# Vertex Pharmaceuticals Incorporated presents at The 44th Annual William Blair Growth Stock Conference
Tuesday, June 4, 2024 5:00 PM
# Event Participants
Analysts 2 Myles Minter, Unknown Analyst
Executives 1 Reshma Kewalramani
# Myles Minter Analyst
All right. Thank you very much. Welcome back to the William Blair Growth Stock Conference, the 44th addition, as I understand it. My name is Myles Minter. I'm a Senior Biotech Analyst here at the !rm.
I'm joined next to me by Sami Colin cell and gene therapy expert also a senior biotech analyst. And we are together kind of cover Vertex Pharmaceuticals. It's my pleasure to have Reshma Kewalramani, here, the Chief Executive O"cer of Vertex. She's nicely taken time out to come from Boston. I live in Boston as well, and I see the building every time I live in Seaport there.
So -- it's nice to know we've got a nice neighbor.
Full disclosure is available at williamblair.com. Very, very brie#y, I think Vertex here is the best quality and most durable growth story you can buy in biotech right now. Obviously, has changed the way that we think about people living with cystic !brosis with their lead candidate TRIKAFTA, which is generating close to $$ 10$ billion as a franchise per year. But I think the other aspect of it that I really like is that at the heart of this company is still innovation. And I think as Reshma is going to tell you, they play an integral part of the commercialization of the !rst \[ FR \] approved CRISPR-based therapy for sickle cell, we'll hear a little bit more about that today.
Also hopefully, a nonopioid pain alternative, which has really been a long time coming, particularly here in the U.S. So it's enough of me talking.
I'll pass it over to Reshma.
# Reshma Kewalramani Executive
Thank you so much. Thank you for the invitation to be here today. I was going to thank you for the Midwest Hospitality, but I was thrown o$ by the non-Midwest accent. But I'll thank you anyway. It is actually our !rst time as Vertex and certainly my !rst time here at the William Blair conference, and it has been super informative and very exciting.
So let me take about 20 minutes or so to introduce you to the company for those of you who may not know us. And for those of you who do to reintroduce you to the company, there's been a lot of advancement, and we are quite a di$erent company today than we were maybe even just 5 years ago. You'll read some of the important disclosures and risks in the other prepared materials, but there is some of it here on the screen today.
There are a couple of really important slides in the deck, and I'll try to call them out as we go along. This is probably the most important one, because as you try to !gure out who we are, what we're interested in, why we are pursuing certain modalities and not others and why we're going after certain diseases, but not others. This slide will tell you all about it. So around 2013, 2014 or so, we set on the course of setting up a new strategy. And that wheel on the left of the slide is our corporate strategy and our R&D strategy.
And it is di$erent. It is not pithy, but there's 5 components to it. And if you follow along those 5 components, it really tells you about who we are, what we do and why we do it. And it goes like this.
We are interested in cracking open new disease areas. We are interested in creating value by serially innovating for our patients and for our shareholders. And we believe that by going after diseases with high unmet needs, diseases where we understand causal human biology, diseases where we have validated targets, usually genetic, but pharmacologic is just !ne, diseases where we have biomarkers that translate from bench to bedside, and diseases where we have e"cient development and regulatory pathways, then we will have disproportionate R&D success. That will lead to corporate investment and success, and because we only intend to work in specialty areas, this will allow us to reinvest the majority of our investment back into R&D to do the same thing and get this virtuous cycle going.
So when you wonder about, well, what kind of company aren't anyway, we are not a platform company. We are not a therapeutic area company. We are a disease !rst company. If you're wondering about why are you into mRNA at the same time, you're pursuing cell therapies at the same time you're doing small molecules, and I note that you have some antibody and protein therapeutics in your pipeline, yes. The modality we see as a tool to the end of transforming if not curing the diseases that we're going after.
And so as you think about us and wonder about our pipeline and think about where we're going, I think this slide is the most helpful to you to try to understand us best. If you wonder -- okay, understood, that's the strategy, that's the corporate strategy, that's the R&D approach, where has that led you? So remember, I said this was a strategy that was formed circa 2014, 2015. Here's where it has brought us. We have serially innovated in CF, and that word serial is really important.
We are not only about innovation. We're about a special kind of innovation, serial innovation.
