Good evening. Welcome to the Vertex Second Quarter 2020 Financial Results Conference Call. This is Michael Partridge, Senior Vice President of Investor Relations for Vertex. Making prepared remarks on the call tonight, we have Dr. Reshma Kewalramani, Vertex's CEO and President, Stuart Arbuckle, Chief Commercial Officer and Charlie Wagner, Chief Financial Officer. We recommend that you access the webcast slides on our website as you listen to this call. This conference 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 our filings with the Securities and Exchange Commission. These statements, including, without limitation, those regarding Vertex's marketed CF 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 all of the financial results and guidance that we will review on this call this evening are non-GAAP. I will now turn the call over to Dr. Reshma Kewalramani.

Thanks, Michael. 2020 continues to be a year of remarkable progress for Vertex across all aspects of our business, as measured by the continued strong performance of the TRIKAFTA launch in the U.S. The recent positive CHMP opinion for the triple combination regimen in Europe, completion of a landmark reimbursement agreement to expand access to the triple combination for patients in England, and the advancement of our late preclinical and clinical stage pipeline programs, most notably, our proof-of-concept data for CTX001 that underscores the curative potential of this therapy in both beta-thalassemia and sickle cell disease. I'm especially proud that the Vertex team has been able to accomplish all of this despite the challenges presented by the COVID-19 pandemic and want to acknowledge the resilience and commitment of all of our employees to continue to deliver on our goals for patients. Turning first to our CF medicines. Today, the vast majority of our eligible patients in the U.S. have begun treatment with TRIKAFTA, reflecting the significant and fundamental benefit that this medicine provides by addressing the underlying cause of disease. The rate of uptake for TRIKAFTA and the speed at which we have obtained broad reimbursement speak to the appreciation of the therapeutic profile of this medicine, which we believe will be the foundation of CF therapy for many years to come. Outside the U.S., in June, we received a positive CHMP opinion for the triple combination regimen, which, if approved, will be known in Europe as KAFTRIO. This positions us for an earlier-than-expected approval in Europe in the coming months, which would provide up to 10,000 new patients with the first medicine to treat the underlying cause of their disease. Following the anticipated approval later this year in Europe, we plan to seek a potential expansion of the KAFTRIO label to include patients with one F508del mutation and a residual function or gating mutation based on the positive Phase III data reported earlier this month that showed KAFTRIO added significant additional benefit in these patients. We are also pleased that we were recently able to expand our reimbursement agreement with NHS England to include KAFTRIO, allowing thousands of patients in England to begin receiving this medicine once European Commission approval occurs. This is truly a landmark achievement for patients and builds on our other innovative reimbursement agreements, such as those in Ireland and Denmark that include KAFTRIO as well as our other medicines. Reaching these agreements in advance of regulatory approval is uncommon and reflects a shared belief in the value and benefit of our medicines in treating the underlying cause of cystic fibrosis. Based on our year-to-date performance, driven primarily by TRIKAFTA, we are again revising upward our 2020 revenue guidance, which Stuart and Charlie will discuss in more detail in a moment. Beyond 2020, we retain clear line of sight to reaching our long-standing goal of bringing the triple combination to 90% of all CF patients worldwide, as we obtain additional regulatory approvals, including approvals to treat younger patients and reimbursement agreements globally. Turning to our programs beyond CF, where we are advancing a differentiated and broad pipeline of small molecule, cell and genetic therapies for a range of serious diseases. Despite the challenges of the COVID-19 pandemic, we have now been able to reinitiate enrollment and dosing in all of our clinical trials, and we've also been able to initiate new clinical studies during this period. Let me go into more detail on a few of these programs. In our CRISPR-Cas9 gene editing program with CTX001, we and our partner, CRISPR Therapeutics, announced new clinical data at the AHA meeting last month that highlighted the curative potential of gene editing in two serious diseases, beta-thalassemia and sickle cell disease. A total of seven patients had been treated with CTX001 as of the AHA meeting. And all of these patients had successfully engrafted, which is an important yet early sign of their potential response to treatment. Of note, we have now resumed conditioning and dosing in both studies of CTX001 and have dosed additional patients across the program in recent weeks. This program continues to gain momentum as we enroll and treat even more patients, and we expect to report additional data later in 2020. In alpha-1 antitrypsin deficiency, we have now reinitiated enrollment in the Phase II study of VX-814 at all sites that have indicated the ability to resume clinical trials. This means that some, but not all clinical trial sites have been reopened and are screening and enrolling patients in the VX-814 study. We have also now initiated a similar Phase II study with our second AAT corrector, VX-864. Ultimately, the pace of enrollment will dictate the timing for data readouts from VX-814 and VX-864. We now expect data from the VX-814 study toward the end of 2020 or Q1 2021. In the next several months, we will have a much clearer picture of enrollment dynamics for these studies and when to expect data for each molecule. Our goal is to evaluate data from each Phase II study and to pick the best molecule to advance into late-stage development. This is consistent with our strategy of cracking the biology and then pouring on the chemistry to allow us to discover multiple molecules that we can simultaneously advance through proof-of-concept and pick the best molecule then for further development, just as we did in CF. In APOL1-mediated FSGS, multiple clinical trial sites are now open for screening and enrollment in our Phase II study of VX-147, evaluating the reduction of proteinuria over 13 weeks. We expect to obtain data from this study in 2021. And with our cell therapy for type 1 diabetes, we are tracking for an IND submission in late 2020, to support initiation of our first study to evaluate the islet cells alone in patients with type 1 diabetes. The advancement of key IND-enabling activities and the generation of preclinical data to support the IND package in type 1 diabetes were key priorities in the first half of the year and have remained on track through the COVID-19 pandemic. With that summary of the business and review of the R&D portfolio, let me turn it over to Stuart.

