Good day ladies and gentlemen, and welcome to the Vertex Pharmaceuticals Second Quarter 2018 Conference Call. As a reminder, today's program may be recorded. I would now like to introduce your host for today's program, Michael Partridge, Vertex Pharmaceuticals, Inc. Please go ahead.

Thank you, and welcome to the Vertex second quarter 2018 conference call. This is Michael Partridge, Senior Vice President of Investor Relations for Vertex. Tonight, we will review our financial results and our continued progress to develop new medicines for all people with cystic fibrosis. Dr. Jeff Leiden, Chairman and CEO and Ian Smith, Chief Operating Officer, will provide prepared remarks this evening. Stuart Arbuckle, Chief Commercial Officer and Dr. Reshma Kewalramani, Chief Medical Officer, will join us for Q&A. We recommend that you access the webcast slides as you listen to this call. The slides are available for download on our website. This conference call is being recorded, and a replay will be available on our website starting later tonight. We will make forward-looking statements on this call. These statements are subject to the risks and uncertainties discussed in detail in today's press release and our filings with the Securities and Exchange Commission. These statements including, without limitation, those regarding Vertex's marketed CF medicines, the ongoing development and potential commercialization of any triple-combination regimen for cystic fibrosis, Vertex's other programs and Vertex's future financial performance are based on management's current assumptions. Actual outcomes and events could differ materially. I will now turn the call over to Dr. Jeff Leiden.

Thanks, Michael. Good evening everyone. In the first half of 2018, Vertex continued to make tremendous progress across our business, especially in the area of cystic fibrosis. Today, we are treating more patients with our CF medicine than ever before and delivering important clinical benefits to thousands of people around the world. First, to the launch of SYMDEKO in the U.S. The demand for this medicine has been strong across a wide range of eligible patients, including those who previously discontinued or never started ORKAMBI. Patient access to SYMDEKO is excellent and similar to prior launches in the U.S. for KALYDECO and ORKAMBI. And feedback from patients and physicians has been highly positive. Treating more patients is driving significant revenue growth. And on the basis of the rapid uptake of SYMDEKO in the first half of 2018, we are raising our total revenue guidance for 2018, which Ian will review in a moment. Second, we are moving toward achieving our goal to treat CF patients at younger and younger ages, so we may help deliver transformative benefits early in life and slow or prevent the progression of disease. This progress is exemplified by the pending approvals for KALYDECO in children as young as one year of age and for ORKAMBI in children ages 2 to 5 years where we expect decisions from the FDA this summer. We're also evaluating SYMDEKO in children ages 6 to 11 and expect data from this study later this year. Third, our two triple-combination regimens that contain a next-generation corrector are proceeding rapidly through Phase 3 development. We expect to complete enrollment of our Phase 3 studies for both VX-659 and VX-445 triple-combination regimens in the second half of this year. Based on anticipated completion of enrollment for both programs, we expect to submit a…

Thanks, Jeff, and good evening to everyone. I'm pleased to review our second quarter 2018 financial results, which are highlighted by the launch of SYMDEKO in the U.S. and our upward revision of the 2018 full year financial guidance for total CF revenues. Revenues first. Total CF product revenues of $750 million in the second quarter of 2018 represents a 46% increase compared to the $514 million we recorded in the second quarter of 2017. We continue to see significant revenue growth, as we increase the number of patients treated with our medicines globally. The second quarter included $186 million in revenues from the launch of SYMDEKO in the U.S., which is the primary driver of the rapid growth in total CF revenues. Demand for SYMDEKO is strong, and we are seeing favorable early trends in persistence and compliance and are receiving positive feedback from patients and physicians. Five months into launch in the U.S., public and private insurance plans representing 95% of covered lives are processing claims for SYMDEKO and nearly all state Medicaid programs are providing coverage for SYMDEKO. The demand has been particularly strong among the F508del homozygous patients initiating treatment for the first time and also in patients who discontinued ORKAMBI coming back to initial – initiate therapy for SYMDEKO. We're also seeing patients switching from ORKAMBI to SYMDEKO, as evidenced by ORKAMBI's revenues of $236 million in the U.S. for the second quarter compared to $282 million for the first quarter this year. Based on the launch-to-date and our expectation for continued growth in SYMDEKO revenues, as more patients initiate and remain on treatment over the coming months, we today revised our guidance for total CF product revenues to $2.9 billion to $3 billion from a prior range of $2.65 billion to $2.8 billion. The…

