Vertex Pharmaceuticals (VRTX) Q1 2024 Earnings Call Transcript

adminMay 7, 2024

VRTX earnings call for the period ending March 31, 2024.

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Vertex Pharmaceuticals (VRTX 0.35%)
Q1 2024 Earnings Call
May 06, 2024, 4:30 p.m. ET

Prepared Remarks:

Operator

Good day, and welcome to the Vertex Pharmaceuticals first quarter 2024 earnings conference call. All participants will be in a listen-only mode. (Operator instructions) After today’s presentation, there will be an opportunity to ask questions. I would now like to turn the conference over to Ms.

Susie Lisa. Please go ahead.

Susie Lisa — Senior Vice President, Investor Relations

Good evening all. My name is Susie Lisa, and as the senior vice president of investor relations. It is my pleasure to welcome you to our first quarter 2024 financial results conference call. On tonight’s call, making prepared remarks, we have Dr.

Reshma Kewalramani, Vertex’s 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’s marketed medicines for cystic fibrosis, sickle cell disease, and beta-thalassemia, our pipeline Vertex’ anticipated acquisition of Alpine Immune Sciences, and Vertex’s 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 foreign exchange is presented inclusive of our foreign exchange risk management program.

I will now turn the call over to Reshma.

Reshma Kewalramani — President and Chief Executive Officer

Thanks, Susie. Good evening all, and thank you for joining us on the call today. Continuing our strong momentum from 2023, we’ve kicked off ’24 with another quarter of excellent performance across the board. Vertex continued to reach more CF patients, delivering $2.7 billion in revenue in Q1, representing 13% growth versus the prior-year period.

We also began our journey of revenue diversification with the launch of Casgevy in both sickle cell disease and beta thalassemia in multiple regions. In our late-stage pipeline, we continue to drive programs into Phase 3 and toward regulatory approval, creating multiple opportunities for both revenue growth and diversification, including one, completing our regulatory submissions for the vanzacaftor triple in patients with cystic fibrosis six years and older in both the U.S. and the EU, initiating the rolling NDA submission for VX-548 or suzetrigine in moderate to severe acute pain; three, advancing inaxaplin into the Phase 3 portion of its pivotal trial in APOL1-mediated kidney disease and expanding the eligible patient population down to age 10. And four, following the successful completion of the end of Phase 2 regulatory meeting with the FDA, we are on track to initiate the Phase 3 trial of suzetrigine in painful diabetic peripheral neuropathy in the second half of this year, and milestones in our early and mid-stage pipeline matched this pace of progress as we resumed the VX-880 trial in type 1 diabetes, initiated clinical development of VX-407 in polycystic kidney disease, and three, achieved regulatory clearances in multiple regions, including the U.S., and initiated the Phase 1/2 clinical trial of VX-670 in patients with myotonic dystrophy type 1.

And of course, we are very excited to expand the Vertex portfolio and team with our definitive agreement to acquire Alpine Immune Sciences announced on April 10. Alpine’s lead asset, povetacicept or pove, is a potential best-in-class Phase 3-ready molecule for IgA nephropathy or IgAN, a disease with high unmet need. Pove is also a molecule that holds a pipeline in a product potential in a number of other serious autoimmune renal diseases and cytopenias in Phase 2 development. We see the acquisition as just the right fit with just the right assets at just the right phase of development, where Vertex’s capabilities can accelerate pove’s development in IgAN and other indications.

And lastly, Alpine will add protein engineering and immunotherapy expertise to Vertex’ capabilities with particular relevance for our development programs in gentler conditioning for Casgevy and immune evasion for type 1 diabetes cell therapies. We are excited to begin working with the Alpine team and together advanced pove into Phase 3 in IgAN later this year. With that overview, let me now turn to a more detailed pipeline review. This quarter, I’ll limit my comments to the programs with the most significant recent updates, cystic fibrosis, pain, type 1 diabetes and the pending Alpine acquisition.

Starting with CF. We are very pleased with the Phase 3 results of the vanza triple we announced in early February as we continue to advance toward our ultimate goal of bringing all eligible patients to carrier levels of sweat chloride. Results from the vanza pivotal program met our high expectations, and we’re an important milestone in our progress toward this aspiration. Results from the two randomized studies in patients 12 and above demonstrated vanza was non-inferior to Trikafta on lung function and superior to Trikafta on sweat chloride including, as measured by the proportion of patients achieving sweat chloride levels below the diagnostic threshold of 60 millimoles per liter and below the carrier level or normal levels of sweat chloride of less than 30 millimoles per liter.

Included in the pivotal program was the RIDGELINE study in patients 6 to 11 years of age to underscore the potential impact of vanzacaftor considering 95% of patients age 6 to 11 in this study achieved sweat chloride levels below the level of diagnosis for cystic fibrosis, and more than half reached sweat chloride levels considered to be in the normal or carrier level range of sweat chloride. We believe these results indicate that Vanda could set a new standard in the treatment of CF. To round out the profile of the vanzacaftor triple, it’s important to note that the therapy also offers the convenience of once-daily dosing and a substantially lower royalty burden. With these results in hand, we’ve been working rapidly to compile the regulatory marketing applications, and I am pleased to share that we have completed submissions in the U.S.

and EU for patients ages six years and older ahead of our midyear goal. In the U.S., we use one of our priority review vouchers, which if the filing is accepted, provides an expedited six-month review versus the standard 10-month review timeline. We’re also on track to complete submissions in the U.K., Canada, Australia, New Zealand, and Switzerland by midyear. I’ll close on CF with VX-522, our CFTR mRNA therapy in development with our partners at Moderna for the treatment of the more than 5,000 people with CF, who do not make any CFTR protein and therefore, cannot benefit from CFTR modulators.

