Vertex Pharmaceuticals Incorporated (VRTX) Earnings Call Transcript & Summary

Great. Good morning, everybody. I'm Terence Flynn, Morgan Stanley's U.S. biopharma analyst. Pleased to be kicking off our 24th Annual Healthcare Conference here in New York City. For important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. I'm very pleased to be kicking off the conference this morning with Vertex Pharmaceuticals. Joining me is Reshma Kewalramani, who is the company's CEO and President. Thank you so much, Reshma. It's great to see you this morning, bright and early.

Good morning, Terence.

So maybe I'll turn it over to you to just give us an update on the company's diversification journey. I know that's been a big focus of yours as the CEO here. There's been a lot of movement on the company's pipeline and also the Crinetics acquisition recently. And so maybe just give us a mark-to-market on kind of where you stand on that journey.

You bet. Well, good morning all and for you, brave souls, who've made it here at 7:00 a.m. It's very nice to see you. We have been on a journey, it's more than 10 years now, to diversify our company and continue to grow. I do want to make sure that we talk about CF for 1 minute. CF has been and remains important to us, and we see more growth in CF as we now launch ALYFTREK around the world and get down to lower age groups. We also have our last 5% of patients for which we don't yet have a therapy. And so that foundational pillar of CF continues to go strong. Outside of CF, over the last 3 years, we've been bringing CASGEVY to more people around the globe. And you know CASGEVY has a very significant patient journey. And now we're at a point where we can see patients who are initiating, who have first cell collections and have infusions. And so we can see the -- we have line of sight into the growth, and it looks very good. And I continue to believe CASGEVY is going to grow into a multibillion-dollar asset. Over the last year or so, we've been launching JOURNAVX in acute pain. This is the first non-opioid in more than 2 decades, and I really like what I see in the growth there. And then we were talking about the fourth pillar, which was going to be renal medicine. And it is, but I think it's actually going to just switch places with where endocrine and Crinetics, which is our fourth pillar now with PALSONIFY, which is an approved medicine in the U.S. It's approved in Europe, launched in the U.S. This is a medicine for acromegaly. And then, of course, there is the renal pillar. The PDUFA date for our first renal medicine, pove in IgAN is November 30, and I'm sure we'll get into a little bit more there. And there's much more beyond that. In total, there's something like 6 programs in Phase III, more than that in Phase II, and I like what's coming out of the bench into the clinic as well. So lots going on inside and outside of CF.

Great. Well, no, that's a perfect framing. So I guess the area I want to dig into first is just your kidney franchise. Obviously, that's been a big focus of investors. You mentioned the pove PDUFA date coming up here. Maybe just level set us on differentiation. I think that's a question we get a lot from investors is there's 2 competitors that have launched into the market already. So as you come from a third-to-market position, how do you think about differentiation of pove?

Yes. So when you think about IgA nephropathy, just to level set, you're looking at something like 300,000 patients between the U.S. and Europe, let's say, 150,000 inside the U.S. and then add another 1 million or so in Asia, where we're going with Zai in China and associated countries and with Ono in Japan and a few other countries. So it's one of these rare diseases that is a common rare disease. In terms of coming to market, it turns out that this is an interesting area where there are 3 medicines that are all launching, let's call it, within a year or so of each other in the category of APRIL or APRIL/BAFF. In my mind, as I think about IgA nephropathy, and I happen to be a nephrologist, this is a disease that is very well understood in terms of its etiology. It is a B-cell-mediated disease. It is a disease that results from autoantibody production. And when you think about it that way, it makes most sense to have a medicine that works on both APRIL and BAFF because those are the 2 cytokines that are most responsible for B-cell development maturation, and it wouldn't make sense to me to work on only APRIL or only BAFF, unless you saw some concern in the safety profile. We now have the profile. We have -- we put out a fairly extensive press release. The safety profile looks really good. And the efficacy, and this is numerical and it's cross-trial comparisons, you got to take this with a grain of salt. But when I look at the numerical response, pove has the best numerical response in terms of proteinuria, hematuria, Gd-IgA1 levels, and that's important. But maybe the most important thing, which could be surprising to you, is the fact that it's also the most patient-friendly dosing. This is a biologic. A patient will be taking this for the rest of their life and their ability to take a small volume, pove is 0.46 mLs in an auto-injector once monthly, is a very favorable presentation. And I think that's actually going to be one of the greatest differentiators. I also think our ability to support patients through their journey is going to be important. We've learned a ton doing the same in cystic fibrosis. I think that's going to be important. And the last thing I'll call out is we have built the largest sales force, and that is to serve patients where they are. There are certainly centers of excellence and large clinics, but there's also a smaller number of patients in the community setting, and we want to be able to serve all patients.

