Good evening, ladies and gentlemen, and thank you for joining the Vertex Pharmaceuticals Incorporated Fourth Quarter 2014 Financial Results Conference Call. [Operator Instructions] As a reminder, this call is being recorded. I would now like to turn the call over to your host Vice President of Investor Relations, Mr. Michael Partridge. Sir, you may begin.

Thank you, operator, and good evening, everyone. Joining me on the call tonight are Dr. Jeff Leiden, Chairman and CEO; Stuart Arbuckle, Chief Commercial Officer; and Ian Smith, Chief Financial Officer. Dr. Jeff Chodakewitz, Chief Medical Officer, will join us for Q&A. Our agenda tonight is as follows. Jeff will begin by reviewing Vertex’s strategic priorities for 2015. Stuart will review the full year 2014 performance of KALYDECO, provide commentary on the outlook for KALYDECO in 2015 and will also discuss preparations for the launch of the lumacaftor/ivacaftor combination. To close, Ian will review the full year 2014 financial results and discuss our 2015 financial guidance. We will then open the call for your questions. We expect the call to run for no more than 45 minutes. You can access the webcast slides by going to the Events section of the Investor Relations page on our website, vrtx.com. I will remind you that we will make forward-looking statements on this conference call. These statements are subject to the risks and uncertainties discussed in detail in today's press release and our 10-K and 10-Q, which have been filed with the Securities and Exchange Commission. These statements, including, without limitation, those regarding the ongoing development and potential commercialization of lumacaftor/ ivacaftor combination and those about Vertex's other cystic fibrosis programs are based on management's current assumptions. Actual outcomes and events could differ materially. Information regarding our use of GAAP and non-GAAP financial measures and a reconciliation of GAAP to non-GAAP is available in our fourth quarter 2014 financial results press release. I would also refer you to Slide 4 of tonight's webcast. I will now turn the call over to Jeff Leiden.

Thanks, Michael, and good evening, everyone. 2014 was a year of continued success in delivering on our vision to be a leader in discovering and developing therapies for cystic fibrosis and other serious diseases. And we made significant progress this past year in establishing a foundation for sustainable growth. First, we expanded the number of patients with KALYDECO through geographic and label expansion efforts. Second, we announced positive data from our Phase III studies of lumacaftor/ ivacaftor and submitted an NDA in the U.S. and MMA in EU paving the way to treat significantly more people with CF. Third, we continue to manage our financial position ending the year with approximately $1.4 billion in cash to support the future of our business. These accomplishments have fundamentally changed the outlook for our business and increased their confidence and the company’s plans for the future and for people with CF and their families. I had the opportunity to meet with many of our investors and analysts of JPMorgan Healthcare Conference earlier this month and to talk about our strategy. So let me remind everyone about our priorities for 2015. First, approval and successful launch of the lumacaftor/ ivacaftor combination while continuing to increase KALYDECO revenues enabling us to treat even more people with CF and to accelerate our revenue growth. Second, significantly advancing our CF pipeline with a focus on next generation medicines that have the potential to create regimens that may increase the benefit for CF patients, and third, expanding and diversifying our pipeline into other areas as evidenced by multiple programs advancing into the clinic during 2015. If we are successful in meeting our goals we expect to deliver the Vertex and its shareholders a long term financial profile that includes significant revenue and earnings growth. Before turning the call over to Stuart I wanted to take the opportunity to mention how proud we are at Vertex to be at the forefront a new approach in developing medicines, broadly referred to as precision medicine. KALYDECO and hopefully soon the combination of lumacaftor/ ivacaftor are benefitting CF patients around the world and demonstrating the potential of this approach and developing medicines. We are pleased that our success had provided part of the basis for newer search initiatives, discussed for the first time in the State of Union address last week to apply precision medicine approaches across a broad range of diseases. And we look forward to working closely with regulators and other government entities to apply the learnings of precision medicine so that we can help more patients and do it faster. With that I’ll turn it over to Stuart.

