- Full-year 2018 CF product revenues of $3.04
billion, a 40% increase compared to $2.17 billion in 2017;
fourth-quarter 2018 CF product revenues of $868 million -
- Full-year 2018 GAAP operating income
increased 415% to $635 million; non-GAAP operating income increased
97% to $1.11 billion -
- Company provides full-year 2019 financial
guidance for total CF product revenues of $3.45 billion to $3.55
billion -
Vertex Pharmaceuticals Incorporated (Nasdaq: VRTX) today
reported consolidated financial results for the full year and
fourth quarter ended December 31, 2018 and provided full-year 2019
financial guidance.
Fourth-Quarter
and Full-Year 2018 Financial Highlights
Three Months EndedDecember
31,
%
Twelve Months EndedDecember
31,
%
2018 2017 Change 2018
2017 Change (in millions, except per share and
percentage data)
TOTAL CF product revenues, net $ 868 $ 621
40% $ 3,038 $ 2,165 40%
GAAP
Operating income $ 128 $ 126 2% $ 635 $ 123 415%
Benefit from (provision for) income taxes ^ $ 1,493 $ (10 )
$ 1,487 $ 107
Net income $ 1,551 $ 101 $ 2,097 $ 263
Net income per share - diluted $ 5.97 $ 0.39 $ 8.09 $
1.04
Non-GAAP
Operating income $ 348 $ 184 90% $ 1,112 $ 564 97%
Provision for income taxes $ (3 ) $ (13 ) $ (16 ) $ (7 )
Net income $ 337 $ 158 113% $ 1,059 $ 495 114%
Net income per share - diluted $ 1.30 $ 0.61 113% $ 4.08 $
1.95 109%
^ GAAP net income includes a benefit from
income taxes of approximately $1.5 billion in the fourth quarterand
full year ended December 31, 2018 due to the release of Vertex's
valuation allowance on the majorityof its net operating losses and
other deferred tax assets.
"Our achievements in 2018 were marked by a significant increase
in the number of CF patients being treated with our approved
medicines and by remarkable progress advancing our two triple
combination regimens through late-stage development. We remain on
track to submit a New Drug Application for a triple combination
regimen no later than mid-2019," said Jeffrey Leiden, M.D., Ph.D.,
Chairman, President and Chief Executive Officer of Vertex. "Beyond
CF, we have made tremendous advances with our research and
development pipeline. We initiated clinical development for
potential medicines to treat alpha-1 antitrypsin deficiency, sickle
cell disease and beta thalassemia, provided multiple positive data
readouts in pain, and progressed several other drug candidates into
late preclinical development. Through our continued progress in
treating CF and other serious diseases, we believe Vertex will
continue to create revenue and earnings growth in 2019 and
beyond."
Full-Year 2018 CF
Net Product Revenues
Twelve Months EndedDecember
31,
2018 2017 (in millions)
TOTAL CF product
revenues, net $
3,038 $
2,165
KALYDECO product revenues, net $ 1,008 $ 845
ORKAMBI product revenues, net $ 1,262 $ 1,321
SYMDEKO
product revenues, net $ 769 $ —
Total CF net product revenues increased 40% compared to
the full-year of 2017, primarily driven by the rapid uptake of
SYMDEKO in the U.S. and the full year impact of KALYDECO label
expansions.
Full-Year 2018
R&D and SG&A Expenses
Twelve Months EndedDecember
31,
2018 2017 (in millions)
Combined GAAP
R&D and SG&A expenses $
1,974 $
1,821 GAAP R&D expense $ 1,416 $
1,325
GAAP SG&A expense $ 558 $ 496
Combined
Non-GAAP R&D and SG&A expenses $
1,527 $
1,335 Non-GAAP R&D expense $ 1,089 $
959
Non-GAAP SG&A expense $ 437 $ 375
Combined GAAP and non-GAAP R&D and SG&A expenses
increased compared to the full year of 2017, primarily due to the
advancement of the company's portfolio of triple combination
regimens for CF and investments to support the treatment of CF
globally.
Full-Year 2018 Income
Taxes
Vertex released the valuation allowance on the majority of its
deferred tax assets in the fourth quarter of 2018 based on, among
other things, its achievement of cumulative profitability over the
last several years and its expectations regarding future
profitability. The one-time release of this valuation allowance
resulted in Vertex recording a GAAP income tax benefit of $1.5
billion in 2018 compared to a benefit of $107.3 million in
2017.
Vertex reported non-GAAP income tax expense of $16.4 million in
2018, which excludes the release of the valuation allowance,
compared to income tax expense of $6.8 million in 2017.
Full-Year 2018
Net Income and Cash Position
Twelve Months EndedDecember
31,
2018 2017 (in millions)
GAAP net income
$ 2,097 $ 263
Non-GAAP net income $ 1,059 $
495
As of December 31, 2018 2017 (in
millions)
Cash, cash equivalents and marketable securities $
3,168 $ 2,089
GAAP net income increased compared to the full year of
2017 largely driven by the release of the tax valuation allowance
and strong growth in total CF product revenues.
Non-GAAP net income increased 114% compared to the full
year of 2017 largely driven by the strong growth in total CF
product revenues.
Cash, cash equivalents and marketable securities as of
December 31, 2018 were approximately $3.2 billion, an increase of
approximately $1.1 billion compared to $2.1 billion as of December
31, 2017.