And I do think CF is the best example of that. We started with KALYDECO, moved to ORKAMBI, SYMDEKO, then TRIKAFTA, now vanzacaftor which we just !led a couple of weeks ago, and we intend to keep going. If it is humanly possible to do better for our CF patients, we are absolutely committed to being the ones who do so.
In addition to the portfolio of CF medicines, we also have approved what I think will be seen in current day and in retrospect, as a real achievement in science and medicine CASGEVY, the !rst CRISPR/Cas9-based therapy. And it was approved in rapid order in the U.S. and in the EU, the U.K., Bahrain and the Kingdom of Saudi Arabia. And I'll tell you a little bit more about it in future slides.
Upcoming for us are approvals for vanzacaftor, let's call it the next-in-class for cystic !brosis that was !led about 2 weeks ago. And suzetrigine, the !rst nonopioid pain medicine in over 2.5 decades, which we intend to complete the !ling of by middle of this year. And beyond that, there's a whole host of programs in mid- and late-stage development. And the midstage development here is meant to signal that these are the programs that are in-patient base. There are more programs that are in Phase I healthy volunteer studies, but the list here are all in-patient studies.
If you try to look at the same sort of disease map you can also get a sense for the number of patients that might bene!t from these therapies. These circles represent the number of patients who are eligible for the diseases in which we are working. And I want to make 2 points here. One; some people think about Vertex as a rare disease company. We are not a rare disease company as you can see from the number of patients who su$er from acute pain or Type 1 Diabetes.
The second point to make is in all of these diseases, just as we did in CF, there is a !rst medicine, and then there is a serial innovation approach to bring better and better medicines or treat more and more patients or treat patients with less of a burden for them. And an example of that would be gentler conditioning for our CASGEVY program.
Today, we are targeting about 35,000 people in the U.S., in Europe for CASGEVY, which requires busulfan based conditioning and an additional 20,000 or so people in the Middle East. And the goal here would be to be come forward with a \[indiscernible\] conditioning regimen that would then open cash CASGEVY to the full 150,000 people who live with this disease in Europe and the U.S.
I won't be able to cover all of the diseases today, but I've picked 4 diseases to start the conversation. The !rst is cystic !brosis. We continue to reach more patients around the globe as we have brought forward TRIKAFTA, which can treat to $9 0 %$ of patients with cystic !brosis. And as we go further down the age group, TRIKAFTA now is approved for 2- to 5- year olds.
KALYDECO that was our !rst medicine approved around 2012 is approved for patients down to 1 month old, and what are we trying to really do here with CF, we're trying to get to patients at the youngest age possible so that we can treat them and hopefully, they have no manifestation of their disease. One of the learnings in medical school, and I'm not that also, I went to medical school, in reasonably speaking, the last couple of decades here. We were
taught that the average age of mortality for CF patients was around 30 years of age.
I'm going to share some modeling data with you. It's modeled data, but the life expectancy of a child born with cystic !brosis today, taking one of our CFTR modulators and with all of the other advances in therapy is more than 70 years of age. And what we're trying to do now with the vanzacaftor program and then with other CFTR modulator programs behind that is gets a higher and higher levels of e"cacy with the goal of bringing our patients the $9 0 % ,$ who can bene!t from oral small molecules to either diagnostic levels of sweat chloride. That's 60 millimole or better yet to normal levels of sweat chloride.
So when you and me, our sweat chloride levels are less than 30. The diagnostic threshold is 60. If you're more than 60 you're diagnosed with CF. With the vanzacaftor triple in the 6 to 11 age group, $9 5 % ,$ so it's not $1 0 0 % ,$ but it's pretty close. $9 5 %$ of our 6- to 11-year-old have sweat chloride levels now below 60.
And more than half, $5 3 %$ has sweat chloride levels in that study less than 30.
Next on the agenda, we're working on an mRNA program with our partners at Moderna for the last $1 0 % ,$ let's call it, 5,000 to 7,000 people who simply don't make any protein, and therefore, cannot bene!t from a CFTR small molecules, we have to somehow introduce the protein. Our LEAP program is using an mRNA approach with an LNP. It's an inhaled nebulized therapy. That program is in its multiple ascending dose phase of the Phase I/II program. And we've said that we expect to complete this program later this year or in Q1 of next year.
