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Vertex Pharmaceuticals Reports Second Quarter 2009 Financial Results and Highlights Recent Clinical Progress and Business Development Activity
CAMBRIDGE, Mass., Aug 05, 2009 (BUSINESS WIRE) -- Vertex Pharmaceuticals Incorporated (Nasdaq: VRTX) today reviewed recent business and clinical progress and reported consolidated financial results for the quarter ended June 30, 2009.
"Our top priority is to execute on the telaprevir Phase 3 registration program in hepatitis C and to prepare for a New Drug Application submission in the second half of 2010," said Matthew Emmens, Chairman, President and Chief Executive Officer of Vertex Pharmaceuticals. "Beyond HCV, we are now conducting a comprehensive program in cystic fibrosis - a life-threatening orphan disorder - with two novel therapies that target the underlying disease mechanism. With the advancement of our pipeline and continued research productivity, we are moving closer to fulfilling our corporate vision of building a profitable, fully-capable biopharmaceutical company focused on improving patient outcomes in areas of serious unmet medical need."
Mr. Emmens continued, "Vertex enters the second half of 2009 in a strong financial position that will enable continued investment into late-stage development opportunities for HCV and CF and into product creation from research. We continue to closely manage our cash investment in the Company and will add $105 million to our financial position through an amended agreement with Mitsubishi Tanabe for the development and commercialization of telaprevir in Asia."
Broad Commitment to Hepatitis C
Telaprevir Phase 3 registration program on track
Treatment-naïve Phase 3 trials
Treatment-failure Phase 3 trial
Telaprevir twice-daily evaluation
Additional telaprevir clinical studies
STAT-C combination therapies
Additional HCV compounds in clinical development
Broad Program Targeting Cystic Fibrosis
Potentiator compound VX-770 in Phase 3 registration program
Corrector compound VX-809 in Phase 2a trial
Additional Pipeline Progress - VX-509 (JAK3 inhibitor)
Recent Business Development Activities - Amended Agreement with Mitsubishi Tanabe
Second Quarter Results
For the quarter ended June 30, 2009, the Company's GAAP net loss was $171.3 million, or $0.99 per share, including stock-based compensation and executive transition expenses of $28.6 million, restructuring expenses of $1.1 million, and loss on exchange of convertible subordinated notes of $12.3 million, compared to a GAAP net loss for the quarter ended June 30, 2008 of $91.3 million, or $0.66 per share, including stock-based compensation expense of $16.6 million and restructuring expenses of $1.2 million.
The non-GAAP loss, before stock-based compensation and executive transition expenses, restructuring expenses, and loss on exchange of convertible subordinated notes, for the quarter ended June 30, 2009 was $129.3 million, or $0.75 per share, compared to $73.6 million, or $0.53 per share, for the quarter ended June 30, 2008. The increase in the Company's 2009 non-GAAP loss was principally attributable to a decrease in collaborative revenues and an increase in total operating expenses to support telaprevir's global Phase 3 registration program and commercialization, and initiation of the VX-770 Phase 3 registration program.
Total revenues for the quarter ended June 30, 2009 were $19.1 million, compared to $69.4 million for the second quarter of 2008. The second quarter 2008 revenues included an R&D milestone of $45.0 million that did not recur in 2009.
Research and development (R&D) expenses for the quarter ended June 30, 2009 were $139.3 million, compared to $129.6 million for the second quarter of 2008. The increase primarily reflects investment activity to support advancement of Phase 3 trials for telaprevir as well as initiation of the Phase 3 registration program for VX-770.
Sales, general and administrative (SG&A) expenses for the quarter ended June 30, 2009 were $32.5 million, compared to $26.4 million for the second quarter of 2008. This increase reflects building of capabilities, including an increase in the number of employees and our commercial investments, to support advancement of telaprevir toward potential launch.
Interest expense, net, for the quarter ended June 30, 2009 was $1.8 million, compared to interest income, net, of $0.2 million for the second quarter of 2008. This decrease resulted primarily from a lower level of investment portfolio yields reflecting the broader economic environment.
At June 30, 2009, Vertex had $754.4 million in cash, cash equivalents and marketable securities. Additionally, following the recent exchange of $143.5 million of 2013 convertible senior subordinated notes for common stock, the Company now has $144.0 million of remaining 2013 notes at a conversion price of $23.14 per share.