Fourth-Quarter
2018 CF Net Product Revenues
Three Months EndedDecember
31,
2018 2017 (in millions)
TOTAL CF product
revenues, net $
868 $
621
KALYDECO product revenues, net $ 259 $ 256
ORKAMBI
product revenues, net $ 315 $ 365
SYMDEKO product revenues,
net $ 294 $ —
Total CF net product revenues increased 40% compared to
the fourth quarter of 2017, primarily driven by the rapid uptake of
SYMDEKO in the U.S.
Fourth-Quarter
2018 R&D and SG&A Expenses
Three Months EndedDecember
31,
2018 2017 (in millions)
Combined GAAP
R&D and SG&A expenses $
591 $
441 GAAP R&D expense $ 438 $ 307
GAAP SG&A expense $ 153 $ 135
Combined
Non-GAAP R&D and SG&A expenses $
400 $
355 Non-GAAP R&D expense $ 275 $ 249
Non-GAAP SG&A expense $ 125 $ 106
Combined GAAP R&D and SG&A expenses increased
compared to the fourth quarter of 2017 primarily due to $111.9
million of expenses related to strategic licensing agreements
entered into in the fourth quarter of 2018 and the advancement of
the company's portfolio of triple combination regimens for CF and
investments to support the treatment of CF globally.
Combined non-GAAP R&D and SG&A expenses increased
compared to the fourth quarter of 2017 primarily due to the
advancement of the company's portfolio of triple combination
regimens for CF and investments to support the treatment of CF
globally.
Fourth-Quarter 2018 Income
Taxes
Vertex released the valuation allowance on the majority of its
deferred tax assets in the fourth quarter of 2018. The one-time
release of this valuation allowance resulted in Vertex recording a
non-cash GAAP income tax benefit of $1.5 billion in the fourth
quarter of 2018 compared to income tax expense of $10.3 million in
the fourth quarter of 2017.
Vertex reported non-GAAP income tax expense of $3.0 million in
the fourth quarter of 2018, which excludes the release of the
valuation allowance, compared to income tax expense of $12.7
million in the fourth quarter of 2017.
Fourth-Quarter
2018 Net Income
Three Months EndedDecember
31,
2018 2017 (in millions)
GAAP net income
$ 1,551 $ 101
Non-GAAP net income $ 337 $ 158
GAAP net income increased compared to the fourth quarter
of 2017 largely driven by the release of the tax valuation
allowance and strong growth in total CF product revenues, partially
offset by upfront payments on strategic licensing agreements.
Non-GAAP net income increased 113% compared to the fourth
quarter of 2017 largely driven by the strong growth in total CF
product revenues.
Full-Year 2019 Financial
Guidance
Vertex today provided its full-year 2019 guidance as
follows:
FY 2019 TOTAL CF product revenues $
3.45 to 3.55 billion
Combined GAAP R&D and SG&A
expenses $ 2.00 to 2.15 billion
Combined Non-GAAP R&D
and SG&A expenses $ 1.65 to 1.70 billion
GAAP and
Non-GAAP effective tax rate 21% - 22%
The company's total CF product revenue growth in 2019 is
expected to be driven primarily by the full-year impact of the
SYMDEKO launch, recently completed reimbursement agreements and
label expansions for the company's CF medicines. The company's
full-year 2019 revenue guidance reflects only markets where its CF
medicines are currently reimbursed.
The company's combined GAAP and non-GAAP R&D and SG&A
expense guidance reflects CF development efforts, incremental
investment to support the potential launch of a triple combination
regimen and investment to support the expansion of Vertex's
pipeline into new disease areas.
Based on the release of the company's valuation allowance in the
fourth quarter of 2018, Vertex will also begin recording a tax
provision in 2019 and expects its full-year GAAP and non-GAAP tax
rate to be between 21% and 22%. The vast majority of this tax
provision will be a non-cash expense until the company fully
utilizes its net operating losses.
Business Highlights
TRIPLE COMBINATION REGIMENS
Bringing triple combination regimens to people with CF as
quickly as possible: On November 27, 2018, Vertex announced
positive data from two Phase 3 studies evaluating VX-659 in triple
combination with tezacaftor and ivacaftor in people with CF who
have one F508del mutation and one minimal function mutation and in
people who have two F508del mutations. Data are expected in the
first quarter of 2019 from the two Phase 3 studies evaluating
VX-445 in triple combination with tezacaftor and ivacaftor in
people with CF who have one F508del mutation and one minimal
function mutation and in people who have two F508del mutations.
Vertex will evaluate data from both the VX-659 and VX-445 triple
combination programs to choose the best regimen to submit for
potential regulatory approval. Together these data are expected to
provide the basis for submission of a New Drug Application (NDA) to
the U.S. Food and Drug Administration (FDA) no later than
mid-2019.
APPROVED CF MEDICINES
SYMKEVI in the European Union: On November 1, 2018,
Vertex announced that the European Commission granted Marketing
Authorization for SYMKEVI (tezacaftor/ivacaftor) in a combination
regimen with ivacaftor (KALYDECO) for the treatment of people with
CF ages 12 and older who either have two copies of the F508del
mutation or who have one copy of the F508del mutation and a copy of
one of the following 14 mutations in which the CFTR protein shows
residual activity: P67L, R117C, L206W, R352Q, A455E, D579G,
711+3A→G, S945L, S977F, R1070W, D1152H, 2789+5G→A, 3272-26A→G, and
3849+10kbC→T.
