Vertex Pharmaceuticals Inc (VRTX) — Q2 2023 Earnings Call Transcript

Good evening, everyone. My name is Susie Lisa, and as the Senior Vice President of Investor Relations, it is my pleasure to welcome you to our second quarter 2023 financial results conference call. On tonight's call making prepared remarks we have Dr. Reshma Kewalramani, Vertex's CEO and President; Stuart Arbuckle, Chief Operating Officer; and Charlie Wagner, Chief 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 cystic fibrosis medicines, our pipeline 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 results and guidance that we will review on the call this evening are presented on a non-GAAP basis. In addition, the impact of foreign exchange is presented inclusive of our foreign exchange risk management program. I'll now turn the call over to Reshma.

Thanks, Susie. Good evening all, and thank you for joining us on the call today. After a strong start to the year, we saw continued momentum into the second quarter across all aspects of the company. Our CF business continues to grow, and we are reaching more patients than ever. In the second quarter, this expanded reach drove 14% global safe product revenue growth versus the prior year period. And with this first half performance, we are raising our full year 2023 CF product revenue guidance to a revised range of $9.7 billion to $9.8 billion. As we continue to deliver in CF, we're also investing for future commercial excellence, ahead of multiple potential near-term launches. In exa-cel in both severe sickle cell disease and transfusion-dependent beta thalassemia which we expect will be the first in our next wave of launches. In VX-548 for acute pain, another multibillion-dollar commercial opportunity and in our Vanzacaftor triple combination therapy for cystic fibrosis which provides the opportunity to further extend our leadership in CF. In addition to these four disease areas, our mid-stage clinical pipeline continues to develop rapidly and marked progress towards our five launches in five years goal. Recent achievements include: the VX-147 or Inaxaplin pivotal trial remains on track to complete the Phase IIB portion of the study by the end of this year. In our type 1 diabetes program, both VX-880, the naked cells and VX-264, the cells plus device programs are now in the clinic and dosing patients. Additionally, we announced a strategic long-term manufacturing agreement with Lonza for our type 1 diabetes cell therapy programs. And finally, an accelerated timeline for the VX-548 Phase II study in peripheral neuropathic pain, where we now expect the study to complete by the end of 2023. In total, we're advancing programs in eight disease areas through mid- and late-stage development, six of which are now past the proof-of-concept stage as detailed on Slide 5. Beyond our clinical pipeline, we're also advancing the next wave of research stage assets, reflecting programs sourced from both internal and external innovation. This includes programs in Duchenne's muscular dystrophy, myotonic dystrophy type 1, the NaV1.7 program for pain, and gentler conditioning agents for use with exa-cel. In the CF franchise, in R&D, and across the business, this quarter, Vertex has continued to make meaningful advancements to bring our CFTR portfolio to more patients around the globe and bring additional first-in-class or best-in-class potentially transformative medicines to multiple new disease areas. With that overview, I'll turn to the details of recent R&D progress, starting with CF. While TRIKAFTA delivers tremendous benefit for patients, if it's possible to do better, we're committed to being the ones who do so, and that is the goal for our next-in-class vanzacaftor triple combination therapy. I am pleased to share we expect to complete all three Phase III studies, SKYLINE 102 and 103 in patients ages 12 years and above, and the RIDGELINE study in patients ages 6 to 11 by the end of 2023 and release results from these three studies in early '24. We have high expectations from the vanzacaftor triple program to lead to further improvements in CFTR function based on the totality of the evidence generated to date. The most direct readout of higher CFTR function is chloride transport in vitro and sweat chloride in patients. In vitro, our human bronchial epithelial cell assays with the vanzacaftor triple showed greater restoration of chloride transport than with TRIKAFTA. And in Phase II in patients, the vanzacaftor triple clinical studies showed correspondingly lower levels of sweat chloride than in previous studies with TRIKAFTA. We, therefore, believe the vanzacaftor triple has the potential to provide patients with enhanced clinical benefit, the convenience of once-daily dosing, and additionally, the Vanza Triple carries a substantially lower royalty burden. Another important program in our CF portfolio is VX-522, our CFTR mRNA therapy in development with our partners at Moderna for the more than 5,000 CF patients who cannot benefit from CFTR modulators. We have enthusiasm for this approach for three key reasons, based on what we've achieved to date: first, the delivery of mRNA at high efficiency into HBE cells in vitro; second, expression of CFTR protein leading to high levels of chloride transport; and third, successful nebulized delivery of mRNA in both small and large animals resulting in expression of CFTR protein in the desired cells. We continue to enroll and dose CF patients in the single ascending dose or SAD study of VX-522. And we expect to complete the SAD portion and initiate the multiple ascending dose portion of the study this year. Turning now to exa-cel, our CRISPR/Cas9-based gene editing program for sickle cell disease and transfusion-dependent beta-thalassemia which targets the most severe patients and an estimated patient population of approximately 32,000. Exa-cel holds the promise to be a one-time functional cure for these diseases. On the regulatory front, the FDA has accepted our filings and granted priority review in sickle cell disease with the December 8 PDUFA date, along with a standard review in beta-thalassemia with the March 30, 2024 PDUFA date. The FDA has indicated an advisory committee will be held, and we look forward to the opportunity to discuss the high unmet need, share results from the exa-cel studies and discuss the transformative potential exa-cel holds for patients. Outside the U.S., in the EU and the U.K., reviews for our exa-cel filings are also well underway. Our oral presentation, the most recent EHA meeting in June, provided new data that were the basis of the EMA and MHRA regulatory filings. Both trials met the primary and key secondary endpoints with follow-up in some patients of more than 36 months. The exa-cel EHA results continue to demonstrate transformative, consistent, and durable benefit