Thanks, Reshma. I am pleased to review this evening our continued strong commercial performance. TRIKAFTA revenues for the second quarter were $918 million, reflecting very rapid uptake in the U.S. across the vast majority of all eligible patients. We have received rapid and broad reimbursement from both public and private payers, and feedback from patients and CF centers has been highly positive, consistent with the strong benefit-risk profile for this medicine. Our TRIKAFTA revenues to date in 2020 have also benefited from very strong persistence and compliance trends and from increased patient inventory levels as a result of early refills amidst the COVID-19 pandemic. I am proud of the teams that have worked tirelessly to execute such a phenomenal launch, which has exceeded even our own expectations. And I am thankful for the commitment of the CF community, to working with us to help get so many patients on to TRIKAFTA since its approval in October last year. We now have the opportunity to build on this strong performance of the U.S. launch with an earlier-than-expected potential approval in Europe. This approval, which is anticipated to come in the next few months, will allow up to 10,000 new patients with a minimal function (MF) mutation to be treated with a medicine for the underlying cause of their disease for the first time. Further accelerating our ability to bring this medicine to patients is the recent expansion of our agreement with England to include immediate reimbursement of KAFTRIO for patients ages 12 and older upon European Commission approval, as well as reimbursement for all future label expansions for KALYDECO, ORKAMBI, SYMKEVI and KAFTRIO. This unique agreement provides the CF patient community in England with certainty that they will be among the first in Europe to receive our CF medicines. We are very pleased with this expanded agreement, which is a reflection of the importance and value of treating the underlying cause of CF with our medicines. We would like to thank NHS England and the CF patient community for their commitment to working collaboratively with us towards this agreement over recent months. And we are working with the other developed nations in the U.K. to finalize equivalent agreements as soon as possible. As a result of our strong start to 2020, we are again raising our revenue guidance for the year. And I will offer the following perspective regarding launch dynamics in the U.S. and how we view the anticipated KAFTRIO launch in the EU. First, we are nine months into the TRIKAFTA launch in the U.S., and the vast majority of all eligible patients have now begun treatment. Second, the compliance and persistence rates and patient inventory levels we have seen to date with the launch are high, and we expect them to normalize in the second half of the year. And third, we will be launching KAFTRIO in Europe amidst an ongoing and rapidly evolving global pandemic. This may significantly impact patients' ability to see their physicians for treatment initiation visits and to conduct important laboratory and clinical work to support initiation of KAFTRIO. It will also be the first time that our teams have had to execute a launch virtually. As in the U.S., we ultimately expect to treat the vast majority of eligible patients in Europe. However, the exact trajectory of the launch in Europe is uncertain. All of these factors and their potential impact on future quarters are reflected in our revised revenue guidance, which Charlie will review in more detail momentarily. We expect CF revenue growth beyond 2020. This growth will be driven primarily by additional approvals and reimbursement agreements for KAFTRIO outside the U.S. and by expanding the TRIKAFTA and KAFTRIO labels to treat younger patients. As markers of our continued progress to reach more patients with our medicines, our regulatory submissions for the triple combination are complete in Australia and Switzerland. And following potential EU approval of KAFTRIO later this year, we plan to begin discussions in countries where we are not yet reimbursed with the goal of providing access to this medicine for eligible patients as rapidly as possible. We also remain on track to submit a supplemental new drug application for TRIKAFTA in the U.S. in the fourth quarter of 2020 for children ages 6 to 11 years of age with one F508del mutation. If approved, some 1,500 new patients in the U.S. would be eligible for a medicine to treat the cause of their CF beginning in 2021. We expect this submission would be followed rapidly by similar label expansion efforts outside the U.S. and by additional Phase III studies to support approval in even younger children. In summary, Vertex remains on a trajectory of significant near-term and long-term revenue growth as we bring TRIKAFTA and KAFTRIO to more patients globally in the coming months and years. I am pleased with the significant commercial progress we've seen to date in 2020. And we'll now turn the call over to Charlie.

