Michael Partridge - Vice President of Investor Relations Jeff Leiden - Chairman, Chief Executive Officer Ian Smith - Chief Financial Officer, Chief Operating Officer Stuart Arbuckle - Chief Commercial Officer

Matthew Harrison - Morgan Stanley Geoff Meacham - Barclays Michael Yee - RBC Capital Markets Brian Abrahams - Jefferies Terence Flynn - Goldman Sachs Cory Kasimov - JPMorgan Mark Schoenebaum - Evercore ISI Geoffrey Porges - Leerink Partners Alethia Young - Credit Suisse Ying Huang - Bank of America Merrill Lynch Phil Nadeau - Cowen and Company

Good evening. This is Michael Partridge, Vice President of Investor Relations for Vertex. Welcome to our Fourth Quarter and Full Year 2016 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later we will open the lines for questions. This call is recorded and a replay of the call will be available later tonight on our website. Dr. Jeff Leiden, Chairman and CEO; and Ian Smith, Chief Operating Officer and Chief Financial Officer, will provide prepared remarks this evening. Stuart Arbuckle, Chief Commercial Officer will join us a little later for Q&A. I will remind you that we will make forward-looking statements on this conference call. These statements are subject to the risks and uncertainties discussed in detail in today's press release, our 10-K and other filings with the Securities and Exchange Commission. These statements, including those regarding the ongoing development and potential commercialization of our drug candidates, and Vertex's future financial performance are based on management's current assumptions. Actual outcomes and events could differ materially. Information regarding our use of GAAP and non-GAAP financial measures and a reconciliation of GAAP to non-GAAP is available in the financial results press release. I will also refer you to Slide 4 of tonight’s webcast. I will now turn the call over to Dr. Jeff Leiden.

Thanks, Michael. Good evening, everyone. Earlier this month, we met with many of our investors and analysts at the Annual JPMorgan Healthcare Conference, where we outlined our priorities for 2017. We have three key goals as we enter the year. First: we remain focused on increasing the number of people eligible for and being treated with ORKAMBI. Our progress towards this goal in 2017 will be measured primarily by achieving reimbursement for ORKAMBI in Europe and by the subsequent growth in our 2017 revenues. Second: we’re advancing multiple potential new medicines for CF that may improve treatment and also provide many more people with the first medicine to address the underlying cause of their disease. Over the coming year we expect to obtain data from across our CF pipeline that will mark our progress towards this goal. And third: we’re committed to reinvesting in our pipeline to create future medicines for other serious specialty diseases beyond CF while creating value for our shareholders. Tonight, Ian and I will briefly review some of the key 2017 milestones and activities that support these goals and how our progress will position the company for continued growth in 2017 and beyond. First: to ORKAMBI and our anticipated revenue growth for 2017. With the approval for use in children ages 6 to 11 ORKAMBI is now approved for approximately 11,000 with CF in the United States. Similar to the launch in those ages 12 and older, we’ve seen strong uptake of ORKAMBI in younger patients and believe that physicians recognize the importance of starting treatment as early as possible. Given the large number of eligible children and adults who’ve already started treatment in the U.S. to-date we expect a further growth ORKAMBI in 2017, will come primarily from eligible patients initiating treatment in European countries following the completion of reimbursement discussions. Across Europe, we’ve completed the clinical and health economic assessments of ORKAMBI in key countries and are actively engaged in reimbursement discussions that would enable patients to initiate treatment with ORKAMBI. Importantly we recently reached a formal reimbursement agreement in Germany that we believe reflects the value that ORKAMBI provides to eligible patients. We expect to conclude additional reimbursement discussions in 2017 and anticipate rapid uptake of ORKAMBI following these reimbursement decisions which will drive revenue growth beginning this year. We are confident that it is not a question of if we will achieve reimbursement outside the U.S. but a question of when. Now, to our pipeline of other potential new medicines for CF, our goal is to create new medicines to treat the underlying cause of CF for all people with the disease. We have potential CF medicines in all stages of research and development and expect to obtain important value defining data from across our CF pipeline of age approved and investigational medicines throughout 2017. In the first half of this year we expect to obtain data from the Phase III program of tezacafter in combination with ivacafter in two large groups of people with CF, those were two copies of delta-508 mutation and those with one copy of the delta-508 mutation and one copy of a residual function mutation. These data are intended to support an NDA and MAA submission in the second half of this year. Additionally the Phase III studies are together expected to enroll more than 1,000 people with CF and will thus provide a robust evaluation of the safety of the tezacafter/ivacafter combination, an important consideration for the ongoing development of our triple combination regimens that also contain our next-generation corrector. We have four next-generation correctors currently in clinical development including two ongoing Phase II studies evaluating the next-generation correctors VX-440 and VX-152 as part of a triple combination in people with one copy of the delta-508 mutation and one copy of a minimal function mutation and in people with two copies of the delta-508 mutation. The third next-generation corrector VX-659 is currently being evaluated in the Phase I study in healthy volunteers NCF patients. And the fourth, VX-445 is expected to enter a Phase I study next month. Most importantly we expect to have data in people with CF from three of these studies in the second half of this year. We believe that based on our in-vitro data, a triple combination of a next-generation corrector with tezacafter and ivacafter could provide benefit for any person with CF who is at least one delta-508 mutation, approximately 90% of all people with the disease. 2017 will be a year of multiple important data events that will inform us as to the potential of our CF pipeline to both enhance treatment and also treat many more people in the years ahead. We look forward to updating you on our progress in CF throughout the year. Before turning the call over to Ian to discuss our financial position, I will briefly review the key pillars of our research strategy which is designed to support the creation of future medicines focused on serious specialty diseases that are aligned to Vertex as corporate strategy and core capabilities. First, we’re going to focus on validated targets to address the underlying cause of disease just like we did with CFTR and CF. Second we’re committed to developing assays both at the cell level and in humans that predict clinical efficacy. Third, we’re only interested in discovering and developing transformative medicines for serious specialty diseases. Taken together, we believe this will allow us to identify rapid paths for clinical trials and registration just as we have in CF. With these principles in mind, we’ve refined our internal research focus to ensure that the types of molecules we may discover in research would also be the types of medicines that we would seek to develop and commercialize ourselves. Today we’re focused on diseases in our research labs that are consistent with these research principles including Adrenoleukodystrophy, Alpha-1 Antitrypsin Deficiency, Sickle Cell Disease and Polycystic Kidney Disease. We look forward to updating you on these and other similar programs as they progress over the coming years. With that, I will now turn the call over to Ian.

