福泰製藥 (VRTX) 2011 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Vertex Pharmaceuticals, Incorporated first-quarter 2011 financial results conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Instructions on how to participate will be given at that time. (Operator Instructions) As a reminder, today's conference call is being recorded.

Now, I would like to turn the conference over to your host, Michael Partridge.

Thank you. Good evening, and welcome to Vertex's first quarter 2011 conference call. We are pleased to be able to review with you Vertex's achievements to date in 2011 and also highlight the further progress we anticipate in the months ahead. Since the start of this year, we have advanced our business significantly in the disease areas of hepatitis C and cystic fibrosis. Starting with hepatitis C, we intend to use the name INCIVEK as the trade name for telaprevir in the US. Last week, the advisory committee completed its review of INCIVEK and we now look forward to potential approval within weeks. We are ready for approval and believe that INCIVEK will be important for people seeking an improved treatment option for this disease.

In cystic fibrosis, we are concluding our Phase 3 program and have seen results that suggest we have the potential to provide a substantial benefit for certain people with this disease. We anticipate global regulatory submissions in US, Europe, and Canada, including an NDA and an MAA in the second half of this year.

We remain financially strong, with a cash position of more than $820 million at the end of the first quarter, sufficient to support the anticipated launch of INCIVEK and the advancement of our pipeline.

With me on the call today are Dr. Peter Mueller, who will provide a comment on the advisory committee for INCIVEK and also briefly review our pipeline progress; Nancy Wysenski, who will summarize our launch readiness for INCIVEK; Ian Smith, who will comment on our first-quarter financial results; and Matt Emmens, who will comment on our business for 2011 and beyond.

After the prepared remarks, we will be joined by Dr. Bob Kauffman and will be happy to take your questions. I will remind you that we are between our advisory committee meeting and our PDUFA date for INCIVEK. This means that we cannot provide any comment on INCIVEK labeling discussions. We look forward to updating you on that in the very near future. Once the call concludes, our IR team, joined by Ian, will be in the office to answer any additional questions that you have.

Finally, let me 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 SEC, 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 on our first-quarter 2011 financial results press release, which is now on our website. All 2010 and 2011 expenses discussed in this call exclude stock-based compensation.

Thank you, and I will now turn the call over to Peter.

Thank you, Michael, and good evening, everyone. It is a real pleasure to start today's call. As Michael noted, we are coming just off a positive FDA advisory committee meeting. And we prepared for this meeting for several months and I think I speak for everyone at Vertex when I say that we are excited to finally be within a few steps of the finish line. The PDUFA date, which is the target date for the FDA to make a decision regarding approval, is May 23. We are now working closely with the FDA on the potential label for INCIVEK.

As we progress in 2011, we continue to be focused on advancing the significant opportunities in our pipeline. In the coming months, we expect to report 48-week results from our Phase 3 ENVISION trial for VX-770 in children with cystic fibrosis. We also expect to announce data from our Phase 2 combination study of VX-809 and VX-770 in cystic fibrosis. In the second half of the year, we plan to submit the NDA and MAA for VX-770. We expect to report the first data from VX- 509, our JAK3 inhibitor in rheumatoid arthritis. And we also expect to initiate additional trials in hepatitis C, cystic fibrosis, and epilepsy. So as you can see, 2011 is a very busy year for us, from a developmental and regulatory standpoint, and a number of important events are approaching.

Let me focus now on hepatitis C first. With completion of the advisory committee meeting last week, we are in position for an FDA decision within the next few weeks. At the meeting, the committee members voted unanimously that clinical benefits of INCIVEK outweigh the risk in a broad group of people with genotype 1 hepatitis C. An important aspect of the discussion with the FDA regarding our NDA submission in the meeting was updated SVR rates of 79% in treatment naive patients upon which we and the FDA agreed. We believe that this high viral cure rate is both an important treatment modulator for patients and a high bar for future regimens.

Also, at the meeting the panel recommended that an educational program be put in place to manage the risks associated with regimens containing INCIVEK primarily focused on rash and anemia. We agree this will be important and I am pleased to say that our team has been working the past several months to develop educational tools. Also, I would like to note that toward the end of the outcome session, the panel strongly suggested that the therapy, including direct-acting antivirals, should be considered the new standard of care. We appreciate that the FDA seeks advice from the outcome, but it is not required to follow its recommendation.

With respect to education and competition, we believe that the introduction of more than one new hepatitis C regimen will be a positive for patients and healthcare providers, as this increases the amount of disease awareness and educational information available. As for the process we have ongoing with the FDA, I will not make any further comments about the outcome or regulatory path for INCIVEK.

In the meantime, we continue to receive positive feedback regarding INCIVEK's clinical data. We look forward to the Digestive Disease Week Conference in Chicago, which kicks off at the end of this week. DDW is the largest meeting in the world for GI professionals, and we have 10 abstracts related to INCIVEK scheduled for presentation. In addition to finalizing the regulatory process for INCIVEK, we are focused on the next evolution of hepatitis C treatment, including the potential to further shorten treatment duration for the entire regimen to 12 weeks, with similar high viral cure rates.

One area we are exploring in a trial we expect to start in the third quarter is 12 weeks of INCIVEK in combination with pegylated-interferon ribavirin for people who have a specific polymorphism known as CC near the IL28B gene. We presented data recently at the EASL conference that showed patients with that polymorphism were highly responsive to a triple regimen containing INCIVEK, suggesting that 12 weeks of total treatment may be possible. We estimate that close to one-third of people who have not been treated for the hepatitis C have this marker.

