福泰製藥 (VRTX) 2010 Q1 法說會逐字稿

Good evening. I'm your conference facilitator today. At this time, I'd like to welcome everyone to the Vertex Pharmaceuticals conference call. All lines have been placed on mute. After Vertex's remarks, there'll be a question-and-answer period. (Operator Instructions). Michael, are you ready to begin?

Yes.

Thank you. You may now begin your conference.

Good evening. This is Michael Partridge. Welcome to Vertex's 2010 first quarter conference call. Before we discuss the quarter, I'll mention to you that a few days ago at the EASL Conference in Vienna, we hosted an investor reception, communicating our progress in hepatitis C and reviewing data that was presented Telaprevir combination therapy as well as VX-222. If you missed our EASL update, an archive of the webcast is available on our website. We hope that everyone has now arrived safely home.

Now to our first quarter call. Our top priority within the business continues to be the planned NDA submission of Telaprevir in the second half of 2010 in preparation for a potential launch in 2011. Within the next two months, we expect to report topline SVR and safety results from our Phase III trial advance which is in treatment in [E patients]. And then in the third quarter, we expect to report our data from Illuminate which is also in treatment [naive] patients and then also report data from [realize] which is in treatment failures. We believe that these data will allow us to submit the complete NDA for Telaprevir in the second half of the year.

From a commercial perspective, we're using our understanding of the [HCV] market to inform our go-to-market strategy with Telaprevir. We continue to add to our commercial infrastructure with the goal of reaching efficiently the many hepatitis C patients who need therapy. Nancy will discuss this in more detail on the call. We're also focused on building long-term leadership in hepatitis C by developing further potential therapeutic regiments for hepatitis C patients. We are initiating a combination trial of Telaprevir and VX-222, and we expect to have the first interim data in the second half of this year . In addition to our hepatitis C priorities, we are seeking to advance the rest of our pipeline, including the development of multiple potential therapies for cystic fibrosis patients, as well as generate proof-of-concept data in other diseases, including rheumatoid arthritis and epilepsy.

In today's call, our 2010 progress will be reviewed by will be reviewed by Matt Emmens, Nancy Wysenski, Dr. Peter Mueller and Ian Smith. In addition, Dr. Bob Kauffman is also here today and he will be joining us for Q&A. Please note that the 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 10K. GAAP and non-GAAP financial measures will be discussed on the call. Information regarding our use of non-GAAP financial measures and a reconciliation of those measure to GAAP is available in our first quarter 2010 financial press release which is now posted on our website. All 2010 expenses discussed in this call are inclusive of stock based compensation expense, expenses related to the September 2009 financial transactions and also restructuring expense.

After our prepared remarks tonight, we will try to accommodate as many questions as the time will allow. In the interest of time, we ask everyone to limit themselves to one or two questions at the most. Once the call concludes, we'll be in the office to answer additional questions that you have. Thank you. I'll now turn the

Thanks, Michael. I'd like to open with a few comments regarding the progress of our company. As you know, 2010 was described as a defining year for Vertex. The vision for Vertex, as I told you about at the beginning of the year, is starting to become a reality; to build a fully capable biopharmaceutical company around Telaprevir. We have the pipeline and resources to accomplish our 2010 goals and to position Vertex to create significant shareholder value in the future.

To realize our vision, we are growing the Company in functions that will support late-stage development and ultimately commercialization of our compound, being an HCV and CF as the first ones. From a macro perspective, it'll come as no surprise to you, that Health Care Reform efforts are putting pressure on pharmaceutical and biotech companies to prove the value of their products. However with Vertex's focus in serious diseases like HCV and CF, we are well-positioned to deliver clear benefits to patients and the health care system as a whole.

With that context, let me talk about the remainder of the year, the opportunities as well as some of the challenges we face as we build a fully capable biopharmaceutical company. First the opportunities, we're executing on our plan to complete the end date submission for Telaprevir in the second half of 2010. The strong data, presented at EASL last week supports the emerging product profile of Telaprevir and we're looking forward to releasing topline data for all of our Phase III registration studies over the next two quarters.

In addition to the progress in support of HCV, we continue to advance innovative treatments for cystic fibrosis. Our Phase III registration program for VX-770 in CF is progressing well and we continue to explore ways to reach more patients with this serious orphaned disease. Also as you have heard me state in the past, we continue to build our pipeline and we expect data to roll out this year from proof-of-concept studies in rheumatoid arthritis and epilepsy. Overall, there is a lot we'll know at the end of this year that will help support our long-term growth and realize our vision for the business.