Vertex will receive approximately $105 million of cash as a result of an amended agreement with Mitsubishi Tanabe for the development and commercialization of telaprevir in Asia, which puts the Company's pro forma cash, cash equivalents and marketable securities position above $850 million as of June 30, 2009.
Full Year 2009 Financial Guidance
This section contains forward-looking guidance about the financial outlook for Vertex Pharmaceuticals.
The Company is today reiterating its guidance for 2009 year-end cash, cash equivalents and marketable securities of approximately $700 million. Vertex is also reiterating its guidance for 2009 non-GAAP loss of $400 to $435 million, which assumes the successful completion of additional business development and outlicensing activities that may further add to the Company's year-end cash, cash equivalents and marketable securities position. The Company is updating its guidance for 2009 GAAP loss to approximately $515 to $550 million.
"Vertex remains focused on its capital structure and maintaining a strong cash position while managing its investment through to an anticipated cashflow positive business following the potential launch of our late-stage products," said Ian Smith, Executive Vice President and Chief Financial Officer of Vertex. "Following the recently amended agreement with Mitsubishi Tanabe, we are positioned with pro forma cash, cash equivalents and marketable securities in excess of $850 million as of June 30, 2009. We believe our financial position continues to support the advancement of late-stage development programs and investment in product creation from research, and we continue to consider further business transactions that may provide additional sources of capital in 2009.
"In addition, in the second quarter we completed a private exchange of $143.5 million in convertible notes for common stock, further reducing our near-term debt obligations as we advance toward the launch of telaprevir," Mr. Smith added.
Non-GAAP Financial Measures
In this press release, Vertex's financial results 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 (i) provides its second quarter 2009 and 2008 loss, and guidance for its projected 2009 loss, excluding restructuring expense, acquisition-related expenses, executive transition expenses, stock-based compensation expense, and loss on exchange of convertible subordinated notes, and (ii) references its cash, cash equivalents and marketable securities position on a pro forma basis as of June 30, 2009, which in each case results in a non-GAAP financial measure. 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. The pro forma cash, cash equivalents and marketable securities in excess of $850 million represents Vertex's cash, cash equivalents and marketable securities balance of $754.4 million on June 30, 2009 plus the $105.0 million Vertex expects to receive from Mitsubishi Tanabe following signing. A reconciliation of the other non-GAAP financial results to GAAP financial results is included in the attached financial statements.
Vertex Pharmaceuticals Incorporated is a global biotechnology company committed to the discovery and development of breakthrough small molecule drugs for serious diseases. The Company's strategy is to commercialize its products both independently and in collaboration with major pharmaceutical companies. Vertex's product pipeline is focused on viral diseases, cystic fibrosis, inflammation, autoimmune diseases, cancer and pain. Vertex co-discovered the HIV protease inhibitor, Lexiva, with GlaxoSmithKline.
Lexivais a registered trademark of the GlaxoSmithKline group of companies.
PEGASYS(R) is a registered trademark of Hoffman La Roche.
PEGINTRON(TM) is a trademark of Schering Corporation.