for patients as measured by freedom from severe vaso-occlusive crises for 94% of SCD patients and transfusion independence in 89% of TDT patients. The safety profile was generally consistent with busulfan conditioning and bone marrow transplantation. Another significant opportunity for exa-cel is in younger patients, and the pediatric trials in both sickle cell disease and beta-thalassemia are underway. We have enrolled more than half the target number of patients in both pediatric studies and have dosed multiple patients. This is an important area of focus given the opportunity to intervene earlier and potentially prevent organ damage and other complications before they ever occur. As the PDUFA dates approach in the U.S. and reviews come to conclusion in the U.K. and EU, we look forward to bringing this one-time potentially curative therapy to thousands of patients with severe sickle cell disease and transfusion-dependent beta-thalassemia. Turning next to our pain program and VX-548, our novel, highly selective NaV1.8 inhibitor that holds the promise of effective pain relief without the side effects or addictive properties of opioids. In acute pain, I am pleased to share that all three Phase III studies, two randomized controlled trials and a single-arm safety and efficacy study will complete by the end of this year, with results available in late 2023 or early '24. The pace of this Phase III program has been rapid which we see as indicative of the high unmet need and strong interest in an efficacious, non-opioid acute pain therapy. We have high confidence in the outlook for these Phase III studies given: one, the genetic and pharmacologic validation of the target; two, multiple proof-of-concept trials with the predecessor molecule and with VX-548 itself; and three, the similar methodology, design, and endpoints of our Phase III studies compared to the Phase II program. Closing on acute pain, recall that the Phase III program has been designed to support a broad moderate-to-severe acute pain level which would enable prescribing and usage across multiple settings including in hospital or the ambulatory surgical center post-discharge and in the home. We are also studying VX-548 in diabetic peripheral neuropathy or DPN, a type of peripheral neuropathic pain that represents yet another significant area of unmet need and another multibillion-dollar market opportunity. We have previously delivered positive proof-of-concept data in peripheral neuropathic pain with the predecessor molecule VX-150. The current study in DPN with VX-548 is a 12-week Phase II dose-ranging proof-of-concept study. I am pleased to share the timeline for this DPN study has accelerated, and we have recently completed enrollment. This study will complete by the end of this year, and we expect to share results in late 2023 or early '24. Moving now to type 1 diabetes, where we're evaluating stem cell-derived, fully differentiated insulin-producing islet cells for people with type 1 diabetes. Our goal is to develop a functional cure for the millions of people living with type 1 diabetes, including the more than 2.5 million patients in North America and Europe alone. The VX-880 program is our foundational cell therapy program for T1D in which we have already demonstrated proof of concept. In the VX-880 trial or the naked cell program, patients take standard immunosuppressants to protect the islets from the immune system. We presented updated clinical data on Parts A and B of the study at the recent American Diabetes Association meeting. The presentation at the ADA showed that all six patients treated with VX-880 engrafted islet cells, produced endogenous insulin, and had improved glycemic control while reducing or eliminating exogenous insulin use. Importantly, the two patients with at least one year follow-up saw a complete elimination of severe hypoglycemic events, maintained hemoglobin A1Cs below 7%, and were insulin independent. Further, patients who were earlier on their course of therapy were on a similar trajectory as the two patients with long-term follow-up. Based on these results, the VX-880 trial has now advanced to Part C, where patients are treated concurrently at the full target dose. And as part of our global study plan, we've now opened clinical trial sites in Europe in addition to those already open in the U.S. and Canada. Our second program, VX-264, the cells plus device program encapsulates these same cells which have already demonstrated proof of concept in a proprietary immunoprotective device. And hence, there is no requirement for immunosuppressants. I am pleased to share that enrollment in the VX-264 study has initiated, and we have already dosed the first patient. The third program is our hyperimmune program in which we edit the same fully differentiated cells to cloak them from the immune system. This represents another path to obviating the need for immunosuppressants. In March, we expanded our collaboration with CRISPR Therapeutics into type 1 diabetes to use CRISPR/Cas9 to make these edits, and we continue to make progress in this research stage program. Transitioning now to Inaxaplin or VX-147, the first potential medicine to target the underlying cause of APOL1-mediated kidney disease or AMKD, a genetically defined disease that affects approximately 100,000 patients in the U.S. and Europe alone. Recall the Inaxaplin pivotal program for patients with AMKD is a single adaptive Phase II/III study with a pathway to accelerate approval in the U.S. The Phase IIB dose-ranging portion of the study continues to enroll and dose and remains on track to complete this year. We also continue to work to enhance AMKD disease awareness and genetic testing availability to support diagnosis, including through partnerships with Natera, a leader in genetic testing and Arkana, a leader in renal pathology services. To close an update on our Alpha-1 antitrypsin deficiency or AATD program, our small molecule approach targets both the lung and liver manifestations of this disease that affects an estimated 100,000 people in North America and Europe. Our program is exploring two hypotheses: first, longer treatment duration with VX-864; and second, a more potent molecule with VX-634. The Phase II program for VX-864, a 48-week study in patients with AATD that assesses both liver clearance of Z polymer and functional plasma AAT levels is ongoing and is anticipated to complete enrollment later this year. VX-634, the next-in-class molecule with multifold greater potency and better drug-like properties, is projected to complete its Phase I trial by the end of this year. Overall, the AATD program remains on track, and we look forward to sharing results in 2024. With that, I'll turn it over to Stuart to provide a commercial update, including details on our launch preparations for exa-cel.

