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# Vertex Pharmaceuticals Incorporated presents at 14th Annual Jefferies London Healthcare Conference 2023

Tuesday, November 14, 2023 3:30 AM

# Event Participants

Analysts 1 Michael Yee

Executives 1 Stuart Arbuckle

# Michael Yee Analyst

All right. Good morning, everybody. Thank you for joining us here on a beautiful morning session here at the Je!eries Global Healthcare Conference here in London. I am Michael Yee, one of the senior biotechnology analyst here at Je!eries. And I'm really excited to have Stuart Arbuckle, Executive Vice President and Chief Operating O"cer of Vertex Pharmaceuticals.

I started -- before we jumped on the stage here and I said the amazing thing here about having Vertex is we have a biotech at an all-time high. So that is a great thing here given how challenging it is in the biotech sector. So it is refreshing to have Vertex up here with us. And part of that is because there are so many things going on. So hopefully, we can hit on some of the key topics i...

# Vertex Pharmaceuticals Incorporated presents at 14th Annual Jefferies London Healthcare Conference 2023

Tuesday, November 14, 2023 3:30 AM

# Event Participants

Analysts 1 Michael Yee

Executives 1 Stuart Arbuckle

# Michael Yee Analyst

All right. Good morning, everybody. Thank you for joining us here on a beautiful morning session here at the Je!eries Global Healthcare Conference here in London. I am Michael Yee, one of the senior biotechnology analyst here at Je!eries. And I'm really excited to have Stuart Arbuckle, Executive Vice President and Chief Operating O"cer of Vertex Pharmaceuticals.

I started -- before we jumped on the stage here and I said the amazing thing here about having Vertex is we have a biotech at an all-time high. So that is a great thing here given how challenging it is in the biotech sector. So it is refreshing to have Vertex up here with us. And part of that is because there are so many things going on. So hopefully, we can hit on some of the key topics in just 25 minutes.

Stu, maybe if I turn it over to you, the #rst thing I would just ask you is to give us a very brief snapshot of some of the things that you're excited about for 2024, obviously, with CF with -- I know people will want to talk brie$y about pain. And also, you have a launch coming up for, hopefully, an approval for sickle cell. So a lot going on. Maybe just give us a few brief comments about what you guys are focused on for 2024, and then we'll get into some of the details.

# Stuart Arbuckle Executive

Well, thanks, Mike, for having us. Good morning, everybody. Yes, I know it's a super exciting time to be at Vertex. We do have a lot going on. Clearly, we are continuing to execute in cystic #brosis, getting to more and more patients around the world, as we've been doing since

We were just talking about when KALYDECO was #rst approved back in 2012. And we've continued to execute on that plan to develop medicines for all patients with CF, and we can certainly talk about that.

But in addition to CF, we've also got a number of near-term commercial launches upcoming, #ngers-crossed, regulators willing and data willing, with exa-cel in both sickle cell disease and transfusion-dependent beta thalassemia. We're eagerly anticipating our pain data, our Phase III data in acute pain, Phase II data in neuropathic pain. We also have our next-generation triple combination in Phase III, the vanzacaftor-based triple combination where we'll see data on that in the beginning of 2024. So a number of near-term commercial launches.

And then in addition to that, we've got a great pipeline as well, which is continuing to advance in things like type 1 diabetes, APOL1-mediated kidney disease and a number of other diseases as well, where we're already well advanced and in the clinic. All of that success has given us a great #nancial position. We have great #nancial strength, which gives us enormous $exibility to invest in both internal innovation, which obviously, we have a lot going on, but also to look at external innovation. And so that's a focus for us. So advance the ball in CF, get ready for those near-term commercial launches, continue to advance the pipeline and build and use our #nancial strength.

That's what we're focused on.

# Michael Yee Analyst

Absolutely. So a ton going on there. Maybe just starting with CF #rst. Obviously, continuing to execute around the world with TRIKAFTA as well as new countries and new populations. One of the interesting things is that you have an improved version of that drug with Phase III data that comes in early 2024, Vanza, once a day, not twice a day, and there's some other potential bene#ts.

