Good evening. Welcome to the Vertex Third 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; Dr. David Altshuler, Chief Scientific Officer, will join the Q&A portion of the call following the prepared remarks. 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 select financial results and guidance we will review on the call this evening are non-GAAP. I will now turn the call over to Dr. Reshma Kewalramani.

Thanks, Michael. I'll begin tonight with a few general comments across the business and then provide details on our R&D programs before turning it over to Stuart for a review of the commercial performance. First, starting with CF. 2020 continues to be a remarkable year for our growing CF business. Our performance through the third quarter was driven by the strong TRIKAFTA launch in the U.S., and we are building on that progress as we launch KAFTRIO, as a triple combination is known in Europe. Based on our year-to-date performance, we are again revising upward our 2020 product revenue guidance to $6 billion to $6.2 billion. There are two important aspects that characterize our outlook in CF, and I want to be sure to provide a perspective on both. The first is growth, which has been exceptional. 2020 is poised to deliver more than 50% growth in revenue over 2019, and we see significant top and bottom line growth beyond 2020. Driven by three factors: expansion of the triple combination geographically, expansion of our medicines to lower age groups and additional mutations, as well as the development of a treatment for the last 10% of CF patients who cannot benefit from CFTR modulators. There's two ways to think about this growth. Near term, even for the CF population who are currently eligible and reimbursed for our medicines, there are many patients who have yet to begin treatment. And beyond that, there are at least 20,000 more who we anticipate will become eligible through label, geographic and reimbursement expansions. Stuart will go into more details on these growth drivers in a moment. The other aspect of our business I want to address is leadership. We have a strong leadership position in cystic fibrosis, and we believe this will last a very long time into at least the late 2030s as a base case when considering the high bar set by the significant benefit of TRIKAFTA to patients and the patent coverage for this regimen. Turning to the pipeline. Our pipeline reflects a deliberate strategy of investing in serial innovation, both internally and externally to develop first-in-class or best-in-class treatments for serious diseases. The diseases we pursue are selected based on the understanding of causal human biology, target validation and biomarkers with high fidelity from bench to bedside. Once we begin working on a disease, we are relentless in our pursuit of a transformative therapy. Because drug development is an inherently high-risk endeavor, we strive to increase our chances of success by advancing a portfolio of drug candidates for each disease so that we can bring the very best one to market. This strategy is working exactly as expected and it is the reason for our success in CF. And this is exactly the same approach we are applying to every pipeline program. With this strategy, Vertex has advanced a broad and deep portfolio with first-in-class programs in the clinic in five different disease areas outside of CF. The programs in sickle cell disease, beta-thalassemia, FSGS and alpha-1 antitrypsin deficiency are already in patients. And the type 1 diabetes program is projected to be in patients next year. A number of these programs have the potential to read out important proof-of-concept data between now and the end of 2021. Individually, each represents a potentially transformative treatment for a serious disease. And collectively, they represent a very large opportunity. Some compounds will inevitably fail, and some programs will not fulfill their early potential. In terms of the Vertex portfolio, not all of the molecules will succeed. And not all of them have to, even if two or three of the programs succeed, and we firmly believe that they will, the return on investment for the innovations that emerge will create exceptional outcomes for patients and drive exceptional returns for our shareholders. That is our R&D and corporate strategy. Lastly, a few words about the AATD program. This program is an example of our portfolio approach at work. The recent discontinuation of VX-814 is disappointing. But it is neither unusual nor extraordinary to have a clinical program discontinued in early or mid-stage development. This is a potential for any molecule, and it is anticipated in our overall strategy. Hence, our portfolio approach. That is to say, the advancement of multiple molecules in parallel, through research and into early clinical development. Our enthusiasm for the AATD program is not diminished. And it does not change how we think about VX-864 or our follow-on molecules. Let me now turn to reviewing some of our R&D programs in more detail and highlight some specific upcoming pipeline events. Starting with CF. We have completed the study of TRIKAFTA in patients 6 to 11 years of age and are on track for filing this quarter with a potential approval in 2021. The Phase III study in TRIKAFTA for 2- to 5-year olds is also now underway. And lastly, we continue our efforts in nucleic acid therapies to bring forward a treatment to the last 10% of CF patients who do not make any CFTR protein and hence, cannot be served by CFTR modulators. On this front, I'm pleased with our second collaboration with Moderna, and the preclinical progress using mRNA to serve the last 10% of CF patients. Moving to AATD. The Phase II study of VX-864 is ongoing and continues to enroll and dose patients. This Phase II study is a dose-ranging proof-of-concept study in approximately 40 people with AATD. The duration of treatment is 28 days, followed by 28 days of safety follow up. We expect to see results from this program in the first half of 2021. We're also advancing additional small molecule correctors through preclinical development with a goal of at least one new corrector entering the clinic next year. Next, the CTX001 program. Our gene editing program in transfusion-dependent beta-thalassemia and sickle cell disease is gaining momentum. As you will recall, data at the EHA conference in June included the results for two patients in the beta-thalassemia study, which provided clinical proof-of-concept for CRISPR-Cas9 ex vivo gene editing in this disease. Results were also presented for one patient with sickle cell disease. Also in the summer, we updated you on enrollment and dosing progress, noting that a total of seven patients had been treated with CTX001, and all had successfully engrafted. Since then, we have enrolled and dosed additional patients across both studies. Given the progress across these trials, we look forward to reporting additional clinical data including more patients and longer durations of follow-up by the end of this year. With regard to the APOL1-mediated FSGS program, enrollment is ongoing in our Phase II proof-of-concept study of VX-147, evaluating the safety, pharmacokinetics and reduction in proteinuria over 13 weeks. We expect to obtain initial data from this study in 2021. And with our cell therapy for type 1 diabetes, we have completed the required IND-enabling studies and manufacturing work, which were key priorities in the first half of the year, and we are on track to submit an IND application to the FDA before the end of this year. We expect the first study to focus on islet cells alone, and I'm optimistic about the progress we're making. This program is important in so many ways, including the number of patients who are living with this disease and the approach which holds the potential to truly transform this condition. In summary, we've made strong progress across the business in Q3, and we are well positioned for continued growth in CF and continued advancement of our portfolio of small molecules, cell and genetic therapies across multiple different disease areas. And now over to Stuart.

