- First-quarter 2019 product revenues of $857
million, a 34% increase compared to $638 million in 2018-
- First-quarter 2019 GAAP operating income
increased 115% to $277 million; non-GAAP operating income increased
81% to $377 million -
- On track to choose best triple combination
regimen in Q2 2019; NDA submission planned for Q3 2019 -
Vertex Pharmaceuticals Incorporated (Nasdaq: VRTX) today
reported consolidated financial results for the first quarter ended
March 31, 2019 and reiterated full-year 2019 financial
guidance.
"Our goal is to develop transformative medicines for all people
with CF and other serious diseases and to ensure all eligible
patients have access to these medicines as quickly as possible,"
said Jeffrey Leiden, M.D., Ph.D., Chairman, President and Chief
Executive Officer of Vertex. "We have made significant progress
toward achieving this goal by rapidly advancing our triple
combination regimens through late-stage development, and we remain
on track to submit a New Drug Application for one of these
medicines in the third quarter of 2019. We also continue to advance
our earlier-stage programs targeting AAT, pain, FSGS and sickle
cell disease. In the first quarter, we again delivered strong
revenue and earnings growth, which further enhances our ability to
make significant investments in internal and external
innovation."
First-Quarter 2019 Financial
Highlights
Three Months Ended March 31, %
2019 2018 Change (in millions,
except per share amounts)
Total product revenues, net $ 857
$ 638 34%
KALYDECO $ 244 $ 250
ORKAMBI
$ 293 $ 354
SYMDEKO/SYMKEVI $ 320 $ 34
GAAP
Operating income $ 277 $ 129 115%
Non-GAAP Operating
income $ 377 $ 208 81%
GAAP Net income $ 269 $
210 28%
Non-GAAP Net income $ 296 $ 196 51%
GAAP
Net income per share - diluted $ 1.03 $ 0.81 27%
Non-GAAP
Net income per share - diluted $ 1.14 $ 0.76 50%
Total product revenues increased 34% compared to the
first quarter of 2018, primarily driven by the uptake of SYMDEKO in
the U.S. since launch.
GAAP and Non-GAAP net income increased compared to the
first quarter of 2018, largely driven by the strong growth in total
product revenues, and was partially offset by increases in
operating expenses and income taxes.
Cash, cash equivalents and marketable securities as of
March 31, 2019 were $3.5 billion, an increase of approximately $300
million compared to $3.2 billion as of December 31, 2018.
First-Quarter 2019
Expenses
Three Months Ended March 31, 2019
2018 (in millions)
Combined GAAP R&D
and SG&A expenses $ 487 $ 440
Combined Non-GAAP
R&D and SG&A expenses $ 388 $ 360
GAAP
R&D expense $ 339 $ 311
Non-GAAP R&D expense $
273 $ 260
GAAP SG&A expense $ 147 $ 130
Non-GAAP SG&A expense $ 114 $ 100
GAAP income
taxes $ 52 $ (13 )
Non-GAAP income taxes $ 81 $ 3
Combined GAAP and non-GAAP R&D and SG&A expenses
increased compared to the first quarter of 2018 primarily due to
the incremental investment to support the global use of Vertex's
medicines and the expansion of Vertex's pipeline in CF and other
new disease areas.
GAAP and Non-GAAP income taxes increased significantly
compared to the first quarter of 2018 due to Vertex's release of
its valuation allowance on the majority of its deferred tax assets
in the fourth quarter of 2018. GAAP and non-GAAP income taxes in
the first quarter of 2019 include a provision for income taxes on
Vertex's pre-tax income using an estimated effective tax rate
approximating statutory rates. This provision for income taxes
includes a significant non-cash charge due to Vertex's ability to
offset its pre-tax income against previously benefited net
operating losses. Vertex 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 income. Refer to "Supplemental
Income Tax Information" for discussion of the cash versus non-cash
components of Vertex's provision for income taxes.
Full-Year 2019 Financial
Guidance
Vertex today reiterated its full-year 2019 guidance as
follows:
FY 2019 TOTAL 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
Non-GAAP
effective tax rate 21% - 22%
The company's total product revenue growth in 2019 is expected
to be driven primarily by the full-year impact of the SYMDEKO
launch, reimbursement agreements reached in 2018 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.