Thanks, Stuart. Our financial performance for the second quarter was exceptional, highlighted by continued significant growth in CF product revenues following the launch of TRIKAFTA. Second quarter total CF product revenues were $1.52 billion, a 62% increase compared to 2019, bringing our year-to-date revenues to just over $3 billion. Our second quarter revenues included $1.21 billion in revenues in the U.S. and $314 million in revenues outside the U.S. Revenues from outside the U.S. in the second quarter grew 31% over the prior year, driven by strong patient uptake of ORKAMBI and SYMKEVI, following the completion of multiple reimbursement agreements in late 2019. Both in the U.S. and in countries outside the U.S. where our medicines are reimbursed, the vast majority of eligible patients have now initiated treatment with our medicines. Our second quarter 2020 combined R&D and SG&A expenses were $467 million compared to $394 million for the second quarter of 2019, bringing our year-to-date expenses to $945 million. As we've said previously, our 2020 expenses reflect greater investment to support the use of our CF medicines globally and the expansion of our pipeline into new diseases. The significant growth in revenues, combined with more moderate growth in spending resulted in year-to-date operating margin of 58% and year-to-date operating income of $1.75 billion, an increase of 122% compared to operating income in the first half of 2019. Year-to-date net income for 2020 was $1.36 billion compared to $623 million for the first half of 2019. Now to guidance. Today, we are revising upward our 2020 financial guidance for total CF product revenues to a range of $5.7 billion to $5.9 billion, which at the midpoint, reflects 45% growth over 2019. Our guidance reflects the strong launch of TRIKAFTA to date in the U.S., the performance of our other CF medicines globally and the anticipated approval and uptake of KAFTRIO in Europe specifically in England, Ireland, Denmark and Germany. Even with the exceptional midyear results, it's important to reiterate a few of the moderating factors that Stuart mentioned in his remarks. First, the persistence and compliance trends to date for TRIKAFTA are strong. And in fact, they're among the strongest and best we've seen for any of our medicines at this stage of the launch. However, we are still less than a year into the launch, and as such, we expect these metrics to reach a steady state during the second half of the year. Second, as we previously noted, we saw a benefit from patients refilling their TRIKAFTA prescriptions early as the COVID-19 pandemic emerged. This resulted in patients having a higher amount of TRIKAFTA on hand at the end of both the first and second quarters. Our guidance assumes that this increased patient inventory normalizes throughout the second half of 2020. And finally, I would also note that while we have incorporated some incremental European revenues for KAFTRIO into our revised 2020 revenue guidance, the actual rate and level of uptake that we will see in 2020 in Europe is unpredictable, given the ongoing pandemic and the fact that we are conducting a virtual launch. Our OpEx and tax guidance remains unchanged. I would note that we have recognized some savings on expenses as a result of the COVID-19 pandemic, travel costs, for example, however, we have also actively rebalanced our spending by making incremental investments in certain programs and in technology infrastructure to support both the remote operation of certain clinical trials and work-from-home capabilities for our global workforce. With our strong revenue and profitability, we finished the second quarter with $5.5 billion in cash. And as in recent years, our top priority for capital allocation is to reinvest in our own internal R&D engine and to invest in external innovation to accelerate the creation of future medicines for the disease areas in which we are interested. Now back to Reshma for a few concluding remarks.

Thanks, Charlie. The first half of 2020 was a trying period for people, societies and businesses across the world as we grappled with the widespread impact of the COVID-19 pandemic. As a global business with thousands of employees, Vertex shared in these challenges, yet despite the significant changes in how we work, interact and operate our business, Vertex continues to thrive, and our people continue to rise to the occasion with courage and determination. As I said earlier this year, the future of Vertex remains brighter than ever. And this remains true today as we enter the second half of the year with continued strong commercial execution, increasing momentum across our pipeline with our type 1 diabetes program approaching the clinic and multiple upcoming data readouts in the next six to twelve months, and the financial strength to support both internal innovation and business development to discover and develop new medicines for patients and to support our long-term growth. I look forward to updating you as the year progresses. Thank you, and we'll now open the call to questions.

Our first question comes from the line of Cory Kasimov with JP Morgan.