Thanks Jeff; and hello everyone. Tonight I’ll discuss our fourth quarter and full-year CF revenues and revenues for ORKAMBI and KALYDECO. And I will also review our 2017 financial guidance. Our total CF product revenues in the fourth quarter of 2016 were $454 million, compared to $401 million for 2015. Our full-year 2016 CF product revenues were approximately $1.68 billion a significant increase compared to $982 million for 2015. For ORKAMBI, we reported fourth quarter 2016 product revenues of approximately $277 million, a significant increase compared to $220 million for the fourth quarter of 2015. Full-year product revenues for ORKAMBI grew to $980 million in 2016 from $351 million for 2015. 2015 revenues for ORKAMBI reflect two quarters of sales following the approval of the medicine in the U.S. in July 2015. Fourth quarter KALYDECO sales were $177 million compared to $181 million for the fourth quarter of 2015. Full-year product revenues for KALYDECO grew to $703 million for 2016 from $632 million for 2015. Now to operating expenses. Our fourth quarter 2016 non-GAAP combined R&D and SG&A expenses were $295 million compared to $282 million for 2015. Our non-GAAP net profit for the fourth quarter of 2016 was $88 million or $0.35 per diluted share compared to a non-GAAP net profit of $44 million or $0.18 per diluted share for 2015. From a balance sheet perspective, we ended 2016 with approximately $1.43 billion in cash, cash equivalents and marketable securities. As part of the recently announced out-license agreement with Merck KGaA, for our oncology portfolio, we will receive an upfront cash payment of $230 million that would add to our current cash position in the first quarter of 2017 further strengthening our financial position. This agreement and the related upfront payment, is subject to the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act. As we significantly added to our cash position over the recent months, we remain highly focused on reinvestment into our business to support our future growth. Internally, this means we will continue to invest in key research programs to create future medicines and externally, this means business development efforts will remain focused on bolstering our position in CF, expanding our non-CF pipeline with early stage external assets and expanding our access to important scientific technologies that could represent transformative future changes to medicine. Now to the financial guidance for 2017 which we discussed in detail in our JPMorgan press release. For ORKAMBI we expect $1.1 billion to $1.3 billion in total net product revenues. The low-end of this range reflects potential revenues from markets where ORKAMBI is currently reimbursed including the U.S. in eligible patients ages 6 and older, and outside the U.S. mainly in Germany, in eligible patients ages 12 and older. The high-end of the range reflects an estimated potential, additional European revenues in 2017 that is largely dependent on which European countries complete reimbursement agreements in 2017 and when these agreements become effective. Stated differently, revenue growth for ORKAMBI will be driven primarily by the completion of reimbursement discussions in Europe later this year. We continue to expect our first quarter 2017 ORKAMBI revenues will be similar to the fourth quarter 2016 given the majority of eligible patients in the U.S. have initiated treatment. For KALYDECO, we expect $690 million to $710 million in net product revenues. As the majority of all patients eligible for KALYDECO have initiated treatment, further growth for KALYDECO revenues will only be driven by potential U.S. approval for treatment of people with residual function mutations. Additionally, we expect to combine non-GAAP R&D and SG&A expenses of $1.25 billion to $1.3 billion for 2017 compared to $1.2 billion for 2016. This reflects investments in our CF pipeline and in our global infrastructure for KALYDECO and ORKAMBI. Our path to treating many more people with CF which will result in significant and sustained revenue growth is clear. Importantly, as our revenues grow over future years, we’re committed to managing our operating expenses to drive earnings and operating margin growth. With that, I will open the line to questions.

[Operator Instructions]. Our first question comes from the line of Matthew Harrison from Morgan Stanley.

Great good afternoon I appreciate it, thanks for taking the question. Can I ask on the VX-150 not an area that I think a lot of us are as familiar with can you put any context what you see as the sort of key competitive hurdles and how you plan to further develop that compound?

Yes, this is Jeff, thanks for the question Matthew. This is the first time we’ve really spent a lot of time talking about this, looking at the clinical results. Maybe to start-off and take a step-back and remind you that obviously pain is an enormous indication actually multiple indications around the world that really hasn’t been a novel pain mechanism of action probably in 40 or 50 years. And obviously the recent attention on some of the side-effects with pain medicines line opioid has made that even more urgent problem. You probably also know that the NAV channels are interesting because both NAV 1.7 and 1.8 has been validated genetically in humans, meaning that patients who have homozygous loss-of-function mutations in 1.7 really don’t feel any pain as those of the famous fire-walkers and patients that have various gaining functions in 1.8 have hyperacute pain syndromes. So, one of the reasons that are exciting to us is, as they’ve hit the Vertex strategy of having a validated target in the area of large unmet need where if you had a medicine that could have that kind of pain efficacy without the pain side-effects some of the others you’d obviously have a very important new medicine for patients. So that’s sort of the background. We’ve been working on 1.7 and 1.8, actually for some time in our San Diego labs, this is the first one of those molecules we’re bringing forward 1.50 to 1.8 inhibitor. And in this study which was a double-blind randomized placebo-controlled crossover study which is probably the most powerful kind of study in pain because of the placebo effects. What we saw was the statistically significant reduction in pain using the WOMAC scale and also a number of other secondary end-points that were all consistent with that. And the tolerability profile that actually was quite good in 124 patients. So that tells us that works in just kind of chronic away pain again as very different as you know from acute pain and it’s very different from neuropathic pain. And so, in order to fully understand the profile of this molecule, our plan is to take it forward in a couple of more exploratory studies one of two pain studies this year and then one in neuropathic pain probably starting later this year or over the next year. When we have the results from those we’ll really understand what we have here and then we could really make decisions about how to bring it forward to patients most quickly, and these different indications what are involved with the potential involvement of the partner might be etcetera. All those questions are little bit premature. I think you should really take away, it’s yet another novel mechanism of action potential transformative medicine to come out of the labs and because of that large unmet need, we’re excited about it.

And just for clarity why not move, it ahead in LA right now, is it because of the competitive landscape or because of commercial considerations including partnering?

