Michael Partridge - Senior Director, Strategic Communications Freda Lewis-Hall - EVP, Medicines Development Kurt Graves - EVP, CCO, Head of Strategic Development Ian Smith - EVP and CFO Joshua Boger - President and CEO

Geoffrey Porges - Sanford Bernstein Rachel Mcminn - Cowen Steve Harr - Morgan Stanley Meg Malloy - Goldman Sachs Yaron Werber - Citi Geoff Meacham - JPMorgan Annabel Samimy - UBS Brian Abrahams - Oppenheimer Liisa Bayko - JMP Securities Howard Liang - Leerink Swann Tom Russo - Baird Alan Carr - Needham Terence Flynn - Lazard Capital Markets Jason Zhang - BMO Capital Markets Jason Kolbert - SIG

At this time I would like to welcome everyone to the Vertex Pharmaceuticals conference call. (Operator Instructions) Michael Partridge, are you ready to begin?

Yes.

Thank you. You may now begin your conference.

Good evening, this is Michael Partridge. Welcome, everyone, to Vertex's second quarter 2008 conference call. On today's call, we will review key recent developments in our business. First, we'll discuss the emerging broad product opportunity for telaprevir, which is based on clinical results and treatment-naive hepatitis C patients, as well as HCV patients who failed to achieve viral cure with prior therapy. We will also discuss interim data that supports the continued evaluation of twice-daily dosing of telaprevir. Next, we will review other drug candidates directed at important diseases, particularly VX-770 for cystic fibrosis, and then, we'll review second quarter financial results, our mid-year financial profile, and second half financial forecast. In 2008, we have made important progress in our business. We have moved our clinical pipeline forward with our key HCV and cystic fibrosis product candidates, and we have financially strengthened our business by adding approximately $550 million of new capital through a capital raise, and the monetization of a non-core financial asset. Joining me on the call today to discuss these topics are Dr. Freda Lewis-Hall, our Executive Vice President of Medicines Development, Kurt Graves, Ian Smith, and Dr. Joshua Boger. I'll remind you of the following. Information discussed on this conference call, includes forward-looking statements which are subject to the risks and uncertainties discussed in detail in our reports filed with the SEC, including our 10-K. GAAP and non-GAAP financial measures will be discussed on this call. Information regarding our use of non-GAAP financial measures and reconciliation of those measures to GAAP is available in our second quarter 2008 financial press release, which can be accessed at www.vrtx.com. Unless otherwise noted, all 2008 expenses and guidance discussed in this call are inclusive of stock-based compensation. As always, you can visit our website to listen to the conference call and view our PowerPoint presentation or download a podcast. Lastly, after our prepared remarks, we will take questions. Following our call, our IR team joined by Ian, Kurt and Freda will be in the office to answer any additional questions that you have. I'll now turn the call over to Freda Lewis-Hall. Freda is the newest member of Vertex's Executive Team. She joined us in June from Bristol-Myers Squibb, where she was Senior Vice President of U.S. Pharmaceuticals and Medical Affairs. Freda also served on the BMS U.S. Operating Committee and on numerous internal governance teams. We welcome Freda, and we look forward to you getting to know her. Freda Lewis-Hall: Thanks, Michael. It's an exciting time to join the company, and I'm pleased to have the opportunity to contribute to telaprevir's development, and lead the development of Vertex's other emerging product candidates. In my prepared remarks today, I will briefly summarize our recent progress with telaprevir in hepatitis C and VX-770 and cystic fibrosis. I will also provide a perspective on the remainder of the year. Important data have emerged from telaprevir's development program that have given us insights on the potential product profile, and has informed our development program. We're excited to have embarked on our Phase 3 program. In treatment-naive genotype 1 HCV patients, we are well under way with our pivotal study ADVANCE. This study is focused on 24 weeks of therapy, and is on track to complete enrollment in the fourth quarter of this year. We are also on track to begin in the third quarter, a 450-patient study in the treatment-naive population that will include an evaluation of 24 and 48-week telaprevir based regimens. In treatment-failure patients, European agencies have agreed to the start of Phase 3 in this patient population, and we're engaged in discussions with the FDA to transition to Phase 3 in the US. We expect to start the global Phase 3 program this quarter. Our progress in the treatment-failure patient population is supported by the impressive PROVE 3 and Study 107 interim results. I'll now turn to the 12-week interim results disclosed today from Study C208, an exploratory clinical trial evaluating twice-daily dosing of telaprevir based combination therapy. This four-arm Phase 2 study is evaluating telaprevir dosed at 1125 milligrams every 12 hours, compared to telaprevir dosed at 750 milligrams every eight hours in approximately 160 patients. In the study, telaprevir is being dosed in combination with ribavirin and Pegasys or PEG-INTRON. The available interim data from this study support continued clinical evaluation of twice-daily telaprevir dosing. Specifically, from a safety perspective, the interim analysis shows that the type and frequency of adverse events across the study arms were generally consistent with the previous studies we've conducted with telaprevir. In addition, we did not observe any substantial differences in safety profile between twice-daily and three times daily dosing regimens. In terms of antiviral activity, at week 4 and week 12, the interim analysis showed greater than 80% of patients receiving either twice-daily or three times daily telaprevir plus Pegasys and ribavirin had undetectable HCV RNA. We expect that a more detailed presentation of the interim data from the current study will be presented at a medical conference later in 2008, and based on the completed study results, we're discussing with Tibotec, different options of how to best advance this dosing opportunity within the context of our broad development program. Now briefly to our two cystic fibrosis development programs. I'll start with our current Phase 2a trial for our potentiator compound, VX-770. In the second quarter, we started the 28-day Part 2 portion of the trial, which will dose VX-770 in patients with a mutation known as G551D. Enrollment in this study has been rapid and is now complete with 18 patients. The primary endpoint in this study is safety, with secondary endpoints that were included to determine if a potentiator compound could improve the function of the defective CFTR channel that is responsible for CF. We look forward to completing dosing of the 28-day study in the third quarter of this year, with data by the end of the year. We expect to present data from the 28-day study at a future medical meeting. Now, let me briefly review results from the 14-day, Part 1 portion of the Phase 2 study. In June, we presented results of 20 patients at the European Cystic Fibrosis Society Annual Meeting. The results presented showed an average improvement in lung function of 10% with the highest dose of VX-770 at the end of 14 days compared to pre-treatment. There was no improvement in the placebo group. In addition, results showed that VX-770 improved CFTR function as measured by significant reductions in sweat chloride levels, and changes in membrane potential in the nasal passageway. We currently are engaged in a constructive dialogue with US and EU regulatory authorities about the path forward for VX-770. Impending positive results from the 28-day study, we believe we will be in a position to agree with the authorities on the initiation of a registration program for VX-770 in 2009. We're also conducting two Phase 1 trials in healthy volunteers with VX-809, a corrective compound for CF that based on its mechanism could treat a greater number of patients living with this disease, including patients with a Delta F508 mutation. Depending on the results from these trials, we would look to progress into a single PK and safety Study of VX-809 in patients with CF by the end of the year. Our research group is continuing its high level of productivity, and had advanced other early stage compounds including our next generation protease inhibitor for HCV, and a JAK3 compound for immune-mediated diseases. In summary, we have made important progress with our late stage opportunities in HCV and CF, and remain focused on advancing these programs. I look forward to updating you on data coming out of our program throughout the year. I'll now turn the call over to Kurt.