We continue to enroll in the multiple ascending dose portion of the study and expect data late in 2024 or early 2025. Moving to the pain program, and suzetrigine, our novel, highly selective NaV1.8 pain signal inhibitor. Suzetrigine offers a compelling combination of both strong safety and strong efficacy with the potential to treat moderate to severe pain across multiple settings of care. In acute pain, suzetrigine has secured fast-track and breakthrough therapy designations, and we were very pleased that the FDA granted us a rolling NDA submission.

I’m also pleased to share that multiple modules have already been submitted and we are on track to complete the submission this quarter. Consistent with our serial innovation strategy, the next asset in our Acute Pain pipeline is VX-993. We recently received IND clearance for the intravenous formulation of VX-993 and have already started the Phase 1 trial. We’re also planning a VX-993 oral formulation Phase 2 study in acute pain, which we expect to initiate later this year.

Beyond suzetrigine and VX-993, we continue to innovate in the NAV 1.8 space and are also making strong progress preclinically with our NAV1.7 Pain Signal inhibition program, that may be used alone or in combination with suzetrigine or other NAV1.8 inhibitors. In peripheral neuropathic pain or PNP, we are very pleased with the outcomes from the recently completed end of Phase 2 meeting with the FDA and are excited to begin the pivotal program for suzetrigine in painful diabetic peripheral neuropathy, or DPN, in the second half of this year. The program will consist of two randomized sister studies of approximately 1,000 patients each with three arms in each study. Suzetrigine 70-milligram arm once daily, a placebo arm, and a pregabalin or Lyrica arm.

The efficacy endpoints are based on the change from baseline to week 12. The primary endpoint is the comparison of suzetrigine versus placebo in the weekly average of the daily pain intensity score or NPRS. The first key secondary endpoint will test for non-inferiority of suzetrigine to pregabalin on the same NPRS pain score, and if successful, we will test for superiority. And finally, the second key secondary is quality of life measures versus placebo.

In order to evaluate the long-term safety and effectiveness of suzetrigine, a subset of patients completing the 12-week study will have the opportunity to roll into a 52-week open-label extension study. Our goal continues to be a broad peripheral neuropathic pain label. And in support of this goal, we’re also studying suzetrigine in lumbosacral radiculopathy or LSR, a PNP condition for which there are no specifically indicated or approved treatments. LSR accounts for approximately 40% of all PNP patients and together with DPN make up more than 60% of the PNP segment.

We are continuing to enroll and dose our Phase 2 study of suzetrigine in LSR, and I’m pleased to share that the study is on track to complete enrollment by the end of this year. Just as we transform the treatment of CF, we believe we have the potential to transform the treatment of pain, both acute and neuropathic, and look forward to helping address the unmet needs of the tens of millions of Americans suffering ith these conditions. Turning now to type 1 diabetes. VX-880 is a stem cell-derived, fully differentiated islet cell therapy for patients with T1D and impaired hypoglycemic awareness who suffer from severe hypoglycemic events.

I’m pleased to share that after data review by the independent data monitoring committee, the VX-880 study has resumed Parts A, B, and C of the global 17-patient study are fully enrolled, and we expect to complete dosing soon. We look forward to sharing updated data this June at the American Diabetes Association Annual Meeting. VX-264, the next asset in our T1D program is our self-plus device program. using the same VX-880 cells, which have already demonstrated efficacy VX-264 is designed to eliminate the need for immunosuppression by shielding the cells from the immune system in the proprietary device.

This Phase 1/2 study has completed Part A and Part B is underway. Lastly, our hyperimmune program, which aims to evade the immune system by introducing certain edits into the same VX-880 cells is yet another approach to avoiding the use of immunosuppressive. This program continues to advance in preclinical development. I’ll conclude with a few comments on povetacicept, the lead asset from our pending acquisition of Alpine Immune Sciences.

We are excited about the potential of povetacicept across multiple dimensions, including preclinically with its high affinity and potency against both APRIL and BAFF pathways in preclinical assays and, as well as high efficacy in cell and animal models of B cell-driven diseases, clinically with patient data in IgAN through Phase 2 that look potentially best-in-class in proteinuria in hematuria, GFR, and clinical remission, better drug-like properties with direct patient benefit, including once every four-week dosing, subcutaneously with low injection volume, a good safety, and tolerability profile, the broadest development plan in the field and a robust IP portfolio. Important upcoming pove milestones in the second half of this year include the initiation of the Phase 3 study in IgAN, and readouts from the ongoing RUBY-3 and RUBY-4 basket studies in autoimmune renal diseases and cytopenias, respectively. With that, I’ll turn it over to Stuart for a commercial overview.

Stuart Arbuckle — Chief Operating Officer

Thanks, Reshma. I’ll first discuss CF, and then as we’re entering a new era of commercial diversification, provide some highlights of the ongoing Casgevy launch and the outlook for suzetrigine in acute pain. As Reshma noted, we once again delivered strong results in CF as we continue to grow the number of eligible patients receiving our CFTR modulators. First quarter year-over-year U.S.

growth was driven by the continued strong performance of Trikafta, including in patients ages two to five years old following the approval in this patient population in April of last year. Outside the U.S., we also saw growth this quarter, driven by the rollout of Kaftrio in the EU in patients ages two to five, following approval in this age group in November 2023, and we will continue to drive access and uptake in more EU countries over the course of the year. Our outlook in CF is bright in the short, medium, and long term. We will drive growth in the near term by reaching more eligible patients, including younger age groups and additional geographies.

For example, we recently received EU approval of Kalydeco in patients between the ages of one month up to four months old. We also expect regulatory approvals for additional rare genotypes for Kaftrio in the EU and Trikafta in the U.S. and Canada later this year. And Brazil is a good example of a new geography.

