Vertex Pharmaceuticals
VERTEX PHARMACEUTICALS INC / MA (Form: 8-K/A, Received: 10/27/2017 16:05:02)


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K/A

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): October 23, 2017

VERTEX PHARMACEUTICALS INCORPORATED
(Exact name of registrant as specified in its charter)


MASSACHUSETTS
(State or other jurisdiction of incorporation)
000-19319
(Commission File Number)
04-3039129
(IRS Employer Identification No.)


50 Northern Avenue
Boston, Massachusetts 02210
(Address of principal executive offices) (Zip Code)

(617) 341-6100
(Registrant's telephone number, including area code)


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o







Item 2.01.  Completion or Disposition of Assets.
This current report on Form 8-K/A amends and supplements Item 2.01 of the Current Report on Form 8-K filed by us on October 25, 2017 to provide the pro forma financial information required by Item 9.01 of Form 8-K, which was not previously filed with the Form 8-K filed on October 25, 2017. This pro forma information is presented for informational purposes only to provide an understanding of our historical financial results as adjusted for the deconsolidation of Parion.
Item 9.01. Financial Statements and Exhibits.
(b) Pro Forma Financial Information
The following unaudited pro forma consolidated financial statements of Vertex Pharmaceuticals Incorporated are filed as Exhibit 99.1 to this Current Report on Form 8-K/A:
unaudited pro forma condensed consolidated statements of operations for the six months ended June 30, 2017 and for the year ended December 31, 2016; and
unaudited pro forma condensed consolidated balance sheet as of June 30, 2017.
(d) Exhibits
Exhibit          Description of Document






SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
VERTEX PHARMACEUTICALS INCORPORATED
 
(Registrant)
 
 
Date: October 27, 2017
/s/ Michael J. LaCascia
 
Michael J. LaCascia
Senior Vice President and General Counsel
 
 





Exhibit 99.1
Unaudited pro forma consolidated financial information
On October 23, 2017, Vertex Pharmaceuticals Incorporated (“Vertex” or the “Company”) concluded that the intangible asset related to Parion Sciences, Inc.'s (“Parion”) pulmonary ENaC platform had become fully impaired based on data from a Phase 2 clinical trial of VX-371 that did not meet its primary efficacy endpoint. The Company recorded an impairment charge of $255.3 million, which represented the entire value of the intangible asset in the third quarter of 2017. After evaluating the results of the clinical trial, the Company determined that it was no longer the primary beneficiary of Parion as it no longer had the power to direct the significant activities of Parion. The most important factor in this determination was the decrease in the fair value of Parion’s pulmonary ENaC platform relative to Parion’s other activities. Accordingly, the Company deconsolidated Parion as of September 30, 2017. The impairment charge of $255.3 million, decrease in the fair value of the contingent payments payable by the Company to Parion of $69.6 million and benefit from income taxes of $126.2 million resulting from these charges were recorded in the third quarter of 2017 attributable to noncontrolling interest. The benefit from income taxes consisted of benefits of $97.7 million and $28.5 million attributable to the impairment charge and decrease in the fair value of contingent payments, respectively. The net effect of these charges and impact of the deconsolidation was a loss of $7.1 million recorded in other income (expense), net attributable to Vertex in the consolidated statement of operations for the three and nine months ended September 30, 2017.
In accordance with S-X Rule 11-02(b)(5), these amounts have not been reflected in the pro forma statements of operations.
The following supplemental pro forma information is presented for informational purposes only, to provide an understanding of the Company’s historical financial results as adjusted for the deconsolidation of Parion. These pro forma financial statements should not be considered a substitute for the actual historical financial information prepared in accordance with generally accepted accounting principles, as presented in the Company’s filings on Form 10-Q and 10-K. The unaudited pro forma condensed consolidated financial information disclosed in this report is for illustrative purposes only and is not necessarily indicative of results of operations that would have been achieved had the pro forma events taken place on the dates indicated, or our future consolidated results of operations.
The unaudited pro forma condensed consolidated statements of operations for the six months ended June 30, 2017 and for the year ended December 31, 2016 present our condensed consolidated results of operations giving pro forma effect to the deconsolidation of Parion as if it had occurred on January 1, 2016. The unaudited pro forma condensed consolidated balance sheet at June 30, 2017 presents our condensed consolidated financial position giving pro forma effect to the deconsolidation of Parion as if it had occurred on June 30, 2017. These pro forma financial statements should be read in connection with the Company’s historical condensed consolidated financial statements for the period ended June 30, 2017, which were included in the Form 10-Q filed on July 28, 2017 and the Company’s historical consolidated financial statements for the year ended December 31, 2016, which were included in the Form 10-K filed on February 23, 2017.
The pro forma adjustments are based on currently available information, estimates and assumptions that the Company believe are reasonable in order to reflect, on a pro forma basis, the impact of this deconsolidation on our historical financial information.




