Certainly. Our first question comes from the line of Phil Nadeau from Cowen & Company. Your question, please? Philip Nadeau - Cowen & Co. LLC: Good afternoon. Thanks for taking my question. Questions on the SYMDEKO launch. Congratulations on the numbers. It's really impressive. I'm curious to get a little bit more color around the trends there. So, I guess, what were the U.S. sales of ORKAMBI in the quarter and how'd they compare to SYMDEKO? And given that they're probably not too far off, what is your sense of SYMDEKO's penetration of its U.S. opportunity given that the bottom end of the guidance can kind of be hit by flat quarters in H2? It seems like you'd suggest it's largely penetrated, but I'm curious to get a little bit more information there.

Sure. Hey, Phil. It's Stuart. So I'll try and answer all those. So, for ORKAMBI in the U.S., we recorded net revenues of $236 million for the quarter compared to the $186 million that Ian referenced for SYMDEKO. In terms of how the launch is going, as Jeff said in his prepared remarks, we've actually seen strong uptake across the three different patient populations that we were anticipating that we'd see demand in. That's those who have tried ORKAMBI previously and discontinued, those who have never been exposed to a CFTR modulator either ORKAMBI or KALYDECO and we saw a fair amount of transitions from ORKAMBI to SYMDEKO. And that's the reason why you see the sequential decline for ORKAMBI from Q1 to Q2. In terms of for the balance of the year, whilst the launch is off to a strong start, we do continue to expect that there is a further growth opportunity for SYMDEKO because they're not yet, as you might expect four or so months into the launch, we're not yet fully penetrated into those patient populations that were either naïve or have seen patients discontinue. Philip Nadeau - Cowen & Co. LLC: Great. Thanks for taking my question.

Thank you. Our next question comes from the line of Robyn Karnauskas from Citi. Your question, please?

Hi, guys. (14:25) question a little bit about the company more long term now that cystic fibrosis is playing out and some of your competitors are dropping off. Could you help us think about capital allocation, business development particularly since your pain and your antitrypsin and CRISPR are more early stage or Phase 2, how do you think about how you might grow the business earlier using capital?

Yes, Robyn. This is Jeff. I'll maybe take the first long-term strategic part of it, and then I'll turn it over to Ian to talk a little more specifically about business development. So, as we look at the business and we've talked about this a little bit before, mission one is to complete the journey in CF. And obviously, that really involves bringing the best triple regimen to patients as quickly as possible. We're well on track to do that. The good news today is that those trials are enrolling very rapidly. And if and when we do that and we have a high level of confidence we will, we see growth coming from the CF franchise for a number of years going forward. So, I think that's really the first important point. In both top line and bottom line growth, that's significant. Then obviously, we're focusing a lot of attention on what comes after CF, and we divide that into two parts. Our internal pipeline, where we believe we have a very unique scientific innovation engine that has now generated multiple breakthrough medicines. And therefore, we're confident that we're going to do that again in some of the diseases we're talking about like AAT, sickle cell, pain and FSGS. And the good news about those is that I think we'll have a lot more visibility to them earlier than many people expect because the early-stage clinical trials like in CF give you a pretty good sense of where you are after 20 patients, 50 patients, et cetera. So, in 2019, 2020, we expect to have a lot more visibility to the success of those programs. So, that's the internal part. Obviously, we're also accumulating a lot of capital and that gives us a lot of opportunity to invest externally more and more each quarter, as you're seeing. And so, we are seeing our BD efforts ramp up pretty significantly. As I've said before, are we going to go out and buy short-term revenue? No, we really don't need to. But we certainly want to supplement our pipeline and invest in other kinds of innovation. And maybe I'll turn it over to Ian. He can review our strategy with you there.

Sure. And I'd first of all say that as Jeff reviews our broader strategy, as we look outside the company, everything we look at is absolutely consistent to how we think about the company inside. We have three areas that we're focused on outside the company. Obviously, first is cystic fibrosis. We should look at everything in cystic fibrosis and see if it's complementary to our approaches to effect the underlying cause of the disease. And so, we do look at everything that moves and that includes different modalities and therapies for cystic fibrosis. Second area is really platforms and early-stage technologies. And you've seen us complete a couple of deals in the last couple of years that have been very important for us in terms of getting us into new areas of science and new modalities. And in particular, Jeff updated you on our CRISPR Therapeutics collaboration on the call this evening, where we've made really nice progresses in beta thalassemia and sickle cell. And then, the third area that we continue to look at is, kind of, more opportunistic in terms of products and medicines that would be consistent to our overall disease strategies, going from the underlying cause of biology through to the disease itself and how those diseases may fit inside Vertex and be consistent to what we're working on inside Vertex. We're very active. We're more active than we've ever been. We're able to do that because, today, we do have capital that we can apply outside the company. So, we look forward to advancing that efforts within our business and advising you when we close some transactions.

Thank you. Our next question comes from the line of Matthew Harrison from Morgan Stanley. Your question, please? Jeff Hung - Morgan Stanley & Co. LLC: Thank you for taking the questions. This is Jeff Hung in for Matthew. I guess, first, for SYMDEKO, are you seeing patients come back to the market? Can you comment on persistence and compliance compared to ORKAMBI?

Yeah, Jeff. This is Stuart here. So, yes, we are seeing patients who had previously been initiated on ORKAMBI but have discontinued. We are seeing a large number of those patients being reinitiated on a CFTR modulator; in this case, SYMDEKO. And it really is that growth in patients who have been treated with a CFTR modulator are either those who have discontinued or those who were naïve to therapy have never been treated with ORKAMBI that's driving the growth in revenues that you saw in the second quarter. And it's that adding new patients which is underlying the increase in our revenue guidance that we gave tonight to $2.9 billion to $3 billion. Jeff Hung - Morgan Stanley & Co. LLC: Great. Thanks. And then, can you comment on – if you view the UK pricing dispute as isolated or potentially broadening out to the rest of Europe? The price in the media is obviously very low compared to your existing prices.

Yeah. So, I mean, I'll just start by reminding you and others on the call that, yeah, we've been successful in a large number of countries across Europe in securing pricing and reimbursement agreements, be it, Germany, Italy, Ireland, the Netherlands. And as a result of that, I'm thrilled to say that thousands of patients have access to ORKAMBI today. But obviously, our goal is to ensure that all eligible patients in all countries have access to ORKAMBI and indeed our future medicine. And so, we are absolutely focused on securing reimbursement in those markets where we don't yet have access to patients. There's a number of significant markets obviously defined by the number of patients there, places like Australia and the UK. There are particularly large number of patients there. And so, obviously we're very focused on those as we are in all countries where we don't yet have access, and we know there's patients have been waiting too long and we're not going to stop until we get access for those people. Jeff Hung - Morgan Stanley & Co. LLC: Great. Thanks. And maybe one last one on the CRISPR R&D, now that you have a written comment from the FDA about the IND hold. Can you comment on the differences between what the UK and Canada regulators ask and what the FDA is asking? And any comments about what you need to do to proceed in the U.S.? Thank you.

Yes. We're obviously in those discussions with the FDA to answer their questions. As you know, this is likely going to be the first gene-editing trial outside of cancer to be approved for human trial. And so, I think the FDA is being appropriately cautious and conservative. We're in the process of answering their questions. We obviously don't comment on that while we're in those discussions. But as soon as we have answered them and have a clear plan forward, we'll let you know. Jeff Hung - Morgan Stanley & Co. LLC: Thank you.

Thank you. Our next question comes from the line of Terence Flynn from Goldman Sachs. Your question please. Gavin Scott - Goldman Sachs & Co. LLC: Hi, thank you. This is Gavin on for Terence. Congrats on the quarter. Maybe just one on the triple combo. Can you give us any update? Is there upside to completing enrollment before the end of the year and potentially starting or getting a readout before mid-2019?

Yes. This is Jeff. So, what we've told you today is really what we know. We're obviously early on in the enrollment of the VX-445 trials. So, it's just too early to give you any more specifics on that. But I think the good news is that we're going to be able to complete enrollment of both of those trials earlier than we thought by the end of the year. And we're very confident that will allow us to make a choice of the best regimen and submit that application to the FDA by mid-2019.

All right. Thank you.

Thank you. Our next question comes from the line of Michael Yee from Jefferies. Your question please.

Hi. And this is Andrew on for Mike. Actually – to follow up on the last question, would you consider disclosing the data for both triples at the same time or would they be staggered one by one or, yeah, would they be disclosed once you submit the NDA? Thanks.

Hey, Andrew. It's Ian. At this point in time, it's just really too early to – for us to figure out how we're going to disclose this. As Jeff made, just previously in the comments, we've just announced that we expect to complete enrollment in the second half of this year. We are comfortable based on that, though, saying that we expect to file an NDA in the U.S. by, be no later than mid, next year or mid-2019. But to start talking about how we will disclose data and how it rolls out and whether these studies are close enough together to do it both together, it's just a little too early. We know it's an important issue to you and to other investors. And as the year progresses and we talk to you more, we'll give you guidance on how we think about it when we have greater visibility.

Thanks. And just a quick follow-up on the Concert molecule. Have you completed the dose ranging studies? What else needs to happen basically to have Phase 3? Thanks.

Hi there. This is Reshma. As you know, VX-561, which is the molecule we in-license from Concert, is an important part of our portfolio as we drive towards getting a medicine for 90% of patients with CF with a once-a-day pill. We are wrapping up our study design and discussing that with the FDA. And as soon as we finish all that up, we're going to be starting the trials.

Thanks again.

Thank you. Our next question comes from the line of Laura Chico from Raymond James. Your question, please? Timur Ivannikov - Raymond James & Associates, Inc.: Yes. Hi. This is actually Timur Ivannikov for Laura. So I guess, the first question we have is about seasonality for SYMDEKO. It looks like you've had a great launch and the summer is halfway through in the U.S. And wondering if you can opine on the potential for any seasonal headwinds that might impact U.S. looking ahead. And how should we be thinking about this dynamic in 2H 2018?

Yeah. So, this is Stuart. So yes, it is not untypical to see a seasonal dip in compliance as people go on their vacations and their normal kind of routine, if I can call it that, is disrupted. We've been focused on that for a number of years now. It certainly was a big focus of ours last year, is again this year. And so, we're going to be doing everything we can, working with providers and directly with patients where applicable to try and maintain their compliance with their physicians' instructions. So, exactly how that's going to play out, obviously, it's too early for us to say right now. But it's a phenomenon we're familiar with, the one we've certainly focused on very closely and we'll be doing that again this year. Timur Ivannikov - Raymond James & Associates, Inc.: Okay. Thanks. And maybe a bigger question on, bigger picture question on reimbursement. Do you think the reimbursement landscape has changed or how the companies will continue to be rewarded for innovation has changed recently? Or has it always been a tough situation like it's been recently? Thank you.

