Vertex Reports Second Quarter 2013 Financial Results and Reviews Recent Progress and Upcoming Milest

Vertex Reports Second Quarter 2013 Financial Results and Reviews Recent Progress and Upcoming Milestones in Clinical Development Programs

-Second quarter 2013 total revenues of $311 million, including net product revenues of $99 million for KALYDECO in cystic fibrosis and $156 million for INCIVEK in hepatitis C; cash position of approximately $1.43 billion on June 30, 2013-

-Data from Phase 3 study of ivacaftor monotherapy support submission of supplemental New Drug Application (sNDA) planned for second half of 2013 for gating mutations-


CAMBRIDGE, Mass.--(BUSINESS WIRE)-- Vertex Pharmaceuticals Incorporated (NAS: VRTX) today reported consolidated financial results for the quarter ended June 30, 2013. Vertex reported total second quarter 2013 revenues of $311 million, including net product revenues of $99 million from KALYDECOTM (ivacaftor) and $156 million from INCIVEK® (telaprevir). The GAAP net loss attributable to Vertex was $(57.2) million, or $(0.26) per share, for the second quarter of 2013, including certain charges of $51.0 million, comprised primarily of stock-based compensation expense. Non-GAAP net loss attributable to Vertex for the second quarter of 2013 was $(6.2) million, or $(0.03) per diluted share. The company reported $1.43 billion in cash, cash equivalents and marketable securities as of June 30, 2013 and has no outstanding convertible debt following the completion of a call of its outstanding Convertible Senior Subordinated Notes due 2015.

"Entering the second half of 2013, we continue to progress key programs in cystic fibrosis, hepatitis C and rheumatoid arthritis and have strengthened our financial position to support continued investment in our business," said Jeffrey Leiden, M.D., Ph.D., Chairman, President and Chief Executive Officer of Vertex. "Our progress in the first half of the year was marked by the initiation of a Phase 3 program in CF for people with the most common form of the disease, continued progress in bringing KALYDECO to people with CF around the world and the initiation of all-oral studies for VX-135 in hepatitis C."

Development Program Updates

Cystic Fibrosis

Vertex's strategy in cystic fibrosis (CF) is to provide benefit to as many CF patients as possible, and to maximize the benefit for these patients, with our approved and investigational medicines.

Data from Phase 3 Label-Expansion Study of Ivacaftor Monotherapy in Gating Mutations Show Statistically Significant Improvements in Lung Function

  • In a separate press release issued today, Vertex announced data from a Phase 3 label-expansion study in people with CF who have at least one non-G551D cystic fibrosis transmembrane conductance regulator (CFTR) gating mutation that showed statistically significant improvements in lung function (percent predicted forced expiratory volume in one second; FEV1). Additional details on these data were provided in the separate press release.
  • Based on these data, Vertex plans to submit a supplemental New Drug Application (sNDA) in the United States and a Marketing Authorization Application (MAA) variation in Europe in the second half of 2013 for the use of ivacaftor monotherapy in people with CF ages 6 and older who have at least one non-G551D CFTR gating mutation. Approximately 400 people with CF ages six and older have a non-G551D gating mutation worldwide.

Continued Progress in Additional Label-Expansion Studies for Ivacaftor Monotherapy

  • Two additional Phase 3 label-expansion studies are ongoing for ivacaftor monotherapy, including a study in people with CF ages 6 and older who have at least one copy of the R117H mutation and a study in children with CF ages 2 to 5 who have a gating mutation, including the G551D mutation. Data from the study in the R117H mutation are expected in the second half of 2013, and, pending study results, Vertex plans to submit an sNDA in early 2014 for the use of ivacaftor monotherapy in people with CF ages 6 and older who have the R117H mutation. The pharmacokinetic portion of the study in children ages 2 to 5 is complete and a dose has been selected for the 24-week dosing period, which is now underway. Data from this study are expected in mid-2014.

Study of People with CF Who Have Evidence of Residual CFTR Function

  • Enrollment is ongoing in a Phase 2 proof-of-concept study evaluating ivacaftor in people with CF who have clinical evidence of residual CFTR function. Data from this study are expected in the first half of 2014.

Vertex believes that ivacaftor monotherapy may provide clinical benefit in 10 to 15 percent of the estimated 70,000 CF patients worldwide, pending results from our clinical studies and regulatory approvals.

