July 30, 2012

Vertex Reports Second Quarter 2012 Financial Results and Provides Updates on Progress in Research and Development Programs in Hepatitis C and Cystic Fibrosis

-Second quarter 2012 total revenues of $418 million, including second quarter 2012 net product revenues of approximately $328 million for INCIVEK in hepatitis C and $46 million for KALYDECO in cystic fibrosis; company revises financial guidance for full-year 2012 INCIVEK net revenues-

-Cystic Fibrosis: Ongoing label-expansion studies for KALYDECO monotherapy and recent data from study of KALYDECO and VX-809 in combination support goal to help more people with cystic fibrosis; company recently announced European approval of KALYDECO-

-Hepatitis C: Positive seven-day viral kinetic data for nucleotide analogue ALS-2200 provide flexibility in the development of multiple all-oral approaches to treatment of hepatitis C, including Phase 2 all-oral studies planned for this year-

CAMBRIDGE, Mass.--(BUSINESS WIRE)-- Vertex Pharmaceuticals Incorporated (Nasdaq: VRTX) today reported consolidated financial results for the quarter ended June 30, 2012.

Vertex reported total revenues of approximately $418 million for the second quarter of 2012, including net product revenues of approximately $328 million from INCIVEK® (telaprevir) and approximately $46 million from KALYDECOTM (ivacaftor). Royalty revenues related to the sale of INCIVO® in Europe by our collaborator were approximately $28 million for the second quarter of 2012. In the second quarter of 2012, the company reported GAAP net loss of approximately $(65) million, or $(0.31) per share, and non-GAAP net income of approximately $100 million, or $0.46 per share. The non-GAAP income excludes charges related to Vertex stock-based compensation expense, charges related to an increase in the fair value of expected future payments under our Alios collaboration and a reserve against the potential for excess INCIVEK inventory. Vertex also updated financial guidance for full-year 2012 INCIVEK net revenues. The company expects full-year 2012 INCIVEK net revenues to be in the range of $1.1 billion to $1.25 billion. Additionally, Vertex today provided updates on a number of ongoing and planned trials in cystic fibrosis, hepatitis C, rheumatoid arthritis and other diseases. In a separate press release issued today, Vertex announced positive viral kinetic data for ALS-2200, a nucleotide analogue in development for the treatment of hepatitis C, which was well-tolerated and showed a median 4.54 log10 reduction in hepatitis C virus RNA after seven days of dosing with 200 mg of ALS-2200 once daily.

"During the first half of the year, Vertex delivered several important advancements across our broad pipeline. In cystic fibrosis, we obtained U.S. and E.U. approval of KALYDECO earlier than anticipated, and we announced promising data for a combination of VX-809 and KALYDECO that accelerated our plans to begin a pivotal program early next year in people with the most common type of cystic fibrosis. We also announced today the first results for our nucleotide analogue ALS-2200, which enhance our portfolio of potential hepatitis C medicines and provide flexibility in the future development of multiple all-oral treatments for this disease," said Jeffrey Leiden, M.D., Ph.D., Chair, President and Chief Executive Officer of Vertex.

Dr. Leiden concluded, "Our ability to consistently discover, develop and launch transformative medicines has created significant value for our shareholders. Vertex is positioned for continued leadership in the treatment of hepatitis C and cystic fibrosis, and our efforts to bring forward additional new medicines for other serious diseases are moving forward rapidly."

Cystic Fibrosis (CF)

  • KALYDECO Gains Approval in Europe; Additional Global Launches Planned: Vertex recently announced that the European Commission approved KALYDECO in the European Union for people with cystic fibrosis ages six and older who have at least one copy of the G551D mutation in the cystic fibrosis transmembrane conductance regulator (CFTR) gene. An estimated 1,100 people in Europe have this mutation. In addition, KALYDECO is under Priority Review by the Therapeutic Product Directorate (TPD) of Health Canada, and an application for review has been submitted to the Therapeutic Goods Administration (TGA) of Australia.
  • KALYDECO Studies in Other Types of CF: Vertex recently initiated two Phase 3 trials for people with CF who have certain CFTR gene mutations that were not evaluated in previous Phase 3 studies. The first study will enroll people 6 years of age and older who have at least one R117H mutation, and a second study will enroll people 6 years of age and older with at least one non-G551D CFTR gating mutation. A third Phase 3 study will be initiated later this year for children with CF aged 2 to 5 years who have at least one gating mutation.
  • CF Combination Studies: In June, Vertex announced data from a Phase 2 study that evaluated dosing of KALYDECO and VX-809 in combination in people with CF who have one or two copies of the F508del CFTR mutation. Based on these data, Vertex plans to initiate a pivotal program in early 2013 to evaluate a combination of KALYDECO and VX-809 in people with two copies of the F508del CFTR mutation, pending discussions with regulatory agencies. A Phase 2 study of VX-661, a second CFTR corrector, dosed in combination with KALYDECO for people with two copies of the F508del mutation is also ongoing, with final data expected next year.

