Vertex Pharmaceuticals (VRTX) Q4 2022 Earnings Call Transcript

Vertex Pharmaceuticals (VRTX -1.02%)
Q4 2022 Earnings Call
Feb 07, 2023, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the Vertex Pharmaceuticals fourth quarter and full year 2022 conference call. [Operator instructions] Please note this event is being recorded. I would now like to turn the conference over to Ms. Susie Lisa.

Please go ahead.

Susie Lisa -- Vice President, Investor Relations

Good evening, everyone. My name is Susie Lisa, and as the senior vice president of investor relations for Vertex, it is my pleasure to welcome you to our fourth quarter and full year 2022 financial results conference call. On tonight's call, making prepared remarks, we have Dr. Reshma Kewalramani, Vertex' CEO and president; Stuart Arbuckle, chief operating officer; and Charlie Wagner, chief financial officer.

We recommend that you access the webcast slides as you listen to this call. The call is being recorded, and 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 in our filings with the Securities and Exchange Commission. These statements, including, without limitation, those regarding Vertex' marketed cystic fibrosis medicines, our pipeline, and Vertex' future financial performance are based on management's current assumptions.

Actual outcomes and events could differ materially. I would also note that select financial results and guidance that we will review on the call this evening are presented on a non-GAAP basis. In addition, the impact of the foreign exchange is presented inclusive of our foreign exchange risk management program. I'll now turn the call over to Reshma.

Reshma Kewalramani -- Chief Executive Officer and President

Thanks, Susie. Good evening all, and thank you for joining us on the call today. We are pleased to have closed out a strong 2022 with full year global CF product revenue up 18% versus 2021. Our full year 2023 product revenue guidance is $9.55 billion to $9.7 billion, representing 7% to 9% growth year on year, inclusive of FX headwind of approximately 1.5%.

We have more than 20,000 patients still to reach with CFTR modulators, and we continue to work with focus and urgency to reach all patients with CF around the globe who may benefit from our therapies. It is an exciting time for Vertex. Our medicines have transformed CF, and the growth of our CF business has transformed Vertex. Our differentiated R&D approach led to our multiple life-changing therapies in cystic fibrosis and is designed to deliver transformative medicines for serious diseases at high rates of success, agnostic to modality.

It is delivering just that. In aggregate, our mid- and late-stage clinical pipeline holds the promise to deliver potentially transformative benefit for patients across eight disease areas as detailed on Slide 5. Each program holds the potential to be best-in-class and transform the disease, and each represents a multibillion-dollar market opportunity. Furthermore, we see the opportunity to launch new products into five of these disease areas within the next five years or our five-in-five goal.

And we're not done. The next wave of innovation is also making progress and advancing through preclinical development, including programs in Duchenne's muscular dystrophy and myotonic dystrophy Type 1. This breadth of pipeline success accelerated pace of clinical trial progress and build-out of commercial capabilities for upcoming product launches warrant continued investments in 2023. As such, we are strategically investing and focusing on execution to drive forward this significant opportunity.

With a uniquely strong and durable CF franchise, a deep, broad and advancing R&D pipeline with multiple potentially near-term commercial opportunities, a strong balance sheet and a deeply talented and committed team, Vertex is well-positioned to deliver for patients and shareholders for years to come. With that overview, I'll turn to the details of recent R&D progress, starting with CF. We'll continue our journey in cystic fibrosis as we serially innovate to bring highly efficacious therapies to all CF patients. Our next-in-class vanzacaftor triple combination completed enrollment in its two Phase III clinical trials, SKYLINE 102 and SKYLINE 103 and in patients ages 12 years and older in Q4 of 2022.

While TRIKAFTA sets a very high bar, our enthusiasm for this vanzacaftor program is also high. This program could deliver even greater benefits to patients, given, one, our highly predictive in vitro human bronchial epithelial or HBE cell assays, a showed the vanza triple was superior to TRIKAFTA in improving chloride transport, a direct measure of CFTR function. Two, our Phase II clinical data also suggests the potential for greater efficacy for vanzacaftor versus TRIKAFTA. And three, the vanzacaftor triple also has the benefit of once-daily oral dosing and a substantially reduced royalty burden relative to TRIKAFTA.

The Phase III trials are currently in the 52-week dosing period, and we anticipate their completion toward the end of this year. Another important program is the VX-522 program, our CFTR mRNA approach that we are developing in partnership with Moderna for CF patients who cannot benefit from our CFTR modulators. In December of 2022, and the FDA cleared the IND for VX-522, and the single ascending dose study in CF patients was initiated last year, a major milestone for Vertex and the field. We have high expectations given over five years of research that led to the discovery of VX-522 with the following properties: one, delivery of mRNA at high efficiency into HBE cells; two, expression of CFTR protein leading to high levels of chloride transport; and three, in both rodents and nonhuman primates, expression of CFTR protein in the desired cells; and lastly, a preclinical safety profile that supported advancement into human clinical trials.

We are excited with the progress of VX-522, which brings hope to the more than 5,000 CF patients who are still waiting for a treatment that targets the underlying cause of their disease. Turning now to exa-cel, our gene editing program for severe sickle cell disease and transfusion-dependent beta-thalassemia. This is our most advanced program outside of CF, and we expect exa-cel to be our next commercial launch. In late Q4, we completed our regulatory submissions for exa-cel for both sickle cell disease and beta-thalassemia in the EU and U.K.

Both the EMA and the MHRA have recently validated the MAA submissions. And in the U.S., we remain on track to complete our rolling BLA submission by the end of this quarter. The remarkable clinical benefits are evident in the data we've shared to date. exa-cel holds the promise to be the first CRISPR-based gene editing treatment to be approved and represents a near-term and significant market opportunity, which Stuart will detail.

Turning next to VX-548 and our pain program. VX-548 is our novel selective NaV1.8 inhibitor that holds a promise of highly effective pain relief without the side effects or addictive potential of opioids. If approved, VX-548 would represent the first new class of pain medicine in decades with the potential to address the staggeringly high unmet need in acute pain. VX-548 acts on the peripheral nerves to block the pain signal, and thus may be able to provide effective pain relief without the abuse potential, which is a central nervous system phenomenon.

