Logo of jester cap with thought bubble.

Image source: The Motley Fool.

Vertex Pharmaceuticals Inc  (NASDAQ:VRTX)
Q3 2018 Earnings Conference Call
Oct. 24, 2018, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Michael Partridge -- Senior Vice President of Investor Relations

Welcome to the Vertex Third Quarter 2018 conference call. This is Michael Partridge, Senior Vice President of Investor Relations for Vertex. Tonight, we will review our financial results, our continued progress to develop new medicines for all people with cystic fibrosis and recent advances in our research and development pipeline.

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 on our website as you listen to this call. This conference call is being recorded, a replay will be available on our website.

We will make forward-looking statements on this call that 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 our 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.

Jeff Leiden -- Chairman and CEO

Thanks, Michael. Good evening everyone. I'm pleased to say that we have made tremendous progress across our business in 2018 and are well on track to achieve the key goals that we outlined to start this year. In CF approximately half of all patients are now eligible for a Vertex CF medicine. And we're progressing rapidly toward the development of a single medicine to treat any CF patient with one or more F508del mutations. Approximately 90% of all people with the disease.

In our development pipeline, we have initiated the first clinical study of CTX001 in beta thalassemia with our partner CRISPR Therapeutics. And are progressing VX-150 for the treatment of pain. And in research, we're preparing to advance the first of our potential medicines for alpha-1 antritrypsin deficiency into clinical development by year-end and to move other molecules into development in 2019.

First, to our recent progress in cystic fibrosis, CF is a progressive multi-organ disease that is present from birth and the key part of our strategy is to treat patients as early as possible to slow or prevent the progression of disease.

To that end, we gained important approvals throughout 2018. That now allow us to treat a eligible children as young as 1 year of age with KALYDECO and as young as 2 years of age with ORKAMBI. With SYMDEKO demand continues to be strong following the US approval in February. The launch of this medicine in the US has been a significant driver of revenue growth in 2018, as new patients initiate treatment. And we also plan to submit a supplemental new drug application to the FDA later this year to gain approval in eligible patients as young as 6 years of age.

In Europe, we anticipate approval of this medicine before the end of this year, which will further increase the number of patients eligible to be treated with the medicine for the underlying cause of their disease.

We've also reached multiple important reimbursement agreements across the world to provide access to ORKAMBI, enabling patients in many countries to treat the underlying cause of the disease for the first time. Many of these agreements, including those recently signed in Denmark and Australia, also provide a pathway to access and rapid reimbursement for certain future CF medicines. Importantly, these portfolio agreements provide certainty to patients that they will have immediate access to future innovations in CF from Vertex. We remain in discussions regarding this type of agreement in other countries that have yet to reimburse ORKAMBI.

We're also rapidly progressing our two Phase III programs evaluating two different triple combination regimens that include the next generation corrector either VX-659 or VX-445. In September, we completed enrollment of the two Phase III studies for the VX-659 triple combination regimen and expect data from these studies in late 2018. We expect to complete enrollment for the VX-445 Phase III studies this quarter and to report data from these studies in the first quarter of 2019. We will evaluate data from both programs with the goal of choosing the best regimen to submit for regulatory approval.

We remain on track to submit a New Drug Application for a triple combination regimen, no later than mid 2019. In parallel, we have also recently initiated studies of both of our triple combination regimens in patients ages 6 to 11 years of age with the goal of gaining approval for this group of children as quickly as possible. We also continue to innovate in CF to develop even better regimens for the future, including potential once-daily triple combination regimens with our potentiator VX-561 and regimens that contain other next generation correctors that may have enhanced profiles.

We expect to advance one or more of these novel next generation correctors into early clinical development in the coming months. Beyond CF, our research strategy is well defined and focused on the development of transformational medicines for serious specialty diseases with large unmet medical need. And we're advancing a portfolio of such potential new medicines into the clinic. The diseases we are targeting all have well understood biology, where we can use or create early clinical markers that would support the potential for transformative benefit and rapid development timelines.

We are establishing proprietary scientific insights into a number of these diseases, just as we did in CF and CFTR. And we are bringing significant resources to bear to both advance our development stage assets and also to bring other potential new medicines from research into early clinical studies. With our partner CRISPR Therapeutics, we're advancing CTX001 is the first gene editing treatment for both sickle cell disease and beta thalassemia using the CRISPR/Cas9 technology. This is the cutting edge transformational technology that holds great promise in the treatment of many diseases. And we're pleased with the rapid progress we are making together with CRISPR toward dosing the first patient with the CRISPR/Cas9 gene editing therapy.

Our pain program is another example of Vertex's innovative science translate into the clinic. Where Phase II data generated to-date for VX-150 provided the first clinical validation for the sodium channel 1.8 mechanism in the treatment of acute and chronic pain. We expect to have Phase II results for VX-150 in a third type of pain -- neuropathic pain in early 2019.

We now also plan to initiate a Phase IIb dose-ranging study of VX-150 in acute pain following bunionectomy surgery that has the potential to support future pivotal development of this medicine in acute pain. Acute pain represents a multi-billion dollar opportunity where many of the conditions that lead to acute pain are treated by physicians that can be reached with the specialty sales force.

Given the significant need for highly efficacious pain medicines that do not have the addiction, tolerability and abuse issues associated with opioids, acute pain is an opportunity that is well suited to inhibitors of the NAV1.8 sodium channel and we're also continuing to invest in the discovery of other potential pain molecules including additional NAV1.8 inhibitors, as well as medicines targeting other new mechanisms. We are also advancing a portfolio of small molecule correctors for the treatment of alpha-1 antritrypsin deficiency or AAT. And I'm pleased to report that we expect to move the first of these compounds into clinical development later this year.

There are many similarities between AAT and CF, both in the biology of the disease and how we may target it's cause and in the potential to establish early clinical proof of concept and rapid development pathways for new AAT medicines. Like CF AAT is a protein folding disorder caused by mutations in a single gene. Where more than 90% of patients have one common mutation, the results in life shortening systemic complications, primarily in the lung, but also in the liver. We believe our scientific expertise in CFTR protein folding coupled with our development experience position us well to rapidly advance our novel small molecule approach to the treatment of AAT.

