-Second-quarter 2017 cystic fibrosis product
revenues of $514 million; $324 million for ORKAMBI and $190 million
for KALYDECO-
-Vertex reiterates 2017 guidance for ORKAMBI
and KALYDECO product revenues; updates guidance for combined GAAP
and non-GAAP R&D and SG&A expenses-
-Pipeline of investigational CF medicines
continues to progress and expand to support goal of treating all
people with CF-
Vertex Pharmaceuticals Incorporated (Nasdaq: VRTX) today
reported consolidated financial results for the second quarter
ended June 30, 2017. Vertex reiterated its full-year 2017
financial guidance for ORKAMBI® (lumacaftor/ivacaftor) and
KALYDECO® (ivacaftor) net revenues and updated its guidance for
combined GAAP and non-GAAP R&D and SG&A expenses. The
company also reviewed its recent progress toward treating all
people with CF, including the completion of an asset purchase
agreement with Concert Pharmaceuticals for worldwide development
and commercialization rights to CTP-656 and other assets related to
the treatment of CF.
Key financial results include:
Three Months Ended
June 30,
%
2017 2016
Change
(in millions, except per share and percentage data)
ORKAMBI product revenues, net $ 324 $ 245 32 %
KALYDECO
product revenues, net $
190
$
180
5 %
TOTAL CF product revenues, net $
514
$
426
21 %
GAAP net income (loss) $ 18 $ (65 ) n/a
GAAP net income (loss) per share - diluted $ 0.07 $ (0.26 )
n/a
Non-GAAP net income $ 99 $ 58 71 %
Non-GAAP
net income per share - diluted $ 0.39 $ 0.24 63 %
"During the first half of 2017, Vertex has made significant
progress throughout the business and in particular, across our CF
development programs," said Jeffrey Leiden, M.D., Ph.D., Chairman,
President and Chief Executive Officer of Vertex. "Our progress has
been marked by the progression of multiple combination regimens
that allow us to treat more people with CF today and to potentially
treat up to 90% of patients with this disease in the future."
Financial Highlights
Revenues:
- Total CF net product revenues were
$514.0 million compared to $425.7 million for the second quarter of
2016.
- Net product revenues from ORKAMBI were
$324.4 million compared to $245.5 million for the second quarter of
2016. The increase in ORKAMBI revenues was primarily driven by the
continued uptake in the medicine globally and additional uptake in
people with CF ages 6 to 11 in the U.S., where approval was
received in September 2016.
- Net product revenues from KALYDECO were
$189.6 million compared to $180.2 million for the second quarter of
2016.
Expenses:
- Combined GAAP R&D and SG&A
expenses were $416.7 million compared to $382.7 million for the
second quarter of 2016. Combined non-GAAP R&D and SG&A
expenses were $333.4 million compared to $306.3 million for the
second quarter of 2016.
- GAAP R&D expenses were $289.5
million compared to $271.0 million for the second quarter of 2016.
Non-GAAP R&D expenses were $240.5 million compared to $217.7
million for the second quarter of 2016. The increase in combined
GAAP and non-GAAP R&D expenses was primarily attributable to
R&D expenses related to the clinical development of the
company's four triple combination regimens for CF.
- GAAP SG&A expenses were $127.2
million compared to $111.7 million for the second quarter of 2016.
Non-GAAP SG&A expenses were $92.9 million compared to $88.6
million for the second quarter of 2016. The increase in combined
GAAP and non-GAAP SG&A expenses was primarily driven by
commercial support for the launch and expansion of ORKAMBI
globally.
Net Income (Loss) Attributable to Vertex:
- GAAP net income was $18.0 million, or
$0.07 per diluted share, for the second quarter of 2017, compared
to a net loss of $(64.5) million, or $(0.26) per diluted share, for
the second quarter of 2016. Non-GAAP net income was $98.9 million,
or $0.39 per diluted share, for the second quarter of 2017,
compared to $58.0 million, or $0.24 per diluted share, for the
second quarter of 2016. Second quarter 2017 non-GAAP net income
growth was primarily driven by increased product revenues.
Cash Position:
- As of June 30, 2017, Vertex had
$1.67 billion in cash, cash equivalents and marketable securities
compared to $1.43 billion in cash, cash equivalents and marketable
securities as of December 31, 2016.