We have high expectations for this program because NaV1.8 is a genetically and pharmacologically validated target. Second, we have multiple positive proof-of-concept results with VX-150, a predecessor molecule to VX-548, and proof-of-concept with VX-548 itself. And lastly, our Phase III program in acute pain is substantially similar to the positive Phase II trials we have already conducted. VX-548 has been granted Fast Track and breakthrough therapy designation in the U.S.

We initiated pivotal development last year, and we are enrolling patients across three Phase III studies with the goal of seeking a broad, moderate-to-severe acute pain label. We anticipate completing the Phase III pivotal program toward the end of this year or the beginning of next, creating another potentially significant and near-term commercial opportunity, which Stuart will also discuss. In addition to validation of NaV1.8 as a target in acute pain, it has also been validated as a target in neuropathic pain. I am pleased to share that in late Q4, we initiated a 12-week Phase II dose-ranging proof-of-concept study for VX-548 in peripheral neuropathic pain.

We look forward to updating you as this Phase II program progresses and to sharing more on the market opportunity on future calls. Transitioning now to inaxaplin, or VX-147, the first potential medicine to target the underlying cause of APOL1-mediated kidney disease or AMKD. Post the positive Phase II proof-of-concept study inaxaplin is now being studied in a single adaptive Phase II/III pivotal trial. This study has a preplanned interim analysis at 48 weeks of treatment, which, if positive, could serve as the basis to seek accelerated approval in the U.S.

Our goal is to complete the Phase II dose-ranging portion of the Phase II/III pivotal study this year, selected dose and then continue on to the Phase III portion. We are also working to increase awareness, screening and diagnosis through multiple initiatives, given the high unmet need and the approximately 100,000 patients in the U.S. and Europe alone. With inaxaplin, we see the potential of bringing a first-in-class treatment to patients with AMKD and unlocking a multibillion-dollar market opportunity.

Moving to Type 1 diabetes, where our goal is to deliver a transformative, if not curative therapy for the more than 2.5 million patients with Type 1 diabetes in North America and Europe. We are advancing multiple programs. First, VX-880s are stem cell-derived fully differentiated insulin-producing islet cells, which use standard immunosuppressives to protect the cells from the immune system. These cells are also foundational for the other two T1D programs.

For VX-880, we achieved proof-of-concept last year with the first two patients treated in Part A of the VX-880 study. We have now fully enrolled Part B where patients will receive the target dose on a staggered basis. The next phase is Part C, expected to initiate later this year in which patients will be treated concurrently with the target dose. We look forward to sharing VX-880 data from more patients and with longer duration of follow-up at medical congresses this year.

Second, VX-264 or the cells plus device program, which encapsulates these same fully differentiated insulin-producing islet cells in a proprietary device that shields the cells from the body's immune system, and hence, there is no requirement for immunosuppressants. In late Q4, we simultaneously filed a CTA in Canada, as well as the IND in the U.S. As we shared last month, the CTA has cleared, and we look forward to initiating enrollment and dosing of patients in Canada in the coming months. In the U.S., the IND has not cleared.

We've received and responded to the FDA's questions. We look forward to working with the agency with urgency so that we can initiate the study in the U.S. as soon as possible. Third, in our hypoimmune program, we are editing the same fully differentiated insulin-producing islets to cloak them from the immune system, another path to obviating the need for immunosuppressives.

This program continues to progress in preclinical development. Let me close the T1D section with an update on the ViaCyte acquisition through which we gained intellectual property, tools and capabilities that hold the potential to accelerate our goal of developing transformative treatments for this disease. We have now completed our data and portfolio review and are very pleased with the progress to date. We have begun executing our integration plans.

On the clinical side, a Phase I/II study of VCTX-211, a hypoimmune cell program that originated with ViaCyte and that Vertex is now developing in partnership with CRISPR Therapeutics, has been initiated and is ongoing. All other ViaCyte clinical trials have completed enrollment and dosing and are in the follow-up stage. I'll finish up with the alpha-1 antitrypsin deficiency, or AATD program. Both a Phase I study of VX-634, the first in a series of next-wave AAT correctors and a 48-week Phase II study of VX-864, our first-generation AAT corrector, are ongoing.

We look forward to updating you as these programs advance. I'll now ask Stuart to review our commercial progress.

Stuart Arbuckle -- Chief Operating Officer

Thanks, Reshma. Today, I will review our continued strong performance and outlook in CF, as well as potential near-term commercial launches in new disease areas with exa-cel and VX-548. Starting with CF, where we continue to bring our transformative medicines to many more patients globally. Last month, we raised our estimate for the number of patients with cystic fibrosis in the U.S., Europe, Australia and Canada to 88,000, up from our previous estimate of 83,000.

The growth in the CF population can be attributed to more patients coming forward to receive treatment, better data capture in patient registries, and perhaps most importantly, people with CF are living longer due to improvements in patient care and the availability of truly effective therapies. For a baby born with CF in 2021, the Cystic Fibrosis Foundation predicts the median age of survival is now 65 years. In the U.S., our focus remains on maintaining the very high persistence and compliance rates we have seen with our therapies and extending the benefits into younger age groups. Outside the U.S., uptake of KAFTRIO/TRIKAFTA in countries with recent reimbursement agreements continues to drive growth, as has the rollout of KAFTRIO in children ages six to 11 years in countries where this indication has recently received reimbursed access such as France and Spain.

There are still more than 20,000 CF patients who could benefit from but are not on CFTR modulator treatment. These patients fall primarily into two categories: one, patients in countries where we are early on the launch curve; and two, younger patients, for whom we continue to pursue additional label and reimbursement extensions such as the recent U.S. approval of ORKAMBI for ages one to two years, and recent regulatory submissions for KALYDECO in children ages one to four months and for TRIKAFTA in ages two to five years, which has received priority review and a PDUFA date of April 28 in the U.S. We are confident that we will reach the vast majority of these patients over time, which will continue to drive revenue growth in the near and long term.