As you all know, another area where we are exploring 12 weeks of treatment is the combination of VX-222, our polymerase inhibitor, with INCIVEK pegylated-interferon ribavirin. This Phase 2 combination trial includes 2-drug regiments that are response-guided towards 12- or 24-week duration. As part of this Phase 2 combination study, enrollment is underway for a triple interferon sparing regimen with INCIVEK, VX-222 and ribavirin. We look forward to the first post-treatment data from the quarter arms of this study and on-treatment data from the triple therapy arm in the second half of this year. These data will inform us of our next steps in advancing this potential hepatitis C treatment regimen.

So let me now turn to 3 key highlights from our cystic fibrosis program. First, I want to highlight 770. In the first quarter, we announced that VX-770 showed profound improvement in lung function and other measures of disease across several age groups, including children as young as 6, in 2 separate pivotal trials.

We are also very pleased with the safety profile shaping up for VX-770, specifically VX-770 was generally well tolerated with a lower rate of adverse events in the VX-770 treatment groups compared to control. We think our pivotal data support a clear regulatory pathway for people with the G551DCFTR mutation, which represents approximately 4% of people with cystic fibrosis. We hope that with VX-770, we can provide the first treatment option that targets the underlying disease and not just the symptoms.

VX-770 remains on track for an NDA submission in the US and an MMA submission in Europe in the second half of the year, in people with G551D mutations. Our submissions will be focused on this specific mutation first and will include 48-week data from both the STRIVE trial in people aged 12 and older and the ENVISION trial in people aged 6 to 11. We are also planning to include data from the Phase 2 DISCOVER trial evaluating the safety of VX-770 in people with the F508del mutation, the most common CFTR mutation. Our submission will also include 2-year carcinogenesis studies.

I want to take this time to be clear on our plans for use of VX-770 monotherapy in non-G551D mutations. We continue to conduct in vitro studies, evaluating the potential of VX-770 monotherapy to address people with other CFTR mutations that may have a similar modality to the G511D mutation. We expect to use this information to initiate either new clinical trials in people with non-G551D mutation, as well as further our discussions with regulatory agencies.

Second, I will highlight an upcoming CF medical conference. Four abstracts have been accepted for presentation at the European Cystic Fibrosis Conference, June 8 to 11, including Phase 3 data from STRIVE and Phase 2 data from DISCOVER, as well as data related to in vitro studies of VX-770. We have additional plans to present data for VX-770 in other medical venues this year.

Third, I will highlight our combination therapy work. The Phase 3 data from VX-770 in G551D patients validated our approach of targeting CFTR, enabling us to initiate trials in other mutations. Specifically, with regard to efforts to expand the treatment of CF in people with the F508del mutation, we are conducting part 1 of a Phase 2 combination study with VX-809 and VX-770.

This combination study has an adaptive design and the decision to move forward into part 2 will be driven by data. The primary end points of that study are safety and change in sweat chloride when VX-770 is combined with VX-809. Based on the design of the study with 14 days of VX-809 [monitor people] followed by 7 days of combination with VX-770, we will be looking to see whether VX-770 provides an additional response in sweat chloride compared to VX-809 alone, which would be consistent with what we observed in our in vitro studies. We are on track to announce interim data this quarter. Depending on results from this study, we plan to start part 2 in the second half of this year that may involve investigation of other doses and longer durations of VX-770 and VX-809 combinations, as well as a larger number of patients with the F508del mutation.

Another development for our CF program in the first quarter was the expansion of our existing collaboration with the Cystic Fibrosis Foundation to support development of a second corrector VX-661 and for accelerated discovery and development of next generation correctors. We believe it is very prudent to investigate multiple opportunities to treat a broad set of people with cystic fibrosis. By working with the CF Foundation, we not only have additional financial support, but also benefit from a network of caregivers, clinical sites, and patients. We expect to start a Phase 2 study with VX-661 in people with the F508del mutation by the end of this year.

I have just highlighted our lead programs in hepatitis C and cystic fibrosis. Behind these programs is a robust pipeline. The first reported data from our Phase 2 trial of VX-765 in epilepsy, 60 patients who had a history of being resistant to current therapy were enrolled in the trial. People who do not respond to standard medicines for epilepsy are often severely debilitated by frequent seizures that limit daily activities and independence. Results from the study were an important step forward towards understanding the potential role of VX-765 in helping people with severe epilepsy, and we expect to start a larger and longer-duration study in epilepsy as early as the fourth quarter of 2011.

For VX-509, our JAK3 inhibitor, we have completed enrollment of approximately 200 patients in an ongoing Phase 2 trial in rheumatoid arthritis. We expect to announce clinical data from this study, including safety, tolerability, and clinical efficacy in the third quarter of this year.

With that, I would like to end my remarks, but let me summarize. Following our advisory committee meeting, we are now working closely with the FDA on the potential label for INCIVEK. We are excited about our lead medicine VX-770 in cystic fibrosis. And operationally, we are preparing for the submission of the NDA and MMA in the second half of this year. We are evaluating opportunities to further advance treatment regimens of hepatitis C and cystic fibrosis, and are conducting or plan to conduct several trials in these disease areas as we go forward. At the same time, we remain committed to our strong research engine and expect additional candidates to emerge in 1 or more disease area later this year.

Thank you very much, and I will now turn the call over to Nancy.

