On October 28, 2015 Vertex Pharmaceuticals Incorporated (Nasdaq: VRTX) reported consolidated financial results for the quarter ended September 30, 2015 (Press release, Vertex Pharmaceuticals, OCT 28, 2015, View Source [SID:1234507826]). Vertex also increased its financial guidance for total 2015 KALYDECO (ivacaftor) revenues and reiterated its prior guidance for non-GAAP operating expenses. Key financial results include:
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"The expansion of our pipeline positions us to generate important proof-of-concept data across multiple diseases next year and is further evidence of our continued execution against the plan we outlined in 2013."
"During the third quarter, more than 3,000 people started treatment with ORKAMBI in the U.S., underscoring the importance of this medicine to people with cystic fibrosis and their doctors and the interest to begin treatment as soon as possible," said Jeffrey Leiden, M.D., Ph.D., Chairman, President and Chief Executive Officer of Vertex. "Importantly, with the planned initiation of the first clinical study of a next-generation corrector this week, we continue to move quickly to develop combinations of our potential medicines that could provide enhanced benefit for people already taking our medicines and for others, to provide the first medicine to treat the underlying cause of their cystic fibrosis."
On October 8, 2015, Vertex provided a comprehensive update on its development program in cystic fibrosis (CF). Key highlights included:
Clinical Development of Next-Generation Correctors
Vertex is preparing to advance two next-generation correctors, known as VX-152 and VX-440, from its research program into clinical development. Vertex will evaluate these next-generation correctors alone and in combination with VX-661/ivacaftor as part of Phase 1 studies in healthy volunteers, and the first Phase 1 study is expected to begin this week. Pending results of these studies, Vertex plans to initiate Phase 2 studies in people with CF evaluating VX-152 or VX-440 in combination with VX-661/ivacaftor in the second half of 2016. The studies of a triple combination (VX-152/VX-661/ivacaftor and VX-440/VX-661/ivacaftor) are planned for the second half of 2016 and are expected to enroll three groups of people with CF: (1) people who carry two copies of the F508del mutation; (2) people who carry one copy of the F508del mutation and a second mutation that results in minimal CFTR function; and (3) people who carry one copy of the F508del mutation and a second mutation that is known to be responsive to ivacaftor. VX-152 and VX-440 are designed to further improve processing and trafficking of the CFTR protein to the cell surface, beyond that observed with a single corrector combined with ivacaftor, which may enable increased CFTR chloride transport, a measure of the function of the CFTR protein at the cell surface. Increased chloride transport may translate to increased clinical benefit for people with CF who have at least one copy of the F508del mutation.
In human bronchial epithelial (HBE) cells with two copies of the F508del mutation, as well as in HBE cells with one copy of the F508del mutation and one copy of a mutation known to result in minimal CFTR function, the triple combinations (VX-152/VX-661/ivacaftor and VX-440/VX-661/ivacaftor) resulted in chloride transport (percent of normal) that was approximately three-fold greater than the use of the lumacaftor/ivacaftor combination in these cells. A significant increase in cilia beat frequency was also observed with triple combination therapy as compared to the use of the lumacaftor/ivacaftor combination in these cells.
KALYDECO (ivacaftor) Supplemental New Drug Application in Residual Function Mutations
On October 7, Vertex announced that its supplemental New Drug Application (sNDA) for the use of KALYDECO in people ages 2 and older with one of 23 residual function mutations was accepted for review by the U.S. Food and Drug Administration (FDA). The FDA granted Vertex’s request for Priority Review of this sNDA, and a target review date of February 6, 2016 was set under the Prescription Drug User Fee Act (PDUFA) for the FDA’s decision on the sNDA. More than 1,500 people with CF in the U.S. have the mutations represented in the sNDA.
Studies of the ENaC Inhibitor VX-371
In June 2015, Vertex and Parion Sciences entered into a collaboration to develop investigational epithelial sodium channel (ENaC) inhibitors for the potential treatment of CF and other pulmonary diseases. Parion is currently conducting an exploratory Phase 2a study (known as the CLEAN-CF study) of inhaled VX-371 (P-1037), compared to treatment with VX-371 with hypertonic saline, in approximately 120 people with CF. Data from this study are expected in mid-2016. Vertex plans to conduct a placebo-controlled Phase 2a study to evaluate VX-371 in patients taking lumacaftor/ivacaftor, both with and without the addition of hypertonic saline, who have two copies of the F508del mutation. This Phase 2a study is expected to begin in early 2016.
In human bronchial epithelial cells from people with CF who have two copies of the F508del mutation, the addition of investigational VX-371 to lumacaftor/ivacaftor resulted in an additional increase in both airway surface liquid and cilia beat frequency as compared to baseline and to the use of VX-371 or lumacaftor/ivacaftor alone. Improvements in airway surface liquid height and cilia beat frequency are measures of increased hydration of the cell surface.