We also see exciting growth potential for our vanzacaftor triple combo given the anticipated clinical profile more convenient once-daily dosing and the potential to offer a new option for patients who have discontinued prior CFTR modulator therapy. Finally, in CF, as Reshma mentioned, our CFTR mRNA program, VX-522 is being developed for the more than 5,000 CF patients worldwide who currently do not have any therapies that treat the underlying cause of their disease. I will now detail our commercial readiness efforts and the market opportunity for two potential product launches outside of CF, exa-cel and VX-548. Exa-cel holds curative potential for patients with sickle cell disease and transfusion-dependent beta-thalassemia, and we are making significant progress with launch preparation activities.

Our initial launch of exa-cel will focus on the approximately 32,000 individuals in the U.S. and Europe for whom these diseases are most severe, presenting a significant clinical, humanistic and economic burden. The estimated 25,000 severe sickle cell disease patients have multiple hospitalizations annually for vaso-occlusive crises, while the estimated 7,000 TDT patients undergo near-monthly transfusions. There is also a considerable financial burden, both for these patients and to the healthcare system.

In the U.S., economic models project the lifetime treatment costs for severe sickle cell disease patients to be between $4 million and $6 million. Recent market research indicates that physicians have a strong preference and interest in gene editing over other potentially curative approaches and that patients with sickle cell disease are increasingly optimistic about the potential role for curative therapies in the treatment of their disease. In addition, payers view the emerging clinical data for exa-cel as highly impactful, most notably the reductions in vaso-occlusive crises and hospitalizations. Importantly, for our specialty commercial model, these 32,000 severe patients are concentrated geographically, and we believe can be served effectively with a network of approximately 50 authorized treatment centers or ATCs in the U.S.

and approximately 25 in Europe. We have established the needed supply chain and manufacturing infrastructure to support the launch, including validated chain of identity and chain of custody systems, global shipping infrastructure and the needed manufacturing capacity to support uptake following approval. And finally, we continue to work with key commercial and government payers and policymakers in the U.S. and Europe to ensure they understand the significant burden of these diseases and that broad patient access and reimbursement are in place if and when exa-cel is approved.

To date, we have engaged with all U.S. state Medicaid agencies, some 150 unique U.S. commercial payers, as well as multiple health technology assessment bodies in Europe, including NICE and GBA to share important information about exa-cel and our commitment to working collaboratively to provide access to this therapy. Shifting now to VX-548, which we believe has the potential to play an important role across the pain spectrum, including acute pain and chronic pain conditions.

I'll focus my comments on acute pain, which is a near-term commercial opportunity. There are four aspects critical to framing the acute pain opportunity for Vertex. One, there is a significant unmet need due to the limitations and drawbacks of currently available treatments. Two, the market is large today, even with 90% generic prescribing.

Three, prescribing is concentrated in the hospital setting and thus addressable with a specialty commercial infrastructure. And four, there is broad stakeholder recognition of the need for new therapies, which also helps provide a clear path to future patient access and reimbursement. Firstly, millions in the U.S. suffer from acute pain each year, yet it is often difficult to manage effectively given the limitations of existing therapies.

The current standards of care are NSAIDs and acetaminophen at one end of the spectrum, which are non-addicting but offer limited pain relief and can pose GI and liver toxicity concerns. And at the other end of the spectrum are opioids, which provide effective pain relief but have many undesirable side effects, including nausea and somnolence and have significant abuse potential. Many large hospital systems and all 50 states have adopted restrictions for the use of opioids. This leaves a vast gap in the treatment landscape for a medicine like VX-548 and with strong efficacy, a desirable benefit-risk profile, and without abuse potential, given it is peripherally acting.

Second, the acute pain market is very large, valued in the U.S. at $4 billion despite 90% of prescriptions being generic. Third, this highly concentrated market can be served with a specialty commercial model. Of the 1.5 billion treatment days for acute pain annually, some two thirds or 1 billion are driven by hospital prescribing, following inpatient or outpatient procedures such as surgeries or emergency room visits.

Furthermore, these hospital-driven prescriptions are concentrated among approximately 1,700 hospitals that aggregate to roughly 220 integrated delivery networks. Thus, we believe we can reach a large proportion of this market with a specialty sales and marketing infrastructure and have begun to hire for key positions. Fourth and finally, given the wide stakeholder recognition of the limitations of current treatments and the unmet need, we see both high demand and a clear path to access and reimbursement for a medicine with a profile like VX-548. A key example of the path to reimbursement and access is the recently passed NOPAIN or Non-Opioids Prevent Addiction in the Nation Act signed into law last December.

Through the NOPAIN Act, Congress has directed CMS to make a separate add-on payment to hospitals in the outpatient and ambulatory surgery center setting for non-opioids for the treatment of pain. We believe this new law is an important sign of the growing movement to remove barriers for hospitals, providers and patients to utilize non-opioid treatment options. In closing, we are excited about the opportunity to extend the benefits of our CF medicines to more patients around the globe and the near-term potential to commercialize transformative treatments for patients with sickle cell disease, beta-thalassemia and acute pain. I will now turn the call to Charlie to review the financials.

Charlie Wagner -- Chief Financial Officer

Thanks, Stuart. Vertex' fourth quarter full year 2022 results represent another year of strong execution and exceptional financial performance. Fourth Quarter 2022 revenue increased 11% year over year to $2.3 billion. Growth was led by a 24% year-over-year increase outside the U.S.

on continued strong TRIKAFTA/KAFTRIO in markets with recently achieved reimbursement, as well as label extensions into younger age groups. U.S. CF revenue grew 5% year over year with ongoing consistent performance. Full year 2022 revenue of $8.93 billion represents 18% growth versus 2021, marking Vertex' eighth consecutive year of at least double growth.

Full year 2022 International revenue of $3.23 billion increased 41% and full year U.S. revenue of $5.7 billion increased 8% compared to 2021. For the full year 2022, we estimate the changes in foreign exchange negatively impacted our global revenue growth rate by approximately 1.5 percentage points, inclusive of our foreign exchange risk management program. Fourth quarter 2022 combined non-GAAP R&D, acquired IPR&D and SG&A expenses were $872 million, an increase of 5% compared to the fourth quarter of 2021.