I look forward to updating you on this program as we enter development later this year into providing additional insight into our research programs including those in focal segmental glomerulosclerosis and others as they progress in 2019.

As we move our internal R&D pipeline forward. We are also continuously evaluating external opportunities where our research and business development strategies are fully aligned. With our strong financial profile. We have increased ability to in-license or acquire assets or establish scientific collaborations that provide access to unique product opportunities and technology platforms. We've completed a number of such transactions in recent years and we've expanded our internal team devoted to finding and evaluating potential opportunities for scientific innovation, with the goal of further broadening our pipeline and scientific expertise in the future.

We believe that it is a combination of our R&D strategy with our business model, that truly differentiates Vertex as a biotechnology company with a potential for highly profitable long-term growth based on a portfolio of transformative medicines for multiple serious diseases. This year has been marked by significant progress across research and development and in our efforts to bring our CF medicines to more patients globally, which has led to significant growth in our revenues and earnings which Ian will now discuss in more detail.

Ian Smith -- Chief Operating Officer

Thanks, Jeff and good evening to everyone. I'm pleased to review with you our third quarter 2018 financial results and to discuss our outlook for future financial growth as we approach 2019. Revenues first. Total CF product revenues of $783 million in the third quarter of 2018 represent a 42% increase compared to the $550 million, we recorded in the third quarter of 2017. We continue to see significant revenue growth as we increase the number of patients treated with our medicines globally.

The third quarter included $255 million in revenues from the launch of SYMDEKO in the US, which is the primary driver of the rapid growth in our total CF revenues. Demand for SYMDEKO remains strong and we continue to receive positive feedback from patients and physicians and strong coverage for SYMDEKO across both public and private payers. Similar to prior quarters, demand for SYMDEKO has come from all groups of eligible patients F508del homozygous patients initiating treatment for the first time, patients who discontinued ORKAMBI coming back to initiate therapy with SYMDEKO and also patients switching from ORKAMBI to SYMDEKO.

Our third quarter 2018 non-GAAP combined R&D and SG&A expenses were $379 million compared to $334 million in the third quarter of 2017. This increase was primarily due to the advancement of our portfolio of triple combination regimens for CF and the investment to support the treatment of patients with our medicines globally.

Non-GAAP net income for the third quarter of 2018 was $282 million with an earnings per share of $1.09 compared to non-GAAP net income of $136 million with an earnings per share of $0.53 for the third quarter of 2017. Our non-GAAP net income and EPS has more than doubled compared to last year, largely driven by strong growth in the total CF product revenues. We ended the quarter with approximately $3.1 billion in cash, cash equivalents and marketable securities compared to $2.1 billion at the beginning of this year.

Today, we also reiterated our guidance for total CF product revenues of $2.9 billion to $3 billion, and for combined non-GAAP R&D and SG&A expenses of $1.5 billion to $1.55 billion.

I'll close with a few comments on our expectations for future financial growth and how we anticipate providing revenue guidance next year as well as how we may start to record non-cash tax charges. We have already created a strong financial profile for our business and we anticipate that our revenues will continue to grow next year.

In 2019, revenue growth will be based largely on the impact of SYMDEKO and SYMKEVI launches, the impact of label expansions across our CF portfolio and the recent completion of multiple reimbursement agreements. The timing of further revenue growth from countries where we do not currently have reimbursement for ORKAMBI is unpredictable. Therefore, when we provide 2019 guidance for total CF revenues early next year, it will be based only on the geographies where we have established reimbursement agreements at that date.

If we gain additional reimbursement agreements in 2019, we will update you on our guidance as appropriate. This is consistent with how we provided guidance at the beginning of 2018. Beyond 2019, continued revenue growth will be driven largely by the potential approval and launch of a triple combination medicine for the large group of patients with one minimal function mutation and one F508del mutation who are not eligible for our currently approved medicines.

Now to taxes, I would note that in 2019, we may begin recording a non-cash tax provision at an effective tax rate in the low to mid 20s as a result of the improving profitability of our business and our future strong financial outlook. The vast majority of our tax provision would be a non-cash expense until we fully utilize our net operating losses. This will be further discussed in our 10-Q filing.

The financial profile of our business is strong and the coming year will be important period to define our future growth as we obtain Phase III data from our triple combination regimens for CF, provide access to each of our CF medicines to more patients globally, progress multiple new medicines in development and also to advance new approaches for the treatment of serious diseases from research into development. I look forward to updating you on our progress, with that I will open the line to questions.

Questions and Answers:

Operator

(Operator Instructions) And our first question is from Phil Nadeau from Cowen & Company. Your line is now open.

Phil Nadeau -- Cowen & Company -- Analyst

Good afternoon, thanks for taking my question and congrats on the progress. Two questions from me, one on competition and one on the financial guidance or financial comments that you just made. In your comments, you talked about 2019 sources of revenue growth. Can you specifically talk about the revenue growth outside the US, which I know you said it was unpredictable, but which countries could be drivers of growth where you recently got expansions? Which ones are possible for next year and which ones are total wildcards?

Ian Smith -- Chief Operating Officer

Yes, thanks for the question, Phil. Thanks for the comment on the good quarter. I do want to kind of replace some of the comments I just made which is that when we think about 2019, first of all, we see 2019 as being a continued growth year for our revenues. When we look over the previous years and we look over future years, I think what we're seeing here is between more patients or treat more patients globally and therefore that's driving our revenue line year-on-year and into the future, and so, it's a really nice profile.

As we think about more proximaly in time and we think about going from 2018 to 2019, we should continue to see growth with -- even without reimbursement outside the US and that growth would be driven by the continued launch of SYMDEKO in the US and getting a full year's contribution to patients that are on drug.

But then also, outside of the US, SYMDEKO which is known as SYMKEVI outside the US, is also launching in certain markets where it is already reimbursed. So we see baseline growth from already approved geographies. More specifically, to your question as in where are the geographies that we could anticipate or possibly attain reimbursement approval to have an impact in terms of growth on our revenues, it would have to be those larger markets and principally that those would be either the UK, France or Canada.