VERTEX PHARMACEUTICALS INCORPORATED
Unaudited Condensed Consolidated Pro Forma Statement of Operations
For the six months ended June 30, 2017
(in thousands, except per share amounts)

 
Vertex
 
Pro Forma Adjustments
 
Notes
 
Pro Forma
Revenues:
 
 
 
 
 
 
 
Product revenues, net
$
994,610

 
$

 
 
 
$
994,610

Royalty revenues
4,412

 

 
 
 
4,412

Collaborative revenues
259,831

 
(20,801
)
 
(a)
 
239,030

Total revenues
1,258,853

 
(20,801
)
 
 
 
1,238,052

Costs and expenses:
 
 
 
 
 
 
 
Cost of product revenues
116,777

 

 
 
 
116,777

Royalty expenses
1,416

 

 
 
 
1,416

Research and development expenses
563,014

 
(1,479
)
 
(b)
 
561,535

Sales, general and administrative expenses
240,575

 
(1,753
)
 
(a)
 
238,822

Restructuring expenses
13,522

 

 
 
 
13,522

Total costs and expenses
935,304

 
(3,232
)
 
 
 
932,072

Income (loss) from operations
323,549

 
(17,569
)
 
 
 
305,980

Interest expense, net
(31,429
)
 
(44
)
 
(a)
 
(31,473
)
Other expense, net
(3,081
)
 

 
 
 
(3,081
)
Income (loss) before provision for (benefit from) income taxes
289,039

 
(17,613
)
 
 
 
271,426

Provision for (benefit from) income taxes
8,322

 
(8,582
)
 
(a)
 
(260
)
Net income (loss)
280,717

 
(9,031
)
 
 
 
271,686

Net (income) loss attributable to noncontrolling interest
(14,965
)
 
15,121

 
(a)
 
156

Net income attributable to Vertex
$
265,752

 
$
6,090

 
 
 
$
271,842

 
 
 
 
 
 
 
 
Net income per share attributable to Vertex common shareholders:
 
 
 
 
 
 
 
Basic
$
1.08

 
 
 
 
 
$
1.10

Diluted
$
1.06

 
 
 
 
 
$
1.08

Shares used in per share calculations:
 
 
 
 
 
 
 
Basic
246,782

 
 
 
 
 
246,782

Diluted
250,199

 
 
 
 
 
250,199


(a) To eliminate the results of operations of Parion and related non-controlling interest
(b) To adjust research and development expenses to:
(i) eliminate the results of operations of Parion and related non-controlling interest of $6.1 million
(ii) record research and development funding paid to Parion of $4.6 million attributable to Vertex as if Parion was not consolidated as a variable interest entity









VERTEX PHARMACEUTICALS INCORPORATED
Unaudited Condensed Consolidated Pro Forma Statement of Operations
For the year ended December 31, 2016
(in thousands, except per share amounts)

 
Vertex
 
Pro Forma Adjustments
 
Notes
 
Pro Forma
Revenues:
 
 
 
 
 
 
 
Product revenues, net
$
1,683,632

 
$

 
 
 
$
1,683,632

Royalty revenues
16,600

 

 
 
 
16,600

Collaborative revenues
1,945

 
(398
)
 
(c)
 
1,547

Total revenues
1,702,177

 
(398
)
 
 
 
1,701,779

Costs and expenses:
 
 
 
 
 
 
 
Cost of product revenues
206,811

 

 
 
 
206,811

Royalty expenses
3,649

 

 
 
 
3,649

Research and development expenses
1,047,690

 
(396
)
 
(d)
 
1,047,294

Sales, general and administrative expenses
432,829

 
(3,367
)
 
(c)
 
429,462

Restructuring expenses
1,262

 

 
 
 
1,262

Total costs and expenses
1,692,241

 
(3,763
)
 
 
 
1,688,478

Income from operations
9,936

 
3,365

 
 