Thanks, Peter. I would like to echo Peter's comments regarding the advisory committee meeting. I am equally as pleased with the unanimous vote supporting the safety and efficacy profile of INCIVEK. Our studies, we believe, showed a compelling profile for a regimen containing INCIVEK. Based on our market research, we believe the simplicity of this regimen, the high SVR rates regardless of race or ethnicity, stage of disease, and prior treatments, coupled with shorter duration for the majority of treatment-naive patients, and a manageable safety profile will be appreciated by both patients and healthcare providers.

We're looking forward to the planned launch of INCIVEK and executing on the marketing and commercial plans we have in place. Following approval, a major focus of our efforts will be on offering information to patients and healthcare providers to educate them on the potential benefits and risks of INCIVEK, in combination with pegylated-interferon and ribavirin, to ensure people with hepatitis C have the best possible chance for a viral cure.

On the commercial front, we've been executing on 4 key priorities this year. Number 1, hiring an experienced and talented group of people across the commercial organization who are focused on ensuring a robust launch. To date, we've hired approximately 200 field-based employees, which include about 115 in field sales. Number 2, training our field force, who will be key in educating providers and unlocking the substantial potential of INCIVEK in the hepatitis C community. 3, initiating and expanding our hepatitis C disease awareness campaigns to provide information to the general public.

And, 4, importantly, creating Vertex's first patient-assistance program to help people with hepatitis C who might otherwise have a hard time getting INCIVEK because of financial constraints. I'm happy to tell you that this comprehensive program will enable us to help people in a number of ways, including providing reimbursement support and free medicine for qualified patients. I'll talk more about this program after approval.

We've recently gone live with a disease awareness campaign, which includes a nurse hotline, radio ads, media and print placements, as well as the website, www.BetterToKnowC.com. Through this venue, we intend to increase awareness of hepatitis C and Vertex. And the community is responding. Since kicking off the campaign in March, we've already had more than 61,000 unique visits to our website, more than 2,200 calls into the nurse support line, and approximately 1,600 views of our educational video on hepatitis C on YouTube. We're learning there is a real demand for information and further resources for people suffering from hepatitis C.

Our ultimate goal is to provide specific resources to help diagnose and treat people with hepatitis C and help to bring them to the successful outcome that patients and their families, providers, and payers all want. We have an outstanding team in place and we're excited about INCIVEK and we look forward with great anticipation to the potential launch in the US.

Now, turning to cystic fibrosis. We have begun the hiring of key commercial staff for VX-770, including a general manager for Europe. If approved, we're committed to launching VX-770 and potentially other medicines for cystic fibrosis on a worldwide basis. And we're establishing a global commercial infrastructure to support that approach. Cystic fibrosis is an orphan disorder, with approximately 70,000 patients in the US and Europe; there are more than 2,000 people with the G551D mutation alone. This is a unique, highly concentrated commercial model that will enable us to meet the needs of providers and patients by building a focused marketing operation, with a sales team of approximately 40 people supporting the global use of VX-770. Thank you for your time, and I'll now turn the call over to Ian.

Thanks, Nancy, and good evening to everyone. Once again, we ended the quarter in a strong financial position, with more than $820 million in cash, cash equivalents, and marketable securities. The solid financial footing is where we had hoped to be and support the planned launch of INCIVEK in the coming weeks, while maintaining our investment in other disease areas.

It's a challenge to launch 1 new major medicine and we have the potential to launch 2 and advance the pipeline. This requires investment, and we're in good financial position to support this required investment as we transition to a cash flow positive Company. The business model we aspire to is tried and true, although somewhat rarely achieved. We focus on important drugs for serious diseases in specialty-driven markets. These drugs require significant investment, but they also offer the potential for high returns. The bottom line, we are committed to being a financial performer.

With that backdrop, let me turn to the first-quarter results. I'm going to cover the loss components of our financials on today's call. You may refer to our press release for the further details about our financial results.

Specifically, our GAAP net loss in the first quarter of 2011 was approximately $176 million. This compares to the first quarter of 2010 loss of approximately $165 million. When comparing the first-quarter 2011 non-GAAP loss to the first quarter of 2010, our increased loss was approximately $184 million from approximately $140 million. The change was principally attributable to costs to support the planned launch of INCIVEK, including SG&A costs. The mainline actions within our income statements can be found in our first-quarter press release.

Before I conclude, we are reiterating our operating expense guidance we provided earlier this year. Specifically, we guided to 2011 total operating expenses, principally those of R&D and SG&A expense, but excluding cost of revenues and stock compensation, and we reiterate our guidance in the range of $890 million to $930 million.

In summary, we are committed to leveraging our business model to achieve positive operating cash flow and earnings with INCIVEK, while making the investments necessary for potential future successes in our current and future disease areas. Thank you, and Matt, over to you.

Thanks, Ian, and good evening, everyone. You have just heard from the team about our accomplishments since the beginning of the year, as well as our milestones for the remainder of this year. I hope you took away from their remarks a true understanding of the breadth of Vertex and the transformational potential our clinical programs may create for patients, the Company, and our shareholders.

Looking at the big picture, we are proud of the Company that we are building and we believe we are positioned for long-term growth. We have spent more than $4 billion over the past 22 years to discover and test new medicines with the goal of developing breakthroughs that make a real difference for people with serious diseases. As a result of the hard work of Vertex's scientists and clinicians, we now have 2 lead medicines, 1 in hepatitis C, and 1 in cystic fibrosis, that have the potential to change the way these diseases are treated. We believe we have established the foundation for a sustainable business that will continue to grow and enable us to discover and develop more breakthroughs.