2017 Financial Guidance:
Vertex today reiterated its 2017 guidance for ORKAMBI and
KALYDECO revenues and updated its combined GAAP and non-GAAP
R&D and SG&A expenses:
- Total CF Product Revenues:
Vertex expects total 2017 CF product revenues of $1.84 to $2.07
billion, comprised of ORKAMBI and KALYDECO product revenues.
- ORKAMBI: The company continues
to expect total 2017 product revenues for ORKAMBI of $1.1 to $1.3
billion. This range includes an estimate of potential additional
European revenues in 2017 that is largely dependent on which
European countries complete reimbursement agreements in 2017 and
when these agreements become effective.
- KALYDECO: The company continues
to expect total 2017 product revenues for KALYDECO of $740 to $770
million. This range includes the recent U.S. approval of KALYDECO
for the use in people with CF ages 2 and older who have one of 23
residual function mutations.
- Combined Non-GAAP and GAAP R&D
and SG&A Expenses: Vertex today updated its total 2017
guidance for combined non-GAAP R&D and SG&A expenses to a
range of $1.33 to $1.36 billion, compared to its previously
announced guidance of $1.25 to $1.30 billion. The updated guidance
reflects the progression of the company's CF portfolio, including
acceleration of Phase 2 studies for VX-659 and VX-445, preparation
for pivotal studies for its triple combination regimens, and
investment to develop CTP-656 as part of future triple combination
regimens. The company also updated its GAAP R&D and SG&A
expenses to a range of $1.79 to $1.92 billion, compared to its
previously announced guidance of $1.55 to $1.70 billion. The
updated GAAP guidance also reflects $160.0 million in R&D
expense that Vertex expects to incur in the third quarter of 2017
related to the upfront payment for the rights to CTP-656 and other
assets acquired from Concert Pharmaceuticals.
Business Highlights
Vertex today provided the following updates:
ORKAMBI
Continued progress toward label expansion
and global reimbursement: Vertex continues to make progress
toward the reimbursement of ORKAMBI for people with CF ages 12 and
older who have two copies of the F508del mutation in the European
Union. ORKAMBI is now available for eligible patients in Austria,
Denmark, Germany, Ireland, Italy and Luxembourg. Negotiations
continue in a number of other countries where CF is prevalent,
including France, the Netherlands and the United Kingdom, among
others.
KALYDECO
KALYDECO label expansion for people ages 2
and older: The U.S. Food and Drug Administration (FDA) recently
approved KALYDECO for the use in people with CF ages 2 and older
who have one of 23 residual function mutations in the cystic
fibrosis transmembrane conductance regulator (CFTR) gene. More than
900 people ages 2 and older in the U.S. have one of these
mutations. In addition to these mutations added to the label,
Vertex is continuing discussions with the FDA concerning the
approval for 600 additional people who have other residual function
mutations responsive to KALYDECO.
In the U.S., KALYDECO is now approved to
treat people with CF ages 2 and older who have one of 33 mutations
in the CFTR gene responsive to ivacaftor based on clinical and/or
in vitro assay data.
TEZACAFTOR/IVACAFTOR
Regulatory submissions for people ages 12
and older: Based on Phase 3 data, Vertex has submitted a new
drug application (NDA) to the FDA and a Marketing Authorization
Application (MAA) to the European Medicines Agency (EMA) for the
tezacaftor/ivacaftor combination therapy in people with CF ages 12
and older.
Orphan Drug Designation: On June 16,
2017, the FDA granted Orphan Drug Designation to tezacaftor in
combination with ivacaftor. The FDA grants Orphan Drug Designation
to medicines intended to treat fewer than 200,000 people in the
U.S.
Phase 3 study in people with one copy of
the F508del mutation and a second mutation that results in a gating
defect: Vertex announced today that it has completed enrollment
in a study evaluating the tezacaftor/ivacaftor combination in
people with CF ages 12 and older with one copy of the F508del
mutation and a second mutation that results in a gating effect in
the CFTR protein that has been shown to be responsive to ivacaftor
alone. Data from this study are expected in the second half of
2017.
TRIPLE COMBINATION REGIMENS
Positive Phase 1 and Phase 2 data from
three different triple combination regimens: Vertex continues
to evaluate four different next-generation correctors to be
included in an investigational triple combination regimen with
tezacaftor and ivacaftor.