I do want to replay though that this is unpredictable in terms of timing and in particular in the UK, which is a -- it's probably -- it is the second largest CF market. If we are to attain reimbursement over there, then we are launching the drug from a new, so we're in a launch curve in the UK, it's not that we're just switching on a large bowls (ph) of revenue, we have to launch the drugs in the UK.

We continue to make good progress with discussions with all three of those countries. However, resolution, whether it is in 2019 or whether it's in 2020, we'll update you as we progress.

Phil Nadeau -- Cowen & Company -- Analyst

That's really helpful, and then second on competition. After the close today (inaudible) had a couple announcements, some new data as well as the change to the collaboration, and produce thesis recently announced some data for their programs. I'm curious to get the teams updated thoughts on competition from these two parties. How real is it? What you see their strengths and weaknesses?

Jeff Leiden -- Chairman and CEO

Yes. Phil, this is Jeff. Thanks for the question. As you know, we don't typically comment on individual competitors or data. I think actually the data sort of speaks for itself. But what I would like to comment on is sort of how we view our competitive position and our data is sort of where we are in the process.

I think we've learned a lot over the last year, in fact I think our competitive position has improved over the last year significantly. One of the things we've learned is that it's going to be a world of triples and it's going to be a world of triples pretty quickly. And the reason for that is that in order to really get to all patients, particularly the het/min patients who are so difficult to treat, its -- and to maximize benefit for the homozygous patients. It's pretty clear now that you need a triple, any company need to triple.

And that doesn't only mean you have three components. It means you have three medicines that can be combined, co-formulated, that have the right PK, that can provide really superior efficacy and I think the bar in efficacy has gone up very significantly, we'll talk about that in a minute. And also importantly that they are tolerable and say these are medicines that kids are going to take for the rest of their lives.

And we've learned a lot about our regimens in that regard in the last year. We know that we have two different triple regimens that have now been in hundreds of patients. They are co-formulatable, they do have the right PK, they've raised the bar in efficacy very significantly into the double digits for the het/min patients and even into the mid double-digits for the homozygous patients, that's going to be the bar, I think for the future.

And most importantly, you asked and we're well into our Phase III trials, which are enrolling ahead of schedule to the point where we're very confident we'll be able to file one of those regimens, no later than mid next year, which would allow us to launch those drugs and get patients on them pretty quickly in the coming years. And so I think from our perspective, we like where we are, we have multiple options and most importantly, we have clinical data both on efficacy and on safety with these drugs, which is a high bar frankly.

Phil Nadeau -- Cowen & Company -- Analyst

That's helpful. Thank you.

Operator

Thank you. Our next question is from Geff Meacham from Barclays. Your line is now open.

Geoffrey Meacham -- Barclays -- Analyst

Afternoon, thanks for the question, guys. Just have a couple. The first one is on the triple selection process. Just to the NDA. When you guys think about you likely won't have much in the way of mature data on exacerbation benefit or BMI when you pick the regimen. So and that may matter actually over the long term. So, is it just about safety tolerability in FEV1 or other parts of the profile that you think will be impactful that you're looking for?

Jeff Leiden -- Chairman and CEO

Yes, Gefoffrey. This is Jeff Leiden. You're right. I mean, I think at the point we can pick these triples, the primary data that will base that on is FEV1 data and safety and tolerability data as well as the whole profile of these drugs; remember, we have a lot of preclinical and early clinical data as well.

I think the good news is that there hasn't been enormous disparity between many of those long-term outcomes and short-term outcomes. And what I mean by that is that at least in our experience so far, drugs that have a very positive acute effect on FEV1 and a lowering of sweat chloride is significant, acutely have also turned out to have these very profound long-term effects.

And in fact, as you know, one of the interesting things is that KALYDECO and say ORKAMBI, which have a bit different acute profiles, ORKAMBI being less potent acutely, actually have very similar long-term profiles, which suggests that if you can really hit CFTR effectively in these patients, you will get the long-term benefits.

I think the risk of a disconnect between an acute effect and a long-term effect is rather small. And obviously, we will have the long-term effects of both of these drugs within a relatively short period of time. But you're right, probably not by the time we decide which one to file.

Geoffrey Meacham -- Barclays -- Analyst

Okay. And just a follow-up for Ian. And I know you haven't given a 2019 outlook, but when you plan for OpEx spend, you'll have the triple launch pending to date obviously and then a bunch of new programs in R&D. So, how are you guys thinking about that in the context of also showing some operating leverage?

Ian Smith -- Chief Operating Officer

And Jeff, thanks for the question. I would really appreciate you pointing out that we got this continued investments and commitments to CF. I just want to cover that because we do sometimes get asked the question, whether when we deliver on these Phase III trials, are we declining our investments in CF and I actually want to maintain the position that, we would not, we continue to invest in CF. In fact, those patients that were in our Phase III studies roll over to open-label studies. Those open-label studies we have found to be incredibly important because we got the longitudinal data that show the benefit of these medicines longer term.

We're also doing studies in the younger patients. And so we're able to treat these children at much younger ages of their lives. And so, our commitments and investments to CF into these medicines that we believe will be hugely beneficial to them is maintained, so if you could think about that as a kind of a steady state part of our R&D investment.

And then as we think about advancing our pipeline in other disease areas beyond cystic fibrosis, we are happy to be letting you bringing more up-to-dates with how we're advancing new medicines into the clinic in these new disease areas that Jeff just referred to earlier. The investments in these disease areas is smaller in magnitude, it's earlier stage, but it is additional investment. And therefore when you compare 2018 operating expense profile to a 2019 operating expense profile, you should see a relatively small increase compared to the increase we anticipate on the revenue line.

So, yeah, we do anticipate operate to increase. And then one last thing I would say is that you got to remember, we're also launching medicines globally, not just where it's been in the US. And therefore there are launch costs that are being incurred outside of the US, not significant because of the nature of the disease and how we can mix these patients with our medicines, but there is investment there as well.

So, you shouldn't expect to see operating expense margin increase in 2019 compared to 2018, but the key will be the revenue growth which will allow us to continue to generate more cash flow.

Geoffrey Meacham -- Barclays -- Analyst

Okay, that's helpful. Thanks guys.