If I may, I would like to repeat a couple of statements from the panel members during the vote at the INCIVEK advisory committee meeting held last week. One member said that INCIVEK was a huge advancement. And another said -- I would like to congratulate the sponsor on a very well-done and thoughtful presentation. Thank you as a hepatologist for the elegant simplicity of the regimen and making the telaprevir dosage so short that if there are any adverse events they can be well managed.

So, even as we anticipate the launch of INCIVEK in the coming weeks, we are committed to helping people with hepatitis C and their healthcare providers over the long term, and see opportunities to future advance our leadership. We are evaluating ways to expand INCIVEK's profile and broaden the potential benefits of this medicine with the study of BID dosing, exploring additional subsets of patients, such as HIV and hepatitis C co-infection, pre- and post-liver transplants, and perhaps shortening treatment duration even further, while maintaining high viral cure rates.

Before I move on to CF, I would like to recognize and express my thanks to our entire R&D group who participated in or helped the team prepare for INCIVEK's advisory committee meeting. I would also like to thank all of the investigators and clinical staff and patients who participated in INCIVEK trials over the last 7 years. Folks, we are almost there.

I would like now to take a moment to comment on our cystic fibrosis program. The results of the Phase 3 registration program for VX-770 exceeded our expectations for people with CF and the G551D mutation. Cystic fibrosis can be devastating for people and their families, particularly when current therapies don't address the underlying causes of this disease. We believe the profile we showed for VX-770 in Phase 3 for people with the G551D mutation has the potential, if approved, to make a profound impact in the care of patients living with this disease. We know we have more to do to further exploit our scientific leadership in investigating the underlying causes of this disease for the benefit of those with CF who do not have the G551D mutation.

Important to that effort are trials that are underway or planned in the F508del mutation using a combination of our CFTR modulators. Almost 90% of children and adults have at least 1 copy of the F508del mutation. The recent signing of our new collaboration with the CF Foundation underscores our commitment to this orphan disease, and we and the CF Foundation are more focused than ever on determining how we can help improve the lives of a greater number of people living with cystic fibrosis.

Finally, we have other opportunities behind hepatitis C and cystic fibrosis to make a difference for patients and grow our Company. Specifically, we have robust clinical programs ongoing for VX-765 in epilepsy and VX-509 in rheumatoid arthritis, and we anticipate adding new medicines in new disease areas to our clinical pipeline later this year.

I would also like to make one comment. I spent last night and several times over the last several weeks with our new field force, and I can't tell you how excited and competent these people are. They are literally biting at the bit to get out there once our drug is approved. We have a clear goal of discovering, developing and launching breakthrough medicines. I continue to believe this is the best way to enhance and grow our business. Thank you, and I will now turn the call back to Michael.

Thank you, Matt. For anyone who joined the call late, I'll just reiterate, we won't be able to comment on the label discussions we are having with the FDA. We are nevertheless happy to take your questions related to other aspects of the business. Thank you, and we will now open up the call to Q&A.

(Operator Instructions) Geoffrey Porges of Bernstein.

Thanks very much for taking the question. Focus on CF a little bit, Peter, first, could you comment on whether your further analysis of STRIVE, DISCOVER, and what you have for ENVISION, in that analysis, how strong is the correlation between sweat chloride change FEV-1. And specifically have you been able to establish a threshold as a percentage of millimole change in sweat chloride associated with or predictive of lung function change? And then maybe if I could just ask a question on CF after that. Could you start off with that?

Hi, Geoff, it's Peter speaking now. Thanks for the question. So there were a whole bunch of questions in this entire thing. So first, I think what we can say is, at this given point in time, we have at least a first insight that sweat chloride might be correlated with FEV. I think that was the first trials ever that showed the potential correlation. Statistically significant, obviously you cannot easily do this at this point in time and you have to have a deeper insight. I think we will evaluate as we go forward how we basically built a correlation between sweat chloride and other parameters to describe basically a functional benefit, whether it's lung functions or other functions that are impacted in that disease. I think it's a more complicated picture. So that's that point.

But I think there is a trend that if sweat chloride goes down, you might have a possibility to see a therapeutic benefit. But I cannot give, because at this given point in time those are not basically existing, and I think you can speculate on whatever you want, because there's historical data that show that if you get, and you can look into those, the published, you get to about a 10% lowering in sweat chloride you might see a therapeutic benefit in different strengths, depending where you are with your disease.

Okay. And could I just follow up. It sounds as though there's a change in your tone on G551D and the likely label, the application in the label for VX-770. It sounds as though the discussions with the Agency have moved towards it being a G551D only application. Is that a reasonable interpretation? And if so, what's your strategy for the other 48% who don't have G551D and don't have delta F508? Thanks.

So to that question, our number one comment is there was no change in strategy or tone. I think it was always predominantly first 551 and that's what we have done. We are currently in negotiations with regulatory agencies in Europe as well as in the US how we can basically move forward and extend the label into other populations that might benefit form a monotherapy of 770. But I think the safe bet is 551 is a good first chart.

Jeff, I'll just jump in on Peter's answer, as well. One of the things that you may be hearing in the prepared remarks was us being clear on the day that we expect to support the filing, which is the 48-week data from both STRIVE and ENVISION. I think that was something we haven't been as clear on in the past, but we do anticipate 48-week study data will be required to support the filing. And then also carcinogenistic studies, which we want to be clear on.

