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x
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the Fiscal Year Ended December 31, 2014
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or
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from
to
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Massachusetts
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04-3039129
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(State or other jurisdiction of
incorporation or organization) |
(I.R.S. Employer
Identification No.) |
50 Northern Avenue, Boston, Massachusetts
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02210
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(Address of principal executive offices)
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(Zip Code)
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Title of Each Class
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Name of Each Exchange on Which Registered
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Common Stock, $0.01 Par Value Per Share
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The NASDAQ Global Select Market
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Large accelerated filer
x
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Accelerated filer
o
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Non-accelerated filer
o
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Smaller reporting company
o
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(Do not check if a smaller reporting company)
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Page
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ITEM 1.
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BUSINESS
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Change in ppFEV
1
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TRAFFIC Trial
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TRANSPORT Trial
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|||||
Placebo (n=184)
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Lumacaftor (600 mg once daily) + Ivacaftor (250 mg q12h) (n=183)
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Lumacaftor (400 mg q12h) + Ivacaftor (250 mg q12h) (n=182)
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Placebo (n=187)
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Lumacaftor (600 mg once daily) + Ivacaftor (250 mg q12h) (n=185)
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Lumacaftor (400 mg q12h) + Ivacaftor (250 mg q12h)
(n=187)
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||
Mean Absolute Change (percentage points)
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Treatment Difference
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N/A
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4.0 (p<0.0001)
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2.6 (p=0.0003)
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N/A
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2.6
(p=0.0004)
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3.0 (p<0.0001)
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Within Group
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-0.44
(p=0.4002) |
3.6
(p<0.0001)
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2.2
(p<0.0001)
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-0.15
(p=0.7744) |
2.5
(p<0.0001)
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2.9
(p<0.0001)
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Mean Relative Change
(%)
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Treatment Difference
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N/A
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6.7% (p<0.0001)
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4.3% (p=0.0006)
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N/A
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4.4%
(p=0.0007)
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5.3% (p<0.0001)
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Within Group
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-0.34%
(p=0.7113) |
6.4%
(p<0.0001)
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4.0%
(p<0.0001)
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0.0%
(p=0.9983)
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4.4%
(p<0.0001)
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5.3%
(p<0.0001)
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•
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Two Copies of the F508del Mutation.
In 2015, we initiated a Phase 3 clinical trial to evaluate the combination of VX-661 and ivacaftor in patients with CF twelve years of age and older who have two copies of the F508del mutation in their
CFTR
gene. The primary endpoint of this clinical trial is absolute change in ppFEV
1
through six months of treatment for patients who receive the combination treatment versus patients who receive placebo. This clinical trial is expected to enroll approximately 500 patients.
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•
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One Copy of the F508del Mutation and a Second Mutation That Results in a Gating Defect in the CFTR Protein
.
In the second quarter of 2015, we plan to initiate a Phase 3 clinical trial to evaluate the combination of VX-661 and ivacaftor in patients with CF who have one copy of the F508del mutation in their
CFTR
gene and a second mutation in their
CFTR
gene that results in a gating defect in the CFTR protein. The primary endpoint of this clinical trial is expected to be absolute change in ppFEV
1
through eight weeks of treatment for patients who receive the combination treatment versus patients who receive ivacaftor alone. This clinical trial is expected to enroll approximately 200 patients.
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•
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One Copy of the F508del Mutation and a Second Mutation That Results in Residual CFTR Function.
In the second quarter of 2015, we plan to initiate a Phase 3 clinical trial to evaluate the combination of VX-661 and ivacaftor in patients with CF who have one copy of the F508del mutation in their
CFTR
gene and a second mutation in their
CFTR
gene that results in residual CFTR function. This clinical trial also will evaluate ivacaftor dosed without VX-661. The primary endpoint of this clinical trial will be absolute change in ppFEV
1
through eight weeks of treatment as part of a crossover design. This clinical trial is expected to enroll approximately 300 patients.
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•
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One Copy of the F508del Mutation and A Second Mutation That Results in Minimal CFTR Function.
In the second quarter of 2015, we plan to initiate a Phase 3 clinical trial to evaluate the combination of VX-661 and ivacaftor in patients who have one copy of the F508del mutation in their
CFTR
gene and a second mutation in their
CFTR
gene that results in minimal CFTR function. This clinical trial is expected initially to enroll approximately 120 patients, and the primary endpoint will be absolute change in ppFEV
1
through 12 weeks of treatment for patients who receive the combination treatment versus patients who receive placebo. Expansion of this clinical trial to an additional approximately 150 patients will depend on an interim futility analysis of efficacy data from the initial approximately 120 patients.
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Drug/Drug Candidate
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Status of United States Patent
(Anticipated Expiration, Subject to Potential Extensions) |
Status of European Union Patent
(Anticipated Expiration, Subject to Potential Extensions) |
KALYDECO (ivacaftor)
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Granted (2027)
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Granted (2025)
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lumacaftor
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Application Pending (2026)
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Granted (2026)
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VX-661
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Granted (2027)
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Application Pending (2027)
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•
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U.S. and foreign patent applications covering potentiator compounds and corrector compounds for the CFTR protein, including ivacaftor, lumacaftor and VX-661 and many other related compounds, and the use of those potentiators and correctors to treat CF.
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•
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U.S. and foreign patents and patent applications covering VX-803 and VX-970 and the use of VX-803 and VX-970 to treat oncology indications.
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•
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U.S. and foreign patents and patent applications covering VX-210 and the use of VX-210 to treat neurology indications.
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•
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U.S. and foreign patents and patent applications covering the manufacture, pharmaceutical compositions, related solid forms, formulations, dosing regimens and methods of use of these compounds, including ivacaftor and lumacaftor.