Can you just talk a little bit about how investors should look at the result that is coming in a few months and tell us how important it is to be non-inferior, which is the primary endpoint versus superior, which some people would like to see and what are the commercial or rami#cations of each of those results?

# Stuart Arbuckle Executive

Sure. Yes. So we just announced our Q3 results, where we had another great quarter of growth in cystic #brosis. As you said, that's built on getting to more patients around the world, expanding our label down to younger and younger age groups. We're now approved for TRIKAFTA down to 2 to 5 year olds in the U.S.

and we have applications pending around the world for that. That's a big part of what we're trying to do is to get to patients younger and younger in life.

Then you have to get reimbursement agreements and then you have to launch and the team has been doing a fantastic job around the world doing that. We updated our guidance to approximately $$ 9.85$ billion for this year, up from the previous range of $$ 9.7$ billion to $$ 9.8$

billion. If we achieve that, that will be another year of double-digit growth for the company. It will be our ninth successive year of double-digit growth in cystic #brosis, which is a tribute to the way the team is executing.

But as you said, we have an improved version. Our goal in CF is always to be to get to everybody with cystic #brosis, development and for everybody with cystic #brosis and deliver increasing levels of clinical bene#t. And that's what we believe the vanzacaftor triple combination o!ers us. Essentially, we are trying to get all patients to carrier levels of chloride transport is essentially the level of chloride transport or CFTR function, the parents of kids with CF have. The parents of kids with CF don't have the symptoms of cystic #brosis as we know it.

So if we can get children with CF down to carrier levels of chloride transport, our hope is we'll essentially be able to prevent them developing CF as we know it today.

The vanzacaftor triple combination based on our in vitro data, but also our clinical data we believe, has the prospects of delivering greater levels of CFTR function as measured by sweat chloride, and that's what we're focused on. So the trial, as you said, is a head-to-head study. The regulatory endpoint is noninferiority versus TRIKAFTA on FEV1. Obviously, that's a very high bar. TRIKAFTA delivers incredible clinical bene#t, but we'll also be looking at other markers of disease such as sweat chloride.

Sweat chloride is the pharmacodynamic marker of CFTR function in people. And we believe if we can show equivalent levels of FEV1, but greater levels of CFTR function as measured by sweat chloride and the fact that the combination is once a day, that will be a compelling pro#le to patients and physicians. And we've certainly done su"cient market research to validate that hypothesis. The fact that improved CFTR function leads to superior outcomes is not something that's not di"cult. It's not hard for people to imagine.

# Michael Yee Analyst

I like to imagine, but do the payers in the U.S. and do payers or governments abroad view -- with con#dence view and agree with you that, that is a pro#le that is reimbursable and viable over TRIKAFTA for just sweat chloride superiority versus FEV1?

# Stuart Arbuckle Executive

It's hard to talk about payers in the hypothetical because they're going to want to see the data, which obviously makes sense. But let me remind you, in a number of countries, we have our portfolio agreements, which essentially envisage a world where we've already told people this is our strategy. This is what we're going to deliver. We're looking to continue to increase the level of clinical bene#t. So for a number of countries, we already have agreements in place, which imagine our future product launches and future development.

So -- and then we'll have to see what the data shows. But again, the link that patients with more severe CF have worse CFTR function and higher levels of sweat chloride is well-known. Indeed, that's how CF is diagnosed. And so it's not a great leap of faith to imagine the reverse. If you're improving CFTR function as shown by lower levels of CFTR -- of sweat chloride that will lead over time to improved clinical outcomes.

# Michael Yee Analyst

I think because of the contracts that are, I guess, packaged -- I'm not sure...

# Stuart Arbuckle Executive

Portfolio agreements.

# Michael Yee Analyst

Portfolio agreements. And in the U.S. where it's more straightforward that there should be no issue with that. One of the things at Wall Street, I think we're working to get clarity on is trying to explain to Wall Street, why sweat chloride should be a very, very relevant and acceptable surrogate for clinical outcomes because the Street doesn't know anything kind of beyond FEV. So that is something that the message is that you guys are pushing forward.

Hopefully, people understand that, but they're still trying to get comfortable with that.