Thanks, Jeff, and hello, everyone. Tonight, I'll review the sales performance of KALYDECO in 2014 and outline our expectations for KALYDECO in 2015 that reflects strong underlying demand and the positive impact of label and geographic expansion. I will also discuss our progress in preparing for the approval and launch of the lumacaftor/ivacaftor combination. KALYDECO has shown rapid growth since it was approved in 2012. Product sales increased 25% in 2014 to $464 million. At the start of 2014 nearly all eligible patients with the G551D mutation in the U.S. and Europe were being treated with KALYDECO. Growth in 2014 was driven by both additional patients initiating therapy in new and existing international markets and the U.S. approval of KALYDECO for use in eight additional mutations. Turning to 2015 there are again multiple potential growth drivers based on achieving reimbursement approvals and further label expansions. In the first half of 2015 we expect rapid uptake of KALYDECO by eligible patients in Australia following the completion of reimbursement discussions in late 2014. There are more than 200 children and adults with CF who are expected to be eligible for treatment. In the U.S. KALYDECO was approved for use in children and adults ages 6 and older with the R117H mutation on December the 29th last year. The first patients have already initiated treatment and we expect to see continued uptake in the months ahead. In the second half of 2015 we expect to see the revenue impact from achieving reimbursement or Gating mutations in some European countries. We also anticipate a potential approval in children with CF ages 2 to 5 with the G551D or other Gating mutations in the U.S. which would be a growth driver in the second half of 2015. As a result, we expect the number of…

Thanks, Stuart, and good evening to everyone. Tonight I would like to discuss our 2014 results, then our 2015 guidance and how that puts us on track to long term sustainable revenue and earnings growth. I’ll be brief on the 2014 results and for a more detailed discussion of these results please refer to our press release we issued earlier today. 2014 financial performance was marked by the continuing growth in KALYDECO revenues controlling the level of our operating expenses and completing the year with a strong balance sheet. As we look to 2015 and beyond we see revenue growth continuing based on treating more patients with KALYDECO and then accelerating this revenue growth with the potential approval and launch of the lumacaftor/ivacaftor combination. As we anticipate this growth in our CF revenues we also expect to control the level of operating investments into our company. We anticipate that this will enable us to deliver a future financial profile that includes high operating margins and significant earnings growth. Now to the 2014 results. We generated $536 million in total non-GAAP revenues in 2014, including $464 million in KALYDECO revenues. This was a significant increase over 2013 KALYDECO revenues and we expect this growth to continue. We also recorded $72 million in royalty and collaborative revenues including $35 million in revenue from the outlicense of VX-787, our novel flu medicine, to Janssen. Then looking at the main components of our non-GAAP operating expenses, our combined non-GAAP R&D and SG&A expenses were $920 million in 2014 a decrease of $177 million compared to the prior year. This decrease reflects our prioritization with CF medicines and continued focus on managing operating expenses. The non-GAAP loss was $511 million or $2.17 per share compared to the prior year loss of $203 million. This increased…

Thank you. [Operator Instructions]. Our first question comes from the line of Geoffrey Meacham from Barclays.

Afternoon, guys. Thanks for taking the question. Obviously everyone is focused on the upcoming 661 date. I guess I wanted to get a sense from you guys when you’re planning your Phase III where you look at the opportunity in heterozygous patients? What population I guess would you estimate would be eligible for perhaps 661 plus KALYDECO and from your basic research what population may need a second corrector? And then I have follow-up.

