Vertex Pharmaceuticals Incorporated (Nasdaq: VRTX) today
reported consolidated financial results for the quarter ended
June 30, 2014. Vertex reported total second quarter 2014
revenues of $138 million, including revenues of $113 million from
KALYDECO® (ivacaftor). The GAAP net loss for the second quarter of
2014 was $(159) million, or $(0.68) per share. The non-GAAP net
loss for the second quarter of 2014 was $(142) million, or $(0.61)
per share. As of June 30, 2014, Vertex had $1.22 billion in
cash, cash equivalents and marketable securities. In July 2014,
Vertex entered into a credit agreement that provides for a secured
loan of up to $500 million, $300 million of which Vertex received
in July 2014, which adds to the company's cash balance. Vertex also
reiterated its financial guidance for total 2014 non-GAAP revenues,
2014 KALYDECO revenues and non-GAAP operating expenses. The company
also provided updates on its key research and development programs
in cystic fibrosis (CF).
"As we enter the second half of the year, we continue to make
significant progress toward achieving all of our key goals,"
commented Jeffrey Leiden, M.D., Ph.D., Chairman, President and
Chief Executive Officer of Vertex. "Based on data generated
throughout the first half of this year, we have increased
confidence in our scientific approach to treating the underlying
cause of CF and believe that we are on the right path to help the
vast majority of people with this disease in the coming years.
Importantly, with a strong financial platform, we are today well
positioned to invest in our business to create future medicines and
grow our revenues as we advance toward profitability."
Research and Development
Updates
Vertex today provided the following research and development
updates:
KALYDECO® (ivacaftor)
Global Availability of KALYDECO (ivacaftor)
- KALYDECO is currently available to all
eligible patients in the United States, England, Scotland, Northern
Ireland, Wales, the Republic of Ireland, France, Germany, the
Netherlands, Switzerland, Austria, Denmark, Sweden, Norway, Greece,
Italy and Spain. In addition, Vertex signed a letter of intent with
the pan-Canadian Pricing Alliance (pCPA) in the second quarter of
2014 to enable the public reimbursement of KALYDECO in Canada.
Patients in the Canadian provinces of Ontario and Alberta are now
able to receive KALYDECO under public reimbursement, and
discussions are ongoing to add KALYDECO to drug programs in the
remaining provinces and territories. In Australia, KALYDECO was
approved in July 2013, but eligible patients are still not able to
receive the medicine through public reimbursement. Vertex is
awaiting a response from the Australian government to the company's
proposal submitted in May that would allow all Australians with the
G551D mutation ages 6 and older to receive KALYDECO and to stay on
treatment once started. There are approximately 200 people age 6
years and older who have the G551D mutation in Australia.
- In February 2014, the U.S. Food and
Drug Administration (FDA) approved a supplemental New Drug
Application (sNDA) for KALYDECO for people with CF ages 6 and older
who have one of eight additional mutations in the cystic fibrosis
transmembrane conductance regulator (CFTR) gene. The eight
additional mutations include: G178R, S549N, S549R, G551S, G1244E,
S1251N, S1255P and G1349D. In Canada, Vertex also recently received
approval for the use of KALYDECO in people with CF who have these
mutations, as well as the G970R mutation. In North America,
approximately 150 people ages 6 and older have one of these
additional mutations.
Additional Activities and Clinical Studies Aimed at
Increasing the Number of People Eligible for Ivacaftor
- Gating Mutations in Europe: In
June, the European Committee for Medicinal Products for Human Use
(CHMP) issued a positive opinion recommending the approval of
KALYDECO for people with one of the eight additional mutations
(G178R, S549N, S549R, G551S, G1244E, S1251N, S1255P and G1349D).
The CHMP's positive opinion will now be reviewed by the European
Commission, which has the authority to approve medicines for the
European Union (E.U.). The European Commission generally follows
the recommendation of the CHMP and typically issues marketing
approval within three to four months. In Europe, approximately 250
people ages 6 and older have one of these additional
mutations.
- R117H Mutation: Based on data
from a Phase 3 study, Vertex submitted an sNDA in the U.S. in June
and an MAA variation in the E.U. in July for the approval of
KALYDECO for use in people ages 18 and older who have the R117H
mutation. The Phase 3 study did not meet its primary endpoint of
the absolute change from baseline in percent predicted forced
expiratory volume in one second (ppFEV1), however a pre-specified
subset analysis in patients 18 years of age and older showed
statistically significant improvements in lung function and other
key secondary endpoints. In North America, Europe and Australia,
approximately 700 people with CF ages 18 and older have at least
one copy of an R117H mutation.
- Children Ages 2 to 5 with Gating
Mutations: A Phase 3 study of ivacaftor in children with CF
ages 2 to 5 who have a gating mutation is complete, and data are
expected in the third quarter of 2014 to support a potential NDA
submission and MAA variation in the fourth quarter of 2014. The
primary endpoint of this study is safety, and secondary endpoints
include pharmacokinetics, change in sweat chloride and change in
weight. In North America, Europe and Australia, approximately 300
children ages 2 to 5 have the gating mutations evaluated in this
study.