Full year 2022 combined non-GAAP R&D, acquired IPR&D and SG&A expenses were $3.07 billion, a decrease of 11% versus the prior year. Recall that 2021 results were impacted by $1.1 billion of acquired IPR&D charges, including the onetime $900 million payment to CRISPR compared to $116 million of such charges in 2022. Acquired IPR&D aside throughout 2022, we continued to invest in research in our advancing pipeline, which includes mid-and late-stage clinical assets across eight different disease areas. The year-over-year increase in spending reflects stepped-up investments in programs where we made notable clinical progress, particularly in pain, the new vanza triple, as well as Type 1 diabetes.

We also continued to invest in the pre-commercial build-out activities for exa-cel and preparation for other potential near-term launches. Given these programs' potentially transformative benefit to patients and multibillion-dollar market opportunities, we will continue to invest accordingly. Fourth quarter 2022 non-GAAP operating margin was 50%, and we generated non-GAAP operating income of $1.15 billion in the quarter, an increase of 15% versus the prior year period. Full year 2022 non-GAAP operating margin was 54%, and full year non-GAAP operating income was $4.79 billion, up 48% versus 2021.

We ended the quarter with $10.8 billion in cash and investments as our cash flow generation and balance sheet remain very strong. On the business development front, in Q4, we announced a global collaboration with Entrada Therapeutics focused on therapeutics for DM1. The HSR period expired last night and the transaction is expected to close within days. As a result, our Q1 2023 results are anticipated to include an approximate $224 million up-front payment recorded in our income statement and an approximate $26 million equity investment recorded on the balance sheet.

Now, switching to guidance. We are establishing 2023 product revenue guidance of $9.55 billion to $9.7 billion, representing 7% to 9% year-over-year growth at current exchange rates. Note that this guidance includes an expected approximate 1.5 percentage point headwind to our revenue growth, inclusive of our foreign exchange risk management program. Also, note that 2023 product revenue guidance reflects revenue from cystic fibrosis products only.

Exa-cel is not included in guidance as potential approval and launch dates in the EU, U.K. and U.S. are still to be determined. For our CF franchise in 2023, we see continued strong performance of TRIKAFTA/KAFTRIO in all major markets, further uptake in markets with recent reimbursement agreements and expansion into younger patient populations.

Of note, with four years of TRIKAFTA experience, the majority of international reimbursement agreements secured and recent revisions in epidemiology, we have strong visibility to our 2023 revenue guidance range and another year of attractive growth for our CF product portfolio. We are also providing 2023 guidance for combined non-GAAP R&D, acquired IPR&D and SG&A expenses in a range of $3.9 billion to $4 billion, which includes approximately $300 million of upfronts and milestones from known collaborations including the expected up-front payment in Q1 2023 for Entrada. This targeted investment increase is consistent with the significant continued progress of our multiple mid-and late-stage clinical development programs and the expansion of our commercial and manufacturing capabilities in anticipation of the multibillion-dollar market opportunities represented by our programs with near-term launch potential. Our guidance for projected full year 2023 non-GAAP effective tax rate is a range of 21% to 22%.

Lastly, we announced today a new $3 billion multiyear share repurchase authorization. In closing, Vertex performed exceptionally well in 2022. We grew revenue double digits for the eighth consecutive year, maintained our strong balance sheet, invested internally and externally and accelerated programs across our diverse pipeline. In 2023, we look forward to further important milestones as highlighted on this slide to mark our continued progress in multiple disease areas.

We look forward to updating you on future calls, and I'll ask Susie to begin the Q&A period.

Questions & Answers:

Operator

[Operator instructions] And the first question will come from Salveen Richter with Goldman Sachs. Please go ahead.

Salveen Richter -- Goldman Sachs -- Analyst

Good afternoon. Thanks for taking my question. Can you frame what we're going to see from the VX-880 program this year and when? And also, on the second program, the cells and device program, how you overcome challenges here and your confidence level that you'll be able to kind of get to the bars that you want to see?

Reshma Kewalramani -- Chief Executive Officer and President

Yes. Thanks for the question, Salveen. With regard to the 880 program, remember, this is the program that is, let's call it, the naked cell program that requires off-the-shelf immunosuppressives. This is the program that we demonstrate proof-of-concept with the half-dose patients last year.

Where we are now is we fully enrolled this Part B. That's where patients received the target dose, but in a staggered manner. And the real importance here is -- and our excitement is to get to Part C, because then we can dose patients concurrently. You should expect data this year at congresses.

And there are a couple of important diabetes congresses that occur each year that will have longer duration of follow-up and more patients' worth of data. And the dimension on which you can expect us to share information are what we've already done with the first two patients. That's to say see C-peptide levels, decreases in exogenous insulin, improvements in hemoglobin 1Ac. With regard to the cells and device program, historically, in the field, the challenge with devices has been fibrosis, lack of oxygen getting to the cells inside these devices, as well as the inability for nutrients to go in and for insulin, in this instance, to be secreted out.

We have worked long and hard to develop a proprietary, what we call a channel array device. This device has particular features in terms of geometry, materials and proximity of blood and oxygen to ourselves to overcome these historic areas. And what I'll say, to just give you a little bit more on this point, is in small animal models and large, with our proprietary device, we have seen no evidence of fibrosis. Last thing to point out, of course, the same 880 cells that we've already shown proof-of-concept with, those are the same cells in the cells plus device presentation, as well as in our hypoimmune presentation.

Salveen Richter -- Goldman Sachs -- Analyst

Thank you.

Operator

The next question will come from Geoff Meacham with Bank of America. Please go ahead.

Geoff Meacham -- Bank of America Merrill Lynch -- Analyst

Hey, everyone, afternoon, and thanks for the question. I just have two. for VX-548, is the communication strategy here to have all the Phase III data in acute pain and neuropathic pain and then disclose everything before filing? I wasn't sure what the plan was there. And then, Stuart, given the hospital setting, what role do you think that treatment algorithms and cost/benefit studies will play commercially? This is obviously a pretty different market than you guys are typically used to.