Geoff, this is Jeff Leiden. Thanks for the question. The way we’re thinking about the heterozygous in terms of 661 and KALYDECO really in two bucket. You’ll remember that last year we published a Phase II study and adding 661 to KALYDECO in patients who had a 508del mutation on one allele and some sort of gating mutation in that case G551D and the other allele. And we’re able to show if you remember that, one those patients once they were stable on KALYDECO, if we added 661 we saw greater than 4.5% improvement in an absolutely FEV1. And so the first part of the heterozygous strategy that we’re going to test in the Phase III program is basically a pivotal program around that population where we’re trying to maximize the benefit that we can bring by adding 661 to KALYDECO and patients were heterozygous for 508 in the gaining will. And so if you think about that population, it’s about 80% of all gating patients who have 508 and the other allele. The other population is what we call heterozygous men population, not a very good term I admit, but its patients who have 508 on one allele and basically a non-KALYDECO responsive mutation on the other allele. About 17,000 patients worldwide, as we’ve said this is s hardest to treat population because those express half of the amount of the Delta 508 protein that Delta homozygous expresses, and so they need better correction. We know for example that 809 plus KALYDECO doesn’t work in that population. We look that in our traffic and transport trials you remember. So we’re taking two prong approach to these patients, because today they don’t have any CFTR correction therapy. We’re going to taken admittedly high risk, but more rapid approach and try them with 661 plus KALYDECO, the two drug combination as part of our pivotal program and we’ll start that program as we said in the first half of this year. The idea there is if we can see an effect, than we’ll be able to get the medicines to patients much more quickly. But the high probability approach that we’re taking is the three-drug combination and that’s where we take 661, KALYDECO and the next generation corrector. Our cell-based data suggest that will work in this population with the higher probability, but of course that’s slower, because our next generation correctors are in lead optimization now and our goal is to put the first to those and perhaps multiple in the clinic this year. And so that’s the high probability but longer term approach.

I guess that was more of my question of if you get the next gen corrector in clinic, you don’t necessarily have to have 661 on the market. You’ll be able to look at two unapproved drugs and proof-of-concept studies and get an answer pretty quickly?

Well, we’ll be able to look at two unapproved drugs but getting an answer quickly, I want to clear about, we’ll have to take these first generation correctors into the clinical by themselves first of course to a Phase I study in normal than we’ll able to begin to explore combination So as compared to the 661 KALYDECO trial which we’re going to start in the first half of this year and quickly enroll. It is a significantly longer approach.

Right. I got you. Okay. That’s helpful. Thanks.

Thanks, Geoff.

Thank you next question comes from the line of Terence Flynn from Goldman Sachs.

Hi, thanks for taking the questions, maybe one follow-up on Geoff question then second one. So first just from a strategic standpoint I was just wondering the benefit of developing 661 plus KALYDECO in the patients that already benefit from KALYDECO, is it higher barriers to entry, is it greater revenue per patient, just maybe helped frame for us to strategic thinking there. And then, I would love your latest thoughts on partnerships and/or BD within and outside of CF? Thanks.

This is Jeff Leiden. And I’ll now take the first part and then Ian will take the BD question. The strategic plan here is really simple. It’s to bring the best benefit we can to those patients and that’s our number one priority. And as we talked about less, so we were very pleasantly surprised actually by the Phase II data that showed the significant improvement over and above KALYDECO when we added 661 to those G551D on 508 patients. And that was one of things that really push us to go quickly into a pivotal program, so we could get those patients maximum benefit.

And Terence to your second part of your question. In the last year we’ve had a fairly active and broad business corporate development focus three main areas. One being to understand the landscape of other CF technologies and medicines that may combined with what we’re doing here at Vertex to enhanced benefits from regimens. Second area to focus has been to consider other technologic or research based approaches to creating medicines. I mean Vertex’s has been very successful over the year with small molecule development and targeting certain molecular targets. But there are other things that are going on there right now that we need to involved in, so, with considering expanding our significant footprint as well. And then the third area of focus has been –can you we diverse by our pipeline and by that it both out licensing non-core assets which we’re been successful with. While also considering bringing on other opportunities into our pipeline that where Vertex’s further. I hope to update you with regard to 2015 in terms of where we’ve been spending our efforts. And as I would outline cystic fibrosis is our number one priority.

Thank you. Our next question comes from the line of Michael Yee from RBC Capital Markets.

