福泰製藥 (VRTX) 2007 Q2 法說會逐字稿

Good afternoon. My name is Heather, and I'll be your conference facilitator today. At this time, I would like to welcome everybody to the Vertex Pharmaceuticals conference call.

All lines have been placed on mute. After Vertex' remarks there will be a question-and-answer period. (OPERATOR INSTRUCTIONS) Lynn, are you ready to begin?

Yes. Thank you.

Thank you. You may now begin your conference.

Thanks, Heather. Good afternoon, everyone.

This is Lynn Brum, Vice President of Strategic Communications and welcome, everyone, to Vertex' second quarter 2007 conference call.

We made significant progress in the first half of 2007 and met major milestones across our product pipeline. In particular we generated significant data on telaprevir from our global Phase II development program including safety and efficacy data from PROVE 1 and PROVE 2. These data are enabling us to identify regimens and durations suitable for late-stage development.

On today's call we will cover second quarter financial results, telaprevir development and pipeline. Topics will be discussed and expanded upon during today's call by Ian Smith, John Alam, Kurt Graves, who joined Vertex earlier this month as Executive Vice President, Chief Commercial Officer and Head Strategic Development, and our CEO, Joshua Boger.

Before I turn the call over to Ian I'll remind you of the following. Information discussed on this conference call includes forward-looking statements which are subject to the risks and uncertainties discussed in detail in our reports filed with the Securities and Exchange Commission including our 10-K.

GAAP and non-GAAP financial measures will be discussed on this call. Information regarding our use of non-GAAP financial measures and the reconciliation of those measures to GAAP is available in our second quarter 2007 financial press release which can be accessed on our Web site at www.vrtx.com.

Unless otherwise noted all 2007 expenses and guidance discussed in this call are inclusive of stock-based compensation.

As always, you can visit vrtx.com to listen to the conference call and view a Power Point presentation or download a podcast.

Lastly, after our prepared remarks we'll accommodate as many questions as time permits. Once the call concludes our IR team joined by John, Ian, and Kurt, will be in the office to answer any additional questions you may have.

I'll turn the call over to Ian.

Thank you Lynn. My remarks today will be brief.

Firstly to the second quarter 2007 financial results. The second quarter non-GAAP loss before certain charges was $95.4 million compared to a 2006 non-GAAP loss of $66 million.

The increased loss was due primarily to an increase in development investment for telaprevir including investment into our commercial supply chain. Our second quarter GAAP net loss was $117.8 million compared to a second quarter 2006 net loss of $78 million.

Total revenues for the second quarter of 2007 were $38 million compared to $30 million for the second quarter in 2006. This increase in revenue is primarily driven by collaborative R&D revenues and, more specifically, the contribution from our J&J collaboration.

Combining the development based revenues with continuing HIV product royalties, we expect to continue to receive significant funding that will provide support to our overall R&D investment.

Now to R&D. Our total R&D expense was $136 million compared to $91 million in the second quarter of 2006.

This increase reflects advancements across our pipeline including the investment into the global Phase IIb clinical program of telaprevir, a $19 million investment into the commercial supply chain for telaprevir, the start of the Phase II trial of VX-770 in patients with cystic fibrosis, and the ongoing Phase IIa study of VX-702 in rheumatoid arthritis.

Our second quarter SG&A expense was $23 million compared to $14 million in the second quarter of 2006. This increase reflects costs associated with building infrastructure that we have undertaken to support the clinical advancement and the commercialization of telaprevir.

Now turning to our balance sheet. We ended the second quarter with approximately $617 million of cash, cash equivalents and marketable securities and we have $42 million of convertible debt remaining which is due in September 2007.

In closing, we are reiterating our guidance for 2007 GAAP and non-GAAP loss and our cash, cash equivalents and marketable securities that we originally provided on our year-end 2006 conference call in February 2001.

In summary, the substantial clinical progress and investment we have made across our pipeline has been supported by maintaining a strong balance sheet and funding from our R&D collaborations.

I'll now turn the call over to John.

Thank you, Ian.

I'll begin today with telaprevir. I'll briefly summarize our recent progress and provide perspective on our goals for the remainder of the year. The start of Phase III is our top corporate priority and I know it's of high interest to many of you.