- Residual Function Study: In
June, Vertex announced data from a two-part proof-of-concept study
of ivacaftor in 24 people with CF who had a residual function
mutation. This study was the first to evaluate the use of ivacaftor
in multiple residual function mutations, and based on the data from
the study, Vertex plans to initiate a larger Phase 3 study in
people with residual function mutations that will evaluate
longer-duration treatment, pending discussions with regulatory
authorities. In North America, Europe and Australia, more than
3,000 people ages 6 and older have non-R117H mutations that result
in residual function.
Lumacaftor in Combination with
Ivacaftor
Planned Regulatory Submissions for People 12 and Older with
Two Copies of the F508del Mutation
- In June, Vertex announced data from the
Phase 3 TRAFFIC and TRANSPORT studies evaluating lumacaftor
(VX-809) in combination with ivacaftor in people with CF ages 12
and older who have two copies (homozygous) of the F508del mutation.
Based on these data, Vertex is on track to submit an NDA and MAA
for the combination therapy in people ages 12 and older who have
two copies of the F508del mutation in the fourth quarter of 2014.
In North America, Europe and Australia, there are more than 22,000
people ages 12 and older who have two copies of the F508del
mutation.
Orphan Drug Designation
- Also in June, the U.S. FDA granted the
combination of lumacaftor and ivacaftor Orphan Drug Designation.
The FDA grants Orphan Drug Designation to medicines intended to
treat fewer than 200,000 people in the U.S. The combination of
lumacaftor and ivacaftor also recently received Orphan designation
in Europe.
Phase 2 Study in People with One Copy of the F508del Mutation
(heterozygous)
- Vertex today reported results from a
Phase 2, 8-week exploratory study of lumacaftor in combination with
ivacaftor in 125 people ages 12 and older who have one copy
(heterozygous) of the F508del mutation and a second mutation that
is not expected to respond to either ivacaftor or VX-809 alone. The
study evaluated a twice daily (q12h) combination of VX-809 (400mg)
and ivacaftor (250mg) compared to placebo. The primary endpoints
were safety, tolerability and mean absolute change in ppFEV1 from
baseline at Day 56, and key secondary endpoints included absolute
change in body mass index (BMI), absolute change in
patient-reported respiratory symptoms as reported in the CF
questionnaire-revised (CFQ-R) and absolute change in sweat
chloride, among others.
- In the study, the within-group mean
absolute change in ppFEV1 at day 56 for the patients who received
the combination regimen was -0.62 percentage points (p=0.4550)
compared to -1.23 percentage points (p=0.1287) for those who
received placebo. The mean absolute treatment difference was 0.61
percentage points (p=0.5978) at day 56. The study did not meet its
primary efficacy endpoint. For patients who received the
combination, the mean absolute improvement in CFQ-R at day 56 was
+6.48 points (p=0.0131) versus placebo. Additionally, there was a
-11.03 mmol/L (p<0.0001) decrease in sweat chloride at day 56
for those who received the combination compared to those who
received placebo. There was no increase observed in body mass index
(BMI).
- Safety results from this study were
consistent with the Phase 3 TRAFFIC and TRANSPORT studies in people
with two copies of the F508del mutation. The combination regimen
was generally well tolerated. The most common adverse events,
regardless of treatment group, were respiration abnormal, infective
pulmonary exacerbation, cough, increased sputum and headache, and
adverse events that occurred more frequently in patients who
received the combination regimen than those who received placebo
were generally respiratory in nature and included dyspnea and
respiration abnormal, as well as gastroesophageal reflux. 6.5
percent of patients who received combination therapy discontinued
treatment because of adverse events compared to 0.0 percent of
those who received placebo.
VX-661 in Combination with
Ivacaftor
Ongoing 12-Week Study in People with Two Copies of the
F508del Mutation
- A 12-week Phase 2 study of VX-661 in
combination with ivacaftor in people with CF who have two copies of
the F508del mutation is currently underway. The study is designed
to evaluate safety, efficacy and pharmacokinetics to characterize
VX-661 for further clinical development.
Further Development for VX-661
- Pending data from the ongoing 12-week
study of VX-661 and ivacaftor and discussions with regulatory
authorities, Vertex plans to evaluate multiple development pathways
for VX-661 in combination with ivacaftor, including the potential
evaluation of this combination in people with one F508del mutation
and one mutation known to respond to ivacaftor and in people with
two copies of the F508del mutation. Additionally, VX-661 and
ivacaftor may be evaluated in combination with, or without, a
next-generation corrector in people with one copy of the F508del
mutation and a mutation that is not expected to respond to
ivacaftor or a first-generation corrector alone.
Next-Generation Corrector
Research
- Vertex has multiple next-generation
correctors in the lead-optimization stage of research and expects
to begin clinical development of a next-generation corrector in
2015.
Second Quarter 2014 Non-GAAP Financial
Results
The second quarter 2014 non-GAAP financial results exclude
stock-based compensation expense, transition and restructuring
costs related to the relocation of our corporate headquarters, a
one-time cash payment received related to a lease agreement,
hepatitis C costs and revenue and other adjustments. The second
quarter 2013 non-GAAP financial results exclude stock-based
compensation expense, expenses related to Alios (HCV), an inventory
charge, certain interest expenses related to the company's
convertible senior subordinated notes due 2015 that were converted
during the second quarter of 2013 and other adjustments.