Great. Maybe just 1 follow-up there is that GFR kidney function is the other endpoint that you guys are studying. The trial is going on for 2 years to look at that. So as you think about positioning the kidney function data, how do you think about the importance of that in either a label or at some point down the road, given one of your competitors who already have some of that data?

Yes. So this one has been a rapidly evolving field. 10 years ago, 15 years ago, the FDA wasn't yet comfortable with proteinuria as an accelerated endpoint. And the community, the renal community has been working with the FDA, with academic centers, with industry to get proteinuria to be it. We are now at a point where proteinuria is routinely accepted in IgAN as an accelerated approval endpoint. And your point, Terence, is around, all right, where are we with GFR? On GFR, the agency has been hinting and in the spring renal meetings, they all said they're going to get comfortable with 1-year GFR as the endpoint as opposed to 2-year GFR, which is where it was at prior to those meetings with the FDA. Where we are is that we want to launch pove around the globe. That is our ambition. That is what we are going to do. For that to happen, we have to meet the global regulators where they are and global regulators, so think MHRA for the U.K., the EMA for EU and the Asian regulators, not to mention Australia, are not yet at the point where proteinuria is acceptable. They are at the point where 2-year GFR is okay. And so we're methodically making our way around to understand where they are with 1-year GFR, but we won't cut our data set early because our ambition and our goal is to have pove go around the globe. It is true that the FDA has become increasingly comfortable and they've all but said 1-year GFR would be acceptable to them.

Great. So it seems like you're unlikely going to get that 1-year GFR on because you want to keep -- preserve the integrity of the data set for that.

That's exactly right. That's exactly right. If you cut the data early, as you remember, the FDA had instructed all 3 companies in the APRIL, APRIL/BAFF space to not share the GFR because it was ongoing. And so once you cut the GFR and share it, that would be the concern for -- if the U.S. is okay with it, that would be the concern for the global regulators.

Okay. Maybe just 1 on the commercial side. You mentioned you're going to have one of the largest renal sales forces out there. What have been some of your early conversations with payers? Obviously, we've seen a couple of quarters from Otsuka now in terms of the uptake of their IgAN drug, but how are your preliminary conversations with kind of payers going and anything to update us on there?

Yes. On the payer side, they are familiar with the disease. They are familiar with proteinuria, the accelerated approval, the correlation to GFR and such. And they're very familiar with the outcomes of patients with IgA nephropathy. Unfortunately, that is progression to dialysis, transplantation or death. And the value of slowing that progression is well understood to them. So we've been in conversations, the ones that we are allowed to have legally and appropriately since about last summer. We've targeted and discussed pove with more than 70% of payers and the conversations have been productive and positive. I expect that we will be able to secure reimbursement. I expect that it will be the kind of reimbursement that would be appropriate and commensurate with what you've already seen in the field. But this one seems like the payers are familiar and they are understanding of the value of medicines that prevent death, dialysis or transplantation.

Okay. Great. I think the other thing as we think through differentiation is breadth of program or breadth of indication set on a label. I think back to some of the historical examples here where that is oftentimes pretty important as you think about formulary position. So maybe just give us an update on kind of where we stand with the pove program in terms of breadth of opportunity and the next set of data that we should focus on here.

Yes. I think the Alpine team did a really nice job in studying pove in multiple potential indications by way of these Phase II basket studies that they conducted for us. After pove in IgAN, that's the November 30 PDUFA date, I expect the next Phase III readout to be in membranous nephropathy. I think that has an advantage to our first discussion point around differentiation. I think nephrologists are going to find it helpful and easier for their clinical practice to pick a single B-cell modulating drug across the various glomerular diseases that they're dealing with. And so having pove in IgAN and pove in membranous, I think, will be valuable. I do think membranous will be next, and I think the one after that is going to be in myasthenia gravis. The myasthenia program is in Phase II. The membranous nephropathy program is in Phase III. And to close out on membranous, the DSMB has met and they have picked 80 milligrams, which is the same dose that we had studied in Phase II in the RUBY-3 trial in the event you want to look at those data as the Phase III dose.