On July 18, 2017, Vertex announced positive
data from Phase 1 and Phase 2 studies of three different triple
combination regimens in people with CF who have one F508del
mutation and one minimal function mutation, as well as positive
data in people with two copies of the F508del mutation.
Pending additional data from all four
next-generation correctors, discussions with regulatory agencies
and input from a Steering Committee of global CF experts, Vertex
plans to initiate pivotal development of one or more triple
combination regimens in the first half of 2018.
CTP-656
CTP-656 for potential use in future
combination regimens: On July 25, 2017, Vertex and Concert
Pharmaceuticals announced the completion of their previously
announced asset purchase agreement. Vertex now has worldwide
development and commercialization rights to CTP-656 and other
assets related to the treatment of CF. Concert received $160
million in cash upon closing and is eligible to receive up to $90
million in additional milestones based on regulatory approval in
the U.S. and reimbursement in the UK, Germany or France.
CTP-656 is an investigational cystic fibrosis
transmembrane conductance regulator (CFTR) potentiator that has the
potential to be used as part of future once-daily combination
regimens of CFTR modulators that treat the underlying cause of
cystic fibrosis.
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 (i) stock-based compensation expense,
(ii) revenues and expenses related to business development
transactions including collaboration agreements and consolidated
variable interest entities and (iii) other adjustments. 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 a non-GAAP
basis. The guidance regarding GAAP research and development
expenses and sales, general and administrative expenses does not
include estimates regarding expenses associated with any potential
business development activities, but includes $160.0 million in
R&D expense related to the upfront payment that Vertex expects
to incur in the third quarter of 2017 for the rights to CTP-656 and
other assets acquired from Concert Pharmaceuticals. A
reconciliation of the GAAP financial results to non-GAAP financial
results is included in the attached financial information.
Vertex Pharmaceuticals
Incorporated
Second-Quarter Results
Consolidated Statements of Operations
Data
(in thousands, except per share
amounts)
(unaudited)
Three Months Ended June 30, Six Months Ended June
30, 2017 2016 2017
2016 Revenues: Product revenues, net $
513,988 $ 425,651 $ 994,610 $ 820,061 Royalty revenues 2,861 5,282
4,412 8,878 Collaborative revenues (Note 1) 27,286 675
259,831 749 Total revenues 544,135 431,608
1,258,853 829,688 Costs and expenses: Cost of product revenues
70,535 44,154 116,777 93,943 Royalty expenses 670 1,098 1,416 1,958
Research and development expenses 289,451 271,008 563,014 526,868
Sales, general and administrative expenses 127,249 111,652 240,575
216,866
Restructuring expenses 3,523 343 13,522 1,030
Total costs and expenses 491,428 428,255
935,304 840,665 Income (loss) from operations 52,707
3,353 323,549 (10,977 ) Interest expense, net (14,664 ) (20,155 )
(31,429 ) (40,853 ) Other (expenses) income, net (2,537 ) (1,219 )
(3,081 ) 3,192 Income (loss) from operations before
provision for income taxes 35,506 (18,021 ) 289,039 (48,638 )
Provision for income taxes 4,337 18,130 8,322
23,615 Net income (loss) 31,169 (36,151 ) 280,717 (72,253 )
Income attributable to noncontrolling interest (Note 4) (13,173 )
(28,374 ) (14,965 ) (33,903 ) Net income (loss) attributable to
Vertex $ 17,996 $ (64,525 ) $ 265,752 $ (106,156 )
Amounts per share attributable to Vertex common
shareholders: Net income (loss): Basic $ 0.07 $ (0.26 ) $ 1.08 $
(0.43 ) Diluted $ 0.07 $ (0.26 ) $ 1.06 $ (0.43 ) Shares used in
per share calculations: Basic 247,521 244,482 246,782 244,124
Diluted 251,635 244,482 250,199 244,124
Reconciliation of GAAP to Non-GAAP Net
Income (Loss)
Second-Quarter Results
(in thousands, except per share
amounts)
(unaudited)
Three Months Ended June 30, Six Months Ended June
30, 2017 2016 2017
2016 GAAP income (loss) attributable
to Vertex $ 17,996 $ (64,525 ) $ 265,752 $ (106,156 )
Stock-based compensation expense 72,582 61,942 141,564 117,414
Collaboration and transaction revenues and expenses (Note 2) 4,051
59,720 (222,249 ) 69,151 Other adjustments (Note 3) 4,268
835 15,236 (15 )
Non-GAAP net income attributable
to Vertex $ 98,897 $ 57,972 $ 200,303 $
80,394
Amounts per diluted share attributable to Vertex common
shareholders: GAAP $ 0.07 $ (0.26 ) $ 1.06 $ (0.43 ) Non-GAAP $
0.39 $ 0.24 $ 0.80 $ 0.33 Shares used in diluted per share
calculations: GAAP 251,635 244,482 250,199 244,124 Non-GAAP 251,635
246,426 250,199 246,872
Reconciliation of GAAP to Non-GAAP
Revenues and Expenses
Second-Quarter Results
(in thousands)
(unaudited)
Three Months Ended June 30, Six Months Ended June
30, 2017 2016 2017
2016 GAAP total revenues $
544,135 $ 431,608 $ 1,258,853 $ 829,688 Collaboration and
transaction revenues (Note 2) (27,222 ) (573 ) (259,684 )
(647
) Other adjustments (Note 3) — 489 — (362 )
Non-GAAP total revenues $ 516,913 $ 431,524 $
999,169 $ 828,679
Three Months Ended June
30, Six Months Ended June 30, 2017 2016
2017 2016 GAAP cost of product revenues and
royalty expenses $ 71,205 $ 45,252 $ 118,193 $ 95,901 Other
adjustments (Note 3) — 6 — (133 )
Non-GAAP
cost of product revenues and royalty expenses $ 71,205 $ 45,258
$ 118,193 $ 95,768
GAAP research and development
expenses $ 289,451 $ 271,008 $ 563,014 $ 526,868 Stock-based
compensation expense (43,832 ) (40,640 ) (88,669 ) (75,088 )
Collaboration and transaction expenses (Note 2) (5,024 ) (12,746 )
(7,033 ) (12,905 ) Other adjustments (Note 3) (136 ) 51 (272
) 845
Non-GAAP research and development expenses $
240,459 $ 217,673 $ 467,040 $ 439,720
GAAP sales, general
and administrative expenses $ 127,249 $ 111,652 $ 240,575 $
216,866 Stock-based compensation expense (28,750 ) (21,302 )
(52,895 ) (42,326 ) Collaboration and transaction expenses (Note 2)
(4,984 ) (1,698 ) (6,988 ) (2,241 ) Other adjustments (Note 3) (609
) (61 ) (1,442 ) (29 )
Non-GAAP sales, general and
administrative expenses $ 92,906 $ 88,591 $ 179,250 $ 172,270
Combined non-GAAP R&D and
SG&A expenses $ 333,365 $ 306,264 $ 646,290
$ 611,990
Three Months Ended June 30,
Six Months Ended June 30, 2017 2016
2017 2016 GAAP interest expense, net and other
expense, net $ (17,201 ) $ (21,374 ) $ (34,510 ) $ (37,661 )
Collaboration and transaction expenses (Note 2) (40 ) (36 ) (74 )
177
Non-GAAP interest expense, net and other expense,
net $ (17,241 ) $ (21,410 ) $ (34,584 ) $ (37,484 )
GAAP provision for income taxes $ 4,337 $ 18,130 $ 8,322 $
23,615 Collaboration and transaction expenses (Note 2) (8,132 )
(17,510 ) (8,523 ) (20,572 )
Non-GAAP (benefit from) provision
for income taxes $ (3,795 ) $ 620 $ (201 ) $ 3,043
Condensed Consolidated Balance Sheets
Data
(in thousands)
(unaudited)
June 30, 2017 December 31, 2016 Assets
Cash, cash equivalents and marketable securities $ 1,668,650 $
1,434,557 Restricted cash and cash equivalents (VIE) (Note 4)
64,628 47,762 Accounts receivable, net 247,949 201,083 Inventories
92,263 77,604 Property and equipment, net 740,103 698,362
Intangible assets and goodwill 334,724 334,724 Other assets (Note
1) 137,277 102,695
Total assets $ 3,285,594 $
2,896,787
Liabilities and Shareholders' Equity
Accounts payable and accruals $ 421,003 $ 376,700 Other liabilities
335,169 260,984 Deferred tax liability 136,649 134,063 Construction
financing lease obligation 525,542 486,849 Debt — 300,000
Shareholders' equity (Note 4) 1,867,231 1,338,191
Total
liabilities and shareholders' equity $ 3,285,594 $
2,896,787 Common shares outstanding 250,770 248,301
Note 1: In the six months ended June 30, 2017,
collaborative revenues were primarily attributable to a $230
million up-front payment earned from our collaboration with Merck
KGaA, Darmstadt, Germany. During the first quarter of 2017, the
company received $193.6 million of the up-front payment and the
remaining $36.4 million was remitted to the German tax authorities.