Operator

Thank you. Our next question is from Michael Yee from Jefferies. Your line is now open.

Michael Yee -- Jefferies -- Analyst

Thanks for the question. Congrats on a great quarter as well. On the once daily, you made a comment that you've had some positive feedback and are moving that forward. Can you just, I guess, clarify the process going forward and why you're choosing gaining mutations as sort of the first move forward and not maybe a broader population. How should we think about that?

And then the second question was more of a modeling finance question, which is about, obviously the triples our advancing forward like you said, but ORKAMBI and SYMDEKO are pretty big franchises. Over some period of time, is that expected conceptually to have those doublet drugs go away and the triple as basically the single line item, how do you think about that, would the patients that actually withstand doubles? Thanks.

Reshma Kewalramani -- Chief Medical Officer

This is Reshma. Let me start by taking the first part of the question with regard to VX-561. As you know and we've talked about this on previous calls, the FDA had asked us to do additional dose-ranging before proceeding to Phase III. And part of that request was to study VX-561 across these dose ranges in gating patients. And we've had productive discussions with the agency and we're now at the point where we've designed our study; we've selected our doses. And I expect that this study will get started next year, probably in the first half or so. Stuart?

Stuart Arbuckle -- Chief Commercial Officer

Yeah, Michael. On the question of what do we think the triplet combinations might do to the doublets. Yes, certainly, if we see the sort of results in Phase III that we saw in Phase II in the homozygous population, where as you know, we saw the triple combinations deliver very, very substantial increases in clinical benefit over and above a baseline of tezacaftor and ivacaftor. If those results hold true, then our expectation would be that the vast majority of patients would be transfered to a triple combination rather than staying on a doublet just given the significant benefit risk improvement that we saw in those Phase II studies.

Michael Yee -- Jefferies -- Analyst

Okay. And just to clarify on 561. You have that tested in gating patients first, but the full plan certainly is to move it to a broader population after that. Is that fair?

Reshma Kewalramani -- Chief Medical Officer

You got that right.

Michael Yee -- Jefferies -- Analyst

Okay, thanks so much.

Operator

Thank you. Our next question is from Robyn Karnauskas from Citi. Your line is now open.

Robyn Karnauskas -- Citi -- Analyst

Hi, thanks for taking the question and also congratulations. So, I guess, let me ask about VX-150. So you mentioned that you're dosing, doing a dose-ranging study and you've already done since filed an acute. I was curious, if you get a drug that may be superior to Vicodin since the other doses were shown to be equivalent?

And then another question on that is, like you talked about the acute market, and some (inaudible) that reimbursement might be challenging there because doctors may just give a cheap generic drug. How -- what does your market has told you what has to happen for a more expensive non-addictive drug that have uptick in that setting?

Jeff Leiden -- Chairman and CEO

Yeah, thanks for the questions. And both good questions, let me start with maybe your second one and I'll come back to your -- to the dose-ranging study, which is pretty straightforward. With respect to reimbursement, you're correct, a large part of the acute market has been genericized and as you know, a large part of that market is actually opioids for acute post-surgical pain post-dental pain, et cetera.

Obviously, we're sitting in the middle of an opioid epidemic and the number one objective that I think patients, physicians and the government has is to find medicines that have essentially equivalent efficacy to opioids without the abuse potential and the side effects of opioids. We believe, that VX-150 based on the data we have so far, has potential to hit that profile, you saw that in the comparative trial that we did. If that's true, we feel that VX-150 is a very, very competitive drug to a generic opioid.

And with just reasonable pricing, that market has a multi-billion dollar opportunity even if you only capture a portion of it. You know, in the US last year, there were over 200 million opioid prescriptions written, which is truly an astounding number, obviously not all of them for acute pain, but a lot of them. And so, that answer the question in terms of reimbursement?

Robyn Karnauskas -- Citi -- Analyst

Yeah, that's very helpful.

Jeff Leiden -- Chairman and CEO

Okay. Then in terms of VX-150. I'm sorry. Go ahead. Did you have another question?

Robyn Karnauskas -- Citi -- Analyst

No, I don't have, I just asked about the dose ranging, (inaudible) higher, if you get a maybe for a superior profile in the key studying, which may make reimbursement even easier?

Jeff Leiden -- Chairman and CEO

Yeah, so you may remember that the study that we did in acute bunionectomy is essentially, I would call it a proof of mechanism study, because it was the first time anybody had shown that a 1.8 inhibitor could work in acute pain, so we actually used a fairly high dose there, just to make sure that we are getting up to a reasonable exposure.

You also know that before you can move into Phase III, regulators will require you to do a dose-ranging study, really to understand two things: one, what is the PK-PD profile of the drug and frankly two, what is the lowest effective dose because you always want to give the lowest fully effective dose. And so, think of this as just a standard part of the Phase II regulatory process, where we need to identify the PK-PD profile of the lowest effective dose, and that would then enable us to go to the agency with a plan for pivotal trial, again assuming that it is successful.

Robyn Karnauskas -- Citi -- Analyst

Got it and second question on Alpha -- Antitrypsin, so you mentioned like sweat chloride, so it's more sweat chloride if you see reduction, so efficacy. But I do have flashbacks on sweat chloride or it can be I think not correlating with FEV; in this indication, is it more straightforward that if you see a reduction, you're going to see an improvement in efficacy, help us understand a little bit about the disease?

Jeff Leiden -- Chairman and CEO

Sure, sure. Yeah, let me maybe give a little context on the disease. If you don't mind my taking a minute. One of the remarkable things about AAT is how similar, it sort of smells and looks a lot like CF in many, many different ways. It's a genetic disease. It affects somewhere between 60,000 and 100,000 people in the US and probably about another 50,000 to 60,000 outside the US. It is caused by one major mutation in more than 90% of people, and it's a protein folding disorder as it turns out just like CF as with sort of remarkable similarity.

In this case the normal protein AAT has made in the liver and is normally secreted into the blood where it travels to the lung and it protects the lung against auto digestion essentially by endogenous enzymes. So in the disease, the mutant protein has two problems; one, it doesn't fold correctly it accumulates in the liver and so it causes significant liver disease, actually in up to 30% of all the patients.