Looking at the challenges, despite HCV being one of the largest therapeutic categories in this decade, it's a unique market. More than three million patients in the US have HCV, but less than one million know they have it and of the patients that are diagnosed, these patients have different degrees of intent and motivation to be treated. Nancy will talk about the market research we have completed and how it will segment these patients. She will also review summary steps that we believe could drive patients' uptake, following the potential launch of Telaprevir.

Lastly, we've done a lot of things right with the Telaprevir 222 combination regimen to get us where we are today. We have worked closed with the FDA to design trials that we believe could help redefine the treatment paradigm of HCV. Stay tuned as the year progresses. We expect lots of into news on our current programs as well as some new compounds entering into the clinic. Now I'll turn the call over to Nancy.

Thanks, Matt. Having just returned home from EASL, I can tell that you we are well-positioned as we prepare for the potential launch of Telaprevir. Nine posters and oral presentations related to Telaprevir, VX-222 and HCV treatments were presented at this medical conference. Two oral presentations, highlighting data from the study 107 and study CT08, as well as our Phase II studies and the design of our Phase III studies, give us confidence in the potential product profile and positioning that we hope to achieve with Telaprevir.

In particular, studies C208 showed the utility of response-guided therapy in helping to drive the best outcomes for treatment-naive patients. That treatment regiment is consistent with our advanced three -- excuse me, advance Phase III registration study. The results from study 107 in treatment failure patients were encouraging in support -- our realized Phase III study design and provide us with confidence that we're evaluating the right regimens for treatment failure patients. In summary, we believe we're on the path to becoming a leader in the treatment of HCV, due to Telaprevir's potential application across a broad array of HCV patients.

Just prior to EASL, we were pleased to see our third and most recent publication of the proved III results in the New England Journal of Medicine. Rarely has a product candidate had such recognition, prior to Phase III. Our proved one, two and three data have all appeared in a prominent medical journal over the last 12 months. These publications help to validate the importance of our Phase II data and we believe has the potential to help Telaprevir, administered in combination with pegylated interferons and ribavirins transform the treatment of HCV.

As Matt said, the HCV market opportunity is significant and yet unique. One million patients are currently diagnosed in the US, but treatment rates are low. Let's remember, HCV is a disease that can actually be cured. We believe the first stage of success in this market will be the opportunity to drive higher treatment rates for those patients who are already diagnosed with HCV. We have improved our understanding of who the diagnosed patients are, where they are in the course of their disease, and what motivates them.

Let me explain in a little more detail. According to market research and our own proprietary database, we believe there are currently up to 350,000 mono affected genotype one treatment naive patients diagnosed. However, less than 10% of these patients are being treated in a given year with the currently available therapies. Within the treatment naive patients, we see a great deal of variance in terms of their understanding of the disease and motivation for treatment. But what is clear is that a subset of these patients suffer from progressive disease and they may seek an alternative therapy. We believe the potential product profile of Telaprevir may increase treatment rates for these patients with serious unmet needs.

Now, to the second group within the genotype one patient population or the treatment failure patients. We believe this patient population has the highest level of unmet need and therefore, offers the greatest potential to drive uptake during the early stages following Telaprevir's launch. Based on our market research, we believe there are approximately 300,000 mono infected genotype one treatment failure patients diagnosed today. They've all crossed a key barrier. That is, they've already elected to go through a round of pegylated interferons and ribavirins.

These patients are also already in the system, if you will, and a majority of them are covered by some form of medical insurance. Given the advance stage of their disease, more than one-third visit a hepatologist or gastroenterologist on average twice a year. Despite this, current treatment rates in this population are about 5%. With Telaprevir and the right product profile, we believe will have the potential to improve these treatment rates within this previously diagnosed category. I'll now turn the call over to Peter.

Thank you, Nancy and good evening, everyone. We have made good progress in our clinical and regulatory activities in the first quarter. In HCV, we are trying to receive the first results from our Phase III program with SVR data from advance treatment naive patients this quarter. This will be followed by data from Illuminate and then realized for treatment failure patients by the end of the third quarter. In the area of cystic fibrosis, our lead program, we have 770 is advancing as planned in our Phase III registration program. And we also announced at the first quarter, proof-of-concept data for VX-809, our corrective compound for cystic fibrosis.