Special Note Regarding Forward-looking Statements
This press release contains forward-looking statements, including statements regarding (i) the anticipated submission of an NDA for telaprevir in the second half of 2010, (ii) the advancement of two drug candidates aimed at the underlying mechanism of the orphan disorder cystic fibrosis, (iii) moving closer to fulfilling the Company's corporate vision of building a profitable, fully-capable biopharmaceutical company focused on improving patient outcomes in areas of serious unmet medical need, (iv) the Company's strong financial position enabling the continued investment into late-stage development opportunities for HCV and CF and into product creation from research, (v) the Company's expectations regarding when sustained viral response data will be available from its ADVANCE, ILLUMINATE and REALIZE clinical trials, (vi) the aim of the ILLUMINATE clinical trial being to characterize whether there is an additional benefit to extending treatment from 24 weeks to 48 weeks in treatment-naïve patients who achieve eRVR, (vii) the expectation that additional data, including final sustained viral response data, from Study C208 will be presented at AASLD, (viii) the expectation that additional data, including SVR24 data, from Study 107 will become available in 2010, (ix) the plan to begin a combination trial of telaprevir with VX-222 as early as the fourth quarter of 2009 and the expectation that data from this study will become available in the first half of 2010, (x) the scheduled completion of the 3-day VX-222 clinical trial in the third quarter of 2009 and the expectation that the Company will initiate a drug-drug interaction study with VX-222 and telaprevir in the third quarter of 2009, (xi) seeking to advance HCV therapy through the development of novel STAT-C combinations and to identify compounds through the Company's early-stage development activities that are appropriate for further development, (xii) the ENDEAVOR registration program being designed to evaluate the utility of VX-770 across different age groups and genotypes, (xiii) the clinical trial designs, including expected numbers of patients, primary and secondary endpoints and the treatment durations, for the STRIVE, ENVISION and DISCOVER clinical trials, (xiv) the expectation that STRIVE will complete enrollment in the first quarter of 2010 and that the DISCOVER trial will be initiated in the third quarter of 2009, (xv) the expectation that the Phase 2a clinical trial of VX-809 will be complete in early 2010, (xvi) the results of the Phase 1 dose-ranging study of VX-509 suggesting a promising safety profile, showing a profound dose-dependent and reversible reduction in a biomarker of JAK3 activity and a high degree of selectivity for JAK3 over JAK2, (xvii) the possibility that VX-509 may have broad potential for the treatment of multiple immune-mediated inflammatory diseases, (xviii) the expectation that the Company will receive $105 million from Mitsubishi Tanabe and the eligibility for the Company to receive further milestones from Mitsubishi Tanabe, (xix) guidance that the Company's projected GAAP and non-GAAP 2009 annual loss and year-end cash, cash equivalents and marketable securities balances will be within the ranges stated under the heading "Full Year 2009 Financial Guidance," (xx) the focus on capital structure and maintaining a strong cash position while managing investment through to an anticipated cashflow positive business following the potential launch of late-stage products, and (xxi) the consideration of further business transactions that may provide additional sources of capital in 2009. While the Company believes the forward-looking statements contained in this press release are accurate, 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 outcomes for each of its planned clinical trials and studies, and in particular its planned clinical trials of telaprevir, may not be favorable, that regulatory authorities may require supplemental clinical trials in order to support registration of telaprevir in any particular indication, that there may be varying interpretations of data produced by one or more of our clinical trials, that enrollment may be more difficult or slower than we currently anticipate or that planned clinical trials may not start when planned, that regulatory authorities will require more extensive data for a telaprevir NDA filing than currently expected, that the Company may not be able to successfully develop combination therapies involving telaprevir and VX-222, that the Company may not complete additional business development and outlicensing activities, that one or more of the Company's assumptions underlying its revenue expectations -- including clinical and scientific progress that could lead to payments under new collaborations -- or its expense expectations -- including estimates of the variables that go into determining stock-based compensation expenses -- will not be realized, or that the Company will be unable to realize one or more of its financial objectives for 2009 due to unexpected and costly program delays, or any number of other financial, technical or collaboration considerations, that unexpected costs associated with one or more of the Company's programs will necessitate a reduction in its investment in other programs or a change in the Company's financial projections, that future competitive or other market factors may adversely affect the commercial potential for the Company's product candidates in HCV or other potential indications, that due to scientific, medical or technical developments, the Company's drug discovery efforts will not ultimately result in commercial products or assets that can generate revenue, that the Company will be unable to enter into new collaborative relationships on acceptable terms, 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. The Company disclaims any obligation to update the information contained in this press release as new information becomes available.