Thank you, Reshma. I am pleased to review with you this evening, our continued strong commercial performance. It is amazing to think that TRIKAFTA was first approved in the U.S. just a little over a year ago. The response to the product has been incredibly positive. Payers recognize the value of the medicine and provided almost immediate access for eligible patients. The CF community enthusiastically welcomed the approval and CF centers have worked tirelessly to initiate treatment for patients even during the disruption caused by the COVID-19 pandemic. As a result, today, the vast majority of eligible patients in the U.S. are now being treated with TRIKAFTA. Total CF product revenues for the third quarter were $1.54 billion, reflecting this impressive uptake in the U.S. We continue to observe that patients are maintaining the relatively high levels of personal inventory that they built up at the beginning of the pandemic. Moving forward, we are focused on maintaining the high rates of patient persistence and compliance that have been important factors contributing to our revenue performance in the year-to-date. In late August, we were delighted to receive an earlier-than-expected approval for KAFTRIO in Europe. We have begun to execute what is our first fully remote launch. Despite the challenges posed by COVID-19, which continues to surge in Europe, our team has enabled patients to access KAFTRIO in multiple countries. Germany, which provides immediate access to new medicines, and other countries where we secured reimbursement for the triple combination ahead of approval, including England, Ireland, Scotland, Wales and Denmark. We are also working to secure reimbursement and access for all eligible patients in countries where we don't yet have agreements in place. As in the U.S., enthusiasm in the CF community is high. And over time, we expect the vast majority of patients will be treated. We expect the impact of the KAFTRIO launch to become a significant driver of growth starting in the fourth quarter. All of these factors and their potential impact on results for the fourth quarter and full year of 2020, are reflected in our revised revenue guidance, which Charlie will review in more detail. I am pleased by the progress we've made in bringing our medicines to patients to date. Our teams are working hard to ensure that we are able to reach all eligible patients with CF as quickly as possible after regulatory approval. And we expect to see continued revenue growth in CF beyond 2020. Our goal remains, as it has always been, to treat the 90% of all CF patients who might benefit with our CFTR modulators. While we have made great progress towards this goal, our job is far from done. Today, there are still many patients who, although they are eligible and have reimbursement and access to our medicines have yet to start treatment. These patients are primarily in Europe, and our teams are working toward treating all of these patients. As we think about our CF business heading into 2021 and beyond, there are more than 20,000 patients who we believe will become eligible for our medicines as we achieve additional regulatory approvals and secure future reimbursement agreements. The key expected drivers for our near and long-term growth in CF include: first, reaching reimbursement agreements for KAFTRIO in additional countries in the EU; next, regulatory and reimbursement approvals for the triple combination in additional geographies, such as Australia; third, regulatory approval and reimbursement of the triple combination in children age 6 to 11; and finally, continued label expansions and reimbursement in younger age groups and additional mutations for our portfolio of CF medicines. We remain steadfast in our belief that we will be able to treat 90% of all CF patients with our CFTR modulators in the years to come. And we look forward to continuing to update you on our progress. I am very grateful to the CF teams at Vertex in both the U.S. and internationally, who have delivered tremendous results during these challenging times, all in service of our shared dedication to patients living with this life-shortening disease. It is because of this commitment to delivering for our patients that I have high confidence in our ability to reach all eligible patients with our CFTR modulators. Finally, I would like to thank once again the CF community for their commitment to collaborating with us to reach our shared goals. Charlie will now review our third quarter results and financial guidance.