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•
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refusal to approve or delay in review of pending applications;
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•
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withdrawal of an approval or the implementation of limitations on a previously approved indication for use;
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•
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imposition of a clinical hold, a risk mitigation and evaluation strategy or other safety-related limitations;
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•
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warning letters or “untitled letters”;
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•
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product seizures;
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•
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total or partial suspension of production or distribution; or
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•
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injunctions, fines, disgorgement, or civil or criminal penalties.
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•
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completion of preclinical laboratory tests, animal studies and formulation studies conducted according to Good Laboratory Practices, or GLP, and other applicable regulations;
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•
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submission to the FDA of an investigational new drug, or IND, application, which must become effective before clinical trials in the United States may begin;
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•
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performance of adequate and well-controlled clinical trials according to Good Clinical Practices, or GCP, to establish the safety and efficacy of the proposed drug for its intended use;
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•
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submission to the FDA of an NDA;
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•
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satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product will be produced to assess compliance with cGMP to assure that the facilities, methods and controls are adequate to preserve the product’s identity, strength, quality and purity; and
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•
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FDA review and approval of the NDA.
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•
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Phase 1.
The drug initially is introduced into healthy human subjects and tested for safety, dosage tolerance, absorption, metabolism, distribution and elimination. In the case of some drug candidates for severe or life-threatening diseases, such as cancer, especially when the drug candidate may be inherently too toxic to ethically administer to healthy volunteers, the initial human testing is often conducted in patients.
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•
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Phase 2.
Clinical trials are initiated in a limited patient population intended to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the drug candidate for specific targeted diseases and to determine dosage tolerance and optimal dosage.
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•
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Phase 3.
Clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population at geographically dispersed clinical trial sites. These clinical trials are intended to establish the overall risk-benefit ratio of the drug candidate and provide an adequate basis for regulatory approval and product labeling.
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Phase
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Estimated Duration
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Discovery
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2 to 4 years
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Preclinical
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1 to 2 years
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Phase 1
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1 to 2 years
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Phase 2
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2 to 4 years
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Phase 3
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2 to 4 years
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FDA approval
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6 months to 2 years
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•
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record-keeping requirements;
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•
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reporting of adverse experiences with the product;
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•
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providing the FDA with updated safety and efficacy information;
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•
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drug sampling and distribution requirements;
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•
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notifying the FDA and gaining its approval of specified manufacturing or labeling changes;
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•
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complying with certain electronic records and signature requirements; and
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•
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complying with FDA promotion and advertising requirements.
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Name
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Age
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Position
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Jeffrey M. Leiden, M.D., Ph.D.
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59
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Chairman of the Board, Chief Executive Officer and President
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David Altshuler, M.D., Ph.D.
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50
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Executive Vice President, Global Research and Chief Scientific Officer
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Stuart A. Arbuckle
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49
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Executive Vice President and Chief Commercial Officer
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Jeffrey A. Chodakewitz, M.D.
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59
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Executive Vice President, Global Medicines Development and Medical Affairs, and Chief Medical Officer
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Amit K. Sachdev, J.D.
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47
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Executive Vice President, Global Government Strategy, Market Access and Value
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Ian F. Smith
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49
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Executive Vice President and Chief Financial Officer
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Paul M. Silva
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48
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Senior Vice President and Corporate Controller
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Joshua S. Boger, Ph.D.
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63
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Director
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Terrence C. Kearney
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60
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Director
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Yuchun Lee
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49
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Director
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Margaret G. McGlynn
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55
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Director
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Wayne J. Riley, M.D.
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55
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Director
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Bruce I. Sachs
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55
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Director
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Elaine S. Ullian
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67
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Director
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William Young
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70
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Director
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•
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whether or not the FDA and European regulatory authorities determine that the evidence gathered in well-controlled clinical trials, other clinical trials and nonclinical studies demonstrates that lumacaftor in combination with ivacaftor is safe and effective as a treatment for patients with CF 12 years of age and older who have two copies of the F508del mutation in their
CFTR
gene;
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•
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whether or not the FDA and European regulatory authorities are satisfied that the manufacturing facilities, processes and controls for the combination of lumacaftor and ivacaftor are adequate, that the labeling is satisfactory and that plans for post-marketing studies, safety monitoring and risk evaluation and mitigation are sufficient; and
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•
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the timing and nature of the FDA and EMA’s comments and questions regarding the NDA and MAA for the combination of lumacaftor and ivacaftor, the scheduling and recommendations of any advisory committee meeting to consider the combination of lumacaftor and ivacaftor, the time required to respond to the FDA or EMA’s comments and questions and to obtain the final labeling for the combination of lumacaftor and ivacaftor and any other delays that may be associated with the NDA and MAA review process.
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•
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prevalence and severity of adverse side-effects;
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•
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lack of reimbursement availability from third-party payors;
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•
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lower demonstrated efficacy, safety and/or tolerability compared to other drugs;
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•
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lack of cost-effectiveness;
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•
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a decision to wait for the approval of other therapies in development that have significant perceived advantages over our drug;
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•
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convenience and ease of administration;
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•
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other potential advantages of alternative treatment methods; and
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•
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ineffective sales, marketing and/or distribution support.
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•
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offer therapeutic or other improvement over existing competitive drugs;
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•
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be proven safe and effective in clinical trials;
|
•
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meet applicable regulatory standards;
|
•
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be capable of being produced in commercial quantities at acceptable costs; or
|
•
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if approved for commercial sale, be successfully marketed as pharmaceutical products.