 
13,301

Interest expense, net
(81,432
)
 
182

 
(c)
 
(81,250
)
Other income, net
4,130

 

 
 
 
4,130

(Loss) income before provision for (benefit from) income taxes
(67,366
)
 
3,547

 
 
 
(63,819
)
Provision for (benefit from) income taxes
16,665

 
(21,196
)
 
(c)
 
(4,531
)
Net (loss) income
(84,031
)
 
24,743

 
 
 
(59,288
)
Net (income) loss attributable to noncontrolling interest
(28,021
)
 
35,057

 
(c)
 
7,036

Net (loss) income attributable to Vertex
$
(112,052
)
 
$
59,800

 
 
 
$
(52,252
)
 
 
 
 
 
 
 
 
Net loss per share attributable to Vertex common shareholders:
 
 
 
 
 
 
 
Basic
$
(0.46
)
 
 
 
 
 
$
(0.21
)
Diluted
$
(0.46
)
 
 
 
 
 
$
(0.21
)
Shares used in per share calculations:
 
 
 
 
 
 
 
Basic
244,685

 
 
 
 
 
244,685

Diluted
244,685

 
 
 
 
 
244,685


(c) To eliminate the results of operations of Parion and related non-controlling interest
(d) To adjust research and development expenses to:
(i) eliminate the results of operations of Parion and related non-controlling interest of $14.6 million
(ii) record research and development funding paid to Parion of $9.2 million attributable to Vertex as if Parion was not consolidated as a variable interest entity
(iii) record milestone paid to Parion of $5.0 million that was not previously recorded to research and development expenses because Parion was consolidated as a variable interest entity







VERTEX PHARMACEUTICALS INCORPORATED
Unaudited Condensed Consolidated Pro Forma Balance Sheet
As of June 30, 2017
(in thousands)
 
Vertex
 
Pro Forma Adjustments
 
Notes
 
Pro Forma
Assets
 
 
 
 
 
 
 
Current Assets:
 
 
 
 
 
 
 
Cash and cash equivalents
$
1,223,130

 
$

 
 
 
$
1,223,130

Marketable securities, available for sale
445,520

 

 
 
 
445,520

Restricted cash and cash equivalents (VIE)
64,628

 
(61,925
)
 
(e)
 
2,703

Accounts receivable
247,949

 

 
 
 
247,949

Inventories
92,263

 

 
 
 
92,263

Prepaid expenses and other current assets
107,082

 
(631
)
 
(e)
 
106,451

Total current assets
2,180,572

 
(62,556
)
 
 
 
2,118,016

Property and equipment, net
740,103

 

 
 
 
740,103

Intangible assets
284,340

 
(255,340
)
 
(e)
 
29,000

Other assets
80,579

 
(385
)
 
(e)
 
80,194

Total assets
$
3,285,594

 
$
(318,281
)
 
 
 
$
2,967,313

Liabilities and Shareholders’ Equity
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
Accrued expenses
$
345,062

 
$
(275
)
 
(e)
 
$
344,787

Customer Deposits
147,686

 

 
 
 
147,686

Other current liabilities
132,658

 
(1,628
)
 
(e)
 
131,030

Total current liabilities
625,406

 
(1,903
)
 
 
 
623,503

Deferred tax liability
136,649

 
(125,967
)
 
(e)
 
10,682

Construction financing lease obligation
525,019

 

 
 
 
525,019

Other liabilities, excluding current portions
131,289

 

 
 
 
131,289

Total liabilities
1,418,363

 
(127,870
)
 
 
 
1,290,493

Shareholders' equity:
 
 
 
 
 
 
 
Common stock
2,479

 

 
 
 
2,479

Additional paid-in capital
6,808,002

 

 
 
 
6,808,002

Accumulated other comprehensive loss
(21,753
)
 

 
 
 
(21,753
)
Accumulated deficit
(5,117,455
)
 
(7,094
)
 
(e)
 
(5,124,549
)
Total Vertex shareholders’ equity
1,671,273

 
(7,094
)
 
 
 
1,664,179

Noncontrolling interest
195,958

 
(183,317
)
 
(e)
 
12,641

Total shareholders’ equity
1,867,231

 
(190,411
)
 
 
 
1,676,820

Total liabilities and shareholders’ equity
$
3,285,594

 
$
(318,281
)
 
 
 
$
2,967,313


(e) To deconsolidate the net assets of Parion and related non-controlling interest