Vertex Pharmaceuticals Incorporated (VRTX) Earnings Call Transcript & Summary

Great. Welcome, everyone. My name is Jess Fye, biotech analyst at JPMorgan, and we're delighted to be continuing the 44th Annual JPMorgan Healthcare Conference today with Vertex. You're going to hear a presentation from the management team and then we're going to go into some Q&A. So if you're in the room here, just raise your hands, someone will bring you a microphone or if you're listening at home, you can submit a question to the portal, and I can read it up, up here on stage. So with that, let me pass it over to Vertex' CEO, Reshma Kewalramani.

Thanks, Jess, and thank you to JPMorgan for hosting us. We're at a slightly different time and a slightly different venue for those of you who come every year and it's very good to see you all. In the event, I'm not the first to wish you a happy New Year. Let me be amongst the first on behalf of the entire Vertex team, we're really happy to be here, and we look forward to kicking off the year with all of you as always. Before getting into the presentation, let me put up our safe harbor statement that you may or may not be able to read, I will be making forward-looking comments, and I encourage you to read our SEC disclosures, which contain more information. I'll leave it up for a minute and then we'll get right into it. Okay. We have a unique corporate strategy and business model at Vertex. And it's depicted on the flywheel to the left. You've seen this before. I think I've shared it every year that I've been at the conference. We invest in scientific innovation to make transformative, if not curative medicines. And we do so for serious diseases in specialty markets, which means a very particular thing for us. It means markets in which there's low SG&A spend. This enables strong operating margins and profitability, allowing us to invest significantly back into R&D and therefore, executing on our serial innovation strategy and creating a virtuous cycle. The key pillars of our differentiated modality-agnostic, disease-first R&D strategy are the foundation of Vertex. We only go after diseases with high unmet need. We only go after diseases where we understand causal human biology diseases, where we have validated targets, usually genetic, but pharmacologic as well. Diseases where we have biomarkers that translate from the bench to the clinic and we only work on diseases with efficient regulatory and development pathways. This approach we put into play about 10 years ago, and we designed this approach to deliver disproportionate R&D success, and it has delivered. We are now at a point where we have 7 marketed medicines in CF across 4 disease areas including 5 approved medicines in CF, CASGEVY for sickle cell disease and beta thalassemia and JOURNAVX for moderate-to-severe acute pain. It has also set us up for a very exciting emerging renal franchise. That renal franchise has 4 programs in mid- and late-stage development. Povetacicept in IgAN, I know, is front and center in many people's minds, but it also has inaxaplin in AMKD. Both of these programs are well into clinical development. Both of these programs have breakthrough designation from the FDA. And both of these programs have the opportunity for accelerated approval in the U.S. I'm going to move to Slide 4 and ask someone if they can help me with the door in the back. Thank you. On this slide, you see that commercialization is a key focus for us in 2026. And the 4 priorities on this page depict and highlight the opportunities right in front of us. In CF, we aim to continue our leadership position and to sustain it for decades to come, noting that IP protection for TRIKAFTA goes into 2037 and beyond that for ALYFTREK. For CASGEVY, we look to capitalize on the foundation we built and the momentum in finishing 2025, with more than $100 million in revenue. We believe CASGEVY is well positioned to continue on its path to become a blockbuster medicine. We're also looking forward to growing JOURNAVX from its strong first year with a goal to more than triple the prescriptions in 2026, compared to 2025, and we are preparing for the potential launch of pove in IgAN in the U.S. Pove holds the potential for best-in-class and it is poised to be the first launch in our emerging renal franchise. I'm going to move on now to Slide 6 and show you a little bit about the numbers of patients and the geographies we hope to serve. The pipeline is diversifying there's more than 10 disease areas in the clinic now. And while we do that, we're also diversifying our revenue base and our geographic presence. As you can see on this slide, we expect to expand the number of patients we serve from about 160,000 or so in CF in sickle cell disease and beta thalassemia, plus the about 180 -- I'm sorry, about the 80 million patients who seek prescription for JOURNAVX to something more than 10 million patients over the coming years as we bring forward medicines for IgAN, for AMKD, for diabetic peripheral neuropathy, type 1 diabetes and more. Given the time I have with you today, I'm going to limit my forward-going comments to CF and CASGEVY, JOURNAVX and the emerging renal franchise. And I'm going to start with cystic fibrosis on Slide 6. We are continuing to execute for market leadership, and I'll call out 4 points on this slide. We have been in CF for a long time. We have many approved medicines. And in that portfolio of CFTR modulators, we have something very precious. And that is long-term, real-world safety and efficacy and over 200,000 patient years of exposure. Second, our serial innovation has led to 5 approved medicines, each of which has brought more benefit for patients and/or expanded the patient population. And as we have done this today, 95% of patients could be eligible for one of our CFTR modulators. And it's not just about the number of patients, it's also the age group. We have medicines, namely KALYDECO, that can treat babies down to 1 month of age. Third, the Vertex Guidance and Patient Support Services, or GPS, is a highly valued differentiating feature that we offer our CF patients. Since 2012, when KALYDECO was first approved 85% plus of our CF patients have chosen to be enrolled in our program and have