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•
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ongoing discussions with the FDA or comparable foreign authorities regarding the scope or design of our clinical trials and the number of clinical trials we must conduct;
|
•
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delays in enrolling volunteers or patients into clinical trials, including as a result of low numbers of patients that meet the eligibility criteria for the trial;
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•
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a lower than anticipated retention rate of volunteers or patients in clinical trials;
|
•
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the need to repeat clinical trials as a result of inconclusive results, unforeseen complications in testing or clinical investigator error;
|
•
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inadequate supply or deficient quality of drug candidate materials or other materials necessary for the conduct of our clinical trials;
|
•
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unfavorable FDA or foreign regulatory authority inspection and review of a manufacturing facility that supplied clinical trial materials or its relevant manufacturing records or a clinical trial site or records of any clinical or preclinical investigation;
|
•
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unfavorable scientific results from clinical trials;
|
•
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serious and unexpected drug-related side-effects experienced by participants in our clinical trials or by participants in clinical trials being conducted by our competitors to evaluate drug candidates with similar mechanisms of action or structures to drug candidates that we are developing;
|
•
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favorable results in testing of our competitors’ drug candidates, or FDA or foreign regulatory authority approval of our competitors’ drug candidates; or
|
•
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action by the FDA or a foreign regulatory authority to place a clinical hold or partial clinical hold on a trial or compound or deeming the clinical trial conduct as problematic.
|
•
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failure to successfully further develop the acquired or licensed drugs or technology or to achieve strategic objectives, including successfully developing and commercializing the drugs, drug candidates or technologies that we acquire or license;
|
•
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inadequate or unfavorable data from clinical trials evaluating the acquired or licensed drug or drug candidates;
|
•
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entry into markets in which we have no or limited direct prior experience or where competitors in such markets have stronger market positions;
|
•
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disruption of our ongoing business and distraction of our management and employees from other opportunities and challenges;
|
•
|
potential failure of the due diligence processes to identify significant problems, liabilities or other shortcomings or challenges of an acquired company, or acquired or licensed product or technology, including but not limited to, problems, liabilities or other shortcomings or challenges with respect to intellectual property, product quality, safety, accounting practices, employee, customer or third party relations and other known and unknown liabilities;
|
•
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liability for activities of the acquired company or licensor before the acquisition or license, including intellectual property infringement claims, violations of laws, commercial disputes, tax liabilities, and other known and unknown liabilities;
|
•
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exposure to litigation or other claims in connection with, or inheritance of claims or litigation risk as a result of an acquisition or license, including but not limited to, claims from terminated employees, customers, former equity holders or other third-parties;
|
•
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difficulty in integrating the drugs, drug candidates, technologies, business operations and personnel of an acquired company; and
|
•
|
difficulties in the integration of the acquired company’s departments, systems, including accounting, human resource and other administrative systems, technologies, books and records, and procedures, as well as in maintaining uniform standards, controls, including internal control over financial reporting required by the Sarbanes-Oxley Act of 2002 and related procedures and policies.
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•
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Our collaborators may change the focus of their development and commercialization efforts or may have insufficient resources to effectively develop our drug candidates. The ability of some of our products and drug candidates to reach their potential could be limited if collaborators decrease or fail to increase development or commercialization efforts related to those products or drug candidates. Our collaboration agreements provide our collaborators with a level of discretion in determining the amount and timing of efforts and resources that they will apply to these collaborations.
|
•
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Any future collaboration agreements may have the effect of limiting the areas of research and development that we may pursue, either alone or in collaboration with third parties.
|
•
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Collaborators may develop and commercialize, either alone or with others, drugs that are similar to or competitive with the drugs or drug candidates that are the subject of their collaborations with us.
|
•
|
Disagreements with collaborators, including disagreements over proprietary rights, contract interpretation or the preferred course of development, might cause delays or termination of the research, development or commercialization of drug candidates, might lead to additional responsibilities for us with respect to drug candidates, or might result in litigation or arbitration. Any such disagreements would divert management attention and resources and be time-consuming and expensive.
|
•
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Collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential litigation.
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•
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Collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability.
|
•
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Investigations and/or compliance or enforcement actions against a collaborator, which may expose us to indirect liability as a result of our partnership with such collaborator.
|
•
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Our collaboration agreements are subject to termination under various circumstances.
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•
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implement and clearly communicate our corporate-wide strategies;
|
•
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enhance our operational and financial infrastructure, including our controls over records and information;
|
•
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enhance our operational, financial and management processes, including our cross-functional decision-making processes and our budget prioritization systems;
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•
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train and manage our global employee base;
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•
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transition from a U.S.-centric company into an organization capable of developing and commercializing multiple drug candidates in international markets; and
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•
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enhance our compliance and legal resources.
|
•
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differing regulatory requirements for drug approvals and regulation of approved drugs in foreign countries;
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•
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collectibility of accounts receivable;
|
•
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unexpected changes in tariffs, trade barriers and regulatory requirements;
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•
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economic weakness, including inflation, or political instability in particular foreign economies and markets;
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•
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complying with local laws and regulations, which are interpreted and enforced differently across jurisdictions and which can change significantly over time;
|
•
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foreign taxes, including withholding of payroll taxes;
|
•
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foreign currency fluctuations, which could result in reduced revenues or increased operating expenses, and other obligations incident to doing business or operating in another country;
|
•
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workforce uncertainty in countries where labor unrest is more common than in the United States;
|
•
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import and export licensing requirements, tariffs, and other trade and travel restrictions;
|
•
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production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and
|
•
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business interruptions resulting from geo-political actions, including war and terrorism.
|
•
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the information contained in our quarterly earnings releases, including our net product revenues and operating expenses for completed periods and guidance regarding future periods;
|
•
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announcements of FDA actions with respect to our drugs or our competitors’ drugs, or regulatory filings for our drug candidates or those of our competitors, or announcements of interim or final results of clinical trials or nonclinical studies relating to our drugs, drug candidates or those of our competitors;
|
•
|
prescription data and other information disclosed by third parties regarding our business or products;
|
•
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technological innovations or the introduction of new drugs by our competitors;
|
•
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government regulatory action;
|
•
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public concern as to the safety of drugs developed by us or our competitors;
|
•
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developments in patent or other intellectual property rights or announcements relating to these matters;
|
•
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developments in domestic and international governmental policy or regulation, for example, relating to intellectual property rights;
|
•
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developments relating specifically to other companies and market conditions for pharmaceutical and biotechnology stocks or stocks in general;
|
•
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business development, capital structuring or financing activities; and
|
•
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general worldwide or national economic, political and capital market conditions.
|
•
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expectations regarding the result and timing of our pending applications for marketing approval for lumacaftor in combination with ivacaftor;
|
•
|
our expectations regarding the amount of, timing of and trends with respect to our revenues, costs and expenses and other gains and losses, including those related to net product revenues from KALYDECO and potential net product revenues from lumacaftor in combination with ivacaftor;
|
•
|
our expectations regarding clinical trials, development timelines and regulatory authority filings and submissions for ivacaftor, lumacaftor, VX-661 and combinations thereof;
|
•
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our ability to successfully market our products or any of our other drug candidates for which we obtain regulatory approval;
|
•
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our expectations regarding the timing and structure of clinical trials of our drugs and drug candidates, including, ivacaftor, lumacaftor, VX-661, VX-210, VX-803 and VX-970, and the expected timing of our receipt of data from our ongoing and planned clinical trials;
|
•
|
the data that will be generated by ongoing and planned clinical trials and the ability to use that data to advance compounds, continue development or support regulatory filings;
|
•
|
our beliefs regarding the support provided by clinical trials and preclinical and nonclinical studies of our drug candidates for further investigation, clinical trials or potential use as a treatment;
|
•
|
our plan to continue investing in our research and development programs and our strategy to develop our drug candidates, alone or with third party-collaborators;
|
•
|
the establishment, development and maintenance of collaborative relationships;
|
•
|
potential business development activities;
|
•
|
potential fluctuations in foreign currency exchange rates;
|
•
|
our ability to use our research programs to identify and develop new drug candidates to address serious diseases and significant unmet medical needs; and
|
•
|
our liquidity and our expectations regarding the possibility of raising additional capital.
|
ITEM 1B.
|
UNRESOLVED STAFF COMMENTS
|
ITEM 2.
|
PROPERTIES
|
ITEM 3.
|
LEGAL PROCEEDINGS
|
ITEM 4.
|
MINE SAFETY DISCLOSURES
|
ITEM 5.
|
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|
Year Ended December 31, 2014:
|
|
High
|
|
Low
|
||||
First quarter
|
$
|
87.77
|
|
|
$
|
67.49
|
|
|
Second quarter
|
98.80
|
|
|
59.79
|
|
|||
Third quarter
|
116.88
|
|
|
84.41
|
|
|||
Fourth quarter
|
124.35
|
|
|
96.43
|
|
Year Ended December 31, 2013:
|
|
High
|
|
Low
|
||||
First quarter
|
$
|
55.93
|
|
|
$
|
42.72
|
|
|
Second quarter
|
87.47
|
|
|
51.28
|
|
|||
Third quarter
|
89.96
|
|
|
73.43
|
|
|||
Fourth quarter
|
78.38
|
|
|
58.06
|
|
Period
|
|
Total Number
of Shares Purchased |
Average Price
Paid per Share |
Total Number of Shares
Purchased as Part of Publicly Announced Plans or Programs |
Maximum Number of
Shares that May Yet be Purchased Under the Plans or Programs |
|||
Oct. 1, 2014 to Oct. 31, 2014
|
38,121
|
|
$
|
0.01
|
|
—
|
—
|
|
Nov. 1, 2014 to Nov. 30, 2014
|
21,911
|
|
$
|
0.01
|
|
—
|
—
|
|
Dec. 1, 2014 to Dec. 31, 2014
|
16,253
|
|
$
|
0.01
|
|
—
|
—
|
ITEM 6.
|
SELECTED FINANCIAL DATA
|
|
Year Ended December 31,
|
||||||||||||||||||
|
2014
|
|
2013
|
|
2012
|
|
2011
|
|
2010
|
||||||||||
|
(in thousands, except per share amounts)
|
||||||||||||||||||
Consolidated Statements of Operations Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Product revenues, net
|
|
|
|
|
|
|
|
|
|
||||||||||
KALYDECO product revenues, net
|
$
|
463,750
|
|
|
$
|
371,285
|
|
|
$
|
171,645
|
|
|
$
|
—
|
|
|
$
|
—
|
|
INCIVEK product revenues, net
|
24,071
|
|
|
466,360
|
|
|
1,161,813
|
|
|
950,889
|
|
|
—
|
|
|||||
Total product revenues, net
|
487,821
|
|
|
837,645
|
|
|
1,333,458
|
|
|
950,889
|
|
|
—
|
|
|||||
Royalty revenues
|
40,919
|
|
|
156,592
|
|
|
141,498
|
|
|
50,015
|
|
|
30,244
|
|
|||||
Collaborative revenues (1)
|
51,675
|
|
|
217,738
|
|
|
52,086
|
|
|
409,722
|
|
|
113,126
|
|
|||||
Total revenues
|
580,415
|
|
|
1,211,975
|
|
|
1,527,042
|
|
|
1,410,626
|
|
|
143,370
|
|
|||||
Total costs and expenses (2)
|
1,272,827
|
|
|
1,821,983
|
|
|
1,480,315
|
|
|
1,277,355
|
|
|
839,447
|
|
|||||
(Loss) income from continuing operations attributable to Vertex
|
(737,643
|
)
|
|
(503,622
|
)
|
|
32,271
|
|
|
109,797
|
|
|
(754,626
|
)
|
|||||
(Loss) income from discontinued operations attributable to Vertex (3)
|
(912
|
)
|
|
58,594
|
|
|
(139,303
|
)
|
|
(80,223
|
)
|
|
—
|
|
|||||
Net (loss) income attributable to Vertex
|
$
|
(738,555
|
)
|
|
$
|
(445,028
|
)
|
|
$
|
(107,032
|
)
|
|
$
|
29,574
|
|
|
$
|
(754,626
|
)
|
Diluted (loss) income from continuing operations attributable to Vertex per common share
|
$
|
(3.14
|
)
|
|
$
|
(2.24
|
)
|
|
$
|
0.15
|
|
|
$
|
0.52
|
|
|
$
|
(3.77
|
)
|
Shares used in per diluted share calculations
|
235,307
|
|
|
224,906
|
|
|
215,262
|
|
|
208,807
|
|
|
200,402
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
|
As of December 31,
|
||||||||||||||||||
|
2014
|
|
2013
|
|
2012
|
|
2011
|
|
2010
|
||||||||||
|
(in thousands)
|
||||||||||||||||||
Consolidated Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash, cash equivalents and marketable securities
|
$
|
1,387,106
|
|
|
$
|
1,465,076
|
|
|
$
|
1,321,215
|
|
|
$
|
968,922
|
|
|
$
|
1,031,411
|
|
Total assets
|
2,334,679
|
|
|
2,319,041
|
|
|
2,759,288
|
|
|
2,204,280
|
|
|
1,725,446
|
|
|||||
Total current liabilities
|
368,254
|
|
|
397,829
|
|
|
432,624
|
|
|
392,348
|
|
|
474,783
|
|
|||||
Long-term debt obligations, excluding current portion (4)
|
280,569
|
|
|
—
|
|
|
400,000
|
|
|
400,000
|
|
|
400,000
|
|
|||||
Construction financing lease obligation, excluding current portion (5)
|
473,073
|
|
|
440,937
|
|
|
268,031
|
|
|
55,950
|
|
|
—
|
|
|||||
Other long-term obligations
|
116,600
|
|
|
123,870
|
|
|
424,251
|
|
|
390,470
|
|
|
346,690
|
|
(1)
|
In 2013, we recorded
$203.4 million
of collaborative revenues from Janssen NV, which were primarily attributable to a 2013 amendment to our collaboration agreement with Janssen NV. In 2011, we recognized
$318.5 million
in milestone revenues from Janssen NV and Mitsubishi Tanabe Pharma Corporation. See Note B, “Collaborative Arrangements.”
|
(2)
|
Total costs and expenses included (i) in 2013 and 2012, an aggregate of
$10.4 million
and
$133.2 million
, respectively, of write-offs for excess and obsolete inventories, (ii) in 2013 and 2012, total costs and expenses included intangible asset impairment charges of
$412.9 million
and
$105.8 million
, respectively and (iii) in 2014 and 2013,
$50.9 million
and
$40.5 million
, respectively, of restructuring charges primarily related to the relocation of our corporate headquarters and a strategic restructuring in 2013. See Note H, “Inventories,” Note J, “Intangible Assets and Goodwill” and Note Q, “Restructuring Expenses.”
|
(3)
|
(Loss) income from discontinued operations attributable to Vertex relates to our collaboration with Alios BioPharma, Inc., in 2011 through 2013, which we deconsolidated as of December 31, 2013. See Note B, “Collaborative Arrangements.”
|
(4)
|
In 2014, we borrowed $300.0 million in the form of a senior secured term loan that matures in July 2017. In 2013, our convertible senior subordinated notes (due 2015) with an aggregate principal amount of $400.0 million was converted into common stock or redeemed. See Note L, “Long Term Obligations.”
|
(5)
|
In 2011, we entered into two leases for our corporate headquarters, which we occupied in December 2013. We are deemed for accounting purposes to be the owner of the buildings. See Note L, “Long Term Obligations.”
|
ITEM 7.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
|
|
|
|
|
|
2014/2013
Comparison |
|
2013/2012
Comparison |
||||||||||||||||
|
|
|
|
|
|
|
Increase/(Decrease)
|
|
Increase/(Decrease)
|
||||||||||||||||
|
2014
|
|
2013
|
|
2012
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
|
(in thousands)
|
|
(in thousands, except percentages)
|
||||||||||||||||||||||
Revenues
|
$
|
580,415
|
|
|
$
|
1,211,975
|
|
|
$
|
1,527,042
|
|
|
$
|
(631,560
|
)
|
|
(52
|
)%
|
|
$
|
(315,067
|
)
|
|
(21
|
)%
|
Operating costs and expenses
|
1,272,827
|
|
|
1,821,983
|
|
|
1,480,315
|
|
|
(549,156
|
)
|
|
(30
|
)%
|
|
341,668
|
|
|
23
|
%
|
|||||
Other items, net
|
(45,231
|
)
|
|
106,386
|
|
|
(14,456
|
)
|
|
n/a
|
|
|
n/a
|
|
|
n/a
|
|
|
n/a
|
|
|||||
(Loss) income from continuing operations attributable to Vertex
|
(737,643
|
)
|
|
(503,622
|
)
|
|
32,271
|
|
|
234,021
|
|
|
46
|
%
|
|
n/a
|
|
|
n/a
|
|
|||||
(Loss) income from discontinued operations attributable to Vertex
|
(912
|
)
|
|
58,594
|
|
|
(139,303
|
)
|
|
n/a
|
|
|
n/a
|
|
|
n/a
|
|
|
n/a
|
|
|||||
Net loss attributable to Vertex
|
$
|
(738,555
|
)
|
|
$
|
(445,028
|
)
|
|
$
|
(107,032
|
)
|
|
$
|
293,527
|
|
|
66
|
%
|
|
$
|
337,996
|
|
|
316
|
%
|
|
|
|
|
|
|
|
2014/2013
Comparison |
|
2013/2012
Comparison |
||||||||||||||||
|
|
|
|
|
|
|
Increase/(Decrease)
|
|
Increase/(Decrease)
|
||||||||||||||||
|
2014
|
|
2013
|
|
2012
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
|
(in thousands)
|
|
(in thousands, except percentages)
|
||||||||||||||||||||||
Product revenues, net
|
$
|
487,821
|
|
|
$
|
837,645
|
|
|
$
|
1,333,458
|
|
|
$
|
(349,824
|
)
|
|
(42
|
)%
|
|
$
|
(495,813
|
)
|
|
(37
|
)%
|
Royalty revenues
|
40,919
|
|
|
156,592
|
|
|
141,498
|
|
|
(115,673
|
)
|
|
(74
|
)%
|
|
15,094
|
|
|
11
|
%
|
|||||
Collaborative revenues
|
51,675
|
|
|
217,738
|
|
|
52,086
|
|
|
(166,063
|
)
|
|
(76
|
)%
|
|
165,652
|
|
|
318
|
%
|
|||||
Total revenues
|
$
|
580,415
|
|
|
$
|
1,211,975
|
|
|
$
|
1,527,042
|
|
|
$
|
(631,560
|
)
|
|
(52
|
)%
|
|
$
|
(315,067
|
)
|
|
(21
|
)%
|
|
2014
|
|
2013
|
|
2012
|
||||||
|
(in thousands)
|
||||||||||
KALYDECO
|
$
|
463,750
|
|
|
$
|
371,285
|
|
|
$
|
171,645
|
|
INCIVEK
|
24,071
|
|
|
466,360
|
|
|
1,161,813
|
|
|||
Total product revenues, net
|
$
|
487,821
|
|
|
$
|
837,645
|
|
|
$
|
1,333,458
|
|
|
2014
|
|
2013
|
|
2012
|
||||||
|
(in thousands)
|
||||||||||
Collaborative revenues:
|
|
|
|
|
|
||||||
Janssen Inc.
|
$
|
35,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Janssen NV
|
7,104
|
|
|
203,437
|
|
|
16,178
|
|
|||
CFFT
|
6,455
|
|
|
14,322
|
|
|
16,960
|
|
|||
Mitsubishi Tanabe
|
—
|
|
|
—
|
|
|
18,879
|
|
|||
Other
|
3,116
|
|
|
(21
|
)
|
|
69
|
|
|||
Total collaborative revenues
|
$
|
51,675
|
|
|
$
|
217,738
|
|
|
$
|
52,086
|
|
|
|
|
|
|
|
|
2014/2013
Comparison |
|
2013/2012
Comparison |
||||||||||||||||
|
|
|
|
|
|
|
Increase/(Decrease)
|
|
Increase/(Decrease)
|
||||||||||||||||
|
2014
|
|
2013
|
|
2012
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
|
(in thousands)
|
|
(in thousands, except percentages)
|
||||||||||||||||||||||
Cost of product revenues
|
$
|
39,725
|
|
|
$
|
88,979
|
|
|
$
|
236,742
|
|
|
$
|
(49,254
|
)
|
|
(55
|
)%
|
|
$
|
(147,763
|
)
|
|
(62
|
)%
|
Royalty expenses
|
21,262
|
|
|
41,298
|
|
|
43,143
|
|
|
(20,036
|
)
|
|
(49
|
)%
|
|
(1,845
|
)
|
|
(4
|
)%
|
|||||
Research and development expenses
|
855,506
|
|
|
882,097
|
|
|
765,905
|
|
|
(26,591
|
)
|
|
(3
|
)%
|
|
116,192
|
|
|
15
|
%
|
|||||
Sales, general and administrative expenses
|
305,409
|
|
|
356,188
|
|
|
432,681
|
|
|
(50,779
|
)
|
|
(14
|
)%
|
|
(76,493
|
)
|
|
(18
|
)%
|
|||||
Restructuring expenses
|
50,925
|
|
|
40,521
|
|
|
1,844
|
|
|
10,404
|
|
|
26
|
%
|
|
38,677
|
|
|
2,097
|
%
|
|||||
Intangible asset impairment charges
|
—
|
|
|
412,900
|
|
|
—
|
|
|
(412,900
|
)
|
|
(100
|
)%
|
|
412,900
|
|
|
n/a
|
|
|||||
Total costs and expenses
|
$
|
1,272,827
|
|
|
$
|
1,821,983
|
|
|
$
|
1,480,315
|
|
|
$
|
(549,156
|
)
|
|
(30
|
)%
|
|
$
|
341,668
|
|
|
23
|
%
|
|
|
|
|
|
|
|
2014/2013
Comparison |
|
2013/2012
Comparison |
||||||||||||||||
|
|
|
|
|
|
|
Increase/(Decrease)
|
|
Increase/(Decrease)
|
||||||||||||||||
|
2014
|
|
2013
|
|
2012
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
|
(in thousands)
|
|
(in thousands, except percentages)
|
||||||||||||||||||||||
Research expenses
|
$
|
257,483
|
|
|
$
|
233,651
|
|
|
$
|
213,550
|
|
|
$
|
23,832
|
|
|
10
|
%
|
|
$
|
20,101
|
|
|
9
|
%
|
Development expenses
|
598,023
|
|
|
648,446
|
|
|
552,355
|
|
|
(50,423
|
)
|
|
(8
|
)%
|
|
96,091
|
|
|
17
|
%
|
|||||
Total research and development expenses
|
$
|
855,506
|
|
|
$
|
882,097
|
|
|
$
|
765,905
|
|
|
$
|
(26,591
|
)
|
|
(3
|
)%
|
|
$
|
116,192
|
|
|
15
|
%
|
|
|
|
|
|
|
|
2014/2013
Comparison |
|
2013/2012
Comparison |
||||||||||||||||
|
|
|
|
|
|
|
Increase/(Decrease)
|
|
Increase/(Decrease)
|
||||||||||||||||
|
2014
|
|
2013
|
|
2012
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
|
(in thousands)
|
|
(in thousands, except percentages)
|
||||||||||||||||||||||
Research Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Salary and benefits
|
$
|
82,975
|
|
|
$
|
80,957
|
|
|
$
|
72,811
|
|
|
$
|
2,018
|
|
|
2
|
%
|
|
$
|
8,146
|
|
|
11
|
%
|
Stock-based compensation expense
|
40,531
|
|
|
27,426
|
|
|
24,914
|
|
|
13,105
|
|
|
48
|
%
|
|
2,512
|
|
|
10
|
%
|
|||||
Laboratory supplies and other direct expenses
|
38,082
|
|
|
35,981
|
|
|
31,365
|
|
|
2,101
|
|
|
6
|
%
|
|
4,616
|
|
|
15
|
%
|
|||||
Outsourced services
|
17,401
|
|
|
20,169
|
|
|
13,983
|
|
|
(2,768
|
)
|
|
(14
|
)%
|
|
6,186
|
|
|
44
|
%
|
|||||
Infrastructure costs
|
78,494
|
|
|
69,118
|
|
|
70,477
|
|
|
9,376
|
|
|