Yes. Two quick topics. one is one the Phase IIb 661 study that you’re finishing and then you move into a Phase III both Homozygous and heterozygous. I guess how did you go about being certain on your 100 milligram QD dose. Why didn’t you go with higher BID dosing and how could you do all and take all that if you haven’t even seen the full Phase IIb data. And then my second question as it relates to the over heterozygous populations that we’ve been discussing on last couple of questions. I guess you talk little about what it was high risk population, as the heterozygous population where we did see in the population where you did have 551, 508 and it was additive by 4.6%, even with only half protein [ph] expression. I’ve been in the heterozygous admins you will have the protein expression with the mutation, so wouldn’t work on that half – somewhat similar effect.

Mike hi, its Jeff Chodakewitz. So let me take this, let me take this first one. I think that really have to step back and remember that in the fall of last year with the Phase II data that we had, both the data in the 508 homozygous patients. And the patients that Jeff Leiden referred to with the 551D 508 patience. We already had 4-week data from those patients. So we had a fair amount of information. What then the 12 weeks study really contributed is real the – its primary objective which was safety. It’s a small study 40 patients, only 20 on active and in fact they’re actually dividend across the couple of different doses. So that gave us the information at the interim to accelerate, because we knew from the DSMB revenue and our view that nothing – it was nothing there on safety that fundamentally changed our profile. So, that’s really how we look at and it was really the preponderance of data that we had at the 100 milligram dose that gave us that confident using the opportunity to move faster.

Got it. Okay.

Yes. Then and your other question which is a good one, can we just extrapolate from the G551D 508 heterozygous to heterozygous men, I really think the answer is no. We don’t lot of things about those heterozygous patients for G551D for instance, we don’t know the effect of 661 on that G551D protein as well and so they could be a beneficial folding effect on the G551D protein getting more protein to the surface and contributing to the 4.5% or 4.6% increase we saw when we had 661. So we don’t and I really wouldn’t extrapolate from that G551D 508 data to 508 has been patient. And that’s why we think its particular high risk.

Yes, in other words it’s helping -- it could help the 551 as well, I think?

Correct.

Thanks.

Thank you. And our next question comes from the line of Matt Roden from UBS.

Great. Thanks very much for taking the question and congrats for getting the shot up the President in the State of Union address. Just to follow-up on the last question. Jeff you commented on the 661 Phase IIb data that you see in terms of safety and indorsing as a necessarily getting faster for moving into the phase III, but what can you tell us about what you saw in the efficacy if anything. Should we be thinking about this compound is being advantages relative to 8 or 9 because of the drug like proprieties and lack of invest interaction or is actually something to look at on the efficacy side is potentially better. And then shifting gear, second question would be one ATR inhibitor program in cancer and I use to see that coming forward, looks like the approach here increase the sensitivity to the chemotherapy if I understand it correctly. So the question would be, do you need chemo combos for this to work. Or could the approach work with the targeted agents or immunotherapy, just trying to get a sense of where we going with that program?

So Matt, I think in terms of the interim results, they really aren’t just bad and there is really just no way to comment on those results. I think I do go back to the prior data that and it was really the totality of the data from those multiples cohorts across the different populations that we been referring to and then getting that information at an interim basis on say primarily safety that is really what contributed to our decision making.

Yes, I can take the second part. This is Jeff Leiden. And that I think I actually like the way you said. I think you should think about 661 as the foundation for multi-drug regimens going forward because of its pharmaceutical properties. And that its best attribute if you will. Now we’re going to find out more about what it does in some of these populations from the Phase III certainly not from 12-week study because of course there were no headwinds [ph] for example and no 551Ds in that 12-week study. But number one is it really has pharmaceutical properties that allow us to make combination regimens including the three-drug regimen which is going to be so important I think in the headwinds. With respect to the ATR, yes, you’re right, this is a DNA repair pathway and so the hypothesis here is that by simultaneously disrupting a DNA repair pathway, while you’re also providing DNA damage to the cell in the form either cytotoxic chemo agent or radiation. You’re going to potentiate the radiation of cytotoxic chemo agent and that will be the real basis that which we’ll look at the drug rather than looking at it by itself.

Great. Thanks very much.

Thank you. And our next question comes from the line of Geoffrey Porges from Bernstein.