Thank you, Freda and good evening everyone. As you can imagine, the first half of 2008 has been an exciting time at Vertex as we've advanced our business quite significantly. With our lead asset telaprevir, we're well into late stage developments, and at the same time, we're generating new treatment-failure data, and interim twice-daily dosing data that have the potential to strengthen telaprevir's commercial potential and competitive profile. The treatment-failure results to-date have really impressed our key opinion leaders and external advisors. It's fair to say, that these results have exceeded internal and external expectations. From a broader program and portfolio management perspective, we've also met our pipeline objectives, and milestones to-date regarding advancement of our second generation protease inhibitors, our two CF, programs and the initiation of our first clinical study in our JAK3 program. While we're pleased with the pipeline progress to-date, I also want to assure you that we remain highly focused on our top strategic imperative. That imperative is to build leadership in HCV by delivering the best-in-class profile for telaprevir, getting it to market quickly with a competitive label, and then building around our telaprevir position with potential deals and collaborations aimed at establishing the leading STAT-C franchise in the category. The progress we have made to strengthen telaprevir's profile in the first half of the year can be broken down into three key areas: First, the opportunity in treatment-naive patients; secondly, the opportunity in treatment-failure patients; and third, with interim data that further support clinical evaluation of telaprevir in a twice daily dosing regimen. While final results and more studies may be required, all three of these support the broad potential of telaprevir in treating this serious disease. In treatment-naive population, telaprevir has shown unprecedented SVR rates ranging between 61% and 68%. And that's with a treatment duration that cuts standard treatment times in half for the majority of patients. The recent results in treatment failure patient population, estimated now at over 300,000 patients in the US alone are even more compelling, particularly in light of the extreme difficulty of successfully retreating these patients, and the high levels of unmet need in this patient population. If you take a step back and look at our treatment failure-data to-date, there are at least three things that we are seeing in our PROVE 3 and Study 107 trial results. First, we're seeing the potential of telaprevir to be effective across all categories of treatment-failure patients, no responders, partial responders, and relapsers. This bodes very well for the value proposition of telaprevir in the most high unmet need segment of this market. Second, in PROVE 3, we've seen a 73% SVR 12 rate in the relapser population, the highest SVR 12 rate seen to-date with telaprevir, and a 41% SVR 12 rate in the non-responder population, which is critically important because the historical success rate in these patients is 10% to 15% at best with re-treatment. We still see a need for final SVR 24 data from these trials but these results are very encouraging. And thirdly, telaprevir really stands out in treatment-failure patients, especially in non-responders where other STAT C agents have failed, and existing therapies just don't hold much, if any promise for patients. The non-responder population poses a significant healthcare issue as we know from recently published studies including a study published in Annals of Internal Medicine in November, that showed up to 43% of treatment-failure patients, with advanced disease run the risk of liver failure, cancer, or death, within seven years of failing current therapies on the market. Taken together, with PROVE 3 and Study 107 treatment failure results reported to-date, we and our advisors believe that we have demonstrated the potential to deliver a very important clinical benefit that telaprevir may provide to many treatment-failure patients that are desperate for new treatment options before it's too late. We look forward to starting our Phase 3 program as soon as possible and are ongoing discussions with health authorities. Now on to a few remarks about the second half of the year. In addition to refining telaprevir's differentiated profile, we are also focused on capturing first-to-market opportunities and to building an HCV franchise around telaprevir's lead position. We continue to discuss and evaluate novel STAT-C compounds that when dosed in combination with telaprevir and either interferon or ribavirin could define a new triple therapy with potentially even higher SVR rates in shorter durations in the future. Evaluating additional STAT C combination therapies and external collaborations for the future remains a high priority for us as we aim to build on our lead position with telaprevir, and our second generation program. In order to capture the full opportunity in HCV, we are also working to build a commercial model that is highly focused on giving appropriate patient access to telaprevir. This includes addressing the important medical needs in treatment failure-patients I spoke about earlier. We're also focused on addressing the barriers in the healthcare system that currently results in unacceptably low diagnosis rates, treatment rates and referrals to specialists. We are working closely with the medical thought leaders, patient groups and health economic experts to raise the education and awareness of the burden of illness and the expected increase in HCV related morbidity and mortality for patients that have had their viral infection now for 20 to 25 years or more. In summary, we are advancing telaprevir in our pipeline in multiple fronts in the first half of 2008. Our organization is hard at work, and I look forward to updating you on our portfolio and business progress throughout the rest of the year. Ian, over to you.

