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Form 8-K/A_ER 2013 Q4


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): January 27, 2014

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))





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 January 29, 2014 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 January 29, 2014. 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 Alios.
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 nine months ended September 30, 2013 and for the year ended December 31, 2012; and
•
unaudited pro forma condensed consolidated balance sheet as of September 30, 2013.
(d) Exhibits
Exhibit        Description of Document
99.1
Vertex Pharmaceuticals Incorporated unaudited pro forma condensed consolidated statements of operations for the nine months ended September 30, 2013 and for the year ended December 31, 2012, and unaudited pro forma condensed consolidated balance sheet as of September 30, 2013.





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:  January 31, 2014
/s/ Kenneth L. Horton
 
Kenneth L. Horton
Executive Vice President and Chief Legal Officer
 
 



Form 8-K/A_ER 2013 Q4_EX-99.1


Exhibit 99.1
Unaudited pro forma consolidated financial information
On January 27, 2014, Vertex Pharmaceuticals Incorporated (“Vertex,” the “Company” or “we”) concluded that the intangible asset related to the HCV nucleotide analogue program (VX-135) had become fully impaired. This conclusion was based on, among other factors, (a) available safety, tolerability and efficacy data regarding VX-135, (b) the continuing partial clinical hold on VX-135 by the FDA and (c) a review of the competitive landscape for treatments for hepatitis C virus infection. Based on these factors, we evaluated the fair value of the VX-135 intangible asset from the perspective of a market participant and concluded that the fair value of this asset was zero as of December 31, 2013. Accordingly, a $250.6 million impairment charge and a benefit for income taxes of $102.1 million was recorded in the fourth quarter of 2013. In connection with this impairment charge, we determined that we no longer had a variable interest in Alios BioPharma, Inc. ("Alios") and deconsolidated the financial statements of Alios from the Company’s consolidated financial statements as of December 31, 2013. The net effect of the impairment charge, tax benefit and related deconsolidation was a gain of approximately $68.2 million attributable to Vertex in 2013. 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 Alios. 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 nine months ended September 30, 2013 and for the year ended December 31, 2012 present our condensed consolidated results of operations giving pro forma effect to the deconsolidation of Alios as if it had occurred on January 1, 2012. The unaudited pro forma condensed consolidated balance sheet at September 30, 2013 presents our condensed consolidated financial position giving pro forma effect to the deconsolidation of Alios as if it had occurred on September 30, 2013. These pro forma financial statements should be read in connection with the Company’s historical condensed consolidated financial statements for the period ended September 30, 2013, which were included in the Form 10-Q filed on November 7, 2013 and the Company’s historical consolidated financial statements for the year ended December 31, 2012, which were included in the Form 10-K filed on March 1, 2013.
The pro forma adjustments are based on currently available information, estimates and assumptions that we 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 nine months ended September 30, 2013
(in thousands, except per share amounts)

 
Vertex
 
Pro Forma Adjustments
 
Notes
 
Pro Forma
Revenues:
 
 
 
 
 
 
 
Product revenues, net
$
708,823

 
$
—

 
 
 
$
708,823

Royalty revenues
119,705

 
—

 
 
 
119,705

Collaborative revenues
32,290

 
—

 
 
 
32,290

Total revenues
860,818

 
—

 
 
 
860,818

Costs and expenses:
 
 
 
 
 
 
 
Cost of product revenues
75,698

 
—

 
 
 
75,698

Royalty expenses
32,315

 
—

 
 
 
32,315

Research and development expenses
669,174

 
(17,339
)
 
(a)(b)
 
651,835

Sales, general and administrative expenses
287,154

 
(4,009
)
 
(a)(b)
 
283,145

Restructuring expense
12,863

 
—

 
 
 
12,863

Intangible asset impairment charge
412,900

 
—

 
 
 
412,900

Total costs and expenses
1,490,104

 
(21,348
)
 
 
 
1,468,756

Income (loss) from operations
(629,286
)
 
21,348

 
 
 
(607,938
)
Interest income
4,986

 
(173
)
 
(a)
 
4,813

Interest expense
(11,564
)
 
2

 
(a)
 
(11,562
)
Income (loss) before provision for (benefit from) income taxes
(635,864
)
 
21,177

 
 
 
(614,687
)
Provision for (benefit from) income taxes
(132,863
)
 
9,089

 
(a)
 
(123,774
)
Net income (loss)
(503,001
)
 
12,088

 
 
 
(490,913
)
Net loss (income) attributable to noncontrolling interest (Alios)
13,688

 
(13,688
)
 
(a)
 
—

Net loss attributable to Vertex
$
(489,313
)
 
$
(1,600
)
 
 
 
$
(490,913
)
 
 
 
 
 
 
 
 
Net loss per share attributable to Vertex common shareholders:
 
 
 
 
 
 
 
Basic
$
(2.20
)
 
 
 
 
 
$
(2.20
)
Diluted
$
(2.20
)
 
 
 
 
 
$
(2.20
)
Shares used in per share calculations:
 
 
 
 
 
 
 
Basic
222,764

 
 
 
 
 
222,764

Diluted
222,764

 
 
 
 
 
222,764


(a) To eliminate results of operations of Alios and related non-controlling interest (Alios)
(b) To record research and development and administrative funding paid to Alios of $8.2 million in the nine months ended September 30, 2013