And two, obviously it's not secreted into the blood, so it's unable to go to the lung and protect the lung and so the lung gets auto digestive and these patients suffer from early onset emphysema. So that's the disease. The challenges for us was to, could we make a corrector, a small molecule corrector of AAT just as we have for CFTR that would essentially refold the protein in the liver, so it'd be secreted from the liver and therefore presumably help treat the liver disease. And more importantly that would secrete functional AAT into the blood where it will go to the lung and protect the lung, that was the challenge.

It's very hard problem, I can tell you biological problem. I think we've cracked that problem now, we've made a series of small molecule correctors that clearly do both of those things, they refold the protein, so it's secreted. And that it's secreted in a functional form, so that it could protect the lung.

One of the really nice things in this disease is that there is both a cell or several cell models and there's also in this case an animal model, which we didn't have in CF and which the human mutation has been engineered into the animal. And so we've been able to test these molecules, both in the cells and then the animals, and they do what we thought they would do, they refold the protein, it secreted from the cells; in the animals, they produce secreted AAT at levels that would be sufficient to essentially be prevented over a period of the disease.

And then the other thing it's very similar to CF as this a nice biomarker, which is simply the circulating levels of AAT in this serum, you can treat the patients for several weeks and just measure both levels and function of the AAT in the serum. And we know from human experiments of major essentially that if you have a certain level of AAT in the serum, you don't get the disease. And so we know exactly what we're shooting for here and we can measure it very easily and so the plan is take this into normal healthies by the end of this year. The first of these molecules and we have a whole series of them just like we did the CFTR correctors. And that if they are safe and more tolerant, once we understand the PK, take them into patients and again with relatively small numbers of patients treated for relatively short periods of time, you simply measure AAT in the serum and you know exactly where you are.

Robyn Karnauskas -- Citi -- Analyst

Thanks a lot, very helpful.

Operator

Thank you. Our next question is from Geoffrey Porges from Leerink. Your line is now open.

Geoffrey Porges -- Leerink -- Analyst

Thank you very much, I appreciate getting the questions in. First, Jeff, you mentioned a mid-teens FEV1 improvement now being the hurdle for triples for competition. Do you give us your sense of what the bar is for sweat chloride relative and absolute for homozygous and het/mins. So we kind of know, how to appraise of these competitors coming along. And then I'm just wondering, Stuart, if you could give us a sense of where you are in the eligible Delta-F508 penetration in the US between SYMDEKO and ORKAMBI. You've sort mentioned that you had quite a few discontinuations in patients who never started on ORKAMBI and have you caught all those patients up yet? Are you still substantially below the penetration you've achieved with KALYDECO in the eligible populations that vector (ph).

Jeff Leiden -- Chairman and CEO

Jeff. Thanks. I'll answer the first part and Stuart then of course will answer the second part. And the first part, I do want to just correct what it may have been a miss impression of what I said or maybe I said the wrong thing, but I want to be very clear. I don't think mid teens is the bar for instance for het/min patients. So, I think the bar that we've said, as you know from the data is somewhere between 9.8% and 13.8% in our Phase II data for het/mins.

And for homozygous patients, who already have an effect from doubles that we believe for instance is around 4%. We showed an additional 9.6% or 10% improvement, which is how I get to that mid, mid-teens. So just want to be clear that I'm not suggesting that 15 is the bar that you need for het/mins to get to be successful.

With respect to sweat chloride. Yes, I think these are approximate numbers, but I think when you reach sweat chloride, it approaches carrier levels, which is our sort of goal, let's say 40 to 50 that's probably the goal that you know you're there with the triple. And so I think those are the two numbers we look at, in most cases, but not in all cases they correlate pretty well and at the end of the day, as you know, the regulatory endpoint is going to be FEV1.

Geoffrey Porges -- Leerink -- Analyst

Alright, thanks.

Stuart Arbuckle -- Chief Commercial Officer

Jeff, it's Stuart, just commenting on the SYMDEKO launch in the US. So as you suggested, one of the most important things for us to SYMDEKO was the ability to get patients who were not being treated by ORKAMBI onto a CFTR modulator and that was really two populations. One was those who were completely naive, had never been exposed to ORKAMBI and we've seen a good uptake in that population.

And the second population was those who had discontinued ORKAMBI often because of the respiratory adverse events. And we've also seen good uptake in that patient population as well. We've also seen a number of patients switch from ORKAMBI to SYMDEKO. So we've seen strong uptake in all those patient populations. we're certainly not done with the launch. Whilst we've seen a good uptick, Jeff, we're certainly not done. We haven't flattened out on SYMDEKO uptake in the US yet. So we still have some ways to go, but we're certainly pleased with how the launch has gone so far.

Geoffrey Porges -- Leerink -- Analyst

Okay, thanks very much.

Ian Smith -- Chief Operating Officer

And Jeff, maybe just to add one thing that I know you're aware of this. We talked about the efficacy side of these triples, but clearly tolerability and safety of the other side of the equation and long-term tolerability and safety not one week to two weeks, and so I think that's going to be an important thing that we'll all look at as well as these trials progress.

Geoffrey Porges -- Leerink -- Analyst

Great, thanks.

Operator

Thank you. Our next question is from Terence Flynn from Goldman Sachs. Your line is now open.

Terence Flynn -- Goldman Sachs -- Analyst

Hi, thanks for taking the question and congrats on progress (ph). I was just wondering, first you might not comment on this at this point, but just for the respect to the triple combo. Can you maybe just give us an update on the different inputs you're thinking about with respect to pricing and then Ian, we're just love your latest thoughts on capital allocation here, I know, Jeff, you made some comments in your opening remarks, but could you have $3 billion on the balance sheet that might be the most you guys have ever had. So just curious how you're thinking about that as that continues to grow here into next year. Thank you.

Stuart Arbuckle -- Chief Commercial Officer

Yes, Terence, Stuart. Here on pricing for the triple obviously much too early to make any specific comments. But we'll be taking into account the same factors that we always do. And that'll be the magnitude of the clinical benefit that we're able to deliver for patients, it will be the label that we get approved for and that obviously leads into what's the eligible patient population. So those are really going to be the inputs that we take into consideration and obviously we'll get more information on those in the coming months.

