Conference Transcript - VRTX 2026-05-19

Brian Abrahams, Analyst — RBC Capital Markets

All right. Well, thanks, everybody, for being here. Again, I'm Brian Abrams, Senior Biotech Analyst here at RBC Capital Markets. I'm really pleased to have our next featured company, Vertex Pharmaceuticals, represented by their CFO and COO, Charlie Wagner. Charlie, thanks so much for being here. Yeah, thanks for having us. So a lot I would love to cover, but why don't we start with CF? It's obviously been a core driver for many years for you guys. Can we talk about the growth opportunities in CF? And maybe in the near term, can you elaborate a little bit more on the additional 800 patients you've talked about with the Trikafta and AleveTrek label expansions this year? I guess just what we should expect, the cadence of those patients coming on therapy to look like, how quickly you're seeing that happen, how many of those patients were already being treated off-label. And then as we kind of look beyond that bolus, 2027 and beyond, and some of the additional age and geographic expansions, What do you foresee as the key additional growth drivers for the CF franchise over the long term? Because it's continued to grow so nicely, and you've got more and more patients. Talk to us about what the cadence looks like from here on in.

Charlie Wagner, CFO

Yeah, listen, we continue to be really excited about CF, very proud of the leadership position that we've built over the last 20 years. you know we have an outstanding portfolio of medicines and hundreds of thousands of patient years of experience at this point and yet the business continues to grow generally speaking the playbook in cf has been a few drivers it's serial innovation it is moving to younger patients it is picking up patients with rare mutations who maybe couldn't benefit from previous generations of medicines. It is geographic, expanding access and reimbursement through geographic expansion. And then lastly, there is a benefit from price increases as well. You see all of those playing out in the guidance that we gave for 2026. And maybe if you don't mind me backing up, the company's guidance for the year is revenue of $12.95 to $13.1 billion. We said that that includes 500 million or more from Caschevi and Gernavix, so implied the resulting revenue from CF, and that implies healthy growth over 2025, and it's all of those drivers. Obviously, we see the Lyftrek uptake both in some naive patients, particularly those with rare mutations, some from patients who've discontinued from previous medicines, and then significant switching for lift track as well and that's we'll talk about that as well and that's the serial innovation piece um you know we continue to uh see younger patients coming on medicine and then we haven't talked as much about geographic expansion this year but for example um a lift track we got a lift track reimbursement agreements done in 11 countries in the first quarter um and then a lift track aside for a second in recent years we've expanded to markets like brazil mexico turkey not some of the core european markets where that drove the growth three four or five years ago but those have those markets have a significant number of patients and we continue to try to reach cf patients wherever they are around the world so so if you look at 2026 i would say healthy growth drivers the themes will be the same in 2027 we are filing for approval for a lift trek two to five late this year um trek capital one to two and so hopefully would expect approvals in those younger age groups next year you'll continue to see some geographic expansion so very much the same themes and year to year the mix is a little bit different but we continue to

Brian Abrahams, Analyst — RBC Capital Markets

see growth in cf excellent and then maybe speaking of a leaf trek conversion seems to be progressing steadily, I think particularly outside of the U.S. How has this aligned with your initial vision? And are there ways to accelerate this further in the U.S.? How have some of those initiatives started to take hold? And what is the level of importance on conversion? Or is this something you just will kind of step back and let play out organically over time? Yeah.

Charlie Wagner, CFO

Yeah, listen, it's crystal clear to us that they lift outstanding efficacy in PPFEV1, great results on sweat chloride, great safety profile, convenience of once-a-day dosing. So it is the best CFTR modulator we have. That said, we've learned that people are super loyal to their Trikafta, and so that's not a terrible thing either. They're doing well on it. Yeah, they're doing incredibly well. So if you look, we have said, we've described the rate of switching from Trikafta to a lift track in the U.S. as steady, and that continues. And to your point, certainly the results in the first quarter were very good. Outside the U.S., you see even, let's say, a steeper ramp for a lift track for a couple of reasons. One, I'd say European physicians are very, very attuned to sweat chloride. and the advantages of lift track on sweat chloride are very clear to them the label is a little bit different in europe and therefore doesn't require liver monitoring to switch and so there's less of an impediment there and then lastly um there were a series of rare mutations that were picked up in the lift track label and there are more of those rare mutations in europe than there are in the u.s so you do see a little bit of a steeper ramp in europe in markets where it's reimbursed so so important i mentioned we had 11 reimbursements in the fourth quarter we are a lift track is reimbursed in several large markets like the uk ireland germany italy but not throughout europe so there are additional reimbursements to gain over the course of this year that'll also fuel the lift track ramp so i would say overall it's it's been very much in line with our expectations i think we reported uh in the first quarter earnings call that cumulatively now a lift trek has surpassed the billion dollar mark since launch and if you look at the kind of sequential ramp in the first quarter i think things look really good for a very strong year for a lift trek excellent great um let's shift gears to acute pain and intern avics i know you guys have talked about a lot of really good progress you've made on on medicare deals securing reimbursement access overall what's left to do and when should we expect that we're going to start to see