Vertex Pharmaceuticals Incorporated
2009 Second Quarter and Six Month Results
Consolidated Statements of Operations Data
(in thousands, except per share amounts)
Three Months Ended
Six Months Ended
|Royalty revenues (Note 6)||$5,917||$9,741||$12,057||$20,592|
|Collaborative and other R&D revenues||13,147||59,668||30,986||90,492|
|Costs and expenses:|
|Royalty expenses (Note 6)||3,267||3,701||6,843||7,277|
|Research and development expenses (R&D) (Note 7)||139,331||129,573||282,912||245,846|
|Sales, general & administrative expenses (SG&A) (Note 7)||32,526||26,448||61,046||46,380|
|Restructuring expense (Note 3)||1,107||1,168||3,509||1,798|
|Acquisition-related expenses (Note 1)||---||---||7,793||---|
|Total costs and expenses||176,231||160,890||362,103||301,301|
|Loss from operations||(157,167||)||(91,481||)||(319,060||)||(190,217||)|
|Net interest income (expense) (Note 5)||(1,836||)||160||(2,615||)||2,742|
Loss on exchange of convertible subordinated notes (Note 5)
|Net loss||$ (171,297||)||$ (91,321||)||$ (333,969||)||$ (187,475||)|
|Basic and diluted net loss per common share||$ (0.99||)||$ (0.66||)||$ (2.03||)||$ (1.37||)|
|Basic and diluted weighted-average number of common shares outstanding||172,563||138,725||164,258||136,607|
|Non-GAAP Loss and Loss per Common Share Reconciliation||
Three Months Ended
Six Months Ended
|GAAP Net Loss||$ (171,297||)||$ (91,321||)||$ (333,969||)||$ (187,475||)|
|Pro Forma Adjustments:|
Stock-based compensation and executive transition
Stock-based compensation and executive transition
Total stock-based compensation and executive
Loss on exchange of convertible
subordinated notes (Note 5)
|Restructuring expense (Note 3)||1,107||1,168||3,509||1,798|
|Acquisition-related expenses (Note 1)||---||---||7,793||---|
|Non-GAAP Loss||$ (129,319||)||$ (73,560||)||$ (258,018||)||$ (156,012||)|
|Basic and diluted non-GAAP loss per common share||$ (0.75||)||$ (0.53||)||$ (1.57||)||$ (1.14||)|
Note 1: On March 12, 2009, the Company acquired ViroChem Pharma Inc. ("ViroChem"), a biotechnology company based in Canada. The Company paid an aggregate purchase price of $100.0 million in cash and 10,733,527 shares of the Company's common stock in order to acquire ViroChem. The transaction is being accounted for under the acquisition method of accounting in accordance with Financial Accounting Standards Board ("FASB") Statement No. 141(R), "Business Combinations" ("SFAS 141(R)"). Under SFAS 141(R), all of the assets acquired and liabilities assumed in the transaction are recognized at their acquisition-date fair values, while transaction costs and restructuring costs associated with the transaction are expensed as incurred.
The $390.6 million purchase price for ViroChem is based on the acquisition-date fair value of the consideration transferred, which was calculated based on the opening price of the Company's common stock of $27.07 per share on March 12, 2009. The difference between the aggregate purchase price and the fair value of assets acquired and liabilities assumed was allocated to goodwill.
Note 2: For the three and six months ended June 30, 2009, the Company incurred $28.6 million and $52.4 million, respectively, in stock-based compensation and executive transition expenses of which $22.2 million and $40.7 million, respectively, is included in research and development expenses and $6.4 million and $11.6 million, respectively, is included in sales, general and administrative expenses. For the three and six months ended June 30, 2008, the Company incurred $16.6 million and $29.7 million, respectively, in stock-based compensation expense of which $13.3 million and $24.0 million, respectively, is included in research and development expenses and $3.3 million and $5.7 million, respectively, is included in sales, general and administrative expenses.
Note 3: The Company recorded restructuring expense of $1.1 million for the three months ended June 30, 2009 compared to $1.2 million for the three months ended June 30, 2008. The Company recorded restructuring expense of $3.5 million for the six months ended June 30, 2009 compared to $1.8 million for the six months ended June 30, 2008. The restructuring expense in all periods included imputed interest cost related to the restructuring liability. The increase in restructuring expense for the six months ended June 30, 2009 compared to the six months ended June 30, 2008 was primarily the result of a revision, in the first quarter of 2009, of certain key estimates and assumptions about facility operating costs for the remaining period of the lease commitment, for which there was no corresponding revision in the six months ended June 30, 2008. The lease restructuring liability was $34.1 million as of June 30, 2009. The expense and the related liability have been estimated in accordance with FASB Statement No. 146, "Accounting for Costs Associated with Exit or Disposal Activities," and are reviewed quarterly for changes in circumstances.
Note 4: In February 2009, the Company completed a public offering of 10,000,000 shares of common stock, at a price of $32.00 per share. This transaction resulted in net proceeds of $313.3 million to the Company.
In September 2008, the Company completed a public offering of 8,625,000 shares of common stock, at a price of $25.50 per share. This transaction resulted in net proceeds of $217.4 million to the Company.
In February 2008, the Company completed a public offering of 6,900,000 shares of common stock at a price of $17.14 per share. This transaction resulted in net proceeds of $112.7 million to the Company.