Thanks, Stuart. In the third quarter of 2020, we continued our exceptional financial performance headlined by the strong results with TRIKAFTA in the U.S. Third quarter total product revenues were $1.54 billion, a 62% increase compared to 2019, bringing our year-to-date revenues to $4.58 billion. Our third quarter revenues included $1.22 billion in the U.S. and $314 million in revenues outside the U.S. Revenues from outside the U.S. in the third quarter grew 31% over the prior year driven by continued uptake of our medicines following the completion of several reimbursement agreements late last year. And as Stuart mentioned, KAFTRIO launched late in the third quarter so we expect to see increased contribution to international revenues in the fourth quarter and beyond. Our third quarter 2020 combined R&D and SG&A expenses were $497 million, compared to $416 million for the third quarter of 2019, bringing our year-to-date expenses to $1.44 billion. Our expenses in 2020 reflect increased cost to support the rapid global expansion of our CF business as well as targeted investment in the expansion of our pipeline into new disease areas and the progression of several important clinical programs. The significant continued growth in revenues, combined with more moderate growth in spending, resulted in year-to-date operating margin of 57%, and year-to-date operating income of $2.6 billion, an increase of 118% compared to operating income in the first three quarters of 2019. Year-to-date net income for 2020 was $2.06 billion compared to $945 million in the first three quarters of 2019. With our strong revenue and profitability, we finished the second quarter with $6.2 billion in cash. Consistent with our corporate strategy, our top priority for capital deployment is to reinvest in innovation, both in our internal R&D engine and external innovation aligned with our R&D strategy to accelerate the development of transformative medicines for serious diseases. In summary, Vertex's exceptional financial performance represents an attractive combination of growth, profitability and scale that is unique among large-cap biotech. Now to guidance. Today, we are pleased to once again revise upward our 2020 financial guidance for total product revenues to a range of $6.0 billion to $6.2 billion, which at the midpoint reflects 52% growth over 2019. This revised guidance primarily reflects the ongoing and impressive performance of TRIKAFTA in the U.S., our current view of persistence and compliance trends and the impact of the KAFTRIO launch on fourth quarter revenue. For non-GAAP OpEx, we are maintaining our guidance of $1.95 billion to $2.0 billion, with the vast majority of the year-over-year increase concentrated in R&D. With the expansion and progression of our pipeline in 2020, we are poised to generate important clinical data and results across our programs in coming quarters. The progress of these programs will be the primary driver of further investments in 2021 as well as investments in critical technologies and capabilities. For example, we expect our Vertex cell and genetic therapies efforts to remain a priority as programs enter the clinic and advance further in clinical development. This includes investments in our ongoing CTX001 Phase I/II program and our type 1 diabetes program, which we expect to move into patients as we initiate a Phase I/II study next year. Lastly, due to changes in the utilization of certain tax assets, we are revising our 2020 full year non-GAAP tax rate guidance to a range of 20% to 21%. I would note that the benefits that lower our 2020 tax rate are not expected to repeat, so our non-GAAP tax rate is expected to remain at 21% to 22% in subsequent years. Now back to Reshma for a few concluding remarks.

As we head into 2021, I'm very pleased with both, the achieved and potential growth of the CF franchise and the breadth of our pipeline. Our strategy of investing in internal and external innovation is working with more CF patients becoming eligible and receiving treatment, with CFTR modulators and our portfolio of first-in-class and best-in-class therapies advancing, providing additional confidence for our long-term growth. I want to make a point of recognizing the progress of our R&D teams, especially in diseases outside of CF, with a broad pipeline of potentially transformative programs. Throughout our history, we have built this differentiated pipeline now extending to five diseases already in the clinic outside of CF by investing in game-changing science, research and development. With continued internal innovation in our labs as well as external innovation through business development, such as partnerships with CRISPR Therapeutics and our acquisitions of Semma and Exonics, we are on track to deliver multiple programs into the clinic and multiple proof-of-concept readouts in the coming year. This proven R&D and business development strategy of investing in transformative science and medicines internally and externally, is core to our current success. And it will continue to be so as we move forward into 2021 and beyond. I look forward to updating you on the progress across the business and the multiple R&D programs in the clinic in the coming months. Thank you, and we'll now open the call up to questions.

