福泰製藥 (VRTX) 2010 Q2 法說會逐字稿

Good day and welcome to the Vertex Pharmaceuticals Incorporated second quarter 2010 financial results conference call. Today's conference is being recorded. At this time I would like to turn the conference over to Mr. Michael Partridge. Please go ahead, sir.

Thank you. Good evening and welcome to Vertex's second quarter conference call. The quarter that just completed included the announcement of top line data from our pivotal Phase 3 ADVANCE trial evaluating telaprevir in combination with pegylated-interferon and ribavirin. These data are an important marker of our progress toward the potential launch of telaprevir for the treatment of hepatitis C. In August and September we expect to report topline rates of SVR, also termed viral cure and safety results from our remaining Phase 3 trials of telaprevir. The ILLUMINATE trial which is in treatment-naive patients and the pivotal REALIZE trial, which is in treatment failure patients. With all of the Phase 3 data, we plan to complete the rolling NDA submission for telaprevir in the second half of the year in preparation for a potential approval and launch in 2011.

Now to the agenda of the call. Today, Matt Emmens will highlight the potential value drivers we see in the months ahead in the context of the Company's vision of becoming a fully capable biopharmaceutical Company. Then Nancy Wysenski will discuss the emerging product profile of telaprevir and how we are building our commercial organization in order to meet the needs of key patients segments of the hepatitis C market. Next Dr. Peter Mueller, our Executive Vice President of Global Research and Development and our Chief Science Officer will discuss progress with a range of research and development programs and provide a perspective on the importance of the upcoming ILLUMINATE and REALIZE data. Then Ian Smith will review our second quarter results and our efforts to maintain a strong capital structure to realize new product opportunities targeting serious diseases. In addition, Dr. Bob Kauffman is also here with us today and will take part in Q&A.

Please note that 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 a reconciliation of those measures to GAAP is available in our second quarter 2010 financial press release, which is on our website. After our prepared remarks, we will try and accommodate as many questions as time permits. Once the call concludes, we will be in the office to answer any additional questions that you have. Thank you. I will now turn the call over to Matt.

Thanks, Michael. What distinguishes Vertex in my view at least, is our total focus on innovation on novel product candidates targeting serious diseases. Discovering and commercializing new drugs is a high risk business but we believe in our business model and the opportunities that we have before us. We believe we are in a strong position to emerge as a Company that can provide new hope for patients with serious diseases and a significant return to our investors through earnings generation, along with reinvestment into R&D and new product candidates. The creation of new medicines has never been more important for our industry, the health care system and society. We are deeply committed to doing our part. In May, we achieved a major milestone with the ADVANCE results. These data support our belief that we can leverage our business model and translate our own research into potential drugs that are clinically and commercially meaningful. I believe that telaprevir is just our first step and will be followed by new breakthrough drugs in other diseases including fibrosis.

I said in the beginning of the year, that 2010 is a defining year for Vertex. We set forth ambitious goals in 2010 for the Company and we are continuing to make steady progress towards these goals. Looking ahead, our projected pipeline milestones for the second half of 2010 include the following. In hepatitis C, we need to complete the Phase 3 registration program rolling NDA submission for telaprevir. We need to generate clinical data from the combination trial of telaprevir and VX-222 and initiate a Phase 3-B clinical trial evaluating the BID dosing of telaprevir. In cystic fibrosis, we need to continue to progress the VX-770 Phase 3 registration program and initiate a Phase 2 clinical trial of the combination of VX-770 and VX-809 in patients with the F508del mutation.

Elsewhere in our pipeline we will generate data from the proof-of-concept study for VX-765 in epilepsy and continue to move forward enrolling the VX-509 trial in rheumatoid arthritis. Our plan is to do all of this while building out our commercial infrastructure for the expected launch of telaprevir while maintaining a strong capital structure. We have consistently invested in our future and will continue to do so. We believe this approach will create the greatest value for our shareholders. We are committed not only to telaprevir but also to other pipeline opportunities with the goal of creating sustained commercial leadership in multiple disease areas and transforming Vertex into a fully capable biopharmaceutical company.

I'd like to turn it over now to Nancy.

Thanks, Matt. I'd like to start by echoing Matt's sentiments. I'm pleased with our progress this year. With the results we achieved in ADVANCE, we are confident in telaprevir's profile and we're aggressively preparing within commercial for the goal of being able to offer telaprevir to as many patients as possible. We're well into the process of hiring and building Vertex's commercial infrastructure ahead of the planned launch of telaprevir. Today, I'd like to highlight some key accomplishments made during the second quarter. Then I'd like to outline objectives for the remainder of the year, provide patient demographic information and talk about how our launch strategy fits within this framework. First, let me say the necessary build of internal processes and systems is on track and is being put in place for a robust launch. We're pleased to announce that our commercial leadership team is nearly complete. Following the hires of Paul Daruwala, Vice President of Marketing, Joe Cozzolino, Vice President of Sales and [Kaso Hushmanos]Vice President of Commercial Operations. Together, this team brings to Vertex more than 45 years of commercial health care expertise with a focus in infectious diseases. We've added approximately 30 individuals throughout our commercial organization since January, and we've initiated the hiring of our sales leadership team. Next, we'll be hiring our field sales team. These hires highlight our belief in the potential of telaprevir, as well as the full-force of effort that we plan to put behind the launch. During the second half of the year, in addition to hiring the sales force, we plan to implement training systems necessary to support our sales team as well as ramp up our disease awareness programs.