Up to now, some patients in Brazil have been able to benefit from our CFTR modulators through named patient sales. We recently secured government reimbursement for Trikafta in ages six and are in the process of launching Trikafta for all eligible patients there. We will then look to drive further CF growth over the medium term with the vanzacaftor triple combination launch, as many existing Trikafta patients may seek to achieve even greater levels of CFTR function with the added convenience of once-daily dosing. And there are also more than 6,000 patients who have discontinued one of our current CFTR modulators, who may be interested in a new treatment option.

Furthermore, there are 31 additional rare mutations, not previously responsive to our other CFTR modulators that are responsive to the vanzacaftor triple. Our launch preparations are well underway, including pre-approval information exchange with payers, and we are both encouraged by our interactions to date and excited by the opportunity to launch our fifth medicine in CF. Longer term, we expect continued growth in CF from our mRNA program, VX-522 for the more than 5,000 people with CF, who do not respond to CFTR modulators. Now turning to Casgevy and our launches in sickle cell disease and beta thalassemia.

We are making strong progress with ATC activation, physician and patient engagement, and payer conversations. Enthusiasm from stakeholders is high in all regions, and our teams are working to translate this historic scientific achievement into meaningful patient benefit in the real world. Let me provide some insights on the launch with two key metrics we are sharing externally as important markers of our early launch progress, the number of activated authorized treatment centers or ATCs, and patient cell collections. Recall that Vertex will recognize revenue for Casgevy near the end of the patient journey at infusion.

Starting with ATC activation. You may recall, we are prioritizing approximately 75 ATCs globally and already had 9 ATCs activated at launch, even ahead of knowing the final label or pricing for Casgevy. We are pleased with our progress as we now have more than 25 activated centers including centers in all regions where Casgevy is approved. Even more important than the number of ATCs activated is patient initiations and cell collections.

Many patients have begun the treatment journey, and as of mid-April, five patients already had cells collected. This is excellent progress given the short time frame since approval and the complexity and length of the patient journey. These sales collections have occurred across all regions where Casgevy is approved, the U.S., Europe, and the Middle East. We also continue to make great progress with payers, who recognize the transformative clinical benefits of Casgevy and are moving quickly to provide rapid and equitable access.

In the U.S. commercial market, we have contracts and/or published policies in place for over 200 million lives, or nearly 65% of total lives. In the government Medicaid sector, we have policies in place or active contract negotiations ongoing with 18 states. And in the meantime, all states have confirmed their intent to provide case-by-case coverage.

Outside the U.S., we are also making progress with reimbursement and access, either through formal reimbursement agreements or early access programs. In Europe, we see strong traction in France with a reimbursed early access program in TDT. We’re particularly pleased with our progress in the Middle East, which is a new region for Vertex and especially important for Casgevy given the high prevalence of sickle cell disease, in particular, and the government’s clear focus on elevating the health of their citizens. Since receiving regulatory approvals from KSA and Bahrain, we have worked with local healthcare authorities and refined our epidemiology estimates for the region.

Our work indicates that the eligible 12-plus sickle cell disease and beta-thalassemia population in KSA and Bahrain that we could serve is in excess of 23,000 patients, a potentially larger opportunity than even the U.S. These regions have the infrastructure to administer medicines like Casgevy given the prevalence of the diseases and relatively high volume of allogeneic stem cell transplants performed annually. And importantly, we have already secured reimbursement agreements in KSA and Bahrain, allowing certain eligible patients to access Casgevy for both sickle cell disease and transfusion-dependent thalassemia. In addition to having activated ATCs and collected cells from our first patients in the Middle East, we continue to work with local healthcare professionals to increase the number of ATCs and expand patient access in the region.

Shifting now to suzetrigine. We believe this highly selective NaV1.8 pain signal inhibitor has the potential to provide a transformative treatment option for millions of patients suffering from acute and peripheral neuropathic pain. This quarter, I’m going to limit my commercial comments to the opportunity in acute pain. Throughout its clinical trials to date, suzetrigine has shown a compelling combination of efficacy and safety with strong potential to be used across a range of moderate to severe acute pain conditions, both surgical and nonsurgical, and across a range of settings.

This profile will ideally address the clear unmet need among both patients and physicians, effective pain relief with a favorable safety and tolerability profile. On a prior investor webcast, we provided details on this opportunity, including the magnitude, of approximately 80 million patients are prescribed a medicine for moderate-to-severe acute pain each year in the U.S., and the high concentration with approximately two-thirds of patients being treated in the institutional setting. There is a further concentration within that setting in approximately 2,000 institutions that roll up to around 150 IDNs. Accordingly, they can be served with a specialty commercial infrastructure.

We have also detailed the mix of settings for their over 1 billion calendar days of acute pain treatment, 15% are prescribed and dispensed in an institutional setting. 35% are prescribed discharge and 50% are prescribed in physicians’ offices. This quarter, I’ll provide you with some insights on our go-to-market strategy and an update on the legislative and payer landscape. We are focused on the institutional setting, given these approximately 2,000 institutions account for 50% of acute pain prescriptions.

Extensive market research has also helped us identify an initial set of specific acute pain conditions and procedure types with high clinical fit, such as high-volume surgical procedures, pain conditions that typically require prescription pain medicines at discharge, or where we can seek to replace or significantly reduce opioid utilization. And the related physician specialties that are likely to adopt and champion suzetrigine. The key healthcare professionals we will be targeting include orthopedic, general and plastic surgeons, emergency department physicians anesthesiologists, and pain medicine specialists. Given the dynamics for new medicines to be approved for use in institutions, we expect the earliest uptake of suzetrigine will occur at discharge.

Recall, this discharge segment represents roughly 35% of the approximately 1.1 billion calendar days of acute pain treatment in the U.S. each year. The average prescription length in this setting is approximately two weeks. Treatment in this setting commonly includes opioids where prescription length is shorter four to five days due to side effect profile, addiction concerns, and prescribing limits at the state IDN and hospital level.