Year-to-date important pieces of data have emerged that have guided our thinking on the Phase III trial design. Specifically supporting 24 weeks as a viable total treatment duration for study in Phase III.

The most important of these supportive data is the post-treatment analysis we reported today for the 12 plus 12 arm in PROVE 1. This analysis showed a 12-week post-treatment relapse rate of less than 10% from the patients who completed the 12 weeks of telaprevir-based treatment followed by 12 weeks of pegylated interferon and ribavirin and were undetectable at completion of this dosing regimen.

With the current therapy of pegylated interferon and ribavirin administered for 48 weeks, relapse rates of 20 to 30% are typical and have been cited often in the medical literature. So as you might expect with a relapse rate of less than 10% we're very pleased with these data and this level of relapse rate, this low relapse rate, suggests to us that 24 weeks of total therapy with a telaprevir regimen is appropriate for further study.

Support for continued evaluation of a 24-week treatment duration also comes from the PROVE 1 interim data we reported at EASL in April. These data suggested that it may be possible to clear the HCV virus in some treatment naive patients successfully with only 12 weeks of telaprevir-based combination therapy, and represented the first evidence that short-term duration therapy could potentially be achieved in patients with genotype 1 HCV.

Within the PROVE data an additional important finding with respect to what was with respect to the slope of viral decline. In PROVE 1 80 to the 90% of patients receiving telaprevir had a rapid viral response, or RVR.

Several published studies of pegylated interferon and ribavirin have demonstrated a strong correlation between rapid viral response and the ability to shorten treatment duration in genotype 1patients. Taken together these data, and in particular, the recent analysis that demonstrated low relapse rate in the, after the 12 plus 12 arm in PROVE 1 point to overall to an evaluation of 24 weeks total treatment durations with telaprevir treatment regimen in late-stage development.

We expect the further data from PROVE 1 and PROVE 2 will be presented at the [AASLD] (sic) meeting this year. In addition, certain data from PROVE 1 will be presented at ICAAC in September.

Next let me tell you where we are focused in the third quarter. We told you that we should begin discussions with the FDA in mid 2007.

All available data to date was recently submitted to the FDA including post-treatment SVR data from the 24-week telaprevir-based regimens in PROVE 1 and available 12-week data from PROVE 2. A meeting has been scheduled with the FDA to review these data. In summary, transition to Phase III is our top priority and we look forward to updating you further on this exciting program.

Now to our other development opportunities. While we're currently focusing our resource at Vertex on telaprevir, we also have a pipeline of product candidates with opportunities in a number of other serious disease areas.

First the VX-770, is an oral drug we have in development that may address the underlying genetic defect in cystic fibrosis due to mutations in the gene encoding the CFTR protein. As planned, in the second quarter we initiated a Phase II clinical trial of VX-770 in patients with cystic fibrosis.

The Phase IIa clinical trial is a randomized double blind placebo controlled trial of VX-770 and is designed to evaluate the safety and pharmacokinetics of VX-770 and how it affects certain biomarkers of CFTR protein function. We're targeting enrollment of 36 patients.

We're also advancing VX-702 for the treatment of rheumatoid arthritis. We're conducting a 12-week Phase II clinical trial in approximately 120 patients with rheumatoid arthritis in a background of methotrexate.

Enrollment is complete and we expect to have data from the Phase IIa study by the end of the third quarter. The results from the Phase IIa trial and the thorough QTc study, which is also under way, will determine whether we initiate a larger Phase II trial on a background of methotrexate.

Finally, turning to our collaborative programs. Our collaborator Merck is targeting the development of Aurora Kinase Inhibitors in a broad range of cancers and is currently evaluating a lead candidate, MK-0457, or VX-680 in a large Phase II trial in treatment-resistant leukemia.

In terms of our collaboration with GSK on the development commercialization of novel subtype sodium channel modulators, GSK has recently discontinued the preclinical development of VX-409 for the treatment of pain. In its place GSK selected a backup compound for development. We look forward to continuing to update you on data coming out of our programs throughout the year.

I'll now hands the call over to Kurt.