Brian Abrahams of Wells Fargo Securities.

Hi, thanks very much for taking my question, and congratulations to the team on a great job with the panel. Question for Nancy on pricing. Recognize that you're not in a position to talk specifically about telaprevir pricing now, but I was wondering if you could maybe give us any general sense, perhaps drawing off of the reimbursement dynamics that's been seen for peg interferon and ribavirin, as to how you expect the actual realized price per patient to be, net of discounts, patient assistant programs, et cetera, relative to what you set as the list price?

Sure, Brian. Let me take a shot at that. As you know, depending upon the different channel that one is dealing with, be that commercial or different government payers, we'll be apt to provide obvious statutory reimbursement rates for the governments and other additional reimbursement or discounts to other channels. I think you can probably get a sense for what those tend to look like by looking at the way the market has performed historically. Beyond that, we really haven't set our price for INCIVEK. I'm pleased to tell you that we have planned a very aggressive patient assistance program that will be rolled out at the point of launch to ensure that any patients who really need INCIVEK can gain access to it, even if they can't afford it. Beyond that, we're considering a number of other factors that will eventually take us to a final price. And that, of course, will be the final label as that comes in from the FDA over the coming weeks. How well INCIVEK worked in the clinical trials, as measured by our SVR cure rates. The cost of other medicines and procedures that have been used for the treatment of hepatitis C up to this point in time. And of course the amount of money we need to generate to enable our scientists and our labs here at Vertex to continue to discover and test new medicines for other serious diseases in the future.

Rachel McMinn of Bank of America.

Hi, this is Marcia for Rachel. I was wondering if you have already had your pre-NDA meeting for CF? And given your guidance for second half submissions, were there other gating factors for the regulatory filings here aside from the 48-week data?

Bob will answer that.

This is Bob. In terms of the pre-NDA meeting, it is upcoming shortly. We've not yet had the pre-NDA meeting, but it's scheduled.

That's for the clinical side. And on the CMC side, where you have also pre-NDA meetings, I think we had our pre-NDA meeting on CMC in the US. We are going to have a pre MAA meeting in Europe next week.

Terence Flynn of Goldman Sachs.

Hi, thanks for taking the question. Just wondering in terms of the combo study, I know that that trial's enrolling patients that are homozygous for 508del. Was wondering, first, if you could maybe outline your thoughts on any potential differences in efficacy between a patient that's homozygous for that mutation versus heterozygouos. And then what percent of the market does each of those represent?

This is Bob. Yes, you're right. The study is enrolling homozygous patients. We're trying to keep as homogeneous a population for this initial study as possible. We do plan, as we go through this trial and as you had heard, it's an adaptive trial, it gives us some freedom to look at different patient groups, and we probably will be looking at heterozygous patients as part of that evaluation as the trial goes forward. I can't comment on any differences in efficacy because we haven't seen any results yet.

In terms of population, the 508 is the biggest portion, and I think that covers about 80% or more.

That's absolutely right.

So the homozygous are about 40% overall and heterozygous make up the other 40%.

Okay, and then just a quick follow-up question, if I might. Can you give us any benchmark in terms of what you want to see on sweat chloride to consider making that decision to go forward to part 2 of the study?

Yes. I get asked the question often, and all I will say is that our hope is to see some additive activity above and beyond each individual alone, each individual agent. We don't really have a target in mind. It really depends a little bit on what we see. There's also dose ranging going on and other aspects that will help us to analyze that. But at this point there's no definitive target.

And the reason for that is because it is not understood yet what PKBD is in vivo in human beings. And we first have to figure out what the right dose regimens are before we can make any statement what direction we have to look. I think the excitement will come if see additive effect in whatever form, because that will prove the concept.

Yaron Werber of CitiGroup.

Hi. Thanks for taking my question, and congrats on really a wonderful panel. Maybe the first question, can you help us understand how fast can you launch once you get approved? And second, you've mentioned how many incoming calls you've had and so a point of contact into your hot line, and that was really an impressive number. I'm just trying to get a sense. Is there any way you're able to maybe ascertain how many of those are actually patient calls or unique patient calls? Maybe it gives us a very early gauge as to how many people are already contacting you. And then I had a follow-up on CF as well.

Okay. Those are two good questions. I think the rapidity of launch is limited only by how fast you can get drug supply out through the channels and to the actual retail outlet. And we think we'll be able to do that within a matter of several weeks at the outside. Beyond that, I am fully confident that we will have every piece of infrastructure in place, each person trained, and waiting to make the calls on physicians and managed care organizations as soon as we get that drug out to the outlets. The second piece was a question -- can you remind me?

Yes, you've mentioned an impressive number of hits already or contacts into your hotline and website. Is there any way you're able to ascertain how many of them were patients and maybe even unique contacts into your hotline and website?

No, I'm sorry. I can't tell you how many of those are actually patients, due to privacy laws that prohibit that sort of thing.

Okay, but presumably at this point, do you have that information? I'm just trying to understand if maybe that can help you actually also reaching out to patients also?

No, we know that a good number of the patients who do come into the website end up opting into our relationship management program, so we will be able to stay in touch with them. But that is a voluntary decision made on their part, and we have no insight into why others don't make that decision.