Thank you, Kurt, and good evening to everyone. I'm pleased with the strong progress across our business in 2008. This was mainly visible in the clinical advancement of our hepatitis C and cystic fibrosis product candidates, and importantly, in strengthening our financial profile. Financially, we completed the second quarter with approximately $832 million of cash, cash equivalents and marketable securities, a strong financial position by any measure, and one that supports our R&D investment. Notably the clinical progression and the advancement in hepatitis C and cystic fibrosis have exceeded our initial 2008 expectations, and to support this progress, we are increasing the investment into these programs to drive our products forward and protect the opportunities being created. Now to the 2008 financial results. The second quarter non-GAAP loss before certain charges was $74 million compared to 2007 non-GAAP loss of $95 million. Increased collaborative revenues are the principal reason for the decreased loss, and such collaborative revenues will continue to be an important contribution to funding our business. The GAAP net loss for the second quarter of 2008 was $91 million, compared to $118 million of 2007, which includes stock-based compensation. Total revenues for the second quarter was $69 million compared to $38 million for 2007. The increase in revenue was primarily driven by a $45 million milestone payment from J&J for the commencement of our Phase 3 registration program with telaprevir and this amount was fully recognized as revenue in the second quarter. Our revenues will continue to be comprised substantially by collaborative revenues that are derived from telaprevir development. Now to the R&D investment. Our total R&D expense was $127 million, compared to $136 million in the second quarter of 2007. This decrease over the prior year reflects a variability in expenses incurred in connection with telaprevir development, with higher expense in 2007 to support PROVE 1 and PROVE 2 clinical trials, and the investment in to telaprevir's commercial supply chain. Our R&D investment in 2008 second quarter reflects reduced investment during the initial start-up period for telaprevir 's advanced trial, and a period of preparation before entering Phase 3 registration program in patients who failed to achieve viral cure with prior therapy. We anticipate that our R&D investment will increase commensurate with the increased development activity, and investment into commercial supply as telaprevir progresses, and will also increase as VX-770 development activities expand following favorable clinical data achieved in Part 1 of the Phase 2 trial in patients with cystic fibrosis. Our second quarter SG&A expense was $29 million compared to $23 million in the second quarter of 2007. This increase was the result of infrastructure build to support our business, and the initial commercial steps we have taken to support telaprevir. Now turning to our balance sheet. We ended the quarter with approximately $832 million in cash, cash equivalents and marketable securities, and we have approximately $288 million of convertible debt outstanding, and due in 2013, which has a conversion price of $23.14. Our balance sheet position has significantly improved compared to that we had at December 31, 2007; of approximately $468 million of cash and equivalents. This improvement was driven by equity and convertible debt financings resulting in $460 million of cash and the monetization of our HIV royalty stream, adding approximately $550 million of cash to our balance sheet. Now to the financial guidance for 2008. As I remarked in my opening comments, our business has progressed and advanced during 2008, most notably in the development of our HCV and CF products. In response to the favorable progression and results from clinical trials in these disease areas, we're increasing the originally forecasted 2008 investment. In particular, we are increasing our development investment relating to telaprevir, including investment in telaprevir's supply chain as a result of the favorable progression and results from clinical trials of telaprevir in treatment-failure patients, and, increasing the expected investments in VX-770 development for cystic fibrosis due to the favorable progression and results from our initial Phase 2 study. I'll also point out that the accounting treatment for the monetization of our HIV royalty asset increased the 2008 net loss by approximately $14 million, therefore, we are revising our 2008 guidance. We expect our 2008 loss, excluding certain charges to be $390 million to $410 million. We expect full year 2008 GAAP net loss in the range of $450 million to $ 470 million, and this includes stock-based compensation. In summary, the progress in the first half of 2008, and the increased investment to progress the opportunities that continue to emerge in the areas of HCV and CF are supported by significantly improved financial position. I'll now turn the call over to Josh. Joshua, over to you.

Thank you, Ian. And I'd like to add my hearty welcome to Dr. Freda Lewis-Hall. First half of 2008 has been data rich, and we are pleased with the profile of telaprevir that continues to build. We are grateful to shareholders who support Vertex and our employees who work tirelessly to build Vertex on this important medical advancement. We're also making traction in our other pipeline programs like cystic fibrosis. In the second half of the year, we expect data to continue to rollout and further shape telaprevir's future medical and commercial opportunities. We look forward to continuing to report our progress to you throughout the year. Michael, back to you.

Thanks, Joshua. That concludes our prepared remarks. We will now open up the call to your questions.

(Operator Instructions) Your first question is from Geoffrey Porges with Sanford Bernstein. Geoffrey Porges - Sanford Bernstein: Thanks very much for taking the question and congratulations on the BID results that are very helpful and encouraging. I have a quick question that maybe is a semantic one about the BID results, and then, a string of questions on 770. The question on BID is, could you give us a threshold for what would be a substantial difference in safety profile? I mean you said that there was no substantial difference, and I would just like to have an understanding for what would amount to a substantial difference between the two arms? Then on 770, could I maybe follow-up with just a couple questions on that? Freda Lewis-Hall: Sure. First of all, thank you for the congratulations on the BID results. We are encouraged by them. As you know Tibotec and Vertex are anticipating giving the details of our results from the BID at a conference later in this year, so stay tuned. Geoffrey Porges - Sanford Bernstein: Okay. All right.

Geoff, as we go through this call there is a couple of other folks that are going to help answer questions here. So, in terms of a disclosure, because that is really what you are asking, when there will be further data on the BID data. This is a top line release. We understand that people were anxious and wanted to understand the data for the BID dosing schedule. We want to provide this top line data release at this point. We believe we have communicated the critical pieces of this data. As Frieda said, later this year, we hope to be at a significant medical conference giving you all of the specific details on that data. However, at this point, it certainly supports progressing with a twice daily regimen. Geoffrey Porges - Sanford Bernstein: Okay. So I will just ask on 770. The question on 770 seems to be, its breadth of application and we have had the 10% before, you've top-lined released that. So it is hard for me to see that there is anything new in what you have had to say about that other than progress of the 28-day study. When will you know if that 10% increase is with longer exposure? When will you know whether the drug has utility beyond the G551D patient subset? And when will you know if the drug works in teenagers and children? Freda Lewis-Hall: So let's answer the first part. Obviously, the 28-day results are going to be critical to the design of our overall program. We expect at that point to be able to address the inclusion of children as well as the inclusion of other mutations as a part of our overall program. Geoffrey Porges - Sanford Bernstein: Okay.