SYMKEVI is now reimbursed and available to all eligible patients
in Germany, Ireland and Austria.
Establishing long-term reimbursement outside of the U.S.:
During 2018, Vertex established important reimbursement agreements
in several countries, including Australia, Sweden and Denmark.
These reimbursement agreements allow CF patients access to
medicines that treat the underlying cause of their disease for the
first time and provide a pathway to access and rapid reimbursement
for future CF medicines. The company continues to work toward
establishing pricing and reimbursement agreements in other
countries outside of the U.S. to ensure all eligible patients have
access to current and future CF medicines from Vertex as quickly as
possible.
SYMDEKO receives rare pediatric disease priority review
voucher: On January 29, 2019, the FDA granted Vertex a rare
pediatric disease priority review voucher based on the February 12,
2018 U.S. approval of SYMDEKO for the treatment of people with CF
ages 12 and older who have two copies of the F508del mutation or
who have at least one mutation that is responsive to
tezacaftor/ivacaftor. A rare pediatric disease priority review
voucher entitles the voucher holder to priority review of other
human drug applications and is not limited to applications for
drugs to treat rare pediatric diseases. Rare pediatric disease
priority review vouchers can be transferred, including by sale,
from one sponsor to another.
Treating patients at younger ages with CFTR modulators:
The company continues to make significant progress toward gaining
approval for its CF medicines to be used earlier in the course of
disease progression. Recent highlights include:
- KALYDECO was approved for
children with CF ages 12 to <24 months in the EU in November
2018 and in Canada in January 2019.
- ORKAMBI was approved for
children with CF ages 2 to 5 years old in Canada in December 2018
and in the EU in January 2019.
- In late 2018, sNDAs were submitted to
the FDA for ivacaftor in infants ages 6 to <12 months and
for tezacaftor/ivacaftor in children ages 6 through 11.
LATE-STAGE RESEARCH & CLINICAL DEVELOPMENT
Vertex continues to invest to discover and develop
transformative medicines in other serious diseases. The company has
a portfolio of potential medicines across a range of diseases,
including:
Sickle Cell Disease & Beta-Thalassemia: Vertex and
its partner CRISPR Therapeutics are developing the autologous
gene-edited hematopoietic stem cell therapy CTX001 for the
treatment of sickle cell disease and beta-thalassemia. On January
4, 2019, Vertex and CRISPR Therapeutics announced that the FDA
granted Fast Track Designation for CTX001 for the treatment of
sickle cell disease. Phase 1/2 trials in sickle cell disease and
beta-thalassemia are currently underway.
Selective NaV1.8 Inhibitors for the Treatment of
Pain: Data are expected in the first half of 2019 from a
Phase 2b dose-ranging study evaluating the NaV1.8 inhibitor VX-150
using an oral formulation in patients with acute pain following
bunionectomy surgery. The study is designed to evaluate multiple
oral doses of VX-150 to potentially support pivotal development in
acute pain.
In December 2018, the company announced positive results from a
Phase 2 study evaluating VX-150 for the treatment of pain in people
with small fiber neuropathy. This study is the third positive
proof-of-concept study of VX-150 and further validates the
potential role of NaV1.8 inhibition in the treatment of pain.
Vertex is advancing multiple pain molecules through late-stage
preclinical development and plans to initiate clinical development
with the first of these molecules in 2019.
Alpha-1 Antitrypsin (AAT) Program: In December
2018, Vertex initiated clinical development of its first potential
medicine for alpha-1 antitrypsin deficiency, a genetic disorder
that is caused by mutations in a single gene that result in
life-shortening systemic complications, primarily in the lung and
liver.
The company is advancing multiple other small molecule
correctors of alpha-1 antitrypsin deficiency through preclinical
development.
Focal Segmental Glomerulosclerosis (FSGS): Vertex
has multiple candidates in preclinical development for the
treatment of FSGS. The company's goal is to advance its first
potential medicine for this disease into clinical development in
2019. FSGS is a rare disease that attacks the kidney’s filtering
units causing serious scarring that leads to permanent kidney
damage. FSGS is a leading cause of nephrotic syndrome in children
and kidney failure in adults.
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 and guidance exclude from Vertex's pre-tax net income (i)
stock-based compensation expense, (ii) revenues and expenses
related to business development transactions including
collaboration agreements and asset acquisitions, (iii) revenues and
expenses related to consolidated variable interest entities,
including asset impairment charges and the effects of the
deconsolidation of variable interest entities in 2017 and 2018 and
(iv) other adjustments, including gains or losses related to the
fair value of the company's strategic investments. The company's
non-GAAP financial results also exclude from its provision for or
benefit from income taxes (i) the estimated tax impact related to
its non-GAAP adjustments to pre-tax net income described above as
well as (ii) non-operating tax adjustments, which are not
associated with Vertex's normal, recurring operations and include
the release of the company's valuation allowance on the majority of
its net operating losses and other deferred tax assets in the
fourth quarter of 2018. 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 the company's 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. The company adjusts, where appropriate, for both
revenues and expenses in order to reflect the company's operations.