Thanks, Reshma. From a commercial perspective, we had strong second quarter results as we continue our focus on reaching all patients eligible for our CFTR modulators and maintaining high levels of adherence for patients treated with our medicines. In addition, we continue to prepare for multiple potential near-term launches, including exa-cel in severe sickle cell disease and transfusion-dependent beta-thalassemia, VX-548 in moderate to severe acute pain, and the vanzacaftor triple combination in CF. At the same time, we are developing new capabilities to support the commercialization of other pipeline assets, such as disease awareness for AMKD and investing in our manufacturing capabilities for type 1 diabetes. Given our nearest term opportunity is exa-cel in hemoglobinopathies where we have completed our regulatory filings in Europe and the U.S. and also being granted PDUFA dates in the U.S. This quarter, I will focus my comments about our pipeline on prelaunch activities for exa-cel. But briefly first on CF. At the beginning of this year, there were more than 20,000 people with CF in North America, Europe, and Australia, who could benefit but were not yet being treated with a CFTR modulator. We continue to bring our medicines to these patients through new approvals and uptake following additional reimbursements with a focus on reaching younger patients, and this will continue to be a driver of near-term growth for our business. Second quarter 2023 CF revenue growth of 14% was consistent with this outlook and was driven primarily by expanded use of our medicines in younger age groups. Following U.S. TRIKAFTA approval in children ages 2 to 5 in late April, we've seen strong interest from the CF community with the first prescription written just hours after the approval and uptake across all eligible patients. Outside the U.S., KAFTRIO growth has continued to be strong in patient ages 16 and older, following approval, reimbursement, and successful launches in multiple geographies. In addition, we received EU approval for ORKAMBI in children ages 1 to 2 in early July, and we continue to expect approval for KAFTRIO in the EU in children ages 2 to 5 by the end of this year. We are also actively enrolling our KAFTRIO study in children ages 1 to 2. Overall, we see continued growth for our portfolio of CFTR modulators, driven by approvals, reimbursement, and uptake of our medicines in younger patients. In addition, approvals of future CF medicines will also drive growth. Notably, our next-generation vanzacaftor triple seeks to provide improved efficacy for patients and a new treatment option for those who have discontinued prior CFTR modulator therapy. And longer term, VX-522, our mRNA approach could offer a therapy for the more than 5,000 patients who cannot benefit from CFTR modulators. Shifting now to exa-cel, which holds curative potential for patients with severe sickle cell disease and transfusion-dependent beta-thalassemia, both chronic diseases that can be disabling and life-shortening, and have an extremely high burden of care. On previous quarterly earnings calls, I provided details for exa-cel on the estimated eligible patient population, the geographic concentration of those patients, and our proposed ATC network of 50 centers in the U.S. and 25 in Europe. The hiring and training of our field and medical education teams and insights from physician and patient market research. This quarter, I'd like to provide our perspective on access and reimbursement and our discussions globally with payers and policymakers. Our teams continue to make excellent progress in pre-approval discussions with both government and commercial payers in the U.S. and Europe. With more than a dozen cell and gene therapies on the market, payers across different channels are increasingly experienced with these transformative types of therapies. In the U.S., approximately 65% of patients with sickle cell disease or beta-thalassemia have coverage through government programs, with the majority via Medicaid and the remaining 35% of patients are covered by private insurance. Our teams have already engaged Medicaid administrators in all 50 states, with a particular focus on the 24 states with the highest prevalence of sickle cell disease, accounting for an estimated 90% of Medicaid patients with SCD. We're encouraged by the enthusiasm from state Medicaid administrators for exa-cel, as well as the proactive steps they are taking to prepare for the availability of therapies like exa-cel, including the enablement of separate payment policies for coverage of the cost of the therapy, distinct from the cost of the bone marrow transplant procedure. The Medicaid-focused CMS cell and gene therapy access model also continues to make progress towards its anticipated launch in 2026. The model is clear evidence of the federal government's recognition of the potential transformative value of gene therapies like exa-cel to treat sickle cell disease and their interest in finding innovative payment solutions and pathways for state Medicaid programs. Shifting to commercial payers. We have had high levels of engagement with commercial payers, including the top four payers that account for approximately 80% of commercial lives, and our goal is to facilitate timely coverage decisions upon a potential exa-cel approval. Our pre-approval discussions have been encouraging and are focused on disease burden, epidemiology estimates, our clinical data, and potential payment models. In Europe, the MAA reviews are well underway, and thus, we are also working on paving the way to secure reimbursed access for patients in our targeted European markets. We have been engaging with health systems to educate them on the significant disease burden on patients, healthcare systems, and society. In addition, we have been meeting with European health authorities to understand their interest in different payment models and to communicate the holistic value of a one-time potential functional cure. Given the urgent unmet need for new treatments for sickle cell disease and beta-thalassemia, there is significant interest from patients and physicians, particularly in geographies with high concentrations of the eligible patient population. To conclude, it's a remarkable time to be at Vertex. We continue to make progress treating more CF patients while our excitement for the transformative promise of exa-cel for patients and the resulting multibillion-dollar market opportunity continues to grow as we approach potential approval. We are also preparing for multiple additional near-term launches, including the vanzacaftor triple in CF and VX-548 in acute pain, both of which have the potential to dramatically improve patients' lives.