Do you have a follow-up question, Geoff? Geoffrey Porges - Sanford Bernstein: The 28-day study will not include any of the other mutations? Freda Lewis-Hall: No. Our plan now is for the 28 day results to include only G551D mutations. Geoffrey Porges - Sanford Bernstein: Okay. Have any of the patients continued beyond the 14-days in the first study? Freda Lewis-Hall: No. Geoffrey Porges - Sanford Bernstein: Okay. All right, so that is all we know right now. Thanks. I will get back in the queue.

I will comment, as we move into 2009 Geoff, I think we want to explore other mutations in this disease, the Delta 508 mutation is one that we are very interested, and it's affects a broader piece of this population. We are focused on the 551 mutation at this point which is what Frieda is referring to. However, as we move into 2009, I think you will see us look to explore as we get more comfortable with the progression in this patient population. Geoffrey Porges - Sanford Bernstein: Okay. Thanks.

Your next question is from Rachel Mcminn with Cowen. Rachel Mcminn - Cowen: Thanks very much and I will add my congratulations on the BID data. However, I did want to ask about if you can comment or if it is fair to assume that the virologic breakthrough between the two arms, BID versus TID are comparable? I also noticed that you left out PEG-INTRON from your commentary. Is it fair to assume those data do not look as robust? Freda Lewis-Hall: Yes, actually, I will go back to the point. This is top line data. We are encouraged by it, and we anticipate giving fuller answers to questions around this data when we present it at a medical conference later in the year. Rachel Mcminn - Cowen: Okay. In terms of the naive study, it looks like you have decided to include a 24-week arm in addition to the 48-week arm, and I am just curious what the impetus was for that?

Rachel, its Kurt. As you remember when we talked earlier this year about our registration program in the treatment-naive population. One of the pieces of advice the FDA gave us beyond the pivotal study that we are running the advanced trial which is now enrolling, they thought it would be helpful for us to run a smaller study looking at if there is any benefit of 48-weeks versus 24-weeks; not in a straight head-to-head study but in patients who had achieved RVR and EVR at Week 12.This is the current proposal that we are discussing with the FDA right now and plan to move forward in the third quarter this year. Rachel Mcminn - Cowen: Okay. Just a last question, in terms of the spending increases there, can we walk away thinking that you have more comfort in telaprevir coming to market earlier because of the commercial supply or it is more related to the additional investment based off of the treatment failure data in terms of clinical trial expense.

The increased investment Rachel as I said in my remarks is around hepatitis C and cystic fibrosis. I think we have great opportunity in both areas. It is both progression which has exceeded our expectation, and what I mean by progression is, we are ahead of where we thought we would be, and that includes things like recruitment and others. Also, we do need to invest to protect the opportunities. As you know and talked about, and we are asked many times about early filing opportunities, our base plan here is focused on a 2010 filing launch, towards the end of 2010 and early 2011. We are going to make the commensurate investments where we are with the program at this point in time. So we continue to focus on a late 2010, early 2011 launch. Rachel Mcminn - Cowen: Okay. Thanks very much.

Your next question is from Steve Harr with Morgan Stanley. Steve Harr - Morgan Stanley: I had a question on C208. My recollection is that this trial included both PEG-INTRON and Pegasys patients or as background regimens, and you gave us the data for Pegasys. What does the data look like for the PEG-INTRON?

I will take that because Steve. We specifically have chosen at this point not to provide the data today on PEG-INTRON. That will come later at the medical conferences as Frieda mentioned. We see the important data in terms of the profile, the large revenue, the understanding of the development of our drug, and therefore we provided a top line data on the Pegasys arms, as we are studying our drug with Pegasys in Phase 3 registration program at this point. Steve Harr - Morgan Stanley: Is there any reason for us to believe that it would be different between Pegasys and PEG-INTRON given what is known about both telaprevir and the pegylated interferons?

Why do not we wait for the data at the medical conference? As I said, we are focused on the development of telaprevir in combination with Pegasys and ribavirin. So that is what is more important for our development drug. Steve Harr - Morgan Stanley: Okay, thank you.

Okay.

Your next question is from Meg Malloy with Goldman Sachs. Meg Malloy - Goldman Sachs: Thanks very much. Good afternoon. A question on the thought process around advanced patients in the US. I know you have indicated what the plan is for Europe, and that you plan to begin the screening in the US. Could you share with us your thought process on what that study looks like? Freda Lewis-Hall: In the treatment-failure trial, we are currently in advanced discussions with the FDA on that trial and we are on track to start our patient screening this quarter, actually. Meg Malloy - Goldman Sachs: So is it expected to be different than the study under way in Europe in terms of size or patient entry criteria? Freda Lewis-Hall: Our expectation now by way of our proposal that is on the table is that the studies are going to be very similar to one another, and are awaiting the conclusion of our discussions with the FDA in order to get started. Meg Malloy - Goldman Sachs: It going to be about the same size of 650 patients? Freda Lewis-Hall: It will be about the same size, yes. Meg Malloy - Goldman Sachs: Okay. And if I could just follow up, assuming that BID results hold, what would be your plan to advance that regimen given the pivotal studies are already under way with TID?

Meg, it is Kurt, maybe I can address that, and I just want to provide a clarity point, it is probably clear to you. The treatment-failure trial, we are only talking potentially about one trial there. Our goal is to do one global study just like we are doing in treatment-naive. However, as Freda said we are in final discussions with the FDA. They are really advanced and as soon as we have that finalized, we will let you know. As it relates to your question around twice-daily dosing, and how we would advance that. Obviously, we want to see the final results from this ongoing study. That is encouraging as we continue to evaluate this, but we do anticipate having to do additional studies and probably file an sNDA post launch to get that on our label. And as long as the results are consistent with what we have seen so far in the study, we would try to move quickly to do that. Meg Malloy - Goldman Sachs: Okay. Thanks. And I am sorry to be dense on this; the total size of the treatment-failure is just over 1200 patients, 1300 patients?