Enrollment Ongoing in Phase 3 Registration Program for VX-809 in Combination with Ivacaftor

  • Two 24-week Phase 3 studies of VX-809 in combination with ivacaftor are ongoing in people ages 12 and older with two copies of the most common mutation in the CFTR gene, known as F508del. The company expects to complete enrollment in these studies in the second half of 2013. Vertex plans to submit a New Drug Application in the United States for this combination treatment in 2014, pending study results. Worldwide, nearly half of people with CF have two copies of the F508del mutation.
  • The pivotal program for VX-809 in combination with ivacaftor also includes an evaluation of this combination in people with one copy (heterozygous) of the F508del mutation and a pharmacokinetic and safety evaluation of this combination in children ages 6 to 11 with two copies of the F508del mutation. Enrollment in these additional studies is expected to begin in the second half of 2013.

Advancing Multiple First- and Second-Generation Correctors

  • VX-661: At the European Cystic Fibrosis Society (ECFS) conference in June, Vertex presented data from a Phase 2 study of VX-661 in combination with ivacaftor. Additional details on these data are available in a press release issued on June 5, 2013. Vertex is preparing to begin Phase 2 evaluation of a 4-week regimen of VX-661 in combination with ivacaftor in people with one copy of the F508del mutation and one copy of the G551D mutation. This is the first proof-of-concept study of a combination of a corrector and ivacaftor in people with the G551D mutation. This exploratory evaluation is based on in vitro data presented at ECFS by Vertex researchers that showed increased chloride transport in human bronchial epithelial cells with one copy of the F508del mutation and one copy of the G551D mutation after treatment with a corrector and ivacaftor, as compared to the use of ivacaftor alone. Vertex's strategy is to evaluate multiple first-generation correctors, including VX-661 and VX-983, in combination with ivacaftor to identify regimens that may provide benefit to people with the F508del mutation.
  • Second-generation Correctors: Vertex has an active research program focused on second-generation correctors that could be used as part of a future dual-corrector regimen in combination with ivacaftor in people with one or two copies of the F508del mutation. Vertex's goal is to advance a second-generation corrector into clinical development by the end of 2014. The proposed use of a dual-corrector combination regimen is supported by in vitro data presented at ECFS that showed a combination of two correctors and ivacaftor increased chloride transport in human bronchial epithelial cells with one or two copies of the F508del mutation, as compared to the use of a single corrector in combination with ivacaftor.

Hepatitis C

Vertex's strategy in hepatitis C is to develop new all-oral treatment regimens of 12 weeks or less in duration with a goal of providing a high viral cure rate and improved tolerability over currently available treatment options. Multiple Phase 2 studies of VX-135 as part of all-oral treatment regimens are ongoing, including studies of VX-135 in combination with ribavirin in the United States and Europe and a study of VX-135 in combination with daclatasvir, an NS5A replication complex inhibitor, in New Zealand. Dosing of 100 mg and 200 mg of VX-135 is complete in the European study and ongoing in the New Zealand study. Dosing of 100 mg of VX-135 is ongoing in the U.S. study. Under a previously announced partial clinical hold, Vertex will not evaluate a 200 mg dose of VX-135 in the United States without authorization from the FDA. Vertex provided a comprehensive update on the status of these studies in a press release issued July 25, 2013.

Autoimmune Diseases

Vertex's strategy in autoimmune diseases is to maximize the value of VX-509 across multiple autoimmune diseases globally. The company will evaluate collaborative opportunities that provide funding and capabilities to broaden and accelerate global development of VX-509.

Ongoing Phase 2b Study of VX-509 in Rheumatoid Arthritis

  • Enrollment is complete in a 24-week Phase 2b study of VX-509, a selective JAK3 inhibitor, in people with moderate to severe rheumatoid arthritis (RA) receiving methotrexate. The primary endpoints of this study will be measured after 12 weeks of treatment, and data from this study are expected in the second half of 2013.

Second Quarter 2013 Financial Results

Total Revenues: Total revenues for the second quarter of 2013 were $310.8 million, compared with $418.3 million in total revenues for the second quarter of 2012. The components of total revenues for the second quarter and first six months of 2013 and 2012 were:

   
Three Months Ended

June 30,

Six Months Ended

June 30,

2013 20122013 2012
Product Revenues(in millions)(in millions)
INCIVEK revenues, net$155.8 $327.7$361.4 $684.6
KALYDECO revenues, net99.0  45.5 160.8  63.9
Total product revenues, net254.8373.3522.2748.7
Royalty revenues
Royalty revenues from INCIVO44.128.083.160.9
Other royalty revenues5.0  5.5 9.5  11.5
Total royalty revenues49.133.592.772.5
Collaborative revenues6.8  11.6 24.3  36.0
Total revenues$310.8  $418.3 $639.1  $857.0
 

A table of the components of total revenues for the second quarter of 2013, first quarter of 2013 and second, third and fourth quarters of 2012 is provided following the Condensed Consolidated Statements of Operations Data.