Total Non-GAAP Revenues: Total non-GAAP revenues for the
second quarter of 2014 were $121.9 million, including $113.1
million in net product revenues from KALYDECO and $8.8 million from
royalties and collaborative revenues. The components of total
non-GAAP revenues for the second quarter of 2014 were:
Three Months Ended June 30, 2014 (in millions)
GAAP revenues HCV related revenues
Non-GAAP revenues
Product revenues KALYDECO revenues, net $
113.1 $ — $ 113.1 INCIVEK revenues, net 9.3 (9.3 )
— Total product revenues, net $ 122.4 $ (9.3 ) $ 113.1
Royalty revenues 13.0 (5.7 ) 7.3
Collaborative
revenues 3.0 (1.5 ) 1.5
Total
revenues $ 138.4 $ (16.5 ) $ 121.9
- Net Product Revenues from
KALYDECO: Vertex's second quarter 2014 net product revenues
from KALYDECO were $113.1 million compared to $99.0 million for the
second quarter of 2013. The increased revenues, compared to the
second quarter of 2013, resulted primarily from KALYDECO
label-expansion in the U.S. In the second half of 2014, further
growth and achievement of the company’s total 2014 net product
revenue guidance for KALYDECO is dependent on completion of
reimbursement discussions in Australia for eligible patients with
the G551D mutation and on the potential further expansion of the
KALYDECO label globally.
- Collaborative Revenues: Vertex
recognized $1.5 million in non-GAAP collaborative revenues in the
second quarter of 2014. In June, the company entered into a
licensing agreement with Janssen Pharmaceuticals, Inc. for the
worldwide development and commercialization of VX-787. As part of
the agreement, Vertex expects to receive an up-front payment of $30
million from Janssen in the third quarter. Vertex expects to
include all, or a portion of, this payment in its collaborative
revenues in the second half of 2014.
Non-GAAP Operating Expenses: Total non-GAAP operating
expenses for the second quarter of 2014 were $237.4 million,
compared to $280.7 million for the second quarter of 2013. This
reduction was primarily the result of prioritization of investment
toward medicines for CF resulting in decreased R&D and SG&A
expenses as follows:
- Research and Development (R&D)
Expenses: Non-GAAP R&D expenses were $179.5 million for the
second quarter of 2014, compared to $191.2 million in non-GAAP
R&D expenses for the second quarter of 2013.
- Sales, General and Administrative
(SG&A) Expenses: Non-GAAP SG&A expenses were $57.9
million for the second quarter of 2014, compared to $89.5 million
in non-GAAP SG&A expenses for the second quarter of 2013.
Non-GAAP Net Income (Loss) Attributable to Vertex:
Vertex's second quarter 2014 non-GAAP net loss was $(142) million,
or $(0.61) per diluted share, compared to a non-GAAP net loss of
$(6.2) million, or $(0.03) per diluted share, for the second
quarter of 2013. The increased non-GAAP net loss for the second
quarter of 2014 was primarily the result of a reduction in INCIVEK
net product revenues and the removal of INCIVEK net product
revenues from the company's non-GAAP financial results, partially
offset by decreased operating expenses.
Cash Position at June 30,
2014
Cash Position: As of June 30, 2014, Vertex had $1.22
billion in cash, cash equivalents and marketable securities
compared to $1.47 billion in cash, cash equivalents and marketable
securities as of December 31, 2013. In July 2014, Vertex
entered into a credit agreement that provides for a secured loan of
up to $500 million, $300 million of which Vertex received in July
2014.
2014 Financial Guidance
This section contains forward-looking guidance about the
financial outlook for Vertex Pharmaceuticals.
- Vertex today reiterated its financial
guidance for total 2014 non-GAAP revenues, 2014 KALYDECO revenues
and non-GAAP operating expenses:
- Total Revenues: Vertex expects
total non-GAAP revenues of $520 to $550 million.
- KALYDECO Net Revenues: Vertex
expects total 2014 KALYDECO net revenues of $470 to $500 million.
Achieving this guidance depends on anticipated revenues from Canada
following the recently signed letter of intent to enable public
reimbursement of KALYDECO for eligible patients with the G551D
mutation, from Australia following the potential completion of
reimbursement discussions in the second half of 2014, from Europe
following the potential approval of KALYDECO for use in additional
gating mutations and in the U.S. from the use of KALYDECO in
additional mutations.
- Non-GAAP Operating Expenses:
Vertex expects 2014 non-GAAP operating expenses to be in the range
of $890 to $930 million.