(inaudible). That's why I was clarifying. Meg Malloy - Goldman Sachs: Okay. So the whole thing is 650 patients.

That is right. Meg Malloy - Goldman Sachs: Thank you.

That is our current proposal, Meg. Meg Malloy - Goldman Sachs: Okay thanks. Thanks, guys.

Yeah..

Your next question is from Yaron Werber with Citi. Yaron Werber - Citi: Hi, thanks for taking my question. I just wanted to get a little bit of an update on Study 107. When do you think we might be able to see the ASLD next year, and what is the earliest timeframe in which we can start seeing end-of-treatment data and some SVR data as well. Thanks.

On Study 107, we anticipate having final results on that study some time in the second half of 2009. So we would have results prior to the 2009 ASLD. Yaron Werber - Citi: Okay, but can you give us a sense maybe along the way or can give us an update as to how many patients you have enrolled so far, and would we see any data at the upcoming ASLD, any updates there?

Yaron, as you know we do not pre-announce what we will be disclosing at ASLD, it has embargo, but as you have seen, it is an open label study and it would be nice to think that we could provide an update of that study about the progression of the patients and also the new patients that have come in to the study. We have always anticipated that there would be between a 100 and 150 patients in that study and we still have those expectations. Yaron Werber - Citi: Maybe, just a final follow-up. I know you have gotten a few questions on the call already, but, again, on the BID data, just to clarify if you can, and I appreciate it is still early, but it sounds that the data is very promising. Would you wait until your ongoing Phase 3 is fully enrolled and then start your BID pivotal studies or is there any chance you can do them in parallel or is it concerning to do it in parallel with maybe physicians or patients are going to start using it twice a day in the current Phase 3? I am just trying to get a sense as to how fast can that program move along. Freda Lewis-Hall: We remain very encouraged by these results, and as I mentioned earlier, we are in conversations right now with Tibotec on how we would evolve the BID dosing in the context of our overall program. Yaron Werber - Citi.: Do you have a sense as to when you might be able to communicate that to us?

We need to run the course of the study, Yaron, and I think, underneath your question what I also heard you say or heard you ask was, is there an opportunity here as we think about our registration program, is there an opportunity to roll this twice-daily opportunity to registration programs? Absolutely not. Let's be clear on this. We have focused our registration programs on a three times-daily dosing schedule. That is what we discussed with the FDA. That is what we are committed to as we look to label this drug. In terms of advancing the three times daily opportunity, there is going to be a discussion with Tibotec as Freda said. This is an early data, we are very encouraged by it and we will work in to the plan at a later date. I think Kurt referenced that specifically thinking about an sNDA which would come later. Yaron Werber - Citi.: Great. Thank you.

Your next question is from Geoff Meacham with JPMorgan. Geoff Meacham - JPMorgan: Hey guys, thanks for taking the question. This is Terry calling in for Jeff today. Just on your thoughts ahead of the discussions with the FDA following the PROVE 3 results, just trying to get a sense from you, how are you going to approach the meeting and what your suggestion is going to be to the FDA ahead of that or in that meeting.

If your question is about where we are at with the overall treatment-failure program, we are in advanced discussions with the FDA already and the European authorities. In fact, the European authority discussions have already concluded, and we have a commitment from them to go forward with the recommended treatment-failure studies. That same set of data and the same trial design is what is going at the FDA right now, and we are in final late stage discussions with them to hopefully get the same study under way in the third quarter in the US. Geoff Meacham - JPMorgan: I am actually curious about plans to try to file on the PROVE 3 data.

It is really too early to speculate on any potential for early filing yet until we get final PROVE 3 data and our 107 data in the second half of 2009. Geoff Meacham - JPMorgan: Okay, thanks.

Thank you.

Your next question is from Annabel Samimy with UBS. Annabel Samimy - UBS: Hi, thanks for taking my question. Just on the same vein regarding the PROVE 3 as well as the 107 study, you started the two Phase 3s when the treatment-naive, I am sorry, the second Phase 3 on the treatment-naïve, but also in the treatment-experienced, and given that the second treatment-naive study was really to answer a question for physicians, do you still think that PROVE 3 could serve as a second confirmatory study to potentially file on one Phase 3, the PROVE 3 and maybe go for the broader label more rapidly than if you waited for the Phase 3 for the treatment-experienced?

You know, that is a very good question. Thanks for the question. We do believe that based on our prior discussions with the FDA, we were asked to do one pivotal study which is now underway, and we did discuss at the time that if PROVE 3 were to be a successful study, that it could qualify for a second adequate and well controlled study. So it still our position that we are now in that position that we are seeing positive PROVE 3 results. The other study we are still committed to doing Study 111 that Frieda was talking about earlier, and that is the one that we hope to get underway in this quarter. Annabel Samimy - UBS: Okay, so it is primarily commitment, used more as a precautionary measure if the PROVE 3 strategy does not work?

It is precautionary but it is also really, more importantly for our label, to help get a clean 24-week label, and we also think it is valuable information for doctors and patients to stop therapy at 24 weeks. Annabel Samimy - UBS: Okay. And on a separate note, Roche has made it pretty clear they are starting combination studies with other antiviral agents like the nucleoside inhibitors about now. I mean, they are checking it out right now. So by the time they come out with some of their own products, they may have that combination data. What is your strategy around that?

We have heard bits and pieces but I do not think there has been any confirmation to my knowledge yet that any studies are about to start on that. I know that a lot of people are talking about STAT C combination studies, and obviously including us. We are under active discussion with many companies that have potentially complimentary STAT C therapies to ours. I think the fact that telaprevir is so advanced in clinical studies right now, it would make a lot of sense for anyone who has a STAT C combination product to work with telaprevir since we will be on the market quite a bit earlier than any other protease inhibitor that really has potential, especially in treatment failure patients. So, we feel good about our position right now and we are under active discussion with people that have those complimentary drugs. Annabel Samimy - UBS: Okay, thank you.