Beyond that, we continue to invest in cystic !brosis because as I said, we're not just about innovation, we're about serial innovation. And if we can get better than TRIKAFTA and we can get better than vanzacaftor, boy we're invested in doing so in the next-generation of molecules beyond vanzacaftor are already in clinical development.
CASGEVY. A few words to say about that. We've started the launch in the last quarter. And what we shared is that ATC activation authorized treatment center activation, and the number of patients who start their journey with CASGEVY are important early indicators of where we are in the launch, and that's what we would share with you over time. CASGEVY is not a CFTR modulator.
Our CFTR modulators are medicines that the doctor prescribes you, go to your pharmacy, pick it up and you can start on it right away. This is a procedure that takes many months. You are identi!ed by your hematologist. There's a candidate for CASGEVY therapy as a potential. You go to your transplant physician.
A lot of testing is done. There's plasmapheresis involved. One session is possible, multiple sessions may be needed. And then your cells are set to have the editing procedure performed. And then when you are ready for reinfusion, there is a step that requires you to be in hospital for between 20 and 30 days while you have the busulfan myeloablative conditioning.
Long way of saying, it's a long process. But hopefully, what our patients get from it is a lifetime of bene!t. Before we had regulatory approval in the United States, we already had 9 ATCs activated. That's actually quite remarkable. Now we have about 25 ATCs activated in the U.S.
And we have ATCs activated around the globe in all regions in which we have regulatory approval.
With regard to patient initiations, we also have patient initiation in all regions where we have regulatory approval around the world. So how is the launch going? It is both going well and as predicted, which is to say this is a bit of a journey for our patients, but the patients have started the journey.
Moving on to acute pain and VX-548, otherwise known as suzetrigine. The big idea here is we would like to come forward with an e$ective pain medicine that is not an opioid that doesn't have the side e$ects of opioids. It doesn't have the addictive potential of opioids. But has e"cacy and a good-looking bene!t-risk pro!le. That's our goal here.
Our goal is to do this in acute pain, and our goal is to also do this in neuropathic pain.
And the !rst medicine that we have brought forward or I should say, potential medicine is suzetrigine. We have covered and completed our Phase III program in acute pain. We have fast track designation. We have breakthrough designation, and we also were able to secure a rolling submission with the FDA. That rolling submission has already begun.
And what we've said is that we will complete the rolling submission by middle of this year, and we are well on track to do so.
Without going into all of the details about the mechanism of action, I do want to make sure that I share with you -- the reason for our enthusiasm for this program is the following: NaV1.8 and its sister channel, NaV1.7 are genetically validated targets. NaV1.8 is also pharmacologically validated by our own predecessor molecule VX-150.
The way that you're -- that you and I all of us perceive pain is through an action potential that is perpetrated or propagated through C-!bers a particular kind of nerve !ber. The action potential is initiated by NaV1.7. And that action potential propagated by NaV1.8. And here, we are working on NaV1.8. Those NaV1.8 receptors are not present in the central nervous system.
So if you think about, okay, well, how does this really work, how do you get pain relief and how do you know that you're not going to have addiction potential? Addiction is a central nervous system phenomenon. The way this works is on the underlying channels, these NaV1.8 channels that are only present in the peripheral nervous system.
And what we're really looking to do here with acute pain is have an option for our patients, who need a prescription medicine, acetaminophen or ibuprofen is not enough for them, but they are not wanting to go on to opioids. Physicians don't want to prescribe opioids. Patients don't want to take opioids, but we do need to have e$ective pain medicines and we hope that, that gap of having an e$ective pain medicine that doesn't have that side e$ect pro!le or addictive potential of opioids is exactly the gap that suzetrigine !lls.
Let me move on to Type 1 diabetes. I picked this one as an example of another to share with you, because it's in that mid-stage of development. There are actually 3 programs within our Type 1 diabetes umbrella. Here, we're talking about Type 1 diabetes, not Type 2. The etiology
of Type 1 diabetes is very well known.
It's autoimmune destruction of pancreatic islet cells. We know that. We also know that if you have a patient with Type 1 diabetes transplant in with a whole pancreas transplant, or if you have an islet cell transplant from cadaveric donors, patients can do very, very well. They can have 5, 10, a lifetime of insulin freeness with excellent blood sugar control.