Non-GAAP Financial Measures
In this press release, Vertex's financial results and financial
guidance are provided in accordance with accounting principles
generally accepted in the United States (GAAP) and using certain
non-GAAP financial measures. In particular, non-GAAP financial
results exclude (i) in 2014, revenue and expenses related to
hepatitis C, stock-based compensation expense, transition and
restructuring costs related to the relocation of the company's
corporate headquarters, a one-time cash payment received related to
a lease agreement and other adjustments and (ii) in 2013,
stock-based compensation expense, expenses related to Alios (HCV),
the impairment of VX-222, an inventory charge, certain interest
expenses related to the convertible notes due 2015 and other
adjustments. These results are provided as a complement to results
provided in accordance with GAAP because management believes these
non-GAAP financial measures help indicate underlying trends in the
company's business, are important in comparing current results with
prior period results and provide additional information regarding
its financial position. Management also uses these non-GAAP
financial measures to establish budgets and operational goals that
are communicated internally and externally and to manage the
company's business and to evaluate its performance. A
reconciliation of the GAAP financial results to non-GAAP financial
results is included in the attached financial information.
Second Quarter 2014 GAAP Financial
Results
Total Revenues: Total revenues for the second quarter of
2014 were $138.4 million compared with $310.8 million in total
revenues for the second quarter of 2013. Second quarter 2014
revenues are comprised primarily of $113.1 million in KALYDECO net
revenues and an aggregate of $25.3 million in net product revenues
from INCIVEK, royalty revenues and collaborative revenues. For the
second quarter of 2013, Vertex reported $99.0 million in net
product revenues from KALYDECO and $211.7 million in net product
revenues from INCIVEK, royalty revenues and collaborative
revenues.
Operating Costs and Expenses: Total operating costs and
expenses for the second quarter of 2014 were $319.3 million,
including certain charges of $81.9 million, compared to $367.7
million for the second quarter of 2013, including certain charges
of $87.0 million. GAAP operating costs and expenses include:
- R&D Expenses: R&D
expenses were $224.8 million for the second quarter of 2014,
including $45.3 million of certain charges, compared to $222.5
million for the second quarter of 2013, including $31.3 million of
certain charges.
- Sales, General and Administrative
(SG&A) Expenses: SG&A expenses were $77.4 million for
the second quarter of 2014, including $19.6 million of certain
charges, compared to $106.5 million for the second quarter of 2013,
including $17.0 million of certain charges.
Net Loss Attributable to Vertex: Vertex's second quarter
2014 net loss was $(159.4) million, or $(0.68) per share, and
includes net charges of $17.7 million. Vertex's GAAP net loss for
the second quarter of 2013 was $(57.2) million, or $(0.26) per
share, including net charges of $51.0 million.
Vertex Pharmaceuticals Incorporated Second
Quarter Results Condensed Consolidated Statements of
Operations Data
(in thousands, except per share
amounts)
(unaudited)
Three Months
EndedJune 30, Six Months EndedJune 30,
2014 2013 2014
2013 Revenues: Product revenues, net $ 122,319 $ 254,789 $
225,780 $ 522,170 Royalty revenues 13,015 49,120 23,748 92,693
Collaborative revenues 3,087 6,841 7,344
24,255 Total revenues 138,421 310,750
256,872 639,118 Costs and expenses:
Cost of product revenues 9,655 24,695 18,227 55,650 Royalty
expenses 7,645 13,236 14,549 25,024 Research and development
expenses (R&D) 224,780 222,455 463,743 440,550 Sales, general
and administrative expenses (SG&A) 77,446 106,521 151,658
199,400 Restructuring expenses (270 ) 776 5,918 815 Intangible
asset impairment charge (Note 1) — — —
412,900 Total costs and expenses 319,256 367,683
654,095 1,134,339 Loss from
operations (180,835 ) (56,933 ) (397,223 ) (495,221 )
Interest expense, net (15,585 ) (6,551 ) (31,302 ) (10,016 ) Other
income (expense), net (Note 2) 37,731 (27 ) 38,182
(1,214 ) Loss before provision for (benefit from)
income taxes (158,689 ) (63,511 ) (390,343 ) (506,451 ) Provision
for (benefit from) income taxes (Note 1) 693 (1,799 )
1,496 (132,112 ) Net loss (159,382 ) (61,712 )
(391,839 ) (374,339 ) Net loss attributable to noncontrolling
interest (Note 3) — 4,547 —
9,158 Net loss attributable to Vertex $ (159,382 ) $ (57,165
) $ (391,839 ) $ (365,181 ) Net loss per share