Your next question is from Brian Abrahams with Oppenheimer. Brian Abrahams - Oppenheimer: Hi, thanks for taking my question and my congratulations as well on the BID data. A question on the BID study, without getting into what the specific data looks like, I am just wondering what is your view in terms of what an allowable Delta might be in the 12-week undetectable rates between BID and TID for you to be comfortable that there is essentially no clinically meaningful difference between those two regimens?

I think that is a good question, and I want to give you an answer. I think the most important thing that we can look at in the study at the 12-week time point, the two most important parameters to us are the 4-week RVR data, because we know that that correlates very well to SVR from all of our data so far, and the 12-week safety data, which like we said, we are not seeing substantial differences in either any of the antiviral activity or the safety data across the BID or TID regimen with Pegasys. That is what we are encouraged about. That is what gives us confidence to continue to proceed with the BID program. I think where the EVR parameter is important is only in those patients that have achieved RVR, because we know from our data that if we also achieved EVR at 12 weeks, there is even a higher confidence interval, about 4% to 5% higher confidence interval that they will get to SVR for short duration therapy. That is the way we look at the results that we have right now. Brian Abrahams - Oppenheimer: Okay, just one follow-up question about that study. I am wondering if you can make a comment on the dropout rates between the BID versus the TID arm? I know you said that the undetectable rates looked similar on an intend-to-treat basis, and I am just wondering if that could potentially mean increased dropouts, but offset by, maybe, increased activity with BID or was it generally the same for both? Thanks.

Thanks again for the question. Right now what this top line announces and I repeat, we are not seeing substantial differences across any antiviral or safety parameters? Brian Abrahams - Oppenheimer: Okay. Thanks very much for that information. Brian Abrahams - Oppenheimer: Thank you.

Your next question is from Liisa Bayko with JMP Securities. Liisa Bayko - JMP Securities: Good afternoon. A question, a question about ASLD. With the C208 study, is it possible that you might get a look at more advanced data such as the 24-week data which you may have available by that point?

Liisa, I will tell you first as it's fairly a little disclosure question, Liisa. So, thanks for the question. We do not want to pre-disclose what we are committing to in ASLD, and clearly if we are submitting abstracts we also need to see if they are also going to be accepted, but clearly, if certain abstracts are accepted, we will be providing the data that we have in hand at that point in time. The study will have progressed at that point in time. So if we have the opportunity to update, we will do it. This is a Phase 2a, its 160 patients, its 40 patients per arm. It is a small number of patients but it gives us a good understanding of the twice daily opportunity. Liisa Bayko - JMP Securities: Okay, great, Kurt, you talked about combination studies in the context of your second half comments. Should we infer that to mean that you might be starting some combination studies in the second half? Have you done any pre-clinical work yet towards that?

My general comments around our strategy and pursuing STAT-C combinations is that, our strategy and our strategic objective is unchanged. We have been actively discussing the potential collaborations with multiple parties now for months, and really where we are at right now is; we are in a great place with telaprevir. The drug is in late stage development. We have got a significant lead both in timeline and profile on protease inhibitors behind us. What we are doing is a careful analysis of the most attractive, and, what I would say is, 'later stage STAT-C combination products', polymerases, but also others to try and figure out the best ones to take into Phase 1b/2a type studies to see if there is potential to improve upon where we already are with telaprevir. We do not feel that we need to be rushed to move into those studies too quickly. We want to make sure that when we do go into a combination trial that we have a fair amount of clarity about what the profile of that complimentary therapy is. And once we get that, I think we are well positioned to potentially do multiple different kinds of studies and/or deals with people that have those complimentary drugs. So once we are at that point in time we will update you as appropriate. Liisa Bayko - JMP Securities: All right, thanks a lot.

Thank you.

Your next question is from Howard Liang with Leerink Swann. Howard Liang - Leerink Swann: Thank you very much. Just have a question about the second Phase 3 study in treatment-naive patients. What is the design of that study, superiority versus inferiority? Can you talk about the powering, what would be considered equivalent for a trial of that size?

In terms of the details, I would rather wait until we get our final feedback from the FDA. As I mentioned, we are in late stage discussions with them about our treatment-failure Phase 3 study and this is also a component of that. What I can tell you about the design is, it is geared to answer what I would call the labeling and educational piece of information we think will be helpful to doctors and patients, and that central question is, is there any incremental benefit of 48-weeks over 24-weeks in the subset of patients that achieved RVR and EVR? Now based on all of the data we have today and the pool data from PROVE 1 and PROVE 2, we do not think that people who achieve both RVR and EVR, there is any meaningful difference in SVR rates from people that get treated with the 48-week regiment or a 24, and this study is aimed to give us additional data to show them. Howard Liang - Leerink Swann: Okay, I just had a question on C208. I know that you have said that both arms, BID and TID have treatment rates greater than 80%, but is there a numerical difference between the two arms?

Right now, all we are prepared to say and understanding that you want all of the data on this, we really have to protect this data. We are submitting it as an abstract to the ASLD, and we want to respect their policy and embargo policy that we do not give all of the data around this because we have put the abstract at risk and we have put the presentation at risk. What we are seeing with this as we said is no substantial differences in the antiviral activity or the safety parameters for this drug. Howard Liang - Leerink Swann: Okay.

I think that is the main takeaway from it, we are encouraged by this data. Howard Liang - Leerink Swann: Great. The last question is regarding ASLD and would the PROVE 3 SVR 12 data on the 48-week arms be mature enough for presentation?

That is going to be close, Howard. In terms of timeline of the study it is going to be very close. The complete honest answer is if, we are able to gain that data for that presentation, and that presentation is accepted, then we will be providing it but it is going to be close whether we can ensure that we gain the data, we do our QC on it, but if we can do all that I am sure we would like to put it out at the conference. Howard Liang - Leerink Swann: Thanks very much.

Your next question is from Tom Russo with Baird. Tom Russo - Baird: Good afternoon. I have to ask a question about 208 also, but I will try to keep it to what you have disclosed. Kurt, with the 80% EVR being higher than I think what we have seen before, do you think that we are heading towards potentially higher SVRs than we have seen before in this trial?

I am sorry. Could you repeat your question one more time? Tom Russo - Baird: The 12-week time point being above 80% in study 208 for both arms based on what you have seen before, do you think you might be heading towards higher SVR rates in this trial?