We are already engaging with key decision-makers across the formulary and access landscape, including pharmacists, PBMs, payers, IDNs, and GPOs. We expect these stakeholders to make formulary and coverage decisions throughout the first year of the launch and thus plan to engage in contracting discussions in the second half of this year, ahead of the launch to support the potential for accelerated formulary adoption. We’ve also made great progress in the build-out of our commercial team. Our field leadership team is now on board and fully trained and has engaged in the hiring of the field force until after the Phase 3 data we are now finalizing the hiring of 150 new customer-facing colleagues.

Finally, we know the significance of policy in the world of pain treatment with important legislation like the No Pain Act already on track for implementation in 2025 and bills like the Alternatives to PAIN Act recently introduced. Our long-standing efforts continue to help shape state and federal policy initiatives to: one, encourage consideration and use of non-opioid alternatives; and two, remove financial barriers to choosing a branded non-opioid. Overall, we plan for a high science, digitally enabled commercialization approach with a strong focus on population health decision-makers. In addition, both patient advocacy and public policy efforts complement and supplement our commercial activities.

In conclusion, it’s an exciting time to be at Vertex. We continue to treat more CF patients around the world and are well advanced in planning for the launch of the vanzacaftor triple combination. We are entering a new era of commercial diversification with the launch of Casgevy in the U.S., Europe, and the Middle East. And our launch preparations for suzetrigine in acute pain are well underway as we seek to fundamentally redefine the treatment of pain and drive further diversified revenue growth.

I’ll now turn the call over to Charlie to review the financials.

Charlie Wagner — Chief Financial Officer

Thanks, Stuart. Vertex’s excellent start to the year demonstrates once again our consistent strong performance and attractive growth profile. First quarter 2024 revenue increased 13% year over year to $2.7 billion with solid growth of 8% in the U.S. and 21% outside the U.S.

The drivers of this strong start were in line with our expectations with some outperformance due to channel inventory phasing in select international markets. First quarter U.S. growth was driven by the continued strong performance of Trikafta, including in patients ages two to five following the approval in this patient population in April of last year partially offset by the typical pattern of seasonally higher gross to net in the first quarter. Outside the U.S., growth was also driven by Kaftrio ’25 launch, and a benefit from channel inventory phasing is expected to reverse in subsequent quarters, similar to the dynamics we saw in the first half of 2023.

First quarter 2024 combined non-GAAP R&D acquired IP R&D and SG&A expenses were $1 billion, compared to $1.2 billion in the first quarter of 2023. Included in Q1 ’24 results, our $77 million of acquired IP R&D charges, compared to $347 million of such charges in the first quarter of 2023. Non-GAAP R&D expenses in Q1 ’24 were relatively flat year over year and reflect growing investment in the advancement of our broad earlier-stage R&D portfolio offset by reduced costs from the recent successful completion of multiple late-stage clinical trials for Casgevy, vanzacaftor, and suzetrigine, as well as the associated transition of certain costs from R&D to COGS and inventory. The increase in non-GAAP SG&A costs versus Q1 ’23 includes investment in the commercial organization and launch activities for Casgevy and acute pain.

We anticipate the quarterly non-GAAP R&D and SG&A expenses will increase over the remainder of 2024 as we advance inaxaplin into Phase 3 development in AKD initiate the suzetrigine Phase 3 program in painful diabetic peripheral neuropathy and continue to invest in preparation for upcoming potential new commercial launches, including the further build-out of our suzetrigine team. First quarter 2024 non-GAAP operating income was $1.3 billion, a 48% increase, compared to $902 million in non-GAAP operating income in the first quarter of 2023. We First quarter 2024 non-GAAP effective tax rate of 17.4% compares to 21.3% in Q1 ’23 and includes a benefit from a discrete adjustment to Vertex’s income tax reserves. First quarter of 2024 non-GAAP earnings per share were $4.76 and including benefits from revenue and expense phasing, as well as a lower tax rate, compared to $3.05 in the first quarter of 2023.

We ended the quarter with $14.6 billion in cash and investments. We will use a portion of this cash on hand to fund the $4.9 billion acquisition of Alpine Immune Sciences, which is expected to close this quarter, subject to certain customary conditions. Alpine is a prime example of our priority for capital deployment, to invest in innovation, including external innovation via business development. We see the multibillion-dollar potential for Phase 3-ready povetacicept given the transformative and best-in-class potential in IgAN, a disease area with high unmet needs.

We also look forward to exploring pove’s full potential in other serious diseases. Additionally, we deployed over $140 million of cash in the first quarter to repurchase 336,000 shares. Now switching to guidance. There is no change to our 2024 total product revenue guidance range of $10.55 billion to $10.75 billion, representing revenue growth of 8% at the midpoint at current exchange rates.

We have high visibility into this revenue outlook. We expect continued growth in CF as we continue to reach more patients, including younger ones, in core markets and select other countries, as well as contribution in the second half of the year from the commercial launch of Casgevy in approved indications and geographies. For total Vertex operating expenses, we continue to project $4.3 billion to $4.4 billion in full year 2024 combined non-GAAP SG&A, R&D, and acquired IP R&D. This operating expense range continues to include approximately $125 million in currently anticipated IP R&D charges.

Upon the close of the Alpine acquisition, we expect Alpine’s projected non-GAAP operating expenses for the remainder of 2024 to be absorbed within this guidance range but note the potential impacts of transaction accounting, including any potential acquired IPR&D charges will be determined at the time of closing. There’s also no change to our full year 2024 non-GAAP effective tax rate guidance range of 20% to 21%. In closing, Vertex posted excellent results yet again to start off the year as we delivered strong revenue growth, regulatory approvals, and commercial launches. We also strengthened our capabilities in preparation for additional near-term launches, progressed our mid- and earlier-stage pipeline, and entered the clinic in our 10th disease area of ADPKD.