Yes, great question. I think in pain, with the experiences that I’ve had in my career, you really want to understand the molecule fully to understand how you develop it to its fullest potential for patients. And while we could take it forward in LA now, which is a large study and actually would probably not be consistent with our commercializing it. I think we’re going to do, we’re going to create a lot more value as we first fully understand the mechanism across for three different types of pain, then we can make a really rational development plan. And I still think we have a nice competitive position even while doing that.

Okay, great thanks

Thank you. And our next question comes from the line of Geoff Meacham from Barclays.

Good afternoon guys. Thanks for taking the questions. So, when you look at the 661 data in the first half, is it more important in the near term to have a new product cycle for ORKAMBI or are you guys thinking about this as being the cornerstone of a triple, I guess more of a focus on, is it more of a focus on limiting Bronchoconstriction rather than higher FAB one? And I have a follow-up too.

Yes, thanks, Geoff. As you know, we’ve always talked about 661 is having at least three goals. One, exactly as you said is if it had an enhanced benefit tolerability profile and delta-508 to delta-508 that are currently being treated with ORKAMBI, obviously that would be important because we do have a subset of those patients that has not been able to tolerate ORKAMBI due to respiratory effects and we’d be able to reach more of those patients with such a combo. The second purpose really is around those patients who are on KALYDECO monotherapy because they have a gating residual function mutation; remember 90% of those patients have delta-508 and other allele. And so, if you could add tezacafter to ivacafter in those patients and produced enhanced benefit that would obviously be very, very important for those patients. And you’ll remember that we actually published a Phase II study a couple of years ago a small number of patients but it was impressive and that it showed adding tezacafter/ivacafter in those patients added an additional about 4.6% increase in the FEB-1 and that was a significant result. If we could reproduce that in our residual function and gating mutations in this larger study that's going to be very important for that population of patients and obviously somewhat important competitively as well since we try to move most of those patients on to the double regimen. And then the final one, just as you said is the basis for the triple regimen and here we’re going to have 1,000 plus patients of safety data in particular on 661 plus ivacafter meaning that two of the three components would have been fully vetted in our combination and we would only have to add the one component the next-gen corrector which we think moves that program ahead considerably and also gives us a pretty nice competitive advantage. So I think about it with those three different perspectives and frankly all of them are important but anyone of them could be successful.

Got you, okay. And Jeff I know you guys have talked about the productivity of your technology when you look at generating new correctors. What would you say is the optimal number of leads or backups should we expect to see more going into Phase I, just that JPM obviously we added 445 to the pipeline but is for Next-Gen enough?

Yes, I mentioned that we literally have hundreds of these now obviously, we’re not going to bring hundreds forward into the clinic. We’re bringing forward molecules that we think have particularly interesting and advantageous properties compared to what is there. My hope is that at some point maybe relatively soon we’ll stop because one of these looks very, very good as it goes through Phase II and we’re ready and off to the races and it's going to be hard to improve on it, sort of like KALYDECO was an example. But until we see the data, I’m just happy to have multiple swings at the ball and I think you can expect potentially to see even another one come this year depending on the data that we start to generate.

Okay, great. Thanks.

Thank you. And our next question comes from the line of Michael Yee from RBC Capital Markets.

Thanks, I have to two questions. One is following up on 661 on the efficacy side of the equation. Do you guys have confidence that it’s at least as good as ORKAMBI? And if it was not for some reason given there's only been short-term studies, is there a rationale for not filing in that situation and just using it as a triple, if it was lower with that change of confidence on the triple overall? And then the second follow-up question is, as you are mentioning a lot of comments around business development which we appreciate. Are you pretty focused on very early stage stuff or should we not be surprised if you do something different than early stage? Thanks so much.

Yes, Mike, this is Jeff. I’ll take the first one and then Ian can take the BD question. With respect to 661 and efficacy, obviously the reason we’re doing the study is to get the final answer in a large number of patients. But the reason we’re doing this study is that our Phase II data just supports the notion that it has an efficacy profile that was as, good or better than ORKAMI. And we’re going to find out a large number of patients for longer now. With respect to I think just sort of asking what would be a positive or what would be a good result, I thought I’d interpret your question. A good result to me would be a drug that’s approvable with enhanced benefit tolerability profile in one of those groups of patients that I told you about that would be success and the safety database that was consistent with taking it forward as part of the triple.