Thanks, Stuart. Vertex's excellent results in the second quarter of 2023 demonstrate once again our consistent strong performance and attractive growth profile. Second quarter 2023 revenue increased 14% year-over-year to $2.49 billion. Growth was led by a 26% year-over-year increase outside the U.S. on continued strong uptake of TRIKAFTA-KAFTRIO in markets with recently achieved reimbursement as well as label extensions in younger age groups. Similarly, expansion in younger age groups helped drive 7% U.S. revenue growth following the recent FDA approval of TRIKAFTA in patients ages 2 to 5. Second quarter and first half revenues also benefited from increases in channel inventory in certain international markets which are expected to draw down in the second half. Second quarter 2023 combined non-GAAP R&D, acquired IP R&D and SG&A expenses were $1.04 billion compared to $750 million in the second quarter of 2022. Q2 2023 results include $110 million of acquired IP R&D charges compared to $62 million of such charges in the second quarter of 2022. Second quarter 2023 IP R&D expense reflects a $70 million milestone to CRISPR Therapeutics for progress made in our hypoimmune program for type 1 diabetes. Aside from our investments in external innovation and the resulting higher acquired IP R&D charges, operating expense growth was driven as expected by continued investment in research and our advancing pipeline which includes mid- and late-stage clinical assets across eight different disease areas. The most significant areas of increased investment versus prior year included the clinical studies for the vanzacaftor Triple-NCF, for VX-548 in acute pain and for type 1 diabetes. In addition, we continued our pre-commercial activities for exa-cel and other anticipated near-term launches, given the potentially transformative benefits to patients and multibillion-dollar market opportunities for our mid- and late-stage programs, we will continue to invest appropriately. Second quarter 2023 non-GAAP operating income was $1.15 billion compared to $1.19 billion in the second quarter of 2022. Second quarter non-GAAP earnings per share were $3.89, representing 8% growth compared to $3.60 in the second quarter of 2022. We ended the quarter with $12.6 billion in cash and investments. Now switching to guidance. Given our strong first half results and our consistent execution, including the successful launch of TRIKAFTA in patients ages 2 to 5 in the U.S., we are increasing our 2023 revenue guidance as detailed on Slide number 16, for the full year 2023, we now expect CF net product revenue of $9.7 billion to $9.8 billion, an increase of $100 million to $150 million compared to our prior range of $9.55 billion to $9.7 billion. Note that this revenue guidance includes an expected approximate 150% percentage point headwind to our revenue growth rate, consistent with our prior expectations. In addition, given our December 8 U.S. PDUFA date for exa-cel and sickle cell disease, 2023 product revenue guidance continues to reflect revenue from cystic fibrosis products only. We are also raising our 2023 guidance for combined non-GAAP R&D, acquired IP R&D and SG&A expenses to a range of $4.1 billion to $4.2 billion, an increase of $200 million from prior guidance. This increase reflects higher IP R&D expenses from new business development, including collaborations with Entrada in DM1 and with CRISPR in type 1 diabetes. Our 2023 non-GAAP operating expense guidance now includes approximately $500 million of upfronts and milestones compared to the $300 million projected at the start of the year. We continue to invest a majority of our operating expenses into R&D, given the momentum in our multiple mid- and late-stage clinical development programs. We are also funding the expansion of our commercial capabilities in anticipation of the multibillion-dollar opportunities represented by our programs with near-term launch potential, while continuing to leverage an attractive business model afforded by our focus in specialty markets. Our guidance for projected full year 2023 non-GAAP effective tax rate of 21% to 22% is unchanged. In closing, Vertex delivered excellent results for the second quarter of 2023. We delivered strong revenue growth, completed important regulatory milestones, updated on significant clinical trial programs and invested internally and externally. As we continue to advance our programs in 2023, we anticipate further important milestones, as highlighted on Slide 17 to mark our continued progress in multiple disease areas. We look forward to updating you on our progress on future calls and I'll ask Susie to begin the Q&A period.