Great. And then as we think about read-through, I guess, from IgAN to these 2 other indications, either one of those that you put a higher probability than the other? Are they both about the same given B-cell biology? How do you think about read-through from IgAN to those 2?

Yes. I think it's reasonable to look at the Phase II RUBY-3 trial for membranous to get a sense of where that's going. It's the same dose. It's 80 milligrams. So you know the safety because we just announced the results of the interim analysis accelerated approval cohort for IgAN. And there are lots of similarities between IgAN and membranous. As Gd-IgA1 is to IgAN, PLA2R is to membranous, and you can see what that reduction was. So I think that's a very -- it's a reasonably easy analogy to make. I am very excited about the myasthenia opportunity because there is a wild-type TACI that already completed a study, a Phase II study in a China-only population. So you got to think about that. But when you look at the timeline and if you plot, for example, time on the X-axis and the ADL, the activities of daily living on the Y-axis, the wild-type TACI in that China-only cohort had really nice results. Of course, pove is an engineered TACI. It has better binding affinity, higher potency, better tissue distribution. So I am very excited about this. This is a patient population that has a disease that is one of the most B-cell-mediated diseases, if I can call it that way. And while there are medicines that are available that have been real game changers, unfortunately, they have to be cycled on and cycled off, but the disease doesn't cycle. And pove would be a medicine that could be taken consistently over the period of the patient's life, and I think that could bring a real benefit.

Okay. Great. Maybe we'll move over to inaxaplin, which is another one of your pipeline assets. This is for APOL1-mediated kidney disease. And so first, maybe just, again, give us a little bit of background on the disease and the need there. And then as we think about the upcoming data from AMPLIFY, I'd like to dig into that a little bit because I think that's expected in the fall here, and this is from a Phase II study.

Absolutely. So staying with the renal franchise, this is about inaxaplin in a disease called AMKD, APOL1-mediated kidney disease. The disease itself is fairly new. It was just described in about 2010 or so. And basically, it's a disease that occurs only in people of recent sub-Saharan African descent. It is a very rapidly progressive disease. And fundamentally, what you see is if you have 2 APOL1 alleles versus if you don't, your risk of progression is something like 5x, 6x. It's extremely high compared to those who do not have APOL1. There are about 150,000, let's say, 100,000 to 150,000 people with AMKD in the United States. It's largely a disease in the Western world that is in the U.S. And these patients have no medicines that have been specifically approved for their condition. We have a program that is going to read out. It's called AMPLITUDE early next year. It's in Phase III development. We have an agreement with the FDA for potential approval, and the accelerated approval is based on 1-year GFR. The FDA is not yet comfortable in AMKD, unlike in IgAN, for proteinuria to be the accelerated approval endpoint. That study finished its enrollment in the IA cohort last year. We are on track to finish the full cohort enrollment in 2H of this year, and we're fully on track for the Phase III interim analysis readout early next. That's AMPLITUDE. But as Terence said, there is another study, AMPLIFY, and we do have to talk to the teams about not naming them so similarly. AMPLIFY is a IIb study. That one will read out this year and in the fall is about right. We are on track for that readout this fall. That one, I would think of as an expanded population as an indication expansion from AMPLITUDE. So AMPLIFY has 2 cohorts in that Phase II study. Cohort 1 is modest proteinuria. So up to 0.3 to 0.7 grams of proteinuria whereas AMPLITUDE is more than 0.7 grams. And Cohort 2 in AMPLIFY is patients who have AMKD. So they have 2 APOL1 alleles, but they have a second disease. And that second kidney disease is type 2 diabetes. The reason I consider them expansion cohorts is obviously, when you have lower proteinuria, this modest proteinuria cohort, the dynamic range is smaller. And when you have 2 kidney diseases, it's not clear what kidney disease is causing your proteinuria. Is it 50-50 type 2 diabetes and AMKD? Is it disproportionately AMKD, disproportionately type 2 diabetes? And of course, our medicine, inaxaplin, only takes care of the AMKD portion. And so that's why that's an indication expansion, a potential indication expansion. Those results could expand the 150,000 people in the U.S. that maybe add another 100,000 or so. So that's what the AMPLIFY study looks like.

Great. Maybe we'll just focus on the modest proteinuria cohort. What would you view as kind of a good result there? And what are the implications then for the AMPLITUDE study as we think about that Phase III if we see the data from Cohort 1, recognizing Cohort 2 is type 2 diabetics. So again, a bit more of a wildcard, but in Cohort 1, how do you think about what the bar is for success there?