And then for 522, I don't have a doubt that you guys can express the FTR, but obviously, it has to be in the right tissues. Can you talk maybe about the technical challenges here with an mRNA strategy and your development plan just at a high level?

Reshma Kewalramani -- Chief Executive Officer and President

Yes. Sure thing, Geoff. Let me start with the VX-522 question, which is the mRNA program that we are developing in collaboration with Moderna and then we'll switch to the 548 program in pain. So with regard to VX-522 in the mRNA program, the biggest challenge we and others have faced through the development of this approach for those last 5,000 patients who cannot benefit from CFTR modulators because they simply don't make any protein, it's been delivery.

That is really what we have been working on for years. And it was only about 12, 18 months ago that we really had a big breakthrough that area. The reason for our excitement for this program is that we can now deliver with our LNPs into our HBE cells using those same assays that are not only qualitatively translated to what we see in the clinic, but quantitatively so. Second, we also can show that the protein expression levels with that mRNA delivery is high with high chloride transport.

That's the direct readout for CFTR function. And then, lastly, we have taken this mRNA LNP construct and administered it to small animals and large, and we can deliver it to the right cells. That's a really important part of doing this in patients. So that's the technical challenges we've overcome and it's really been all about delivery.

With regard to VX-548 yes, you're right. The plan is to complete the studies, all three Phase III studies, the two RCTs, which are very similar to what we've already done in Phase II and the one single-arm study, let's call it, an all-comer study, so we get different pain types. We are projecting that we're going to complete those trials toward the end of this year, beginning of next, and we'll share all the data at the same time. Stuart, over to you for commercial potential.

Stuart Arbuckle -- Chief Operating Officer

Yes. So Geoff, as we've described before, this is a very big market opportunity with 1.5 billion treatment days of acute pain therapy prescribed per year. Just to dimensionalize that, I talked, in my prepared remarks, about two thirds of those prescriptions are, either written and dispensed in a hospital or institution or ambulatory care center, or they are written institutional setting but given to a patient on discharge and therefore filled in the retail setting. And the combination of those two accounts for about two thirds of the 1.5 billion treatment days.

When we've talked to stakeholders across the board, they are well aware of the unmet need for new therapies in the acute pain space, because all institutions and all states have put in place restrictions on the use of opioids. It's created this gap in the market for products like 548 that have a really positive benefit-risk profile. I do think we are beginning to see a sea change in terms of policies, which have been focused on limiting utilization of opioids to actually policies which are looking to remove barriers that might be created by cost sensitivity, and I'll point you to the NOPAIN Act, which I referred to in my prepared remarks, that directs CMS to develop a system of add-on payments for non-opioid pain medicines in addition to the bundled payment that they give to hospitals for the outpatient and the ACS setting. I see that as a really important sea change and recognition that these are cost-sensitive segments, but this is a way of creating barriers or, sorry, reducing barriers or creating incentives to do the right thing and prescribe non-opioid pain management when they're available.

Reshma Kewalramani -- Chief Executive Officer and President

Hey, Geoff, this is Reshma, again. Just to close out on pain and others may ask questions later, but I just wanted to make sure I also mentioned the peripheral neuropathic pain with VX-548. That Phase II study also began last year. And those results, we aren't calling yet when they would be available, but I wanted to make sure that you know that that study is also ongoing.

Geoff Meacham -- Bank of America Merrill Lynch -- Analyst

Great. Thank you.

Operator

The next question will come from Phil Nadeau with Cowen. Please go ahead.

Phil Nadeau -- Cowen and Company -- Analyst

Good afternoon. Thanks for taking our question and congrats on the progress. Question on the expense side from us. It does seem like the guidance for cost for 2023 is a bit heavier than we had anticipated in.

Even excluding the Entrada upfront it, it does seem like costs are growing a bit faster than revenue. So curious what are the push-pulls in the guidance. What elements are you including the guidance? Is there investment for prelaunch or heavy investment in R&D? Just kind of looking for a little bit more color on what is causing the expenses to rise so much.

Reshma Kewalramani -- Chief Executive Officer and President

I'm going to ask Charlie to take that one.

Charlie Wagner -- Chief Financial Officer

Yes. Phil, thanks for the question. And just so you get an overall sense of where we're thinking about things. Given the strong and predictable performance in CF and the recent success of the advancing pipeline with a number of first-in-class and best-in-class assets, including programs with significant near-term potential commercially, we see this is as absolutely the right time to be investing in the business.

If you look at 2023 specifically, over 70% of the planned increase in R&D and SG&A is expected in programs which are past POC and therefore, meaningfully derisked. Specifically, we've got trials for vanza, in pain in AMKD, in Type 1 diabetes. You've got the full year cost of the investments in commercial readiness for sickle cell and beta-thal, and we're making commercial investments for pain as well. Importantly, all of these programs are advancing rapidly and represent multibillion-dollar market opportunities.

So from our perspective, it's the right time to invest. And the good news is that with our differentiated business model, we can deliver industry-leading profitability while we're investing for innovation and growth.

Phil Nadeau -- Cowen and Company -- Analyst

Maybe one follow-up. Is there a long-term goal for, either operating margins or R&D and SG&A as a percent of sales?

Charlie Wagner -- Chief Financial Officer

No, we have not established a long-term goal.

Phil Nadeau -- Cowen and Company -- Analyst

Great. Thanks for taking our questions.

Operator

The next question will come from Liisa Bayko with Evercore ISI. Please go ahead.

Liisa Bayko -- Evercore ISI -- Analyst

Hi there. Could you just tell us a little bit more about VTCE-210, VCTX-211 versus 211. I noticed before you were a little bit more focused on 210. Now, we're talking about 211 and when -- what's the right form for data for there? And what should we be expecting to see?

Reshma Kewalramani -- Chief Executive Officer and President

Yes. Sure. Liisa, this is Reshma. VCTX-211, a bit of a mouthful, is the study that Vertex is now running in collaboration with CRISPR Therapeutics.

It's a hypoimmune program for Type 1 diabetes, where we're going to be assessing safety and efficacy. VCTX-210 was a safety study. In terms of when you should expect data readouts and such, this study is just getting going. We haven't called when we will be sharing results, but it is just getting going.