Pipeline Updates:
"Beyond CF, we are advancing multiple potential medicines for the treatment of cancer, pain and other serious diseases, and we recently entered into an important research collaboration with CRISPR Therapeutics to use the company’s gene editing technology to address the underlying genetic causes of many diseases," continued Dr. Leiden. "The expansion of our pipeline positions us to generate important proof-of-concept data across multiple diseases next year and is further evidence of our continued execution against the plan we outlined in 2013."
Vertex recently advanced multiple investigational medicines into clinical development for the potential treatment of cancer and pain and entered into a strategic research collaboration focused on the use of gene editing:
Gene Editing Collaboration
On October 26, Vertex announced that it had entered into a strategic research collaboration with CRISPR Therapeutics focused on the use of CRISPR’s gene editing technology, known as CRISPR-Cas9, to discover and develop potential new treatments aimed at the underlying genetic causes of human disease. The collaboration will evaluate the use of CRISPR-Cas9 across multiple diseases where targets have been validated through human genetics. Vertex and CRISPR will focus their initial gene editing research on discovering treatments to address the mutations and genes known to cause and contribute to cystic fibrosis and sickle cell disease. Vertex and CRISPR will also evaluate a specified number of other genetic targets as part of the collaboration.
Oncology
Vertex has three potential medicines in early development that are designed to inhibit DNA repair pathways that are fundamental to the survival and proliferation of certain cancers. These potential medicines, which were discovered by Vertex scientists, may be applicable to the treatment of multiple tumor types.
VX-970: Multiple Ongoing and Planned Studies in People with Solid Tumors
VX-970 is Vertex’s most advanced drug candidate in oncology. By inhibiting a protein kinase known as ATR, VX-970 targets a critical regulator of the DNA damage repair system. Cancer cells often have defects in the DNA damage repair system that contribute to disease progression and drive reliance on ATR for survival from DNA damage. Inhibition of ATR may therefore selectively kill cancer cells under DNA damaging conditions.
Vertex’s strategy is to evaluate VX-970 in early trials in selected tumor types and patient subtypes that are expected to be responsive to ATR inhibition based on biomarker data. These studies will be used to generate data that will inform potential late-stage clinical development. Vertex is currently conducting two Phase 1 studies of VX-970 dosed intravenously in combination with commonly used DNA-damaging chemotherapies across a range of solid tumor types, and these studies have recently been amended to enroll specific cohorts of triple-negative breast cancer patients and non-small cell lung cancer patients.
Data from a Phase 1 safety and PK study were accepted for presentation at the 2015 AACR-NCI-EORTC (Free AACR-NCI-EORTC Whitepaper) International Conference on Molecular Targets and Cancer Therapeutics (EORTC-NCI-AACR) (Free ASGCT Whitepaper) (Free EORTC-NCI-AACR Whitepaper) hosted by the American Association for Cancer Research (AACR) (Free AACR Whitepaper), the National Cancer Institute (NCI) and the European Organisation for Research and Treatment of Cancer (EORTC), being held November 5-9 in Boston. The data showed that treatment with VX-970 was generally well-tolerated, both alone and in combination with the chemotherapy drug carboplatin, and there was preliminary evidence of antitumor activity. The data will be presented at the AACR (Free AACR Whitepaper)-NCI-EORTC meeting as part of an oral and poster presentation titled "Phase I Trial of First-in-class Ataxia Telangiectasia-mutated and Rad3-related (ATR) Inhibitor VX-970 as Monotherapy or in Combination With Carboplatin in Advanced Cancer Patients With Preliminary Evidence of Target Modulation and Antitumor Activity."
Additionally, Vertex has entered into a cooperative research and development agreement (CRADA) with the National Cancer Institute to support evaluation of VX-970 across other types of cancers. The CRADA enables NCI to conduct multiple clinical studies that will evaluate treatment with VX-970 in people with small cell lung, head and neck, urothelial and other cancers. The first study conducted under the CRADA is ongoing, and six additional studies are planned.
Vertex is also developing a second ATR inhibitor known as VX-803, which is dosed orally. An ongoing Phase 1 study is evaluating escalating doses of VX-803 alone and in combination with chemotherapy.
VX-984: Phase 1 Study Planned for Early 2016
Vertex is developing VX-984, an inhibitor of DNA-dependent protein kinase that also targets the DNA damage repair system. VX-984 could be used to treat a variety of tumor types in combination with commonly used chemotherapy and radiation therapy. Vertex plans to initiate the first clinical study in early 2016 to evaluate escalating doses of VX-984 alone and in combination with the chemotherapy drug pegylated liposomal doxorubicin.