attributable to Vertex common shareholders: Basic $ (0.68 ) $ (0.26
) $ (1.68 ) $ (1.67 ) Diluted $ (0.68 ) $ (0.26 ) $ (1.68 ) $ (1.67
) Shares used in per share calculations: Basic 233,808
222,053 233,353 218,795 Diluted 233,808 222,053 233,353 218,795
Consolidated Revenues
(in millions)
(unaudited)
Three Months Ended June
30,2014 March 31,2014
December 31,2013 September
30,2013 June 30,2013
Product revenues KALYDECO revenues, net $ 113.1 $ 99.5 $
109.5 $ 101.1 $ 99.0 INCIVEK revenues, net 9.3 3.9
19.3 85.6 155.8 Total product revenues, net 122.4
103.5 128.8 186.7 254.8
Royalty revenues 13.0 10.7 36.9 27.0
49.1
Collaborative revenues 3.0 4.3 185.4
8.0 6.8
Total revenues $ 138.4
$ 118.5 $ 351.2
$ 221.7 $ 310.8
Reconciliation of GAAP to Non-GAAP Financial Information-Second
Quarter
(in thousands, except per share
amounts)
(unaudited)
Three Months Ended June 30, 2014
Adjustments GAAP
Stock-based compensation expense (Note
4)
Corporate headquarters relocation (Note
5)
HCV related costs (Note 6)
Other adjustments (Note 7)
Non-GAAP Income (loss) from operations $ (180,835 ) $ 42,444 $
12,761 $ (2,323 ) $ 1,467 $ (126,486 ) Other income (expense), net
22,146 — (36,685 ) —
— (14,539 ) Income (loss) before provision for
(benefit from) incomes taxes (158,689 ) 42,444 (23,924 ) (2,323 )
1,467 (141,025 ) Provision for (benefit from) income taxes 693
— — —
— 693 Net income (loss) $ (159,382 ) $ 42,444
$ (23,924 ) $ (2,323 ) $ 1,467 $
(141,718 ) Net income (loss) per diluted share attributable to
Vertex common shareholders (Note 8) $ (0.68 ) $ (0.61 )
Three Months Ended June 30, 2013
Adjustments GAAP
Stock-based compensation expense (Note
4)
Alios transaction (Note 3)
HCV related costs (Note 6)
Other adjustments (Note 7)
Non-GAAP Income (loss) from operations $ (56,933 ) $ 41,263
$ 7,007 $ 5,083 $ 776 $ (2,804 ) Other
income (expense), net (6,578 ) — (183 ) —
3,908 (2,853 ) Income (loss) before provision
for (benefit from) incomes taxes (63,511 ) 41,263 6,824 5,083 4,684
(5,657 ) Provision for (benefit from) income taxes (1,799 ) —
2,357 — — 558
Net income (loss) (61,712 ) 41,263 4,467 5,083 4,684 (6,215
) Net loss (income) attributable to noncontrolling interest (Alios)
4,547 — (4,547 ) — —
— Net income (loss) attributable to Vertex $ (57,165
) $ 41,263 $ (80 ) $ 5,083 $
4,684 $ (6,215 ) Net income (loss) per diluted share
attributable to Vertex common shareholders (Note 8) $ (0.26 ) $
(0.03 )
Reconciliation of GAAP to Non-GAAP
Financial Information-Second Quarter
(in thousands)
(unaudited)
Three Months Ended June 30, 2014
2013 GAAP total costs and expenses $ 319,256 $
367,683 Adjustments: Cost of product revenues and royalty expenses
(17,300 ) (37,931 ) Stock-based compensation expense (Note 4)
(42,444 ) (41,263 ) Corporate headquarters relocation (Note 5)
(12,761 ) — HCV related costs (Note 6) (7,889 ) — Alios transaction
(Note 3) — (7,007 ) Other adjustments (Note 7) (1,467 ) (776 )
Non-GAAP operating costs and expenses $ 237,395 $ 280,706
GAAP research and development expenses $ 224,780 $ 222,455
Adjustments: Stock-based compensation expense (Note 4) (27,253 )
(25,700 ) Corporate headquarters relocation (Note 5) (9,382 ) — HCV
related costs (Note 6) (5,049 ) — Alios transaction (Note 3) —
(5,566 ) Other adjustments (Note 7) (3,584 ) —
Non-GAAP
research and development expenses $ 179,512 $ 191,189
GAAP sales, general and administrative expenses $ 77,446 $ 106,521
Adjustments: Stock-based compensation expense (Note 4) (15,191 )
(15,563 ) Corporate headquarters relocation (Note 5) (1,706 ) — HCV
related costs (Note 6) (2,666 ) — Alios transaction (Note 3) —
(1,441 )
Non-GAAP sales, general and administrative
expenses $ 57,883 $ 89,517
Reconciliation of
GAAP to Non-GAAP Financial Information-Six Month
(in thousands, except per share
amounts)
(unaudited)
Six Months Ended June 30, 2014
Adjustments GAAP
Stock-based compensation expense (Note
4)
Corporate headquarters relocation (Note
5)
HCV related costs (Note 6)
Other adjustments (Note 7)
Non-GAAP Income (loss) from operations $ (397,223 ) $ 89,024
$ 32,370 $ 8,999 $ 5,123 $ (261,707 ) Other income (expense), net
6,880 — (36,685 ) —
— (29,805 ) Income (loss) before provision for (benefit
from) incomes taxes (390,343 ) 89,024 (4,315 ) 8,999 5,123 (291,512
) Provision for (benefit from) income taxes 1,496 —
— — — 1,496 Net
income (loss) $ (391,839 ) $ 89,024 $ (4,315 )
$ 8,999 $ 5,123 $ (293,008 ) Net income (loss)
per diluted share attributable to Vertex common shareholders (Note
8) $ (1.68 ) $(1.26)
Six Months Ended June 30, 2013
Adjustments GAAP
Stock-based compensation expense (Note
4)
Alios transaction (Note 3)
HCV related costs (Note 6)
Other adjustments (Note 7)