In addition, based on the release of the company's valuation
allowance in the fourth quarter of 2018, Vertex has also begun to
record a tax provision in 2019 and expects its full-year 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
INVESTIGATIONAL CF MEDICINES
Bringing CF medicines to more people as quickly as
possible:
- Final Phase 3 24-week data are expected
in the second quarter of 2019 from the triple combination program.
Vertex plans to utilize these data to choose the best triple
combination regimen to submit for regulatory approvals globally.
The company plans to submit a New Drug Application (NDA) to the
U.S. Food and Drug Administration (FDA) in the third quarter of
2019 and a Marketing Authorization Application (MAA) in Europe in
the fourth quarter of 2019 for either the VX-659 or VX-445 triple
combination regimen in people with CF who have two F508del
mutations and in people with CF who have one F508del mutation and
one minimal function mutation.
- The company has initiated a Phase 2
dose-ranging study evaluating the once-daily potentiator VX-561 as
a monotherapy as requested by the FDA. The study is designed to
evaluate multiple doses of VX-561 to support potential Phase 3
development of VX-561 in a once-daily triple combination
regimen.
- Vertex has initiated a Phase 2 study
evaluating the next-generation corrector, VX-121, in combination
with VX-561 and tezacaftor as a potential once-daily triple
combination regimen.
APPROVED CF MEDICINES
Securing access for Vertex CF medicines:
- The company continues to work toward
establishing pricing and reimbursement agreements in additional
countries outside of the U.S. Highlights in 2019 thus far
include:
- Positive recommendation for SYMDEKO in
Australia for ages 12+ from the Pharmaceutical Benefits Advisory
Committee (PBAC).
- Reimbursement for ORKAMBI in Sweden for
ages 2 to 5.
- Expanded pricing agreement for ORKAMBI in
Germany to include children ages 6 through 11.
Treating patients at younger ages with CFTR
modulators:
- Vertex continues to make significant
progress toward gaining approval for its CF medicines for use
earlier in the course of disease progression. Recent highlights
include:
- Approval for KALYDECO in the U.S. for
infants ages 6 to <12 months.
- Approval for KALYDECO in Canada for
children ages 12 to <24 months.
- Approval for ORKAMBI in the EU for children
ages 2 to 5 years old.
- Supplemental New Drug Application (sNDA)
submitted in the U.S. for tezacaftor/ivacaftor in children ages 6
to 11 years old.
LATE-STAGE RESEARCH & CLINICAL DEVELOPMENT
Alpha-1 Antitrypsin (AAT) Program:
- The FDA has granted Fast Track
Designation for VX-814, Vertex's first small molecule corrector for
the treatment of alpha-1 antitrypsin (AAT) deficiency. The company
initiated a Phase 1 study of VX-814 in December 2018.
- Vertex is advancing other small
molecule correctors of AAT through late preclinical development and
expects to begin clinical development of a second small molecule
AAT corrector in 2019.
Sickle Cell Disease & Beta-Thalassemia:
- In February 2019, CRISPR and Vertex
announced that the first patient had been treated with CTX001 in a
Phase 1/2 clinical study of patients with TDT, marking the first
company-sponsored use of a CRISPR/Cas9 therapy in a clinical
trial.
- In April 2019, Vertex and its partner
CRISPR Therapeutics announced that the FDA has granted Fast Track
Designation for CTX001, an investigational, autologous, gene-edited
hematopoietic stem cell therapy, for the treatment of
transfusion-dependent beta thalassemia (TDT).
- The companies are also evaluating
CTX001 for the treatment of sickle cell disease (SCD) and received
Fast Track Designation for CTX001 from the FDA in January 2019 for
SCD. The companies announced in February 2019 that the first
patient had been enrolled in a Phase 1/2 clinical study of CTX001
in severe SCD in the U.S. and is expected to be infused with CTX001
in mid-2019.
- Enrollment in both Phase 1/2 studies of
CTX001 in patients with TDT and in patients with severe SCD is
ongoing.
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 income (i)
stock-based compensation expense, (ii) revenues and expenses
related to business development transactions including
collaboration agreements, asset acquisitions and consolidated
variable interest entities and (iii) 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
the estimated tax impact related to its non-GAAP adjustments to
pre-tax income described above. 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 on both a GAAP and non-GAAP basis. The company also
provides guidance regarding its anticipated income taxes as a
percentage of pre-tax income on 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. A
reconciliation of the GAAP financial results to non-GAAP financial
results is included in the attached financial information.