Ian Smith -- Chief Operating Officer

And as far as capital allocation is concerned, it's really interesting. I can tell you that been in the company's invested mainly and been about capital preservation for a long period of time and then in the last 3 years, we're now a cash accumulator and create earnings about capital allocation. It is an interesting philosophical change for the company.

But -- I'd like to start by saying the revenue line is the main source of cash and because after that we then allocate inside the company on our internal programs, as often not thought about in terms of capital allocation. But the main source of capital is our revenue line and then we allocate that internally and as you can hear in terms of the questions that were asked on operating expense earlier, we still allocate significant amount of capital toward cystic fibrosis medicines.

But also now we're starting to allocate capital to diseases that are beyond cystic fibrosis and we're really happy about that. Some of those opportunities that are beyond cystic fibrosis are our next order of priority, which is we're allocating capital outside the company toward collaborations and toward medicine that we can accelerate into development and some of the opportunities we have in with beta thalassemia and also sickle cell have been a product of a very successful and nice collaboration with CRISPR Therapeutics. And we're really excited to be going into the clinic very shortly with these medicines, but sickle cell and beta thal. And we anticipate that there will be others to follow that the medicines for FSGS for example was something that we in-licensed from a very early stage a couple of years ago.

But what it allowed us to do is to really reignite a research effort in that area is now providing the opportunity to go into the clinic in a very short period of time were very important medicine. So it's a high order priority for us to allocate capital outside the company to do collaborations to give us opportunity with more modalities and more medicines for diseases that we would be interested in.

And I would say there is also a consideration for how we may also limit the increase of our share count, our share count outstanding shares does increase year-by-year based on the issuance and exercise of options and restricted stock. And so, we like to think of ways that we may limit that creep in outstanding shares. And we've been doing that throughout this year.

We did announce earlier this year that we entered in a $500 million share buyback program and we have been buying shares back throughout this year. And that's been very successful for us as well and therefore is limited the creep in the outstanding shares, which obviously helps us with small amount on the dilution. And so that's how we think about capital allocation is very important, very close to us and we're happy that we have the opportunity to prioritize it in this way.

Terence Flynn -- Goldman Sachs -- Analyst

Great, thank you.

Operator

Thank you. Our next question is from Alethia Young from Cantor Fitzgerald. Your line is now open.

Aliyan -- Cantor Fitzgeral. -- Analyst

Hi guys, this is Aliyan (ph) on for Alethia. Thanks for taking the question, just on the earlier side of things on the R&D front, you recently did a deal with Genomics. So could you talk a little bit more about that and sort of how having this particular discovery and Jan (ph) will sort of enhance your R&D efforts?

Jeff Leiden -- Chairman and CEO

Yes. Thanks for the question. We're actually quite excited about that collaboration. As you know, one of the principles of our research effort is to really I mean work on what we call highly validated targets. There is really two major ways you validate targets; one is pharmacologically with medicines that's actually the minority by the way.

And the second is human genetics, where mutations either gain a function or loss of function tell you a lot about the role of specific targets, and beautiful example of that is that Nav1.7, Nav1.8 which are validated by human genetics obviously CFTR et cetera. The collaboration with Genomics who we believe is the leading small company in the world, working on this kind of high through -- human genetics will allow us to screen for new targets on the one hand through large-scale data analysis of human genetic databases, but also it will allow us to ask questions, for instance, about the potential side effects of hitting a specific target because you can screen the human population for mutation from that target which are loss of function for example and ask are those people normal or not? Do they suffer from any mechanism based side effects? That's a very important thing to know as we begin to hit targets and develop small molecule.

So, think about it as a way of tapping into the human genetic data resource that both help pick targets and help screen for safety, and that collaboration is off to a very nice start in number of different diseases.

Aliyan -- Cantor Fitzgeral. -- Analyst

Got you. Thanks. And there's just another one in terms of early stage development. Can you just tell us a little bit more about the preclinical models for AT, I mean, obviously with CF you guys were very successful in optimizing these preclinical models, but could you tell us a little bit sort of about your thoughts on what you think the vast preclinical model for AAT then also sort of your thoughts on how protective these models might be? Thanks.

Jeff Leiden -- Chairman and CEO

Yeah, thanks for the question. There's two kinds of models that are generally used, these are not by the way, that's solely proprietary to us. One is the sub-cell based models that in which either derived from patients or derived from engineered cells with the human Z mutation in them, which is the major AT mutation. And in those cells, the mutant protein is made it's misfolded, it's not secreted, and so one can test molecules on those cells to ask do they help refold the protein secreted as a function et cetera.

The other one is that there is a transgenic mouse which actually expresses some human mutant protein, again that protein is not secreted well, it accumulates in the liver of those mice and one can dose those mice with medicines and ask is the protein secreted as a functional, what levels do you meet, et cetera. So two very nice models, which we feel actually will be highly predictive because they do actually study the human mutation not some mouse rate of mutation.

Aliyan -- Cantor Fitzgeral. -- Analyst

Got you. Thanks very much. It's helpful.

Operator

Thank you. Our next question is from Ying Huang from Bank of America Merrill Lynch. Your line is now open.

Ying Huang -- Bank of America Merrill Lynch -- Analyst

Hi, thanks for taking my question. First one maybe on again competition. We have seen some data from proteostasis. I was wondering if you guys have done you work in the lab about the role of amplifier. You have any view on that or not? And then secondly, maybe for us, do you -- can you tell us by when you might see SYMDEKO pretty much reaching a full penetration in the US market and given what you're seeing in the market today?

Jeff Leiden -- Chairman and CEO

Yes. This is Jeff. I'll take the first one in terms of amplifier. Again, we really don't comment on other people's specific molecules. One of the things that we like about our triple is, and our correctors are, we know that they're quite specific for the CFTR protein, which is I think one of the reasons, it was set quite selective, if you really don't hit other proteins. One of the reasons why they've been so tolerated. And so I think as we look at, as you look at other molecules that issue of specificity and potency is very important thing to look at.