Importantly, we also announced the anticipated acquisition of Alpine Immune Sciences, a compelling fit with Vertex’s strategy. Post-close, we aim to leverage Vertex’s clinical, regulatory, and commercial capabilities to accelerate the development and commercialization of pove. We are targeting approval in IgAN in 2027 and and contribution to Vertex’s revenue growth and diversification beginning in 2028, leveraging a specialty market approach with attractive margins. As we move through 2024, we anticipate further important milestones as detailed on Slide 18 to mark our continued progress in multiple disease areas.

Please note that this pipeline slide will not reflect programs from Alpine Immune Sciences until post-transaction close. We look forward to updating you on our progress on future calls, and I’ll now ask Susie to begin the Q&A period.

Questions & Answers:

Operator

We will now begin the question-and-answer session. Go ahead, Ms. Susie.

Susie Lisa — Senior Vice President, Investor Relations

No. That’s great.

Operator

(Operator instructions) And at this time, we’ll pause momentarily to assemble our roster. And the first question will come from Geoff Meacham with Bank of America. Please go ahead.

Geoff Meacham — Bank of America Merrill Lynch — Analyst

Great. Afternoon, guys. Thanks for the question. I had a few on the filings.

So, the first question is for vanza. Do you think you guys will get a claim for the sweat chloride benefit? It seems like Obviously, you’ll have the Phase 3 data on the label. I’m just curious about what you can do from a regulatory perspective to kind of elevate the sweat chloride benefit. So, that’s the first question.

The second one, kind of the same question for 548 in acute pain. Do you think that — are you guys going to push to make a claim for — as an option to opioids or to Lyrica? I wondered if the regulatory climate can drive that.

Reshma Kewalramani — President and Chief Executive Officer

Yeah. Hey, Jeff, this is Reshma. Let me take those questions. On the vanzacaftor triple, if you go back and look at all of the CFTR-modulated labels, you’ll see that we always have sweat chloride in the labels, and they are reflected because it is indeed a pharmacodynamic or PD marker.

So, I fully expect that the sweat chloride data from the vanza triple studies will be reflected in the label Obviously, we are just at the point of having submitted the filing. So, we’re not at the point of label negotiations yet. But if history serves as a guide, I expect that sweat chloride will absolutely be on the label. On VX-548, Jeff, I think your question was about the DPN, diabetic peripheral neuropathy, and study, but let me broaden the question about 548 and acute pain because that’s the filing that we have already initiated the rolling submission.

We’ve already submitted a few of the modules, and we expect, as I said in my prepared remarks, to complete the filing this quarter. We are submitting all of the data that we generated in acute pain and the same will be true when it comes to the diabetic peripheral neuropathy data. And insofar as the acute pain Phase 3 results are versus placebo as the primary endpoint, but there are data that have the opioid arm in there, I expect that it will be a discussion with the regulators about how exactly they want to display it. We are not at the point for the acute pain studies have label negotiations and quite a bit far away from it for the DPN studies, which are just starting Phase 3.

But I will say that the reason we have a pregabalin arm in the Phase 3 DPN study is exactly for that reason for us to be able to share the data with prescribers.

Geoff Meacham — Bank of America Merrill Lynch — Analyst

Reshma, just a quick follow-up to that. Just on the alternative to opioids. I mean, obviously, you don’t know yet when it comes to the label, but do you think you’ll need that to help with Medicare, you know, kind of reimbursement?

Reshma Kewalramani — President and Chief Executive Officer

Yeah. So, on the acute pain side, Jeff, I think that the most important data are going to be the primary endpoint data, and I’ll ask Stuart to comment on that in a minute. And with regard to securing reimbursement and ensuring that there are no barriers to prescribing non-opioid, we see that as a very important place for policy. Stuart?

Stuart Arbuckle — Chief Operating Officer

Yeah. Thanks, Reshma. So, first thing I would say, Jeff, is remember, we are seeking a broad moderate to severe acute pain level so that the product could be used if the physician decides and the patient wants to do it for any type of acute pain, and so we’re not really looking for a label that’s looking to niches or pre-position us relative to other agents that are out there. We want physicians to have the broadest possible ability to use the product in the patients they see fit.

As Reshma said, the primary endpoint, which talks to the really strong efficacy we see in moderate to severe acute pain is clearly very important as is all the additional safety and tolerability data that we have to support VX-548 in combination with the fact that given its mechanism, it doesn’t have addictive potential. So, we’re really looking at the full range of efficacy and safety, which I think is going to be the most important thing that’s going to allow physicians to decide who they want to prescribe the product for.

Geoff Meacham — Bank of America Merrill Lynch — Analyst

Great. Thank you very much.

Operator

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

Jessica Fye — JPMorgan Chase and Company — Analyst

Hey, guys, thanks for taking my question. I’m curious for your various NaV1.8 and 1.7 programs, would you consider advancing maybe another molecule for musculoskeletal pain perhaps engaging a commercial partner to the extent it’s not a Vertexian sales detail? Just curious if you kind of have any thoughts about that, so to not leave potential value on the table. Thank you.

Reshma Kewalramani — President and Chief Executive Officer

Yeah. Hey, thanks for that question, Jeff. So, just to set the stage, we see three distinct areas in pain, acute pain, neuropathic pain, and then everything else. And in everything else, I would add musculoskeletal pain, it’s the kind of osteoarthritis kind of pain.

We fully intend to serve all patients. And I fully do expect that our NAV1.8 and when the time is right, the NAV1.7 or the NAV 1.7, 1.8 combinations, our pain assets will serve patients with musculoskeletal pain. And I say that because, as you know, the predecessor molecule to VX-548, VX-150 already demonstrated that potential. But we want to go one step at a time here.