  • Net Product Revenues from INCIVEK

Vertex's second quarter 2013 net product revenues from INCIVEK were $155.8 million, compared to $327.7 million for the second quarter of 2012. The reduced revenues from INCIVEK were due to fewer HCV patients initiating treatment in the second quarter of 2013 compared to the second quarter of 2012.

  • Net Product Revenues from KALYDECO

Vertex's second quarter 2013 net product revenues from KALYDECO were $99.0 million, compared to $45.5 million for the second quarter of 2012. The increased revenues, compared to the second quarter of 2012, resulted primarily from the rapid uptake of KALYDECO in eligible patients in Europe following the conclusion of reimbursement discussions. Nearly all eligible patients with the G551D mutation in the United States and Europe have started treatment with KALYDECO.

  • Royalty Revenues from INCIVO®

Vertex recognized $44.1 million in INCIVO royalty revenues for the second quarter of 2013 from our collaborator Janssen, compared to $28.0 million in INCIVO royalty revenues for the second quarter of 2012. The increase in INCIVO royalties was due to expanded availability of INCIVO in international markets, most notably in Latin America.

Cost of Product Revenues: Cost of product revenues was $24.7 million for the second quarter of 2013, compared to cost of product revenues of $104.5 million for the second quarter of 2012. The cost of product revenues for the second quarter 2012 included a $78.0 million reserve against the potential for excess INCIVEK inventory.

Research and Development (R&D) Expenses: R&D expenses were $222.5 million for the second quarter of 2013, including $31.3 million of Vertex stock-based compensation expense and Alios expenses related to the accounting for the collaboration with Vertex, compared to $196.5 million for the second quarter of 2012, including $23.3 million of Vertex stock-based compensation expense and Alios expenses related to the accounting for the collaboration with Vertex. The increase in Vertex's R&D investment is principally due to progression and expansion of clinical development programs in cystic fibrosis and hepatitis C, including initiation of a pivotal program for a combination of VX-809 and ivacaftor.

Sales, General and Administrative (SG&A) Expenses: SG&A expenses were $106.5 million for the second quarter of 2013, including $17.0 million of Vertex stock-based compensation expense and Alios expenses related to the accounting for the collaboration with Vertex, compared to $117.5 million for the second quarter of 2012, including $12.5 million of Vertex stock-based compensation expense and Alios expenses related to the accounting for the collaboration with Vertex. This decrease in SG&A expenses resulted primarily from reduced HCV marketing and commercial expenses.

GAAP Net Loss Attributable to Vertex: Vertex's second quarter 2013 GAAP net loss was $(57.2) million, or $(0.26) per share, including certain charges of $51.0 million, comprised primarily of stock-based compensation expense. Vertex's GAAP net loss for the second quarter of 2012 was $(64.9) million, or $(0.31) per diluted share, including $164.7 million in certain charges.

Non-GAAP Net Income (Loss) Attributable to Vertex: Vertex's second quarter 2013 non-GAAP net loss was $(6.2) million, or $(0.03) per diluted share. Vertex's non-GAAP net income for the second quarter of 2012 was $99.8 million, or $0.46 per diluted share. The decrease in the company's second quarter 2013 non-GAAP net income, compared to the second quarter of 2012, is primarily attributable to a decrease in total revenues, specifically decreased INCIVEK revenues due to fewer HCV patients initiating treatment. Total non-GAAP operating expenses for the second quarter of 2013 were consistent with the second quarter of 2012.

Cash Position: As of June 30, 2013, Vertex had $1.43 billion in cash, cash equivalents and marketable securities compared to $1.32 billion in cash, cash equivalents and marketable securities as of December 31, 2012.

Convertible Debt: As of June 30, 2013, Vertex had no outstanding convertible debt following the completion of a call of its outstanding Convertible Senior Subordinated Notes due 2015.