Pain
VX-150: Phase 2 Proof-of-Concept Study in Osteoarthritis
Vertex is developing VX-150 as a potential medicine for the treatment of pain. VX-150 is designed to block pain signaling through inhibition of a sodium channel known as NaV 1.8. Vertex recently completed a Phase 1 study in healthy volunteers to evaluate the safety and pharmacokinetics of VX-150. Based on data from this study, Vertex is preparing to initiate a Phase 2 proof-of-concept study of VX-150 in approximately 100 people with symptomatic osteoarthritis of the knee. This study is expected to begin by the end of 2015. Additionally, Vertex is advancing a second sodium channel inhibitor known as VX-241, which is an inhibitor of a sodium channel known as NaV 1.7. Vertex plans to begin clinical development of VX-241 in the first half of 2016. There is a strong rationale for exploring the treatment of pain through inhibition of sodium channels based on human genetics and well documented roles in pain sensation.
Influenza
JNJ-872 (VX-787): Biomedical Advanced Research and Development Authority (BARDA) To Support Late-Stage Development Activities
In September, the U.S. Department of Health and Human Services’ Office of the Assistant Secretary for Preparedness and Response (ASPR) announced that the Biomedical Advanced Research and Development Authority of ASPR will provide technical assistance and funding of up to $131 million to Janssen Pharmaceuticals Inc. for advanced development of JNJ-872 (VX-787), a potential medicine for the treatment of influenza. JNJ-872 was discovered by Vertex scientists and was out-licensed to Janssen in June 2014. As part of the agreement with Janssen, Vertex may receive development and commercial milestone payments as well as royalties on future product sales.
Third Quarter 2015 Financial Highlights
Revenues:
Net Product Revenues from ORKAMBI were $130.8 million. As of September 30, 2015, more than 3,000 people with CF had started treatment with ORKAMBI.
Net Product Revenues from KALYDECO were $165.9 million compared to $126.8 million for the third quarter of 2014. The increased KALYDECO net product revenues, compared to the third quarter of 2014, resulted primarily from additional people being treated with KALYDECO in both U.S. and ex-U.S. markets.
Expenses:
Total combined non-GAAP cost of product revenues and royalty expenses (COR) were $33.5 million, compared to $11.0 million for the third quarter of 2014. GAAP COR expenses were $32.0 million compared to $14.2 million for the third quarter of 2014.
Non-GAAP research and development (R&D) expenses were $201.6 million compared to $157.4 million for the third quarter of 2014. The increased R&D expenses for the third quarter of 2015 were primarily the result of increased costs related to the initiation of the pivotal Phase 3 program for VX-661 in combination with ivacaftor, which includes four Phase 3 studies in more than 1,000 patients. GAAP R&D expenses were $246.3 million compared to $190.9 million for the third quarter of 2014.
Non-GAAP sales, general and administrative (SG&A) expenses were $76.1 million compared to $55.1 million for the third quarter of 2014. This increased SG&A expenses were primarily the result of increased investment in global commercial support for the planned launch of ORKAMBI. GAAP SG&A expenses were $99.8 million compared to $75.2 million for the third quarter of 2014.
Net Loss Attributable to Vertex:
Non-GAAP net loss was $31.9 million, or $0.13 per diluted share, compared to a non-GAAP net loss of $86.2 million, or $0.37 per diluted share, for the third quarter of 2014. The decreased net loss was the result of the first quarter of ORKAMBI product revenues and increased KALYDECO product revenues, offset by increased operating expenses. The GAAP net loss was $95.1 million, or $0.39 per diluted share, compared to Vertex’s third quarter 2014 GAAP net loss of $170.1 million, or $0.72 per diluted share.
Cash Position:
As of September 30, 2015, Vertex had $1.0 billion in cash, cash equivalents and marketable securities compared to $1.4 billion in cash, cash equivalents and marketable securities as of December 31, 2014.
As of September 30, 2015, Vertex had $300 million outstanding from a credit agreement that provides for a secured loan of up to $500 million.
2015 Financial Guidance:
Vertex today increased its financial guidance for total 2015 KALYDECO revenues and reiterated its guidance for non-GAAP operating expenses:
KALYDECO Net Revenues: Vertex now expects KALYDECO net revenues of $605 to $620 million for 2015. The prior range, provided on July 29, 2015, was for KALYDECO net revenues of $575 to $590 million for 2015.
Non-GAAP R&D and SG&A Expenses: Vertex reiterated its guidance for combined non-GAAP R&D and SG&A expenses in 2015 of $1.05 to $1.10 billion. Total combined non-GAAP R&D and SG&A expenses are expected to be in the middle of the guidance range.
Vertex’s expected combined non-GAAP R&D and SG&A expenses exclude stock-based compensation expense and certain other expenses recorded in 2015.