Just a couple on exa-cel. In the prepared remarks, you mentioned or at least in the press release, you mentioned that an advisory committee is likely. Does Vertex have any sense of what is likely to be discussed or debated at the advisory committee? And then second, for Stuart, thanks for all your comments on the commercial prep. We have seen gene and cell therapy launches get off to a relatively slow starts of late with some not actually having patients dosed for seven or so months after approval. What does Vertex learn from that? What could you do to increase the speed at which patients are adopting exa-cel post approval?

Phil, this is Reshma. Let me take the first part of your question and then I'll ask Stuart to comment on the commercial launch readiness. With regard to exa-cel, the FDA has informed us that there will be an advisory committee. This is not unexpected as we've discussed in the past, given the new mechanism of action. We don't have further details. Those will be forthcoming. And I expect we'll know more as we approach the date of the AdCom, which we don't have today either. However, conventionally, the advisory committees usually take place about one to two months before the PDUFA date. So that's the general framework that we're looking at. We are very excited to have the opportunity to share our data, to talk about the benefit-risk, and to talk about the transformative potential and to have the patient's voices heard at the advisory committee. Let me turn it over to Stuart to comment on launch readiness.

Yes, Phil, so thanks for the question. Obviously, the first most important step to provide the conditions for a successful launch are going to be to secure access and reimbursement because, as you know, without access and reimbursement, there really is no opportunity for patients to get treated. And that's why I focus my comments on that; and we are doing everything we can with payers, both in the U.S. and internationally to try and get access and reimbursement as close to regulatory approval as we possibly can. Obviously, that's not entirely within our control, but that's what we're working on. In terms of the kind of uptake curve in the future, now, obviously, that's going to depend on the interest from physicians and patients. We know that, that is very high. But I would remind you that, as I've said on previous calls, we do expect the uptake with exa-cel to be slower, obviously, than we see with our CF medicines where the launches are almost vertical. And that's largely because, as you know, this is a multi-month process that a patient has to go through to get treated with exa-cel. Obviously, they have to decide with their physician that they want to go through a gene therapy. They have to have their cells collected. The cells then have to be edited, returned to the site, and then the patient has to schedule coming in for essentially the equivalent of a bone marrow transplant before they're actually dosed with the exa-cel drug product. So it is a multi-month process from start to finish for any individual patient. And so that's why we've always said this launch, we do expect to be slightly slower in uptake rate than in cystic fibrosis, but we continue to believe there's a lot of interest. It's a big market opportunity and we see exa-cel as a multibillion-dollar opportunity in the future.

Great. One follow-up, if I may. On the reimbursement, we've seen warranty agreements put in place by one recent gene therapy launch. Is that something you're considering, or you think would be helpful?

Sorry, Phil, I didn't quite catch the question. Can you say it again?

Yes. In terms of reimbursement in the structure of reimbursement agreements, one recent gene therapy launch included a warranty as part of the reimbursement agreement. Is that something Vertex is considering or would think would be helpful for a launch like exa-cel?