Yes, Michael, two BD questions. As I’ve said many times on this call, it’s really a three-pronged approach. Firstly, we look at most things pretty much everything that’s involved with cystic fibrosis that may be complimentary to how we’re progressing, our own medicines. And we actually - usually get the opportunity to work with a lot of those, let’s call them other ideas internally in our labs in San Diego and run them through our assays. So we get a pretty good look at how to progress in the area of CF that is number one priority. Secondarily I’d say that the last couple of years we’ve also understood how we may expand our scientific footprint and couple of markers for progression there, the two deals, recently one with Moderna Therapeutics and the other with CRISPR for gene editing and they’ve allowed us different modalities, different approaches to solving some of the problems we’re trying to solve. And then to your point, there is a third like to our BD approach in corporate development and that is potentially in licensing, potentially smaller M&A, but it is really focused on early-stage. Our priorities today in the business as I said is about growing our, as well as growing our revenues but growing our cystic fibrosis franchise and expanding scientific modalities. And if we can expand our efforts into other diseases, we will at the right time.

Okay. Thanks that's helpful. I appreciate it.

Thank you. And our next question comes from the line of Brian Abrahams from Jefferies.

Hi, thanks very much for taking my questions. Two questions, first, I wonder if you had any updated sense of how compliance persistence and tolerability in the 6 to 11-year-olds, compares to adults. And secondly I know you’ve mentioned that the NDA for tezacafter and KALYDECO would include data from the het/min study that was discontinued. I just wanted to follow-up and see whether at this point you had received the data and if you could potentially provide any general sense as to trends on lung function or biomarkers or perhaps rates of A&E including bronchoconstriction how those looked relative to prior ORKAMBI Phase II in the het/min population? Thanks.

Hi Brian, it’s Stuart here. I’ll take the question on 6 to 11 compliance and persistence. And really it’s too early to tell in that population in terms of actual data from the real world as it were. There are some reasons to be optimistic that it could potentially be better than in the 12 plus population, couple of reasons for that, one we know from the clinical data that we have generated in 6 to 11 population that we do see less of the respiratory adverse events that we know were, so important to some of the early discontinuations we saw with ORKAMBI in the adult population. In addition, we also know from KALYDECO and indeed from many other chronic therapies that compliance in the 6 to 11 patient group not surprisingly because of the parental supervision tends to be as high as it is, if not higher than it is in any of the patient group. So, we don’t have actual data really that’s mature in the real world but I think there are some reasons to be optimistic that it could be higher than in the adult population. And for the second part of your question, I’ll hand that over to Jeff.

Yes, hi, Brian. So, I think the second part of your question was about the het/min data from the tezacafter trial, yes, we’ve seen that data, by the way the data safety monitoring board has also evaluated that data. At some point we’ll publish it I’m not going to go into detail, I will just say that there were no new or concerning safety signals seen in that population of a little over 100 patients.

Thanks.

Thank you. And our next question comes from the line of Terence Flynn from Goldman Sachs.

Hi, thanks for taking the question. Maybe first just Stuart to follow-up, can you tell us what's embedded in your ORKAMBI guidance for assumptions on persistence and adherence in younger population?

Terence, I’m actually going to take that question. We provided guidance for ORKAMBI at JPMorgan as you know, that was $1.1 billion to $1.3 billion. The assumptions are underneath the model, what we’ll do more towards providing you with revenue guidance and then also updating you on timing as we gather reimbursements at the different markets. Just a quick commentary to the $1.1 billion to the $1.3 billion though, the $1.1 billion that’s the low-end of our guidance range is principally from the U.S. markets that does assume some growth in the 6 to 11 population, so it also does assume that there are some loss of patients due to the chronic nature of this medicine. And then the growth beyond the 1.1 or towards the 1.3 potentially above it if it’s possible will be driven by European reimbursement and approvals in the different markets and a key contributor to the growth of the revenue line in 2017 will be France.

Okay, thanks Ian. And then just maybe one on the pipeline I think you’re expecting VX-371 plus ORKAMBI Phase II data in the mid-point of the year. Maybe just help remind us what you guys want to see to move forward with that combination or assuming maybe you’d move forward with 371 plus 661 KALYDECO?