I wanted to ask about the AAT program. Now that the Phase II VX-864 study has initiated, are there any key differences between this and the VX-814 study that's ongoing on ClinicalTrials.gov? It looks like VX-864 is 40 patients versus 50 patients for VX-814. So wondering if there's any specific rationale behind that and any other potential differences between the two trials?

Yes. Cory, it's Reshma. In essence, the VX-814 study, which is a study of about 28 days with a one-month safety follow-up, a few different doses and a placebo group, is similar, if not exactly the same as our VX-864 study. Again, a few different doses versus placebo, 28 days of treatment and another one month of safety follow-up. You can think of them as very similar.

And our next question comes from the line of Salveen Richter with Goldman Sachs.

On guidance for the CF franchise, how are you factoring in the positive CHMP decision with regard to countries coming on board in the second half? And how are you accounting for England? And then with regard to the pipeline, where do you stand with progress at the DMD and DM1 gene editing program?

Salveen, this is Reshma. Let me ask Charlie to take the first question about guidance and how we're thinking about the CHMP decision. And of course, there still is a step of European Commission approval, and then I'll come back and tackle DMD and DM1. Charlie?

Sure. Thanks, Salveen. As we mentioned on the call, we have factored into our revised guidance an assumption of incremental revenues from approval in Europe, but as Reshma points out, we do not have the approval yet. And so the exact timing of that is not perfectly clear. We also highlighted that it will be a virtual launch and the potential for the ongoing pandemic to have an impact on the rate of uptake. That said, we feel very good about including it in the guidance, and that is factored into the number we gave today.

And with regard to the DMD and DM1 programs, you'll remember, of course, last year, around the summer time, we acquired Exonics and that's where we got the DMD and DM1 programs from and then a few months after that, we acquired Semma, and that's where we're working on the type 1 diabetes program. With regard to where we are with DMD, we're in late preclinical development. We have had our conversations with the FDA. We understand what they are looking for in terms of preclinical safety and preclinical pharmacology, and we have a very good sense of what the IND package needs to look like. We are working through all of that. And I anticipate in the coming months, we're going to be able to give you further updates. I will also let you know that we're thinking very diligently and working hard on things like process development and analytical development. You've seen in the landscape that there is a real importance around dose and around getting the analytical development to make sure that you are very clear about what the dose is. And so we're investing a good amount of our time and effort to make sure that we get all of that right as we make progress towards the clinic.

And our next question comes from the line of Phil Nadeau with Cowen & Company.

Congratulations on the quarter. Just a couple of commercial ones and one brief follow-up on AAT. Commercial in Europe, Stuart, you mentioned that there'll be 10,000 patients who will be on-label for TRIKAFTA when it's approved. Could you give us a sense of how many of those patients will have reimbursement at the time of approval? And then second, in the U.S., can you give us a sense as to the level of inventory that is being held by patients currently?

Sure, Phil. Thanks for the question. So yes, as you mentioned, with the label to include the MF patients, that's about up to 10,000 patients across Europe who will be eligible for a CFTR modulator for the first time. Those patients are roughly split, not exactly, but roughly split as per the existing patient populations. And so the largest countries are the U.K. and Germany; places like France, Italy, Spain follow that. That's where the vast majority of patients are and so obviously, the agreement in the U.K. is excellent because that's the single biggest patient population. Then Germany, obviously, is a country where you get immediate access post the EC approval. Other countries like France, Italy, Spain, et cetera, we will have to begin the reimbursement negotiations there. So that's how that kind of patient population splits out overall. In terms of patient inventory, we didn't see any incremental inventory build from patients in the second quarter. It really was a carryover of the inventory build that patients made when the pandemic first hit in the first quarter, and so we have not seen a drawdown on that inventory; we did not see an increase in that patient inventory in the second quarter.

That's very helpful. And a brief follow-up to Cory's question on AAT. What's your way of thinking on the next steps once you get the proof-of-concept data from the first two candidates? Could you move right into a pivotal study or would it be more likely that there will be an interim trial to further flesh out their profiles?

I had a little bit of a hard time hearing you, but I think it's about what is the next step once we have proof-of-concept data for VX-814 and can we go into pivotal development after that? So yes, I do anticipate that once we have the proof-of-concept data, and we have a sense for dose, and we get a look at the safety in patients with alpha-1 antitrypsin deficiency, we will be moving into pivotal development. Of course, we have two programs VX-814 and VX-864. VX-814 is in the lead. And depending on exactly what the timing of each of those programs are, we're going to have to make some decisions, but yes, I do anticipate after we are at a point of having proof-of-concept, we would move right into Phase III pivotal development.

And our next question comes from the line of Michael Yee with Jefferies.