stayed with the program over these many years. And finally, our ability to get reimbursement and access is a key strategic advantage. It has resulted in rapid, broad and durable coverage for our patients in more than 60 countries. Let me move to Slide 7 and talk a little bit more about the growth drivers in CF. Growth is going to come from the ongoing launch of ALYFTREK, which started in about January of '25 in the U.S. And in the summer, we got regulatory approval and over the past couple of months have secured reimbursements. And so now the global launch of ALYFTREK continues. Treating younger patients, continued expansion into new geographies and serial innovation. Maybe the most important thing to take away is that underpinning this is the significant increase in survival of our CF patients. It is incredible to note that for a child born today, if they start CFTR modulators when they're young, model data suggests that their life expectancy is well into their 80s. Let me turn now to CASGEVY. CASGEVY is a onetime treatment that holds the promise for a potential functional cure for sickle cell disease and beta-thalassemia. Having established the network of ATCs or authorized treatment centers, defining the referral pathways and securing reimbursement, the momentum of CASGEVY is really going strong. The results of our 5- to 11-year-old patients are in. We shared it at ASH in December of last year, and they are excellent. Indeed, CASGEVY data for the last 4 years has received best in ASH recognition. And we're planning to file for these 5 to 11-year-olds this year. Recall that we had previously received the Commissioner's national voucher, the national priority voucher. And this means that the cycle time for review is expected to be reasonably short. As we look forward for what's on the horizon for CASGEVY, we see growth in all 3 regions: the U.S., Europe and the Middle East. And we expect gains in patient initiations, first cell collections and infusions as we drive CASGEVY towards realizing its multibillion dollar potential. I'm going to now move on to pain. And in pain, what I want to talk about is really JOURNAVX in the acute pain setting. In moderate-to-severe acute pain, JOURNAVX launched in January, was approved in January of last year, and it was in channel in about March of last year. It has won outstanding feedback from patients and physicians alike. Given its efficacy, the safety profile and the lack of addictive potential. In the first year of commercialization, our teams delivered access, which was the key point for 2025, access in hospital and access in the retail setting, and they drove broad adoption in physicians across settings of care as well as pain types, surgical and nonsurgical. I'm really pleased to share that we have now contracted with all 3 of the large national PBMs. The third one going into effect January 1 of this year. As these plans come online, about 2/3 of adult Americans will have access to JOURNAVX. In addition to that, 900 hospitals have JOURNAVX either on their formularies as part of their order sets or as part of their discharge protocols. And more than 30,000 prescribers have already written a script for JOURNAVX. In total, through the end of '25, this has resulted in more than 0.5 million scripts for JOURNAVX and quarter-on-quarter, Q4 versus Q3, we've seen a 50% growth. In line with our launch strategy, when you think about where those scripts are coming from, about half are coming from the hospital setting and about half are coming from discharge or in retail. And it's incredibly, incredibly rewarding to note that we estimate over 400,000 Americans have already benefited from JOURNAVX. Going into '26, what we are looking for is building on this foundation, building on the health systems as well as the hospital use, the breadth of physician use. And we think it is time to double down and we are moving from about 150 reps to about 300 reps in the coming months. Consistent with that movement and additional investments that we are making in JOURNAVX, this is why we see moving from the 500,000 scripts or so in '25 to 3x that number in '26. One very important point to make on JOURNAVX is that we are building a strong, durable and long-term franchise in pain, and we seek a leadership position here just like we did in CF. And for that, while we will decrease and eventually sunset towards the end of this year, beginning of next, our patient support program, or PSP, we will continue to offer the PSP to those patients who are not yet covered by insurance because we believe the most important factors for long-term success are threefold: one, transform the standard of care and the management of acute pain from opioids to away from opioids. Second, to ensure that patients have a positive JOURNAVX journey as do the physicians. And lastly, that, that positive experience is accompanied by a smooth experience in terms of access and reimbursement. I'm going to finish on pain with this next slide. This is a slide that looks at the overall pipeline. And as I said, what we're looking to do here is to gain a leadership position in acute pain, and you see the various molecules and stages of development for those molecules here. A few things on this slide. One is that we've just recently completed a set of single-arm JOURNAVX studies in some real-world common conditions. In one study, we looked at JOURNAVX initiated preoperatively as part of multimodal care. And these were reconstructive and aesthetic procedures. The result, 91% of patients on JOURNAVX didn't require any opioid rescue. The other one is a study in certain orthopedic procedures. Arthroscopic knees, for example, or laparoscopic abdominal surgeries done by OB/GYNs or general surgeries. Here, JOURNAVX was studied again as part of multimodal therapy. And here, about 76% of patients did not require opioid rescue. We're doing more trials, more real-world evidence, more outcomes in research, and I look forward to sharing those results with you as they become available. And lastly, on this slide, we have 2 studies in Phase III ongoing in diabetic peripheral neuropathy. Both studies are up and running. They're enrolling and dosing patients. We expect that both studies will complete enrollment by the tail end of this year which sets us up for results in 2027. With that on pain, I'm going to now turn my attention to renal. In renal, we seek to replicate what we've done in CF. And it all starts with the medicine, the Phase III data and where are we today. IgAN, which is the first indication in our emerging renal franchise is a disease that affects about 300,000 people in the U.S. and Europe. And worldwide, it's about 1.5 million patients. We believe pove is best-in-class potential, and there are 3 reasons for that. First, it's important to understand that the molecule, povetacicept, itself was specifically engineered as a dual BAFF/APRIL inhibitor with improved binding affinity, potency, PK and tissue distribution. I'm going to come back to that because it is important relevance when it comes to dosing. Second, the clinical data to date show a leading benefit risk profile when considering Gd-IgA levels, that is the PD pharmacodynamic biomarker. Gd-IgA is the bad actor in IgA nephropathy. And the results through Phase II on Gd-IgA are really good. Next, thinking about proteinuria and hematuria. Proteinuria is obviously the primary endpoint of the Phase III trial and upon which accelerated approval could be granted. When you put that all together and think about the safety profile, this is best-in-class through Phase II. In terms of the last column here, that's the dosing feature, it just simply cannot be underestimated when you're thinking about a chronic biologics market. Simply put, if a patient doesn't take their medicine, they surely can't benefit from it. Pove has unique benefits in this regard. It is a monthly administration. It is small volume, 0.46 mL via an auto injector for at-home use. And when you put that all together, that's why we think pove has best-in-class potential. As we think about where we are and where we're going, I'm very pleased to share that the pove submission, which you will remember is under breakthrough designation, and we also received rolling submission. We have started that and the first module is in, it went in at the tail end of last year. We're on track to commit to filing this and finishing the potential for accelerated approval in the first half of this year. And what we're looking to do commercially, as I said before, is replicate our approach and its success in CF in renal medicine. What this means is bringing the weight of our R&D expertise, our science focus and our patient first stance to nephrology, to bring our reimbursement prowess as well as to bring our comprehensive patient support program that I talked about earlier to the IgAN launch. And we're investing in renal for the long term. To improve the lives of patients with kidney disease to go after the underlying cause of disease to bring transformative medicines. It's not just about pove and IgAN. It's about pove in membranous. It's about inaxaplin in AMKD and something called VX-407 for ADPKD, autosomal dominant polycystic kidney disease. And on Slide 13 here, you can see the full renal portfolio, this is all of our assets that are in the clinic in patients. I'll take a minute to just talk about the middle part here, which is APOL1-mediated kidney disease. This is the other program in our portfolio that has breakthrough designation and also the potential for accelerated approval in the U.S. A couple of things to mention. This is a disease that affects about 150,000 patients or so. We have completed enrollment in the IA or the interim analysis cohort. We expect results from that cohort towards the tail end of this year, beginning of next year, and if supportive, we look to filing this for accelerated approval in the U.S. thereafter. Clearly, a lot going on in the renal franchise, and we are obviously very excited about this, I happen to be a nephrologist that adds a special dimension for the renal franchise for me. Let me move on now to zooming out from the renal franchise to looking at the Vertex portfolio as a whole. What you can see here is a broad, deep and rapidly advancing R&D pipeline. And as we look ahead with Aly in CF, CASGEVY in sickle cell disease and beta thalassemia, JOURNAVX in moderate-to-severe acute pain already launched several potential filings coming up. We are very well positioned to deliver on our goal that we set here at this conference in 2023. That is to say 5 launches in 5 disease areas over a 5-year period. Let me turn now and as we get to the last couple of slides, spend a moment on our financials. Vertex has grown significantly in recent years. Our 2025 total revenue guidance as of the Q3 call was $11.9 billion to $12 billion. We are well poised for future attractive revenue growth, including CF and also, we expect increasingly significant contributions to growth from our disease areas outside of CF. To drive these gains, we are investing in sales and marketing capabilities consistent with our specialty model. And with these investments, we nonetheless continue to target 2/3 of our OpEx to innovation, while also maintaining highly attractive operating margins. As a result of this growth and profitability, our balance sheet remains very healthy and provides significant flexibility to continue to invest in innovation and drive the virtuous cycle I talked about at the top of my remarks. I'm going to end with this last slide. It's one that we show every year. You can think about it as a bit of a report card and you can use this to mark our forward progress. In CF, we're looking to extend our leadership. We're also very focused on commercial execution with our newer products, CASGEVY in sickle cell and beta-thal, JOURNAVX in acute pain. And we're also looking forward to prepare for the launches of a whole host of new medicines starting with pove in IgAN. Third, we're looking to continue the rapid progress of our broad and deep R&D pipeline. And last, we seek to continue to deliver top-tier financial performance. Vertex is extremely well poised to deliver value for patients and for shareholders for many years to come and we are excited to do so. With that, I'm going to thank you again. I'll turn it over to Jess, and then I'll invite the management team to join me on stage. Jessica, I'll stay here to preserve chair bandwidth.

Great. So as a reminder, if you have a question in the room, just raise your hand and somebody will run over with a mic, but I'll go first. So maybe just starting with the cystic fibrosis business. Can you elaborate on kind of the key drivers of growth for that franchise in 2026? And what's the right way for investors to think about the pace of patients switching from TRIKAFTA to ALYFTREK, both kind of U.S. and ex U.S.

Sure thing. Duncan, would you like to take that one?

Yes, sure. Good afternoon, everyone. So the drivers of growth for CF in 2026, as Reshma alluded to are predominantly the continued launches of TRIKAFTA and ALYFTREK for the various mutations and age ranges for which they're indicated. Obviously, our primary focus is the ALYFTREK launch, but there are certain indications, so the 2 to 5 population where we're still launching TRIKAFTA or Kaftrio is called outside the U.S. So TRIKAFTA and ALYFTREK growth are key drivers. The second key driver is geographic expansion. So we're seeing meaningful growth in countries like Brazil, Mexico, Peru and Turkey, some of those countries are countries where we previously had only named patient sales, and we've now moved to a sort of full reimbursement model. And then the third dimension is the sort of underlying survival and diagnosis growth that we see in the market in general terms year-on-year. In terms of the dimensions of transitions from TRIKAFTA to ALYFTREK, as Reshma alluded to, obviously, we are further ahead with the launch of ALYFTREK in the U.S. We've just started really in some countries in Europe in the middle of last -- latter part of last year. So this places like Germany, Norway, Denmark, England, Northern Ireland, Southern Ireland, et cetera. And we continue to see strong growth of ALYFTREK in the U.S. All of the naive patients are on ALYFTREK with the physicians are now working through the discontinued and the transition patients. And here in the U.S., the vast majority of patients on the ALYFTREK have come from TRIKAFTA. Outside the U.S., we're seeing a more rapid uptake in the transition patients essentially driven by the fact that as you probably know, the labels are a little bit different between the U.S. and the European markets, which means that the liver monitoring requirements are slightly less ex U.S., enabling a more swift uptake there. So we're very pleased with the initial signals of launch outside the U.S.

What is your latest thinking on the global CF penetration?

Yes. So the numbers are so we -- I think we updated our epidemiology numbers at this meeting. So it's 112,000 patients worldwide. 97,000 of those are in what we call our core markets. And so I think the U.S., Europe, et cetera, 15,000 which is the same numbers at JPMorgan last year and the sort of expansion markets, I think, Turkey, Brazil, et cetera. At the moment, we're at about 78,000 patients. Now to be fair, you have to take 5,000 patients off the total of that 112 because there are those patients who will only be responsive to the mRNA program, not the CFTR modulator program. So our penetration is in the region of 73%, 74% or so. So I would say we've done incredibly well, but there is still more opportunity to grow the business over the coming years.

And I guess maybe thinking about that other 5,000, what is the next update for VX-522? When could we expect that?

Yes. David, do you want to take that one?

Sure. 522...

Sorry, this is 522. This is the mRNA program that we started in concert with Moderna. It's an LNP with an mRNA. And this is for the absolute number of about 5,000 or so patients who simply don't make any CFTR protein, and therefore, we need a nucleic acid approach. That program is already in patients. We have finished our single ascending dose or SAD study. We're in the middle of the MAD right now. and we expect to have results to share this year. So I do expect that we'll be able to share results in patients, so safety and efficacy, this year.

And I guess in the case of success, what's the next development steps?

Yes. So this is a -- what I would consider a Phase I/II study. This is a dose-ranging study. And if successful, we'll be going to the regulators to move this into pivotal development. This is a very, very small patient group. It's 5,000 patients. And so we've had discussions with the regulators. We want to make sure that this is efficient and that these medicines -- this medicine in particular can come through as fast as possible. But first things first, results from the Phase I/II study later this year.

Maybe switching to pove for IgAN with the Phase III coming up. You talked about some of the product characteristics. But how is that going to shine through in the clinical data? What would you point people to look towards to kind of highlight the product differentiation.

Yes, yes. So as you prepare and we prepare for the interim analysis Phase III results, as with all data sets, it's the totality of benefit risk that you're going to see in the data set that's important. But let me point you to the specific elements that you should be looking for. In efficacy, I find Gd-IgA to be very important because, as I said, that's the bad actors. So looking for strong reductions in Gd-IgA is really important. Second, it is the primary endpoint and proteinuria, depth of proteinuria response is really important in Phase II, the results that we showed at ASN, the results at 36 weeks, which is what the interim analysis potential approval will be based on. So the 36-week proteinuria data was about a 50% reduction. The 48-week reduction was about 64%. But remember, for the Phase III, it's based on 36-week reduction. And lastly, it's really important to look at hematuria. It is not normal to have protein in the urine. It is not normal to have RBCs, red blood cells, in the urine. And so we're going to be looking at that as well. So those are the efficacy measures to pay attention to. On the safety side, it is the overall profile, and I am expecting to recapitulate what we saw in Phase II and Phase III, that is to say, a very attractive safety profile.

How do you think about the probability of success for pove in these additional indications, like primary membranous nephropathy, gMG, warm autoimmune hemolytic anemia. You're going into a lot of areas and just curious...

Yes. So there are so many wonderful things about pove, but one of them is that it really is a pipeline in a product. For B-cell mediated diseases, IgAN is just one example of a very well understood, well-characterized B-cell-mediated disease. There are others. Membranous nephropathy, just happens to be another kidney disease. It's exceedingly well understood. It is a B-cell mediated disease. And that's why we're so excited about it. Our Phase II data, which was also shown at ASN look really excellent. I'm not surprised. There are other very B-cell mediated diseases like myasthenia gravis, not in the renal space, but it is a disease of B cells that make autoantibodies against the neuromuscular junction to things like acetylcholine. I have high expectations for pove there as well. So as we start to turn over these cards, IgAN first, I think then it will be membranous and I think it will then be myasthenia, the confidence level should continue to rise because safety is common across these, it's the same drug. And I think your ability to think through how good of a B-cell modulator is it increases in your confidence level as you get through all of these indications. I am very, very bullish on pove and these B-cell mediated diseases because of the ability to look at safety in a very cross disease manner and to build on what you've done before.