Okay, great. And then just a question, the CF data was very impressive. When you look at the magnitude of the improvement in lung function, inevitably that should translate into survival benefit over time. That can really help you really drive home a great price for VX-770. And when we look at the orphan indications, pricing could be all over the map, from $200,000 on the low end. And if you look at myozyme for adult patients, as we even remember, that drug actually did not even hit the primary end point in the studies, they're charging about $1 million for an adult patient. So it gives you huge flexibility. Help us understand a little bit how do you think what's a good benchmark to think about pricing for 770, if you can.

It looks like everyone is doing their homework, just as quickly as we are. And you're right, the ranges are quite considerable, from an actual orphan indication to what we might term treatment of a rare disease, which is even beyond ultra orphan status. But it's too early for us to really have any sense at this point where a specific price will come in.

Howard Liang of Leerink Swann.

Can you comment on whether it's possible the FDA decision can come before the PDUFA data? In other words, could the two drugs be approved at the same time?

It is possible both drugs can be approved at the same time. That's also possible.

Great. And if I could ask another question. How is 651, the second corrector different from 809?

661 is the number. So it has a different metabolic profile, and also a different tissue penetration profile, which gives you a possibility to basically have different outcomes in different organs that might be beneficial.

Ted Tenthoff of Piper Jaffray.

Great. And let me share my congrats on a hard-fought and well-won panel. My question goes, what have you done for me lately. And now that telaprevir is on the track to approval, I think a lot of people are really looking at future combination therapy. And I wanted to get a sense based on your data with 222 at EASL, as well as some of the competitive data out there. How is your view of combination therapy evolving? And specifically, what other HCV drug classes interest you to look at with telaprevir and how can you explore that?

This is Bob. I'll take that. I guess my take-away from EASL was, for one, dual drug combinations appear not to be sufficiently robust in terms of resistance to be able to really make it in a significant way. That was a piece of learning that we've gotten pretty clearly. Otherwise, I would say that there are many, many different combinations being evaluated, and I think the field is moving along very quickly in that regard. And obviously we are looking to be competitive with all of those other regimens, as well. And I other take-away was that there's at least a hint that interferon may not be necessary as part of the regimen. There was a very small amount of information from the VMS trial, and I think that was pretty exciting to people, although, again, it was a very small experience. I think our view hasn't really changed all that much. Obviously we want to maintain our leadership position in this field. The 222 telaprevir data, particularly the quad regimens, are very encouraging. We're still pursuing non-interferon-based regimens with ribavirin. And as we've said before, we are continuing to look always for new mechanisms to potentially combine with the agents that we currently have to basically, produce a portfolio of agents that can be mixed and matched in appropriate ways, and that position hasn't changed at all. I think in fact the data suggests that that's the right approach and we're continuing to do that.

Mark Schoenebaum of ISI Group.

Hi, yes. It's actually [Nevine Jek] for Mark. Michael, I think you said we can't, ask comments about the label, but perhaps we could ask about the AdCom, is that fair?

Yes, I think our comments on the AdCom have to be very limited. Feel free to ask any question, we'll tell you if we can answer it.

Just wondering, obviously you guys have tremendous data. And again, congrats on a successful panel. But with regards to the null patients, the panel seemed a little hesitant about treatment in nulls because of resistance. The members of the panel that were bullish on telaprevir for nulls spoke about use specifically in cirrhotic patients. But they also referred to the significant benefit that telaprevir provides. And they talked about 30% in nulls. But when you look at cirrhotic patients that are null, the treatment benefit there is only about 10%, so I was just wondering whether that's a concern for you with regards to resistance. And I'm aware of the extend data, as well.

Yes. Ultimately we're pretty happy with the discussion that occurred at the advisory committee. I think they looked at it in the appropriate way. At this point, really it's up to the FDA and the labeling and that's something we really just can't really get into. And don't really know how that's all going to come out at this point.

You have to understand, the advisory committee is just a supportive instrument. It's not a binding instrument.

Sure. Fair enough. And then maybe one question for Ian, if I may. Ian, you've previously given us good guidance on telaprevir inventory that you've built up, saying that we have to be careful in how we model COGS. Wondering if you have any update there. Have you been continuing to build up telaprevir inventory?

Yes, we do continue to build it up, with our expectation. We have multiple scenarios that we planned out for launch possibilities and uptake, and we try to cover all of them, including the most optimistic, as well. So yes, we've continued to build inventory significantly. And I'll just point that on our balance sheet, you'll notice we started to capitalize the inventory as well. That came after the acceptance of our filing and also the positive outcome which gives us a confidence of potential approval and launch this inventory into the market, and then create a more normal cost of goods. But initially we do anticipate that there will be minimal cost of goods relating to telaprevir INCIVEK.

Phil Nadeau of Cowen and Company.

Yes, good afternoon, thanks for taking my questions. Peter, first a follow-up question for you. In your prepared remarks, you mentioned the educational program on rash and anemia and that your teams have been working on it. But what was unclear to me was whether you feel that that educational program has been completed. So have you actually finished that educational program, and is that even possible to do before you have a final label?

This is Bob. I'll take that. No, we're obviously still working on that. Yes, we obviously need to see the final labeling in order to be sure we're in tune with what all the final numbers are and comments that are made in the label. So it's an ongoing, evolving process, but it's well underway.

This is Nancy. I just want to point out that it's standard practice with the approval of any new drug to have a solid educational program that is shared between medical affairs and commercial, utilizing, again, both your medical affairs staff, as well as your commercial team. And in our case, even our website and educators who will reach out to patients to be sure that treaters have the possibility to get the best outcome from a drug by fully understanding all of the adverse events that can occur and how to handle them. So we will be prepared at the point of launch with an aggressive support program educationally related to the benefits of the drug, as well as the adverse events.