Yeah. This is Jeff. So, when we talk about reimbursement, we always separate the U.S. and Europe, and the countries outside the U.S. are very, very different. In the U.S., we believe that innovation is rewarded. And that's really based on our own experience and those of others with breakthrough drugs like our three CF drugs that had very broad and very rapid coverage from all of the major payers including the government payers. And we don't see that changing over the coming years. In Europe, obviously it's a very different environment. It's a single payer environment. And again, over the last two to three years at least, it's been a difficult environment I think for all companies, including the innovative companies. I think one of the things we're pleased with, as Stuart said, is that we've been able to fairly rapidly secure reimbursement in a large number of European countries. And we're moving our discussions along in the several countries that remain, France, the UK and Australia being primary examples. It's always a bit of a difficult discussion and we understand that those countries look at not only the price per patient, but the total budget impact. But so far, we're pleased with what we're seeing and we think that innovative transformational breakthrough drugs will always be at the upper end of the reimbursement and price envelope. And those are the kind of drugs we're developing both in CF and beyond. Timur Ivannikov - Raymond James & Associates, Inc.: Okay. Thank you.

Thank you. Our next question comes from the line of Geoffrey Porges from Leerink. Your question, please?

Thanks for fitting me in. Just a quick one. Could you give us the U.S. sales of KALYDECO? Second, could you tell us the channel inventory contribution to the SYMDEKO revenue number? And then, on the triple combination, you suggested no later than mid 2019. Could it be early 2019 given the fact that you're fully enrolled already? And regardless of when you file it, should we assume the same sort of accelerated review schedule that the FDA has given you for your previous combinations? Thanks.

So, Jeff, this is Stuart. On the KALYDECO U.S. sales, recorded net revenues for the quarter were $161 million. And in terms of channel inventory, there was no meaningful channel build at all in our Q2 numbers. All of the growth we saw there was driven by organic patient growth, more patients going onto our medicines.

Great.

And, Geoff, this is, sorry, this is Jeff. Just to talk about the timeline. It's just too early to give you much more than we've given you today, which is what we know, that we're now very confident based on what we've seen with the VX-659 enrollment and the very beginning of the VX-445 enrollment that both trials will complete. You made one statement, Geoff, I just want to make sure I do clarify, which is you said that we've completed enrollment. We actually have not completed enrollment of the VX-659 trial yet. So, I do want to be accurate about that. But we do think both trials will complete – or both programs will complete enrollment by the end of the year. And if you do the math on that then, that would allow us to compare the regimens, file an NDA in the U.S. by midyear. You asked about how the FDA will deal with these. Obviously, I don't speak for the FDA and I can't. And it's going to depend on the data. So, if the data is as promising as our Phase 2 data, we're obviously going to push very hard. And I think the FDA is very interested in moving as quickly as possible, taking all appropriate precautions. But I think we're going to have to see the data.

Great. Thanks very much.

Thank you. Our next question comes from the line of Brian Abrahams from RBC Capital Markets.

Hi. Thanks for taking my questions, and congrats on the strong quarter. Just want to go back to reimbursement internationally. And just sort of wondering what your expectations are and sort of next steps for some of the key ex-U.S. countries like UK and France. I guess I'm curious, if they're just a fundamental difference in the views on the value of disease-modifying medicines or do you believe that, with additional negotiations or with additional data and perhaps triple combo data, you can sort of get past this and this is resolvable? Thanks.

Yes. Brian, thanks for the question. So, in terms of specifically where we are in the UK and Australia, the two countries that you referenced, in the UK, obviously, we recently received a counteroffer from the NHS. We and many in the CF community believe that offer significantly undervalues both our current and our future medicines. And so, we're not able to accept that offer. And in terms of next steps, we're looking to meet with those – the Head of the NHS and indeed the Minister of Health to try and progress those discussions because, as I said, we're not certainly going to give up on fighting for access for those patients in the UK, who've been waiting too long. In Australia, ORKAMBI, both the 6 to 11 indication and the 12-plus indication were reviewed by the Pharmaceutical Benefits Advisory Committee, PBAC, in Australia which is the body that reviews both clinical effectiveness and cost effectiveness. We're yet to receive the formal minutes from that meeting. And when we do, which will be in the next few weeks, then that will help us determine what the path forward there is. What I would say is that, as I referenced in the answer to an earlier question, we have successfully secured pricing and reimbursement in a number of other countries in Europe where now thousands of patients are now able to access ORKAMBI. And importantly, we are able there to strike pricing and reimbursement agreements which we believe give us a fair price for the level of clinical benefit and innovation that ORKAMBI delivers. And we need that fair return to enable us to continue the journey in CF and other diseases as Jeff was describing in his prepared remarks. So, we are going to continue to fight for access in the UK and Australia to get access for those patients who've been waiting too long. But we can only do that at a price which fairly reflects the value of the medicines and the benefit they bring for patients.