In HCV, our progress is marked by an team NDA meeting we had earlier this year with the FDA to review our plans for the [CMC] and nonclinical portion of the NDA. It was a very collaborative meeting and an important outcome was that we reached agreement on the routings of mission format for the Telaprevir NDA. At this time, we are preparing both the CMC and the nonclinical documents and expect to begin the rolling submission this summer. All other documentation, including Phase III clinical data for treatment naive and treatment failure patients are on track to be submitted in the second half of this year to complete the submission process.

Also in HCV, we are initiating a combination trial with Telaprevir (inaudible) inhibitor VX-222 and expect to complete enrollment in the second quarter. We work closely with the FDA on the design and with this trial, we expect to evaluate sustained virologic response or SVR for patients who receive 12 weeks of the two drug or a four drug combination that includes Telaprevir and VX-222. The [define] of this drug allows us to address a serious number of questions and identify potential optimal regimens for different patient populations. We are positioned to get the first data from this trial in the second half of this year.

I want to highlight now our key data presented at EASL. From study 107, we reported final SVR data, showing [very hard degree buds] for all treatment failure patients, that is prior [nodd] partial responders, relapses and break through patients. These data suggest that we are investigating the appropriate regimen in the realized drug that makes us optimistic that we will see SVR rates offered with existing therapies. Additionally at EASL, a sub analysis of our C208 data in (inaudible) dosing of Telaprevir supports the potential use of Telaprevir twice daily in the future and also demonstrates the importance of response-guided therapy.

Now to the CR program. Our Phase III registration program for VX-770 is on track. We completed enrollment in two of the three registration studies in the first quarter and we expect to receive data from the lead study in the Phase III program which is tried in early 2011. Patients in [stride] are being dosed for 48 weeks as a primary efficacy end point evaluating [FAD1] at 24 weeks. In addition, we expect the envision drug which is evaluated in younger patients with the G551 D mutation age 6 to 11 to complete enrollment in the second quarter.

I would also like to quickly mention VX-809 which is our corrector compound aimed at increasing the concentration of functional [LTFR] proteins at the cell surface of the lung. The Phase II data we announced in February from VX-809 provides validation for the correction concept and gives us reason to hope that we will reach a broader set of patients with cystic fibrosis as we go forward. We are working towards evaluation -- higher evaluation of higher doses of VX-809, and the combination of VX-809 and VX-770 as our next steps for this program.

In summary, before I close, I also wanted to update you that we have commenced dosing in our proof-of-concept studies for rheumatoid arthritis and epilepsy. And these studies, as well as our focus in HCV and cystic fibrosis, we have many opportunities to build and advance a growing pipeline. Now I'll turn the call over to Ian.

Thanks, Peter. As we've indicated in our previous calls and communications, we are putting a significant effort towards managing our capital structure and investment through to being a cash flow positive and profitable company. Our model is for high operating margins, which is driven by our focus on high value, especially diseases. We completed the first quarter of 2010 with a strong and healthy balance sheet with approximately [$1.1 billion] of cash, cash equivalents and marketable securities, and no convertible debt outstanding following its conversion to equity. And with approximately 202 million common shares outstanding at this point, we're well-placed for the future.

I'd like to provide you with a few brief remarks on our first quarter 2010 financials. Our first quarter financial results are largely as we expected and our full year non-GAAP guidance of approximately $600 million that we [divide] in February, remains unchanged. Our GAAP net loss for the first quarter 2010 was approximately $165 million. This is similar to the first quarter of 2009 of approximately $163 million. When comparing the loss on a non-GAAP basis for the first quarter 2009, our loss increased slightly by approximately $129 million to approximately $140 million. The increase is driven by increased costs to support Telaprevir towards its potential loss.

Now to the main line items within our income statement. Total revenues for the first quarter 2010 were approximately $22 million compared to $24 million in 2009 with the main revenue contributors remaining consistent to the prior year. The R&D expenses on a GAAP basis of approximately $143 million included stock compensation of $14 million, were consistent with the same quarter last year at approximately $144 million. Within these numbers though, we have a reducing development cost for Telaprevir with a compensating increased investment towards building commercial products for Telaprevir, as well as increased investment towards cystic fibrosis. The SG&A expenses on a GAAP basis, including $5 million for stock-based compensation, increased to $36 million compared to $29 million in the same quarter of last year, again, driven by the preparation for the potential launch of Telaprevir.