VERTEX PHARMACEUTICALS INCORPORATED
Unaudited Condensed Consolidated Pro Forma Statement of Operations
For the year ended December 31, 2012
(in thousands, except per share amounts)

 
Vertex
 
Pro Forma Adjustments
 
Notes
 
Pro Forma
Revenues:
 
 
 
 
 
 
 
Product revenues, net
$
1,333,458

 
$
—

 
 
 
$
1,333,458

Royalty revenues
141,498

 
—

 
 
 
141,498

Collaborative revenues
52,086

 
—

 
 
 
52,086

Total revenues
1,527,042

 
—

 
 
 
1,527,042

Costs and expenses:
 
 
 
 
 
 
 
Cost of product revenues
236,742

 
—

 
 
 
236,742

Royalty expenses
43,143

 
—

 
 
 
43,143

Research and development expenses
806,185

 
8,736

 
(c)(d)(e)
 
814,921

Sales, general and administrative expenses
436,796

 
(3,798
)
 
(c)(e)
 
432,998

Restructuring expense
1,844

 
—

 
 
 
1,844

Total costs and expenses
1,524,710

 
4,938

 
 
 
1,529,648

Income (loss) from operations
2,332

 
(4,938
)
 
 
 
(2,606
)
Interest income
1,940

 
(207
)
 
(c)
 
1,733

Interest expense
(16,653
)
 
189

 
(c)
 
(16,464
)
Income (loss) before provision for (benefit from) income taxes
(12,381
)
 
(4,956
)
 
 
 
(17,337
)
Provision for (benefit from) income taxes
38,754

 
(39,029
)
 
(c)
 
(275
)
Net income (loss)
(51,135
)
 
34,073

 
 
 
(17,062
)
Net loss (income) attributable to noncontrolling interest (Alios)
(55,897
)
 
55,897

 
(c)
 
—

Net income (loss) attributable to Vertex
$
(107,032
)
 
$
89,970

 
 
 
$
(17,062
)
 
 
 
 
 
 
 
 
Net loss per share attributable to Vertex common shareholders:
 
 
 
 
 
 
 
Basic
$
(0.50
)
 
 
 
 
 
$
(0.08
)
Diluted
$
(0.50
)
 
 
 
 
 
$
(0.08
)
Shares used in per share calculations:
 
 
 
 
 
 
 
Basic
211,946

 
 
 
 
 
211,946

Diluted
211,946

 
 
 
 
 
211,946


(c) To eliminate results of operations of Alios and related non-controlling interest (Alios)
(d) To record research and development milestone paid to Alios of $25.0 million in 2012
(e) To record research and development and administrative funding paid to Alios of $24.3 million in 2012





VERTEX PHARMACEUTICALS INCORPORATED
Unaudited Condensed Consolidated Pro Forma Balance Sheet
As of September 30, 2013
(in thousands)
 
Vertex
 
Pro Forma Adjustments
 
Notes
 
Pro Forma
Assets
 
 
 
 
 
 
 
Current Assets:
 
 
 
 
 
 
 
Cash and cash equivalents
$
583,181

 
$
—

 
 
 
$
583,181

Marketable securities, available for sale
839,469

 
—

 
 
 
839,469

Restricted cash and cash equivalents (Alios)
51,059

 
(51,059
)
 
(f)
 
—

Other current assets
174,922

 
(8,820
)
 
(f)
 
166,102

Total current assets
1,648,631

 
(59,879
)
 
 
 
1,588,752

Property and equipment, net
648,924

 
(1,374
)
 
(f)
 
647,550

Intangible assets
250,600

 
(250,600
)
 
(f)
 
—

Other assets
34,593

 
(153
)
 
(f)
 
34,440

Total assets
$
2,582,748

 
$
(312,006
)
 
 
 
$
2,270,742

Liabilities and Shareholders’ Equity
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
Accrued expenses
$
280,848

 
$
(6,409
)
 
(f)
 
$
274,439

Other current liabilities
128,651

 
(1,052
)
 
(f)
 
127,599

Total current liabilities
409,499

 
(7,461
)
 
 
 
402,038

Other liabilities, excluding current portions
143,797

 
(761
)
 
(f)
 
143,036

Deferred tax liability
150,203

 
(150,203
)
 
(f)
 
—

Construction financing lease obligation
392,569

 
—

 
 
 
392,569

Total liabilities
1,096,068

 
(158,425
)
 
 
 
937,643

Redeemable noncontrolling interest (Alios)
39,624

 
(39,624
)
 
(f)
 
—

Shareholders' equity:
 
 
 
 
 
 
 
Common stock
2,311

 
—

 
 
 
2,311

Additional paid-in capital
5,274,307

 
—

 
 
 
5,274,307

Accumulated other comprehensive loss
(550
)
 
—

 
 
 
(550
)
Accumulated deficit
(4,011,180
)
 
68,211

 
(f)
 
(3,942,969
)
Total Vertex shareholders’ equity
1,264,888

 
68,211

 
 
 
1,333,099

Noncontrolling interest (Alios)
182,168

 
(182,168
)
 
 
 
—

Total shareholders’ equity
1,447,056

 
(113,957
)
 
 
 
1,333,099

Total liabilities and shareholders’ equity
$
2,582,748

 
$
(312,006
)
 
 
 
$
2,270,742


(f) To deconsolidate the net assets of Alios and related non-controlling interest (Alios)