So what's the problem? Why don't we do this across the globe and in a bigger way? The problem is quantity and quality of cells. We simply don't have enough cadaveric islets or cadaveric whole pancreas. The solution, Doug Melton and his post-doc at the time, Felicia Pagliuca, found a way to take embryonic stem cells and coke them into becoming islet cells.
We can now do this in our labs, and we can produce them in unlimited quantities.
The 3 programs use the same cells. And we already know that the cells work based on data we shared last year. We're going to share additional data at the ADA later this month. But these cells have a method 1 that's called VX-880, they're delivered in your portal vein, let's call it, the naked cell program, you need to take immunosuppression with that. Those same cells, which we've already shown work in the 880 program I used in what's called the VX-264 program, where we take those cells and we encapsulate it in a proprietary device.
And based on that, enclosure of the cells, there's no need for chronic immunosuppression.
And the third program is those same cells, and we make certain genetic edits so that the edits hide the cells from your immune system, again, another way to avoid taking immunosuppressives. The !rst program, VX-880, it's completed parts A, B and C in terms of enrollment. It's a Phase I/II study, and we expect to complete enrollment in the -- I'm sorry, complete dosing in the near term, enrollment is complete. The VX-264 program is also a Phase I/II ABC program, Part A is complete, and we are at part B now. For the hyperimmune program or that third program that's in preclinical development, so it's yet in the clinic.
The last program that I'll cover is a acquisition of a company called Alpine Immune Sciences it is an extraordinarily good !t for Vertex. With the acquisition of Alpine, we bring in a dual APRIL/BAFF inhibitor that's called povetacicept or pove for short. Pove is a Phase III-ready asset for IgA or IgAN. In this speed of IgA and nephropathy, there is a real reason to believe that dual inhibition of both APRIL and BAFF will have the best likelihood for bene!t risk and the best-in-class potential. That's why we went after Alpine, and that's why we're so enthusiastic about the povetacicept pro!le.
I expect that the Phase III study of pove and IgAN will begin in the second half of the year. The Alpine team did something very clever. They did 2 basket studies that totaled about 7 indications in all. So there's multiple other Phase II programs with potential readouts in the back half of this year or the !rst part of next in the renal basket study called RUBY-3, they are also investigating povetacicept in addition to IgA nephropathy and membranous nephropathy and something called ANCA associated nephropathy as well as in lupus nephritis. And then there's a RUBY-4, a basket study of B-cell-driven cytopenias like ITP and cold agglutinin disease.
Not only are we so excited about povetacicept, but they have a platform that has pretty neat potential for certain Vertex diseases like the gentler conditioning for CASGEVY and the immune evasion for Type 1 diabetes, but also terri!c people. The acquisition has now closed, and we are to excited to get povetacicept into Phase III for IgAN, which I do expect will happen in the later half of this year.
If you put it all together, the diseases that I covered as well as the diseases that I didn't cover here is what our pipeline looks like and here's what you can expect in terms of advancement of our programs and data releases through select preclinical assets all the way through to our approved molecules.
I'll end with 2 more slides, this one to tell you about the terri!c growth that we've seen in revenues and that we expect to continue as we get to more and more patients with CF to lower age groups and as we prepare for the vanzacaftor launch for the mRNA program readout. And on the right side of the slide is a little bit about what we've done in external innovation or business development. The Alpine acquisition at almost $$ 5$ billion is the largest in our history. But all of the acquisitions or partnerships that you see us do follow the same philosophy in terms of our R&D strategy and our corporate approach.
And when you look at the slide that came before this with the full pipeline, it's interesting to know that about $40 %$ of our pipeline that's in the clinical stage today, not including Alpine came from business development deals. About $6 0 %$ of our pipeline not counting, the Alpine acquisition was through internal innovation. In fact, we think about internal and external innovation so similarly, it's the same strategy, and it all reports up to the same person, i.e., the Chief Scienti!c O"cer.
I'll end with this slide. As you think about this year, the coming year and the coming years, this is what you can expect from us in broad strokes. Our goal is to expand our leadership and raise the bar in cystic !brosis, to drive our what we are calling era of diversi!cation with commercial launches in multiple additional areas. CASGEVY has already begun, and suzetrigine is the next one on deck.