Okay. And you may have just answered this, but I'll ask it anyway. Does this need to be completed per FDA statute on the day of approval? Is this like a REMS where it has to be in place, or is there some leeway where it's more up to the Company as to exactly when the educational program's ready?

There are two different approaches. Obviously if the FDA requires a REMS you would negotiate that with them. But traditionally what you think about is many methods to educate physicians, including patient treatment brochures, nurse hot lines, patient starter kits with patient-specific information, et cetera, et cetera. That's all part of the standard approach.

Okay. So it's fair to think that the educational program doesn't need to be totally finalized at the time of approval. That could be something that actually evolves with time.

There is a REMS piece, which you have to get agreement on. This will be finalized at the given PDUFA time line. And then there's all the other activities, the non-REMS educational activities that Nancy mentioned, that you basically do as fast as you can. And basically we add to them anyhow, as you go forward. It's not a one type of thing.

And Bob, just to reiterate, as we said before, we certainly expect the approval to be on or before the PDUFA data. We see nothing that would interfere with that at this point.

Okay, and then one last question for Nancy. Nancy, I'm sure your sales and marketing folks are out there talking to physicians even though not strictly marketing for telaprevir. Do you have a sense of what proportion of physicians have already begun to schedule patients to come in over the summer, into the fall, once telaprevir and boceprevir are available?

I think we're all aware that physicians have been holding patients back from treatment. I hate to use the term warehousing when talking about human beings, but we're all aware of that. And I think it's pretty easy to estimate what that is by looking at the decline in the usage rates of the current standard of therapy. And to your earlier point, yes, we are actively out there. We have visited with about 65% or 70% of all physicians already, doing our unbranded campaign which helps physicians understand some of the key dynamics related to the treatment of HCV, most notably that a rapid decline in viral rates is typically associated with a very productive clinical outcome.

Tom Russo of Baird.

Good afternoon. Thanks for taking the question. Following what seemed like an endorsement from the panel and seemingly even FDA itself, is there any reason we should not now expect response-guided treatment for prior relapsers in some way at this go-round? And could you at least give us a flavor for how your market research says that might impact uptake or market share in that subset?

Bob, I'll just answer the question in that I can't really answer the question. Obviously it will depend on how things go with the discussions with the FDA and we're in the midst of that now.

And you don't typically do research on a point that is that fine. We're pleased generally with the very high marks that we're getting right now on the research we've done that generally describes the current view of telaprevir in the marketplace.

Okay. And maybe, Nancy, just continuing on that theme, pricing came up earlier, but now that we've seen how the FDA looks at your data, do some of the things moving in a positive direction, like 79% SCR, a 10X improvement over standard of care in nulls, and maybe even more response-guided therapy, does that influent on the margin what you think you can charge?

I wish I could comment more specifically. I just have to say again, we're very pleased with the way that the advisory committee went and we will be getting to you with our pricing decision as soon as it is finalized at the point of approval.

Geoff Meacham of JPMorgan.

Hello, guys. Thanks for taking the question. A couple of questions about CF and the regulatory path and other gating mutations for 770. I know you guys are still in discussions, but how short do you think the treatment may have to be to see a potentiation effect and what types of measures of efficacy do you guys think that you may have to show here?

At this given point in time -- I started the second one first, I think. Currently approved and validated in regulatory agencies across the world from a CF readout point of view, is only FEV-1. That's the only basically validated end point and you have to assume that in all those studies that you do, that you have to show a benefit in that parameter. Other parameters are to be considered as we go forward. None of them are validated at this given point in time in the regulated environment, and therefore we have to do work in order to basically bring some of them forward. And there are several ones that go with lung functions, but also other organ functions. So that's what the situation is. In terms of treatment duration, I think we cannot take out their genes out of bodies so therefore it's a chronic treatment, life-long.

Peter, this is Bob. I'll just add on to that. We're not certain at this point what would be required in terms of these other mutations to demonstrate. As you know from the Phase 2a study of 770, both hose sweat chloride changes and FEV-1 changes we're really seeing quite soon after the initiation of treatment. And perhaps even two weeks or a month might be sufficient to show that. That's not to say that we have any agreements. We're just discussing that with the agencies. But it doesn't take very much time in order to see both of those changes.

But I think what is really true for that length of the clinical trials, was the length of treatment duration afterwards. So those are two different things. And I think what will happen, what has to happen, and we will take the lead on that obviously, that you have to validate more markers so that agencies can feel comfortable in basically going forward. And we have heard those requests already in different settings.

Could I just clarify your question, because maybe you were talking about the 809, 770 study and just the 7 days of combination therapy. Were you pointing to that?

No, sorry. Just 770 in and of itself.

So I think clinical studies in general to see an effect can be relatively short. Treatment duration is to be anticipated for long. And then the question you have to answer and discuss with agencies is how much safety data over what period of time do they want to see, to basically grant you an addition to your label.

Is there any reason for you to think that Europe would be any different in terms of regulatory path end points or duration?

They are. They are. The regulatory path is anyhow different. And it takes normally longer and you have less intervention possibilities. And then I think what accelerated approval in the US is a priority review, six months, and other factors that can get in Europe behind, assuming that you answer the 120-day questions, which you get all at once, within four weeks. If you're not, then you go back to the normal phase, which is a 12-months type of approval regimen. So there is differences. And there's also a difference in how they look at drug regimens with respect to efficacy and also safety.