Liisa Bayko -- Evercore ISI -- Analyst

OK. Great. And then, just a quick question -- two quick questions actually on, regarding the CF franchise. Can you talk about the new 88,000 patients? Is that kind of equally distributed among the key world regions? Are you seeing that in certain areas than others? And then, as for the long-term patents, how should we be thinking about exclusivity for vanzacaftor? And then I noticed you even have next-gen after vanzacaftor and maybe you could enlighten us about market exclusivity there.

Reshma Kewalramani -- Chief Executive Officer and President

Yes, sure. Liisa, let me tackle the IP questions, and then I'll turn it over to Stuart to talk about the CF epidemiology. The patent for TRIKAFTA goes out to at least 2037. And the reason, if you're wondering, gosh, how is it so long from when we launched, it's because of the rapid pace from when we had synthesized this molecule in the lab to when we got approval, starting with the U.S., which is about three years, eight months or so.

The vanzacaftor triple, we haven't given a specific date, but it's longer than the TRIKAFTA compound. And we have, indeed, identified potentiators and correctors behind vanzacaftor toward our goal of getting CF patients to sweat chloride levels in the carrier range, and those would be even longer than vanzacaftor. Let me turn it over to Stuart for CFP.

Stuart Arbuckle -- Chief Operating Officer

Yes, Liisa. So as you said, we updated our estimate for the number of people living with CF to 88,000 for North America, Europe and Australia. That's an increase from our previous estimate from a couple of years ago of 83,000. It's really driven by three things: more patients coming forward for treatment; better data capture, and more complete data capture in registries around the world; and perhaps, most importantly, patients with cystic fibrosis are living longer due to improvements in the quality of care over the years and also the availability of truly effective medicines.

We see those trends occurring kind of across the globe in all of the regions that I mentioned. It's not just in one part of the world. Those trends are consistent. And I have to say we anticipate those trends will continue into the future.

Liisa Bayko -- Evercore ISI -- Analyst

Great. Thank you very much.

Operator

The next question will come from David Risinger with SVB. Please go ahead.

David Risinger -- SVB Leerink -- Analyst

Yes. Thanks very much. So my question is on VX-548. I guess, first, could you talk about publication plans for detailed Phase II results in 2023? And if you are planning publications, what incremental point should we be expecting to focus on? And with respect to the commercialization scenarios, there is one in which VX-548 is non-inferior to active control and then another in which it's superior to active control.

So it would be helpful to just understand the commercial opportunities in those two different scenarios. And then, one final tidbit for Charlie. Non-GAAP IPR&D was $116 million in '22. What is the figure that's incorporated in your guidance for '23, please?

Reshma Kewalramani -- Chief Executive Officer and President

All right. Dave, you've given us three different questions here. Let me save the two related to 548, and let me ask Charlie to talk about the IPR&D.

Charlie Wagner -- Chief Financial Officer

David, the guidance includes an estimate of $300 million for IPR&D, and that's inclusive of the up-front for Entrada.

Reshma Kewalramani -- Chief Executive Officer and President

Let me now move to 548. Dave, I'm going to tell you a little bit more about the publication strategy and the study design. And I'm going to ask Stuart to tell you about the commercial potential and how we see it depending on the two scenarios that you laid out, 548, and this target in particular, NaV1.8, has been the holy grail, NaV1.7 and 1.8 in the pain field for many, many years. And for that reason, because we are the first company to come forward with a highly specific and effective treatment that has shown effectiveness in Phase II across multiple pain models, not only with 548 but its predecessor molecule, the interest level in the community is very high.

And our intent is to publish the full Phase II data, abdominoplasty, and bunionectomy in a high-profile journal this year. With regard to what additional information you will be able to look at, honestly, the key information we've already revealed in our press release, that is to say highly efficacious, statistically significant, clinically meaningful results versus placebo. And we've also already shared the numerical results for the opioid control arm, and you can -- while the control -- I'm sorry, the context arm, while that reference arm wasn't there for statistical comparisons, you can clearly look and see what the context is there. And you'll have the full safety.

The safety profile for 548 is looking very good. You might remember, there were no related SAEs in the Phase II study. In fact, there were no SAEs at all in bunionectomy. With regard to the study design, the way we set it up is that it is a study versus placebo, superiority versus placebo.

Obviously, that's there to demonstrate the efficaciousness, as well as the safety profile. And then, we have the opportunity to also assess versus opioids. If you ask me what are we looking for, if we recapitulate the results in Phase II, that is a home run. Stuart?

Stuart Arbuckle -- Chief Operating Officer

Yes. As Reshma said about the design of the study, the primary endpoint is the comparison to placebo, and then we can compare it to the reference arm. I think in, either scenario that you described, Dave, what we've got here is a very significant commercial opportunity. If you are, in addition to being superior to placebo, as good as opioids from an efficacy point of view without all of their associated liabilities, which include addictive potential but aren't restricted to just addictive potential, then that is something that's going to be highly valued by the treating community.

Obviously, if we're superior, that's even better. But something which is as good as opioids from an efficacy point of view, but without all the liabilities would be a very high-value medicine.

David Risinger -- SVB Leerink -- Analyst

Thank you.

Operator

The next question will come from Robyn Karnauskas with Truist. Please go ahead.

Robyn Karnauskas -- Truist Securities -- Analyst

Hi. Thank you so much. All right. I'll go quickly.

So we get a lot of questions on Vertex' growth, despite you having a robust pipeline. Maybe talk about your thoughts around this 8%, and if you would think that would continue to slow or how you're thinking about it? And then, with regard to next generation, despite, like, more robust efficacy, it still took some time to switch people over to the next-generation product. Maybe some color on what the bar might be to speed up switching. And then, my last question was on chronic pain.

I mean, you've got a lot of key pain data in-house, more to come. I was just curious, is chronic pain partnerships still on the table, what you think partners are really looking for in order to take that forward.

Reshma Kewalramani -- Chief Executive Officer and President

Yes. Robyn, let me ask Stuart to go first with CF and talk about how we see vanzacaftor and the place for that in the marketplace.