Vertex Pharmaceuticals
IncorporatedFirst-Quarter ResultsConsolidated
Statements of Operations(in thousands, except per share
amounts)(unaudited)
Three Months Ended March 31, 2019
2018 Revenues: Product revenues, net $ 857,253
$ 637,729 Collaboration and royalty revenues 1,182 3,070
Total revenues 858,435 640,799 Costs and expenses: Cost of
sales 95,092 71,613 Research and development expenses 339,490
310,553 Sales, general and administrative expenses 147,045 129,808
Restructuring income — (76 ) Total costs and expenses
581,627 511,898 Income from operations 276,808
128,901 Interest income 15,615 5,789 Interest expense (14,868 )
(16,886 ) Other income, net (1) 42,610 96,838 Income
from operations before provision for (benefit from) income taxes
320,165 214,642 Provision for (benefit from) income taxes (2)
51,534 (12,659 ) Net income 268,631 227,301 Income
attributable to noncontrolling interest (3) — (17,038 ) Net
income attributable to Vertex $ 268,631 $ 210,263
Amounts per share attributable to Vertex common
shareholders: Net income: Basic $ 1.05 $ 0.83 Diluted $ 1.03 $ 0.81
Shares used in per share calculations: Basic 255,695 253,231
Diluted 260,175 258,526
Reconciliation of GAAP to Non-GAAP Net
IncomeFirst-Quarter Results(in thousands, except per
share amounts)(unaudited)
Three Months Ended March 31, 2019
2018 GAAP net income attributable to
Vertex $ 268,631 $ 210,263 Stock-based compensation expense
93,791 78,136 Increase in fair value of contingent consideration
payable to VIE (3) — 24,000 Increase in fair value of strategic
investments (1) and other adjustments (4) (37,200 ) (94,616 ) Total
non-GAAP adjustments to pre-tax income 56,591 7,520 Estimated
income taxes related to non-GAAP adjustments to pre-tax income (5)
(29,392 ) (21,859 )
Non-GAAP net income attributable to
Vertex $ 295,830 $ 195,924 Amounts per
diluted share attributable to Vertex common shareholders: Net
income: GAAP $ 1.03 $ 0.81 Non-GAAP $ 1.14 $ 0.76 Shares used in
diluted per share calculations: GAAP and Non-GAAP 260,175 258,526
Reconciliation of GAAP to Non-GAAP
Revenues and ExpensesFirst-Quarter Results(in
thousands)(unaudited)
Three Months Ended March 31, 2019
2018 GAAP total revenues $ 858,435 $
640,799 Other adjustments (4) (141 ) (1,919 )
Non-GAAP total
revenues $ 858,294 $ 638,880
Three
Months Ended March 31, 2019 2018 GAAP cost of
sales $ 95,092 $ 71,613 Stock-based compensation expense (1,338
) (813 )
Non-GAAP cost of sales $ 93,754 $ 70,800
GAAP research and development expenses $ 339,490 $ 310,553
Stock-based compensation expense (59,715 ) (48,488 ) Other
adjustments (4) (6,492 ) (2,073 )
Non-GAAP research and
development expenses $ 273,283 $ 259,992
GAAP sales,
general and administrative expenses $ 147,045 $ 129,808
Stock-based compensation expense (32,738 ) (28,835 ) Other
adjustments (4) — (1,329 )
Non-GAAP sales, general and
administrative expenses $ 114,307 $ 99,644
Combined non-GAAP R&D and SG&A expenses $ 387,590
$ 359,636
Three Months Ended March 31,
2019 2018 GAAP other income, net $ 42,610 $
96,838 Increase in fair value of strategic investments (1) (43,551
) (95,458 )
Non-GAAP other (expense) income, net $ (941 ) $
1,380
GAAP provision for (benefit from) income taxes
$ 51,534 $ (12,659 ) Estimated income taxes related to non-GAAP
adjustments to pre-tax income (5) 29,392 15,454
Non-GAAP provision for income taxes (2) $ 80,926 $ 2,795
Condensed Consolidated Balance
Sheets(in thousands)(unaudited)
March 31, 2019 December 31,
2018 Assets Cash, cash equivalents and marketable
securities $ 3,478,035 $ 3,168,242 Accounts receivable, net 438,297
409,688 Inventories 136,698 124,360 Property and equipment, net
742,559 812,005 Goodwill 50,384 50,384 Deferred tax assets
1,467,518 1,499,672 Other assets 229,623 181,547
Total
assets $ 6,543,114 $ 6,245,898
Liabilities and
Shareholders' Equity Accounts payable and accruals $ 615,007 $
715,482 Finance lease liabilities 596,106 596,639 Other liabilities
608,688 498,574 Shareholders' equity 4,723,313 4,435,203
Total liabilities and shareholders' equity $ 6,543,114
$ 6,245,898 Common shares outstanding 256,351 255,172
Supplemental Income Tax
Information(in thousands, except percentages)(unaudited)
Three Months Ended March 31, 2019
2018 Components of provision for (benefit from)
income taxes related to: Cash taxes paid or accrued for