2013 Financial Guidance

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

Vertex today updated its financial guidance for total 2013 revenues and total 2013 KALYDECO net revenues. The company now expects total 2013 revenues to be in the range of $1.10 billion to $1.2 billion. The prior range, provided on January 29, 2013, was for total 2013 revenues to be in the range of $1.10 to $1.25 billion. The company also now expects total 2013 KALYDECO net revenues to be in the range of $345 million to $360 million. The prior range, provided on April 30, 2013, was for total 2013 KALYDECO net revenues to be in the range of $300 million to $340 million.

The company today reiterated its financial guidance for total 2013 non-GAAP operating expenses, excluding cost of revenues, stock-based compensation expense, intangible asset impairment charges and Alios expenses related to the accounting for the collaboration with Vertex, of $1.09 billion to $1.15 billion, including full-year 2013 non-GAAP R&D expenses of $750 million to $790 million and full-year 2013 non-GAAP SG&A expenses of $340 million to $360 million.

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, Vertex provides its non-GAAP net income (loss) for the periods ending June 30, 2013 and 2012 excluding stock-based compensation expense, restructuring expense, inventory reserves, intangible asset impairment charges, net of tax, certain interest expenses related to the 2015 Notes and charges related to changes in the fair value of expected future payments under 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 GAAP financial results to non-GAAP financial results is included in the attached financial statements.

 

Vertex Pharmaceuticals Incorporated

Second Quarter and Six Month Results

Condensed Consolidated Statements of Operations Data


(in thousands, except per share amounts)

(unaudited)

   Three Months Ended
June 30,
 Six Months Ended
June 30,
2013 20122013 2012
Revenues:  
Product revenues, net$254,789$373,273$522,170$748,648
Royalty revenues49,12033,48092,69372,461
Collaborative revenues6,841 11,552 24,255 35,933 
Total revenues310,750418,305639,118857,042
Costs and expenses:
Cost of product revenues (Note 1)24,695104,54955,650130,467
Royalty expenses13,2369,87425,02423,167
Research and development expenses (R&D)222,455196,544440,550392,915
Sales, general and administrative expenses (SG&A)106,521117,514199,400228,660
Restructuring expense776594815954
Intangible asset impairment charge (Note 2)  412,900  
Total costs and expenses367,683429,0751,134,339776,163
Income (loss) from operations(56,933)(10,770)(495,221)80,879
Other expense, net (Note 3)(6,578)(3,635)(11,230)(7,376)
Income (loss) before provision for (benefit from) income taxes(63,511)(14,405)(506,451)73,503
Provision for (benefit from) income taxes (Note 2)(1,799)20,063 (132,112)20,095 
Net income (loss)(61,712)(34,468)(374,339)53,408
Net loss (income) attributable to noncontrolling interest (Note 4)4,547 (30,463)9,158 (26,749)
Net income (loss) attributable to Vertex$(57,165)$(64,931)$(365,181)$26,659 
 
Net income (loss) per share attributable to Vertex common shareholders:
Basic$(0.26)$(0.31)$(1.67)$0.13
Diluted$(0.26)$(0.31)$(1.67)$0.12
 
Shares used in per share calculations:
Basic222,053211,344218,795209,681
Diluted222,053211,344218,795212,957
 
 

Consolidated Revenues

(in millions)

(unaudited)

  Three Months Ended
June 30,
2013
 March 31,
2013
 December 31,
2012
 September 31,
2012
 June 30,
2012
Product revenues
INCIVEK revenues, net$155.8 $205.6 $222.8 $254.3 $327.7
KALYDECO revenues, net99.0 61.8 58.5 49.2 45.5
Total product revenues, net254.8267.4281.3303.5373.3
Royalty revenues
Royalty revenues from INCIVO44.139.036.820.028.0
Other royalty revenues5.0 4.5 6.7 5.6 5.5
Total royalty revenues49.143.643.525.633.5
Collaborative revenues6.8 17.4 9.2 6.9 11.6
Total revenues$310.8 $328.4 $334.0 $336.0 $418.3
 
 

Reconciliation of GAAP to Non-GAAP Financial Information-Second Quarter

(in thousands, except per share amounts)

(unaudited)

Three Months Ended June 30, 2013    
Adjustments 
GAAPAlios TransactionStock-based Compensation ExpenseInventory Write-offIntangible Asset Impairment Charge, Net of TaxDebt Conversion Costs Read Full Story

Can't get enough business news?

Sign up for Finance Report by AOL and get everything from retailer news to the latest IPOs delivered directly to your inbox daily!

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.

More to Explore
Fri, May 26
Set Your Location
City, State, or Zip