# Stuart Arbuckle Executive

And FEV1, just a couple of other points on that. I mean FEV1 is obviously a very important short-term outcome. But as you have seen from the real-world data we've generated with TRIKAFTA, some of those longer-term outcomes, the results are even more impressive. So if you look at reductions in hospital exacerbations, these very severe infections that lead them to being hospitalized, dramatic reductions. If you look at increases in survival, dramatic increases.

If you look at reductions in lung transplant, in some countries, there hasn't been a lung transplant in a CF patient for over a year.

# Michael Yee Analyst

Because of the drug.

# Stuart Arbuckle Executive

And that's because of CFTR modulators. So the short-term impacts are important, but the long-term impacts are what are the really important clinical outcomes. Last thing I'll say is about vanzacaftor. People get very focused on the transition, on transition patients. So people are going to switch from TRIKAFTA to vanzacaftor if it comes along, if it's the same on FEV1.

What I think a lot of people are forgetting is there are about 6,000-plus patients around the world who've tried our current CFTR modulators and have had to discontinue.

# Michael Yee Analyst

What percent is that?

# Stuart Arbuckle Executive

It's about $10 %$ -ish of patients who've been initiated.

# Michael Yee Analyst

Because I remember, you already have the like highest compliance team.

# Stuart Arbuckle Executive

We have the highest position in the compliance I've ever seen. Yes, I mean, persistence is about $9 0 %$ or so. So only about $10 %$ or so of people over time ever discontinue. And then our compliance rates are in the mid-80s, which is as high as I've ever seen in any disease area.

# Michael Yee Analyst

And you believe people, those people...

# Stuart Arbuckle Executive

So those people have already demonstrated that they want to be on a CFTR modulator, but they've had to discontinue for a variety of di!erent reasons. So I do believe that is a population who will be very interested in a new treatment option being available. So I know people get very focused on the switch, how many people are going to switch from TRIKAFTA to vanzacaftor. I personally am not as focused on that as I am on how many new patients might be interested in a new treatment option if vanzacaftor gets approved.

# Michael Yee Analyst

Beyond just people who -- what are the convenience...

# Stuart Arbuckle Executive

Once a day.

# Michael Yee Analyst

Better e"cacy, not a huge risk to switch over to the new one that is a very common and wellaccepted pharmaceutical approach to get them on the better drug as well as patients who are not on a drug so that is additive to revenue if those new patients get on. Okay.

So the next huge opportunity that people are rightfully focused on because of opioid epidemic and other huge problems in the pain space is the opportunity for new oral pain therapy. You have Phase II chronic DPN, diabetic peripheral neuropathy data coming up by the end of the year. So last I checked, we had 1.5 months left. As well as Phase III acute data. Talk to the audience about the chronic diabetic peripheral neuropathy opportunity versus the acute opportunity.

One is a short-term duration, but a lot of people. The other is a chronic indication, a lot of people as well. But people are thinking about this as chronic is really the big one and acute smaller, but still important.

# Stuart Arbuckle Executive

So let's just go back to the why are we doing this. There hasn't been a new class of pain med in decades. We're still using the same things we've used for 30, 40, 50 years, reformulated version but there hasn't been a new class of pain med in absolutely decades. And the approach we are taking is to try and attack the underlying human biology of pain, which is the way pain is signaled to the brain. So there are speci#c pain receptors.

There are speci#c pain neurons in the body, that's all they do, is transmit the pain signal. And essentially, there are 2 sodium channels. One initiates the pain signal. That's NaV1.7. The other one propagates the pain signal, that's NaV1.8.

So we and many, many others for decades have been working in the pain space. In fact, we've been working on pain longer than we've been working on cystic #brosis. So over 25 years.

So what we have with VX-548 is a very potent and selective NaV1.8 inhibitor, which we developed and demonstrated in Phase II studies in acute pain and has a great pro#le. As you said, we have 2 di!erent studies ongoing. So let's talk about the pain market. We segment the pain market essentially into 3 areas: acute pain; neuropathic pain, which is obviously chronic pain; and then there is kind of chronic nociceptive pain, which is everything else you might think of. It could be osteoarthritic knee pain.

There'll be lots of -- back pain apart from lumbosacral radiculopathy, which we'll come back to. So -- but there's a whole host of other in$ammatory conditions, no susceptive pain, huge opportunity, but very primary care. The areas we're focused on are acute and chronic neuropathic pain.