Note 5: In February 2008, the Company completed an offering of $287.5 million aggregate principal amount of 4.75% convertible senior subordinated notes due February 2013 (the "2013 Notes"). The 2013 Notes are convertible, at the option of the holder, into common stock at a price equal to approximately $23.14 per share, subject to adjustment under certain circumstances. The 2013 Notes bear interest at the rate of 4.75% per year, and the Company is required to make semi-annual interest payments on the outstanding principal balance of the notes on February 15 and August 15 of each year. This transaction resulted in net proceeds of $278.6 million to the Company.
In June 2009, holders of the 2013 Notes exchanged $143.5 million in aggregate principal amount of the 2013 Notes, plus interest, for 6.6 million shares of newly issued common stock. As a result of this exchange, the Company incurred a non-cash charge of $12.3 million in the second quarter of 2009. The charge corresponds to the value of additional shares issued in the transactions over the number of shares that would have been issued upon conversion of the 2013 Notes at the conversion prices set forth therein.
Note 6: In the first quarter of 2008, the Company recognized royalty revenues based on actual and estimated net sales of Lexiva/Telzir and Agenerase by GlaxoSmithKline plc under the Company's 1993 license agreement with GlaxoSmithKline plc. In the second quarter of 2008, the Company sold the Company's right to receive future royalty payments, net of sub-royalty payments due to a third party, arising from sales of Lexiva/Telzir and Agenerase under the Company's license agreement with GlaxoSmithKline plc in return for a one-time cash payment of $160.0 million. In accordance with Emerging Issues Task Force Issue No. 88-18, "Sales of Future Revenues," after the sale of the Company's right to receive future royalty payments, the Company recognizes deferred revenues relating to the $160.0 million one-time cash payment from the purchaser under the units-of-revenue method.
Note 7: Certain amounts in prior year's financial statements have been reclassified to conform to the current presentation. The reclassifications had no effect on the reported net loss.
Condensed Consolidated Balance Sheets Data
|Cash, cash equivalents and marketable securities||$754,364||$832,101|
|Other current assets||28,392||35,480|
|Property and equipment, net||64,358||68,331|
|Intangible assets (Note 1)||525,900||---|
|Goodwill (Note 1)||26,883||---|
|Other non-current assets (Notes 5 & 6)||9,721||14,309|
|Liabilities and Stockholders' Equity|
Other current liabilities
|Accrued restructuring expense (Note 3)||34,050||34,064|
|Deferred tax liability (Note 1)||162,503||---|
|Deferred revenues (Note 6)||230,762||247,474|
|Convertible notes (due 2013)(Note 5)||144,000||287,500|
|Stockholders' equity (Notes 1, 4 & 5)||729,057||238,874|
|Total liabilities and stockholders' equity||$1,439,876||$980,479|
|Common shares outstanding (Notes 1, 4 & 5)||180,203||151,245|
Conference Call and Webcast: Second Quarter Financial Results:
Vertex Pharmaceuticals will host a conference call and webcast today, Wednesday, August 5, 2009 at 5:00 p.m. EDT to review financial results and recent developments. This call and webcast will be broadcast via the Internet at www.vrtx.com. It is suggested that webcast participants go to the web site at least 10 minutes in advance of the call to ensure that they can access the slides. The link to the webcast is available on the Events and Presentations button on the home page.
To listen to the call on the telephone, dial (800) 374-0296 (U.S. and Canada) or (702) 696-4937 (International). Vertex is also providing a podcast MP3 file available for download on the Vertex website at www.vrtx.com.
The call will be available for replay via telephone commencing August 5, 2009 at 8:00 p.m. EDT running through 5:00 p.m. EDT on August 12, 2009. The replay phone number for the U.S. and Canada is (800) 642-1687. The international replay number is (706) 645-9291 and the conference ID number is 21302443. Following the live webcast, an archived version will be available on Vertex's website until 5:00 p.m. EDT on August 19, 2009.
Vertex's press releases are available at www.vrtx.com.
SOURCE: Vertex Pharmaceuticals Incorporated
Michael Partridge, 617-444-6108
Lora Pike, 617-444-6755
Jane A. Kramer, 617-444-6924
Zachry Barber, 617-444-6470
Copyright Business Wire 2009