The company provides guidance regarding product revenues in
accordance with GAAP and provides guidance regarding combined
research and development and sales, general, and administrative
expenses and its anticipated income taxes as a percentage of
pre-tax net income on both a GAAP and a non-GAAP basis. The
guidance regarding GAAP research and development expenses and
sales, general and administrative expenses does not include
estimates associated with any potential future business development
activities. The guidance regarding the GAAP effective tax rate is
based on currently available information and could be lower than
the current guidance of 21 to 22% due to actual value of equity
exercises by employees in 2019, geographic mix of business and
business development activities. A reconciliation of the GAAP
financial results to non-GAAP financial results is included in the
attached financial information.
Vertex Pharmaceuticals
IncorporatedFull-Year and Fourth-Quarter
ResultsConsolidated Statements of Operations Data(in
thousands, except per share amounts)(unaudited)
Three Months EndedDecember
31,
Twelve Months EndedDecember
31,
2018 2017 2018 2017
Revenues: Product revenues, net $ 868,173 $ 621,228 $ 3,038,325 $
2,165,480 Collaboration and royalty revenues (Note 1) 1,933
30,406 9,272 323,172 Total revenues 870,106
651,634 3,047,597 2,488,652 Costs and expenses: Cost of sales
122,289 84,052 409,539 275,119 Research and development expenses
(Note 2) 437,881 306,664 1,416,476 1,324,625 Sales, general and
administrative expenses 153,210 134,794 557,616 496,079
Restructuring expenses (income) 4 387 (184 ) 14,246 Intangible
asset impairment charges (Note 3) 29,000 — 29,000
255,340 Total costs and expenses 742,384
525,897 2,412,447 2,365,409 Income from
operations 127,722 125,737 635,150 123,243 Interest expense, net
(4,773 ) (12,547 ) (34,119 ) (57,550 ) Other expense, net (Note
4)(Note 5) (90,452 ) (748 ) (790 ) (81,382 ) Income (loss) from
operations before (benefit from) provision for income taxes 32,497
112,442 600,241 (15,689 ) (Benefit from) provision for income taxes
(Note 5)(Note 6) (1,492,599 ) 10,257 (1,486,862 ) (107,324 )
Net income 1,525,096 102,185 2,087,103 91,635 Loss (income)
attributable to noncontrolling interest (Note 5) 25,431
(1,501 ) 9,793 171,849 Net income attributable to
Vertex $ 1,550,527 $ 100,684 $ 2,096,896 $
263,484 Amounts per share attributable to Vertex
common shareholders: Net income: Basic $ 6.08 $ 0.40 $ 8.24 $ 1.06
Diluted $ 5.97 $ 0.39 $ 8.09 $ 1.04 Shares used in per share
calculations: Basic 254,868 251,557 254,292 248,858 Diluted 259,812
256,804 259,185 253,225
Reconciliation of GAAP to Non-GAAP Net
IncomeFull-Year and Fourth-Quarter Results(in thousands,
except per share amounts)(unaudited)
Three Months EndedDecember
31,
Twelve Months EndedDecember
31,
2018 2017 2018 2017
GAAP net income attributable to Vertex $ 1,550,527 $ 100,684
$ 2,096,896 $ 263,484 Stock-based compensation expense 78,943
75,402 325,047 290,736 Collaborative and transaction revenues and
expenses (Note 7) 106,570 (19,177 ) 134,447 (76,607 ) Other
adjustments (Note 8) 86,702 941 2,005 16,947
Total non-GAAP adjustments to pre-tax net income
attributable to Vertex 272,215 57,166 461,499 231,076 Non-operating
tax adjustments (Note 9) (1,485,873 ) — (1,499,588 ) —
Non-GAAP net income attributable to Vertex $ 336,869
$ 157,850 $ 1,058,807 $ 494,560
Amounts per diluted share attributable to Vertex common
shareholders: Net income: GAAP $ 5.97 $ 0.39 $ 8.09 $ 1.04 Non-GAAP
$ 1.30 $ 0.61 $ 4.08 $ 1.95 Shares used in diluted per share
calculations: GAAP 259,812 256,804 259,185 253,225 Non-GAAP 259,812
256,804 259,185 253,225
Reconciliation of GAAP to Non-GAAP
Revenues and ExpensesFull-Year and Fourth-Quarter
Results(in thousands)(unaudited)
Three Months EndedDecember
31,
Twelve Months EndedDecember
31,
2018 2017 2018 2017
GAAP total revenues $ 870,106 $ 651,634 $ 3,047,597 $
2,488,652 Collaborative and transaction revenues (Note 7) (663 )
(29,006 ) (4,203 ) (314,981 )
Non-GAAP total revenues $
869,443 $ 622,628 $ 3,043,394 $ 2,173,671
Three Months EndedDecember
31,
Twelve Months EndedDecember
31,
2018 2017 2018 2017 GAAP cost of
sales $ 122,289 $ 84,052 $ 409,539 $ 275,119 Stock-based
compensation expense (Note 10) (1,280 ) — (4,543 ) —
Non-GAAP cost of sales $ 121,009 $ 84,052 $ 404,996 $
275,119
GAAP research and development expenses $
437,881 $ 306,664 $ 1,416,476 $ 1,324,625 Stock-based compensation
expense (50,094 ) (47,045 ) (203,112 ) (181,900 ) Collaborative and
transaction expenses (Note 7) (111,925 ) (10,249 ) (120,004 )
(182,695 ) Other adjustments (Note 8) (877 ) (136 ) (4,005 ) (544 )
Non-GAAP research and development expenses $ 274,985 $
249,234 $ 1,089,355 $ 959,486
GAAP sales, general and