Next, I'd like to make some general comments on the hepatitis C market and provide some detail in terms of how we view the key patient segments. First, we believe that the marketplace is quite unsatisfied and very likely to respond to innovation. There are historical data to support this view. One example is the launch of pegylated-interferons in 2002 and 2003. These agents at least doubled the annual number of hepatitis C patients being treated in the US. As you know we segment the genotype one market opportunity into two primary patient pools, treatment-naive patients and treatment-failure patients.

The treatment failure pool has grown into a significant population. And these patients typically have the greatest unmet medical needs. We believe the treatment failure group will be very important during the first stage of launch as many of these patients may be prioritized for early treatment by their physicians. For these patients, disease is often at an advanced stage and they're being closely monitored within the health care system.

Providing a new treatment option to this group of approximately 300,000 patients in the US who are more likely to be highly motivated for treatment could support the rapid uptake of telaprevir, a successful launch and a greater awareness of telaprevir among treating physicians and patients. We hope to address the treatment failure group with the data from REALIZE, our Phase 3 registration study with telaprevir.

This is our second pivotal study and we expect to release top line data in September. As a reminder, in PROVE 3 and Study 107 our earlier studies in genotype 1 treatment-failure patients we showed high rates of viral cures in trial populations that included all treatment failure subtypes. No responders, partial responders and relapsers. And a safety profile that was consistent with previous studies. If REALIZE confirms the potential we saw in Phase 2, telaprevir could increase the number of treatment failure patients who choose retreatment beyond the 5% to 10% rate noted today. The REALIZE trial is the only Phase 3 trial of its kind and we believe the results, based on its potential application in a broad set of treatment failure patients could differentiate telaprevir from other compounds in development.

Now, let's turn to the treatment-naive patients. The ADVANCE data have already characterized the potential of telaprevir to address the needs of this patient segment. The diagnosed treatment-naive genotype 1 segment represents a significant opportunity in the initial launch years but somewhere between 300,000 to 350,000 patients in total. Our market research reveals that more than half of the currently diagnosed treatment-naive patients have stage II or higher fibrosis, a point in their disease progression where treatment might typically be recommended. But today, less than 10% of these treatment-naive patients are choosing to start therapy in any given year with the current standard of care. We believe that the availability of more effective therapies is likely to increase treatment rates for these patients. Based on our market research, we believe improvements in outcomes, such as those seen in ADVANCE data, could impact physician's decisions to recommend treatment and also motivate patients to be treated. We think the strong potential product profile of telaprevir, combined with a well designed market facing organization, can position us for a successful launch and sustained leadership in hepatitis C. In 2010 and 2011, our commercial team's highest priority is to execute a highly successful launch.

As I just highlighted, we believe that the first stage of success in this market will be the opportunity to potentially increase treatment rates, both for those patients who are already diagnosed with hepatitis C, and not yet treated and for the treatment failure patient group. But we're also thinking beyond, to the needs represented by the undiagnosed population, which as you know, is in excess of 2 million patients in the US.

The CDC has stated they will be considering a potential update to recommendations on screening for hepatitis C. The CDC is getting a study under way called the Birth-cohort Evaluation to Advance Screening and Testing for Hepatitis C or the acronym, BEST-C. This two-part study will evaluate routine, one-time screening for hepatitis C focusing on people born between 1945 and 1964. Results from the BEST-C trial could provide further evidence for the CDC to consider updating their screening guidelines based upon age, also known as birth cohort based screening. All these efforts are still early, we look forward to continuing to participate in discussions with public health authorities towards a goal of further increasing awareness of hepatitis C within the general population. The potential benefit of age-based screening on a large scale would be to enable more patients to become aware of their disease and to receive treatment before they face the consequences of advanced liver disease.

Now I'll turn the call over to Peter.

Thank you, Nancy. And good evening, everyone, 2010 is a very important time and year for Vertex. We initiated the rolling NDA submission for telaprevir and as planned, we have submitted the CMC and the nonclinical documents to the agency. My and my team's top priority is the completion of this NDA with the clinical documents later this year.

To begin, I would like to review certain characteristics of the pivotal Phase 3 ADVANCE trial data which evaluated 12 and 8-week telaprevir based combination regimens. ADVANCE as you heard produced the first Phase 3 data reported for a direct acting antiviral agent for treatment of hepatitis C genotype 1 patients. High viral cure rates of up to 75% in the 12-week telaprevir based combination arm with response guided therapy, including viral cures in a majority of these patients was only 24 weeks of therapy. This compares to a 44% viral cure rate in the control arm. A low rate of discontinuation after treatment regimens due to adverse events, respectively 6.9% to 7.6% in the telaprevir based treatment arms and 3.6% in the control arm.

Now, to the ILLUMINATE trial which we expect to produce the next set of clinical data for telaprevir in August. ILLUMINATE is part of the Phase 3 program and is designed to support the pivotal ADVANCE trials in treatment-naive patients and the pivotal REALIZE trial in treatment failure patients. ILLUMINATE is a supplemental non-pivotal open label study that is evaluating the efficacy and safety of 24 and 48 week telaprevir based treatment regimens in treatment-naive patients. The purpose of ILLUMINATE is to evaluate the comparability of the SVR rates between the 24 and 48 week arms for those patients who were undetectable at week 4 and 12, that is, they have achieved an EVR and ERVR and who remained in the study through week 20. With information we have learned from ADVANCE, including relapse rates and study discontinuation rates and considering as well the design of ILLUMINATE, we expect to see high SVR rates in the primary analysis potentially at or above 85% in the two ERVR treatment arms that were randomized at week 20. We also expect to confirm the safety profile of telaprevir that we have seen so far in Phase 3.