Congrats on a great quarter. Two pipeline questions, one on AAT. Obviously, everyone's focused on functional AAT. I think we all know that, and we look forward to that. Is there anything in your secondary endpoints or any other biomarkers you would look at to help support the overall totality of what's going on? There are outstanding questions around trafficking to the lungs, et cetera. So I think that's an interesting thing if there were any biomarkers to help support what's going on? And then my second question actually is on VX-147 for FSGS. You made some great comments, Reshma. I know you are an expert in renal disease. So I guess my question is, are you confident that a strong reduction of proteinuria can happen in a short amount of time? Or what amount of time do you need based on that mechanism to show that in a Phase II?

Yes. Let me parse it out into the questions around AATD, and then I'll get to FSGS and proteinuria. So on the AATD program, be it for VX-814 or for VX-864, it is really about looking at the antigenic AAT levels and at the functional serum AAT levels. And if you ask me, what exactly are we looking for? What's the breadth of information that we can glean from the proof-of-concept studies? Besides those two things, the other two that I will point you to is safety. We can't minimize that. This is the first time that this medicine has been put into patients with this disease. And the last part is the PK/PD relationship and the relationship between the doses and the achievement of the exposure that we are seeking. So those are really the key elements that we will be able to glean when the study is complete. With regard to FSGS, proteinuria is something that we and the renal community have talked about for a long, long time. There have been multiple workshops between nephrologists, academia, regulatory agencies, et cetera, to think about the relationship of proteinuria and outcomes like time to end-stage renal disease, as well as all of the questions you must be imagining with regard to onset of proteinuria, the duration of reduction in proteinuria, et cetera. And if I just sort of make a long story short, the reason you see our proof-of-concept Phase II study be of 12 weeks duration, is that I think it's going to take about that amount of time to start to see a reduction. And that sort of explains the duration of the study.

And our next question comes from the line of Alethia Young with Cantor.

Congrats on the quarter. So I just want to talk a little bit about CTX001. And of course, there are a lot of medicines now in sickle cell and beta-thal and just how you think about positioning of a potential one-and-done versus like the Global Blood and Agios versus Novartis of the world?

Yes. This is Reshma. Why don't I take that question? Alethia, I can't tell you how excited I am with the CTX001 program that we are conducting in conjunction with CRISPR Therapeutics. This is now a program that has achieved proof-of-concept in beta-thalassemia. We've dosed the first two patients and we've talked about the fact that they have engrafted. We've talked about the hemoglobin levels in these two patients, and it's well north of 11 grams per deciliter. The first patient is at 14.2. The second patient is at 12.5 grams per deciliter at five months. The patients went from, for example, the first patient, 34 units of blood transfused per year, the second patient, 61 units of blood transfused per year to no transfusions in the follow-up that we have observed. And while it is still a limited number of patients and a limited duration — patient number one is now out 15 months — so we are really getting past that one-year point. And we've also shared the data with regard to the first sickle cell patient who's also had hemoglobin F well north of 40% and has had no VOCs. So I think that there is a big difference between transforming a disease and treating a disease. There is a big difference between having no VOCs, no transfusions and having to manage some amount of chronic disease. And I think that there's a great importance in having a therapy that is one-time and then a person's life is restored. So I see enormous promise in this particular program.

And our next question comes from the line of Geoff Meacham with Bank of America.

Congrats on another good quarter in CF. So I have a commercial question and a pipeline one. Stuart, can you talk about for the quarter, the TRIKAFTA sales, the patients coming from switching versus new heterozygous/minimal function patients? And maybe just — I know maybe don't want to give specifics, but how close are you to the 90% penetration that you've seen with other CF products? And then for Reshma, I didn't see a lot of detail on the plan for the remaining 10% of CF patients. I know you guys are committed to 100%, but maybe just remind us of what the status is of the programs, for example, for premature stop codons, et cetera?

Geoff, it's Stuart here. So thanks for the question. In terms of the source of TRIKAFTA prescriptions, when we say it's the vast majority of patients and it's the vast majority of patients across all segments, we mean just that. There really is not very much difference between the uptake in those who were naive to a CFTR modulator before TRIKAFTA was approved and those who were on either KALYDECO or ORKAMBI or SYMDEKO. So the level of uptake has been pretty universal and we are very much at the flat part of the launch curve, but there are still patients who are being initiated, but we are very much at the flat part of the launch curve now, which is why, as Charlie alluded to in talking about the guidance, it really is much more about the trends in persistence and compliance.