Makes sense. Thanks so much.

Operator, we will take two more questions.

Certainly. Our next question comes from the line of Geoff Meacham from Barclays. Your question please.

Hi. This is Olivia Brayer on for Geoff. Thanks for taking the question. Just a question on the triples. Are you expecting VX-659 or VX-445 to yield better results in one population over the other? And maybe as a follow-up, have you given any more thought as to what your strategy and objective is in triple combinations beyond these two? Thanks.

Yes. This is Jeff. So, let me answer each of those. Just to take you back to the Phase 2 data, you'll remember that VX-445 and VX-659, in fact, all four of our triple combinations were remarkably similar. In fact, the consistency and the similarity of the data was quite striking. That's really the only data we have to make assumptions about a Phase 3. That's why we're doing the Phase 3 studies. But based on that data, we would expect VX-659 and VX-445 from an efficacy standpoint to be quite similar. Beyond these two, your next part of the question, yeah, I said before we continue to develop additional next-generation correctors and it's actually fairly remarkable. We have many of them, and they continue to improve over time. And so that we're left with a sort of good problem which is which of these do we take into the clinic? We obviously can't take them all because we have 20 or 30 of them at this point that are better. Which of them will we take into the clinic, how much better do they have to be? Our goal is to get everyone to carrier levels. And as you know, even with VX-659 and VX-445, we're quite close in some populations. And so, you should expect to see one or more of them come into the clinic. We're just trying to choose which one and put the threshold on for what how much better it needs to be before we bring them in. But they're moving forward pretty quickly. So, I think you can expect to see additional compounds entering the clinic.

Thank you. Our final question then comes from the line of Cory Kasimov from JPMorgan.

This is Carmen on for Corey. Thanks for squeezing us in here. Most of my questions have been answered, but just one more. And we've recently seen some data from some of your competitors and we're likely to see more in the coming months. What are your latest thoughts on competitive positioning of your franchise? And what continues to give you confidence in maintaining a leadership position? Thanks.

Yes. Thanks for the question. It's obviously an important one. As you know, we don't comment on individual competitors. You'll have to ask them about their programs and we've seen some of those results recently. I would comment on where we think we are and, on your second part of the question, what gives us so much confidence. We're really pleased with where we are. As I said in my prepared remarks, actually, I've been in this industry for 35, 40 years and I don't think I've ever seen two molecules progress from synthesis into – well into Phase 3 or completion of Phase 3 in two to two and a half years. It's been a really remarkably accelerated journey for these two triple combinations. And so, we feel better and better about our competitive position, both based on the data and based on the speed at which we're moving. As I said, we should be in a position to file an NDA in the U.S. and also an application in Europe shortly thereafter for the best of these triple regimens that can provide therapy up to 90% of patients at very high levels of efficacy. What gives us confidence is really our 20 years of understanding the biology of this disease, the ability that we run our HB assay several hundred thousand times and they predict the human results virtually, perfectly and quantitatively. That's held up with the triples as well, and we're making better and better triples as we go. And so, we're actually getting very close to our goal of getting to carrier levels. And as you know, when you're at carrier levels, carriers don't get the disease. So, our goal is very simple. Get a medicine – a triple medicine to patients that provides carrier levels for everyone. Get it to them as young as possible, and we believe they won't develop cystic fibrosis as we know the disease today and we're well down that road.

Okay. Thanks.

Thank you. This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Michael Partridge for any further remarks.

Thank you very much, everybody, for joining us this evening. The Investor Relations team will be here if you have any additional questions. We'd be happy to talk to you. Thanks.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.