Our first question comes from the line of Phil Nadeau from Cowen & Company.

It sounds like, based on our conversations over the last week, investors are really trying to figure out whether the issue is with 814 or mechanism-based or molecule specific. And therefore, how optimistic should we be about 864? So I'm curious, how do you think about that particular question? And in particular, were there any differences in bioavailability in the healthy volunteer studies between the two molecules? Or anything from the preclinical studies that you can point to that would suggest 864 won't have the same issues with LFT elevations that 814 did?

Phil, this is Reshma. Let me start with that question, and I'm going to ask David Altshuler, who's with us, to comment further. You're asking a really important question about whether the findings with 814 should be considered molecule specific or should be considered on mechanism. And there's another question in there about how different is 864 from 814. So let me just tell you where we are, and then I'll ask David to give you some color. From all of the data that we have and our understanding, I have no reason to believe that this is on mechanism. I believe that this is molecule specific, idiosyncratic to VX-814. And 864 and 814 are different chemical entities. And I'm going to ask David to give you a little bit more color on mechanism versus 814 and then tell you specifically a few differences between these molecules, which are clearly different molecular structures. David?

Thank you, Reshma. And thanks for the question, Phil. First, with regard to whether or not these are on mechanism or idiosyncratic findings in 814, although we don't know, and of course, we can't know for sure, we see no reason to conclude that the LFT findings are on mechanism. There's really two lines of logic there that we think are most convincing. The first is that it is very common to have LFT abnormalities as a cause of programs stopping in early development. And these are typically chemical based, not mechanism based. The second is that with regard to a specific interaction of our mechanism and hepatotoxicity, I'll just note that we have done multiple studies in mouse models that carry the human ZAAT gene, where the polymers are seen and liver histology and injury happens. And in those models, and we treat with our small molecules, not only do we see no evidence whatsoever of hepatotoxicity. We actually see improvement in liver histology. And so common things being common and the specific chemical nature of most LFT abnormalities, combined with the mouse data, makes us think that it's premature to conclude that it's mechanism based and we certainly look forward to the 864 data. Finally, just to close, you asked about 864 and 814. They're chemically different molecules. They have different structures. 864 is multiple fold more potent than 814 and does have different physical properties and metabolism. And these really represent two different opportunities to treat the disease. And just to close in our CF experience, we put multiple next-generation correctors into the clinic. We saw that different molecules, even in the same class, had quite different properties. And so that actually underlies our portfolio strategy.

Our next question comes from the line of Salveen Richter from Goldman Sachs.

On the AAT program, can you speak to your third-generation compounds and how you might be able to optimize them on the front? And I have a second question.

Salveen, I think you were asking about the generation of compounds coming behind VX-864 for AATD. And I'm going to ask David to make some comments. The one thing I'd like to say is, as I said in my prepared remarks, once we have a disease in our sandbox, we are absolutely relentless about pursuing a transformative therapy. And in the case of AATD, but honestly, across our entire pipeline, our approach is defined by this idea of bringing multiple molecules in parallel forward up through early development. And that's exactly what's happening in AATD. David, do you have any points that you want to make about the next-generation of molecules?

Just that we've been working for some time as we always do, to have multiple scaffolds to get improvements in potency and properties and all of the features you would look for and we're excited to move forward molecules that are in late preclinical development that would have differentiated and improved features.

And then secondly, can you just speak to your business development strategy on the front? And if this initial setback has changed this outlook as well as maybe commenting here on your mRNA and CRISPR-Cas9 programs and kind of where they stand in terms of moving into the clinic?

Yes, sure thing. Salveen, let me take that. This is Reshma. Now we have had a long interest in business development. We have this fundamental belief in investing in innovation, be it internal or external. Last year, we did over $1.5 billion worth of business development activities. And that interest remains. Our desire to have business development be one and the same in terms of strategic approach with internal R&D, that remains. And very specifically, our three pillars of interest, that remains exactly the same. That is to say, we are interested in CF, particularly in technologies that could help us with the last 10%. We continue to be very interested in tools like we did deals with Affinia and Moderna and Arbor and others. And we are very interested equally in assets that could tackle diseases that are in our sandbox. Now the one thing that has changed, I think, pretty obviously, is our growing financial strength. And we certainly have the capacity to do more deals or bigger deals. And from that perspective, what we are really focused on is our strategy. And we're prepared to use our balance sheet for business development opportunities that fit within this very disciplined strategy that I've laid out. I'll quickly get through to our mRNA. I think you must be asking about the collaboration with Moderna. I'm pleased with the way our teams in San Diego and Moderna are working together on the CF last 10% program. And with CRISPR-Cas9, that is in partnership with CRISPR Therapeutics. As you heard in the prepared remarks, since the summer and since EHA, we've enrolled more patients, we've dosed more patients. Those early results were very impressive to us, two in beta-thalassemia and one in sickle cell, that we presented over the summer. And for sure, those are small numbers of patients. But it is really a functional cure for those patients. And we're very much looking forward to the results that we intend to share before the end of the year with more patients being treated and longer duration of follow-up.