In summary, we are fortunate to be in a strong financial position since bringing a potential drug like Telaprevir to the market and maximizing the commercial opportunity that exists in HCV requires significant investment. We are well-positioned for the NDA submission and potential launch of Telaprevir. Michael, back to you.

Thank you, Ian. We would now like to open the call to your questions.

Thank you. (Operator Instructions). We'll take our first question from Steve Harr with Morgan Stanley.

Sarah calling in for Steve. At EASL, investor focus was largely on the [IL-28] polymorphism and the impact on the overall addressable patient population. I wanted to get your guys thoughts around that and whether you think it's something as a threat or whether you see an opportunity there.

This is Bob, I'll try to answer that question. The talk of the meeting in some respects was IL-28. Many groups looking at this marker. We obviously find it to be very intriguing. It is the first real marker that seems to differentiate responses to interferon. It is however only one of a number of biomarkers that currently in use, including RVR, a rapid viral response which we've used actually quite successfully in our development program and continue to use in Phase III.

In some respects, RVR may be a better predictor for SVR than (inaudible). IL-28 doesn't explain all of the effects. There may be other markers on the way that we are not even aware of at this point. A lot of work is being done in the field. It's a rapidly evolving field and we're certainly interested in. Vertex has always been the leading edge of the science in this area and we're certainly interested in IL-28 and other markers to help us in our development program.

All in all, we see it as an opportunity rather than as a threat. We see the ability to potentially shorten regimens in genetically favorable populations as one way. We certainly see it as being inclusionary and not exclusionary in terms of patients. As with all areas of hepatitis C, patients segmentation is differentiated treatment based on patient characteristics is really where the field is going. IL-28 may be part of that. We expect to utilize those developments and development of Telaprevir as we go forward.

We are, as you know -- most of our studies, all of our studies were done prior to IL-28 being identified and therefore, we did not collect samples at the time of the study. However, we are looking into going back now retrospectively in our Phase II program here to obtain IL-28 data to be able to retrospectively asses its role. I'll point out to you that so far there are really no data on the effect of IL-28 for direct [impacting] antivirals and that's something we can talk more about. That's really how we view it. We certainly don't see it as a threat. We see it as continuing on as a way of providing optimal therapy for patients and we expect to be part of that.

In addition to what Bob said, which I fully support, is -- what was the question (inaudible) for filing and for approval. The answer is absolutely not. That's not even a commercially viable answer yet available that would make this a requirement. For Telaprevir, as well as most-likely for boceprevir, compilings will not be (inaudible).

Great. Thank you.

We'll go next to Rachel McMinn with Bank of America Merrill Lynch.

Hi. This is Marsha for Rachel. Question on the comp study of boceprevir 222. Do you [quantify two-week data] or should we expect some mature data?

That's a good question, Marsha. I'll take it, given it's a disclosure question. We've been very clear on what we will provide, which is given that we expect to complete enrollment in the second quarter of this combination study, we actually will have the opportunity to collect both week two, week eight and week 12 data within the second half of the year. Which of those data we choose to disclose, I don't want to go into that at this point, but we'll have the opportunity to disclose that data in the second half of the year.

Thank you

We'll go next to Ted Tenthoff with Piper Jaffray.

Thank you very much. Thanks for the updates on IL-28. Peeking into the rolling submission, congrats on that. I think that's a really exciting development. Give us a sense of what the components are and when they will be going in and how we'll sequence this going into the second half and full submission?

Obviously, as I stated in the marked comments is the first package that we will go forward with in a rolling submission is the CMC documentation, which covers basically drug substance and product. And the second piece that comes shortly after , in summer is basically the nonclinical piece which is (inaudible) data and pharma matrix data in a way. When we have all the data together in clinical, means treatment patients as well as the naives and everything evaluated as the last portion, the clinical documents will be submitted

At what point do you request expedited review? How does that work?

We -- so the point is -- we have already fast reg allowance, number one that basically grants expedited review. When we basically regress that and so I think we will request those things when we have our clinical preMDA meeting, which is coming down in second quarter or third quarter, at the beginning, we don't know yet.

Great. Excellent. Thank you

We'll go next to Geoffrey Porges with Bernstein..