administrative expenses $ 153,210 $ 134,794 $ 557,616 $ 496,079
Stock-based compensation expense (27,569 ) (28,357 ) (117,392 )
(108,836 ) Collaborative and transaction expenses (Note 7) (438 )
(515 ) (2,142 ) (9,775 ) Other adjustments (Note 8) (162 ) (418 )
(742 ) (2,157 )
Non-GAAP sales, general and administrative
expenses $ 125,041 $ 105,504 $ 437,340 $ 375,311
Combined non-GAAP R&D and SG&A
expenses $ 400,026 $ 354,738 $ 1,526,695 $
1,334,797
Three Months EndedDecember
31,
Twelve Months EndedDecember
31,
2018 2017 2018 2017 GAAP interest
expense, net and other expense, net $ (95,225 ) $ (13,295 ) $
(34,909 ) $ (138,932 ) Collaborative and transaction expenses (Note
7) 1,037 (4 ) 965 76,503 Other adjustments (Note 8) 85,659 —
(2,558 ) —
Non-GAAP interest expense, net and
other expense, net $ (8,529 ) $ (13,299 ) $ (36,502 ) $ (62,429
)
GAAP (benefit from) provision for income taxes $
(1,492,599 ) $ 10,257 $ (1,486,862 ) $ (107,324 ) Estimated income
taxes related to non-GAAP adjustments to pre-tax income (Note 11)
9,736 2,432 3,668 114,090 Non-operating tax adjustments (Note 9)
1,485,873 — 1,499,588 —
Non-GAAP
provision for income taxes $ 3,010 $ 12,689 $ 16,394 $ 6,766
Condensed Consolidated Balance Sheets
Data(in thousands)(unaudited)
December 31, 2018 December 31, 2017
Assets Cash, cash equivalents and marketable securities $
3,168,242 $ 2,088,666 Accounts receivable, net 409,688 281,343
Inventories 124,360 111,830 Property and equipment, net 812,005
789,437 Intangible assets and goodwill (Note 3) 50,384 79,384
Deferred tax asset (Note 6) 1,499,672 834 Other assets 181,547
194,520
Total assets $ 6,245,898 $ 3,546,014
Liabilities and Shareholders' Equity Accounts payable
and accruals $ 715,482 $ 517,955 Other liabilities 528,050 421,842
Construction financing lease obligation 567,163 563,911
Shareholders' equity 4,435,203 2,042,306
Total
liabilities and shareholders' equity $ 6,245,898 $
3,546,014 Common shares outstanding 255,172 253,253
Note 1: In 2017, collaborative and royalty revenues were
primarily attributable to (i) a $25.0 million milestone earned from
the company's collaboration with Janssen Pharmaceuticals, Inc. in
the fourth quarter of 2017, (ii) a $230.0 million upfront payment
earned from the company's collaboration with Merck KGaA, Darmstadt,
Germany recorded in the first quarter of 2017 and (iii) a total of
$40.0 million that Parion Sciences Inc., a company that Vertex
consolidated as a variable interest entity ("VIE"), earned from a
collaboration agreement with a third party during the second and
third quarters of 2017.
Note 2: In the three and twelve months ended December 31,
2018, the company's research and development expenses include
$111.9 million of expenses related to strategic licensing
agreements entered into in the fourth quarter of 2018, including
license agreements with Merck KGaA, Darmstadt, Germany and Arbor
Biotechnologies, Inc. In 2017, the company's research and
development expenses included $160.0 million that it paid to
acquire VX-561 from Concert Pharmaceuticals, Inc. in the third
quarter of 2017.
Note 3: In the three and twelve months ended December 31,
2018, the company recorded a $29.0 million intangible asset
impairment charge related to VX-210 that it licensed from BioAxone
Biosciences, Inc. In the twelve months ended December 31, 2017, the
company recorded a $255.3 million intangible asset impairment
charge related to Parion's pulmonary ENaC platform.
Note 4: In accordance with ASU No. 2016-01, Recognition
and Measurement of Financial Assets and Financial Liabilities,
which became effective on January 1, 2018, the company recorded a
loss of $85.7 million in the three months ended December 31, 2018
and a net gain of $2.6 million in the twelve months ended December
31 2018 to "Other expense, net", related to changes in the fair
value of the company's strategic investments. Prior to the adoption
of ASU 2016-01, changes in the fair value of the company's
strategic investments were recorded to equity on the company's
condensed consolidated balance sheets until the related gains and
losses were realized; therefore, there were no comparable amounts
in the three and twelve months ended December 31, 2017.
Note 5: In 2017 and 2018, the company consolidated the
financial statements of BioAxone and Parion as VIEs for portions or
all of the three and twelve months ended December 31, 2018 and 2017
because Vertex had licensed the rights to develop these
collaborator's most significant intellectual property asset. Each
reporting period Vertex estimated the fair value of the contingent
payments payable by Vertex to BioAxone and Parion. Any increase in
the fair value of these contingent payments resulted in a decrease
in net income attributable to Vertex on a dollar-for-dollar basis.