Our next question comes from the line of Geoff Meacham from Bank of America.

I just have a couple. One, Stuart, with COVID accelerating in Europe and countries going into full quarantine. The question is, what, if any, are there tweaks to the launch plan? And then the second question, Reshma, I thought the stock reaction after the AAT setback was a bit overdone, but it is implying that there's not a lot of investor confidence in the portfolio behind CF. So to put an emphasis on Salveen's question. Is there urgency to move the pipeline to mid- or late-stage through a larger scale BD? The pipeline is broad. It just seems like it's early, it won't catch up in time for when CFs potentially starts to moderate growth wise?

Yes. Thanks for the question. Let me ask Stuart to go first, and then I'll come back for the second part of your question.

Yes, Geoff, thanks for the question. So obviously, the reaction from the community to KAFTRIO in Europe has been high exactly as we saw here in the U.S., and we fully expect, over time, that we will treat the vast majority of eligible patients. The real question is, how quickly are we going to get to that destination and obviously there are a number of factors that are important there. But clearly, one is the ongoing and rapidly changing pandemic. In terms of changing our launch planning, which I think was your question, it really hasn't changed our launch planning at all. We had been planning since March for a fully virtual launch, and that's what we are executing right now. Obviously, that causes some uncertainty; the pandemic leads to uncertainty about how easy it will be for patients and physicians to interact. So that's why it's certainly uncertain as to how we will — how quickly we will get to that kind of peak uptake. The early trends are, I have to say, very encouraging. Obviously, in this quarter, we were just a few short weeks into the launch, but the early trends are encouraging. And as I say, we expect to get to the vast majority of them over time. The real question is just how quickly we get there.

And about your question for the pipeline, including business development, I think if I just stand back and reflect, I think you're really talking about how do I see growth in the coming years, the next decade. Let me parse that out into two parts. We have to be very careful about making sure that we don't forget about CF. So where we are in CF, as you heard Stuart talk about, we are at a place where we have TRIKAFTA, KAFTRIO, which can serve up to 90% of patients. But that is not all today. It means that there are some patients in some geographies where there's regulatory approval and reimbursement, but we haven't yet gotten to those patients. And then, of course, there's the 20,000-plus patients that we are going to get to with future approvals and reimbursements. And then there is the last 10% of our CF patients. So that is multiple years of getting to more and more patients and by treating more and more CF patients, more growth for the company. Then let's go very specifically to the non-CF pipeline. And I want to make sure I take a minute to really go through this. The non-CF pipeline today, this is not in the future, this is not one year from now, it's not even a few months from now, today. The pipeline is already in Phase II. So it's in proof-of-concept stage in five disease areas. And let me just make sure I take another minute and just underline a few important points. In the CRISPR CTX001 program, beta-thalassemia, we shared clinical proof-of-concept results in beta-thalassemia over the summer time frame. We anticipate proof-of-concept results for sickle cell disease by the end of this year when we share the data from the patients who are currently going through their treatment. That's two. AATD, and this one is really important. You'll remember that 814 and 864 were, let's say, six months apart, something like that. It's certainly months apart, not years apart. And while disappointing, our strategy fully contemplates that molecules and programs may not succeed. And that's why 864 was already in the clinic already in Phase II, and we do expect those results in the first half of 2021. Moving on then to FSGS, that's also in Phase II. And then just to go a little bit more into the pipeline, the type 1 diabetes program, that IND is going to go in by the end of this year, which means that's going to be in patients now, that means in patients, not in healthy volunteers, but in a Phase I/II in patients in 2021. So I think when you really carefully look at the pipeline and you stand back and say, 'Where are we really?' I think we're in a really good place, five disease areas already in the clinic with more coming through up in the pipeline and much to look forward to even in the last few months of this calendar year. And what I mean by that is the 6 to 11 in CF, that application going in, the CRISPR data coming out and the IND for type 1 diabetes. I hope that helps.