14
|
%
|
|
(1,359
|
)
|
|
(2
|
)%
|
|||||
Total research expenses
|
$
|
257,483
|
|
|
$
|
233,651
|
|
|
$
|
213,550
|
|
|
$
|
23,832
|
|
|
10
|
%
|
|
$
|
20,101
|
|
|
9
|
%
|
|
|
|
|
|
|
|
2014/2013
Comparison |
|
2013/2012
Comparison |
||||||||||||||||
|
|
|
|
|
|
|
Increase/(Decrease)
|
|
Increase/(Decrease)
|
||||||||||||||||
|
2014
|
|
2013
|
|
2012
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
|
(in thousands)
|
|
(in thousands, except percentages)
|
||||||||||||||||||||||
Development Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Salary and benefits
|
$
|
161,718
|
|
|
$
|
167,945
|
|
|
$
|
146,250
|
|
|
$
|
(6,227
|
)
|
|
(4
|
)%
|
|
$
|
21,695
|
|
|
15
|
%
|
Stock-based compensation expense
|
76,467
|
|
|
53,757
|
|
|
46,329
|
|
|
22,710
|
|
|
42
|
%
|
|
7,428
|
|
|
16
|
%
|
|||||
Laboratory supplies and other direct expenses
|
34,689
|
|
|
38,526
|
|
|
33,530
|
|
|
(3,837
|
)
|
|
(10
|
)%
|
|
4,996
|
|
|
15
|
%
|
|||||
Outsourced services
|
197,743
|
|
|
238,906
|
|
|
203,600
|
|
|
(41,163
|
)
|
|
(17
|
)%
|
|
35,306
|
|
|
17
|
%
|
|||||
Drug supply costs
|
10,026
|
|
|
38,767
|
|
|
14,044
|
|
|
(28,741
|
)
|
|
(74
|
)%
|
|
24,723
|
|
|
176
|
%
|
|||||
Infrastructure costs
|
117,380
|
|
|
110,545
|
|
|
108,602
|
|
|
6,835
|
|
|
6
|
%
|
|
1,943
|
|
|
2
|
%
|
|||||
Total development expenses
|
$
|
598,023
|
|
|
$
|
648,446
|
|
|
$
|
552,355
|
|
|
$
|
(50,423
|
)
|
|
(8
|
)%
|
|
$
|
96,091
|
|
|
17
|
%
|
|
|
|
|
|
|
|
2014/2013
Comparison |
|
2013/2012
Comparison |
||||||||||||||||
|
|
|
|
|
|
|
Increase/(Decrease)
|
|
Increase/(Decrease)
|
||||||||||||||||
|
2014
|
|
2013
|
|
2012
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
|
(in thousands)
|
|
(in thousands, except percentages)
|
||||||||||||||||||||||
Sales, general and administrative expenses
|
$
|
305,409
|
|
|
$
|
356,188
|
|
|
$
|
432,681
|
|
|
$
|
(50,779
|
)
|
|
(14
|
)%
|
|
$
|
(76,493
|
)
|
|
(18
|
)%
|
|
Payments Due by Period
|
||||||||||||||||||
|
2015
|
|
2016-2017
|
|
2018-2019
|
|
2020 and later
|
|
Total
|
||||||||||
|
(in thousands)
|
||||||||||||||||||
Fan Pier Leases
|
$
|
67,206
|
|
|
$
|
134,412
|
|
|
$
|
139,795
|
|
|
$
|
680,209
|
|
|
$
|
1,021,622
|
|
Facility operating leases, excluding Fan Pier Leases
|
48,589
|
|
|
65,503
|
|
|
28,538
|
|
|
78,612
|
|
|
221,242
|
|
|||||
Capital lease obligations
|
20,792
|
|
|
27,383
|
|
|
16,074
|
|
|
—
|
|
|
64,249
|
|
|||||
Senior secured term loan
|
36,600
|
|
|
305,518
|
|
|
—
|
|
|
—
|
|
|
342,118
|
|
|||||
Research, development and drug supply costs
|
20,717
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
20,717
|
|
|||||
Other
|
7,589
|
|
|
3,484
|
|
|
—
|
|
|
6,591
|
|
|
17,664
|
|
|||||
Total contractual commitments and obligations
|
$
|
201,493
|
|
|
$
|
536,300
|
|
|
$
|
184,407
|
|
|
$
|
765,412
|
|
|
$
|
1,687,612
|
|
•
|
revenue recognition;
|
•
|
intangible assets;
|
•
|
collaborations and variable interest entities;
|
•
|
research and development accruals;
|
•
|
commercial supplies and inventories;
|
•
|
income taxes;
|
•
|
leases; and
|
•
|
restructuring expenses.
|
•
|
there is persuasive evidence that an arrangement exists between us and our customer;
|
•
|
collectability is reasonably assured; and
|
•
|
the price is fixed or determinable.