Thanks very much. And hope you guys both warm and free of snow up there now. I wanted to ask a couple of more questions about 661. Could you give us a sense of the – your expectations enrollment of the trials, knowing [indiscernible] or is it realistic that any of these trials could give us read out that you will disclose by the end of the year or should we be expecting them to all come next year? And then we sort of seeing to be dancing around this Phase IIb efficacy results, but when my bat [ph] come. And then lastly related to that Jeff could you comment on the pharmaceutical properties of what you’re seeing in the next gen corrector. Do you have optimized candidate there or you just sort of really establishing proof that you can target the particular half way that you’re going after?

So, Geoff thanks for it. I’ll take the first question in terms of timing of results from the pivotal Phase III program and then also the 12-week study VX-661 that’s currently ongoing. Firstly, just chronologically, the 12-week study that’s currently ongoing, we anticipate towards the end of the first quarter we’ll provide you top line data from that study. I’ll just reiterate that Jeff has mentioned that it is a small study primary endpoint to safety and lot of the data that we’ve gathered around 661 already has provided with the green light heading to this broad Phase III program. And I’ll also add to that data was discussed with the regulatory authorities to allow proceeding to that Phase III program. As far as the timing of the results from the phase III program, we would anticipate 2016, will provide with a more clear update once we get an understanding of the rate of recruitment to the studies, but we don’t anticipate results within 2015.

Great. Then the second corrector?

So, I think that really I think as we’ve talked about we’re really focused on those markets both driving the efficacy but also having the pharmaceutical properties that are going to allow to be used in the three-drug regimen. That’s really our goal. And we do have as we’ve talked about multiple compounds in lead up. Exactly what those properties are going to be it’s really – to you actually already and we’ve tested them in the clinic. I think it’s really too early to say.

Okay. Thanks very much, Jeff.

Thank you. Our next question comes from the line of Mark Schoenebaum from Evercore ISI.

Hello gentlemen. Thanks a lot for taking the question. I had reasonably simple question, when I look at the design that you’ve chosen for Phase II trials, I’m particularly struck by the design of the heterozygous men population where you plan to enroll 270 patients, mainly serves that’s only about half the size of the traffic and trans – each of the traffic and transport trials which were adequately powered trials in and of themselves. So presumably the power of 270 patients to this CB benefit is substantially less than it was in traffic and transport. If I were the company designing a trial and choosing that I would interpret that as having great confidence. I’m going to see a big benefit. Why am I correct or incorrect in that line of logic so to speak? And then, finally just a follow on the Phase IIb coming out for the 661 combination. Is there reason biologically or study design wise and the length is different just to assume or postulate that the data, the FEV data would be significantly different from the roughly 4.8% improvement and absolutely we saw in the prior experience. Thank you.

Hi. So, its Jeff Chodakewitz, so again in terms of the ongoing Phase II study with 12-week, we really just can’t comment, that is in a interim analysis and we are – as Ian just said, we’re going to really have the results at the end of the first quarter. In terms of your question around comparing the 661 admin study versus traffic and transport, I do thing there are couple of very important considerations that differ between them. One is that in the traffic and transport we had two doses in that study, which obviously complicate the sizing of studies and that’s a very big difference and we are very pleased to be able to focus on one dose as we move 661 into Phase III. The other piece of that is that another consideration and important consideration in attracting transport that is was around secondary endpoint and being able to detect secondary endpoint. The 661 study and the admin population is really focus and powered around [Indiscernible] so it does explains the differences that you were noting.

And why wasn’t that paradigm secondary and then I’ll drop back in the queue. Thanks.

So again I think that we also have the study in I believe homozygous patient that is powered both in terms of size and duration for those secondary endpoints and we think that’s really going to be able to anchor our program and so that’s how we construct to be the program overall.

All right thanks a lot. Great job, congrats.

Thanks.

Thank you. Our next question comes from the line of Robyn Karnauskas from Deutsche Bank.

Great. Thanks. This is Mohit Bansal filling in for Robyn. Thanks for taking my question. Moving aside from cystic fibrosis and looking at your pipeline, you have asset in oncology and neospace [ph] could you please help us understand your strategy with these asset. Do you expect to develop these indications in house or you think partnership or out licensing is the way to go. I guess my real question is do you see these assets as non-core assets or your core asset? Thanks.