Well, I’ll take that Terence, first of all I appreciate you recognizing, it was a transaction that we did in terms of in licensing because there was something that’s going to one of the questions that was earlier on the call where we were able to scan the landscape the CF medicines and we weren’t able to work with [indiscernible] and we saw in-vitro e-NAV inhibitor [ph] together with our own medicines we actually saw an additive benefit in our in vitro assay. So, that's why we move forward with that transaction. We’re happy to say we’re now in Phase II where we are studying inhibitor with ORKAMBI combination in 508-508 patients and we expect that data in the second half of the year. Data to move forward obviously we want to see a proof of concept of the combination of inhibitor with ORKAMBI in the 508-508 patient and we’ll be looking for risk-benefits and progressing based on that proof of study concept.

Okay. Thanks a lot.

Thank you. And our next question comes from the line of Cory Kasimov from JPMorgan.

Hi, good afternoon guys thanks for taking the question. I actually have two of them for you as well. I guess, first of all now that the list price has been published in Germany can you discuss how that may or may not impact or facilitate pricing discussions with other European countries? And then the follow-up is just curious when we could perhaps expect to start hearing of progress on the gene editing and/or mRNA fronts? Thanks.

Sure Cory. As I said we have come to a pricing agreement with the German authorities at the backend of last year which became public in the middle of this month and we're pleased to have reached that point with the German authorities. In terms of the impact it's likely to have on other negotiations both firstly it shows that we're able to come to an agreement with a very major market in Europe, it certainly puts a benchmark out there in terms of a price because the price is in the public domain. And I hope it’s certainly going to encourage other governments in the interest of the patients in their countries who were waiting to get access to this great medicine that it’s going to encourage them to act with a sense of urgency. Exactly what that means kind of quantitatively is really very hard to say but hopefully it encourages other governments to act as the German government has.

And Cory I'll take the second part on gene editing and RNA therapy. As you remember with the CRISPR collaboration and gene editing is multi- indication collaboration with fixed indication that we can choose from. We’ve announced two which is CF and hemoglobinopathies, you’ve probably seen the CRISPR has recently announced their intention to try to get the hemoglobinopathy program into the clinic later this year we’re really pleased with how that's going that's obviously a bit of an easier progress because of the gene editing. We're continuing to work on CF and as we get products that we think are approaching the clinic we’ll start to tell you about them. Somewhat similar is Moderna, Moderna has been a more recent collaboration where we are looking at CF only right now and as we get products that actually we believe to move into the clinic we’ll start to give you updates on some of those time lines.

Okay. Thank you.

Thank you. And our next question comes from the line of Mark Schoenebaum from Evercore ISI.

Hi gents, thanks for taking the question. I was wondering back on ORKAMBI could you just give us an update as to where you guys are in French negotiations and remind us how big that market is. And then I think the news on 150 is great today so just a question to make - reduce my workload because I'm lazy. Is there anything else outside of CF that we could see this year that could just kind of pop up like this that we should be aware of? And thanks for everything while I was out guys thanks for helping out my team.

Yes, Mark, first of all, this is Jeff. Welcome back, that’s most important.

Thank you.

I’m going to let Stuart answer your first question I’ll come on your second one.

Hi Mark, so in terms of where we are in France. You know these negotiations while they’re kind of different country by country, all fall in the same process. They have a clinical benefit assessment, the health technology assessments and then a pricing negotiation. And in France, as with most of the other markets in the EU, we are in that third phase of negotiations with France talking about the specific pricing and reimbursement parameters. So that’s the phase that we’re in right now. And obviously we’re looking forward to try and bring those to a successful conclusion for the patients in France. Many of them are already enjoying the benefits of ORKAMBI.

Let me take the second part of your question Mark, I don’t want to give all the thunder, we like some of these surprises. But just to give you a little bit of the landscape. First of all, as you know we out-licensed flu compound to J&J, they’ve been progressing that compound nicely. And so it’s possible that over the next year or so you’ll start to hear some more proof of concept there. Let them speak to the timelines but I think it’s possible. Oncology, we just out-licensed four assets to Merck KGaA. One of those is in Phase II and again depending on how they’ve progressed the program I think you could hear some proof of concept there. Obviously the proof of concept, most importantly for us is going to be the proof of concept studies with the next-gen correctors which you’ll definitely hear in the second half of this year. And then I would say stay tuned for maybe another program or two to enter the clinic this year, but we’re going to surprise you with those.