Thank you, John, and hello, everybody.

I'm very glad to have the opportunity to be speaking with the investment community on behalf of Vertex. It's only been a little over the week that I've been on site in Cambridge, but I wanted to give you a chance to tell you a little bit about myself, why I joined Vertex and what I'll be working on.

I joined Vertex from Novartis where I reported to the CEO. There I was the Global Head of our General Medicines business and the Chief Marketing Officer for Pharmaceuticals. I was also a member of the Pharmaceutical Executive Committee and I chaired the Global Operating Committee.

So why did I join Vertex? Well, it's probably on obvious to you, Vertex has a very well deserved reputation as an innovator in drug discovery and development. I was drawn to the Company's demonstrated commitment to great science, it's promising pipeline and its real commitment to innovation and transforming lives with new medicines.

The biggest near-term draw for me, obviously, is telaprevir. Telaprevir is the kind of opportunity that is truly rare in this industry and I look forward to working with John and the rest of the team to progress telaprevir to Phase III with the FDA's input and doing everything necessary to prepare the Company, prepare the market and prepare telaprevir for a successful launch.

In addition to building a best-in-class commercial organization around telaprevir, I'll also be heading up strategic development and our business development functions at Vertex.

So that's a little bit about me and my role. I look forward to meeting some of you during your next visit to Vertex or at investor conference this fall.

Joshua, I'll now turn it over to you.

Thanks, Kurt, and welcome.

This has been a quarter of rapid advancement across all aspects of our business. We are facing new opportunities and we're facing new challenges.

The transition to a large international Phase III trial for telaprevir will be a major step and we're taking a pragmatic approach to advancing our clinical program. To that end we're focused on a straightforward dialogue with the FDA as we work to reach agreement to start Phase III.

We're also focused on defining the market opportunity for this compound. And we're maturing as an organization. We've gained significant experience conducting telaprevir's global Phase II PROVE program.

This is, as far as we know, the most comprehensive Phase II program ever run in HCV involving approximately 100 centers in the United States and Europe. We have enrolled more than 1,000 patients. In parallel we are working to secure a supply chain that spans the global to ensure a robust launch and we're growing.

We hired two new pharmaceutical leaders to the executive team. You've met Kurt Graves, who you just heard from, and we hired Amit Sachdev, who is our Senior Vice President Public Policy and Government Affairs. We are on a commercial trajectory and the knowledge and experience they bring to Vertex will be invaluable as the Company advances.

In addition, our board recently promoted Lisa Kelly to Senior Vice President of Human Resources and appointed her to our executive team. Her leadership and impact across the business, including employer relations and recruiting, will be critical as we advance.

We are building the company on Telaprevir. We are also an innovator in drug discovery. We have other molecules in development that provide opportunities for us to build a pharmaceutical company.

The rest of our pipeline is progressing as we further reduce risk in the telaprevir development program. So stay tuned for more of the Vertex story. It's a very busy time for us and I thank you for listening.

Lynn, back to you.

Thank you, Joshua. Now we'll take questions. Heather?

(OPERATOR INSTRUCTIONS) Your first question comes from Geoff Porges.

Thanks very much for taking my question and appreciate the data here.

So I guess I'll ask the obvious question which is what's the denominator? You've told us that less than 10% of patients, of relapse, [are] the patients who reach end of treatment are detectable of relapsing, but can you help us go from the 79 patients in [arm c] who were actually enrolled through the 11% of patients who dropout in the first 12 weeks, give us a sense of how many dropout in a second 12 weeks, how much withdraw from protocols and then what sort of breakthrough rates you're seeing so we can start trying to understand what we can work toward as real SVR rates. Thanks.

Thanks Geoff for the question.

So I can't give you the specific numbers because we're, as we've said from the beginning of the year in terms of specific data from the PROVE trials, because of the stage of development, because of the where we are and the scope of the studies, the specific data and the numbers we are going to be presenting in, at various scientific conferences, in particular, we pointed to with PROVE 1and PROVE 2 that the majority of the data would be presented at AASLD.

The objective of this release was really to bring you up-to-date in terms of where we are from PROVE 1 and PROVE 2 and where we've come to in terms of the overall, our assessment of the duration and where we're headed in terms of the product, in terms of the product profile.