Yes. You are very right about the commitment to get to all patients and what I'll tell you is, and just to remind everyone, for the last 10%, the underlying pathophysiology and the problem we have is that those patients make no protein either because of premature stop codons, they just don't make any protein. And insofar as no protein is made, CFTR modulators cannot be helpful for these patients. So one way or another, a nucleic acid therapy is going to be needed, and we have programs in this area. I see good progress with our partnership with Moderna in working on an mRNA approach to this last 10%. So more to come. The other point that we've made in the past and is worth repeating is, there's also an important delivery consideration here. The lung has a very large surface area. And of course, we're talking about trying to get delivery into a lung that has a large surface area, but is also very inflamed and full of mucus. So the delivery problem cannot be underestimated, but we have made good progress with our partners at Moderna, and I am optimistic about our ability to get there for our last 10% of patients.

And our next question comes from the line of Evan Seigerman with Crédit Suisse.

Congrats, again, on another fantastic quarter. So for Stuart, you seem to be pretty cautious about the upcoming potential launch of KAFTRIO in Europe given the pandemic. But the pandemic is arguably more of an issue here in the U.S. at the moment, so how are you able to overcome some of these commercialization issues domestically? And is there any reason to think that you won't have similar traction in Europe? I understand the ins and outs of the reimbursement agreements, say, for example, in Germany.

Evan, thanks for the question. So I think your question — you were breaking up a little bit — was why are we concerned about the launch trajectory in Europe when the pandemic is more of an issue in the U.S. now? And really, I would say two things. The first one is that you'll remember, we got the approval for TRIKAFTA in October of last year. And as you'll remember from our Q4 and Q1 calls, we saw very, very rapid uptake in the first few months post-approval, when really the pandemic had not been as big of a deal here in the U.S. as it already had been in Asia and obviously in Europe. We are launching into a very different situation where the pandemic is still a very dynamic issue, and we're seeing openings and re-lockdowns and things like that. So it is a very different situation that we are launching into when we get the approval by the European Commission. The second thing that makes it different is that, like most businesses, the vast majority of our employees are working from home. Certainly, the commercial organization is all working from home. And so we will be launching this medicine virtually, which is a first for us as a company. The last thing I would say, which is linked to the pandemic, is about patients and physicians and their ability to get together and see each other as a result of the pandemic. And so that's a dynamic which we have to take into consideration. And as we said in our prepared remarks, it's just uncertain how all that is going to play out. So I do think the situation we're launching into in Europe is very different to the situation we were fortunate enough to be able to launch into here in the U.S.

And our next question comes from the line of Robyn Karnauskas with SunTrust.

Congratulations on all the progress in this environment. I just wanted to ask a little bit more about European dynamics. What were the lessons you learned on the launch itself in the United States with TRIKAFTA and basically, what could be some positive reads to KAFTRIO for the launch in Europe, just regarding compliance and uptake? I think you just addressed the question around COVID, so this is more about do you think that this is more like the KALYDECO launch versus ORKAMBI? And what are some positive reads that we might see when approved?

Yes. Robyn, it's Stuart here. Thanks for the question. In terms of the positives we can take from the U.S. experience, obviously, there's many of them because the launch has been such a terrific success. I think some of the positives would be, obviously, there's very high levels of awareness within the CF community of the triple combination regimen and its very positive benefit-risk profile. Secondly, that positive benefit-risk profile has played out in the real world exactly as we saw it play out in our pivotal and earlier studies. The efficacy is very strong and the overall benefit-risk profile is very positive. So those are definitely positives that resulted in high levels of persistence and compliance. The big uncertainty, as I say, is we are launching into a very, very different environment than we were launching back in October of 2019, which in many ways seems a lifetime away, both in terms of the patients and physicians and their ability to get together and our ability to launch in a virtual world is unproven. So that's clearly very different. We're thrilled to have got a reimbursement agreement in place in England in advance of the approval. That's clearly positive. And one of the positives here in the U.S. is that we got very rapid public and private reimbursement. Obviously, though, there are a number of countries in Europe where we don't yet have reimbursement agreements in place, and we're going to have to begin that process. And that process is likely to take a bit longer in Europe than it did here in the U.S. So there's definitely many positives, but there are a number of things which are going to be different, which leads us to believe that the exact trajectory of the launch is difficult to call. Having said that, I will leave you with this final thought: as we have done in the U.S., we are confident that over time, the vast, vast majority of patients will be initiated on KAFTRIO.

And our next question comes from the line of Mohit Bansal with Citi.

Congratulations from my end as well on the progress. My question is regarding AAT and functionality. Given that these patients have a mutation, so even when you correct the misfolding, the protein which gets released is still going to be Z-AAT, and there's literature out there suggesting that the functionality of Z-AAT may not be as good as wild-type AAT. So to that end, do you think it could be an issue? And how exactly are you measuring or managing the functional AAT levels?