Hepatitis C

  • Global Availability of Telaprevir: Telaprevir (INCIVEK, INCIVO, TELAVIC®) is now available in more than 25 countries around the world, including countries in North America, Europe, South America and the Asia-Pacific region. Vertex's collaborator, Janssen, is marketing telaprevir in Europe and other regions as INCIVO, while Vertex's collaborator Mitsubishi Tanabe Pharma markets this medicine in Japan as TELAVIC.
  • Ongoing Studies to Potentially Expand Use of INCIVEK: Vertex is evaluating whether treatment with INCIVEK can be effectively reduced to twice-daily (BID) dosing instead of three-times-daily dosing. Data from a pivotal study evaluating BID dosing are expected later this year, and pending the results, Vertex plans to submit this revised dosing schedule to the U.S. Food and Drug Administration (FDA) as part of a supplemental New Drug Application (sNDA). To fulfill post-marketing commitments, Vertex also has trials underway for people co-infected with hepatitis C and HIV, people with recurrent hepatitis C following a liver transplant and African Americans with hepatitis C who were not cured with a prior treatment of pegylated-interferon and ribavirin.
  • Alios Nucleotide Analogues: Vertex today announced positive data from a seven-day viral kinetic study of ALS-2200, a nucleotide analogue in development for the treatment of hepatitis C. In the study, there was a median 4.54 log10 reduction in hepatitis C virus (HCV) RNA in people with genotype 1 hepatitis C who were new to treatment (n=8) after seven days of dosing with 200 mg of ALS-2200 once daily. ALS-2200 was well-tolerated in this study, and no patients discontinued due to adverse events. Based on these data, Vertex plans to begin Phase 2 studies of 12-week all-oral regimens including ALS-2200 in people with genotype 1 hepatitis C, pending discussions with regulatory agencies. Additional details on the viral kinetic data and planned next steps for ALS-2200 are available in a separate press release issued today. Another viral kinetic study is ongoing for a second nucleotide analogue, ALS-2158, with data expected in the next few months.

Pipeline Programs

  • Phase 2b Study of VX-509 Underway in Rheumatoid Arthritis: Enrollment is ongoing in the U.S. and Europe in a Phase 2b study of VX-509, an oral, selective JAK3 inhibitor, in people with moderate to severe rheumatoid arthritis (RA). Vertex is also preparing to start additional studies of VX-509 in other immune-mediated inflammatory diseases beginning in early 2013.
  • Phase 2 Study of VX-787 Ongoing in Influenza: Vertex expects data from an ongoing Phase 2 study of VX-787 in influenza in the second half of 2012. VX-787 is an investigational medicine that is designed to treat influenza A, including recent H1 (pandemic) and H5 (avian) influenza strains.

Second Quarter 2012 Financial Results

Total Revenues: Total revenues were $418.3 million for the second quarter of 2012, compared with $114.4 million for the second quarter of 2011. Key components of total revenues for the second quarter 2012 were:

  • Net Product Revenues from INCIVEK: Net product revenues from INCIVEK were $327.7 million.
  • Net Product Revenues from KALYDECO: Net product revenues from KALYDECO were $45.5 million.
  • Royalty Revenues: Vertex recognized $33.5 million in royalty revenues, including $28.0 million in INCIVO royalty revenues from our collaborator Johnson and Johnson.
  • Collaborative Revenues: Vertex recognized $11.6 million in collaborative revenues.

Cost of Product Revenues: Cost of product revenues was $104.5 million in the second quarter of 2012, including a $78.0 million charge to reserve against the potential for excess INCIVEK inventory.

Research and Development (R&D) Expenses: R&D expenses were $196.5 million in the second quarter of 2012, including $19.7 million of Vertex stock-based compensation expense and $3.7 million in Alios expenses related to the accounting for the collaboration with Vertex, compared to $173.6 million for the second quarter of 2011, including $20.5 million of stock-based compensation expense and $0.5 million in Alios expenses related to the accounting for the collaboration with Vertex. The increase in Vertex's R&D investment is principally due to development activities related to ongoing and planned clinical trials in influenza, RA, hepatitis C and CF.