I think the low relapse rate here, which, you know, we have, we have sufficient numbers to be confident that we are in that less than 10% range, provides a lot of assurance from our perspective in terms of an appropriate duration is 24 weeks of treatment.

The second part of the discussion is in which is the first major conclusion from the very low relapse rate, again, keep in mind that the relapse rate after 48 weeks interferon and ribavirin is 20 to 30%. So as we kind of set up the expectations internally for these data we felt that if we were under 20%, then 24 weeks would be an appropriate duration.

Obviously getting to less than 10% is that much more supportive of that concept. So that's the first part, that it does support the duration.

I think the second part is you have to look the sum total of the data out of PROVE 1 and PROVE 2, which is where we're headed in terms of the product profile from an SVR standpoint. And the basis there comes from what we've already reported which is a very high rate of on-treatment response, an 80 to 90% rapid viral response, getting to undetectable within the first month of treatment, an overall discontinuation rate or an discontinuation rate for adverse events of around 11%, a low breakthrough rate of, you know, it's 7% overall, but most of that actually happened with before, in the patients who never got to undetectable.

The breakthrough rate after patients become undetectable is in fact very low, it's well under 5% and it's in the range of around 2%. If you take all of that and then come to then, when you complete treatment and you are undetectable and you haven't broken through, that the relapse rate in those patients is very low, it's under 10%, you can come to why it supports the overall notion of being able to increase SVR rates with a treatment duration of 24 weeks.

Now, what I'm not going to do is actually calculate the specific number for you because it is, we've put all the information out there to be able to do that. And, you know, if people want to walk through the specific calculation we're happy to do that after the call.

John, I just walked through it now and so if I add up what you talked about, 11% discontinuation rates due to AEs, a couple percent due to breakthroughs after RVR, 7% of patients don't get to RVR, and then 5% for everything else, protocol violators, treatment withdrawals, I get to about 25% who dropout prior to getting to get to end of treatment. And then I start thinking about the 10% of that number as being the patients who relapse. Is that the right way to think about it?

I think in very rough terms you're absolutely headed in the right direction. The real conclusion from this is that, as I think you've come to, that the base case of SVR with a low relapse rate is, we are, well, first of all, we are, again, 24 weeks of treatment duration is an appropriate duration.

We don't necessarily need to go longer than that because we're already, you know, the patients who aren't going to -- who aren't relapsing giving more interferon and ribavirin doesn't really necessarily do anything for them. So that's the first conclusion.

Again, 24 weeks of treatment duration. And then beyond that in terms of how, where we end up with the ultimate SVR rate, it clearly is going to be about in Phase III of optimizing management of side effects and managing discontinuations and getting treatment, getting patients to a full duration of treatment.

But from a purely antiviral standpoint, we have a high response rate, low breakthrough rate, low relapse rates, all of which are very consistent with that we can achieve and increase in the SVR rates from where we are today.

I'll get back in line. Thank you.

Okay.

Your next question comes from Steve Harr.

Thanks. I think you've answered a lot of them there.

Just very quickly, is it fair to assume that since they're off telaprevir we should use between week 12 and 24 a toxicity or a dropout rate comparable to what you've seen, what we've seen for peg ribavirin in the past?

Yes, I think a, you know, a rough number of, you know, with interferon and ribavirin it's 3 to 5% discontinuation for every three months on treatment. And that's been relatively consistent.

And, Ian, (inaudible) I don't want you to, I'm not trying to force you to give guidance for '08, but just given where the Company's balance sheet is, which is a little less than two years cash if you use this year's burn rate, do you expect next year to be in an comparable burn rate or up or down from that level?

It's very difficult to give guidance right now for 2008 Steve as you may expect we need to see (inaudible) are.

Yes.

But I think to give you a sense of, I think the question you're really asking is how do we finance the Company [went] through this significant investment and the way that I'd answer that is that right now we're very strong, we've got $617 million of cash to invest in the program.

We will need more capital before we launch this drug, but that capital will be directed towards building inventory, building commercial infrastructure and launching the drug. If that's the need for capital that's when we will go out and acquire that capital and that's how we will finance the Company.