The company filed a refund application for the tax withholding and
expects to receive the refund in approximately second half of 2017.
The income tax receivable is included in Other assets at June 30,
2017. During the three and six months ended June 30, 2017,
collaborative revenues includes $20.0 million that one of the
company's consolidated variable interest entities ("VIEs") received
from a collaboration agreement with a third party.
Note 2: In the three and six months ended June 30,
2017 and 2016, "Collaboration and transaction revenues and
expenses" primarily consisted of (i) revenues and operating costs
and expenses attributable to the company's VIEs and (ii) changes in
the fair value of contingent payments due to VIEs. In the three and
six months ended June 30, 2017, "Collaboration and transaction
revenues and expenses" included the $20.0 million of collaborative
revenue and related tax provision that one of the company's VIEs
earned in the three months ended June 30, 2017 and also consisted
of revenues and expenses associated with the company's oncology
program including the company's collaboration with Merck KGaA,
Darmstadt, Germany and transaction costs associated with the
company's purchase agreement with Concert Pharmaceuticals. The
company has not adjusted its prior year Reconciliation of GAAP to
Non-GAAP Revenues and Expenses for the three and six months ended
June 30, 2016 for $5.7 million and $9.8 million, respectively, of
operating expenses related to its oncology program.
Note 3: In the three and six months ended June 30,
2017, "Other adjustments" primarily consisted of restructuring
charges related to the company's decision to consolidate its
research activities into its Boston, Milton Park and San Diego
locations and to close our research site in Canada. In the three
and six months ended June 30, 2016, "Other adjustments" primarily
consisted of revenues and operating costs and expenses related to
HCV as well as restructuring charges related to the company's
relocation from Cambridge to Boston, Massachusetts.
Note 4: The company consolidates the financial statements
of two of its collaborators as VIEs as of June 30, 2017 and
December 31, 2016. These VIEs are consolidated because Vertex
has licensed the rights to develop the company's collaborators'
most significant intellectual property assets. The company's
interest and obligations with respect to these VIEs' assets and
liabilities are limited to those accorded to the company in its
collaboration agreements. Restricted cash and cash equivalents
(VIE) reflects the VIEs’ cash and cash equivalents, which Vertex
does not have any interest in and which will not be used to fund
the collaboration. Each reporting period Vertex estimates the fair
value of the contingent payments by Vertex to these collaborators.
Any increase in the fair value of these contingent payments results
in a decrease in net income attributable to Vertex (or an increase
in net loss attributable to Vertex) on a dollar-for-dollar basis.
The fair value of contingent payments is evaluated each quarter and
any change in the fair value is reflected in the company's
statement of operations.
About VertexVertex is a global biotechnology company that
aims to discover, develop and commercialize innovative medicines so
people with serious diseases can lead better lives. In addition to
our clinical development programs focused on cystic fibrosis,
Vertex has more than a dozen ongoing research programs aimed at
other serious and life-threatening diseases.
Founded in 1989 in Cambridge, Mass., Vertex today has research
and development sites and commercial offices in the United States,
Europe, Canada and Australia. For seven years in a row, Science
magazine has named Vertex one of its Top Employers in the life
sciences. 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 the second paragraph
of the press release, the information provided in the section
captioned "2017 Financial Guidance" and statements regarding (i)
the country-by-country reimbursement negotiations for ORKAMBI, (ii)
the timing of regulatory applications, including MAAs and NDAs,
(ii) the development plan and timelines for our product development
candidates, including tezacaftor in combination with ivacaftor and
our next-generation triple combination regimens and (iv) potential
milestone payments pursuant to the Concert transaction. 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
2017 revenues and expenses 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 5:15 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.
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Vertex Pharmaceuticals
IncorporatedInvestors:Michael Partridge,
617-341-6108orEric Rojas, 617-961-7205orZach Barber,
617-341-6470orMedia:617-341-6992mediainfo@vrtx.com
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