Our next question comes from the line of Paul Matteis from Stifel.

One AAT and one commercial, if you don't mind. On AAT, in the 814 press release, you mentioned that analysis of the PK data from the study indicated the exposure levels were low. Did you imply that they were lower than seen in healthy volunteers? And if so, what would you make about that? Could that have anything to do with the fact that these AAT patients may have livers that operate differently? And then commercially, just one question on ex-U.S. price. I know you're not going to disclose granular details. But as you think about price of TRIKAFTA, or the triple outside of the U.S. in year one, with the country mix you're launching in initially, how might that compare to kind of the long-term price that you're anticipating?

Well, let me take the first part of your question first, and then I'll ask Stuart to comment on ex-U.S. pricing. So with regard to 814, that study is obviously an incomplete study. What that means is that we don't have all of the patients in all of the dose groups, completing the full treatment period, and we're in the process of closing out that study and bringing all that data in. From the data that we did have access to, what we see is that the exposure across the dose range is lower than the target exposure that we were looking for. And the target exposure that we are looking for is the range at which we expect, let's call it, therapeutic elevations of AAT levels to have occurred. Now when we think about why there might be low PK, there's a standard list of things one thinks about. And yes, you're right, healthy volunteers are different than disease patients in that one's healthy and one has the disease. But there are actually a number of other differences. Differences in age, differences in gender, diet, concomitant medicines, formulations, et cetera. So those are the kinds of things we think about. Absolutely, as we bring in all the data, we're certainly going to evaluate all of that. I think the important point, though, is that 864 is the medicine that's in Phase II, and we're looking forward to the 864 study to give us a full view of this pathway and this mechanism. You asked a question in there, before I turn it over to Stuart, about livers. There's about 100,000 people in the U.S. who have AATD and we have no evidence that they react differently to oral medicines. So I don't have any evidence of that. Stuart, over to you for the question about pricing in Europe.

Yes. So Paul, I think it's important to think about the two types of countries that we are able to get the medicine to immediately. So the first one is countries like Germany, which provide immediate access and there, because of the structure of the German market, you get immediate access for patients at the list price, whilst you negotiate price over the next 12 months. Whereas in contrast, countries like the U.K., Ireland, Denmark, where we negotiated prior to the approval, the negotiated price for KAFTRIO there, we are essentially selling at our final price. So moving forward, we're going to be entering more and more markets where we have negotiated prices. Your question was, how will the negotiated price compare? It's really hard to say because we haven't finalized those negotiations. But in general, I'm expecting our negotiated prices to be similar to our other medicines, in a fairly narrow range across Europe because we know that the products provide the same value and benefit to patients no matter what country they're in.

Our next question comes from the line of Alethia Young from Cantor.

I just wanted to ask one more around AAT. Can you talk about some of the scientific work that you've done to address when you were formulating these molecules, the efficiency that's going to be needed to clear the large amount of AAT created? I know you've been very thoughtful about that. So just wanted to get some more detail on that.

Yes. Sure. I'm going to ask David to give you some color on how we think about this molecule. I think what you're really getting to, Alethia, is that AAT as a protein is an abundant protein. And I'll ask David to give you some of our insights. Obviously, we're not going to give you the full experimental detail here, but David will give you some color.

Thank you for the question. One of the reasons we've been excited and remain very excited about this program is because it's the only approach that has the potential to address both the lung disease and the liver disease in this condition. The key thing to the question you're asking and why the solution is so promising is because although there is a lot of AAT made, one molecule of the drug can refold, or appropriately fold, more than one molecule of AAT. So it's really not a concern that we have based on all the experiments we've done in molecules and cells and animals about whether or not one molecule can do the work. And it just underscores our commitment to beyond 814 and being very excited about 864, and also other molecules because this mechanism has so much promise.

Our next question comes from the line of Michael Yee from Jefferies.

Two-part question around AAT. I guess you can see from some of the questioning that maybe there is a hypothesis that some of it might be mechanism-based either because it's specifically a liver-targeted drug, and you're actually trying to bind aggregates in the liver. So I guess my question is, one, how confident are you that it's not something mechanism related there other than the preclinical model since it's a liver-targeted drug, and that might be related? And two is, how fast did it come on in 814? And do you have some degree of confidence here, at least as the early part of the study for 864, to make us feel a little bit better?

Mike, I think the bottom line to your question is to help us understand why we think this liver finding is not going to be a recurrent finding in 864. I will ask David Altshuler to comment on why we don't think it is on mechanism. I'll just say that I cannot promise you that any molecule in our pipeline will not have a safety finding. That is why we do Phase II studies, to assess safety, PK exposure and the primary end point. But I don't believe that this is an on-mechanism finding, and I'll ask David to walk you through the multiple lines of reasoning and what we've seen in our animal models because we have studied this in great detail in our mouse models to evaluate the liver. David?