So acute pain, let's just talk about the U.S. where we've got the best data on the number of patients. Acute pain, there's approximately 80 million patients in the U.S. each year will have acute pain episodes that require a prescription medication, 80 million a year. There are billions of prescriptions written.

The vast majority of them are generic. As I said, there's not been a new class of pain med in absolute decades. Despite that, this is a multibillion dollar market in the U.S. alone. So our belief is if we can bring a product forward which has great e"cacy on pain, it doesn't have the adverse e!ects, including addictive potential of things like opioids.

That will be a huge opportunity in acute pain in U.S.

# Michael Yee Analyst

Wait, wait. When we say acute pain, we're talking about severe acute pain, we're talking about #rst, there's one in bunionectomy, one in abdominoplasty and one in other. We're not talking about pain where they are prescribing kind of low-level pain, we're talking severe pain after like a procedure.

# Stuart Arbuckle Executive

Correct. Yes. Well, we are seeking a label for moderate to severe acute pain that's the label we're seeking from the FDA, irrespective of the cause of that pain. So we are doing studies, as you rightly said, in Phase III, one in abdominoplasty, one in bunionectomy and then we have an all-comers study. We're doing those because those are well-established pain models for regulatory approval.

But the label we're seeking is for broad moderate to severe acute pain irrespective of the course. So it could be surgery, but it could be trauma or it could be a fall, it could be a burn. Acute pain is essentially de#ned by time. So it's the length of the prescription that you would receive. It's the treatment of pain for less than 90 days.

So that's the acute pain market. . The -- and then as you said, we have 3 studies ongoing. We will be unblinding all of that data, looking at it and reporting out on it all at the same time because they are essentially a package of studies and we need to know exactly what's happening in all of them to know exactly what our path forward will be. That will be in the beginning of 2024 when we will have all that data, have looked at it, analyzed it and be in a position to be able to decide what we're going to do, and share that data.

That's acute pain, Phase III program.

Neuropathic pain we're in Phase II. Neuropathic pain is an umbrella term that describes the whole category of di!erent diseases but are all characterized by damage to the nerves.

Diabetic peripheral neuropathy is one type of it, small #ber neuropathy, trigeminal neuralgia.

There's a variety of di!erent causes of pain, but they're all in this bucket of neuropathic pain.

We have a Phase II study ongoing in diabetic peripheral neuropathy.

We will have the results. We'll unblind that study. We'll look at those results and report out on those by the end of this year. Diabetic -- sorry, neuropathic pain in total, there's about 10 million people in the U.S. who receive a prescription for neuropathic pain every year.

As I said, it's a collection of areas. We've just said on our Q3 call that we are starting another Phase II study in a di!erent type of neuropathic pain called lumbosacral radiculopathy.

Between those 2 pain states, of the total -- the 10 million patients who have neuropathic pain, about $2 0 %$ of them have diabetic peripheral neuropathy and about $40 %$ of them have LSR, lumbosacral radiculopathy. So that's where that program is. We'll have the DPN data by the end of this year. We're just beginning the study in LSR. Again, what we're looking for is a package of data that will enable us to get a broad label for neuropathic pain.

That is our intent. As you said, neuropathic pain, fewer patients at 10 million, but those patients are being treated chronically. These are chronic pain conditions.

# Michael Yee Analyst

I would remind folks that Lyrica, I guess, Neurontin, these are the big branded drugs that were approved. There's others, but those are the biggest ones. Lyrica was doing around $$ 5$ billion to $$ 7$ billion peak.

# Stuart Arbuckle Executive

Correct.

# Michael Yee Analyst

So that's the opportunity and that was like a decade ago.

# Stuart Arbuckle Executive

And about -- our estimate is about $$ 3$ billion of that was in neuropathic pain because it had a range of di!erent vacation not surprisingly. I mean, these are repurposed CNS medicines. And that's the thing to remember about these things. They work in the CNS. They're not actually -- they're changing their perception of pain.

They're not actually tackling the underlying cause of pain, a bit like opioids, they work centrally. These are repurposed \[indiscernible\], antiepileptics, et cetera.