So basically just so I'm just trying to understand. You don't feel you need more capital prior to beginning a Phase III trial.

I don't want to go out and raise capital before we actually need it, and the need is about launching this drug, building inventory and building commercial infrastructure. I think Phase III is a good marker for saying we're well on the way in that course.

Great. Thank you.

Your next question comes from the line of Hari Sambasivan.

Hi, yes. Thank you. Two questions.

John, I'm just wondering, could you give us a bit of a sense post-EASL have you thought about how you might manage the dropouts, whether it be related to GI issues or other issues? You know, is there a program that you've thought about that might actually help you reduce the number of dropouts? That's the first issue.

Second question I have is in your discussions with the FDA are you talking about non-responder populations as well or are you going to be primarily talking about the naive population? And if you're not talking about the non-responders I'm just wondering at what stage do you bring up that discussion with the FDA in terms of registration?

I'll answer the second question first. This first meeting this quarter will be an explicit discussion where we'll be reviewing the data out of PROVE 1 and PROVE 2 which will be the, which are obviously both studies in treatment naive patients. And where we, and so there will be no data out of PROVE 3 which is the treatment failure study in that discussion.

Where we ultimately slot in the non-responder discussion is going to be based on, you know, that first discussion and where we otherwise go with the telaprevir development program.

In terms of management of discontinuations we have, what we've learned from the data to this point are where we're seeing the side effects are in terms of increase overall the nature and the adverse events, the side effects that we're seeing are what's consistent with unknown about interferon and ribavirin, where we see a higher incidence is in terms of skin events, GI events and some increase in the incidents of anemia.

It's the skin events and the anemia are the ones that are driving the higher levels of discontinuation in the telaprevir containing arms. I think we have actually understood much better where we are with those.

We have a rash management plan that we have instituted in our current trials, which we are going to continue to modify as we go head towards Phase III. We do also have an anemia management plan which is built off what's known with ribavirin and interferon.

But the higher level perspective, do keep in mind that our discontinuation rate is, for adverse events was 11% over 12 weeks, it's about, if you, [of the] 12 weeks of treatment if you take in all discontinuation the overall discontinuation rate is about 5% higher. That's still, you know, the majority of patients do complete, the great majority. It is not a, in many ways it's primarily it's a trade-off, it's a tolerability question and as we come into it, it's a benefit risk.

With the data that we're going to be [having] out of PROVE 1 and PROVE 2 I think our biggest leverage point in Phase III is going to be the ability to be able to say to the investigators and to the patients that if you do complete the regimen then there is a potential for benefit. And that gives them motivation to stay on and complete the treatment that we didn't have in PROVE 1 and PROVE 2.

Thank you.

Thanks, Hari. May we have the next question please?

Your next question comes from Meg Malloy.

I guess two quick ones. One is I realize you're about to have your meeting with the FDA, but as far as you know given all the data that you have are you on track to start in the fourth quarter of this year?

And then secondly, in terms of the ribavirin arm planning, are you planning to discuss potentially in addition to the standard of care a shorter duration treatment with ribavirin?

So in terms of the, our target and objective continues to be to initiate Phase III before the end of the fourth quarter. Exactly the time line and how we get there and the specifics of the process I can't talk to at this point.

It's really the first meeting with the FDA will be to review the data that we've generated from PROVE 1 and PROVE 2 to this point and then we'll take it from there.

And you have to clarify the second question, I didn't quite get the question, Meg.

I'm sorry. I was wondering if you would considerate at least one arm of the study that would engender shorter duration of treatment with ribavirin as one means to ameliorate the side effect issues?

No. We're not in a position to really modify the dosing of ribavirin and interferon, so we would not contemplate that.

Okay. Thank you.

Thanks Meg. Next question please?

Your next question comes from Annabel Samimy.

A really quick question. I know you didn't answer the number of patients who are included in that relapse rate calculation, but would you be able to give us some color on how many of those patients had been patients who were undetectable, had discontinued and were undetectable and remain undetectable through that period of study? And did you get a sense of to what extent the RVR was correlated to those patients who were undetectable and if you don't get those details, if you can't give those details here will we be able to see some of this at ICAAC?