Stuart Arbuckle -- Chief Operating Officer

Yes. So Robyn, on vanzacaftor, as you know, based on our in vitro data, but also our Phase II data, we have good reasons to believe that the vanzacaftor triple combination could provide incremental clinical benefit even over TRIKAFTA, which, as you know, sets a very high bar, and that's the way the study is designed to be able to compare vanzacaftor to TRIKAFTA. I think there are really TWO patient populations for whom that would be an attractive proposition if it delivers that profile. One is patients who are currently being treated with a CFTR modulator, who may be interested in switching to something which offers greater clinical benefit.

In addition, we haven't really talked about this part of the population for a while, but there are some patients who've discontinued CFTR modulators for a variety of reasons over time. Our persistence rates with our CFTR modulators are, let me just reemphasize, as high as I've ever seen for any chronic oral Medicaid, but we do have patients who have discontinued over time. And so, I think those patients who want to be on a CFTR modulator but have had to discontinue, one of our previous generations may be interested in the vanzacaftor triple combination when a new treatment option is available. So I do think there is likely to be significant interest from physicians and patients if the vanzacaftor triple combination delivers incremental benefit.

Reshma Kewalramani -- Chief Executive Officer and President

Robyn, let me take the question about chronic pain next, and we'll end with growth. We see pain as three distinct categories: acute pain, that's what we've been talking about with VX-548, and this very near-term commercial opportunity, given we are well underway with our Phase III program, and it is only 48 hours of dosing. The second we see is neuropathic pain. Obviously, that's a version of chronic pain, but we distinguish that from musculoskeletal pain.

For neuropathic pain, I see that as equally a Vertexian opportunity as is acute pain. There is a -- there are a discrete number of prescribers. It can be serviced with a specialty sales force. And we have already shown that this target, NaV1.8, with our predecessor molecule, VX-150, is effective for neuropathic pain.

When Lyrica was a branded medicine, just to give you a sense of the market size, it was approximately a $5 billion market for Lyrica in this chronic neuropathic pain. And then, there's a third kind of pain which is musculoskeletal pain. It turns out that we've already studied that as well with our predecessor molecule, and it's effective in that kind of pain setting as well, which is actually quite unusual. There aren't very many medicines that work in acute neuropathic and musculoskeletal pain.

We are -- I don't see the musculoskeletal pain as a Vertex sales and marketing specialty opportunity, but we're absolutely going to serve all patients, and we would partner that. But our focus is on the two Vertexian opportunities right in front of us, acute pain, very near term; and the neuropathic pain that's already in Phase II and the predecessor molecule was successful there. With regard to growth, let me ask Charlie to comment on the growth profile for the company.

Charlie Wagner -- Chief Financial Officer

Yes. The question -- so just a reminder, on the guidance, we gave $9.55 billion to $9.7 billion, 7% to 9% growth over 2022 and that's after a 1.5 percentage point headwind from FX. Stating it differently, it's a $700 million increment on our 2022 revenue of $9 billion, so a significant increase in 2023. And I think your question really was about where does growth come from.

And so, importantly, as has been mentioned, we've recently increased our estimate of epidemiology. Several years ago, we used to say 75,000, then it was 83,000. Now, it's 88,000. So the patient population is growing.

Within that patient population, there are 20,000 patients or more who would benefit from a CFTR modulator, who are not on medicine today, and we intend to bring as many of those as possible onto medicine as we go with continued uptake across eligible patient groups in countries where we already have reimbursement or approvals, as we expand to younger age groups and to a lesser extent, as we add additional new reimbursements. And so, we have high visibility into our guidance for 2023, those drivers, we see growth beyond '23 as well. And of course, we have the emerging opportunity from the vanza triple and the mRNA therapy in coming years. So overall, we're in a great position for continued growth in '23, and we see lots of opportunities for growth beyond '23.

Reshma Kewalramani -- Chief Executive Officer and President

Robyn, I'll just add, we've been talking about long-term growth, our five-in-five goal. These are five new medicines launching in the next five years. And then, if you think about what qualifies in there, the very near-term opportunities are exa-cel and sickle cell disease and beta-thalassemia, vanzacaftor in CF and VX-548 in pain, those are just right in front of us. And then, we have AMKD that's in Phase II/III with 147, the Type 1 diabetes program that we spoke about, the neuropathic pain program that we spoke about, and there's also the mRNA program and the AATD program, which is also in Phase II.

Operator

The next question will come from Mohit Bansal with Wells Fargo. Please go ahead.

Mohit Bansal -- Wells Fargo Securities -- Analyst

Great. Thank you very much for taking my question. And maybe can you talk a little bit about the capital allocation priorities? I know you announced a buyback program today. But year 2022 year-end cash is almost 14% of your market capitalization at this point.

Do you think, outside of internal R&D, you could think about some midsized acquisition at this point given the cash position and the market at this point?

Reshma Kewalramani -- Chief Executive Officer and President

Charlie?

Charlie Wagner -- Chief Financial Officer

Yes, Mohit, thanks for the question. On capital allocation, I'd probably sound like a broken record, but our priorities are the same, investing in innovation, both internal and external is the top priority. We clearly see that is the best way to create value for patients and for shareholders. We have, for the last five years now, maintained a share buyback program, where we focus on offsetting dilution from employee share programs and for some opportunistic buying.

And so, we have this new larger authorization at $3 billion, but it's simply a reflection of the growing strength of our balance sheet and cash flow.

Mohit Bansal -- Wells Fargo Securities -- Analyst

Thank you.

Operator

The next question will come from Michael Yee with Jefferies. Please go ahead.

Michael Yee -- Jefferies -- Analyst

Hey, guys. Thanks. Appreciate it. Two pipeline questions for you.

One on the vanza triple. I know that you have commented that you think it could be better. I recall that in the Phase II, there was, although difficult to compare across trials, some debate around whether it was truly better on FEV or more about sweat chloride, and you would see the effects, I think, more peripherally. Can you just comment on whether you actually think FEV actually would be better in the Phase III, given the chloride transport data is so much better? I know David Altshuler has also sort of comments on that.