# Michael Yee Analyst

So 2 questions. One is coming away from the third quarter earnings call. One of the big announcements was that Vertex was starting the second pain Phase II. So naturally, people said, well, how can you invest in your -- as chief operating o"cer, how can you guys invest X amount, throw out a number, $$ 50$ million, you could tell me if that's kind of a Phase II result. $$ 50$ million to go start a study.

You start $$ 50$ million, but the #rst pain study, chronic neuropathic pain is literally reading out in a month. So they go, Stu, how are you going to spend $$ 50$ million? Why don't you just wait a month to see the results or maybe Vertex already knows what results you're getting?

# Stuart Arbuckle Executive

Yes. So let me address that last point, we do not know the results. The results have not been unblinded. Nobody in the company has seen the results of the ongoing DPN study. That's not why we began the study in LSR.

The reason why we've been looking at LSR is the underlying biology is exactly the same. It's caused by nerve impairment. That's what's causing LSR. The reason why we were able to start the DPN study previously is DPN is a tried and tested type of neuropathic pain. Multiple products have been approved for diabetic peripheral neuropathy, including Lyrica, so there's an established regulatory path, there's an established market.

So that's why we were looking at DPN #rst. Nothing has ever been approved in the United States for LSR.

So we have to work with the regulators to work through a path of what would the studies look like that would give them and us con#dence that we're working in that disease area. We just concluded those discussions with the regulators. That's what allowed us to start the study. And it's a very important population, as I said, $4 0 %$ of patients, $40 %$ of the 10 million patients treated for neuropathic pain in the U.S. are treated because they have a diagnosis of LSR.

So it's a very important disease in its own right.

# Michael Yee Analyst

It's almost half of the -- you said $4 0 % ?$ So it's almost half, so it's important...

# Stuart Arbuckle Executive

Just over $4 0 %$ . It's very important and nothing approved.

# Michael Yee Analyst

One of the other -- one of the data points coming up when this result reads out, which is in 1.5 months or so within the...

# Stuart Arbuckle Executive

Within the 1.5 month, yes.

# Michael Yee Analyst

Is that -- you're trying to beat a placebo in diabetic peripheral neuropathy, that is the primary analysis and there's also an active control arm of Lyrica. Can you explain to investors how important it is to compare to that result? What is the relevance of that? Some people are like, do you expect that your drug is as good as Lyrica, you want it to be billions of dollars. If it's numerically lower, how do we -- how does -- how important is that?

How relevant is that? Is it possibly better than Lyrica? Can you talk about the \[indiscernible\] and how to interpret the active control arm?

# Stuart Arbuckle Executive

So I think the #rst important thing is to understand the design of the study. So the design of the study is there to show proof of concept that 548 works in diabetic peripheral neuropathy...

# Michael Yee Analyst

To beat a placebo.

# Stuart Arbuckle Executive

And so we are comparing patients being treated with their own baseline. We have a reference arm, which is Lyrica, and it is there for context. The study is not going to be big enough to be able to statistically compare between any of the doses in Phase II for 548 and the Lyrica arm. It is there for context because we know it's going to be an important thing for us to consider as we go into Phase III. But you will not be able to do statistical comparisons between whatever we see with the doses of 548 and what we see with Lyrica.

I would encourage people to look back. We did the same thing in Phase II in acute pain. In our acute pain studies, we compared -- there, we did compare 548 with placebo. We also had a reference arm, which had an opioid in it. But again, it was there for context for us to look at to provide some reference, it's not there for statistical comparisons.

If we were trying to power a Phase II study for that, it would be huge. Well, that's not what we want to do.

# Michael Yee Analyst

Is the idea -- and I've actually never asked David Altshuler this, is the idea that the e"cacy

level of this drug similar to a Lyrica. If you go back to the acute studies, it was similar to Vicodin, or it's similar. Is it that the idea that this is about as good as those drugs? Or is it better?

# Stuart Arbuckle Executive

We are looking overall for it to have a better bene#t risk pro#le than anything else that's out there. So let's think about opioids. Opioids have great e"cacy in general, but a terrible tolerability pro#le, not just the addictive potential and they have addictive potential. So overall, we're looking for a package of data, which has a better bene#t risk pro#le. Same thing with the gabapentinoids and things like that.