And then a question for Ian. Ian, are you sporting a beard these days or no beard?

Welcome back Mark, I’m not sporting a beard.

Take care. Thanks guys.

Welcome back Mark, good to hear you.

Thank you. And our next question comes from the line of Geoffrey Porges from Leerink Partners.

Thanks very much for taking the question. First, Stuart or Ian could you give us a breakout of revenue for KALYDECO and ORKAMBI U.S. and ex-U.S. and then the updated patient starts to products if you will? And then secondly just going back to the 150 and the pain target, I’m just looking at your own pipeline strategy criteria Jeff and wondering how developing a treatment for osteoarthritis fits with these criteria particularly given the target its early stage it's really a widespread disease it's a chronic indication. So should we assume that ultimately that might be a partnering candidate as well given that strategic focus?

So Geoff I’ll answer on the U.S. ex-U.S., in Q4 of the $177 million that we reported for the fourth quarter $101 million of that was in the U.S., $76 million of that was ex-U.S. so that's the KALYDECO Q4 numbers and that was essentially the same split for the full year. For ORKAMBI of the $277 million in Q4 $248 million of that was U.S. and $29 million of that total was ex-U.S.

And the 150 question, sort of, I thought your question is about strategic commercialization, sort of divided into two parts. There is our research strategy I think you’ve probably heard me and David R Schuyler talk about a fair amount over the last year or so that is the focus on serious disease with unmet needs, so we’ll get validated targets we’re going to have assays take response, we could make a transformative medicine. And actually pain in general and NAV channels fit those beautifully, by their fully validated target in serious disease with large unmet need where you can transformative medicine. Then you come to the commercial and development strategies. Pain is an area we could develop but pain isn’t really one disease as I said, pain is a number of different diseases, OA is a very different disease as you know from neuropathic pain, imagine from acute pain and there are different medicines that work with different degrees of efficacy in those diseases. And so I would think of pain as a legacy program that fits our scientific strategy extremely well and depending on what the profile of the drug is might fit parts of our commercialization strategy or might be more appropriate with the partner but until we know the whole profile which is sort of easy and cheap to determine at this point we won't be able to come up with a strategy for how to create the maximum value from the assay once we do I think it will be pretty straightforward actually.

Great. Thanks everyone.

Thank you. And our next question comes from the line of Alethia Young from Credit Suisse.

Hi guys, thanks for taking my question. One on 661, just when you saw the power in the study for 661 homozygotes, were they kind of different assumptions than how you thought about it with 809? And the reason why I ask is if I recall correctly, I thought the 809 had two arms where you get to split the power. And then I have one quick question on the residuals.

Yes, so on the 661, strategy the positive sides of the homozygous study which I think is what you’re really asking about was driven more by the necessary size of the safety database that it was by the powering for efficacy. Because obviously we need a total safety database which includes all the different trials, fits the business sufficiently large to get approval. And the biggest part of that turned out to be the homozygotes because they are the biggest population and the easiest to enroll the fastest so that's what really drives the size of that study. It is highly powered as it is.

And then just on the residual study that’s underway like 661, I know you said you’re still in discussions with the FDA but I guess maybe can you help us think about what might be compelling data or file-able data more specifically?

Sure. I do want to separate those tow a little bit. The discussions that we’re having with the FDA now are really around KALYDECO monotherapy, based upon our initial submission which contains a lot of in-vitro data in the 23 different mutations as well as small clinical study. And as you know, we received a complete response letter from that initial application in February of last year and we’ve been in discussions with them since then because we feel that there is sufficient data to very clearly show that the drug works as monotherapy in those patients, so that’s one set of discussions which you should think of it separate from the new trials that we’re talking about. The new trials that you’re talking about are part of the 661 program, and that that particular residual function trial there is a placebo arm, KALYDECO monotherapy on and a KALYDECO plus tezacafter arm. So we’re going to actually be able to see, compare those three if you will. And that data would hopefully provide the basis for submitting either KALYDECO monotherapy or dual therapy or both in the U.S. and Europe and that’s the data that we’ll see in the first half of this year. Is that clear how the two things are moving.