And then, on the mRNA program, 5Q2, I think you made a nice comment earlier on this call about how, at least in animal models, that was getting into tissue. Can you just reiterate what you were saying about your view of -- or testing in HBE assays about whether the LNP is actually getting in and how confident you are in CF tissue that the LNP is getting in?

Reshma Kewalramani -- Chief Executive Officer and President

Yes. Sure thing, Mike. With regard to the vanza triple, if you look at the Phase II data, and you're right, these are cross-study comparisons, but if you're trying to glean and get a general sense for what the data are telling you, in the Phase II trials, what you can see is, on average, the vanza triple, compared to what we have shown with TRIKAFTA, it's about five points better on sweat chloride. And if you look closely and look at the ppFEV1 values that we've generated, there are some patients in the vanza triple where we've seen 20% improvement in ppFEV1.

So if you ask me, gosh, can the vanza triple be better than TRIKAFTA? Yes. And I would say that the strongest evidence for that is the chloride transport in our HBE assays, which have proven themselves time and time again, as well as sweat chloride because that's simply a less variable measure. But if I look at ppFEV1 there are hints of that as well, but I would put that lower on the scale of evidence because the variability is greater. With regard to mRNA and why we are so enthusiastic about this program, which we are running in collaboration with Moderna, it is really a combination of three things.

The first is the ability to demonstrate that with these LNPs, we get the construct into the HBE cells, and that's important because of how reliable the HBE sells and how translatable they are. Second, it is about the high expression of the protein. And third, in multiple animal models we can show, and this has been difficult for others to show. Some have not talked about it, and it's been difficult to gather whether they have or have not.

But I can tell you, we have, in multiple animal models, demonstrated that the mRNA gets to the right cells in the lung.

Michael Yee -- Jefferies -- Analyst

Perfect. Thank you, guys.

Operator

The next question will come from Jessica Fye with J.P. Morgan. Please go ahead.

Jessica Fye -- J.P. Morgan -- Analyst

Great. Thanks for taking my questions. Just a couple of quick ones, maybe following up on the last. First, with the SAD trial for VX-522 completing this year, should we expect to see data from that trial this year or might not come until later once the MAD work is complete? And similar question on the Phase II/III kidney trial, you said you expected it to complete the Phase IIb dose-ranging portion this year.

What will we hear at that point? Will we hear anything beyond the dose that's been selected? Will you communicate what that dose is?

Reshma Kewalramani -- Chief Executive Officer and President

Yes. Jess, with regard to the SAD/MAD VX-522NCF, we do expect that the SAD will complete this year. And it's hard to say that we're going to see an effect because it is a single-dose study, right? But we've been wrong before. When patients started on TRIKAFTA, for example, they tell us they felt differently with the first dose.

So we do expect that the SAD will finish, and we fully expect to initiate the MAD as well. And I do think that we will have a good line of sight on efficacy with the MAD. So we're not guiding yet to when the data will be available, but we do expect to finish the SAD. We expect to initiate the MAD.

And yes, it's possible that data will be ready this year. On the VX-147 program, inaxaplin and the Phase II/III study, you'll remember this one is particularly exciting because it's in kidney disease, where there has been, unfortunately, very little advancement and there are, really, no products in development for APOL1-mediated kidney disease and our Phase II results showed a 47.6% reduction in proteinuria, which is unprecedented in FSGS, let alone in APOL1-mediated FSGS. We do expect that the Phase II part of the study will be done this year. Because it's an ongoing study, it's adaptive II/III, which means we'll roll right into the Phase III once dose selection is made, I do not expect that we will be sharing results to maintain study integrity, but we will be sharing that we've completed that portion, we've selected a dose, and we've rolled into Phase III.

Susie Lisa -- Vice President, Investor Relations

Thanks. Chuck, we'll take one more question.

Operator

The next question will come from Evan Seigerman with BMO Capital Markets. Please go ahead, sir.

Evan Seigerman -- BMO Capital Markets -- Analyst

Hi. Thank you so much for squeezing me in at the end. I wanted to ask on the IND for the cells plus device program for Type 1 diabetes. Can you provide kind of any color as to what exactly the FDA wants, and maybe color as to why Canada was more comfortable with moving into humans versus the FDA?

Reshma Kewalramani -- Chief Executive Officer and President

Yes. Evan, this is about cells plus device VX-264 in Type 1 diabetes. This is the program using the same cells as the 880 program, but encapsulated in a device so immunosuppressants are not necessary. The most important thing to tell you is we've received the FDA questions and we've already responded.

No new data needed to be generated, no new experiments needed to be run. The questions and clarifications were ready at hand. Evan, if you asked why was one regulatory agency more comfortable than another, that's just a tough question to answer, and I don't know that I have a good answer for you. What I can tell you is that it's a high-quality submission, and we are very excited to get this up and running with patients enrolled and dosed in Canada, and we're working with urgency to get the study in the U.S.

as well.

Evan Seigerman -- BMO Capital Markets -- Analyst

Great. Thank you.

Susie Lisa -- Vice President, Investor Relations

Thanks, everyone. Chuck, will you please give the replay information?

Operator

[Operator signoff]A replay of today's event will be available shortly after the call concludes by dialing 1 (877) 344-7529 or 1 (412) 317-0088, and you can use the replay access code, which is 6823854.

Duration: 0 minutes

Call participants:

Susie Lisa -- Vice President, Investor Relations

Reshma Kewalramani -- Chief Executive Officer and President

Stuart Arbuckle -- Chief Operating Officer

Charlie Wagner -- Chief Financial Officer

Salveen Richter -- Goldman Sachs -- Analyst

Geoff Meacham -- Bank of America Merrill Lynch -- Analyst

Phil Nadeau -- Cowen and Company -- Analyst

Liisa Bayko -- Evercore ISI -- Analyst

David Risinger -- SVB Leerink -- Analyst

Robyn Karnauskas -- Truist Securities -- Analyst

Mohit Bansal -- Wells Fargo Securities -- Analyst

Michael Yee -- Jefferies -- Analyst

Jessica Fye -- J.P. Morgan -- Analyst

Evan Seigerman -- BMO Capital Markets -- Analyst

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