Brian Abrahams, Analyst — RBC Capital Markets

the strong prescription density you're seeing pull through to revenue, more robust revenue growth. I know there's some first quarter dynamics like inventory that may have obscured things, but maybe talk us through what's kind of the expectation around that.

Charlie Wagner, CFO

Yeah, no, and listen, I personally am very excited about the Jernavix launch and the progress that we're making. Again, if I could bring it back to the guidance, we said that Jernavix and Casjevi combined would represent $500 million or more of revenue this year. Additionally, with regard to Jernavix, we said that prescription volume would triple compared to 2025. We are off to a great start on that in the first quarter. And prescriptions will triple and revenue will more than triple because there will be a higher revenue conversion as gross to net normalizes. So you can sort of take all that into account. um you know first quarter you asked about progress the progress on access has been fantastic um so we previously reported we got the third of the large pbms signed uh at the very end of 2025 those as you contract with those sometimes it takes a little while for um the economics to trickle down into the some some of the subordinate plans throughout the first quarter but we've made very good progress there with commercial payers and are largely done. We secured a large Medicare provider in May and are in conversations with a couple of more. Would hope to have an update on that sometime this summer. We'll see. Negotiations take as long as they take, basically. But at this point, we have 240 million covered lives. And so we're really far along in terms of our expectations for coverage and certainly would hope that by the end of this year that we're not talking about accessing coverage anymore. I think that would be the goal. So with that, as we gain coverage, we are able to roll back some of the free drug that's being offered through the patient support program. That, of course, in turn helps normalize gross to net. And as that gross to net normalizes, you get better revenue conversion on the prescriptions. So you mentioned the first quarter with 350 000 prescriptions uh 29 million in revenue there was i i appreciate that outside the company you can see revenue and you can see prescriptions what you can't see is shipments and so there is a little bit of a timing difference between shipments and prescriptions and so we had a small channel inventory build in the fourth quarter that drew down in the first quarter i'm not expecting to talk about that any further in the second quarter and we have said publicly we expect to see a meaningful sequential ramp in gernavics revenues in q2 and and so we shouldn't expect that access would come with any more barriers than the free drug program in other words should the will removing the free drug program change the cadence of utilization yeah in our view it should not so so we have worked very hard in these contracts to avoid things like step edits and other impediments to accessing the drug. In some cases, that's why it's taken longer to negotiate contracts. But in our view, that's well worth it. We don't want there to be impediments to accessing a drug like Gernavix, and we're willing to wait and secure the right type of access at the right value. So again, now five quarters, if you will, into the launch, I think access and coverage is becoming less and less of a story, and now it's about revenue conversion. Great.

Brian Abrahams, Analyst — RBC Capital Markets

Let's talk about some of the pipeline. So on Povitas accept.

Charlie Wagner, CFO

Yep.

Brian Abrahams, Analyst — RBC Capital Markets

Our KOL feedback has indicated a huge appetite for April BAF agents in IGAN, but maybe a little bit less certainty around how the late stage agents differentiate from one another. What are the key learnings that you can take from the SIBI launch about the market and your commercial strategy that can potentially benefit you as a fast follower there? And what do you think you need to do to convince docs around POVI's differentiation, especially once one, if not more, of the other competitor drugs potentially do have a once-monthly sub-Q label?