So, first, we’re going to do acute and neuropathic pain, and we see the research development and commercialization are completely Vertexian. And then for the musculoskeletal pain, whether that’s with VX-548, the next-in-class medicine VX-993, or the ones that come after that, again, either NAV1.8 or NAV1.7 alone or in combination or any of those for musculoskeletal pain, we will get them to patients, but we will not be commercializing that ourselves because it is a primary care cell we do absolutely see value there and we see a need to help those patients. But one step at a time. First, neuropathic and acute pain, and that we will do ourselves.

Jessica Fye — JPMorgan Chase and Company — Analyst

Thanks.

Operator

The next question will come from Salveen Richter with Goldman Sachs. Please go ahead.

Salveen Richter — Goldman Sachs — Analyst

Good afternoon. Thanks for taking my question. A two-part here on the acute pain program. With regard to engaging with key decision makers, can you help us to understand the importance of the hospital administrators who are taking into account the legislative tailwinds versus the physician treaters here in the specific verticals that you cited and how they might make or work together here to make a decision? And my second question is what hospitals really need to make an argument for using it in lieu of opioids? And whether outcomes data is required, be it a reduction in recovery room time or lower usage of opioids, or rates of addictions being reported? Thank you.

Reshma Kewalramani — President and Chief Executive Officer

Sure, Salveen, let me ask Stuart to comment.

Stuart Arbuckle — Chief Operating Officer

Yeah. So, Salveen, all of the stakeholders that you described are going to be important in making decisions on the use of new medicine in the institutional setting. So, administrators are certainly going to be important. But as our physician advocates, we are going to advocate based on the efficacy and safety of the medicine.

And the process is a relatively standardized process. It’s not going to be created newly for suzetrigine. This is a standard process that hospitals go through to decide whether they’re going to put it on their formulary and typically go through some sort of P&T committee process where all of the various stakeholders, be it physicians, be it the pharmacy team, the administrators are all going to be making that decision collectively. They’re particularly interested in the use, obviously, within the institutional setting, use in the discharge setting is typically something which is a little bit more straightforward.

And that’s why I suggested in my prepared remarks that we see that as the likely setting where there is going to be the earliest uptake of a medicine like suzetrigine. In terms of some of the outcomes data that you were referring to I think the clearest way of describing is every patient that is treated with Suzetrigine when the other choice would have been essentially providing opioid sparing for that patient. So, that data, in many ways, is kind of already sort of readily available just from the data that we’ve already shared. And I think that data in addition to all the other efficacy and safety data we’ve got is going to be pretty impactful and compelling to the various stakeholders we’ve described.

Salveen Richter — Goldman Sachs — Analyst

Thank you.

Operator

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

Evan Seigerman — BMO Capital Markets — Analyst

Hi, guys. Thank you so much for taking my questions. I’d love to know if you could provide any additional color on how many patients in the United States have gotten their cells collected, and maybe how we should think about the growth of cell collections in the U.S. going forward.

I’m just trying to understand what the trajectory of this could be like this year and next year. Thank you so much.

Reshma Kewalramani — President and Chief Executive Officer

Yeah. Evan, just to set expectations, we’re not going to comment very specifically on patients and exactly where they are in the cell collection process in each region. But I will ask Stuart to give you a little bit of color commentary on what we’re seeing. And if I was stealing Stuart’s thunder, if you really think about when Casgevy was approved, which is December and January, I am so very pleased that the number of ATCs that are activated around the globe and the number of patients who have already started cell collection.

So, is there anything you want to add?

Stuart Arbuckle — Chief Operating Officer

Only that we are expecting the momentum to build based on all of the feedback that we’ve got and the trends that we’re seeing in activations and cell collections, as Reshma said, we’re delighted to have had five cell collections already. As she also mentioned that represents patients in every region in which we are operating, including obviously, the United States, and we expect those trends to continue to ramp up during the course of 2024, which we’ve always said was going to be a foundational year for Casgevy.

Evan Seigerman — BMO Capital Markets — Analyst

Great. Thank you.

Operator

The next question will come from Colin Bristow with UBS. Please go ahead.

Colin Bristow — UBS — Analyst

Hey, good afternoon, and congrats on the quarter. Maybe first on the pain pipeline. I see you’re advancing 993 to Phase 2, could you just give us any sort of color or detail on how you expect this to be differentiated? And does this advancement mean you won’t be taking 973, which I think also recently completed Phase 1? And then if I may, a quick housekeeping one, any inventory moves in the quarter that we should be aware of? Thanks.

Reshma Kewalramani — President and Chief Executive Officer

Colin, let me break that up into two questions. One on inventory, which I will ask Charlie to comment on first, and then I’ll come back on 993 and 973.

Charlie Wagner — Chief Financial Officer

Yeah, Colin, in my prepared remarks, I mentioned that we saw some benefit in the first quarter from phasing of international channel inventory. So, I assume that’s what you’re talking about. That benefit was on the order of $75 million to $100 million in the quarter, and I expect that to begin to reverse in the second quarter.

Reshma Kewalramani — President and Chief Executive Officer

On 993, 973, Colin, this is all part of serial innovation. 993 is a little bit further ahead than 973 in terms of the preclinical package, the manufacturing, and all of the things we need to do to get our medicines ready to go into Phase 2. That’s why that one is ready to go. 973 is just a little bit further behind.

What are we looking for in terms of differentiation? There’s really two major elements other than our overarching serial innovation strategy. But very specifically, one, we are looking for molecules that can be both oral and IV, VX-548 is oral only because our goal here is to on the waterfront and pain management including for those patients who may be just coming out of surgery for other reasons, not able to take by mouth. The second big goal here is to ensure that we have medicines with the right drug-like properties that can be therefore, combined with the NAV1.7, which is also making good progress in preclinical development. So, that’s what we’re really looking for.