Non-GAAP Income (loss) from operations $ (495,221 ) $ 72,416
$ 12,296 $ 417,983 $ 815
$ 8,289 Other income (expense), net (11,230 ) — (175
) — 3,908 (7,497 ) Income (loss) before
provision for (benefit from) incomes taxes (506,451 ) 72,416 12,121
417,983 4,723 792 Provision for (benefit from) income taxes
(132,112 ) — 5,783 127,586
— 1,257 Net income (loss) (374,339 ) 72,416
6,338 290,397 4,723 (465 ) Net loss (income) attributable to
noncontrolling interest (Alios) 9,158 — (9,158
) — — — Net income (loss)
attributable to Vertex $ (365,181 ) $ 72,416 $ (2,820
) $ 290,397 $ 4,723 $ (465 ) Net income
(loss) per diluted share attributable to Vertex common shareholders
(Note 8) $ (1.67 ) $(0.00)
Reconciliation of GAAP
to Non-GAAP Financial Information-Six Month
(in thousands)
(unaudited)
Six Months Ended June 30, 2014
2013 GAAP total costs and expenses $ 654,095 $
1,134,339 Adjustments: Cost of product revenues and royalty
expenses (32,776 ) (80,674 ) Stock-based compensation expense (Note
4) (89,024 ) (72,416 ) Corporate headquarters relocation (Note 5)
(32,370 ) — HCV related costs (Note 6) (23,441 ) — Alios
transaction (Note 3) — (12,296 ) Other adjustments (Note 7) (5,123
) (413,715 )
Non-GAAP operating costs and expenses $ 471,361
$ 555,238 GAAP research and development expenses 463,743
440,550 Adjustments: Stock-based compensation expense (Note 4)
(60,153 ) (44,973 ) Corporate headquarters relocation (Note 5)
(21,583 ) — HCV related costs (Note 6) (14,046 ) — Alios
transaction (Note 3) — (9,614 ) Other adjustments (Note 7) (6,909 )
—
Non-GAAP research and development expenses 361,052
385,963 GAAP sales, general and administrative expenses $
151,658 $ 199,400 Adjustments: Stock-based compensation expense
(Note 4) (28,871 ) (27,443 ) Corporate headquarters relocation
(Note 5) $ (3,906 ) — HCV related costs (Note 6) (8,572 ) — Alios
transaction (Note 3) — (2,682 )
Non-GAAP sales, general
and administrative expenses $ 110,309 $ 169,275
Condensed Consolidated Balance Sheets Data
(in thousands)
(unaudited)
June 30, 2014 December
31, 2013 Assets Cash, cash equivalents and marketable
securities $ 1,219,161 $ 1,465,076 Accounts receivable, net 81,842
85,517 Inventories 11,982 14,147 Other current assets 34,399 23,836
Restricted cash 129 130 Property and equipment, net 730,000 696,911
Goodwill 30,992 30,992 Other non-current assets 9,315 2,432
Total assets $ 2,117,820 $ 2,319,041
Liabilities and Shareholders' Equity Other liabilities $
388,020 $ 422,377 Accrued restructuring expense 18,984 28,353
Deferred revenues 65,279 70,969 Construction financing lease
obligation 473,268 440,937 Shareholders' equity 1,172,269
1,356,405
Total liabilities and shareholders' equity $
2,117,820 $ 2,319,041 Common shares outstanding
237,331 233,789
Note 1: The company determined that the value of VX-222
had become impaired and that the fair value of VX-222 was zero as
of March 31, 2013. This resulted in a $412.9 million impairment
charge in the six months ended June 30, 2013. In connection with
this impairment charge, the company recorded a credit of $127.6
million in its provision for income taxes.
Note 2: The company recorded the effect of a one-time
cash payment received related to a lease agreement in Other income
(expense), net during the second quarter of 2014.
Note 3: The company consolidated the financial statements
of its collaborator Alios for the three and six months ended June
30, 2013. The company determined that it would no longer
consolidate Alios as of December 31, 2013. Each reporting
period that Vertex consolidated Alios, the company estimated the
fair value of the contingent milestone payments and royalties
payable by Vertex to Alios. Any increase in the fair value of these
contingent milestone and royalty payments resulted in a decrease in
net income attributable to Vertex (or an increase in net loss
attributable to Vertex) on a dollar-for-dollar basis.
Note 4: Stock-based compensation expense in the three and
six months ended June 30, 2014 includes the effect of the company's
full career provision, which was effective for equity grants issued
in February 2014, and results in partial or full acceleration of
stock compensation expense for qualified grants.
Note 5: In the three and six months ended June 30, 2014,
"Corporate headquarters relocation" primarily consists of (i) $11.1
million and $25.5 million transition costs related to the company's
relocation, respectively, (ii) $1.7 million and $6.9 million in
restructuring charges related to this relocation, respectively, and
(iii) a $36.7 million credit to record the impact of the one-time
cash payment received discussed in Note 2 above.