Yes. We are considering a range of different options, Phil. The reason for that is kind of if you ask one payer what they're looking for, you get one answer. If you ask another payer, you get another answer. So I think much as we've done with cystic fibrosis, we're going to look to be flexible. There are some who are going to be interested in just a straight price and just paying upfront for the benefits of one-time functional cures. Others are looking at more things like outcomes-based agreements on that. And so right now, we're in kind of listening mode and defining and designing what the nature of our payment models will be. But I think the key word is probably flexibility.

Congratulations on the good quarter. Just wondering if you could give us a view on sort of the next data readout for your type 1 diabetes program, both the cells and the cells plus pouch?

Sure thing, Liisa. With regard to the T1D program, on the VX-880 side, that's, let's call it the naked cells program. You should expect to have a data readout at the fall diabetes conference where there will be an oral presentation. On the 264 program, that's the cells plus device program, we've just initiated enrollment. We've just dosed, as you heard in my prepared remarks, the first patient. And you should expect to hear from us with regard to results from that cells plus device program which does not require immunosuppressants, either when we reach a milestone in terms of data readout or we have a decision to communicate. We won't be sharing results patient by patient.

Okay, fair enough. As you consider your commercial strategy for pain management, will you be targeting specific types of centers? This market clearly presents a significant opportunity. How do you envision the rollout and where will it take place? I'm interested in your perspective since market estimates can vary widely based on your approach.

Sure. Liisa, you're right. We see this as an enormous opportunity. Let me ask Stuart to tell you how we plan to approach that opportunity. Stuart?

Yes, acute pain will be our first launch indication, assuming the studies yield positive results. There are two important points to consider. First, it is true that a variety of prescribers are responsible for acute pain therapies. However, it is also true that a significant portion of these prescriptions is concentrated in institutions and ambulatory surgical centers. In these settings, patients receive their acute pain medications while still in the facility, and they are given prescriptions for ongoing pain management upon discharge. This accounts for a substantial percentage of acute pain prescriptions, which are concentrated in nearly 200 sites covered by about 220 integrated delivery networks. Our primary focus for commercialization will be on these centers. We believe that a sales force of approximately 150 can effectively cover this network, aligning well with our emphasis on specialty markets.

Can you provide guidance on what needs to be done logistically to ensure a successful launch of the acute pain program from a marketing perspective, particularly in relation to any necessary understanding regarding contracts and how the no pain law applies? Any insights on how to facilitate this process would be appreciated.

Sure. Salveen, I'll ask Stuart to comment.

Yes, Salveen, thanks for the question. I think there's a couple of other things that are likely to be supportive of VX-548 in acute pain. One is, I think we are likely to see a number of the existing pain treatment guidelines consider updates their guidelines once there is the availability of a safe and effective non-opioid medicine. In addition, and you mentioned one of them, I think we are increasingly going to see policies change their focus. The policies that have been put in place in states and hospitals over the last few years for understandable reasons have largely all been about restricting prescriptions, restricting who can prescribe for which patient types for what length of time. I think we are beginning to see the focus of those policy initiatives changed to being supportive of non-opioid pain medicines like VX-548. And I think that that's a very welcome systemic change which will potentially support the uptake of the VX-548 subsequent to it getting approved. So in addition to our own commercialization efforts, I think there's a number of supportive actions at the launch.

I wanted to follow up on exa-cel. While I know you’re concentrating on regulatory and commercial matters, I’m curious about the improved conditioning regimen. What should we expect from its optimization? What does success look like for that? And what are the timelines for when we might see some data?

Sure. Geoff, as we think about the busulfan-based conditioning regimen, which is what exa-cel will launch with, we see that as having a positive benefit-risk profile for the approximately 32,000 people with the most severe forms of sickle cell disease and beta thalassemia. And with the improved or gentler conditioning, we see the opportunity to serve the full 150,000 people with sickle cell disease and beta thalassemia in Europe and the U.S. What this program looks like, and we have an active set of programs internally, our partners at CRISPR are working on this problem, other academia and biotechs are working on this problem. And so I do see this as a problem that will be solved. It's not a tomorrow solution, but I see this happening in the coming months and years. What we see is the opportunity to have a conditioning regimen that very specifically targets the compartment and the cells that are limited to those hematopoietic stem cells sparing all of the other cells. And in so doing, not have the side effects of busulfan, including the very significant cytopenias that you see with busulfan. So I do think that this is an area that we will see a solution for because we and others are working on it and because of the broad application, and I do think you'll see progress in the coming months and in our years. I don't mean decades.

