Vertex Pharmaceuticals Incorporated Strengthens HCV Drug Development Portfolio, Adds Novel Polymerase Inhibitors to Shape New Combinations with Telaprevir Conference Call - Final.(Broadcast transcript)

OPERATOR: Good afternoon. My name is Anita and I am your conference facilitator today. At this time, I would like to welcome everyone to the Vertex Pharmaceuticals conference call.

All lines have been placed on mute. After Vertex's remarks, there will be a question-and-answer period. (Operator Instructions)

Mr. Partridge, you may begin your conference.

MICHAEL PARTRIDGE, SENIOR DIRECTOR OF STRATEGIC COMMUNICATIONS, VERTEX PHARMACEUTICALS, INC.: Thank you and good evening to everyone. Thanks for joining us on such short notice.

We are pleased to announce that Vertex has signed a share purchase agreement to acquire ViroChem Pharma. This acquisition will add two HCV polymerase inhibitors to Vertex's telaprevir-led HCV development portfolio.

Our call today will be focused on three main points. First, the strategic rationale of this transaction -- it further enhances the Vertex development portfolio with the potential for an industry-leading position in the development of STAT-C combination therapy and creates the possibility to combine telaprevir with promising HCV polymerase inhibitors and potentially further advance HCV patient care.

Second, we will provide an overview of the HCV assets we have acquired, which include VCH-222, a non-nucleoside polymerase inhibitor that has shown thus far unprecedented antiviral activity for polymerase inhibitor in early clinical trials, and the VCH-759, which also showed substantial plasma HCV RNA reduction at the end of ten days in a Phase I believe trial. Our plan is to initiate the first combination study of telaprevir with one of these compounds as early as the fourth quarter of this year.

Third, the transaction is being financed through a combination of stock and cash. We will describe how this will be funded and its effect on our financial position in today's call.

On the call today, these topics will be addressed by Kurt Graves, Vertex's EVP/Chief Commercial Officer and head of Strategic Development; Dr. Freda Lewis-Hall, EVP-Medicines Development Group; Ian Smith, Vertex's Chief Financial Officer; and Dr. Joshua Boger, Vertex's CEO, who will provide closing remarks. I would like to add that Dr. Peter Mueller, our Chief Scientific Officer, is unfortunately unable to participate in tonight's call. However, tomorrow he will be in New York City with us as we host a breakfast meeting to discuss this important transaction with the investment community. By now, you should've received an e-mail inviting you to attend this breakfast. If you have not, please contact our Investor Relations team.

I will remind you of the following. 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. You can visit www.VRTX.com to listen to the conference call and view a PowerPoint presentation or download a podcast.

We will keep our prepared remarks brief so that they can take as many questions as possible tonight. After the call, our Investor Relations team, joined by Kurt, Freda and Ian, will be in the office to answer any additional questions.

I will now turn the call over to Kurt.

KURT GRAVES, EVP, CHIEF COMMERCIAL OFFICER, HEAD OF DEVELOPMENT, VERTEX PHARMACEUTICALS, INC.: Thank you, Michael, and good evening to everyone. We are very excited today to announce a strategic transaction to strengthen our HCV development portfolio and put us in a position to potentially lead the development of novel STAT-C combinations for hepatitis C. Our aim with STAT-C combinations is to enhance the profile and extend the lifecycle of our telaprevir-based regimens, thus potentially adding and protecting significant value around our most important late-stage asset.

After closely evaluating the STAT-C landscape for well over a year to find the most attractive and complementary STAT-C agents, we announce today an agreement to add ViroChem Pharma's HCV polymerase inhibitors to our HCV development portfolio. This transaction shouldn't come as a surprise, as we've outlined this as one of our most important corporate goals for a while now, and our business development team has been hard at work on it for the past year and a half.

In saying that, though, I would like to start by reviewing the five key strategic goals behind this transaction. First, we obviously want to build on telaprevir and potentially enhance the profile and the lifecycle of telaprevir-based regimens; second, establish the foundation for a potential HCV franchise and be on the forefront of shaping new STAT-C combinations for patients; third, potentially displace pegylated interferon and/or ribavirin in future regimens without compromising on SVR virological cure rates; fourth, elevate hurdles even higher for competition that's trying to follow us on telaprevir and now will have to follow us with STAT-C combinations; fifth, capitalize on the global growth opportunity we now have in our expanded HCV development portfolio.

With this transaction, we believe we've significantly strengthened our ability to pursue each of these goals outlined in both the short and long term. This probably won't be the only collaboration we pursue over time aimed at building and sustaining a leading position in HCV, but based on our assessment of the unique attributes of the assets we've acquired, we believe that this acquisition could allow us to leap ahead once again while keeping our eye on growing and protecting our related-stage asset as we move to transform the organization into a fully integrated pharmaceutical company.

Over the past year, we've advanced telaprevir's profile in combination with pegylated interferon and ribavirin. Now, we are well into our Phase III pivotal trials. We expect to complete telaprevir dosing in our pivotal trials over the next few months.

Telaprevir's potential profile is already shaping up as potentially differentiated and attractive with unprecedented SVR rates in a 24-week response-guided regimen, as well as being the only protease inhibitor to date to show impressive SVR rates across all treatment-failure subgroups. Telaprevir has been well tolerated in a majority of patients, and it is also showing the potential to be dosed twice daily based on an ongoing clinical study evaluating twice versus three times daily dosing.

In summary, telaprevir has the potential to set a new and high standard of care in the field. That is the case, irrespective of this transaction.

However, to build on that, as we look past our potential launch of telaprevir, we believe there's an opportunity for even further advancement of combination therapies for this very important and highly prevalent disease with powerful STAT-C combination regimens. That is through the combination of telaprevir and other direct-acting antiviral agents.

STAT-C is an acronym for specifically targeted antiviral therapy for HCV. Combinations of STAT-Cs in particular may have the potential to even further increases in SVR rates, even shorter treatment durations, and maybe even provide an opportunity to enhance HCV therapy through the removal of interferon and/or ribavirin from the regimen. These improvements, each one of them and collectively, first with telaprevir regimens and then potentially with telaprevir-based STAT-C combinations, could drive significant increases in HCV treatment rates over the next decade. This is especially true if we are fortunate enough to eliminate or significantly reduce the need for interferon in the regimen.

From a business perspective, the acquisition of ViroChem's polymerase compounds potentially moves Vertex beyond a first-to-market telaprevir-based company to a strategic, long-term player in the field with the potential ability to reshape the basis of competition and, if we are successful in implementing our strategy, create novel STAT-C combinations that could help us build on our foundation and establish a leading franchise in hepatitis C.

As I mentioned, this transaction also enables us to pursue robust lifecycle plans for telaprevir that may enhance telaprevir-based regimens and …