The fair value of contingent payments was evaluated each quarter
and any change in the fair value was reflected in the company's
statement of operations.
The company deconsolidated Parion as of September 30, 2017 and
BioAxone as of December 31, 2018. The company's impairment of
Parion's ENaC platform and subsequent deconsolidation of Parion in
the third quarter of 2017 resulted in the impairment charge of
$255.3 million and a total benefit from income taxes of $126.2
million attributable to noncontrolling interest. The total impact
of the Parion transaction on a GAAP basis was a $198.7 million loss
attributable to noncontrolling interest and a $7.1 million loss
attributable to Vertex and had no impact on Vertex’s non-GAAP net
income in the third quarter of 2017. The net impact attributable to
Vertex resulting from the deconsolidation of BioAxone in the three
and twelve months ended December 31, 2018 was not material.
Note 6: In the three and twelve months ended December 31,
2018, the company recorded a non-cash benefit from income taxes of
approximately $1.5 billion related to the release of its valuation
allowance on the majority of its net operating losses and other
deferred tax assets based on, among other things, its achievement
of cumulative profitability over the last several years and its
expectations regarding future profitability. As a result, the
company recorded deferred tax assets of $1.5 billion on its
consolidated balance sheet as of December 31, 2018, which were
previously subject to the valuation allowance. Starting in the
first quarter of 2019, the company will record a provision for
income taxes on its pre-tax net income using an estimated effective
tax rate that is expected to approximate statutory rates. This
provision will include a significant non-cash charge due to the
company's ability to offset its pre-tax net income against
previously accumulated net operating losses. The company expects
its cash paid for income taxes to increase significantly once all
of its net operating losses have been utilized to offset its
pre-tax net income. As of December 31, 2018, the company's federal
net operating losses and credits were approximately $4.5
billion.
Note 7: "Collaborative and transaction revenues and
expenses" in the three and twelve months ended December 31, 2018
were primarily related to the upfront payments described in Note 2
as well an increase of $5.4 million and a decrease of $17.7
million, respectively, in the fair value of contingent payments
payable by Vertex to BioAxone. "Collaborative and transaction
revenues and expenses" in the three and twelve months ended
December 31, 2017 were primarily related to (i) the collaborative
revenues described in Note 1, (ii) the Concert transaction
described in Note 2, (iii) a $62.6 million decrease in the fair
value of contingent payments payable by Vertex to its VIEs for the
full-year and (iv) a charge attributable to Parion that was
recorded to "Other Expense, Net" upon deconsolidation in the third
quarter of 2017.
Note 8: In the three and twelve months ended December 31,
2018, "Other adjustments" primarily consisted of the changes in the
fair value of the company's strategic investments described in Note
4. In the three and twelve months ended December 31, 2017, "Other
adjustments" primarily consisted of restructuring charges related
to the company's decision to consolidate its research activities
into its Boston, Milton Park and San Diego locations and to close
its research site in Canada.
Note 9: "Non-operating tax adjustments" includes portions
of the company's provision for income taxes that are not associated
with the company's normal, recurring operations. In the three and
twelve months ended December 31, 2018, "Non-operating tax
adjustments" includes the non-cash benefit from income taxes
related to the release of the company's valuation allowance on the
majority of its net operating losses and other deferred tax assets
described in Note 6. Additionally, in the three months ended
December 31, 2018, the company recorded a provision for income
taxes related to stock-based compensation of $13.7 million on a
GAAP basis representing the reversal of the net benefit from income
taxes it recorded in the nine months ended September 30, 2018
related to stock-based compensation. Accordingly, these discrete
items related to stock-based compensation had no effect on the
company's GAAP annual provision for income taxes and the company
excluded this amount from its Non-GAAP measures for the three
months ended December 31, 2018.
Note 10: In the three and twelve months ended December
31, 2018, "Cost of sales" included $1.3 million and $4.5 million,
respectively, in stock-based compensation expense. In the three and
twelve months ended December 31, 2017, “Cost of sales” included
$0.8 million and $2.5 million, respectively, in stock-based
compensation expense. Beginning with the first quarter of 2018, the
company began adjusting for the stock-based compensation expense
recorded in “Cost of sales” in its reconciliation of "Non-GAAP net
income attributable to Vertex" and "Non-GAAP cost of sales". In its
Non-GAAP reconciliation, the company is not adjusting for the
stock-based compensation expense recorded in “Cost of sales” for
the three and twelve months ended December 31, 2017.
Note 11: In the three and twelve months ended December
31, 2018 and 2017, "Estimated income taxes related to non-GAAP
adjustments to pre-tax income" related to the company's VIEs'
income taxes. In the three and twelve months ended December 31,
2017, "Estimated income taxes related to non-GAAP adjustments to
pre-tax income" primarily related to the benefit from income taxes
recorded as a result of the impairment and subsequent
deconsolidation of Parion described in Note 3.
KALYDECO® (ivacaftor) U.S. INDICATION AND
IMPORTANT SAFETY INFORMATION
KALYDECO (ivacaftor) is a prescription medicine used for the
treatment of cystic fibrosis (CF) in patients age 12 months and
older who have at least one mutation in their CF gene that is
responsive to KALYDECO. Patients should talk to their doctor to
learn if they have an indicated CF gene mutation. It is not known
if KALYDECO is safe and effective in children under 12 months of
age.
Patients should not take KALYDECO if they are taking certain
medicines or herbal supplements such as: the antibiotics
rifampin or rifabutin; seizure medications such as phenobarbital,
carbamazepine, or phenytoin; or St. John's wort.
Before taking KALYDECO, patients should tell their doctor if
they: have liver or kidney problems; drink grapefruit juice, or
eat grapefruit or Seville oranges; are pregnant or plan to become
pregnant because it is not known if KALYDECO will harm an unborn
baby; and are breastfeeding or planning to breastfeed because is
not known if KALYDECO passes into breast milk.
KALYDECO may affect the way other medicines work, and other
medicines may affect how KALYDECO works. Therefore the dose of
KALYDECO may need to be adjusted when taken with certain
medications. Patients should especially tell their doctor if they
take antifungal medications such as ketoconazole, itraconazole,
posaconazole, voriconazole, or fluconazole; or antibiotics such as
telithromycin, clarithromycin, or erythromycin.
KALYDECO can cause dizziness in some people who take it.
Patients should not drive a car, use machinery, or do anything that
needs them to be alert until they know how KALYDECO affects them.
Patients should avoid food containing grapefruit or Seville
oranges while taking KALYDECO.
KALYDECO can cause serious side effects including:
High liver enzymes in the blood have been reported in
patients receiving KALYDECO. The patient's doctor will do blood
tests to check their liver before starting KALYDECO, every 3 months
during the first year of taking KALYDECO, and every year while
taking KALYDECO. For patients who have had high liver enzymes in
the past, the doctor may do blood tests to check the liver more
often. Patients should call their doctor right away if they have
any of the following symptoms of liver problems: pain or discomfort
in the upper right stomach (abdominal) area; yellowing of their
skin or the white part of their eyes; loss of appetite; nausea or
vomiting; or dark, amber-colored urine.
Abnormality of the eye lens (cataract) has been noted in
some children and adolescents receiving KALYDECO. The patient's
doctor should perform eye examinations prior to and during
treatment with KALYDECO to look for cataracts. The most common side
effects include headache; upper respiratory tract infection (common
cold), which includes sore throat, nasal or sinus congestion, and
runny nose; stomach (abdominal) pain; diarrhea; rash; nausea; and
dizziness.
These are not all the possible side effects of KALYDECO.
Please click here to see the full U.S.
Prescribing Information for KALYDECO.
INDICATION AND IMPORTANT SAFETY INFORMATION FOR
ORKAMBI® (lumacaftor/ivacaftor)
ORKAMBI is a prescription medicine used for the treatment of
cystic fibrosis (CF) in patients age 2 years and older who have two
copies of the F508del mutation (F508del/F508del) in their CFTR
gene. ORKAMBI should only be used in these patients. It is not
known if ORKAMBI is safe and effective in children under 2 years of
age.
Patients should not take ORKAMBI if they are taking certain
medicines or herbal supplements, such as: the antibiotics
rifampin or rifabutin; the seizure medicines phenobarbital,
carbamazepine, or phenytoin; the sedatives and anti-anxiety
medicines triazolam or midazolam; the immunosuppressant medicines
cyclosporine, everolimus, sirolimus, or tacrolimus; or St. John’s
wort.
Before taking ORKAMBI, patients should tell their doctor
about all their medical conditions, including if they: have or
have had liver problems; have kidney problems; have had an organ
transplant; or are using birth control. Hormonal contraceptives,
including oral, injectable, transdermal, or implantable forms
should not be used as a method of birth control when taking
ORKAMBI. Patients should tell their doctor if they are pregnant or
plan to become pregnant (it is unknown if ORKAMBI will harm the
unborn baby) or if they are breastfeeding or planning to breastfeed
(it is unknown if ORKAMBI passes into breast milk).
ORKAMBI may affect the way other medicines work and other
medicines may affect how ORKAMBI works. Therefore, the dose of
ORKAMBI or other medicines may need to be adjusted when taken
together. Patients should especially tell their doctor if they
take: antifungal medicines such as ketoconazole, itraconazole,
posaconazole, or voriconazole; or antibiotics such as
telithromycin, clarithromycin, or erythromycin.
When taking ORKAMBI, patients should tell their doctor if
they stop ORKAMBI for more than 1 week as the doctor may need
to change the dose of ORKAMBI or other medicines the patient is
taking.
ORKAMBI can cause serious side effects, including:
Worsening of liver function in people with severe liver
disease. The worsening of liver function can be serious or cause
death. Patients should talk to their doctor if they have been told
they have liver disease as their doctor may need to adjust the dose
of ORKAMBI.
High liver enzymes in the blood, which can be a sign of
liver injury. The patient’s doctor will do blood tests to
check their liver before they start ORKAMBI, every three months
during the first year of taking ORKAMBI, and annually thereafter.
The patient should call the doctor right away if they have any of
the following symptoms of liver problems: pain or discomfort in the
upper right stomach (abdominal) area; yellowing of the skin or the
white part of the eyes; loss of appetite; nausea or vomiting; dark,
amber-colored urine; or confusion.
Breathing problems such as shortness of breath or chest
tightness in patients when starting ORKAMBI, especially in patients
who have poor lung function. If a patient has poor lung function,
their doctor may monitor them more closely when starting
ORKAMBI.
An increase in blood pressure in some people receiving
ORKAMBI. The patient’s doctor should monitor their blood pressure
during treatment with ORKAMBI.