Thanks very much for taking the question. Couple things, could you first talk about your strategy at genotype two and the patient subsets. Secondly, wondering when we might hear more about your NS5A. And lastly, without getting into a full marketing campaign, could you tell us how you plan to compete, given what you have seen about your key competitor sharing at EASL and how they're positioning their product and how they are preparing for launch. Thanks.

This is Bob. I'll mention about the different genotypes. As you saw at EASL, we presented the final data on the genotype two, three studies showing that as we expected based on [envitro] data, Telaprevir was highly active in genotype two and virtually not active in genotype three. I think the biggest issue in those genotypes, certainly for three, we don't really have a clear path forward.

For genotype two, it comes down to the value proposition in a way, since treatment results are already excellent and the treatment duration is already 24 weeks for genotype two. Therefore, what a direct acting antiviral would deliver is not entirely clear. I would say, looking forward, however, that genotype two would be certainly amenable to a combined direct acting antiviral combination without interferon and (inaudible). Certainly could provide benefit to those patients and also I think for genotype two non-responders, there would also be a way forward. However, we see those as secondary to our main goal which is really gaining approval for genotype one.

I will maybe address the NS5A portion of your question. As you know, first of all, I and Vertex, we believe strongly that NS5A is a valley platform to announce that fee going forward. This is actually just clear from what we know from BMS and they have proven the safety profile of this approach and everything else. When we acquired (inaudible) about a year ago, they had NS5A program in the mix, which was the cornerstone for us to accelerate that and move forward with our own outcome. We have no compounds that are in preclinical development and we will basically record later in the year how we go forward with those and when that might reach the clinic. I'm very confident and I think it's a great program.

Thanks.

This is Nancy. On the question about how we plan to compete, we believe that Telaprevir has a very positive profile that will easily allow us to differentiate the product, Based upon the data that we've received up to this point in time and as we've stated in our prepared comments, we think that we're well-positioned with the Phase III trials through their design to further drive that differentiation once both products are approved, assuming they are.

We look forward to to any help that Merck will bring to float all those higher in this wonderful improvement that this product class will bring to the market. And we think because of response-guided therapy and the high RBR rates that we'll be able to encourage patients, should data continue to be disclosed consistent with what we've seen to date to use Telaprevir across a wide variety of patient types.

Okay. Thanks very much, Nancy

We'll go next to (inaudible).

Good evening. Thanks for taking my question. My first question is on 222. At the meeting there was some (inaudible) data that was presented and at your investor event you indicated that signal conflicted with what you've seen in healthy volunteers over a long time period where you don't believe there was much (inaudible). I was wondering if you could give us more information on rates of diarrhea in the healthy volunteer study and what could have led to the difference between the two patient populations.

This is Bob. Yes, I'll talk about that. So yes, I'll remind you that the data that was presented at the meeting was still blinded so we're waiting to complete the cleanup and unblind the data and we'll have a little bit better idea. Diarrhea is a side effect that is sometimes seen in healthy volunteers who are receiving placebo. I did mention that yes, we have a bit of other data. We just started to be looking at the data from our drug interaction study in healthy volunteers where 222 was given by itself. I said the data looked reassuring. Having a longer duration is favorable.

Given the early nature of those data in the other trial, I can't say a whole lot more. This is something we will evaluate as we go forward and will be important to keep looking at that. What I did emphasize is the fact that all the case of diarrhea were mild or moderate in severity. We don't consider this at this point a tolerability issue and hasn't impacted our ability to go forward into development.

Great. On nonclinical parts of the NDA, it's unclear to me whether you have all the information you need and you're working up the documents or if there is any other last data sets they need to collect for either of those two components before you submit to NDA.

On the CMC and the two persons (inaudible) one is basically dealing with manufacturing and making ATI into our product. We have all the data that we basically need to move forward. On the nonclinical, we have extra dose of all the data, all the documents (inaudible) basically just a brief step to submission.

Okay. Great. Thanks for taking my questions.

We'll go next to Yaron Werber with Citi.

(inaudible) I have two questions. First one, (inaudible) to Telaprevir combo study, you feel that there is a need to dose longer. Would you be able to start 24 week studies? Second question is can you give us a sense if there -- what your financing plans could be before a Telaprevir launch? If you think they're needed or not? Thank you.

This is Bob. Just to the first part, in terms of the 222 strategy, all of our modeling suggests that 12 weeks is sufficient. I think the program is designed around that so we don't anticipate having to dose longer.