Now, turning to the upcoming REALIZE trial. This trial is evaluating telaprevir in patients who did not achieve SVR in a prior pegylated-interferon based treatment. A key defining feature of this trial is that we believe based on the PROVE 3 study that we are evaluating the optimal duration of therapy for treatment failure patients, which is 12 weeks of telaprevir on top of 48 weeks of pegylated-interferon ribavirin for a total of 48 week therapy. As Nancy noted, since this trial is evaluating all major patients (inaudible) including (inaudible) it could provide a basis for differentiated telaprevir from other compounds in development. We very much look forward to discussing REALIZE with you in September.

I'd also like to mention that we have completed discussions with regulatory authorities regarding the Phase 3B study to evaluate BID dosing for telaprevir. We expect to begin the twice-daily study in the fourth quarter this year. Following the announcement of data from the ADVANCE trial, regulatory authorities in US and Europe advised that the trial did not need the control arm of pegylated-interferon and ribavirin. All patients in this trial will be able to receive telaprevir and we believe this is a very positive outcome. We are looking forward to conducting this in approximately 700 genotype 1 treatment-naive patients in the US, EU and certain other countries. We will provide more about the design of this trial at the time it is initiated.

As we seek to sustain our leadership in hepatitis C, we are also looking ahead to future potential product opportunities that are complementary with telaprevir. We are currently conducting a combination trial with telaprevir and VX-222. This trial has not progressed as quickly in the startup phase as we originally projected. Because this is a novel approach, we wanted to make sure that we conducted sufficient patient monitoring during the study before we started enrolling patients. However, we are making good progress now and plan to dose the first patient in August and look forward to receiving the initial set of data from this trial which we expect will be on treatment data in a proportion of patients in the second half of this year. We expect the data from this trial will help us identify treatment regimens for broader patient segments.

Now, let's turn over to cystic fibrosis. Our Phase 3 registration program for VX-770 is on track. Enrollment is complete in all three registration studies and we expect to receive data from the Phase 3 programs STRIVE in the first half of 2011. STRIVE completed enrollment of approximately 170 G551D patients earlier this year and in a few weeks all patients will have crossed the 24 week primary end point. We will continue the trial as planned and expect to announce data at the end of 48 weeks.

ENVISION is another trial that will support our planned NDA submission in the second half of 2011. ENVISION is a Phase 3 trial evaluating patients aged 6 to 11 with the G551D mutation. The study reached full enrollment with approximately 50 patients in June this year. Similarly to STRIVE patients will be dosed for 48 weeks.

The DISCOVER trial is a 16 week Phase 2 trial, primarily a safety study in patients with the Delta 508 mutation. This trial completed enrollment of approximately 140 patients in January and all patients have now completed the 16 weeks of dosing. We have stated previously that we expect to disclose data from DISCOVER in the first half of 2011 when we have data from all the other studies. That continues to be our expectation. However, if once we have received the DISCOVER data we conclude that it could change the future direction and design of the program, the disclosure time line could be accelerated.

As we advance in our Phase 3 program for VX-770, we are looking at two other trials of exploratory biomarkers that may be more sensitive than FAV-1 in evaluating a change in lung disease. One involves the use of hyperpolarized helium-3 magnetic resonance imaging. We are initiating a phase 2A study using this technique to evaluate the effect of VX-770 on ventilation in patients with the T554 mutation.

This is novel technique using an MRI after a patient inhales hyperpolarized helium to image to lung. It could allow physicians to create a 3-D image of the ventilated areas of the lung which will be obtained before and after treatment with VX-770 or placebo. To use an actual image of a patient's lung could show the potential effect of treatment with VX-770.

Another biomarker of pulmonary function that we are exploring is LCI or lung clearance index. This is measured using a multiple press washer test. These bio markers could assess the response to VX-770 and are potentially more sensitive than NPV-1 in patients with mild lung disease. We're looking forward to exploring the use of these techniques as potential endpoints for future clinical trials in cystic fibrosis and to be part of leading edge advancements for treating this disease. We also expect to initiate a Phase 2 clinical trial evaluating combination regimens of VX-809 and VX-770 later this year. This is an important trial that targets patients with the Delta 508 mutation that most prevalent mutation affecting more than 85% of the CF population.

Also, I do not have time today to review all of our development programs in detail, we are also aggressively advancing our pipeline and our research program continues to yield other promising compounds. We are generating a significant amount of information to guide decision making for clinical development in 2011.

So in summary, first our Phase II proof-of-concept study of VX-765 in epilepsy has completed enrollment ahead of schedule and we are on track to obtain data from this study in the second half of this year. Secondly, we believe VX-509 could potentially represent a novel approach for treating rheumatoid arthritis. We are conducting a Phase 2 proof-of-concept study to initially evaluate the efficacy as measured by ICR 20, 50 and 70 responses and also safety and tolerability of this compound. We are updating the time line now and expect to generate data from this study in 2011. We continue to make great progress across all areas of Vertex and we are preparing for a promising future. We believe that telaprevir has the potential to redefine the treatment of hepatitis C.

I very much appreciate the continued outstanding effort and commitment of everyone who works for and with Vertex that has led to the ADVANCE results and I am really looking forward to the ILLUMINATE and REALIZE results in hepatitis C in the next two months and the first results from our cystic fibrosis pre Phase 3 program in the first half of next year. So now let me turn the call over to Ian.