Yes, that’s helpful. Thank you.

Thanks. Operator we have time for two more questions.

Certainly. Our next question comes from the line of Ying Huang from Bank of America Merrill Lynch.

Hi, thanks for taking my question. Number one I want to probe a little more about these 6 to 11-year old in the U.S. given the number at about 2,400 patients, I'm a little surprised that you do not expect much incremental growth for ORKAMBI from 4Q 2016 to 1Q. And then I have another question on the VX-659 because the trial product has been posted on [indiscernible], you guys are excluding patients or healthy volunteers with any childbearing potential so just curious did you observe any preclinical reproductive molecule or not? Thanks.

Hi Ying, it’s Ian, remember JPMorgan I think you asked the very same question. We provided guidance in 4Q actually, and that was we stated we expected Q1 for ORKAMBI to be similar to that of Q4 2016. And in that assumption we’re trying to help folks like yourself understand how the revenues may flow in 2017 with helping you understand that the low-end of the guidance is still revenues are coming from those approved markets and those approved indications or patient categories that are already here. Within that assumption, there is some expectation of growth but we’re already treating the vast majority of the patients within those categories. So even though we may add new patients, new growth, it is somewhat offset by the loss of patients that are already currently on the medicine, they work currently on the medicine. And we’re also trying to help you understand that as we go out through the year, as the low-end of the guidance is 1.1, we do expect that to be the kind of the exit run-rate to 2016 and the earlier part of 2017 because we anticipate the growth which would be mainly from ex-U.S. markets and principally Europe that would be in the second half of the year as I mentioned earlier on the call a key contributor to that is actually France. So we’re still in the same position in the same discussion we had back at JPMorgan.

So Ying Huang, 659, question on report tax, we don’t have the pre-clinical report tax data yet, and so exclusion nearly represents a typical caution until we have that data.

Got it. Thank you.

Thank you. And our final question for today comes from the line of Phil Nadeau from Cowen and Company.

Good afternoon. Thanks for taking my questions and fitting me in. Just two, I guess, first, on Germany. In the past, at some point you saw that there was maybe some hesitation among physicians to prescribe ORKAMBI to patients in Germany without a final price. So, I’m curious whether you think that impediment continues to exist and now that you have that final price, would there be an uptick in the Eastern Germany? That’s the first question. And then the second question is on the study we’re looking at KALYDECO plus tezacafter versus KALYDECO and placebo and the residual function of patients. Is there any requirement for that study to how a benefit of KALYDECO plus tezacafter over KALYDECO monotherapy alone or is it the really compare versus placebo in order for them to be able to be secured? Thank you.

Okay, Phil, its Stuart here. I’ll take your question on Germany. Actually we don’t believe that the hesitation to prescribe has been due to uncertainty about the final price that we would agree in Germany. The relatively slow uptake we’ve seen in Germany I think is due to a couple of things. Notably the lack of experience many centers had with CFTR modulators at the launch of KALYDECO because of the fragmented nature of the market and because in general a more conservative nature and approach to new medicines in Germany in that market compared to other markets in Europe. And so, I’m not really expecting the fact that we’ve been able to reach a final pricing agreement with the German authorities to significantly change the perception of ORKAMBI in the eyes of German physicians.

Phil this is Jeff, on your 661, residual function question, each of the arms KALYDECO monotherapy and 661 plus KALYDECO would be compared to the placebo arm. And in terms of what would be required to get approval is really going to depend on the profiles of each of those. So it’s not only about efficacy, it’s about tolerability, it’s about the overall profile. So when we see the data I think we’ll be able to give you a pretty good sense of which direction we’re going to take that.

Great. Thanks for taking my questions.

That will conclude our call. This is Michael Partridge. Thanks for your questions tonight. Thanks for tuning in. The investor relations team is available for any follow-up that you have after the call. Enjoy the rest of your evening.

Ladies and gentlemen, thank you for your participation in today’s conference. This does conclude the program. And you may now disconnect. Everyone have a great day.