To your question on financing plans, I'm going to take is back to the beginning of the year where we set our full year financial guidance. We started the year with $1.3 billion of cash and cash equivalents, with guidance -- a non-GAAP guidance of $600 million. That gives you an idea of our cash flow against that $1.3 billion we carried in. Gives you an idea where we could finish this year. This year being the final year and the position we take into next year.

In asking about our financing plans, there is nothing firm, there are no decisions and I want to see how things play out. It depends on how we see the data. It depends on what else needs investing in our portfolio beyond HCV. As we manage our business, we'll keep an an eye on our balance sheet in terms of the low water mark.

We believe we need to protect the balance sheet. We have an opportunity because as I also mentioned in my remarks before, we do not have any commercial debt outstanding. If we need to support the balance sheet and the cash position of the Company, we have the ability to move through that avenue to finance the Company which protect against delusion and is a very successful method of financing for the Company at this stage of its development.

Got it. Thank you

We'll go next to Tom Russo with Robert W. Baird.

Thanks for taking the question. First in the advanced trial, can you remind us what you'd consider an acceptable difference in the SVRs between the eight and 12-week groups and how would that need to get in the label in order to potentially price the drug as an eight week drug.

Tom, I'm just going to jump in ahead of that question. Bob and Nancy can talk from their perspective. The question can be confusing when you say what is acceptable. From a clinical perspective when comparing it to the control arm, that is a way of asking the question. And then there's also, where's our hope or expectation to set a competitive SBR rate so how we can address the patient population.

Just so we don't launch 1,000 ships with an answer, I want to make sure we're clear on the question that we're actually answering. Maybe, Bob, from a clinical perspective can answer and Nancy can take a -- the question in terms of where we'd like this to come in, in terms of being competitive and what the patients may be looking for in these different patient segments .

I'll answer the question this way, I think when we went into the trial with that dosing regimen, we went in with an expectation that from a virological point of view, we were not going to give up very much compared to the 12-week regimen. And the goal was to examine the potential difference in tolerability of eight versus 12 weeks, particularly related to rash. Therefore, I don't really -- to be honest, I don't have any expectations. The data will be what they are. We'll have to evaluate them and and understand what they mean and when that happens. I think our expectations going in were that in fact that arm would do pretty well.

From a market perspective, we already have data in hand from the 107 treatment failure study that suggests approximately 70% of the naive patients would be a reasonable expectation. The bottom line is how that shifts to a shorter duration of therapy leads right back to Bob's comment, but it is a combination of your event profile versus the length of time. Anything you can do to decrease the amount of time you have patients on a combination regimen is seen by physicians as an advantage.

I'll just clarify. The study 107 is the referral to (inaudible) it sets the example of what you may expect from the realized study in Phase III. That's how we're setting our own expectations with the treatment failure population.

Okay, and one quick follow-up for Nancy. Does the market research that you've spoken of say anything specifically about how motivated (inaudible) and also what proportion of previous failures know whether they are in null versus a partial versus a relapse?

I think it's quite easy to see that null patients are probably -- some of the patients who are experiencing the greatest sense of need. And the physicians -- it's not just the patients, but the treating physicians understand that. I can't go into a lot of detail beyond that other than to say that again we showed great data last week about relapsers who are another group who tend to get frustrated for a different problem if you will because they're encouraged to think they're responding to therapy. And then after the completion of therapy, find out in effect that they're left in a tougher situation. I think the data we presented at EASL shows great hope for improvement in the therapy offered to those patients.

Okay. Thanks.

We'll go next to Geoff Meacham with JPMorgan.

This is Terry in for Jeff. Can you hear me okay?

Yes.

Okay. Great. Just actually going back to IR-28 question, I'm wondering if you will be collected IL-28 data from all the patients in the Phase III studies and if you have any plans to present that data when you present the full study presumably at (inaudible) this year.

We're looking into what we're doing with IL-28 across our entire program at this point. And I wouldn't really anticipate being able to answer that question about disclosure and presenting that information. It depends on how we decide to proceed. As I reminded everyone, we didn't have IL-28 testing as part of the original protocols. We're having to go back and look at that. That's all I can say at this point.

Okay. And then just given a lot of the discussion around Health Care Reform, especially today, can you talk about the breakdown in the AC remarket of managed care Medicaid and managed Medicaid, if you guys have that information?