Thank you, Peter. Maintaining our financial position, investments and the opportunities within Vertex is a key component to our business strategy. At the beginning of the year, we established 2010 financial guidance based on an evaluation of our core business objectives, our strategies for achieving those objectives and our financial profile for the year. I'm pleased to say that we're on track with our business objectives and therefore, we are well-positioned as we look to the potential launch of telaprevir. We began the year with approximately $1.3 billion in cash, cash equivalents and marketable securities and provided a non-GAAP guidance of approximately $600 million loss, which is a proxy for our cash burn for the year. We completed the second quarter of 2010 with a strong and healthy balance sheet with approximately $980 million in cash and cash equivalents and marketable securities and no convertible debt outstanding. This positions us for continued investment in key activities to support the successful potential launch of telaprevir.

Now, to the second quarter financial results. I'm just going to cover the bottom line components of our financials on the call today. Specifically, our GAAP net loss in the second quarter of 2010 was approximately $200 million. This compares to the second quarter of 2009 of approximately $171 million.

The main line items within our income statement can be found in our second quarter press release. When comparing the loss on a non-GAAP basis to the second quarter of 2009, our loss increased to approximately $143 million from approximately $129 million in the same quarter last year. The increase was principally attributable to an increase in the total operating expenses to support the potential launch of telaprevir as well as the Phase 3 registration program for VX-770.

We remain committed to investing in our future by advancing our portfolio assets and will continue to make strategic investments in our R&D pipeline while focusing on the launch of telaprevir. We are well-positioned financially and we are looking forward to generating positive cash flows while reinvesting in product opportunities that may treat other serious diseases. The expected scale of the telaprevir opportunity allows us for this vision. Michael, back to you.

Thank you. Elizabeth, we would now like to open the call to questions.

Thank you (Operator Instructions). Our first question today comes from Geoff Porges with Sanford Bernstein.

Thanks very much for taking the question. Peter, just a couple of questions for you. First, could you talk a little bit about the Phase 2/3B study that you've announced today on BID? First, does that -- should we assume that means the BID data from the earlier study will not be on the label? And then secondly, could you comment about the precedent of not having a control arm? Is this something that you've seen before and do you anticipate that the FDA will be imposing that standard on subsequent Phase 3 studies or is there something unique about this? And I just wanted to ask you a little bit more about, could you give us some more color on the ADVANCE data. As you've looked at it, do you have an explanation for the relatively low RVR rate in ADVANCE? Thanks.

Okay. So I hand it first over to Bob and then I help to answer all your questions, Geoff, I think good questions.

Thanks, Geoff. So in terms of the BID study, obviously we're very happy to have gotten agreement with the regulatory agencies on the design of that study. In terms of the C208 data, I think the general impression was, although the data were very strong, the study was a little bit too small to really get us a label claim for that indication. My guess is, and I don't have any real knowledge of this, is when we get to negotiating a label language ultimately, it will primarily be this Phase 3B study data that becomes the label because it's the largest and most robust study. So the C208 data were very valuable to us. Obviously they got us to where we were, probably by themselves -- for sure by themselves they're not enough to really get us to a label. In terms of the design of the study, I'll just stay that there's been a tendancy over the past few years in situations where you're comparing for example two formulations or two dosing regimens to include a standard of care control arm when that's being done with a new therapy. The reason for that is the FDA and other agencies have wanted to be certain that the new therapy is actually superior to the old therapy in addition to the two regimens that you are testing being equivalent to each other.

I think that's standard in general.

That has become much more standard. I think the reason why in this case that requirement was waived was they explicitly said that the data from the ADVANCE study really make that need for a control arm just not there. And so in this case, the data from ADVANCE were the reason why the agencies felt that we did not have to have the control arm within this trial. So it's a two-arm study and we're proceeding on.

Okay.

Maybe I should maybe deal with the last question and then we can go forward. In terms of RVR, I would only say that we are continuing to look at that very carefully. I honestly, I really don't have any additional insights beyond what we presented to you and discussed at the last call.

Our general sense is it's a more difficult to treat population, more geographically diverse and more diverse in terms of the baseline characteristics, but in fact maybe that's borne out by the fact that the RVR rates in the control arm are also lower than what we had seen in some of our other studies. I think that's the best we can come up with now. We're absolutely continuing to evaluate that. There may be other explanations as well, and obviously when we present this at a medical meeting, if there's any other findings we'll certainly present those.

The last question, Geoff, you had was whether the agencies in the future will impose on others the use of a telaprevir regimen as standard of care.

That's right.

I must say, that is most likely true after approval because they cannot force anybody to do something if the drug is not approved. So I think we have to wait until then but then there is a high likelihood if we are out there, that this is the new standard.

That's very helpful. Thanks, Peter, thanks, Bob.

Our next question comes from Rachel McMinn with Bank of America-Merrill Lynch.

Thanks. Just one question following up on Geoff's line of questioning here. Can you talk at all about the powering of this study, what kind of non-inferiority margin would be acceptable? And then can you also clarify -- you say in the press release, twice-daily. I just wanted to, I guess get a sense of is this twice a day or really Q-12 hours but you specifically say Q-8 for the BID arm. And then my last question had to do with 222.

Maybe I'll take the BID study ones. First of all, for the second question, yes, it is BID and not Q-12 as opposed to the Q-8 regimen that we used up until now in the program. Yes, that was very good pickup as I would suspect. So that's what we're going forward with. In terms of the study design and powering, that's not something we normally really disclose. Certainly the design was met with approval by the regulatory agencies and that's -- and we're going forward.