Sure. Mohit, this is Reshma. So just to make sure that we're all grounded on the pathophysiology here. When you have alpha-1 antitrypsin deficiency, this is a genetic mutation of the SERPINA1 gene, and that mutation leads to a misfolded protein. The way our small molecule correctors work is they properly fold that misfolded protein and, in doing so, alleviate the congestion in the liver so that's how the liver part of this disease can be addressed with our approach. And because you have the corrected AAT protein now in the blood, that can go to the lung and do its job, which is to protect the lung from autodigestion. So the small molecule approach allows you to correct both the liver disease and the lung disease. The point that you're raising about how functional is this corrected AAT — people call it the competence of the molecule — we have assessed that preclinically in our models, and the competence is high. We have assays, you can think of it as an ELISA-type assay, that assess the functionality of the protein in neutralizing neutrophil elastase and that looks good. So that's the reason we've entered into Phase II proof-of-concept development, and that's why in Phase II, we are measuring not only antigenic levels, but also functional levels.

And our next question comes from the line of Geoffrey Porges with SVB Leerink.

Stuart, I just want to follow-up on the agreement that you have in place in England. Could you first give us a sense of what proportion of the 10,000 patients that you mentioned, the incremental patient numbers are in England? And secondly, in that agreement, is it similar to the Irish agreement with a cap on the total potential spend for the government — for the NHS in England? Or is it purely volume-dependent?

Yes, Geoff, thanks for the question. So yes, the agreement in England — we're thrilled to have reached that agreement. The ratio of patients in the U.K. that are MF is roughly the same as you would see for the other mutations. You can broadly think that it's proportional to the population size of the U.K. versus others when you look at the CF population. In terms of the exact terms of the agreement, I can't talk about the exact terms. It is similar to others in that it does include access to our existing medications, including KAFTRIO, once approved and additional indications for those approved medicines. So that would include going down into the age groups. And it does include a cap on total expenditure to give some certainty to the U.K. government and in this case, NHS England specifically.

And our next question comes from the line of Gena Wang with Barclays.

I also would like to add my congratulations on a very strong quarter. I have two questions. The first one is regarding the quarterly revenue: if assuming no refill rate that would translate to roughly 12,000 patients. Can you share the percentage of patients that were refilled? And also what is the discontinuation rate? And the second question is regarding the beta-thalassemia and sickle cell program. What would be your plan for a registration trial, specifically, what could you learn from bluebird's experience?

Gena, I'm not sure I entirely heard all of your question. I think you were asking about the percentage of patients that are on the medicine — that have stayed on the medicine, if I'm hearing you right. There's approximately 18,000 patients in the U.S. who were eligible for TRIKAFTA on its approval with the very broad label covering patients with at least one F508del. Of those, the vast majority of those have initiated therapy and the persistence rates, the number of patients who stayed on the medicine, are very, very high. Some of the highest we've seen for any of our medicines at this time in the launch. And so whilst we're not getting into the exact specifics of what that is, you can imagine they are very, very high. Obviously, the discontinuation rate only increases over time, but it's very high. I think that's not surprising given the benefit-risk profile we saw of this medicine in our pivotal trial. And on beta-thalassemia and sickle cell, I'll hand that over to Reshma.

Gena, with regard to the beta-thalassemia and sickle cell trial and what do we need to show in terms of the Phase III pivotal trials, I think the trials that we've designed are right for the job. In terms of the endpoints, very clearly in beta-thalassemia, transfusion independence is key. And in sickle cell, it's all about the reduction of VOCs. Both metrics are ones on which CTX001 has performed very well in the early data: early stages, few patients, all of those caveats, but I think the studies that we've designed are the right ones and those are the endpoints to watch.

And our next question comes from the line of Matthew Harrison with Morgan Stanley.

I have two questions. One, Stuart, can you just comment on the residual patients on SYMDEKO and ORKAMBI? Is that mainly age groups which are not approved for TRIKAFTA yet? Or have you noticed any groups that are staying on that drug that may surprise you? And then second, related to AAT, could you comment on whether the Phase III program or regulatory strategy would look different if you observe carrier levels of the protein versus levels similar to what replacement therapy has?

Matt, thanks for the question. The vast majority of patients who are on ORKAMBI, SYMDEKO or KALYDECO who are eligible for TRIKAFTA are transitioning or have transitioned to TRIKAFTA. So what you see in the performance of the business is that the patients who are remaining on those older medicines are either those who are less than 12, the younger age groups where we continue to expand our indications, or patients outside the U.S. where reimbursement for those medicines is in place. So that's what's driving the existing KALYDECO, ORKAMBI and SYMDEKO business: younger age groups or outside the U.S.