Sales, general and administrative (SG&A) expenses: SG&A expenses were $117.5 million in the second quarter of 2012, including $11.5 million of Vertex stock-based compensation expense and $1.0 million in Alios expenses related to the accounting for the collaboration with Vertex, compared to $96.7 million for the second quarter of 2011, including $11.4 million of Vertex stock-based compensation expense and $0.3 million in Alios expenses related to the accounting for the collaboration with Vertex. This increase reflects the expansion of the company's global commercial organization, costs related to the commercial launch of KALYDECO in the U.S. and launch preparation activities for KALYDECO in Europe and other countries.

GAAP Net Income (Loss) Attributable to Vertex: Vertex's GAAP net loss was $(64.9) million, or $(0.31) per diluted share, for the second quarter of 2012 compared to the GAAP net loss of $(174.1) million, or $(0.85) per share, for the second quarter of 2011.

Non-GAAP Net Income (Loss) Attributable to Vertex: Vertex's non-GAAP net income was $99.8 million, or $0.46 per diluted share, for the second quarter of 2012, excluding $31.2 million in stock-based compensation expense, a $56.2 million charge related to an increase in the fair value of expected future payments under our Alios collaboration following the positive viral kinetic data announced today and a $78.0 million charge in cost of product revenues to reserve against the potential for excess INCIVEK inventory. The non-GAAP net loss was $(136.4) million, or $(0.67) per share, for the second quarter of 2011.

2012 Financial Guidance

This section contains forward-looking guidance about the financial outlook for Vertex Pharmaceuticals.

Full-Year INCIVEK Revenues: Vertex today revised guidance for full-year 2012 INCIVEK net revenues. The company expects full-year 2012 INCIVEK net revenues to be in the range of $1.1 billion to $1.25 billion. The revised guidance reflects the recent downward trend in the number of patients initiating treatment within the hepatitis C market.

Total Operating Expenses: Vertex today reiterated its guidance for 2012 total operating expenses, excluding cost of revenues, stock-based compensation expense and Alios expenses related to the accounting for the collaboration with Vertex, to be in the range of $1.03 billion to $1.13 billion. This guidance was initially established on February 2, 2012.

Non-GAAP Financial Measures

In this press release, Vertex's financial results and financial guidance are provided both in accordance with accounting principles generally accepted in the United States (GAAP) and using certain non-GAAP financial measures. In particular, Vertex provides its second quarter and first half 2012 and 2011 net income (loss) excluding stock-based compensation expense, restructuring expense, inventory reserve, any revenues and expenses related to certain September 2009 financial transactions, and any items related to Vertex's collaboration with Alios. 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 other non-GAAP financial results to GAAP financial results is included in the attached financial statements.


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Copyright 2015 Vertex Pharmaceuticals Incorporated

 

Vertex Pharmaceuticals Incorporated

Second Quarter and Six Month Results

Consolidated Statements of Operations Data

(in thousands, except per share amounts)

(unaudited)

       
Three Months Ended

June 30,

Six Months Ended

June 30,

2012 2011 2012 2011
Revenues:
Product revenues, net $ 373,273 $ 74,535 $ 748,648 $ 74,535
Royalty revenues 33,480 10,010 72,461 16,071
Collaborative revenues 11,552 29,879 35,933 97,480
                       
Total revenues   418,305     114,424     857,042     188,086  
 
Costs and expenses:
Cost of product revenues 104,549 5,404 130,467 5,404
Royalty expenses 9,874 3,902 23,167 6,568
Research and development expenses (R&D) 196,544 173,604 392,915 332,216
Sales, general & administrative expenses (SG&A) 117,514 96,663 228,660 168,186
Restructuring expense   594     741     954     1,501  
 
Total costs and expenses 429,075 280,314 776,163 513,875
 
Income (loss) from operations   (10,770 )   (165,890 )   80,879     (325,789 )
 
Net interest expense (Note 2) (3,635 ) (6,760 ) (7,376 ) (17,359 )
Change in fair value of derivative instruments (Note 2)       (2,220 )       (7,818 )
Income (loss) before provision for income taxes (14,405 ) (174,870 ) 73,503 (350,966 )
Provision for income taxes (Note 3)   20,063     24,448     20,095     24,448  
Net income (loss) (34,468 ) (199,318 ) 53,408 (375,414 )
Net income (loss) attributable to noncontrolling interest (Note 1)   30,463     (25,249 )   26,749     (25,249 )
Net income (loss) attributable to Vertex $ (64,931 ) $ (174,069 ) $ 26,659   $ (350,165 )
 
Net income (loss) per share attributable to Vertex common shareholders:
Basic $ (0.31 ) $ (0.85 ) $ 0.13 $ (1.72 )
Diluted $ (0.31 ) $ (0.85 ) $ 0.12 $ (1.72 )
 
Shares used in per share calculations: