Vertex Pharmaceuticals Incorporated (VRTX) Earnings Call Transcript & Summary

Good day, and welcome to the Vertex Pharmaceuticals conference call to announce the acquisition of Crinetics Pharmaceuticals. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Ms. Susie Lisa. Please go ahead.

Thanks, Chuck. Good afternoon, everyone, and thank you for joining us on short notice for this exciting announcement. I'm Susie Lisa, and as Senior Vice President of Investor Relations, it's my pleasure to welcome you to this conference call to discuss Vertex's acquisition of Crinetics Pharmaceuticals. Making prepared remarks on today's call, we have Dr. Reshma Kewalramani, Vertex's CEO and President; Duncan McKechnie, Chief Commercial Officer; and Charlie Wagner, Chief Operating and Financial Officer. We recommend that you access the webcast slides as you listen to this call. The call is being recorded, and a replay will be available on our website. We will make forward-looking statements on this call that are subject to the risks and uncertainties discussed in detail in today's press release and in our filings with the Securities and Exchange Commission. These statements, including, without limitation, those regarding Vertex's marketed medicines for cystic fibrosis, sickle cell disease, beta thalassemia and acute pain, the proposed acquisition of Crinetics and the expected benefits of the transaction. The commercial potential of PALSONIFY and the clinical potential of Atumelnant and Crinetics' other pipeline assets, the expected timing of closing and associated financing and Vertex's future financial performance are based on management's current assumptions. Actual outcomes and events could differ materially. I would also note that select financial guidance we discussed this evening is presented on a non-GAAP basis. Please consult our forward-looking statement on Slide 2 and see our filings for more information. I'll now turn the call over to Reshma.

Thank you, Susie, and good afternoon, everyone. We are excited to announce that we've entered into a definitive agreement to acquire Crinetics Pharmaceuticals for $85 per share in cash in a transaction with a total equity value of about $10 billion or $8.8 billion net of estimated cash acquired. Crinetics is an excellent strategic fit for Vertex with its focus on serious diseases in specialty markets with significant unmet need, well-understood causal human biology and potentially best-in-class medicines that could deliver transformative benefit to patients. Crinetics has 2 compelling derisked potential best-in-class specialty endocrine assets, PALSONIFY in the early days of its U.S. commercial launch and Atumelnant in pivotal development for congenital adrenal hyperplasia, or CAH, and in Phase II for Cushing's syndrome. There are additional preclinical and clinical programs in the Crinetics pipeline that we won't highlight today, but we will discuss post closing. We believe that these assets have a combined peak sales potential of more than $5 billion. PALSONIFY is the first and only once-daily oral therapy for adults with acromegaly. PALSONIFY is already FDA approved and generating strong early momentum in the U.S. post an October 2025 launch. More recently, it was approved by the EMA. We see blockbuster potential for PALSONIFY. Atumelnant is a once-daily oral ACTH receptor antagonist currently in Phase III development for CAH. Atumelnant has additional potential in ACTH-dependent Cushing's syndrome, another rare endocrinology disease. It is currently in Phase II development for this indication. Across the indications for Atumelnant, we see multibillion-dollar potential. Given the significant unmet medical need in acromegaly, CAH and Cushing's along with the best-in-class potential of both PALSONIFY and Atumelnant for the treatment of these conditions, we see the Crinetics acquisition accelerating Vertex's revenue growth and diversification as well as enhancing our long-term earnings profile. We are truly excited by what the Crinetics team has built in the endocrinology space over the last 18 years. Their world-class R&D capabilities are focused on their G-protein coupled receptor drug discovery platform and differentiated small molecules. Crinetics has uniquely and successfully discovered and/or developed multiple small molecule drug candidates for rare endocrine diseases where the natural ligand is a peptide. This is a capital-efficient model, focused in rare endocrine conditions with high unmet need, where achievement of proof of concept benefits from evaluation of disease markers early in development and reaches patients via targeted SG&A footprint, all of which is strongly aligned with Vertex's strategy and our own strengths in development, regulatory and specialty commercialization. As we've discussed previously, it's not only the assets, but the people and culture that factor heavily into our assessment of companies. It's no different in this instance. The Crinetics team focus is singular. Their science is rigorous. They are committed to world-class commercialization and their culture is dedicated to excellence and patients. We value deeply this alignment on these important dimensions and believe it will ensure our combined success going forward. We are excited to work with the talented Crinetics team to build on the momentum they've created and to bring these specialty endocrine medicines to more people faster. On strategic fit, we have a high bar when we evaluate acquisition opportunities, applying a consistent set of criteria that you can see detailed here on Slide 5. Serious diseases with high unmet need, well-understood causal human biology, validated biomarkers that enable efficient clinical and regulatory pathways, specialty markets and first-in-class or potentially best-in-class medicines. Both PALSONIFY and Atumelnant meet every one of these criteria and check every one of these boxes. We believe Vertex's global infrastructure and commercial footprint will meaningfully amplify the reach of Crinetics science, and we are confident that we can accelerate the trajectory of both lead assets. Let me walk you through these programs in more detail, starting with PALSONIFY in acromegaly. Acromegaly is a rare chronic hormonal disease caused by the overproduction of growth hormone, most commonly due to a benign pituitary tumor, which in turn stimulates excess insulin-like growth factor 1, or IGF-1, from the liver, which is responsible for most of the overgrowth symptoms that define acromegaly. An estimated 20,000 people in the United States are diagnosed with the disease and more than 35,000 people outside the U.S. It's a serious disease. If left untreated, patients with acromegaly face enlargement of the hands and feet, serious heart and metabolic consequences, reduced quality of life and shortened lifespan. Surgery is a first line of treatment, but unfortunately, only 40% to 50% of people achieve durable remission and thus, the majority of patients require lifelong medical therapy. The current standard of care injectable somatostatin receptor ligands or SRLs are used to reduce production of growth hormone and IGF-1. However, current standard of care SRLs are viscous, require large gauge injectables that must be administered intramuscularly or via deep subcutaneous injection. They're inconvenient, often need to be administered by a health care professional and carry low patient compliance. Outside of PALSONIFY, oral options have limited efficacy, challenging dosing logistics or are not indicated for treatment-naive patients. In short, there is significant unmet need to be addressed. This is where PALSONIFY comes in. PALSONIFY is an oral selective somatostatin receptor type 2 or SSTR2 non-peptide agonist. By binding to SSTR2 receptors, PALSONIFY suppresses growth hormone release, which in turn suppresses IGF-1 secretion. PALSONIFY offers multiple important features for patients, first and only once-daily oral therapy, simpler dosing logistics, fast-acting efficacy, a well-tolerated profile with low discontinuation rates and a broad label indicated for both SRL switch and treatment-naive patients. The Phase III PALSONIFY data are compelling and detailed on Slide 8. PATHFNDR-1 on the left side of this slide enrolled patients switching from injectable SRLs. 83% of these "switch" patients treated with PALSONIFY maintained IGF-1 levels within the normal range compared to just 4% on placebo. Indeed, when you look further into the data, you'll see all but 1 patient in the PALSONIFY treated arm had IGF-1 levels that were lower than 1.1x the upper limit of normal. On the right-hand side of the slide is PATHFNDR-2, which enrolled treatment-naive patients as well as patients who stopped treatment for 4 months or more or patients who were washed out of treatment for at least 3 months. In this study, 56% of acromegaly treated naive patients achieved IGF-1 normalization compared to just 5% on placebo. Both results were highly statistically significant with p-values of less than 0.0001. PALSONIFY was well tolerated with no serious adverse events and low discontinuation rates. Given the differentiated mechanism of action, benefit risk profile and significant patient dosing advantages as well as the broad label, we see blockbuster potential for PALSONIFY, which I'll now ask Duncan to highlight.

Thanks, Reshma. The left side of the chart details the unmet need and significant gaps in the current standard of care. At 3 years, less than 20% of patients remain on SRLs given the painful monthly injections with large gauge needles and end-of-dose symptom breakthrough. The right-hand side of the slide highlights the market research that indicates high target physician awareness and very positive perception for PALSONIFY. Physician awareness is building quickly. Market research conducted in quarter 1, 2026 shows approximately 80% unaided awareness amongst endocrinologists and approximately 70% indicated a high intention to prescribe. Physicians perceive PALSONIFY as equivalent to injectable SRLs in IGF-1 reduction, symptom control, safety and best-in-class for speed of onset, duration of response, route of administration and dosing convenience. This physician awareness, the broad label in both switch and treatment-naive patients and the quality of the product profile are a compelling combination. In the context of the depth of unmet need in acromegaly, this has led to strong early launch dynamics for PALSONIFY. Based on quarter 1, 2026 data, as previously disclosed on May 7, PALSONIFY generated $10.3 million in net product revenue with strong patient enrollment forms and good breadth of prescribers. Overall, in just its second quarter of launch, PALSONIFY achieved an impressive 40% to 50% share of new-to-brand prescriptions with broad uptake across both pituitary centers and community endocrinologists and across all patient segments, injectable SRL switch, treatment-naive, switch patients from other therapies and patients who have discontinued therapy entirely. With respect to reimbursement, this market is 60% private pay and the remainder Medicare and Medicaid. The Crinetics team have made excellent progress securing reimbursement. Payer coverage currently stands at 60% through either formal coverage or medical exceptions. Crinetics have emphasized that they are on track to achieve 75% coverage by quarter 3 2026. And on the next slide, let me double-click and give some more details on PALSONIFY. Overall, given the unique attributes PALSONIFY offers to physicians and patients, we believe it is positioned to become first-line therapy in a growing specialty disease area with a high unmet need. We see multiple target patient populations totaling 10,000 in the U.S., including patients on injectable SRLs or other therapies, those who are post surgery, actively managed by an endocrinologist who may now need treatment, those who have discontinued therapy and those patients who are new to treatment annually. While switch patients represent the majority of the patient opportunity, PALSONIFY has a uniquely broad label and is the only oral therapy with data and the label in treatment-naive patients. Market research confirms that HCPs would start the majority of treatment-naive patients on PALSONIFY. We believe Vertex's experience in commercializing medicines for rare genetic diseases around the globe, combined with the extremely strong foundation Crinetics has built in endocrinology, positions PALSONIFY to become the standard of care in acromegaly, and our expectation is that PALSONIFY holds the promise to be a blockbuster medicine. Back to you, Reshma.

Thanks, Duncan. Let me now turn to Atumelnant and congenital adrenal hyperplasia or CAH. Classic CAH is a rare chronic genetic disorder affecting about 17,000 people in the U.S. with an additional 15,000 or more outside the U.S. In about 95% of cases, it's caused by mutations in the CYP21A2 gene, resulting in a deficiency of adrenal enzyme 21 hydroxylase. That enzyme deficiency means people can't produce adequate cortisol. Low cortisol levels lead to increases in ACTH production, which in turn causes steroid precursor buildup. Ultimately, this leads to excess production of adrenal androgens. To manage the disease at minimum, patients must take glucocorticoids for life. Glucocorticoids are administered to these patients to replace the missing cortisol and patients are often given high or super physiologic doses in order to suppress the androgen production. This creates a dual burden for patients. High androgen levels drive abnormal growth, early puberty, infertility and long-term physical and emotional consequences. High-dose glucocorticoids can cause heart disease, obesity, diabetes, bone loss and persistent quality of life issues. There has been limited therapeutic innovation in this field for the last 50-plus years. No currently approved medicine can both normalize androgens and allow people to be maintained on physiologic glucocorticoid doses. A recent market entrant works upstream in the pituitary gland and has shown it can reduce glucocorticoid doses modestly, but it does not concurrently improve androgens with physiologic glucocorticoid dosing, leaving both the steroid burden and androgen excess incompletely addressed for many people. Atumelnant takes a fundamentally different approach. This is the key point. It's an ACTH receptor antagonist that acts directly at the adrenal cortex. By blocking ACTH signaling at the adrenal level, Atumelnant suppresses excess androgen production while concurrently enabling people to reduce their glucocorticoid doses to physiologic levels, the true goal of CAH management. In terms of program status, Atumelnant is currently enrolling its Phase III CALM-CAH study of 150 adults. CALM-CAH is a 2:1 randomized placebo-controlled study with a primary endpoint of proportion of participants with A4, that's the androgen level at or below the upper limit of normal, while on physiologic glucocorticoid replacement therapy at week 32. To be clear, no other drug for CAH has ever evaluated this control of androgens and maintenance of physiologic GC replacement, glucocorticoid replacement as the primary endpoint. The study enrolled its first patient in December of last year and is currently enrolling and dosing patients. So 2 is a Phase II/III pediatric study in CAH. Atumelnant has also demonstrated therapeutic potential in ACTH-dependent Cushing's syndrome, where our Phase II trial has initiated. I'll turn it back over to Duncan to recap the Phase II Atumelnant data in CAH, which is a major value driver and one of the primary reasons we are so excited about this acquisition.

Thanks, Reshma. As Reshma alluded to, the true goal of therapy in CAH is to normalize androgen levels and simultaneously enable patients to be managed with physiologic levels of glucocorticoids to replace their missing cortisol. Currently, this means seeking an almost impossible balance between androgen suppression and glucocorticoid treatment to avoid adrenal crisis while also preventing the metabolic and cardiovascular consequences of excess glucocorticoids. Essentially, physicians and their patients are currently forced to choose between androgen excess or supraphysiologic doses of glucocorticoids. As a result, there are 2 important points to share regarding the Phase II data from the Atumelnant TouCAHn study. Firstly, the impact of Atumelnant on androgen levels; and secondly, the impact of Atumelnant on glucocorticoid dose. To that end, the Phase II Cohort 4 data demonstrated both rapid reduction in A4 and down titration to physiologic levels of glucocorticoids. Specifically, there was an unprecedented 67% reduction from baseline in mean A4 androgen levels even with tapering of glucocorticoid dosing. 87% of patients achieved physiologic glucocorticoid dosing while A4 reduction was maintained. In summary, we believe Atumelnant achieves the previously unattainable holy grail of CAH management. It has the transformative potential to concurrently and durably normalize androgen levels while also allowing physiologic doses of glucocorticoids as well as being well tolerated and given through once-daily oral dosing. In addition, market research with target endocrinologists confirms high awareness of these impressive Phase II data and the top reason physicians select Atumelnant's profile in research is efficacy. Specifically, 75% of respondents cite the data on androstenedione and glucocorticoid reduction. Physicians see Atumelnant as the future standard of care for people with classic CAH. We believe Atumelnant has multibillion-dollar potential in the CAH market alone and meaningful additional opportunity in Cushing's syndrome. Before I turn it back over to Reshma to cover Cushing's, let me take one moment to step back and summarize the commercial opportunity. Going back to the strategic fit of the deal, these rare endocrine diseases are all managed by specialty endocrinologists that can be reached with a small commercial footprint. As an example, Crinetics currently serves the acromegaly market with a roughly 40-person field sales team. In total, there are approximately 8,000 endocrinologists in the U.S., and each of these diseases is managed by a subset of approximately 3,000 to 4,000 specialty endocrinologists, where we also see opportunity for synergy across these rare endocrine diseases. I'll now turn the call back to Reshma to describe the additional opportunity for Atumelnant in Cushing's syndrome.

There are several additional areas of opportunity within the Crinetics pipeline, both clinically and preclinically. Tonight, I'll highlight just one, ACTH-dependent Cushing's syndrome or ADCS. ADCS is another serious rare endocrine disease with high unmet need affecting about 10,000 patients in the U.S. and about 50,000 patients outside the U.S. Surgery is first-line therapy, but many patients will require chronic medical management. Excess cortisol secretion from a benign pituitary adenoma accounts for 80% to 90% of ADCS, while another 10% to 20% comes from ectopic ACTH secretion. This prolonged excess cortisol can lead to high patient morbidity, including heart disease, obesity, diabetes and more. By directly blocking ACTH signaling, Atumelnant reduces cortisol production and thus holds transformative potential for this disease. The data in Cushing's syndrome are impressive. The Phase I/II study of Atumelnant in patients with ADCS treated at 40 milligrams showed at day 10, a rapid lowering of urine-free cortisol, or UFC, with 3 of 6 patients having UFC within the normal range, while on physiologic doses of glucocorticoids. Data from the 80-milligram cohort also demonstrated rapid lowering of UFC with 5 of 6 patients or 83% achieving normalization of urine free cortisol on physiologic doses of glucocorticoids. With regard to program status, the Phase II study has been initiated, and we are excited about taking this program into pivotal development and further. Post closing, we look forward to sharing more on the other Crinetics pipeline programs. For now, let me reiterate our excitement for the lead assets, PALSONIFY and Atumelnant, our admiration for the Crinetics team's deep scientific expertise in endocrinology, GPCR biology and their drug discovery platform as well as the culture they have built. I'll now turn over the call to Charlie for highlights of the transaction and our outlook for the combined companies.

Thank you, Reshma. Vertex will acquire all outstanding shares of Crinetics common stock for $85 per share in cash. The total equity value is approximately $10 billion or $8.8 billion net of estimated cash acquired. To finance the transaction, Vertex expects to use a combination of cash on hand and debt, supported by $4.5 billion of fully committed bridge financing. The transaction is subject to customary closing conditions, including approval by Crinetics shareholders and receipt of regulatory approvals. We currently anticipate closing in the third quarter of 2026. In terms of financial impact, this transaction is consistent with Vertex's capital allocation priorities, which remain focused on internal and external innovation in disease areas where we can deliver transformative benefit to people and sustainable value for shareholders. The financial case is straightforward and compelling. PALSONIFY is already generating revenue and building momentum with the potential to be a blockbuster drug in acromegaly. Atumelnant has the potential to be a multibillion-dollar opportunity in CAH with meaningful additional upside from the market opportunity in Cushing's syndrome. At peak, these assets have the potential to deliver more than $5 billion in combined annual revenue. That revenue profile furthers Vertex's goal of sustained double-digit revenue growth and is expected to be margin accretive over time. Oral small molecules in specialty endocrinology markets carry attractive commercial profiles and Crinetics' capital-efficient development model is well aligned with Vertex's own approach to operating leverage. The transaction is expected to become accretive to non-GAAP operating income in 2029. On guidance, given the anticipated Q3 2026 closing, the impact to 2026 revenue and non-GAAP operating expenses is expected to be modest. We will provide updated 2026 guidance at the time of closing. I'll take a minute now to frame what this acquisition means for Vertex's long-term growth story. Beginning in 2023, we've spoken about our goal of 5 launches in 5 years. With this transaction, not only do we reach that goal more than 2 years ahead of schedule, we're also adding a fifth pillar, endocrinology to our disease area and commercial framework alongside cystic fibrosis, heme, acute pain and our emerging renal area. Across each of those 5 areas, we have a uniquely attractive product portfolio and pipeline. In CF, ALYFTREK and TRIKAFTA continue to generate strong revenue with growth driven by approvals in younger patients, geographic expansion and patients living longer. In heme, CASGEVY is approved for both sickle cell disease and transfusion-dependent beta thalassemia. And importantly, just last week, CASGEVY received supplemental approval in the U.S. for patients ages 2 years and older with either SCD or TDT. In acute pain, JOURNAVX is in year 2 of its launch and on track to triple prescriptions in 2026 versus 2025. Additional pain programs are in development. In renal, povetacicept is advancing rapidly in IgAN with a November 30 PDUFA date and is also in a Phase III study in primary membranous nephropathy and a Phase II study in myasthenia gravis. To this mix, we now add endocrinology as a fifth pillar with PALSONIFY already on the market and Atumelnant in pivotal development plus the Vertex internal endo assets of our type 1 diabetes programs. We also see value in Crinetics' additional pipeline assets, and we'll discuss that post close. We believe this combination makes Vertex a stronger, more diversified company with a long runway of growth while staying true to the strategy that's driven our success. To reiterate the investment thesis behind the acquisition, Crinetics is an excellent strategic fit for Vertex. Both PALSONIFY and Atumelnant meet every element of our strategic acquisition criteria, serious diseases with high unmet need, well-understood causal biology, validated biomarkers, specialty markets and best-in-class potential. Together, these assets add more than $5 billion in combined peak sales potential, and they do so in a disease area, specialty endocrinology, where Crinetics has built deep, durable expertise and exactly fits our commercialization framework. We're excited about this combination, and we look forward to sharing more details as we progress toward closing and beyond. With that, we're happy to take your questions.

[Operator Instructions] And our first question for today will come from Jessica Fye with JPMorgan.

Curious on the $5 billion peak projection for PALSONIFY and Atumelnant. How do you break that out between the assets? And does it factor in carcinoid for PALSONIFY, too? And then related to Atumelnant specifically, how much diligence were you able to conduct on the clinical profile? Did you see any safety data from ongoing trials?

Jess, it's Reshma. Let me take those 2 questions. I'll take the second one first. We were able to do the kind of diligence you would expect from Vertex. And everything we've seen, including efficacy, safety makes us feel really good about what Atumelnant could do for patients, not only in CAH, but in ACTH-mediated Cushing's syndrome as well. On the $5 billion, one of the reasons we like this deal so much is that there are many paths to the $5 billion in revenue that we outlined. Maybe the most visible and straightforward path is just focusing on the 2 lead assets. We see PALSONIFY in acromegaly as a blockbuster medicine. And then we have multibillion-dollar potential for Atumelnant in CAH and then add on to that really significant opportunity in ACTH-mediated Cushing's syndrome. You add that all up, and that's the $5 billion revenue we outlined. But there are many other pathways. As you mentioned, there's a program in Phase III in carcinoid based on mechanism of action, I have every reason in the world to believe it will be successful. There are very interesting preclinical programs in other rare endocrine diseases that are of interest to us. I'll just call one out, Graves' disease and thyroid eye disease. So many paths to the $5 billion that we outlined. The most straightforward is the focus on 2 lead assets.

The next question will come from Salveen Richter with Goldman Sachs.

With regard to Atumelnant, could you speak to how we think about the ramp of the drug and the sales outlook in the context of what's played out with Neurocrine's drug here? And then secondly, for PALSONIFY, the -- maybe speak to the ex U.S. launch outlook here given the recent EMA approval?

Yes. Sure. Thanks, Salveen. Let me take the first question on how we see the Atumelnant ramp, and then I'll ask Duncan to comment on PALSONIFY and commercialization. Let me just make a top line comment for both. Obviously, we're just announcing the merger agreement today. The deal still has to close. So I'm going to be thoughtful about not going too far forward before the deal closes. That being said, as you heard Duncan say, the awareness for Atumelnant in CAH is very high. And this idea that you can have a drug that can control both physiologic levels of GC, glucocorticoid and concurrently manage the androgens, that is the holy grail of what physicians and patients want. And so we see a lot of opportunity, a lot of awareness, and it's an oral small molecule. So for this opportunity to play out in a nice launch uptake. But I won't go further than that until the deal closes. Duncan, do you want to say a couple of words about PALSONIFY and where you would take that once the deal closes?

Yes. Salveen, briefly, PALSONIFY has been approved in Europe in April earlier this year. And without sort of prejudging exactly what we would do, our plan would be to conduct a global launch of PALSONIFY beyond, of course, the excellent launch that the Crinetics team are executing here in the U.S. right now.

The next question will come from Cory Kasimov with Evercore ISI.

This is Josh on for Cory. In regards to Atumelnant, what data did you see to make you feel comfortable that there won't be a liver safety signal as was a concern that was brought up by investors previously. And we'll leave it at that.

Yes. We've looked at the totality of available data generated to date with Atumelnant in all of the indications. So that means CAH as well as in the early study in ACTH-dependent Cushing's. What we see is minor elevations. I believe there were a handful of cases, I think 7 actually to be exact, of minor elevations in LFTs. There are no cases of LFTs plus bilirubin. There -- most of the cases, 6 of the 7 resolved without any intervention on continued therapy. So we feel really good about the safety profile, not only in the liver dimension, which you asked about, but as we reviewed the data, we felt really good about the profile overall.

The next question will come from Andy Chen with Wolfe Research.

And I think you mentioned that the deal is going to be accretive by 2029 based on your internal assumptions. Would this largely be driven by PALSONIFY? Or is it possible for Atumelnant to launch before then? If you can provide some metrics on timing of Phase III data, that would be great.

Charlie, do you want to comment on that?

Yes. Thanks for the question. Obviously, the commentary about this becoming accretive to operating margins in 2029 factors in both our view on revenue ramp as well as OpEx trajectory over the next couple of years. We'll be more specific about that at the time of close.

The next question will come from Geoff Meacham with Citibank.

This is Jarwei on for Geoff. Maybe 2 from us. First, on PALSONIFY, what gives you confidence that the Phase II CAH profile would be reproducible in a larger, more heterogeneous Phase III population? And then on Atumelnant, what's the one risk you're most focused on as you move through the Phase III study?

Sure thing. I think you mean Atumelnant in CAH, what gives us confidence that we're going to recapitulate the results in Phase III as seen in Phase II. One of the really -- one of the things we like so much about this platform is the disease biology is extremely well understood. The manifestation of the disease is clear. You can tell if the medicine is working, as I said in my prepared remarks, early on because these are exactly the biomarkers that we study as you're developing proof of concept as is the endpoint in Phase III. So based on the mechanism of action, the presentation of the disease, it is a rare genetic endocrine disease and the strength of the data, the magnitude of the treatment effect, I have high confidence in the Phase III program. You also asked about what risks are we looking for. There's nothing special that I would call out here. The risks for any program that is transitioning between Phase II and Phase III is simply to ensure that the safety and tolerability profile is the same in Phase III as was in Phase II, and we already talked about the efficacy. But I see no unique risks that concern me here.

The next question will come from Evan Seigerman with BMO Capital Markets.

Congrats on the proposed acquisition. So mechanistically, when you think about the kind of competition out there, walk me through why you think the Crinetics asset is potentially better than Crenessity. I know you have some data in the slides, but when you did your diligence, what was it that was striking that caused you to decide to acquire the company or propose the proposed acquisition of the company?

Yes. You bet, Evan, and thanks for your kind words. So the key here, Evan, if we just focus on CAH is that the long-standing and very well known to the field. So this is a rare endocrine disease taking care of by a small number of endocrinologists. Endocrinologists in any case, is only 8,000, 9,000 endocrinologists in the U.S., kind of the same number as nephrologists. So it's a small specialty. And of that, only like 4,000 or so take care of this kind of rare endocrine disease. When you look at the disease itself, it's very clear that it's this dual burden of needing to supplement with glucocorticoids, but the best outcome would be using physiologic doses of glucocorticoids or GCs. But that's not really possible. People end up using super physiologic doses of GCs because without doing so, the androgens, which have a whole host of complexities, as I described in my prepared remarks, growth challenges, hirsutism, virilization, a whole host of excess androgen challenges. So you use more GCs. And when you do that, you're constantly teetering between too much glucocorticoids and the downstream negative consequences of that or too little glucocorticoids and then having excess androgens. So I think Duncan described it exactly right. The holy grail has been can we have a medicine that allows glucocorticoids at physiologic levels while suppressing androgens. And when you look at the Phase II data, and we shared some of it on the slide, that is exactly what you get. And I would say, Evan, the key thing to look at is look at the end of the trial period where you have GCs at physiologic levels and look at that point at the androgen or A4 level. That's the key data. When we saw that data, we were floored. That is very, very important to this field. I'm going to ask Duncan to see if he wants to make any additional comments.

My only additional comment to that is, and we believe that's unique that there is no other company that have data that has shown the ability to achieve that holy grail of both managing androgen levels as well as and simultaneously enable patients to be treated with physiologic doses of glucocorticoids. And that is unique and no one else has shown that.

The next question will come from Michael Yee with UBS.

Mike Yee from UBS. Two questions, maybe Reshma. One is just thinking about the premium on the acquisition of approximately 100% and appreciating that nearly every deal, I think, year-to-date nearly has been a much more modest premium speaking to sort of bid-ask spreads and where we are in the market. So talk a little bit about either was this a very competitive situation? Or how do we arrive at such a high premium? The second question is more scientific and competitive in nature. And in understanding the difference between your drug and Crenessity, it looks like your -- Crinetics is using quite a different endpoint in Phase III. And perhaps is it that endpoint that speaks to exactly what you're trying to address in terms of normalizing both hormones?