Thank you. One thing I'll say before I go through that is we have no evidence that this is a liver-targeted drug. This is a drug that acts on a protein that's expressed in the liver. One of the things we're excited about is that AAT is not only made in the liver; it's actually made in other cells of the body. This drug is systemic. It would be incorrect to say this is a drug targeted to the liver, even though it does act on the liver. Then, the three lines of logic that make us think it's premature to conclude this is on-mechanism: First, most LFT abnormalities are chemical in nature, not mechanism-based. Second, we've specifically studied in mouse models the human ZAAT protein being corrected with multiple compounds in chronic studies and we see improvement, not liver toxicity. Third, the notion that the liver of an AAT patient can't tolerate medicines is not supported by evidence; there are many people with AATD and no signal that they react differently to medicines. So, we don't think it's the right conclusion, but we'll certainly look forward to the 864 data.

And just a follow-up: the comment on 864 and how far you've gone and whether that gives some degree of confidence versus 814?

It's very early days on 864. We are in the early parts of that study. So I don't have more details for you. It's a study that will take some time to complete, given that we expect our results in the first half of 2021.

Our next question comes from the line of Cory Kasimov from JPMorgan.

So just trying to understand the ultimate opportunity for TRIKAFTA, where do you see pockets of patients that are more difficult to get on label or bring in for treatment beyond just the 10% that aren't amenable to CFTR modulators? And how do you just quantify that in the context of the estimated 68,000 CF patients eligible for TRIKAFTA? And then I have one quick follow-up.

This is Reshma. I'm going to ask Stuart to comment, but I want to make sure we set the frame correctly. The number that we use is 75,000 total patients. The 68,000 represents 90% for whom a medicine like TRIKAFTA could offer potential. The last 10% are those who need a nucleic acid approach. Stuart?

Turner, thanks for the question. Based on our experience in the U.S. over the past year, across all eligible types — those who were naive to therapy, those who were already being treated with ORKAMBI and SYMKEVI, those who had discontinued — we have seen very strong uptake. I really can't identify a group of patients that has been more difficult to initiate on TRIKAFTA. In terms of future growth, as I mentioned, with the approval of KAFTRIO in Europe, we're hoping to replicate what we've done in the U.S. We are encouraged by early trends in Germany and the U.K., Ireland, where we already have access for patients. We need to secure similar reimbursement agreements across the rest of Europe to access those patients. In total, if you count those patients and additional patients who we can get to through expanding the KAFTRIO label to other countries like Australia, going to younger age groups with TRIKAFTA and KAFTRIO, such as the 6 to 11 year olds, and further expanding our portfolio to younger patients and other mutations like rare mutations, in aggregate, in addition to what we've already delivered, we think there's over 20,000 more patients that we will be able to benefit. We continue to feel good about where we are but we know the job is not done, and we have a long way to go to make sure that 90% of patients that are going to be eligible for CFTR modulators have the ability to try one. And then, as Reshma said, in addition to that, we're continuing to work hard to develop new medicines and new interventions for the 10% who won't benefit from the CFTR modulator.

That's helpful. And then just understanding that you're bringing in the remaining 814 data. Is there a potential chance that we get a glimpse at the data prior to seeing 864 results as we're just trying to benchmark 864 for ourselves? If so, to what extent of the data could we potentially see? Or alternatively, do you plan on publishing preclinical 814 data?

We will bring all the data in from the VX-814 program as we close that out. The key finding there is that we had lower than targeted exposure and we didn't achieve the target range. I don't have high expectations that the 814 data will be highly informative for predicting 864. I think the key thing to look forward to is VX-864, and those results. We are working expeditiously to get that trial enrolled and to see those results, which should be available in the first half of 2021.

Our next question comes from the line of Mohit Bansal from Citigroup.

Given that FSGS is a small trial and relatively short, is it possible that we could see that data even before the AAT data? This trial did not stop because of COVID. And the follow-up question is, APOL1 mutation is implicated in many kidney diseases. So if this first compound were to be successful, do you have any plans to go into those broader indications like lupus nephropathy and other indications?

With regard to the trial, you're right, it's a reasonably efficient trial. It is a 12-week trial, so it's a little longer than the AATD program which is shorter. It's a bit early to precisely call timing for both the 864 program and the VX-147 program. They're both active, enrolling and dosing, but it's a little early to call. On FSGS, the endpoint is proteinuria and that seems to be an acceptable endpoint to regulators, so I'm particularly eager to see those results. I'll ask David to tell you more about APOL1-mediated kidney disease. David?