So in terms of number, the relapse rate that we're providing is in the patients who complete the 24-week regimen, the 12 plus 12 regimen, and were undetectable at the end of that period.

So it's a different comment, I mean, you will learn more about the outcome in the patients who were early discontinuations at the upcoming scientific meetings, though, as you know, that given the presentation at EASL patients can achieve SVR with 12 weeks of treatment because that's, that was the result that was presented at EASL. And in fact, John McHutchinson had mentioned in that setting that there were patients who had discontinued even prior to 12 weeks, some of who had achieved an SVR.

But it's clearly, whether or not you get to an SVR and relapse or not, is dependent on the duration. When we went from 12 weeks where at three out of nine or about a third relapsed, we extend the duration out to 24 weeks, we do bring the relapse rate down to less than 10%, which is the data that we've been talking about.

In terms of the second question, I think you will get a full set of, again, the full set of results at the various meetings. There will be certain data presented out of PROVE 1 at ICAAC, but I can't speak to today as to what specifically would be presented at ICAAC versus at AASLD.

Also just a quick question on VX-680. Will Merck be having any data at ASH this year?

It's too early to comment on that.

Okay. Thank you.

Thanks, Annabel.

Your next question comes from Yaron Werber.

Yes, hi.

I wanted to follow-up, John, just on several of the previous questions. So just to make sure we understand it, to recap, at the end of 12 weeks of the triple therapy 70% of patients were undetectable. And then you're expecting roughly 3 to 5% discontinuation rate just background on peg interferon and ribavirin, plus whatever other dropouts [with] protocol terminations there might be.

Do you have any historical data you can share with us as what happens between 12 and 24 weeks under standard of care in terms of end of treatment? I mean if we start at 70% I would presume that's going to go lower over the next 12 weeks. Can you share with us what the background is?

And then the other side is of the patients who actually discontinued therapy between four and 12 weeks, what would you expect, how much of those might become, might achieve SVR even though they discontinued early? Maybe based on the Phase Ib data that you had. I don't know if you're comfortable with that.

No. The second question I'm definitely not comfortable going into it. I think again, let's, it's an, and in terms it of the first question, I'll just come back to, again, we've put out all of the information of where we're headed in terms of the data and in terms of, I think, ultimately the product profile. I'm happy to walk through some of the more detailed specific questions, you know, one on one, because I think it gets, it's pretty, it'll just be easier to do.

In terms of the first question, we provided that, I talked to that earlier. I mean, it is pretty well known that the discontinuation rate for every quarter, for every three months of treatment with interferon and ribavirin is between 3 to 5%.

And just maybe, just for us to understand, is there a certain SVR rate in which you would not be willing to go on an ITT basis in which you're not going to comfortable moving to Phase III? Is there some kind of magic low number that you want to see irrespective of discontinuation rate or the relapse rate?

No, it's the our decision, again, as I said our, the criteria that we had set up in terms of looking at whether or not a 24-week treatment duration was appropriate to take into Phase III, which is all a question about duration of treatment, what's the appropriate duration, was based on, you know, looking at what we know about relapse rates with interferon and ribavirin, which is 20 to 30% out of 48 weeks of treatment, which, you know, made it that 48 weeks of treatment was considered an appropriate duration for interferon and ribavirin.

That if we were lower than 20% that 24 weeks was what was an appropriate duration and that was obviously what would be a good result. I think being under 10%, you know, we're obviously very pleased with that result, because I think it's a very strong support that 24-week treatment duration would be sufficient.

I think in terms of the question of, you know, and at this point otherwise where we stand is we're taking all this data and it is, again, it's all the data, it's the safety data that we have to this point, the high rate of RVR, the low breakthrough rate, and now the very low relapse rate, we've put all of that information together, we're going to be reviewing that with the FDA in a meeting and then, you know, and based on that moving forward.

And just a follow-up question.

And you're comfortable that you are going to mandate or you'll institute a few protocol changes in the Phase III relative to what you've done in Phase II and you're comfortable that FDA is going to back you up on that without asking for another sort of a bridging Phase II study?