Sure. Obviously as you think about this Terry, the data that exists are related to patients that have already been treated. That is a subset of patients have already been out there and sought treatment. We know that the majority of the HCV patients will be covered by some form of commercial experience -- sorry, some of commercial insurance. And we also know that the Medicaid, Medicare, there are other forms of government reimbursement that I don't think we want to dive into all those details here, will be somewhat higher in this patient population than it might have been in say a primary care audience, but the vast majority of the patients will be covered.

Can you give any ballpark in terms of your percentage of Medicaid?

It's so variable, to be honest. It depends on where you live, whether you're in a major urban center, whether you're in a rural area, what insurance you're covered by. I think it's fair, again, to say that the majority patients will be covered and that a slightly, somewhat higher percentage will be covered by government plans than a primary care product.

Okay. Thank you.

We'll go next to (inaudible).

Thanks for taking my question. Just a follow-up in terms of coverage under the different insurance plans and government plans, is there a difference between those who may be more advanced and have already been through treatment -- treatment failures versus the treatment A population?

Yes. I think what's critical in addressing that question is the fact that what is unique to the HCV population is a good subset of these patients will actually be cured after they're treated again once Telaprevir comes to market. And therefore, we have a great position to go in and talk with any insurance program about. We think that will drive very solid reimbursement policies, but I don't think, at least early on, that any insurance plans are going to differentiate between patients who are farther progressed and those who are earlier on.

I didn't think that would be the case, but I was thinking perhaps there's the mix in coverage could be different between those two groups. I didn't know if there with a difference there or not?

We don't have any information to indicate that.

Fair enough. Looking at combination therapy, obviously, I think it's pretty widely understood that complementing side effects is one of the keys to adding the ages together. Just wanted to see if you could comment a little on -- if you look at Telaprevir alone, what that side effect profile looks like and thinking about what we're starting to see as a side effect profile for 222, specifically when you remove ribavirin and interferon, you are actually removing a lot of side effects. If you could -- if there's any data we can turn to, maybe the ribavirin free arm or anything like that to help us understand what these two agents individually bring to the table.

This is Bob. I'll try to take that one. When we were in the process of acquiring VX-22,2 one of our primary considerations was the combinability of that agent with Telaprevir. At that time and we have no data to the contrary at this point, we see them as complementary and combinable from metabolism and all other groups.

In terms of the side effect profile, I think one of things always to compete in mind, most of the side effect profile for Telaprevir has been generated in combination with peg and ribavirin because we can't dose for a long period of time in this mono therapy It certainly is the opportunity that the side effect profile may be actually improved without those other two agents, even with 222 on top because you're talking about a double drug regimen instead of multiple drugs and especially without (inaudible).

That's obviously one of the key goals we're hoping to get from our next trial is to understand what that side effect profile looks like and that will guide further development. At this point, we don't see any lack of combinability or complementarity so we're anxious to get the data.

Okay. Thanks.

We'll go next to Ying Huang with Credit Suisse.

Can you hear me?

Yes.

My first question, when you guys left Vienna, was there any extra seats left for us?

Good question. Very good question.

All right, anyway, my real question is, Bob, you commented that you have seen some data from the VX-222 in ten days of dosing healthy subjects. Was that a single dose study?

No, it was multiple dosing.

If that is the case, did you see any instance of diarrhea?

I'm reluctant to talk about that too much. We took a quick look at the data. It's in the process of being compiled at this point. I think we should probably give you more information about that particular study at a later time when we have a chance to really fully analyze it. It was reassuring to us, that's all I can say and the data, yes.

When you unblind the safety data from VX-222 dose ranging study, would you help us and give us a press release?

We're not going to put a press release out just on the unblinded safety data or on a three-day dosing, Ying/ But what we would do, we'd probably provide you that data or update on Q2 call or some other conference call or press release that we may have between now and the Q2 call.

What we should -- one thing to the diarrhea, when you go in Telaprevir [Agreva] regimens, you see diarrhea too. It's not an uncommon type of side effect and one component that is often overlooked is those people have to eat basically fatty meals, which also can basically disturb your gastrointestinal system. That's what you see more often. I think we have not a higher incidence rate in the studies with Telaprevir and 222 than we had with Telaprevir alone. I think that is just very early set of data, but I think that's what we can say.

Okay. Great. Thank you.

To your first question, we're happy everybody arrived back safely.

I'm still in Europe by the way.

Where are you?

In (inaudible). Tomorrow I'm boarding a flight back to New York.

Safe travels.

Thank you.