APOL1 strikes us as a really compelling target for the strategy of using human genetics and genetically validated targets to address unmet needs. The idea is to first go into FSGS, which is a severe disease strongly driven in certain populations by APOL1 genotype. But in addition, there are many patients with non-diabetic proteinuric kidney disease for which APOL1 is a driver. If we get proof-of-concept for the mechanism in FSGS, our expectation would be to be able to go into a variety of other indications. It's a compelling common genetic risk factor with a major effect on proteinuric kidney disease where there's great unmet need.

Our next question comes from the line of Gena Wang from Barclays.

Could you help us understand a little bit regarding differences between healthy volunteers and patients in terms of exposure and the drug dose that will make you feel more confident that 864 will show a better clinical profile? And my second question is regarding the beta-thalassemia and sickle cell program. Should we expect the late-breaking abstract at ASH? Will we see data beyond the seven patients that were announced, and what would be the plan for the registration path from here?

You should expect to see more data from the CTX001 program. You should expect to see data in more patients and longer duration of follow-up in both beta-thalassemia and sickle cell disease. We'll be patient with regard to the exact venue of those data. David, any quick comments on 814 versus 864? They're structurally different and we would not necessarily expect the same kind of problems again.

All I would say is we were saying about the idea of LFT abnormalities being chemical specific; we meant specific to the particular molecule. And 864 being structurally different than 814, we would not necessarily expect to see the same kind of problems again.

Our next question comes from the line of Robyn Karnauskas from Truist.

I had a question about your diabetes program. Where are you in terms of timelines for the device? How much work is left before you can think of moving into patients and does the IND that you expect to file cover both of those opportunities? Are you looking at them as independent programs or do they have to be done in sequence?

I appreciate the question. The type 1 diabetes opportunity is two shots on goal. The first is naked cells, which is the IND we're submitting by the end of this year and anticipated to be in the clinic in 2021. That program could serve patients with severe hypoglycemic episodes and those post kidney transplant already on immunosuppression. The second, higher-reward program is encapsulated cells in a device, which could serve a much larger population. That's the second program we'll bring forward. The IND going in by year-end is for the naked cells program.

Operator, we're coming right up on the hour, so we'll take two more quick questions.

Our next question comes from the line of Geoffrey Porges from Leerink.

You have $6.2 billion in cash on the balance sheet. You're generating about close to $1.25 billion in free cash flow or you will be by the end of the year. Hypothetically, if you could have $12 billion in cash in the middle of next year, could you give us an idea how you plan to deploy that capital? You've had questions on the call about BD activity, but that's a huge amount of cash and you have no debt. What are you thinking of doing?

Jeff, thanks for the question. We are very pleased with the way the business is progressing and the strength of our balance sheet. At our core, we believe the best deployment of our capital is in innovation. I'll ask Charlie to give you more specifics on how we think about that.

Jeff, with the strength of the business and cash flow, we are focused on capital allocation. As Reshma highlights, we clearly believe the best use of capital is to invest in innovation. You've seen us be very active over the last two years in business development, gaining access to important platform technologies and capabilities as well as assets that have helped broaden and deepen the pipeline, with Semma and Exonics as examples. Looking ahead, you can expect that we'll continue to be active. The BD team is active. We have the balance sheet capacity and flexibility to do more and potentially larger deals. Importantly, we intend to stay very close to our corporate and research strategy because we feel that's the best opportunity for us to add value and drive ROI over the long term.

Our final question for today comes from the line of Evan Seigerman from Crédit Suisse.

Do you have any color as to what you might need to show at a pivotal or registration-directed trial in terms of efficacy or follow-up for CTX001 in sickle cell and beta-thalassemia, just to give us a sense as to when that could potentially be part of the Vertex commercial story?

It's a bit early to call exact numbers of patients and duration of follow-up for registrational packages, but the early results we've shared are exceptional. The results we presented over the summer represent a functional cure for those patients. We have regulatory designations like PRIME and RMAT, Fast Track, that facilitate conversations with regulators. The studies we're doing are in the right patients: for beta-thalassemia, both beta-zero/beta-zero and non-beta-zero patients; for sickle cell, severe patients with multiple VOCs. We're looking forward to regulatory interactions and will update with specifics after discussions with regulators.

Okay. Thank you, everybody, for joining us on the call tonight and on the webcast. We appreciate it. The Investor Relations team, if you have additional questions, is available tonight. Please reach out to us. We'd be happy to help.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.