Sorry for the noise. I'm on board a plane and we're departing. So the question is, what is the bar for neurotropic mean? I know your previous study with your previous drug kind of looks similar to Lyrica. Maybe you could step that for us in a second. We've done some due diligence in the chemo-related peripheral neuropathy is a huge unmet need. I wanted to know whether you thought it might work in this population as well.

Yes. So Robyn, the bar for neuropathic pain is to have a better overall profile, benefit-risk taken together than existing therapies. As you know, the existing therapy has limitations in terms of efficacy, but there are also limitations on the safety/AE side. And the reason for that is what we use for neuropathic pain is frankly, a recycled medicine that comes from fundamentally central nervous system depression that we are reusing for neuropathic pain because that's the best we have. So what we're going to be looking for is improvement in diabetic peripheral neuropathic pain scores, change from baseline, and our Phase II dose-ranging proof-of-concept study also has a Lyrica arm for context. So we'll be able to see the magnitude of the treatment effect as well as a Lyrica arm for context.

Yes, I wanted to change gears, please, to your two AAT candidates. Could you frame the efficacy results to watch in 2024? And potential timeline for those readouts next year?

Sure. David, I think you're asking about the AATD program. And just to ground everyone on that one, this is our program where we have two molecules, VX-864 which is in a Phase II study and VX-634 which is making its way through a Phase I study. Our excitement for this particular program and disease comes from the fact that it fits the Vertex strategy like a glove. We are seeking to target both the liver and lung manifestations of this disease. And our small molecule approach is the only one that holds the potential to treat both liver and lung manifestations. And I do believe you need to treat both in order to have a transformative medicine. Our VX-864 study which is in Phase II is a long-term study. It's a 48-week study. And there, we are looking at the impact of long-term dosing on both functional AAT levels in the blood and clearance of liver polymer. You might recall that on a post-hoc analysis of our VX-864 Phase II data from a few years ago, we saw a 90-plus percent reduction in serum Z polymer levels which is why we're so interested in the liver polymer. And in the 634 study, we are going through our first in-human studies. So I expect that we'll have all the results from both of these trials by sometime next year, so 2024, and I expect that we'll be able to share the results at that time. Exact timing, we're going to need to get a few more months under our belt to look at the enrollment dynamics, but I do expect we'll be sharing results by sometime next year. So it's a '24 milestone.

Stuart, you mentioned there were about 20,000 patients not on drug at the start of the year that could potentially be eligible. Just wondering where that figure will end, assuming you achieve your new 2023 guidance?

Yes, Terence. We have shifted away from providing detailed forensic accounting of the various patient numbers in recent years. Therefore, I won't be offering an updated estimate right now. However, as Charlie mentioned in his remarks, and as I noted in mine, we have been making strong progress in treating more patients, including younger age groups and in countries where we have achieved reimbursements and launches. Apart from that, we will not be providing further details at this moment. If there is a significant change, we may update those figures as we have in the past couple of years at the beginning of next year when we discuss our guidance for the upcoming year.

I would like some clarification on the sweat chloride improvement observed in the vanzacaftor trial. Is there a relationship between the reduction in sweat chloride levels and the improvement in SCD? If I recall correctly, the improvement in sweat chloride was approximately 30% greater than with the dry cast combination. I'm trying to understand how we should evaluate the benchmark for SEB with this new combination.

Mohit, I believe you are referring to the vanzacaftor triple, which is our next-in-class treatment for cystic fibrosis. This program is currently in Phase III, and we anticipate finishing both studies in the 12-plus-year-old age group and the 6-plus-year age group this year, with pivotal program results expected early next year. Regarding your question about sweat chloride and ppFEV1, there is a strong link between the improvements in sweat chloride and lung function enhancements. This connection has been evident with all of our previous CFTR modulators, from KALYDECO to ORKAMBI, SIM, and TRIKAFTA. As for what to expect from the vanzacaftor triple, I want to emphasize that our enthusiasm stems from preclinical experiments, including crucial HBE assays that have proven to be both qualitatively and quantitatively predictive. It's somewhat hard to believe, but preclinically, the vanzacaftor triple shows even better results than TRIKAFTA in our HPE cells. Additionally, in the Phase II studies conducted, the vanzacaftor triple demonstrates a greater improvement in sweat chloride compared to TRIKAFTA. Making predictions on ppFEV1 is challenging due to smaller sample sizes in Phase II studies and the variability of this endpoint, so I believe sweat chloride is the most appropriate metric to consider. All the data we've gathered indicates that vanzacaftor surpasses TRIKAFTA in terms of sweat chloride measurements.