And then on I guess on 222, I guess because of the slight delay, it looks like a couple months delay here, what kind of data will we actually see in the back half of the year? You kind of alluded, Peter, you said something like partial data, but I guess that was on some set of patients. Could you help clarify?

I think we will see in a partial portion of the patients in the regimen some on treatment data. We have not yet defined exactly what that is, but it is actually a couple weeks in and then we will see how we go.

Rachel, maybe I'll clarify on that, which is open label. So it's not an interim analysis. We have the ability to look in and understand how a patient is doing while on treatment, so we know that the early viral kinetic data is important both how quickly the virus goes down but then also some form of measure of whether there's any viral rebound. And that's what we're talking about, it's early on treatment viral kinetic data as well as initial safety data.

We'll take our next question today from Mark Schoenebaum with ISI.

I joined like three or four minutes late so you might have answered this. Any update that you're willing to give on the size of the patient warehouse?

Sure, we can talk a little bit about that, Mark. This is Nancy.

Thanks.

As you know, we've been doing the primary market research and talking as we go out to conferences and so we hear through those sources that patients are being collected, if you will, to be able to take advantage of telaprevir. In addition to that, we've got primary data that if you look at the current sales for standard of care, it peaked several years after launch, and then the total PRXs began to decline since then. If you look more specifically at late last fall and the first five months of 2010, that trend picks up at an even greater rate. So there are fewer and fewer total prescriptions being written now and that sort of hit an all-time low in May. That suggests to us since the rate of diagnosis to our knowledge has not changed, that patients are being held back.

And any help quantifying the size of that warehouse?

Well, I guess the best statement I can make is that total RXs have declined in the course of the year by about 5,000 of the 25,000 in total.

Okay.

So you can use that.

Okay. That's fair. Maybe for Ian, you have a lot of cash, obviously you need it for internal stuff but what's your current take on external business development, a lot of interesting assets out there. As analysts and investors, what should we be expecting? Thank you.

I'm a little confused with your question to be honest, Mark.

Your tolerance for -- your business development strategy, sorry, Ian.

In terms of, well, let's have Peter comment on how we're thinking about the HCV landscape but certainly we're here with what I've often said is one of the real direct antiviral compounds which is telaprevir, even the stage it's at there's great confidence that this drug should be coming to the market. For us now, it's how we extend our presence with telaprevir in the market both with a compound with 222 and we're already in the study there, but it's not just to focus on 222.

We need to look at other mechanisms. Peter can talk about those. But how do we secure this position? How do we build behind the position we've already created? And the tolerance for doing that is very high. We're committed to (inaudible) for the long-term. I think we have great capability of actually executing on bringing in more assets, not just from a cash perspective but when you've got the lead asset, telaprevir, it tends to draw others to want to do studies with telaprevir. But Peter can talk about how we're thinking about the other mechanisms.

Mark, as you know telaprevir is sort of the first and really great regimen in combination with peg-interferon ribavirin and it obviously is also posed to basically be part of first let's say dual combo regimens or other combo regimens as we go forward. However, when you really look at the entire thing, I think there's many mechanisms that could play a role and by looking more in segmented patient populations and the need of a higher diversity, if you want to go for more different genotypes, if you want to go more in, let's say sub populations, ethnic groups and all that, not all of those mechanisms will basically be the same and the response of the patient is not the same. So, therefore, I think there is currently a set of molecules out there that basically cover protease inhibitors, nukes, nonnukes, 5a molecules and maybe novel also lately NS4B molecules and all those type of things and some interferons and even some maybe potentially oral interferons.

I think what we are trying to do is to mix and match our portfolio with the right molecules that are combinable with our assets. Because it's not just that you have the mechanisms that are complete, you have also to have the molecules that can be combined, and don't add, let's say, safety issues to the regimen. And I think we are looking on a constant basis in all mechanisms that are out there for potential, let's say, additions to our portfolio based on those criteria. It has to be relatively safe, it has to be combinable, has to have a metabolism PK profile that is commensurate with the regimen that you want to do, and it has to cover a broader area of genotypes so that we can really have the flexibility to mix and match what we are doing. We are open for everything and we are looking and that's it.

Mark, I'll make a comment on that also just in a general strategic viewpoint. We plan to lead this market in the near and the long-term, and by that, you can look at the market in phases, obviously and I think a lot of you do that. We are looking -- we think we've got a perfect backbone of the market but we're also looking down the road for all oral and we're looking for the most effective even five or six years from now, so we're not letting anything by us without looking into it. Our goal is to lead it.

Thanks a lot. I appreciate it.

We'll now hear from Ted Tenthoff with Piper Jaffray.

Great, thank you very much. Thanks for the update. Can you just verify, you are evaluating telaprevir BID in the 222 combo studies, that's correct?

Yes, that's correct.

Okay, good. And beyond safety help put in perspective what you'll learn from the ILLUMINATE study and how this will really support and impact the NDA if you would.

This is Bob. I'll answer that. I think that, as we've said before, it is a supplementary study. It really is designed to answer a question that if you remember was posed 2.5 years ago when the program was designed, just about the specifics of the 24 versus 48 week regimen in those patients who have an early response.

And though there was some wish to really provide confirmatory information that there was no additional benefit in going beyond 24 weeks in that population and that was the design of the study. That is really what our -- what we're expecting for the outcome and our expectations are that the SVR rates with those two regimens are going to be very similar to each other and, therefore, illustrate that no further treatment is necessary beyond the 24 weeks. I think it adds that -- it's a really clinical confirmation, it's not really quite so useful from a regulatory point of view in terms of the primary approval of the drug but it is -- it will be I think valuable information for practitioners in making the choice of how long to treat their patients.