They have variable e"cacy. They don't work in everybody. And they also have a signi#cant tolerability pro#le largely by the fact that they work in the CNS.

So again, overall, we're looking for a better bene#t risk pro#le. Like it could be better e"cacy, that could be equivalent e"cacy and better side e!ects. But overall, we're looking for a better bene#t risk pro#le in both acute pain and in neuropathic pain against the relevant standards of care and the relevant standards of care in acute pain is typically opioids. In neuropathic pain, it's typically considered to be the gabapentinoids.

# Michael Yee Analyst

I think -- and I'll say this to with the acute studies that are reading now. If you guys have a clinically meaningful, and I'd say Wall Street views clinically meaningful as kind of in any disease, at least a $1 5 %$ or $20 %$ reduction or improvement in the result that. If that is a win, you guys will #le that in acute, in chronic, it win against placebo if $2 0 %$ is solid. I'm sure you're going to advance forward. Wall Street's like, "Oh, is it as good as the control arm." They want to use it as a reference point and so people are trying to look at that.

# Stuart Arbuckle Executive

Understood.

# Michael Yee Analyst

Okay. Lastly, in just 2 minutes. I would be remised to not say that, obviously, you have a PDUFA date in the U.S. for sickle cell and transfusion-dependent beta thalassemia. I'll start with just sickle cell because that is the majority of the U.S.

market per se, and commercial opportunity. Your con#dence on approval and the launch, can you just tell us in a minute or so how to think about it, understand the launch because people have watched gene therapy not be so great. $$ 2$ billion, I think?

# Stuart Arbuckle Executive

So yes, we have a PDUFA date in the U.S. for sickle cell disease, it's December 8. Our PDUFA date for transfusion-dependent thalassemia is March 30. So the approval is just in sickle cell disease. As you say, sickle cell disease is the bigger patient population in the U.S.

Overall, we think there's about 32,000 patients worldwide who are -- sorry, in the U.S. and the

EU, who are likely to be good candidates for exa-cel given the current Bu-cell fan-based conditioning regimen. So these are patients at the more severe end of the scale who are experiencing multiple pain crises or having transfusions every 3 or 4 weeks.

Of that 32,000, about 25,000 the sickle cell disease, of those, the majority about 18,000 or so are in the United States. So it is the bigger opportunity between the U.S. and Europe. It's a bigger opportunity in the U.S. Our con#dence in the approval, the data looks great.

As you probably know, we had an advisory committee with the FDA just -- was it last week or the week before, it was very recently, which was focused speci#cally not on the bene#t risk pro#le, which they seem to accept but on the question of o!-target editing. And so we are feeling good about the data. Obviously, it's in the gift of the FDA. So we await their judgment. But what I will tell you is we're launch ready.

We're excited about the opportunity to bring this to market.

What we have said is this is not -- this is a complex and long procedure for a patient to go through. This is a multi-month procedure that somebody has to go through. So if you're a sickle cell disease patient, once you and your physician have identi#ed that you want to have a gene therapy like our CRISPR-Cas9-based gene editing therapy, they have to have transfusions for 8 weeks to prepare them for the mobilization and apheresis phase. Then they have to come in often for 2 rounds of apheresis to collect their stem cells, then those cells are sent to our manufacturing facilities to be edited, then they have to be tested and quality control before they're released.

Then they have to be shipped back to the transplant center, then the patient has to schedule that into their lives because they will probably be in hospital for some 4 to 6 weeks as part of the procedure because you have to have your bone marrow ablated to receive the therapy. So this is a multi-month journey that the patient is embarking on. And I just think that's an important consideration for people to think about. This is not like they're all going to get initiated on day 1.

# Michael Yee Analyst

Once we get approved, there will be some time as we get to 2024 for actually getting the drug so we have some time to prepare for that education. Wall Street you will be focused on that as well as the pain results coming out. So a lot to look forward to. Appreciate it, and we all look forward to the results.

# Stuart Arbuckle Executive

Thank you, Mike. Appreciate it.

Michael Yee Analyst Appreciate it.