Charlie Wagner, CFO

Yeah, no, I appreciate the question, and it's good that your KOL checks match ours, which is that for those docs that distinguish between APRIL and APRIL-BATH, there's a very strong preference for APRIL-BATH. I would say we've said with POVI, it's an engineered fusion protein. That engineering leads to greater binding and affinity and potency and PK distribution. So HOBI really is designed to be optimal for impacting APRIL-BATH. We've talked about the profile. You saw the results from the trial that we published recently, 52% reduction in UPCR, 77% reduction in GDIGA autoantibodies, 85% resolution of hematuria. And that was true. The efficacy impact was true across all cohorts, so gender, age, race, geography. Importantly, the impact is deep and sustained across all types of patients, which we think is very powerful. Additionally, the safety profile was excellent. No SAEs attributed to POV, no serious and very low incidences of serious infection, similar to what we saw with placebo. Nobody discontinued the trial because of SAEs or serious infection. So a great profile there. And then lastly, we do think the presentation of the drug, the patient factors are important as well. It's a low dose, 0.46 ml monthly dosing auto injector. So the convenience, not just convenience, you know, these drugs only work if you take them. And if you are worried about a self-injection, a format like POV is outstanding. So we think it's the trifecta, if you will. It's the combination of those factors that really differentiate POV. And we are certainly in our pre-approval conversations out there emphasizing those benefits. You asked specifically about the Atsuka launch. It seems like the launch is off to a good start, right? And that's great. I think our view is that this is a huge market with a lot of unmet need. 160,000 patients in the U.S., more than enough room for multiple transformative therapies. I have no doubt our view is that POVI is a best-in-class offering, and we intend to be delivering that message consistently. But, you know, the early signs on that launch are promising because there are patients there that are eager for access to transformative medicines. Timing-wise, obviously, we have submitted for accelerated approval. We're waiting for acceptance of the filing, hopefully very soon. And if that is the case, then we would at least be on track for the possibility of accelerated approval at the end of the year.

Brian Abrahams, Analyst — RBC Capital Markets

We're coming up on EGFR data from Atsuka in the very near term. So I guess what do you guys think constitutes good data versus not good data, and what's good for Vertex and POBE? In our data or in their data? In their data. Because, you know, this has the potential to validate the connection of proteinuria, further validate the connection of proteinuria and EGFR, but at the same time, you know, if there's room for improvement, that could also benefit you guys. I'm curious what you guys are expecting, looking for, hoping to see.

Charlie Wagner, CFO

I think the literature and the KOL view and our view is that proteinuria reduction and EGFR stabilization are very, very highly correlated. You see that in the data from the Ruby trial and from other companies' trials that there is a high correlation there. So I suppose with the Otsuka EGFR data, we're not expecting any surprises. I think the correlation is well understood. but we'll see um you know with povey again part of our part of the accelerate the filing for the accelerated approval we're submitting of course upcr any egfr data we're not able because of agency restrictions can't communicate the egfr data at this point but uh given the the high correlation between the two markers um we're not expecting any surprises there okay and then beyond again you have a program in gmg generalized myasthenia gravis as well how important is that market and how quickly can you move into a pivotal study there yeah so uh i as we talk about gmg we should just talk a little bit about pmn as well i think between eigen pmn and gmg you can already see validation of the thesis that we had about povy being a pipeline in a product um and i am personally really happy to see that playing out so quickly. So we do have a trial ongoing in PMN as well. Phase 2-3 there. Specifically, you asked about GMG. We think that POVI is really well suited for GMG. GMG is sort of a prototypical B-cell mediated disease. The majority of patients with gmg have elevated bath april levels hovi targets bath april so we really feel confident that it's a good fit there there is as you well know there is data from another company in china that shows that these mechanisms can have a serious a significant impact on gmg and so for those reasons we had confidence in moving forward into a phase two trial i can't really give you an expectation on timing that trials enrolling and it will take as long as it takes but we do think povy is well suited not only because of the the mechanism and the impact on bath april but also because some of the existing medicines for gmg have limitations because patients have to cycle on and off because of concerns about adverse events whereas we believe povy is going to be able to be dosed chronically given the safety profile and that consistency of action on the disease we think is valuable so we think there's a great opportunity we think povy is very well suited to it but we'll we'll let the data speak for itself okay good um going back to cf for for a second and on the maybe some of the next generation uh agents i know you have several in development, 828-581-272.

Brian Abrahams, Analyst — RBC Capital Markets

You guys have been serial innovators in the space. I guess when would you make a go? What would you be looking for to guide a go, no-go decision there? And if you see some early biomarker data that looks strong, are there ways to potentially craft a pivotal program to potentially enable a next-gen to reach the market, even if you may already be at a ceiling, an FEV1 with Trikafta and Aliftrek? Like, I guess, how can you do, what are you looking to try to show so these next-generation drugs can actually do better than what's out there for the high bar you've set?