I think at this point your assumptions on the Phase III study design should be that there will be a control arm, 48 weeks interferon ribavirin, and an arm of 12 plus 12, and then beyond that, which we have, you know, obviously, we have a full set of data support and that beyond that that's what the discussion with the FDA in terms of the design will be.

Great. Thank you.

Thanks, Yaron. Next question please?

Your next question comes from the line of Richard Smith.

Yes, good evening.

Just could you provide us a little bit more detail on the twice-daily dosing studies that you plan to do and when you expect to complete those please?

We are anticipating starting a twice-daily dosing study within the second half of this year. We continue to be on track for that.

It's a simple design. Rather than the two tablets every eight hours that we have in the current regimens, and that will be the core regimen that we will take into Phase III, this study will be looking at three tablets twice a day compared to the two tablets every eight hours in terms of, in particular, looking at antiviral response rates and breakthrough rates over 12 and 24 weeks of treatment.

It is a first study. We are very comfortable as we have said, with a treatment regimen that we have today going out to, in particular in the 12 plus 12 regimen, we have data now obviously that that, with that regimen in large studies that we can achieve high response rates and low breakthrough rates.

So again, we're very comfortable with that regimen. This additional study is related to an exploratory study to see whether we can further improve on that.

And just remind me. You're going with the TID in the Phase III rather than the BID regimen?

Yes, our plan would be to go with absolutely with an every eight-hour regimen in Phase III.

And when do you expect to get data given the 12, 24-week trial?

Next year.

Okay. Okay. Thank you.

Thanks, Richard. Next question please?

Your next question comes from Howard Liang.

Thanks very much.

John, in talking about the relapse rate at the end of 12-week post-treatment follow-up, can we, I guess, do we know that that is the [red] measure? I guess the (inaudible) question is do we know for this drug that SVR 12 is very similar to SVR 24?

We have a tremendous amount of data. The kinetics of a relapse rate fundamentally shouldn't be different then because we are, remember the tail end of this therapy is all the second half is all interferon and ribavirin.

There is really no reason why the kinetics of relapse should be any different after this regimen than after, than with traditional interferon and ribavirin. If anything, when you bring the duration of dosing down from 48 down to 24 weeks of interferon and ribavirin, your relapses occur even earlier.

And what we do know is that, you know, close to 95% of the relapses that occur, occur by 12 weeks of follow-up. So we're pretty confident that these data will hold up. Where obviously that's pending, we're obviously following these patients and we will in short (inaudible) have the 24-week follow-up as well.

The data we do have to this point is in 12-week arm, out of PROVE 1, the patients that you saw were, had an SVR 20, they've obviously been followed out to 24 weeks at this point and all six of the patients who had an SVR originally 12 have an SVR 24, and all the three relapses, the three relapses that occurred, occurred at, you know, prior to 12 weeks.

Great. Thanks.

So also the description for this relapse rate is for patients who have completed 24 weeks of therapy and who are undetectable at the end of treatment. I assume these are also patients who had RVR?

Almost all, not all.

Not all. But I thought only if they had RVR they could stop treatment.

There were a small number of patients who chose to stop at 24 weeks.

Okay. Great.

And are we, for AASLD data is it possible from a time line perspective to see data from the PROVE 2 study, the 12 plus 12 arm?

You know, our, if you step away from the specific scientific conferences, where the, what we had said is that the SVR 12 data from the 12-week arms from PROVE 2, we would have within the early in the third quarter and if you then, you know, at that point we would obviously have the 24-week end of treatment results from the 12 plus 12 arm in PROVE 2, and then the SVR 12 data would come 12 weeks after that.

Okay. So it's close.

That's correct.

Okay.

So it's long way of saying I don't know whether it will be presented AASLD or not.

Okay. All right.

A quick question, a last question on VX-667, the second generation Aurora Kinase Inhibitor. Can you talk about the formulation using the Phase I trial?

No. We and Merck have not disclosed specifically how that compound is being administered.

Okay. Thank you very much.

Thank you, Howard. Next question?

Your next question comes from Brian Abrahams.

Hi guys. Thanks for taking my question.