You announced that the chronic pain neuropathic pain study, Phase II was complete enrollment. So that's super exciting and the data, I guess is end of '23, early '24. Can you talk a little bit about, I guess, on one side, you feel confident because of the biology and the acute data was also quite strong, there's also some early chronic data as well as the last gen. But also, I guess, historically, chronic pain studies can be challenging with placebos, even with Vicodin and opioids, you can get mixed results. So I just wanted to ask about your confidence around this probability of success versus the acute study and how we should take this study into consideration from an expectation standpoint, give it just a Phase II?

Sure. My confidence level in the VX-548 program is equal for the acute pain studies in that Phase III program as it is for the diabetic peripheral neuropathy Phase II program. And you're right, that confidence comes from the pharmacologic validation of the target which we ourselves conducted with our predecessor molecule, VX-150 and also the genetic validation of the 1.8 target. With regard to double-click on what you could expect from both acute and the neuropathic pain studies, the acute pain program is two randomized clinical trials in the same bunionectomy, abdominoplasty. Those are two of the RCTs. And the third is a single-arm safety and efficacy study to allow a broad, moderate-to-severe acute pain label in the various settings that Stuart described in terms of use. And I expect that those results will be available late this year, early next. And the goal there is, gosh, if we see what we saw in Phase II for VX-548 acute pain, that would be a home run. So the diabetic peripheral neuropathy program, this is a multiple-dose-ranging proof-of-concept study where we also have a gabapentin arm for context. So what you should be looking for there is improvement in the pain score from baseline to the 12-week time point when we have the pain endpoint, and you'll be able to make assessments versus the gabapentin arm that's in their fourth context. That study is fully enrolled and should also be available in terms of results late this year, early next.

Kind of a follow-up to Mohit's question on the Vanza Triple, Talk about what the added benefit of the vanza triple needs to be versus TRIKAFTA to get patients to switch. You also mentioned getting patients to levels of carrier levels of sweat chloride. Could you ever get to a wild-type level of sweat chloride?

Let me address the second part of your question, Evan, and then I'll hand it over to Stuart to discuss the commercial potential of the vanza triple. When considering parents who are carriers of the CF mutation but do not have the disease, at those carrier levels of sweat chloride, there are virtually no signs of the disease. This is why we are focusing on achieving carrier levels of sweat chloride. Essentially, just like you and I, I am neither a carrier nor a patient with CF, but if one is a carrier, they are largely unaffected. This sets a very high standard that we aim for. The TRIKAFTA triple helps some patients reach this standard, while the vanzacaftor triple will assist even more in achieving that. Our research is ongoing, and we have already discovered additional potentiators and correctors that will help us reach our ultimate goal of attaining carrier levels of sweat chloride. Stuart?

Yes. In terms of the uptake and the appeal of the profile, we've learned from discussions with CF clinicians that if vanzacaftor has the profile described earlier, delivering increased levels of benefit in CFTR function as measured through sweat chloride, it will be an attractive option. The correlation between improvements in CFTR function and patient outcomes has been demonstrated in our research. Additionally, when considering patients who might transition, there is a significant group that includes those who have discontinued their CFTR modulators over the years. We estimate that over 6,000 patients want to be on a CFTR modulator but have had to stop treatment. I believe this population will appreciate having another treatment option available.

Congrats on the quarter. Maybe one of the CRISPR-based DMD program. Are you still on track to file the IND in the second half? And then assuming all goes to plan, would it be reasonable to expect some clinical data in 2024? And then maybe if I could just have a quick follow-on to the vanzacaftor triple question. Just what do you think you need to see for this to be a launch that is a major component of switches versus just a new patient acquisition launch?

Colin, I see there are two questions here: one about the vanza triple and what we need to observe, and the other on DMD. Let me address the DMD and DM1 question first and then return to vanza. Expanding on DMD, we are working on various muscular dystrophies, including DMD and DM1. We currently have programs for DMD that are in the process of IND-enabling studies, as well as multiple studies in DM1. Our leading program in DM1, which we in-licensed from Entrada, is also undergoing IND-enabling studies, and we anticipate having results for both programs in the second half of 2023. We plan to file the INDs for both DMD and the lead DM1 program in that timeframe. Regarding vanza, Stuart just covered that. In our Phase III study design, we are comparing vanzacaftor head-to-head with TRIKAFTA, focusing on sweat chloride as the primary endpoint. This is important because, among carriers with one CF gene, there are nearly no disease manifestations, which we assess through sweat chloride levels. We will also include ppFEV1 in the study. As Stuart mentioned, if we see the improvements in sweat chloride levels as we expect, we believe this will provide significant value for patients. Additionally, the vanzacaftor triple regimen comes with a lower royalty burden compared to the TRIKAFTA combination.

Thanks, Reshma. Thanks, Colin. Gary, that brings us to time. Could you close it out, please?