Thanks for the question. I think as you, its Jeff Leiden as we outlined our strategy a couple of years ago which is to make transformational medicine for very serious diseases with large unmet need and scientific opportunity. And so if you look across our pipeline whether it’s in neurology or whether it’s in oncology each of the programs fulfilled those criteria in different sorts of layers. So it is our strategic assets. In terms of plans for how to commercialize them obviously we’ll be able to make detailed decisions once we begin to see clinical data from Phase II and Phase III studies, but we are very confident that these kinds of asset, these transformational assets are high value assets for the company and they do fill with our corporate strategy.

And Mohit I would just add that we faced this question a lot when we engage with investors and analysts. And it appears as though there is always a category that we want to fit these assets in including maybe some of our really neurology assets as well. And the categories tend to be you are either in the area or you are not in the area and what I would like to be clear on is that we’re committing to the studies and we want to find out the results and we want to see where there is a potential for this transformational medicine as Jeff Leiden has explained. But we’re in the area until we got the data and that doesn’t mean that the company is committed to the oncology space for the next 10, 15 years but it doesn’t mean we are committed to these studies in finding out whether we have the potential to create new medicines. And I wish there was a third – that I could give you but that’s – we are actually in that third category.

Ian and I talked about and we are not an oncology company or a neurology company, we are transformational medicines company and that’s what we are trying to do it here.

This is helpful. Thanks a lot

Thank you. Our next question comes from the line of Liisa Bayko from JMP Securities.

Hi. Thanks for taking the question. And just to follow-up on some discussion earlier. If we see a better treatment effect, a larger treatment effect in the 661 KALYDECO combo study on the homozygous, by extension does it make us feel like the heterozygous study is going to have more robust effect than with seamless lumacaftor/ivacaftor, is that the right way to think about it?

Yes. Thanks for the question. I know what you’re trying to get at here in terms of – will this really read out in the admin study and our impression about chance of success? And the answer is really no. We won’t have single admin patient in this study that they’re obviously the relevant patients and as I don’t think our mind will change in the terms of the risk and the speed of these two approaches we’re going to take. There’s no doubt no matter what we see that the two drug combination is a high risk but more rapid way to get to these patients who today the don’t have any therapy. There’s also no doubt in my mind that the three-drug combination from everything we’ve seen, the much higher probability approach, but unfortunately its going to take us a bit longer.

Okay. Fair enough. And then can you maybe talk about the presentation of the combo, how many pills it would be and sort of what would be the packaging be roughly for the lumacaftor/ivacaftor combo?

Yes, Liisa. So the presentation is a fixed dose combination, so you’ll take the 400 of lumacaftor that’s combined with ivacaftor. You’ll take that in the morning and then 12 hours later you’re also taking fixed dose combination tablets than as well. So it’s completely co-formulated product.

And then just final question from me on the trajectory that you anticipate for the combo, can you maybe compare or characterize how we should think of it compared to what we saw for G551D population? Thank you.

Yes. Great question, Liisa. So in terms of the destination if I can describe it that way in terms of the overall level of update we’re anticipating. We expect the level of uptake, the peak penetration if you want to think that way to be very high for the lumacaftor/ ivacaftor combination based on the things that you already know. It’s incredibly serious disease. The F508del mutation is a serious form of disease and there aren’t another treatment options currently available that treat the underlying cause of the disease. And so everything we know about the profile of lumacaftor and ivacaftor and the reaction you have had from patients and providers since Phase III data became available is very positive So we’re expecting the peak uptake to be very significant. In terms of the rate of uptake I’m anticipating its going to be lower than with G551D and really that’s just driven by the sheer volume of patients. I think about here in the U.S. there’s about 1000 G551D patients they are treated about 250 to 275 CF centers that’s on average three or four patients per center. You think about the F508del homozygous population 12 and above is about 8,500 patients, so nearly an order of magnitude greater. That’s more like 30 patients per CF center on average. And so just the sheer volume of patients and the efforts that goes into initiating a new patient on therapy, the education, the counseling, navigating the reimbursement, process is going to take a significant amount of time and this is the sheer volume of patient I think its going to lead to the absolute rate of uptick to be somewhat lower than we saw with G551D which as you well know was virtually vertical.

