Vertex Pharmaceuticals Incorporated's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Vertex Pharmaceuticals Incorporated (VRTX)

Q1 2012 Earnings Call

April 26, 2012 5:00 pm ET

Executives

Michael Partridge - Senior Director of Strategic Communications

Jeffrey M. Leiden - Chief Executive Officer, President, Director, Chairman of Management Development and Compensation Committee, Member of Corporate Governance and Nominating Committee and Member of Science & Technology Committee

Ian F. Smith - Chief Financial Officer and Executive Vice President

Nancy J. Wysenski - Chief Commercial Officer and Executive Vice President

Peter R. Mueller - Chief Scientific Officer, Executive Vice President of Global Research & Development and Member of the Scientific Advisory Board

Analysts

Aleksandr Rabodzey

Terence C. Flynn - Goldman Sachs Group Inc., Research Division

Omar Saad - ISI Group Inc., Research Division

Gloria Woo

Rachel L. McMinn - BofA Merrill Lynch, Research Division

Unknown Analyst

Howard Liang - Leerink Swann LLC, Research Division

Jason Kantor - RBC Capital Markets, LLC, Research Division

Andrew Peters - UBS Investment Bank, Research Division

Matthew J. Andrews - Wells Fargo Securities, LLC, Research Division

Koon Ching

Ying Huang - Barclays Capital, Research Division

Liisa A. Bayko - JMP Securities LLC, Research Division

David Friedman - Morgan Stanley, Research Division

Irene Lau - ThinkEquity LLC, Research Division

Y. Katherine Xu - William Blair & Company L.L.C., Research Division

Mark Vignola

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Vertex Pharmaceuticals Incorporated First Quarter 2012 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. Now I'll turn it over to your host, Michael Partridge, Vice President of Investor Relations. Please begin.

Michael Partridge

Thank you. Good evening and welcome to Vertex's first quarter 2012 conference call. We're off to a great start for 2012. INCIVEK for the treatment of hepatitis C continues to lead the market in the U.S. and our collaborator, J&J, has now also achieved the leading share in major European countries with INCIVO. In the area of cystic fibrosis, we are making strong progress early in the launch of KALYDECO. The launches of INCIVEK in North America, INCIVO in Europe and KALYDECO in the U.S. are driving strong financial performance while we also continued to advance our broad pipeline of medicines for serious diseases.

Vertex is now a multiproduct profitable global business, generating significant revenues that enable investment for future medicines while delivering significant earnings and cash flow for our shareholders.

With me on the call tonight are Dr. Jeff Leiden, who will provide a perspective on Vertex's recent progress; and Ian Smith, who will review our first quarter financial results. After the brief prepared remarks, Nancy Wysenski, Bob Kauffman and Peter Mueller will join us to take your questions. [Operator Instructions] We expect to conclude the call at 6:00 p.m. Once the call concludes, we will be in the office to answer any additional questions.

I'll note that information discussed on this conference call includes forward-looking statements, which are subject to the risks and uncertainties discussed in detail in our reports, including our 10-K, which have been filed with the Securities and Exchange Commission. These statements, including those regarding the market launch of INCIVEK and KALYDECO are based on management's current assumptions and are subject to risks and uncertainties that could cause actual outcomes and events to differ materially.

GAAP and non-GAAP financial measures will be discussed on this call. Information regarding our use of these measures and a reconciliation of non-GAAP to GAAP is available in our first quarter 2012 financial press release, which is on our website.

Thank you. I'll now turn the call over to Jeff.

Jeffrey M. Leiden

Thanks, Michael. Good evening, everyone. The approval of our second medicine, KALYDECO, in January of this year, the continued strength in the global launch with INCIVEK and INCIVO, the financial performance we've achieved while advancing our pipeline of medicines are all important measures of the success of our business model. We're particularly pleased that Vertex has grown rapidly into a global business with multiple approved medicines that are changing the lives of thousands of patients.

My remarks today will cover 3 main areas: First, product revenues and earnings; second, our pipeline of additional medicines in development; and third, our business model.

Starting with our approved medicines. The strength of the global launch for INCIVEK in North America and INCIVO in Europe and other countries. We launched INCIVEK in the U.S. in May 2011, and our partner, Janssen, begin launching INCIVO in the second half of 2011 in its own territories. INCIVEK and INCIVO are now generating a very significant revenue stream for us, approximately $390 million in the first quarter, including $357 million from INCIVEK and $33 million of royalty revenues from INCIVO.

In the most recent months, we've observed the steady flow of people beginning treatment with INCIVEK, which to date, commands a greater than 70% share in the U.S. INCIVO has also achieved the majority of share in the major European countries where the medicine is available. As INCIVO becomes available in more countries throughout the coming months, we expect to see continued significant growth in our royalty revenues.

We move to KALYDECO for cystic fibrosis. We obtained FDA approval for KALYDECO and launched this breakthrough medicine just over 2 months ago for people with cystic fibrosis who have the G551D mutation. Reimbursement has gone smoothly and the launch is going very well. Approximately 600 people have started treatment with KALYDECO since approval and we recorded approximately $18 million of net revenues in the first quarter. Again, we expect these revenues to grow as more patients begin and maintain treatment with KALYDECO.

In the last few months, we've heard from many patients and their families, and this is one of the most gratifying aspects of bringing a medicine like KALYDECO to patients. Specifically, we've heard how much this medicine has impacted their lives, how they feel better, are healthier and are, for the first time, optimistic about their futures. A young man with CF and his mom recently visited Vertex to share with us their experiences with KALYDECO, an experience that was truly life changing for their family in many ways.

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