Ian Smith -- Chief Operating Officer

And then in terms of the SYMDEKO uptaking, obviously, we're very pleased with how it's gone to date, predicting exactly where it's going to reach full penetration is hard to do, but you can rest assure that when we get to the point of giving '19 guidance, we'll be including our expectations in that for how SYMDEKO is going to perform in the US and then also hopefully by then, we'll have the approval of SYMKEVI in Europe as well and will incorporate all that into our '19 guidance.

Ying Huang -- Bank of America Merrill Lynch -- Analyst

Thank you.

Operator

Thank you. Our next question is from Brian Abrahams from RBC Capital Markets. Your line is now open.

Brian Abrahams -- RBC Capital Markets LLC -- Analyst

Hi there. Thanks very much for taking my questions and congrats on all the progress. In any CF data, we saw more specifics on the rate of cost for the triple combo. I know these weren't classified as Bronco constriction, sooner if you could give us any more details on the quality, severity and duration remind us is this, should we think about this is related to the initial mucus clearance and how that might compare to ORKAMBI? And then just a follow-up on the pain program obviously some really interesting Phase II data. Wondering if there are ways you might be able to further improve upon the bio-availability and potency of VX-150 and should we assume 128 is no longer being pursued? Thanks.

Jeff Leiden -- Chairman and CEO

Yes, maybe I'll take both of those real quickly. With -- I think the question you're trying to get out for the triple, but correct me if I'm wrong, is you know we are seeing bronchoconstriction as we saw with ORKAMBI. And the answer is no. We see no -- we've actually measured that specifically, not only in terms of cough or anything else. So we do not see bronchoconstriction with the triple, and we did not see it with tez/iva, as you remember. But I think the more important point, right Brian, is just looking at the total tolerability and safety profile of these drugs now in a couple of hundred patients. And what we're seeing is there quite clean. They look a lot like the earlier drugs and ORKAMBI accepted. They don't have the bronchoconstriction and that they have been very well tolerated and very safe so far. Does that answer your question?, I just want to make sure that was the question you asking

Brian Abrahams -- RBC Capital Markets LLC -- Analyst

Yes, that's very helpful. Yes, just wanted to contextualize that. Yes.

Jeff Leiden -- Chairman and CEO

Yes. And then the other question was about 150 and 128.

Brian Abrahams -- RBC Capital Markets LLC -- Analyst

Yes.

Jeff Leiden -- Chairman and CEO

Yes. So maybe just again, let me take a step back and remind you that the approach that we're taking in pain, actually not unlike the approach we're taking in CF and the approach we're taking in AAT, is to create a portfolio of molecules, not one, not single rifle shot, but multiple molecules that have different properties, both with respect to things like potency, but also with respect to things like PK bio-distribution drug-drug interactions et cetera.

And then take those molecules forward into early stage clinical development to understand their profiles more fully. Obviously, 150, we have the most data and we know that it's well tolerated, we know that it has efficacy at least at these higher doses in acute pain and in osteoarthritis, and we'll get a readout on the third kind of pain, neuropathic pain, early next year. 128 was a follow-on molecule, if you will, with some different properties than 150.

We discontinued development of 128 in Phase I in healthy volunteers, because it didn't have the PK profile with tolerability improvement that we were hoping to see over 150. We have multiple additional 1.8 inhibitors coming behind that. And so you should expect to see us bring other inhibitors into early clinical development the same way trying to optimize these molecules. Remember in acute pain, you're going to need molecules that are highly efficacious and also highly safe and highly tolerable. There's -- we don't want to create molecules that have liabilities like opioids.

Brian Abrahams -- RBC Capital Markets LLC -- Analyst

That's really helpful. Thanks so much, Jeff.

Michael Partridge -- Senior Vice President of Investor Relations

Operator, we have time for two more questions.

Operator

Thank you. Our next question is from Paul Matteis from Stifel. Your line is now open.

Dean Burnett -- Stifel -- Analyst

Hi, thank you so much. This is Dean Burnett (ph) on for Paul, I wanted to ask another question about VX-150. I wonder if you could provide a little bit more color on the Phase 2b study in acute pain. And I guess specifically what are you looking forward and what is the efficacy hurdle that you need to advance this into a pivotal program?

And then the second question, just sort of more to high level, I guess, across these different pain indications the acute and neuropathy is ongoing, as well as osteoarthritis related pain, you have some data there, what is sort of the ultimate vision for this program and I guess under what scenario is, would you want to commercialize this yourselves and is it -- is there a scenario where partner would might be involved in that aspect of it? Thank you.

Jeff Leiden -- Chairman and CEO

Thank you. I'll take the second part, actually first I'm sorry it's a little more strategic maybe we'll give you some context and then Reshma will take the first part which is about the VX-150 Phase 2b trail.

I've said this before, but maybe just to give you some context, we think about pain both from a commercial and from a scientific standpoint, not as one disease, but is actually multiple diseases. So, an easy way to divide for instance is acute pain, that's the kind of post-surgical pain, the dental pain when you have an acute injury, that's one segment.

The second segment is chronic inflammatory pain things like osteoarthritis, lower back pain. A third segment is neuropathic pain, that is pain like diabetic neuropathy. They have different commercial channels, obviously. But they also potentially of different pain mechanisms and so it's important to study them separately because some drugs will work in one and some drugs will work in two and frankly some drugs might work in all three.

So that's the approach that we've taken with our portfolio, we've done separate trials in acute pain using bunionectomy as the model, we've done a separate trials in chronic inflammatory pain using OA as the model, osteoarthritis and we're doing a third set of trials in neuropathic pain using small fiber neuropathy as the model and as you know, what we've seen so far just to remind you is a high level of efficacy in acute pain and high level of efficacy in osteoarthritis chronic pain and we're still waiting to see the data from the neuropathic trial, which is too early next year. So that's where things sort of stand from a scientific standpoint.

Now again if I take a step back, remember that there is a very large need for a new class of pain medicines, so really hasn't been a new class for over 50 years and the reason is that we have opioids on the one hand which have high efficacy, but are burdened with all of the addictive and other side effects. And then we have drugs like aspirin, Tylenol, NSAIDS, which have lower efficacy and also by the way have some of their own side effects, which are not trivial.