Thank you for the great presentation. So coming back to CASGEVY, you mentioned about 40% are transitioning from the cell collection to infusion, knowing that timely delivery of these products is a huge hurdle in the commercial success. What strategy do you have in place for CMC to make sure that you're reaching these goals, but also reaching the patients in time?

Yes. The longest part of the journey is actually the beginning when you have to be referred from your hematologist to a transplant center, be prepared for the potential transplant. And then there is a segment in there that is about CMC and manufacturing. I'm really happy with where we are in that part of the program. It's not overnight. It's not ever going to be overnight. But in terms of consistency, good time lines and high quality, I'm very happy with where that is. The big movement I see in the next phase of what we can do to both broaden the population and perhaps narrow the time line is moved from busulfan-based conditioning, which is a heavy part of the journey to a gentler conditioning regimen. We're working on that. Our partners at CRISPR are working on that and others in Academia and other companies are as well. And so I have high hopes that, that will happen. Duncan, do you have anything you want to say or Charlie...

Yes. Yes, if I could just add some context, I'm not sure where the 40% figure comes from, but I have an idea. We did let folks know that over 300 patients have initiated the journey for CASGEVY in 2025, about 150 have had first cell collections and 60-plus have been infused. So maybe it's the 60:150 ratio. That's not a conversion ratio. That's just the number of people who've moved from cell collection all the way through infusion. The good news about that is that we have a very good line of sight into how many infusions we expect in 2026. And so as we give revenue guidance in February at our earnings call, that's going to be very high certainty because the -- for lack of a better term, the patient's funnel is full and moving forward.

Thank you very much. Reshma, you mentioned biomarkers. And the question is, what is your vision and appetite for expanding the use of biomarkers to leverage that to both accelerate clinical trials, FDA approvals and drive clinical adoption. And biomarkers also kind of more high-precision diagnostic data. Can you share a little bit about how you can leverage that?

Yes. Biomarkers have been a core part of our strategy as long as the strategy has existed. David, I'll ask you to make a couple of comments on biomarkers.

Yes. No, I agree. I mean, I think it's been a key part of our strategy. whether it's sweat chloride, obviously, with CF, whether it's hemoglobin F with sickle cell disease or whether as, Reshma, was talking about for example, in IgA nephropathy, there's Gd-IgA, which is a key biomarker. Just as a marker, it's actually a causal factor. And I think the key to us is actually that our strategy is we only work on programs where we see such biomarkers, it's hard to invent them midstream. So in other words, if you have a program where it doesn't exist and you say, should we use new technology to do it, certainly a fine concept. But I think for us, it's more pickup program that is already validated biomarker and it's going to be a lot easier to get, for example, interim analysis with UPCR and some other secondary endpoints rather than using really cool technology, but then you have to validate it, it's harder to get an initial approval.

[ Neil Macallan ], thanks for taking my question. Can you talk at all about the potential revenue projections that you may have for pove and IgAN and any competitors that we should look out for?

Yes. Duncan, why don't you give us a few comments on what you see as the total market potential and how you see pove?

Yes. Obviously, I'll just give you some quick guidance, kidding. So there are 160,000 patients in the U.S., who have IgAN. There's about 130,000 patients with IgAN in Europe. And then if you expand your aperture a little bit, there's at least another 1 million in Asia. So IgAN alone is an enormous disease. And as you may have noticed, here in the U.S., Otsuka just priced IgAN at $400,000. So 160,000 patients simplistically put here in the U.S. is over 5x bigger than the CF population. So that's just 1 disease. PMN then is also another 300,000 or so, 333 -- 330,000 patients worldwide. So I think the opportunity for povetacicept is clearly in the multibillion dollar space.

Thank you, Cathy Langham. Just, I guess, going up a level, you've got this amazing pipeline. I know the business is expanding tremendously, you're hiring a great team. What is most exciting for you in '26?

This is a very hard question to answer when you have this kind of potential. But if we narrow down to '26. It is really about bringing our medicines that are approved to more patients. There is enormous opportunity for JOURNAVX, CASGEVY and our CF portfolio, and then it is indeed about pove.

Timed out perfectly. All right. Great. Thank you.

Thank you.

Thank you very much.