Ted, this is Nancy, just to jump in from a commercial point of view. I think in addition to the ADVANCE data that we've already discussed at length, we have the potential based upon what we see in ILLUMINATE to also reassure physicians and patients that the response rates are significant enough that based upon the primary research that was shared following the ADVANCE data, that patients are far more likely to want to seek treatment. So we're hopeful that that may be a secondary benefit.

And the other thing is at the end of the day, it is as we said a supplemental trial, so it's not pivotal. And it's, therefore, not necessarily needed for basically get approval for anything. So it is a support structure system that we have.

That's actually very helpful. I appreciate the time.

Our next question will come from Lisa Bayko with JMP Securities.

Hi, everyone. Just wanted to ask, it seems to me on the Phase 3B with no control arm that that might be a pretty quick to enroll trial given the anticipation of telaprevir in the market. Can you give us a sense of how long you expect this trial to take to enroll?

I think at this point in time, it's too early to say as we are still in process of setting up the logistics.

Okay.

I mean I think it will enroll quickly. We agree with you, it's a very desirable study from the patients' point of view.

Still at 700 patients if that's the number, it will not enroll overnight, and so I think you can anticipate probably treatment data outcome in 2012. That's what I would say is sort of reasonable. And if you are lucky, it is end of 2011, then you are super lucky, okay? That's not basically what I think. I think 2012 is probably what you can look for.

Okay. Good. That's helpful. And moving on to the cystic fibrosis program, I'm sort of intrigued by the combination study that you're planning. Could you maybe give us some details on is it sort of you start with one drug and then sort of add the other drug, or what kind of design are you thinking and how long might patients be on therapy? Will it be long enough to really get a sense of efficacy?

This is Bob. Obviously we'll announce the design when we get to the point that we're really ready to initiate the trial. We're kind of working through the design elements now. I'd say that our, remember, our focus in here is a proof of mechanism. I would actually say that clinical efficacy, for example, FEV1 to efficacy may not be seen this trial. We're really looking for the fact that whether, in fact, 770 can enhance the activity in Delta 508 that we've seen with 809 at this point. And the design is really, yes, studies of the individual drugs and then the combination, how exactly we do that in terms of study design is still being done. But that's what we expect.

I think so this is the first step. We really want to get clarity whether a combination of those two mechanisms is really a therapeutic valuable our concept. When we notice then we will optimize the dose regimen with respect to the patient population. And also we learn from the POM how translatable our in vitro data that we have, and are very translatable on the single agent base but we don't know whether that's all true for the combination and that informs us how we can conduct future clinical trials and further optimize maybe other treatment regimens that we have in mind.

Okay. Thanks. Then one final question. For VX-509 in RA, I thought that we were to get some interim data a little sooner than 2011. Can you maybe comment on how progress is going on that study? Thanks.

I mean, the study, these kinds of studies, these early phase studies in RA are among the most difficult studies to do because the number of patients, particularly with the enrollment criteria we have for that trial, the numbers of patients out there are just not that great, so you really have to search for them. It's not atypical for these early phase RA studies to take a while to enroll and that really is what's going on. You're right, it is going to be somewhat delayed beyond our initial projections. It has mainly to do with just a little bit slower enrollment than we expected. We have a mitigation strategy in place and we are expecting that to really pick up but that's where we stand right now.

Okay. Thanks a lot for answering my questions.

We'll now hear from Howard Liang with Leerink Swann.

Thanks very much. I have two questions if I could. First, if I heard correctly I think Peter said that if discover for the CF program -- if DISCOVER results change the direction of the program that your plan might be a little different. Can you elaborate on that? And then second I was wondering if you can comment on the stopping rules in the telaprevir 222 combination trial associated with terminating a particular arm?

Why don't we have Bob Kauffman comment on the stopping rules and the combination study and then I'll take the disclosure questions.

Yes, so in the 222 telaprevir combo study, there are rules in place for discontinuing treatment in the face of a breakthrough, for example, we often have different stopping rules for different arms of the trials. I can't really go into the details of those but they're designed to fairly protect the patients and prevent exposure to antiviral drugs in the face of a failing regimen which I think is pretty standard.

Yes.

In addition, of course, we're applying the usual stopping rules for the 12 week and 24 week rules that are applied in pretty much all HCV studies with at least a two log drop at week 12 and undetectable at week 24. Obviously we don't expect those rules to pick up very many people in the various arms because we expect everyone to be undetectable long before that, but they're in place in the trial in any case.

I'll answer the question on the disclosure of the 16 week study. We get this question a lot because clearly it is a study that is concluding way ahead of the other registration studies for 770. And we just want to be clear on this call, that it has concluded. The plan as we've guided in the past, is that we will disclose it consistent with the other registration studies in early 2011. However, we do also want to state that if there is data that we get from this study that causes us to conclude to take a different action regarding this patient population -- 508 population regarding 770, we feel there will be a need to disclose that at this time. We just want to be clear on disclosure guidelines regarding that 16 week study.

Disclosure of DISCOVER data only?

Yes. That is correct.

Okay. Thanks very much.

Our next question will come from Yaron Werber with Citi.

Thanks for taking my questions. I had two questions. One, can you just give us a little bit of a sense in the 222 study, you mentioned that you were looking to do some monitoring ahead of enrollment and that pushed back the first patient getting dosed, can you give us a sense as to what kind of monitoring are you doing and whether that fits in with what's been done in the past? And then I had a follow up as well.