Note 6: In the three and six months ended June 30, 2014,
"HCV related costs" primarily consists of (i) $9.3 million and
$13.2 million net product revenues related to INCIVEK,
respectively, (ii) $5.7 million and $10.6 million royalty revenues
related to INCIVO, respectively, and a corresponding amount of
royalty expenses, (iii) $3.6 million and $11.2 million net charges
related to post-restructuring HCV collaborative revenues and
development costs, respectively, and (iv) $2.7 million and $8.6
million related to the 2014 pharma fee and commercial costs related
to INCIVEK, respectively. In the three and six months ended June
30, 2013, HCV related costs consisted of (i) an inventory write-off
related to INCIVEK of $5.1 million recorded in the second quarter
of 2013 and (ii) the first quarter of 2013 VX-222 impairment
charge, net of tax discussed in Note 1 above.
Note 7: In the three and six months ended June 30, 2014,
"Other adjustments" consists of (i) development cost associated
with VX-509 of $3.6 million and $6.9 million, respectively, and
(ii) restructuring credits related to a lease obligation of $2.1
million and $1.8 million, respectively. In the three and six months
ended June 30, 2013, "Other adjustments" consists of (i) $3.9
million of interest expense related to the 2015 Notes that were
converted in the second quarter of 2013 and (ii) restructuring
charges related to a lease obligation of $0.8 million and $0.8
million, respectively.
Note 8: Shares used in non-GAAP net income (loss) per
diluted share attributable to Vertex common shareholders were
233,808,000 and 222,053,000 for the three months ended June 30,
2014 and 2013, respectively, and 233,353,000 and 218,795,000 for
the six months ended June 30, 2014 and 2013, respectively.
INDICATION AND IMPORTANT SAFETY
INFORMATION FOR KALYDECO (ivacaftor)
Ivacaftor (150 mg tablets) is indicated for the treatment of
cystic fibrosis (CF) in patients age 6 years and older who have a
G551D mutation in the CFTR gene.
In the United States, ivacaftor is also indicated for the
treatment of CF in patients age 6 and older who have one of the
following mutations in the CFTR gene: G1244E, G1349D, G178R, G551S,
S1251N, S1255P, S549N, or S549R. In Canada, ivacaftor is indicated
for these same mutations and additionally for G970R.
Ivacaftor is not effective in patients with CF with 2 copies of
the F508del mutation (F508del/F508del) in the CFTR gene.
The safety and efficacy of ivacaftor in children with CF younger
than 6 years of age have not been established.
Elevated liver enzymes (transaminases; ALT and AST) have been
reported in patients receiving ivacaftor. It is recommended that
ALT and AST be assessed prior to initiating ivacaftor, every 3
months during the first year of treatment, and annually thereafter.
Patients who develop increased transaminase levels should be
closely monitored until the abnormalities resolve. Dosing should be
interrupted in patients with ALT or AST of greater than 5 times the
upper limit of normal. Following resolution of transaminase
elevations, consider the benefits and risks of resuming ivacaftor
dosing.
Use of ivacaftor with medicines that are strong CYP3A inducers,
such as the antibiotics rifampin and rifabutin; seizure medications
(phenobarbital, carbamazepine, or phenytoin); and the herbal
supplement St. John's Wort, substantially decreases exposure of
ivacaftor and may diminish effectiveness. Therefore,
co-administration is not recommended.
The dose of ivacaftor must be adjusted when used concomitantly
with strong and moderate CYP3A inhibitors or when used in patients
with moderate or severe hepatic disease.
Ivacaftor can cause serious adverse reactions including
abdominal pain and high liver enzymes in the blood. The most common
side effects associated with ivacaftor include headache; upper
respiratory tract infection (the common cold), including sore
throat, nasal or sinus congestion, and runny nose; stomach
(abdominal) pain; diarrhea; rash; and dizziness. These are not all
the possible side effects of ivacaftor. A list of the adverse
reactions can be found in the product labeling for each country
where ivacaftor is approved. Patients should tell their healthcare
providers about any side effect that bothers them or does not go
away.
Please see KALYDECO U.S. Prescribing Information, EU Summary of
Product Characteristics, Canadian Product Monograph, Australian
Consumer Medicine Information and Product Information, Swiss
Prescribing Information and Patient Information, and the New
Zealand Datasheet and Consumer Medicine Information.
Indication and Important Safety Information for INCIVEK
(telaprevir)
INCIVEK® (telaprevir) is a prescription medicine used with the
medicines peginterferon alfa and ribavirin to treat chronic
(lasting a long time) hepatitis C genotype 1 infection in adults
with stable liver problems, who have not been treated before or who
have failed previous treatment. It is not known if INCIVEK is safe
and effective in children under 18 years of age.
Important Safety Information
INCIVEK® (telaprevir) should always be used in combination with
peginterferon alfa and ribavirin. INCIVEK combination treatment may
cause serious side effects including skin rash and serious skin
reactions, anemia (low red blood cell count) that can be severe,
and birth defects or death of an unborn baby.
Skin rashes are common with INCIVEK combination treatment.
Sometimes these skin rashes and other skin reactions can become
serious, require treatment in a hospital, and may lead to death.
Patients should call their healthcare provider right away if they
develop any skin changes or itching during treatment with INCIVEK.