There's been a lot of variability among recent studies both of antivirals and third generation interferons as to how well standard of care arm behave both in short-term and with full treatment durations. For instance, in the (inaudible) study recently they saw, I think, about a 60% rate of undetectable rate at week 12 whereas you guys have seen 40% at week 12 in the PROVE studies.

So I'm just wondering how do you synthesize all this data in terms of shaping your expectations for the efficacy of the control arm in the Phase III? And can you give us some sense of what those expectations might be? Thanks.

So I can't actually, I'm not going to speak to any of the other specific results. The control group in this study to this point has actually, I think, been very consistent with what you would expect for a genotype 1 HCV population, in particular a U.S. patient population.

There's no, I can't talk to any specific other study, but in our study it's been very, very consistent and we've clearly shown a, whether it's at week four or at week 12 the RVR rates and the week 12 results are very much in line with the various registration trials and other trials with Pegasus in particular, Pegasus and [Copagus] that have been reported. So I think we're very comfortable with the, with what we're seeing and the patient population that we've enrolled into PROVE 1, and in fact into PROVE 2.

In terms of the, you know, in terms of the Phase III trial, our expectation of SVR rate ultimately there is between 40 and 50% if you have a balanced patient population between the U.S. and Europe. What tends to happen is that if you have a majority of patients of the U.S. the response is going to be at the lower end of that.

If the majority of the patients are from Europe the response rate is in the higher range of the 40 to 50%. But I think we can, we have all the information, it's all available to plan the Phase III study appropriately.

Got you. Can you remind us what undetectable rates you might expect after 24 weeks of standard of care alone in this population?

Around 60%.

Great. Thanks.

But it isn't, you know, the whole trick there, I mean the whole comment with interferon and ribavirin is that you can get patients to undetectable in the blood, but you can't get them to an SVR unless you go out to 48 weeks of treatment. Even with that, of the patients who are undetectable at the end of 48 weeks of treatment, 20 to 30% are still relapsing.

Makes sense. Thanks.

Your next question comes from Rachel McMinn.

Thanks very much.

Wanted to ask a couple questions on PROVE 3. How are you thinking about the non-ribavirin arm for PROVE 3 just given the recent findings in PROVE 2? And was wondering if you could just talk about the criteria for patients continuing on in the PROVE 3 trial?

So the PROVE 3 trial has three telaprevir containing arms, two of which do contain telaprevir, interferon and ribavirin, and yes, there is one arm that is, that has 24 weeks of telaprevir and interferon without ribavirin. There were, as we looked at the PROVE 2 data, yes, in terms of treatment naive it clearly supports having ribavirin in the treatment naive population.

At the same time, the level of antiviral response in the no ribavirin arm was still significantly higher than the level of response in the standard of care arm. So I think there is still potential, there's clearly potential for that arm.

Some of the specific side effects that we've seen at a higher incidence with telaprevir and interferon and ribavirin, are comparative standard care are lowered in incidents without ribavirin and the discontinuation rate was lower. So there may be certain contacts where the no ribavirin arm, the overall benefit risk ratio may still support that no ribavirin arm. And I think the treatment failure context where the benefit risk ratio may ultimately be very different than in a treatment naive population still warrants the studying of that arm.

And then PROVE 3 as PROVE 1and PROVE 2 did there are specific virologic failure stopping rules that have been built in to protect patients from the development of high levels of resistance at the point that they've clearly shown an inability to either become undetectable or remain undetectable.

So there are specific viral stopping rules in that study both for the control arm and the telaprevir containing arms that are specific to PROVE 3. And I can't comment on the specifics of that.

Okay.

And one last question on PROVE 2. Can you say how early in treatment the absence of ribavirins in the non-ribavirin arm when you compare that to the ribavirin arm? At what point did that start to materially impact antiviral outcomes with it? Relatively early or really later in the 12-week regimen?

Let's talk about that after the data are presented. It'll just be much easier to do.

Okay. All right. Thanks.

Thank you, Rachel, and thank you, everyone, for joining us tonight on the Vertex second quarter conference call. We're going to end the call now and invite everyone who has further follow-up questions to please contact us back at the office. Thanks a lot tonight for joining us tonight.

This concludes today's conference call. You may now disconnect.