Great. Thanks for taking the question.

Thank you. Our next question comes from the line of Ying Huang from Bank of America Merrill Lynch.

Thanks for taking my question. So, can you categorically talk about the futility analysis after the first 120 patients will be enrolled in the headwind cohort, what would be hurdles for you to continue to enroll the 150 patients? And then I think you made comment before that maybe shall we assume that the 12-week trials of that cohort in case we would not be low enough to capture any benefit in weight gain or exacerbation reduction, is that the right assumption? Thank you.

So its – let’s talk about the futility analysis which I think really reflects what we’ve been talking about in terms of the low probability for the population with the two drug combination. We don’t have an exact final rule that we’re going to use, so we can’t specifics. But let me take a moment and walk you through how it’s going to work to put it in perspective. As you noted that we are going to roll about 120 patients in the initial cohort. We’re going to then pass enrollment and clinical data from those patients will be collected and be reviewed by the DMC. We won’t actually even Vertex be seeing that will be conducted independently by the DMC. And the goal of that is actually to assess the probability whether we can actually know from that amount of data that it is low probability unlikely that that combination is going to be beneficial for the patients. If that’s the case the SMB will tell us and we’ll stop the study. If they see something that we cannot conclude that then we will restart enrollment and complete the study. And that’s really the way it’s going to rollout. I would also note that the – even if the study continues we don’t know fore sure and we really won’t know that the study is going to be positive until we get to the end. It’s just that at that interim point, do we have enough information already to know that it’s not working, that’s the way the analysis is structured. And then your other question about the pulmonary exacerbation and so forth, we will certainly collect that data, we’ll look at it. There’s a different between saying that we have size study to fully power for versus that we will try to look and get all the information that we can out of this value.

That was very helpful Jeff, can I just ask one follow-up. When the futility analysis conducted, is it at the end of 12-week or in the interim?

We haven’t gotten to those details, but again its going to be and its of course going to depend on the rate of enrollment as well when we get to that 120, we have get the patients through some of that, get collect the data and allow time for the DMC to do the analysis.

And Ying it gives me the opportunity to help you understand with disclosure around this as well, so we do not anticipate that there will be a disclosure top line or anything around the futility analysis at least positive. We’ll just continue to expand that study and recruit more patients, so that we will not making that announcement. The only announcement that you would hear around this futility assessment is if it was negative than we had said this, and we decided to curtail the study, and so before the question comes that our plan of disclosure around this as well.

Thank you, Ian.

Thank you. Our next question comes from the line of Brian Abrahams from Wells Fargo Securities.

Hi. Thanks for taking my questions, commercial question on ivacaftor/lumacaftor, it seems as if there’s a large number F508del Homozygous patients under age 12. And I’m just curious if you’ve gotten a sense as to whether clinicians might treat any of these patients age 6 to 11 at launch and whether the drug might or the combo might be reimburse and when you have the results of that upcoming Phase III in patients age 6 to 11 and potentially expand the label into this younger population?

I’ll let Jeff Chodakewitz answer the question on the timing of the study in the 6 to 11 population. In terms of whether we might see usage in that population post approval now that’s really very much a decision of the physician and the patient, but you raised one of the most important limitations there which is likely to be whether it would be reimbursed and given that the speciality products like CF products are managed with a pretty rigorous prior authorizations to the label my anticipation would be that it would be relatively few patients if any who are likely to be able to get access to the product until we’ve got an FDA approval for that here in the U.S. That’s not to say that certain patients and that physicians may seek to appeal that with their payer [ph] I’m sure that will happen but I think it’s likely to be a very small number who actually are likely to get reimbursement after the launch later this year.

