the second study. But it's still to be determined, so I don't have an answer for you beyond completing enrollment in both next year.

Got it. Got it. But yes, like affecting the other trial state results because of the first trial readout could be a consideration?

That's right. That's right.

Very helpful. And then another topic is the 993 trial. I don't know if that was the main reason for the stock weakness. But again, that trial in the acute pain did not show a benefit. So it's supporting drug. So what is the takeaway internally from that trial? And how does this impact the new -- the peripheral neuropathy trial or DPN trial that you're running with 993 at this point?

Sure. So I think that what -- perhaps why there was -- what felt to us like a disproportion itself, I think it was primarily related to concerns about the ultimate peripheral neuropathic pain potential. But then in VX-993, a next-gen that was being studied in bunionectomy, in acute pain, we did see a similar size treatment effect but had hoped for more essentially based on what we had seen in terms of the potency and efficacy. But what we learned, and I think probably in hindsight on IR, we should have framed better, is that going higher up the curve did not get you greater treatment like essentially, we are getting all we can hope to get out of suzetrigine, out of JOURNAVX by inhibiting the NaV1.8 channel. And -- although it is -- VX-993 certainly remains a viable option in acute pain for IV because it can be formulated as IV as well as potential combination use with the future NaV1.7 inhibitor as can JOURNAVX that we won't be advancing it in acute pain as monotherapy because we are getting what we need to get out of what we can get from inhibiting that channel with JOURNAVX. But the ongoing Phase II in DPN, we'll run that study out with VX-993 so we learn about dose response curve. There is some accumulation and slight differences and added to the body of work. But I think perhaps investors have seen what we've done in CF and thought perhaps serial innovation is very, very easy, and there's always an obvious next step, and this was more of to validate our belief in terms of what we're getting by inhibiting 1.8 and the potential to now move to inhibiting 1.7, which actually triggers the pain sensory reaction and then potentially combo use by inhibiting both the trigger and the propagator 1.8 that you could ideally have a synergistic effect. So that's the direction that serial innovation will take from here, so.

That's what you have done with CF as well, starting with KALYDECO and then adding on top of that, right? So that makes sense, actually. Let's just talk about like JOURNAVX a little bit. You were -- you have been open about first half is going to be volume driven and sales will come -- sales will follow the volume growth. Considering all that, I think second quarter was pretty good actually, at least in our opinion. How are you thinking about -- I mean, do you agree with that -- with the progress you have made at this point? And then talk a little bit about the sales effort that you're increasing for JOURNAVX launch at this point. I mean, was that already planned? Or is this a reflection of what you're seeing in the marketplace at this point...

Yes. So thank you for that. We have been pleased with the early results. If you go back prior to launch, I think there were many, many who said, not you, many who said, you will never -- no one will ever pay for this when you can get generic opioids right for pennies on the day. And I think what we have proven is that, yes, Vertex does know what a PBM is and how to talk with them as well as the fact, more seriously, that there is a true unmet need for additional mechanisms of managing pain in the marketplace and a nonopioid option that doesn't have the side effects nor the addictive potential. And so it is a long game that we're in for the long run here. And I think we've been pleased today with slightly faster than expected potentially progress with payers. So we have 2 of the 3 largest PBMs under contract, and we continue to expect we have high visibility on adding the third before the end of the year. We have the 2 largest hospital group purchasing organizations with contracts. And as of the Q2 call in early August, we said we have 16 state Medicaid plans and continue to make progress there as well. So I think from a reimbursed access standpoint, it has been very good progress. The other important barometer is with respect to getting on hospital formulary, right, and going through the P&T committee process, which can take anywhere from 6 to 18 months, we've tried to accelerate that process where we can and are pleased there that we're on about -- a very good portion of hospitals either have us on formulary or discharge order sets or are ordering JOURNAVX as of this time. Then it is the field force reach, our virtual sales team reach and then our targeted media outreach. And there too, I think that we are looking for the long-run success here and trying to build as broad a foundation as possible. So we're trying to go very broad, consistent with the labeling in terms of physician type, setting of care, pain type, et cetera. So we've been pleased with the breadth of physician prescribers that we've seen, anesthesiologists, pain specialists, general surgery, ER docs, orthopedic surgeons, et cetera. We've seen nice uptake from dentists, if you will. So really broad range there, and seeing good rates, it's still early, but good rates of repeat prescriptions as well. And that's where we are seeing things being promotionally sensitive. And now that we have gotten to a point in time where we do see broader access in terms of reimbursed coverage as well as increasing formulary adoption, now is when it makes sense to add more from both a marketing and a field force standpoint. We want to think about the initial 150-person field force rep size that -- they'll continue their focus on the top 150 or so IDNs that we're focused on. But in terms of physicians, some of those in sort of -- they're covering Tier 1, beneath that was the virtual sales force, they'll move up more of them and the new team will cover those folks and then another bucket will come into the virtual -- the virtual sales force team. So -- but to go out with that bigger sales force initially when you didn't have fully reimbursed coverage and you weren't on formularies, that probably would have been too soon. So we think that timing is what makes the most sense. But pleased with the breadth, with the physician reaction, with the patient anecdotes that we've heard. I think it's off to a really strong and encouraging start.

Great. Are you seeing usage outside of the hospital setting or surgical setting as well or mostly...

Well, maybe I don't understand your question, but...

Label is broad, right? So -- but I mean, your target is in the sport surgical setting at this point, but are you seeing usage outside of that as well at this point?

So the mix of the scripts is about 65% in that discharge at-home setting, and about 35% in the hospital or ASC setting, if I'm getting that. But then you do see, as I mentioned, the dental setting and some other things, if that's your question. But very strongly, I think given the concerns about opioids and pain management, we see a big role for this in at home post-surgical care.