And why 993 next, it’s because it’s a little bit further ahead. And 973, we’re going to be working on it just as soon as all of the data are ready there.

Colin Bristow — UBS — Analyst

Great. Thank you.

Operator

The next question will come from Terence Flynn with Morgan Stanley. Please go ahead.

Terence Flynn — Morgan Stanley — Analyst

Great. Thanks for taking the question Maybe a two-part for me as well. I was just wondering if you can give us any insight on a potential presentation venue for the 548 Phase 3 data. And then the second question relates to Casgevy.

I was just wondering any directional insight on pricing and reimbursement in the Middle East. Thank you.

Reshma Kewalramani — President and Chief Executive Officer

Yeah, on VX-548 fall meetings, shall we say, you should expect more data on 548 with those Phase 3 results. certainly not only in Congress form but in publications. So, I’d say fall meetings. And let me ask Stuart to comment on Casgevy in the Middle East.

It is a really exciting opportunity for us.

Stuart Arbuckle — Chief Operating Officer

Yeah, super exciting opportunity for us, Terrence, which is why we provide a little bit more color on it, specifically to answer your question, we don’t provide pricing data at an individual country level, but suffice it to say, the price we are receiving in the existing reimbursement agreements that we’ve signed there reflect the transformative value of the product and the lifetime benefits that patients can accrue from it. And that’s going to be the same kind of philosophy we’re going to have everywhere around the world where we’re commercializing Casgevy.

Operator

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

Phil Nadeau — TD Cowen — Analyst

Good afternoon. Thanks for taking our questions. Two from us. So, first, on the suzetrigine formulary and access discussions.

Stuart, I think you made an interesting comment that you thought enabling reimbursement ahead of opioids in the acute pain setting will be something that government programs could help incentivize or something to that effect. Could you speak a bit more about that? And in particular, are your formulary and access discussions suggesting that in the absence of legislative initiatives, it’s likely that 548 will be reimbursed after opioids in the acute pain setting? And then second, small commercial question. Can you give us some sense of how big Brazil could be for the CF franchise? Thanks.

Reshma Kewalramani — President and Chief Executive Officer

Yep, Phil. I will ask Stuart to comment on both CF in Brazil. You know that we have regulatory approval and reimbursement there, as well as formulary discussions on suzetrigine, but just to make sure we are on the same page. The formulary discussions are separate from our discussions with policymakers, the common theme is that both of those stakeholders and frankly, all of the stakeholders are very aware of the opioid crisis.

They have a high awareness of suzetrigine, and there is enthusiasm for using non-opioids. But those discussions are separate. Over to you, Stuart.

Stuart Arbuckle — Chief Operating Officer

Yes. So, just to add to that, Reshma, what I would say, Phil, is that the policy initiatives that we’ve seen so far are really looking at trying to reduce financial disincentives for patients and indeed for institutions to select a brand in non-opioid in a market which is obviously currently dominated by generic opioids. And so that’s why things like no pain, which is providing an additional payment above the DRG in the outpatient and ambulatory surgical center setting is important there. And then on the patient side, the Alternatives to PAIN Act is looking at in Medicare Part D, ensuring that there are no co-pay disadvantages to a patient for using a branded non-opioid in a market where there are already generic opioids.

So, I’d say that’s the kind of the policy landscape. Those are kind of slightly different discussions that we’re having with the institutions and the stakeholders there, which were much more clinically based on whether this is the right medicine to be used in the patients who are being prescribed and dispensed medicines in the institutional setting. So, that’s how I would describe the difference between the conversations. They’re obviously linked in some ways, but they have a different focus from the policy side to the institutional side.

Phil Nadeau — TD Cowen — Analyst

Maybe just to follow up. The basis for our question is we recently did a survey, and 75% of physicians thought that patients would have to step through a generic opioid. Is that Vertex’s expectation as well?

Stuart Arbuckle — Chief Operating Officer

I can’t really speculate on exactly what’s going to happen with, for instance, 2,000 institutions. But my hope would be that that’s not what’s happening. I don’t think it’s very reasonable to expect a patient to have to step through a therapy which has significant side effect liability, including addictive potential when there is a product available, which has very good efficacy from a pain control perspective and has an excellent safety and tolerability profile, including lack of addictive potential. So, I don’t think that would be something that we would certainly be advocating and I don’t think would be particularly medically reasonable.

I didn’t answer the second part of your question, which was around Brazil. We estimate there’s around 1,500 patients who are eligible for Trikafta. That’s six and over in Brazil, as I mentioned in my prepared remarks, a number of those patients did already have access to Trikafta through named patient sales, but we now have a reimbursement agreement with the national government there, which is going to allow us to launch the medicine and make it available for all of those patients now.

Phil Nadeau — TD Cowen — Analyst

That’s very helpful. Thanks again for taking our questions.

Operator

The next question will come from Olivia Brayer with Cantor Fitzgerald. Please go ahead.

Olivia Brayer — Cantor Fitzgerald — Analyst

Hey, good afternoon. Thank you for the question. What’s your level of confidence that you’ll get priority review in acute pain? And Stuart, I know you’ve talked about the commercial build-out, but what’s your base case for when you’ll start to actually see revenue recognition from that program, and just a quick clarification on Casgevy? Just wanted to clarify that I heard five patients have already finished collection versus just having initiated the cell collection process. Thank you.

Reshma Kewalramani — President and Chief Executive Officer

Olivia, this is Reshma. Let me take one and three, and then I’ll ask Stuart to take the question on where are we exactly with paying commercialization. On number three, again, just to set expectations on Casgevy. We’re thrilled with the number of ATCs, 25 since approval, which has been in just the last few months, and we commented on the cell collection, but we’re not going to comment any further on exactly where each one patient is in their journey.