And it’s Jeff,[Indiscernible] just to follow up. I think it’s really too early until we see what the rate of enrolment is for the to predict when the studies would be completed and be able to try out. I will note that there is a little bit of a difference as you probably remember between the U.S. and Europe and there is a smaller study, its focused primarily on pharmacokinetics and safety to support piling and ultimately approval in the U.S. while Europe has historically required larger studies with independent FXC [ph] data, so just to set the stage that the timing in the two areas will likely differ.

That’s very helpful. Thanks so much.

Operator, we have time for two more questions.

Thank you. Our next question comes from the line of Craig Hassemar [ph] from JPMorgan.

Hey good afternoon guys thanks for squeezing me in. Most of my questions were asked already, but I have two quick ones for you. So first of all with the launch of the 809 KALYDECO combo expected later this year, what kind of impact do you expect this to have on enrolment in the Phase III study of 661 in homozygous patient if any. Do you open more sites in Europe to avoid a disruption given the different timelines there? And then secondly I’m also curious how much of an impact FX has on your 2015 KALYDECO guidance? Thanks.

Hi, so it’s Jeff I’ll take the first one. One of the benefits of actually being able to accelerate the start of the 661 program particularly the homozygous study is that we do plan to enroll patients in the U.S. but we think now are starting this coming month. We are going to be able to get enrolment completed and actually hopefully have patient well into this study. So we don’t, we think that that’s really very consistent and then we can manage those issues. And we don’t see it as a big breadth [ph] Going to the FX question I know it’s much a broad topic at this point. We actually gave guidance back at JPMorgan beginning of January we looked at the spot right to that point. We then did look to see what the ex U.S. revenues that were at potentially at risk to currency fluctuations. We don’t see a big impact to our revenue line, we have a hedge program for our ex U.S. revenues both hedge against those revenues but also the natural hedge here for our investments in the different countries as well. And so we don’t see a big impact to the revenue line because of that hedging program and we also compared it – at the beginning of the year.

Okay. Thanks a lot.

Thank you. And our next question comes from the line of [Indiscernible]

Well thanks very much. I have a question on expense thanks for the color. But given the development cost I think it was $570 million to $600 million mostly for CF. Could that line item potentially decline in 2016 and so Phase III you may have mostly completed 661?

Thanks for the question, Howard. It helps me talk more broadly about let’s say the direction of our operating, our expected direction of the operating investment. Clearly there is a great expectation on our revenue line which is significant growth. But as we look at the operating expense line moving from 2014 into2015 but then onwards we see this increase from 2014 into 2015 as I described in my remarks earlier today and that’s because we are doing effectively two phase three studies through a long a lot of 2015. But then also we are supporting the launch of ivacaftor/lumacaftor to treat many more patients. And those are driving the increase between 2014 and 2015. However, as we look at 2015 into 2016 and 2017 we see a relatively little additional cost and the reason for that is because the company is now starting to move into a steady state. And when you look at all the different aspects of the company that drive the resulting operating expense we start becoming a steady state in the – we are committed to our levels of research. We like what we’ve got going on in research, we like the product and the production of the molecules that comes from our research investment. Our development pipeline or our clinical pipeline is phased now Phase I asset through to Phase III assets and we expect that to continue to roll so as a Phase III program comes to an end we had hoped that a Phase II program enters Phase III. So it rolls and then as far as the SG&A is concerned well our infrastructure is already exists to support the company at the scale it is and as Stuart has mentioned with the launch of ivacaftor/lumacaftor we are building out commercial infrastructure globally but that starts to hit steady state as well this interpretations that we think we will treat in the future. So it helps you understand why we look into 2016 and 2017 and talk about controlling of the operating expense once we make this increased investment from 2014 to 2015. For that reason bringing it back with a growth of a revenue line we do believe that in future years and the successful launch of ivacaftor/lumacaftor that we do actually turn the profitability and growth in earnings and cash flow. And we look to high operating margins.

Thank you very much.

Thank you very much. That will conclude our call. We appreciate everybody joining us tonight. The Investors Relations team is going to be available tonight on [ph] the call if you have additional questions. Have a good evening.