Abnormality of the eye lens (cataract) in some children
and adolescents receiving ORKAMBI. For children and adolescents,
the patient’s doctor should perform eye examinations before and
during treatment with ORKAMBI to look for cataracts.
The most common side effects of ORKAMBI include:
breathing problems, such as shortness of breath and chest
tightness; nausea; diarrhea; fatigue; increase in a certain blood
enzyme called creatinine phosphokinase; rash; gas; common cold,
including sore throat, stuffy or runny nose; flu or flu-like
symptoms; and irregular, missed, or abnormal periods (menses) and
increase in the amount of menstrual bleeding.
Side effects seen in children are similar to those seen
in adults and adolescents. Additional common side effects seen in
children include: cough with sputum, stuffy nose, headache, stomach
pain, and increase in sputum.
Please click here to see the full Prescribing
Information for ORKAMBI.
U.S INDICATION AND IMPORTANT SAFETY INFORMATION FOR
SYMDEKO® (tezacaftor/ivacaftor and ivacaftor)
tablets
SYMDEKO is a prescription medicine used for the treatment of
cystic fibrosis (CF) in patients aged 12 years and older who have
two copies of the F508del mutation, or who have at least one
mutation in the CF gene that is responsive to treatment with
SYMDEKO. Patients should talk to their doctor to learn if they have
an indicated CF gene mutation. It is not known if SYMDEKO is safe
and effective in children under 12 years of age.
Patients should not take SYMDEKO if they take certain
medicines or herbal supplements such as: the antibiotics
rifampin or rifabutin; seizure medicines such as phenobarbital,
carbamazepine, or phenytoin; St. John's wort.
Before taking SYMDEKO, patients should tell their doctor if
they: have or have had liver problems; have kidney problems;
are pregnant or plan to become pregnant because it is not known if
SYMDEKO will harm an unborn baby; are breastfeeding or planning to
breastfeed because it is not known if SYMDEKO passes into breast
milk.
SYMDEKO may affect the way other medicines work, and other
medicines may affect how SYMDEKO works. Therefore, the dose of
SYMDEKO may need to be adjusted when taken with certain medicines.
Patients should especially tell their doctor if they take
antifungal medicines such as ketoconazole, itraconazole,
posaconazole, voriconazole, or fluconazole; or antibiotics such as
telithromycin, clarithromycin, or erythromycin.
SYMDEKO may cause dizziness in some people who take it.
Patients should not drive a car, use machinery, or do anything that
requires alertness until they know how SYMDEKO affects them.
Patients should avoid food or drink that contains
grapefruit or Seville oranges while they are taking SYMDEKO.
SYMDEKO can cause serious side effects, including:
High liver enzymes in the blood, which have been reported
in people treated with SYMDEKO or treated with ivacaftor alone. The
patient's doctor will do blood tests to check their liver before
they start SYMDEKO, every 3 months during the first year of taking
SYMDEKO, and every year while taking SYMDEKO. Patients should call
their doctor right away if they have any of the following symptoms
of liver problems: pain or discomfort in the upper right stomach
(abdominal) area; yellowing of the skin or the white part of the
eyes; loss of appetite; nausea or vomiting; dark, amber-colored
urine.
Abnormality of the eye lens (cataract) in some children
and adolescents treated with SYMDEKO or with ivacaftor alone. If
the patient is a child or adolescent, their doctor should perform
eye examinations before and during treatment with SYMDEKO to look
for cataracts.
The most common side effects of SYMDEKO include headache,
nausea, sinus congestion, and dizziness.
These are not all the possible side effects of SYMDEKO.
Please click here to see the full U.S.
Prescribing Information for SYMDEKO.
About VertexVertex is a global biotechnology company that
invests in scientific innovation to create transformative medicines
for people with serious and life-threatening diseases. In addition
to clinical development programs in CF, Vertex has more than a
dozen ongoing research programs focused on the underlying
mechanisms of other serious diseases.
Founded in 1989 in Cambridge, Mass., Vertex's headquarters is
now located in Boston's Innovation District. Today, the company has
research and development sites and commercial offices in the United
States, Europe, Canada, Australia and Latin America. Vertex is
consistently recognized as one of the industry's top places to
work, including being named to Science magazine's Top Employers in
the life sciences ranking for nine years in a row. For additional
information and the latest updates from the company, please visit
www.vrtx.com.
Special Note Regarding Forward-Looking StatementsThis
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 this press release,
the information provided regarding future financial performance,
including in the section captioned "2019 Financial Guidance" and
statements regarding (i) the timing and expected outcome of
regulatory applications, including NDAs and MAAs and (ii) the
development plan and timelines for our product development
candidates, including our next-generation triple combination
regimens, CTX001, VX-150 and the company's AAT correctors. 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
2019 CF net product revenues, expenses and effective tax rates may
be incorrect (including because one or more of the company's
assumptions underlying its expectations may not be realized), that
data from the company's development programs may not support
registration or further development of its compounds 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
WebcastThe company will host a conference call and
webcast today at 4:30 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.
(VRTX-E)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190205005917/en/
Vertex Contacts:Investors:Michael Partridge,
617-341-6108orEric Rojas, 617-961-7205orZach Barber,
617-341-6470
Media:617-341-6992mediainfo@vrtx.com
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