You know, it is a good question. It is hard to speculate on that right now, and the reason why there is a difference in this trial, and we have designed the study as a response driven trial. We also are using our rash management program in this and I think in PROVE 1 and PROVE 2, what we did see is some patients that ran into a adverse event, they were stopped on all three dugs. And what we are seeing in all of our ongoing studies right now is, as investigators become more comfortable using our drug and the triple therapy in general, and when they run into one of those adverse events instead of discontinuing all three drugs, many times they are continuing people on interferon and ribavirin, and that we believe is one of the potential contributors to these higher numbers, but it is too early to speculate on whether that is going to translate into even higher SVR. It could happen, but it is too early and that would be speculation at this point. Tom Russo - Baird: On PROVE 3, do you have any visibility at this point? I know the expectation would have been for a low relapse after SVR 12, but do you have any visibility yet now that we are a couple months further out into how that is trending?

We do not have any increased visibility on that yet. Tom Russo - Baird: Okay. Thanks very much.

Thank you.

Your next question is from Alan Carr, with Needham. Alan Carr - Needham: Hi, good afternoon. Thanks for taking my question. Just want to make sure I got this right on the Phase 3 program and treatment-experienced patients. You are planning just one 650 patient trial and you are just waiting for feedback from the US or from the FDA before going forward with that, is that right? Freda Lewis-Hall: That is correct. Alan Carr - Needham: Okay, good. On the US commercialization strategy, I'm wondering if you can give an update on that, how that is progressing if there is any changes in your strategy scale, sales force, and any potential for partnering in the US?

In terms of your first question, overall, I think the one thing that we can say about the data that we are showing here is that with new treatment-failure data showing this drug has potential broad application across the treatment-failure population, and if our interim data albeit small numbers in Study C208 right now, if the interim data on BID continues to pan out and we continue to evaluate that further and have a chance to have a twice-daily drug, I think our commercial strategy overall is strong. We believe with a profile like this and the specialty audience that's very focused on specialist, that we will continue as we always have thought that we will be commercializing this product ourselves in the US. Alan Carr - Needham: Can you give us an estimate on what you think the scale of that sales force might be?

The scale of the sales force would be somewhere between 150 to 200 reps at most. You are talking about specialty offices in the US; many of these have more than one physician. There are about 1500 clinics to 2000 clinics that represent about 70% of the prescriptions in the category today, so it is not a broad primary care generalist audience. It is a much focused audience of specialists that really are a expert at managing this disease. Alan Carr - Needham: Great. Thanks.

You are welcome.

Your next question is from Terence Flynn with Lazard Capital Markets. Terence Flynn - Lazard Capital Markets: Hi, good afternoon. Thanks for taking the question. Just a question on the second Phase 3 naive study. I was wondering if there is a chance that that study might be larger than the 450 patients that you originally talked about if the FDA comes back to you and decides to change the design of the study a little bit?

I think the best comment I can give you on that is that, the core part of the registration program from our dialogue with the FDA is the pivotal Phase 3 trial. The standard we have to meet is demonstrating adequate efficacy and safety in that study, like we saw from our Phase 2 trials. That is the primary study. What they did is they gave us I think helpful advice that, to get a clean 24-week label which is our goal with this, and to move the medical practice of this disease forward. It would be helpful, not mission critical, but it would be helpful based on their advice to have additional data to support a clean 24-week label. That is why we want to run the study and we think it will also help in the marketing and sales of this by showing doctors and patients what we learnt so far, that there is no benefit of adding 48-weeks of therapy, a second 24-weeks when someone has already achieved RVR and EVR. Terence Flynn - Lazard Capital Markets: Okay and then just a question on 208. I am not sure if you are going to answer it, but just the timing of the breakthroughs that we are seeing, I am assuming there was some, but in PROVE 1 and PROVE 2, I think the breakthroughs were all clustered pretty much in the first four weeks. Can you just comment maybe if there were any differences in the timing of the breakthroughs between the two arms or if it replicated what you have seen in PROVE 1 and PROVE 2? Thanks a lot.

Yes, I am not going to get into specifics about that. I think if you take a step back from Study C208, we are talking about a Phase 2a study with somewhat small numbers. So, I think we need to be careful of the conclusions we try to draw out of this. This is a study as we are running it right now, where we do not see any substantial differences in the antiviral activity or the safety profile of the BID versus TID regimen. But the reason we say final results and more studies will be required is because this is a Phase 2a study and we will have to move forward as long as these results are consistent when we get final results with a more definitive trial. Right now we are not seeing anything that discourages us from continuing to evaluate twice-daily. Terence Flynn - Lazard Capital Markets: Great. Thanks a lot.

Your next question is from Jason Zhang with BMO Capital Markets. Jason Zhang - BMO Capital Markets: Hi, thanks. A question for PROVE 3, and also Study 107. In the past, at least we have that expectation that by the end of the year, a mature data from PROVE 3 should be available, and given that interim data was very positive and there is certain hope that the mature data is still good, you will be able to talk to the FDA and then hopeful to find out whether there is a pathway for a [extend] with approval. However, I heard you saying today on the conference call, you have to wait for a mature data from Study 107 in the second half of 2009. Is that something you got from FDA or since you have started the Phase 3 treatment-failure population, you just do not want to even try this anymore?

So actually, it is a good question and thanks for asking it because we do get a lot of questions around this. To be very specific to your question, we have not heard from the FDA that would require having 107 in hand. What we do not want to do is speculate that PROVE 3 by itself would be sufficient, and the reason for that is, while, there is clearly a high unmet need in these patients, and we have compelling early interim data from the PROVE 3 study, there are some questions that are not answered in PROVE 3 and I will just give you one example. One of them is, is there any difference in a 48-week regimen and no responders? That question is being addressed in Study 107, so what we are saying is, to be transparent with you is as we can right now, we think having a package of data that answers the right clinical and potential labeling questions, if we were ever to have an opportunity would probably be best served by having PROVE 3 and 107. It may not be the case but, conservatively speaking we think that that would be the right kind of package to be able to talk about the how those drug looks treatment-failure patients. Obviously, when we have the PROVE 3 data, we will be sharing that in our continuous ongoing dialogues with the FDA and that may change, but it is too early to speculate on that right now. Jason Zhang - BMO Capital Markets: Can I just follow-up on that, you said, some questions that could be answered, in the bigger Phase 3, the data will be richer to answer a lot of questions. I am just wondering, for study 107, given that it is an open label study, what critical information you can give that you do not really have in PROVE 3 and to increase your confidence or the regulators' confidence that whatever treatment regimen will be appropriate for approval?