Charlie Wagner, CFO

Yeah, and if you don't mind, I'll just kind of reaching back to what I said earlier. You know, Aliftrek is the best CFTR modulator on the market. We think the benefits, even over Trikafta, are meaningful. And so it sets a really high bar for subsequent development by us or anybody else for that matter. That said, given our decades of leadership and our commitment to the CF community, we're going to keep trying to do better than a lift track. One of your questions was about what are we looking for and when will we advance? And I think the answer is that we want to keep that to ourselves right now. So we will have data on 828 later this year. Of course, we'll be looking at things like safety and tolerability and sweat chloride, looking at some other dimensions as well. Behind 828, we have two other molecules as well, and they're not so far behind 828. So there's a scenario where we wait to see which is sort of the strongest horse in the stable there, or it's possible that the data is so compelling that we move right ahead. So we're going to reserve the right to make that choice. In terms of trial design, how do you move it? Yeah, I'm going faster. I mean, listen, the agency's pretty clear on endpoints for CF trials, and they're crystal clear on the existing standard of care. So while we like to think of ourselves as always innovating, including in our approaches to regulatory, I think the reality is that we or anybody else is going to have to run a full, large trial against the standard of care. And so I'm not sure there is a way to make that go faster, again, for us or anybody else.

Brian Abrahams, Analyst — RBC Capital Markets

Maybe just in the last few minutes, you guys are in a pretty favorable capital position. In fact, we did an analysis, and this was sort of back of the envelope, but from what we can tell, you're one of only two large biopharma companies that are net cash positive, that don't have net debt. You've had some time now to absorb Alpine. Yeah. I guess where do you stand with regards to that overall integration? And just because you're in a favorable capital position doesn't mean you need to necessarily deploy your capital and you can be opportunistic. But how do you think about that overall? What's your appetite for looking externally at BD opportunities? Do you like what's out there? Where might you go? The ways you might deploy this capital?

Charlie Wagner, CFO

Yeah. It's a great question. And it's in my seven years with the company, it's been very interesting, which seven years in the scheme of things isn't that long. And the company had only become cash flow positive slightly before that. Right. So we don't have a long history with capital deployment. But in that said, in the seven years, I think we've we've been pretty responsible. So top priority does continue to be investment in innovation, both internally and externally. So we have an appetite for BD. I am really proud that we got the Alpine deal done in 2024. And again, like I said, it was the right deal, the right disease, the right size, the right stage of development. And I think the whole, not only Povie and I can, but the pipeline and the product really is validated by what we're seeing. So that's encouraging. It's fully integrated at this point. um and so the the organization has capacity i mean it was a significant effort to integrate it and accelerate it but that um you know i think it's it's in a steady state right now so bd continues to be a top priority maybe the only challenge and i think it's a it's a good one is that we have incredibly high standards for science and medicine so there just aren't a lot of assets or companies that kind of clear the hurdle for us but when we find one that does we move decisively and that's what we did with Alpine. So we are active in BD. We'll continue to be active and do what we need to grow the portfolio as a secondary use of capital. We've also scaled our share buyback program over the last several years. Again, at the beginning of my tenure, we had a $500 million authorization. We currently have a $4 billion authorization. And we lean into that authorization in periods when we think the stock is not priced correctly. And so there have been periods where we've been very light in terms of share repurchase, periods where we've been very heavy in terms of share repurchase. And so I like the flexibility of that program, the combination of innovation and share buybacks. That's likely, that's certainly the right order of priority, and that's the program for the next little while.

Brian Abrahams, Analyst — RBC Capital Markets

Any particular profile of what you might be looking for externally?

Charlie Wagner, CFO

Are you looking for the next Alpine, like pipeline in a product, de-risked late stage specialty indication or might the next bd transaction be larger smaller different in profile obviously hesitant to try to characterize that again alpine was a wonderful deal and of course if we could find something similar given the the great experience we had with that it would be wonderful but we're much like we're modality agnostic we're a we're a bit agnostic on bd2 which is there are certain programs where what we need is early stage technology or access to capabilities We'll go get that. But, yes, if we can find something that is, you know, further along in development where we can still add value, either clinically or regulatory or commercial, that's a great fit for us. And I think we have the confidence and the positive experience from Alpine to, you know, to stay active. Out of time. Charlie, thank you so much. Really great to speak with you. Thanks for having us. Appreciate it.