And final question here on 661. And thanks, Peter, for your earlier comment on the differences here. But when you guys look at some in vitro work with Delta S, does 661 exhibit any greater synergy with 770 than 809 did?

It's comparable, but I think that's in vitro and as you know the truth in the pudding is in vivo. We have to see what that means.

Lisa Bayko of JMP Securities.

Hi, there. Thanks for taking my questions. I just wanted to drill down on Brian's question that he asked earlier. Could you maybe just give us a flavor or a breakdown of the hep C landscape in terms of reimbursement. What relative fraction of people are Medicare versus Medicaid versus private or who have no insurance whatsoever?

Let me see if I can help out a little bit, Lisa. Generally speaking, about 60% of the audience is covered through commercial insurance plans. The other 40% breaks down, as you might imagine, between all the different government plans, Medicare, which is outsourced these days through commercial plans, and a little bit of cash. I think probably what you're trying to get at is, maybe related to some issues that other companies have had, with increasing reimbursement rates within Medicaid. And I think most of that has been an issue with other companies because they were looking at chronic therapies for patients. For instance, when you're treating hepatitis B or HIV. Those patients are going on those therapies ad infinitum. The advantage we have is that it's a 12-week cure market. And in my mind, I'm very confident that monies will be made available through the off-patent products that are going to really be bringing big injections of cash back into all of these different types of funding.

David Friedman of Morgan Stanley.

Hi. Thanks for taking our question. Just wondering if you have a sense as to whether telaprevir, or INCIVEK, would primarily be distributed through specialty pharmacies or just your regular pharmacies? And just as a corollary to that, is there any reason why you think this drug would not be accurately tracked by IMS?

The first question's really easy to answer. The second one is much more complex, and I probably won't be able to give you a full and compelling answer today. Our general attitude about the way that we would like to see INCIVEK go out to the market is an open distribution model. And we think that will enable the greatest number of patients in need to be able to gain access to the drug. That means that we'll be using major wholesalers, regional wholesalers, as well as specialty pharmacies. And as I'm sure you're aware, David, from your experience, that may leave some minor gaps in the data that will be available through the common sources such as IMS.

Alan Carr of Needham & Company.

Hi, thanks for taking my questions. And congratulations on the advisory committee. To follow up real quick on 661, to make sure I understand that, is the difference here mainly that you're getting greater distribution in the lung, Peter?

Could you repeat that?

The difference between 661 and 809, it sounds like there's a lot of similarity in vitro, but you mentioned that there was a different tissue penetration. Is it better penetration into the lung? Is that the difference?

There is a higher penetration towards the lung, but we don't know whether it really translates into a therapeutic benefit.

Okay. And, Nancy, about the prescriber rates, I'm curious whether, do you expect the prescriber base to grow, or stay the same, or become more concentrated or specialized as you layer on protease inhibitors

I think the net-net as the drugs are released and as practitioners gain experience will be pretty even keel. It may take a little longer for people who don't see as many patients to find the courage. They are often not on that cutting edge of innovation. They may want to wait for some of your higher treatment prescribers and key thought lead to gain that experience and help advise them. But we don't expect it to change in a very dramatic way.

Ying Lang from Gleecher & Company.

This is Ryan for Ying, thanks for taking my questions. Just two questions. First for the phase 3 telaprevir BID study, could you give us some more details regarding where you are with enrollment. From the ClinicalTrials.gov site it looks like the study was initiated last year. And then second, this is for Ian, given the number of studies you're conducting, could you comment generally on how you're thinking about R&D expense, maybe longer term? Thanks.

This is Bob. I'll answer the first one. It's going along as we planned. The sites are active and patients are actively enrolling, so we expect things to be basically on track.

And then to the guidance for R&D, I can't provide you guidance looking at the 2012 or '13. What we tried to do this year, though, is we gave you guidance for 2011 to help you understand our total operating expenses. Clearly you have your own models in terms of revenues, and that will help you navigate the waters, let's say. As we go into '12 and '13, with how our total operating expense are trending, taking last year, looking at this year, and how we might go into 2012. And then you can apply that to your revenue models and that should give you a good understanding that we're looking at 2012 to be a year where we are continuing reimbursement in R&D because of the pipeline that we've been building. But we still have great potential given the scale of the top line to create significant earnings. So that's how we model the business. That's what we're planning for for '12 and '13, and it's how we're going to take our budgets into 2012.

So it's now past 6.00 PM I think in the interest of everybody's time, we will take just one more question and be available in our offices after that, if you have additional inquiries.

Vernon Bernardino from Dawson James.

Congratulations, as well, for a great panel. One panelist was persistent on the issue of rash anemia and how pyrazinoic acid, metabolite telaprevir plays a role in the risk of gout and tuberculosis. You didn't really get a good chance to reply during the meeting, or at least in detail. Could you comment on what studies are planned to address the panelist's issue?

So, yes, it's true that pyrazinoic acid is a metabolizer telaprevir. It's present in relatively low concentrations in plasma compared to the parent molecule. The safety profile of telaprevir has obviously been developed with pyrazinoic acid as it has been, but we don't anticipate any additional studies being necessary at this point.

Okay. Thank you very much, everyone, for joining us tonight. Thank you very much for your kind words and your questions. We certainly look forward to updating you further on INCIVEK in the coming weeks. And, again, we are in our offices tonight if you have any additional questions. Thank you.

Ladies and gentlemen, thank you for your participation on today's conference. This does conclude the program and you may now disconnect.