And we'll take our next question from Jason Kantor with RBC capital markets.

Thanks for taking my question. You gave a lot of good market data and I'm wondering, you talk about patients who are coming in on average a couple times a year. Is there enough capacity in the hepatology community to bring a good portion of the patients back into therapy rather quickly? Is that something you talked to the thought leaders about?

Yes, absolutely. The good news is, the treatment of these patients, fortunately extends even beyond the hepatology community. There are a good number of gastroenterologists and even some IV physicians who treat. We know from the launch of the pegylated interferon within the last decade that during the highest peek treatment rates, physicians were seeing somewhere about 120,000 to 130,000 patients a year. It looks like we have the capacity to probably more than double, if not triple, without adding additional resources.

And how do you reach out to the patients in order to bring some of these treatment failure patients back into the fold or get more -- that would be the first mode of action. How do you address that?

Actually I think that physicians who see those patients -- these are typically the more sophisticated physicians, those who are trained in hepatology who are treating from [turtuary] care centers, the thought leaders and we don't need to do a whole lot because they're tracking those patients. They are farther progressed in their disease. They, therefore, need to seek more regular treatments and the physicians are already talking to us about which patients they will call immediately upon launch and which patients they would simply wait until they came in in the next cycle of their ongoing follow-up.

What kind of patients are those?

What I'm trying to say, Jason, is just that depending upon how ill patients are, and/or what the higher response rate patients that the physicians are identifying may be in their practice, they will call them at a greater level of urgency or simply wait until they come in for that next six-month visit.

Thank you.

You're welcome.

I think in the interest of time, we'll have time for one more question

All right. We'll go next to Mr. Alan Carr with Needham and Company.

Good afternoon, everybody. Thanks for taking my questions. A couple of them. Can you give us in the update on 813 and 985, where they fit on your priority list now. And second component, where does inventory build stand with Telaprevir?

Maybe I'll take that. Towards the second generation of program for [protease] inhibitors, we are still evaluating those molecules and moving on. We plan to get our kinetic data in the near future. We had to prioritize against 222 and Telaprevir. Those molecules are still on and we'll come with some data whenever we have it and present it.

I think the message here is we are very interested to continuously build a portfolio of molecules and that as we look into bigger molecules for protease inhibitors, we look into molecules for polymerase inhibitors and means 222. And also, here at the beginning are trying to evolve our NS5A portfolio that we have opportunities to mix and max molecules for different patient populations and figure out what the right regimens might be.

Just to Peter's comment, the bars very high for protease inhibitors now. Bringing a protease inhibitor into the clinic at this stage with maybe a five, six year development path in front of it, we have already established what the potential profile could be for Telaprevir. And we're essentially weeks away from the advance data. It's a real challenge bringing a protease inhibitor into the clinic at this point.

The one thing I want to add, it's not just about SVR data that you have to look into a (inaudible) data. The most important component now that the entire world is moving towards combination therapy is the fact that you have to study to what extent those molecules are combinable with other elements in your portfolio. That's what we're constantly evaluating. For this given point in time, it's not clear, to me at least, that protease and polymerase is the only viable option. It might be NS5A molecules (inaudible). It might be protease, and all sorts of combinations and a good development strategy is that you figure out what of your portfolio can be combined with each other and then move forward. It's not just about comparing protease inhibitors with Telaprevir alone because this is at the station. It's about what is the next generation offering. The benefit is that you find mechanisms that can be combined to basically hit the wires better over the head. That is what it is.

And Al, my apologies --

The second question--

It was on the supply chain.

We're in great shape with the supply chain and if your question is more towards where we -- where are we operationally, Peter can certainly talk to that, but we're in great shape. We're making commercial product. We're building it for based on when we expect a potential launch, based on our current estimates for forecast in patient uptake. And the way we're planning for this is upon launch, we believe that we'll have 18 months to two years inventory and will be able to turn it quickly from work in progress and raw materials into tablets and ready to bring to patients. We're in great shape and we have moved through the process with the FDA as well.

Have you broken out spend on inventory within the R&D line?

We have not, no. We do disclose it in our 10-Q and the guidance we provided at the beginning of the year was within our R&D investment. There was going to be approximately $60 million of inventory investment for 2010.

Great. Thanks very much.

Yes.

Okay. We appreciate everybody joining us. We're in our offices if you have additional questions. Thank you.

That concludes today 's conference. We thank you for your participation.