To continue to advance our pipeline, you've seen the mid- and late age pipeline and there's so many new molecules that are in !rst-in-human development, I'll call one of them out, that's the ADPKD program that got to !rst in human this year. And then there is the next wave of innovation that's in late preclinical development that you saw on the previous slide. And of course, to continue to deliver !nancial performance as we have.
With that, I'll turn it back over to you.
# Myles Minter Analyst
Thanks, Reshma. I'm happy to take questions from the audience at any time as well if you want to chime in. But we do have just over 4 minutes left for some questions. So my !rst one is just back on the top line revenue growth for the company and the CF franchise in general, you did mention there's 20,000 patients out there that are not on CFTR modulators, but would be amenable to that. How do we think about the TRIKAFTA and the next-gen vanza coming on board in terms of the growth trajectory for Vertex as top line just from a CF basis?
# Reshma Kewalramani Executive
Yes. We have a lot of growth to look forward to just in CF, and I would break it down on the following. For the near term, it's about getting down to the patients in the lower age groups, and to get into certain additional geographies where we have had named patient sales, but where we now have full regulatory approval and reimbursement, think Brazil. The next step is vanzacaftor launch. And that's important, because there are about 6,000 patients.
So about $10 %$ of the treated population who have CF, who are in contact with their physicians, who see their physicians every quarter, who tried TRIKAFTA, but for one reason or another are no longer on it. I do expect that the vanzacaftor launch will be fastest in those patients.
There's another group of patients for whom vanzacaftor will be important, because it's a once-a-day drug and patients -- some patients have a hard time taking their medicine twice a day, TRIKAFTA is 2 times a day. And then for the longer term, it's about the mRNA medicine that brings another 5,000, 7,000 people into the fold. I should also tell you with the there's a really nice things to look forward to with regard to vanzacaftor, because not only about increased e"cacy by way of CFTR function and sweat chloride, but for the company, it also comes with lower royalty burden compared to TRIKAFTA.
# Myles Minter Analyst
Okay. And then the company is generating pretty impressive free cash #ow here. It's north of $$ 3$ billion and depending on how you play the numbers, it could be ever higher than that. The Alpine acquisition you talked about, that was the !rst sort of sizable deal, I think we've seen in probably the company's history here. So maybe thinking more about like is that sort of size of deal, once every couple of years just looking at that free cash #ow, is that something that's like you're amenable to?
And if you are looking at that size of deal, is it going to be in the I&I space? Are you indicationagnostic here? How do we think about Vertex in 2 to 5 years on an inorganic side?
# Reshma Kewalramani Executive
Yes. I really am going to sound like a broken record on this. Our primary deployment of capital is going to be towards innovation, both internal and external. We have a stock buyback program. And what you've seen us do is what you should expect from us stay close to our knitting.
R&D strategy is exactly the same, whether it's for internal innovation or external innovation and that we are not going to be the kind of company that does something di$erent than what this strategy has laid out and has led to where we are today.
# Unknown Analyst Analyst
With the last minute, I would love to touch on CASGEVY real quick. Although it's a very transformative treatment, it does have a very burdensome treatment process. So would you expect some seasonality in terms of revenue recognition with patients being treated around certain periods of time in which they may have more #exibility in their schedules such as
summer vacation or holidays? And then it sounds like there are mobile patients who have started the treatment process, but considering the amount of time it takes to harvest the cells engineered and then the preconditioning treatment itself. Can you provide any color on when we might expect to see !rst revenue?
And what indication that might come from?
# Reshma Kewalramani Executive
Yes. No. The expectations you should hold for us is that we are going to report out on ATC activation and the number of people who have initiated process as we did recently on the earnings call. You shouldn't expect us to drib and drab additional information in the intervening periods. I will tell you 2 important facts.
One is we recognize revenue on infusion. So that's when we will be able to share that.
And with regard to seasonality, it's actually kind of interesting if you look at the experience in the clinical trials, you might expect that patients don't want to have their infusions around the holidays. Or you might expect that they do want to have their infusions around holidays, because that's what !ts best for them. So I think it's going to be -- time will tell us what really to expect, but it's not entirely clear whether holidays are a pro or con for infusion, I think it really is about a patient !tting it when it !ts into their life.
# Myles Minter Analyst
All right. And with that, the red #ashing screen says we're out of time. So the breakout session will be in the room on the second #oor called \[indiscernible\].