It's not monitoring before enrollment. It's really on study monitoring. This was really done -- remember this is a really quite complicated novel study and we really wanted to make sure that we had all the parameters that we were collecting correct when we started. We actually decided because of where we were at the time that we decided to do this that it would be best to actually put these into place before we enrolled the first patient. We had screened patients but we hadn't actually enrolled anyone, and that's where we'll pick up at this point. But it's not pre -- it was not pre-study, pre-enrollment monitoring, it's really just the typical kinds of monitoring that we do during the course of the trial.

Is there anything different? I'm trying to get a sense as to why you sound like this was unexpected or what's different about this monitoring or why didn't you decide to do it previously?

We just really wanted to get it right. There was some suggestion by the investigators at the investigators meeting that occurred kind of in the immediate phase just as we were beginning screening and it just made a lot of sense, as it always does, to have uniform collection for all patients in the trial, which is why we decided to do it at that time and not later.

I just have a question. We're seeing in the HIV market a lot of payor sensitivity these days and a lot of pressure among the public payors, for example, (inaudible) et cetera, I'm just trying to get a sense, I mean this is going to be -- obviously there's going to be a tremendous amount of interest in warehousing ahead of telaprevir's approval.

Have you had a chance to talk to a lot of the State Medicaid payors to see whether they're going to be ready to handle this volume? Because inevitably, 20%, 25% of the patients are going to be Medicaid. This is going to be a huge market so it is going to be a substantial sum for them. I'm just trying to get a sense of if they are equipped to handle that?

That's a great question and we are beginning our interactions with managed care agencies across the country. I don't think it would be appropriate for us to comment more specifically on who we're meeting with where, but it's in the early stages. We're not launching for a year.

Where I think there may be some concern that has been created within the HIV market where Medicaid and other strictly managed government payor sources have really hurt some companies, I guess what I'd like to point out there is that when you compare the HIV market with the HCV market, we will have a lower incidence of payors, we expect, through those sources. In fact, for HCV, the majority of the patients approximating 60%, will be covered by commercial plans, and we also have the advantage of understanding the full impact of healthcare reform legislation before we go to market and as we consider all of our payor pricing strategies.

Great, thank you.

We'll now take a question from Geoffrey Meacham with JPMorgan.

Couple questions here on the CF program. I think this was touched upon earlier but I'm curious if you guys feel like for the 770, 809 studies, just 200 mg dose for 809 is in fact a maximum dose or do you think you can go higher based on the Phase 2 data?

I think the dose range finding is not yet finalized in this one. I think there's a potential to basically move up. When you look at the data that we have presented now, there seems to be a possibility just to move up. But the thing in the combination is you have to look at those components and I think it has to be sort of a dual approach where you're basically looking up and down in both regimens, 770 and 809 and figure out what the right dose setup is for the patients.

And when you look at the (multiple speakers)

We are not maxed out yet if you ask (inaudible)

Okay. And when you look at the 809 studies, you mentioned, Peter, new end points such as change in lung disease. Have you -- what have you guys learned from other studies for 770 or 809 for this end point and will you be looking at this in the combo study?

We will not look at this at this given point in the combo study. This is sort of a very beginning of the evaluation of the use of new markers. I think they have to first do some studies to see how it can be validated and standardized (inaudible) have to do before you even consider putting it into standard clinical trials. It's an exploratory approach that gives us a new in-road for future trials to come but not at this given point in time applicable to combo trials that we do.

Got you. Then last question, again, on CF, let's assume that you're in Phase 2B with this combination study, what can you tell us, maybe, potentially about the size and the scope of that study in terms of would you, in fact, have a one-year end point and can you talk a little bit about registration strategy with potentially a combo therapy?

So just in terms of duration, the FDA has used a six-month end point but has also asked for a one-year safety data, so my expectation is for the combo we would be in the same situation there. And I would think that the design would be fairly similar to the designs that we've used in the 770 program.

In terms of the size, I can't really speculate on that at this point because we don't really know the extent of the treatment effect that we're going to see with the combination. So until we have that information we can't do the calculations that would give us the sample size so that will have to come later.

Okay, thanks.

We'll now hear from Phil Nadeau with Cowen and Company.

Good evening. Thanks for taking my question. I have just a couple questions on the ILLUMINATE trial. Seems like ILLUMINATE is going to give us a pretty precise answer on the proportion of patients who when taking telaprevir are eligible to discontinue therapy at 24 weeks, so just, first question is, is it safe to assume that you're going to give us the number of patients who are enrolled in the trial and the number of patients randomized so we can just divide those two to get that proportion of patients who are actually eligible to discontinue early?

I can't comment on what we'll actually disclose at this point until we actually see the data.

I just, on the disclosure, Phil, I would say that first of all, that's not the [principal approve] with the ILLUMINATE study in terms of how many patients can be on 24 weeks, it's the comparability of the rapid viral responders that do take 24 weeks versus take 48 weeks. So that's the primary conclusion from that study.

And safety.

And safety, thanks, Peter. And safety. As far as whether we'll disclose data taking the total patients that went on study, for those then that did not achieve RVR, we'll have to make sure that data is available at some point but whether we disclose that when we disclose top line, I can't commit to that at this point.

Okay. And then my second question, which may or may not be relevant given what you just said, but I think we're all going to try to figure out what those numbers are anyway, how does the patient population compare between ILLUMINATE and ADVANCE? Is there any reason that ILLUMINATE would have a higher or lower group of patients eligible to stop at 24 weeks than ADVANCE, for example is the geographic enrollment different? Do you have any idea if the patient characteristics are different?