On the question of AAT and what we are thinking about in terms of Phase III plans, let me take one step back and link what we're doing in Phase II to Phase III and give you a sense of how that strings together. In Phase II, we're looking at safety, and we're looking at the functional AAT levels and the serum antigenic AAT levels. What we're trying to do there is to get the best estimation of dose. We are studying a number of different doses versus placebo. We're going to evaluate the dose-exposure relationship and select the right dose. Assuming that we are in a position to move forward to Phase III based on these Phase II results — which we haven't seen yet — that would be the next step. What we're going to do in Phase III is evaluate a few different measures. We haven't had our end-of-Phase II meeting with the FDA yet, so this is a conceptual framework. The framework would be that we would indeed be looking at antigenic levels, we would be looking at serum functional levels, and we are planning to have an assessment of clearance of the liver from these polymers. Remember, with the small molecule approach, we have this opportunity to treat both the liver and the lung. So we plan to do that and have that be a package. We need to go through the discussions with the agency and confirm that that package would be acceptable. Separately, we are very interested in understanding the impact of our small molecule correctors on lung function measured by imaging or pulmonary function tests, and those are all considerations that we continue to talk and think about. But the framework for our package really is functional AAT levels, antigenic AAT levels and the clearance of the polymers from the liver.

Operator, this is Michael. We have just a few minutes left. We'll take two more questions.

Our next question comes from the line of Brian Abrahams with RBC Capital Markets.

My congratulations as well on the quarter. A couple on AAT as well. Can you talk about the importance of smoother AAT or functional AAT levels that a corrector like 814 could confer versus the high peak-to-trough from an exogenous augmentation? Really the ways to assess the potential benefits of this. And then thinking longer term, you've laid out sort of a schematic for what a pivotal could look like. I'm also curious about your level of interest in exploring combinations with complementary mechanisms, either internally or externally to potentially optimize outcomes. Have you done preclinical work along those lines? And where might the heterozygous patient population fit into the future development plan?

Okay. There's a lot packed into that question, but let me tackle a little bit about how we think about augmentation therapy or exogenous replacement versus our small molecule approach. One critical element to point out with regard to exogenous augmentation therapy is that the only effect it could have is on the lung. The reason I say that is because exogenous therapy is doing nothing for the production of misfolded protein, which gets stuck in the liver and causes fibrosis and could lead to cirrhosis. So one big concept about exogenous therapy is that the only possible organ it could help is the lung, very different than the small molecule approach. The second is around PK and the peak-to-trough. Augmentation therapy is typically administered once a week as an infusion, and during the course of that week, you have the augmentation that you received and then it decays over the week. In people without AAT deficiency, AAT production changes according to the body's needs; for example, in times of stress, inflammation, infection, the body produces more AAT. None of that dynamic responsiveness can happen with once-weekly augmentation therapy. The small molecule approach allows for endogenous production under the native promoter and thus can adapt to the body's needs. The third point is that augmentation therapy is dosed weekly and has decay over that week, and that is not how AAT works physiologically. Regarding combinations and preclinical work, we are always exploring complementary mechanisms and are open to internal and external opportunities to optimize outcomes, but our immediate focus is on advancing these programs through proof-of-concept and then assessing the best path forward.

And our last question comes from the line of Paul Matteis with Stifel.

Great. I'll continue the trend with two AAT questions. One, based on genetic data or natural history data, what range of AAT production do you think you'd need to increase a ZZ mutant patient to in order to clinically derisk the next study? And then second, now that you're in Phase II with VX-864, can you speak to some of the product differences as it relates to pharmacokinetics and potency and are you confident that that molecule should be materially more potent?

Okay. We've had a lot of AAT questions. Let me tell you what we're really looking for from the proof-of-concept study. Remember that this is a target that we have not studied before in patients; we are the first ones there. When we were doing CF, we'd already gone through translation from bench to bedside with prior modulators. For AAT, here's what we're looking for from the proof-of-concept study: first, safety; second, the relationship between PK/PD and dose and exposure to ensure that we get to the exposure levels that we need; and third, an increase in AAT levels, both antigenic and functional AAT levels. If we see those things, we will consider that we have met proof-of-concept. At that point, we can 'pour on the chemistry' to optimize potency, PK and other drug properties. So the proof-of-concept signals are what will guide us. We will then design Phase III with the appropriate endpoints and the regulatory discussions will refine those plans.

Okay. Thank you all for joining us. We appreciate you tuning in. The Investor Relations team is available tonight if you have additional questions. Stay safe, and have a good evening.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating, and you may now disconnect.