And so the target for us is really can we find a new mechanism of pain that approaches opioid like efficacy without the liabilities addictive and other liabilities opioids. And so far, based on Phase II data, what we're seeing is VX-1.8 looks like such a target, -- sorry NAV1.8 looks like such a target, VX-150 is the first medicine that doesn't look like it hits in both of those two pain indications. And the third one, we're waiting to see.

And the final part of your question is what about commercializing that. It turns out acute pain as I said, is a multi-billion dollar opportunity and at least many not all necessarily, where many of the channels in the acute pain market can be addressed by a specialty sales force. That's something that we would develop and commercialize ourselves.

In contrast to that I'd say OA pain or lower back pain, that's clearly not the specialties, that's a community disease requires a primary care sales force. And while we make take the science in Phase II trials forward. We would certainly not a developer own primary care sales force and commercialize that. That would be done with the partner. Nevertheless, we think, if we have such a molecule, it's a very valuable asset for us to partner.

And the neuropathic pains lies somewhere in between, that can be covered by a rather large specialty sales force, meaning 100 to 150 reps probably in this country. So it is in mostly by specialists. It really depends on the quality of the data that we're going to see that in the first part of the year, in terms of deciding what we would do with respect to further development and commercialization. That give you sort of a lay of the land of how we're thinking about it.

Dean Burnett -- Stifel -- Analyst

Absolutely makes sense. I appreciate it.

Stuart Arbuckle -- Chief Commercial Officer

Okay, Reshma?

Reshma Kewalramani -- Chief Medical Officer

This is Reshma. With regard to the VX-150 Phase II study that we are going to be initiating shortly. It's a fairly standard Phase II dose-ranging study. This is going to be in a bunionectomy acute pain model and in essence, it's going to be several doses that we studied to get a full dose exposure range, you'll remember that the bunionectomy study that has the positive results from early in the year with the high dose study because that we were really testing proof of mechanism in that one.

The endpoint is going to be SPiD 24, SPiD 48, this is a pretty standard endpoint for the bunionectomy model. And with regard to the treatment effect, we were very pleased with the treatment effect we saw in the bunionectomy study and now we need to explore the full dose range and exposure to see what the lowest effective dose is going to be in, and that's really what we're studying here.

Dean Burnett -- Stifel -- Analyst

Got it. Okay, thank you very much.

Operator

Thank you. Our next question is from Cory Kasimov from JPMorgan. Your line is now open.

Cory Kasimov -- JPMorgan -- Analyst

Hey, thanks for squeezing me in. Two for me as well. In your prepared remarks, you mentioned you'll have some enhanced NextGen correctors moving into the clinic in the coming months. I'm wondering if there's any additional information you can provide about these in terms of how they might be further differentiated from what you already have. And then my second question is with regard to the clinical hold for CTX001 and sickle cell now being lifted initial trials later to begin. How much data do you ideally want to accumulate before you're potentially comfortable providing an update and will this be something that your responsibility or your partner's?

Jeff Leiden -- Chairman and CEO

Yes, Cory this is Jeff, maybe I'll take part one and Ian will talk about disclosure and part 2 of your question. With respect to the enhanced NextGen correctors, I would say what we're looking for here is two things; one, I think we've shown you the chart before that as we've gone through the last 4 years. It's really remarkable to see how we've been able to improve the potency and efficacy of these NextGen correctors.

With the current molecules 659 and 445 will close to getting all patients to carrier levels, but not quite there. And so the goal would be to find a NextGen corrector that could get all patients near the het/min in particular, as well as homozygous patients to carrier levels of chloride transport because we believe if you can get there, particularly in young patients, you will either prevent or greatly, greatly lessen the severity of the disease.

The other goal of that program is to continue to diversify the chemo types. We always like to have multiple chemo types of any medicine that we're making. And so we've been able to explore alternative chemo types and we're working on those as well. So those are the two kinds of molecules that you can expect to see entering the clinic, we already have examples of both. And so the first one to those. I do expect one to the clinic early next year. And if you can probably see some more as the year goes along as well. Does that answer your question about the enhanced NextGen correctors?

Cory Kasimov -- JPMorgan -- Analyst

Yep. Perfect.

Ian Smith -- Chief Operating Officer

Okay. Cory, add to your disclosure question. Well, we've just started recruiting patients for these studies and I think the next disclosure we'll provide you would be kind of an update of where we are on the recruitment. We'd anticipate dosing first patient probably around the -- toward the end of this year, early next year. And then once we have a number of patients in the study, we'd anticipate a disclosure data from the study later on next year. But that would probably be timed with multiple patients in both studies and being on therapy, let's say have to have the procedure for a certain duration of time.

Cory Kasimov -- JPMorgan -- Analyst

Okay, great, thanks for taking the question.

Operator

Thank you.

Michael Partridge -- Senior Vice President of Investor Relations

Well then we conclude the call. The Investor Relations team is in the office tonight to answer any further follow-up questions. Thank you very much for joining the call and have a good evening.

Operator

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect.

Duration: 60 minutes

Call participants:

Michael Partridge -- Senior Vice President of Investor Relations

Jeff Leiden -- Chairman and CEO

Ian Smith -- Chief Operating Officer

Phil Nadeau -- Cowen & Company -- Analyst

Geoffrey Meacham -- Barclays -- Analyst

Michael Yee -- Jefferies -- Analyst

Reshma Kewalramani -- Chief Medical Officer

Stuart Arbuckle -- Chief Commercial Officer

Robyn Karnauskas -- Citi -- Analyst

Geoffrey Porges -- Leerink -- Analyst

Terence Flynn -- Goldman Sachs -- Analyst

Aliyan -- Cantor Fitzgeral. -- Analyst

Ying Huang -- Bank of America Merrill Lynch -- Analyst

Brian Abrahams -- RBC Capital Markets LLC -- Analyst

Dean Burnett -- Stifel -- Analyst

Cory Kasimov -- JPMorgan -- Analyst

More VRTX analysis

Transcript powered by AlphaStreet

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

Motley Fool Transcribers has no position in any of the stocks mentioned. The Motley Fool recommends Vertex Pharmaceuticals. The Motley Fool has a disclosure policy.