state and foreign income taxes $ 4,778 $ 2,795 VIE provision for
income taxes (5) — 6,405 Provision for income taxes offset by net
operating losses 46,756 (21,859 )
GAAP provision for
(benefit from) income taxes (2) $ 51,534 $ (12,659 )
Cash taxes paid or accrued for state and foreign income
taxes $ 4,778 $ 2,795 Estimated income taxes attributable to Vertex
related to non-GAAP adjustments to pre-tax income (5) 29,392 21,859
Provision for income taxes offset by net operating losses 46,756
(21,859 )
Non-GAAP provision for income taxes (2) $
80,926 $ 2,795
Effective tax rate
reconciliation: GAAP effective tax rate 16 % (6 )% Impact of
GAAP to Non-GAAP adjustments 5 % 7 %
Non-GAAP effective tax
rate 21 % 1 %
Notes and Explanations
1: The company recorded gains of $43.6 million and $95.5
million in the three months ended March 31, 2019 and 2018,
respectively, to "Other income, net," related to changes in the
fair value of its strategic investments.
2: In the fourth quarter of 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. 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 its valuation allowance. Starting in the
first quarter of 2019, the company began recording a provision for
income taxes on its pre-tax income using an estimated effective tax
rate that approximates statutory rates. The provision includes a
significant non-cash charge due to the company's ability to offset
its pre-tax income against previously benefited net operating
losses. The company expects the majority of its tax provision to
represent a non-cash expense until its net operating losses have
been fully utilized. As of December 31, 2018, the company's federal
net operating losses and credits that were available to offset
future pre-tax income were approximately $4.5 billion.
3: During the three months ended March 31, 2018, the
company consolidated the financial statements of a variable
interest entity, or VIE, because Vertex had licensed the rights to
develop the VIE's most significant intellectual property asset.
During the three months ended March 31, 2018, the fair value of the
contingent payments payable by Vertex to the VIE increased by $24.0
million. This increase was attributable to noncontrolling interest
and resulted in a decrease in net income attributable to Vertex on
a dollar-for-dollar basis. The company deconsolidated the VIE as of
December 31, 2018; therefore, there were no comparable amounts
during the three months ended March 31, 2019.
4: "Other adjustments" in the three months ended March
31, 2019 primarily related to collaborative milestone payments.
"Other adjustments" in the three months ended March 31, 2018
primarily related to revenues and expenses attributable to our
VIE's operations and collaboration revenues and payments including
those related to the company's oncology collaboration with Merck
KGaA, Darmstadt, Germany.
5: In the three months ended March 31, 2019, "Estimated
income taxes related to non-GAAP adjustments to pre-tax income"
primarily related to (i) stock-based compensation (including an
adjustment for excess tax benefits related to stock-based
compensation) and (ii) the increase in the fair value of the
company's strategic investments. In the three months ended March
31, 2018, "Estimated income taxes related to non-GAAP adjustments
to pre-tax income" were related to a provision for income taxes
attributable to the company's VIE and excess tax benefits related
to stock-based compensation.
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 "Full Year 2019 Financial
Guidance" and statements regarding (i) the timing and expected
outcome of regulatory applications, including NDAs and MAAs, (ii)
the timing of receipt of final Phase 3 24 week data from the triple
combination program and (iii) the development plan and timelines
for our product development candidates, including our
next-generation triple combination regimens, VX-561, VX-121,
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/20190430006065/en/
Vertex Contacts:Investors:Michael Partridge,
617-341-6108orEric Rojas, 617-961-7205orZach Barber,
617-341-6470
Media:617-341-6992mediainfo@vrtx.com
Vertex Pharmaceuticals (NASDAQ:VRTX)
Historical Stock Chart
From Aug 2024 to Sep 2024
Vertex Pharmaceuticals (NASDAQ:VRTX)
Historical Stock Chart
From Sep 2023 to Sep 2024