On VX-548 and acute pain, three things to say. Maybe the most important thing is we’ll know whether or not we’ve received priority review after we complete the submission and then it takes some 60 days or so for the FDA to tell us what the final review timelines will be. However, the leading indicators of whether or not we will get priority review are all quite favorable. We have fast-track status.

We have breakthrough designation and our conversations with the FDA have shown me that they have high enthusiasm for a medicine that has high efficacy and does not have addictive potential. I’ll turn it over to Stuart for the question about where are we with the acute pain launch and when we’re going to be out there.

Stuart Arbuckle — Chief Operating Officer

Yeah. So, the recruitment of our teams is going very well. Obviously, we are in the middle of our rolling submission here. Obviously, once we’ve completed that, we’ll get an indication from the regulators on when we could expect our PDUFA date to be and we are going to be launch-ready in terms of the question around revenue recognition.

This is unlike Casgevy, I would say, which has an extended treatment process where revenue recognition is at infusion. This is a small molecule, and therefore, we’re going to be kind of selling and distributing it in the normal way. And so there really isn’t going to be that kind of lag, I would suggest around revenue recognition that people are aware of with Casgevy.

Olivia Brayer — Cantor Fitzgerald — Analyst

Great. Thank you, both.

Operator

The next question will come from Debjit Chattopadhyay with Guggenheim Securities. Please go ahead.

Debjit Chattopadhyay — Guggenheim Partners — Analyst

Hey, good afternoon. I got a couple. First on IgAN. When Vertex is ready to launch in IgAN, it’s likely Otsuka will have GFR data.

How are you thinking about navigating this commercially? And then on DM1, with the IND cleared and Phase 1/2 underway, do you think myotonia is an approvable endpoint? Or is the agency going to ask for splicing correction with strength or force measurements? Thanks so much.

Reshma Kewalramani — President and Chief Executive Officer

Yeah. Hey, Debjit, let me take both of those. On DM1 or myotonic dystrophy type 1. We actually haven’t had a chance to talk about it extensively.

But this is a program that is in Phase 1/2 in patients. So, we are going to have the opportunity in this study to not only assess safety but to assess efficacy as well. With regard to what the agency might want to see for the endpoint for approval, the real answer is I don’t know yet because we haven’t gotten to that phase in the clinical trial. But your point around is Myotonia possible insofar as this is a disease that is a rare disease, a serious disease, and one that doesn’t have any therapies that target the underlying cause of the disease or very specifically works on the genetic defect, I think that opportunity is there.

And we’ve seen a lot of openness for accelerated endpoints in these kinds of rare serious diseases. On IgA nephropathy, so the most important thing to know about IgA nephropathy is that it’s a serious chronic disease, and this is a disease that over time leads to a decline in GFR and end-stage renal disease, death, or transplantation. The most important thing that I would be looking at as a nephrologist is efficacy because proteinuria is known to translate to GFR and therefore, the decline in renal function. So, if we have a medicine that has high reductions in proteinuria.

And as I said in my prepared remarks, everything that we’ve seen from pove preclinically and clinically through Phase 2 is best-in-class across many dimensions, but certainly including efficacy. I think that’s the drug that physicians will choose.

Susie Lisa — Senior Vice President, Investor Relations

One last quick question, please, Chuck.

Operator

Yes, ma’am. That will come from Ms. Liisa Bayko with Evercore ISI.

Liisa Bayko — Evercore ISI — Analyst

Hi, thanks for squeezing me in. So, just two from me. Just a follow-up on IgA nephropathy. Have you thought any more about how you might highlight having bliss because, in addition to APRIL, I think that’s one kind of key differentiator of this program? And just wondering how you’re thinking about how you could differentiate on that point.

I don’t know if there are biopsies or some kind of different points that you could really highlight the potential benefits of this. And then just for the CF and Trikafta for the quarter, I noticed you had your price increase yet sales looked slightly down quarter over quarter. Can you kind of just describe in the U.S., what’s going on? Is there some higher gross-to-net inventory changes, whatnot? It’d be great for some color there. Thank you so much.

Reshma Kewalramani — President and Chief Executive Officer

Hi, Liisa. Let me take the IgAN question first, and then I’ll ask Charlie to comment on CF. On IgAN, you are correct in pointing out that it’s a dual inhibitor. It’s an inhibitor of BAFF, as well as APRIL.

And this is one of the most attractive features of povetacicept is this dual inhibition. Yes, preclinically, we can certainly share and we have information, and you’ll certainly see all of this with the fullness of time. The inhibition of BAFF and the measurement of that and how we can show that preclinically, we can also do that with APRIL. However, I think the data that’s more interesting is the clinical data, which is already available, and that is with this dual APRIL, BAFF inhibitor on proteinuria, but I’d encourage you to look at the poster from the WCN meeting that Alpine showed, it has proteinuria results.

It has hematuria results. It has GFR results, and it has a composite of remission. And I find those data very, very interesting, particularly the hematuria results clinically because, as you know, hematuria is a hallmark of this disease along with proteinuria. Let me turn it over to Charlie on the question about CF and U.S.

Charlie Wagner — Chief Financial Officer

Yeah, Liisa, on the quarter, I wouldn’t read too much into sequential quarter fluctuations. We saw strong volume growth in the U.S. year over year. As we normally do, we see some seasonal gross to net in the first quarter and the benefit of the price increase really isn’t fully reflected in the quarter that comes throughout the balance of the year.

So, all of those factors affect the comparison. But overall, very, very strong year-over-year growth in the U.S. and outside the U.S.

Liisa Bayko — Evercore ISI — Analyst

Thanks.

Charlie Wagner — Chief Financial Officer

Thanks, Chuck.

Operator

This concludes our question-and-answer session, as well as our conference call for today. Thank you for attending today’s presentation. 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 using replay access code 101-869-68, again, that is 101 869-68. (Operator signoff)

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