Yes, I mean at this point we don't have the data from the trial, so there's really no way to make a comparison between this trial, the 111 trial and any other trial we have. The study was conducted largely in the United States and Europe, so the population overlaps -- the geographic distribution overlaps fairly well with ADVANCE but obviously one doesn't know if the populations are comparable until we look and we don't know the answer yet.

Phil, I'd just add that if everybody is going to try and calculate the total SVR rate, it's not comparable to the ADVANCE study. What we have to remember here is that there are a proportion of patients that were rapid viral responders, they were undetectable at week 4, 8 and 20 but did take 48 weeks of therapy. That was not the case in the ADVANCE study so this is a very different study, so it's -- it might be an interesting calculation, but it's not the same regimen as the ADVANCE study. I think broadly, it will be interesting to get more patient safety data from those patients that went through 12 weeks of telaprevir. And so we'll have that data, but please be careful of recomputing an overall SVR rate for a regimen that's different than ADVANCE.

Thanks. Just one question for Nancy on pricing. Nancy, as we start to look through or readjust our models, scrub our models down as we approach the launch, can you give us some framework with which we should approach the price that we're plugging into our models?

That's probably something I'm not going to be able to satisfy until the point where we actually are distributing the drug and actually into the launch phase, but let me put a little bit of color around it by saying that we are going through as we speak all of the typical research and thinking that goes into this phase of a product. And it's a little early even there to begin to speculate, because of the fact that we don't have the most important thing, and that is the label, not only for our drug but for competitors. Once we have that, we'll start to really zero down. But again, I don't expect I'm going to be able to share anything publicly until the point of launch.

Okay. Fair enough. Thank you.

Our next question will come from Jason Kantor with RBC Capital Markets.

Thanks. Most of my questions have been answered but I'm intrigued by this idea of running trials with other agents on top of telaprevir, can you give us some examples of what you're thinking of or what types of structures in terms of business relationships you might strike in order to do that and maybe which drug classes are on your short list for wanting to get something started sooner than later?

Thanks for the question, Jason. I'll take it. I'll go to the latter part of your question first, which is no, we're not prepared to discuss the drugs that we're looking at. I think Peter covered the landscape earlier as how we think about different mechanisms that may combine with telaprevir and continue to expand the portfolio beyond just 222. So it's a competitive space right now so I don't want to go any further than that.

What about the timing of potentially starting trials of other combinations?

Well, I mean -- so going to the structured part of your question, I'm going to keep it as broad as saying you can go all the way from doing co-development through to end licensing through to M&A. There's lots of different ways of approaching this and pending your approach and structure, that's how you might set up your combination. So as far as timing, I mean, something we're committed to. But timing isn't always within our control as well. We have to wait for the right molecules to materialize as well. We're very active in this space but we can't provide you any commitment at this time.

All right. Thank you.

You also have to understand we have our own program.

So in the interest of time, operator, I think we have time for two more questions.

Thank you, sir. Our next question will come from Tom Russo with Robert W. Baird.

Thanks, most of mine have been asked but giving Europe dates on the timing for ILLUMINATE and REALIZE and the late breaker submission for AASLD next week, can you comment on what detailed data we should look for from Phase 3 at that conference?

Thanks for the question. We don't comment on the data that we will put at different conferences, as you're probably aware once you announce the date that you believe you would be there, you could be breaking embargo so we're not going to specifically comment. More broadly, though, we realize that, ADVANCE and REALIZE are fundamental studies in the HCV arena and ASLD is a very important medical conference for ourselves this year to position this drug and so knowing that importance to us and to the medical field, we will do all that we can for the benefit of telaprevir.

Okay. In terms of the CF trials that are still in progress, is there anything anecdotal you're hearing from STRIVE on biomarker changes or lung function that would bolster confidence that 770 is working over the longer durations?

We don't want to comment on anecdotal commentary, the data is all blinded at this point in time, some studies are starting to complete that will provide the data when we unblind it. As far as your own research and diligence around this space as you know there is a lot of commentary out there in the electronic world, so you can take that for what it's worth but we're going to maintain blinded until the studies are complete.

Our last question today will come from Brian Abrahams with Oppenheimer.

Thanks very much for taking my question. I just wanted to drill down on something Nancy and Peter both -- you both mentioned before. Just wondering, what's been your feedback from the community as to how important differentiating advantage having NOLs in the Phase 3 program and potentially on the label is going to be commercially.

Maybe I can start and maybe Peter can add a little bit to. I think that for this patient type with 300,000 patients who have already failed therapy, many of them on more than two attempts, some as high as three and four, that it's going to be pretty critical. The way these patients are treated, when they are in a physician's office and they become this complex and have failed a course or two or three, they've been progressed within the system. And they don't always have all of the details related to their status and what those early failures were about. And so it seems to me that from a treating physician's point of view, particularly the high prescribing specialists who see these difficult to treat patients, it's a great advantage to know that they're going to have data on NOL as well as on the partial and the relapsers.

Thanks. That's very helpful.

Ladies and gentlemen, that does conclude today's question and answer session. I would now like to turn the call back over to management for ny additional or closing comments.

Thanks very much, Elizabeth. Thanks to everyone for taking the time to participate tonight. If we didn't get to your question or if you have additional questions, we're happy to talk to you after the call. Thanks again.

Once again, that does conclude today's conference call and we thank you for your participation.