I think the one thing that is different about 107 versus PROVE 3 is, in PROVE 3 as you know everybody was treated, not everybody but in the arm where we have seen compelling data it is on a 12 plus 12 regimen. 12-weeks triple therapy followed by interferon and ribavirin for 12 more weeks. One of the questions based on the results we have in that arm that was not addressed specifically in PROVE 3 was, would a 48-week regimen, 12-weeks of triple therapy, followed by 36-weeks of interferon and ribarivin, would that provide any incremental SVR and relapse benefit over and above a 24 week regimen? That question, we will have some data on in Study 107. Jason Zhang - BMO Capital Markets: Okay. Thanks.

Thank you.

Your next question is from Brian Skorny with SIG. Jason Kolbert - SIG: Hi, guys, Jason Kolbert here actually. Just a couple of questions. You have not talked that much about the next generation PI's. What are the attributes of the next generation PIs? How do you see the development of them going forward?

Thanks Jason, and thanks for your question. As you know, we are choosing to develop the second generation PI's, and at this point we are not ready to provide any data on those programs. The principal focus is on telaprevir and the important data that would come from the next generation programs I think is in the future. So, we are going to continue to focus on those as many ways that they could add or have features that can enhance how we treat this disease, but at this stage we are not in a position where we provide data on those compounds. Jason Kolbert - SIG: Can we switch gears to manufacturing a little bit? I would like to just ask you a question about who is actually in charge of manufacturing? What roll do you have versus Tibotec in terms of sourcing intermediate ingredients? For example, I know that one key intermediate ingredient is sourced out of China. Is there a second sourcing? Is that Vertex's sole responsibility or is that a J&J operation?

So Jason, thanks for that question. It is an all too infrequently asked question in terms of how we protect our supply. We are in great shape with our manufacturing and commercial supply. We outsource all of it. We do start in China. We come through Europe and then establishing in the US. We are already making this drug in commercial scale, and have advanced significantly over the last two or three years. In terms of J&J's or Tibotec's role in manufacturing, when we put in the collaboration, two or three years ago now, we did actually have J&J commit to also building manufacturing capabilities and also contractually provide us with a support if we do run into a problem with our own outsourced supply chain, so we have nice diversification of risk in supply chain with Tibotec and J&J, but right now we are in great shape in terms of starting with our own supply chain outsource, starting in China as you refer to, coming through Europe and then into the US and we are producing the drug to scale at this time. Jason Kolbert - SIG: Perfect. Thank you for that very detailed answer. So, I want to just turn over to my associate to ask you a pretty detailed question on the Delta F508 mutation in CF associated with VX-770. [Miguel], go ahead.

Good afternoon. The question really pertains to a little bit more clarity on where you are going with some of the future mutations for CF. It is our understanding that Delta 508 actually leads to a polypeptide that does not reach the membrane and therefore would not be relevant to the mechanism of action in 770. So, I presume that you are not going to be looking at a homozygous mutations in Delta 508 and you would be looking at heterozygous ones, is that right?

I appreciate the question for this call, let's take that question later. What we will tell you at this point is that we have got in vitro results that support the production of the drug in the Delta 508 patients, but we will have to talk to you in detail in terms of the science and so will Freda after the call is complete.

Okay, thanks. I just want to give a shout out to Dr. Freda Hall, and say, it is really great to see you at Vertex and great to connect with you again. Freda Lewis-Hall: Thank you.

I think we have time for one more question.

Your last question is from Geoffrey Porges with Sanford Bernstein. Geoffrey Porges - Sanford Bernstein: Thanks. Just a quick follow-up on the change in your net loss guidance. Ian, could you just give us a little bit more detail on where the $70 million Delta comes from? You mentioned the $14 million. Could you just talk about what is contributing that and is it principally going to go through the R&D line or the SG&A line? Thanks.

Sure, thanks for the question, Geoff. The number you referred to $70 million is a little higher than the move we've actually made, but in terms of principle of what you are asking, there is a change in our guidance just because we are no longer recording the full revenue and cost of revenues from our HIV royalties and that is approximately $14 million. The remainder of the investment is principally into hepatitis C and cystic fibrosis. As Freda referred to earlier in her remarks, we have made tremendous progress in cystic fibrosis and had some great discussions with the US and European authorities. We have to think about 2009 and the potential of being in a registration program in the 551 patients and that is ahead of our expectations. We need to start preparing for that, so we are in position to commence that trial subject to the results from the 28-day study. Similar to cystic fibrosis, we are also investing in hepatitis C because the results were beyond our expectations. Frankly, in the treatment-failure patient population, we did have expectations at the beginning every year and expectations for the progression of the program. The results that we saw in the PROVE 3 interim analysis were beyond where we thought and again what has translated in to it is the progress of the program, and we need to invest to support that progress of the program which is ahead of where we initially thought at the beginning of the year. Those are the principle investment in hepatitis C and cystic fibrosis. They are good opportunities and we need to protect those opportunities. Geoffrey Porges - Sanford Bernstein: What about the effect on the P&L and other parts of your guidance?

We have not specifically quantified the effect on the R&D but it is principally in the R&D line, if that is the question you are asking Geoff. The change in the guidance is principally in the R&D line other than the comments I made on the royalty loss. Geoffrey Porges - Sanford Bernstein: Okay, thanks. That is helpful.

Okay. Thank you very much everybody for listening to our call tonight. We are in the office if you have any follow-up questions, and we look forward to talking to you. Thanks.

Thank you.

This concludes today's Vertex Q2 financial results conference call. You may now disconnect.