Their healthcare provider will decide if they need treatment or if
they need to stop INCIVEK or any of their other medicines. Patients
should not stop taking INCIVEK combination treatment without
talking with their healthcare provider first.
Patients' healthcare providers will do blood tests regularly to
check for anemia. If anemia is severe, the healthcare providers may
tell them to stop taking INCIVEK.
INCIVEK combined with peginterferon alfa and ribavirin may cause
birth defects or death of an unborn baby. Therefore, a patient
should not take INCIVEK combination treatment if she is pregnant or
may become pregnant, or if he is a man with a sexual partner who is
pregnant. Females who can become pregnant and females whose male
partner takes these medicines must have a negative pregnancy test
before starting treatment, every month during treatment, and for 6
months after treatment ends. Patients must use two forms of
effective birth control during treatment and for 6 months after all
treatment has ended. These two forms of birth control should not
contain hormones, as these may not work during treatment with
INCIVEK.
INCIVEK and other medicines can affect each other and can also
cause side effects that can be serious or life-threatening. There
are certain medicines patients cannot take with INCIVEK combination
treatment. Patients should tell their healthcare providers about
all the medicines they take, including prescription and
over-the-counter medicines, vitamins and herbal supplements.
The most common side effects of INCIVEK combination treatment
include itching, nausea, diarrhea, vomiting, anal or rectal
problems (including hemorrhoids, discomfort, burning or itching
around or near the anus), taste changes and tiredness. There are
other possible side effects of INCIVEK, and side effects associated
with peginterferon alfa and ribavirin also apply to INCIVEK
combination treatment. Patients should tell their healthcare
provider about any side effect that bothers them or doesn't go
away.
Please see full Prescribing Information including Boxed Warning,
and the Medication Guide for INCIVEK available at
www.INCIVEK.com.
About Vertex
Vertex is a global biotechnology company that aims to discover,
develop and commercialize innovative medicines so people with
serious diseases can lead better lives. In addition to our clinical
development programs focused on cystic fibrosis, Vertex has more
than a dozen research programs aimed at other serious and
life-threatening diseases.
Founded in 1989 in Cambridge, Mass., Vertex today has research
and development sites and commercial offices in the United States,
Europe, Canada and Australia. For four years in a row, Science
magazine has named Vertex one of its Top Employers in the life
sciences. For additional information and the latest updates from
the company, please visit www.vrtx.com.
Special Note Regarding Forward-looking Statements
This press release contains forward-looking statements as
defined in the Private Securities Litigation Reform Act of 1995,
including, without limitation, Dr. Leiden's statements in the
second paragraph of the press release, the information provided in
the section captioned "2014 Financial Guidance," and the
information provided regarding (i) the European Commission’s review
of the CHMP’s positive opinion recommending the approval of
KALYDECO for people with CF who have one of eight mutations; (ii)
Vertex’s sNDA in the U.S. and an MAA variation in Europe for people
with CF ages 18 and older who have the R117H mutation; (iii)
expectations about Vertex’s Phase 3 study of ivacaftor in children
with CF ages 2 to 5 who have a gating mutation, and potential
regulatory submissions based on the data from this study; (iv)
plans to initiate a Phase 3 study in people with residual function
mutations; (v) plans to submit regulatory applications for the
approval of lumacaftor in combination with ivacaftor in the fourth
quarter of 2014; (vi) planned further development of VX-661; and
(vii) Vertex’s next-generation corrector research program. While
Vertex believes the forward-looking statements contained in this
press release are accurate, these forward-looking statements
represent the company's beliefs only as of the date of this press
release and there are a number of factors that could cause actual
events or results to differ materially from those indicated by such
forward-looking statements. Those risks and uncertainties include,
among other things, that the company's expectations regarding its
2014 revenues and financial results and its 2014 non-GAAP operating
expenses may be incorrect (including because one or more of the
company's assumptions underlying its revenue or expense
expectations may not be realized), that data from the company's
development programs may not support registration or further
development of its compounds, that Vertex could experience
unforeseen delays in submitting regulatory filings, that regulatory
authorities may not approve, or approve on a timely basis,
lumacaftor in combination with ivacaftor due to safety, efficacy or
other reasons, and other risks listed under Risk Factors in
Vertex's annual report and quarterly reports filed with the
Securities and Exchange Commission and available through the
company's website at www.vrtx.com. Vertex disclaims any obligation
to update the information contained in this press release as new
information becomes available.
Conference Call and
Webcast
The company will host a conference call and webcast today at
5:00 p.m. ET. To access the call, please dial (866) 501-1537 (U.S.)
or +1 (720) 545-0001 (International). The conference call will be
webcast live and a link to the webcast can be accessed through
Vertex's website at www.vrtx.com in the "Investors" section under
"Events and Presentations.” To ensure a timely connection, it is
recommended that users register at least 15 minutes prior to the
scheduled webcast. An archived webcast will be available on the
company's website until August 31, 2014.
(VRTX-GEN)
Vertex Contacts:Investors:Michael Partridge,
617-341-6108orKelly Lewis, 617-961-7530orMedia:Zach Barber,
617-341-6992mediainfo@vrtx.com
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