|
•
|
Beginning in the fourth quarter of 2014, we are consolidating all of BioAxone’s expenses and revenues into our consolidated statements of operations, eliminating all intercompany balances and transactions. As of December 31, 2014, our consolidated balance sheet includes BioAxone’s balances.
|
•
|
As of September 30, 2014, we concluded that we no longer had significant continuing involvement with Alios due to our intent and ability to terminate the Alios Agreement, which we terminated during the fourth quarter of 2014; therefore, the operations of Alios, including collaboration expenses reimbursed by Vertex are presented as discontinued operations for the periods presented in these consolidated financial statements.
|
•
|
In 2013, the deconsolidation of Alios resulted in a gain of
$68.2 million
attributable to Vertex. The
$68.2 million
gain was approximately equal to the difference between (i) losses we recorded in 2011 and 2012 based on increases in the fair value of contingent milestone payments and royalties payable by us to Alios and (ii) the aggregate of
$120.0 million
in up-front and milestone payments that we made to Alios pursuant to the Alios collaboration.
|
•
|
In each period, we recorded net loss (income) attributable to the Alios noncontrolling interest. This net loss (income) reflected Alios’ net loss (income) for the period as adjusted for gains and losses in the fair value of the contingent milestone payments and royalties payable by us to Alios. Determining the fair value of the contingent milestone payments and royalties payable by us to Alios required us to make significant estimates regarding the probability and potential timing of achieving each of the milestones pursuant to the agreement, future potential net sales of the HCV nucleotide analogues licensed from Alios and appropriate discount and tax rates. These net losses (income) attributable to the Alios noncontrolling interest are included in loss from discontinued operations for 2012 and 2013.
|
ITEM 7A.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
ITEM 8.
|
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|
ITEM 9.
|
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|
ITEM 9A.
|
CONTROLS AND PROCEDURES
|
•
|
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;
|
•
|
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and
|
•
|
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
|
ITEM 9B.
|
OTHER INFORMATION
|
ITEM 10.
|
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
ITEM 11.
|
EXECUTIVE COMPENSATION
|
ITEM 12.
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|
ITEM 13.
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
|
ITEM 14.
|
PRINCIPAL ACCOUNTANT FEES AND SERVICES
|
ITEM 15.
|
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|
|
Page Number in
this Form 10-K |
Report of Independent Registered Public Accounting Firm
|
|
Consolidated Statements of Operations for the years ended December 31, 2014, 2013 and 2012
|
|
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2014, 2013 and 2012
|
|
Consolidated Balance Sheets as of December 31, 2014 and 2013
|
|
Consolidated Statements of Shareholders’ Equity and Noncontrolling Interest for the years ended December 31, 2014, 2013 and 2012
|
|
Consolidated Statements of Cash Flows for the years ended December 31, 2014, 2013 and 2012
|
|
Notes to Consolidated Financial Statements
|
Exhibit Number
|
Exhibit Description
|
Filed with
this report |
Incorporated by
Reference herein from—Form or Schedule |
Filing Date/
Period Covered |
SEC File/
Reg. Number |
3.1
|
Restated Articles of Organization of Vertex Pharmaceuticals Incorporated, as amended.
|
|
10-Q
(Exhibit 3.1)
|
August 11, 2008
|
000-19319
|
3.2
|
By-laws of Vertex Pharmaceuticals Incorporated, as amended and restated as of February 5, 2014.
|
|
8-K
(Exhibit 3.1)
|
February 5, 2014
|
000-19319
|
4.1
|
Specimen stock certificate.
|
|
S-1
(Exhibit 4.1)
|
July 18, 1991
|
33-40966
|
Collaboration Agreements
|
|
|
|
||
10.1
|
Research, Development and Commercialization Agreement, dated as of May 24, 2004, between Vertex Pharmaceuticals Incorporated and Cystic Fibrosis Foundation Therapeutics Incorporated.†
|
|
10-Q/A
(Exhibit 10.2)
|
August 19, 2011
|
000-19319
|
10.2
|
Amendment No. 1 to Research, Development and Commercialization Agreement, dated as of January 6, 2006, between Vertex Pharmaceuticals Incorporated and Cystic Fibrosis Foundation Therapeutics Incorporated.†
|
|
10-K
(Exhibit 10.9)
|
March 16, 2006
|
000-19319
|
10.3
|
Amendment No. 2 to Research, Development and Commercialization Agreement, dated as of March 17, 2006, between Vertex Pharmaceuticals Incorporated and Cystic Fibrosis Foundation Therapeutics Incorporated.
|
|
10-Q/A
(Exhibit 10.6)
|
August 19, 2011
|
000-19319
|
10.4
|
Amendment No. 5 to Research, Development and Commercialization Agreement, effective as of April 1, 2011, between Vertex Pharmaceuticals Incorporated and Cystic Fibrosis Foundation Therapeutics Incorporated.†
|
|
10-Q
(Exhibit 10.3)
|
August 9, 2011
|
000-19319
|
Leases
|
|
|
|
||
10.5
|
Lease, dated May 5, 2011, between Fifty Northern Avenue LLC and Vertex Pharmaceuticals Incorporated.†
|
|
10-Q
(Exhibit 10.4)
|
August 9, 2011
|
000-19319
|
10.6
|
Lease, dated May 5, 2011, between Eleven Fan Pier Boulevard LLC and Vertex Pharmaceuticals Incorporated.†
|
|
10-Q
(Exhibit 10.5)
|
August 9, 2011
|
000-19319
|
10.7
|
Lease, dated as of January 18, 2001, between Kendall Square, LLC and Vertex Pharmaceuticals Incorporated.†
|
|
10-K
(Exhibit 10.16)
|
March 26, 2001
|
000-19319
|
|
|
|
|
|
|
Exhibit Number
|
Exhibit Description
|
Filed with
this report |
Incorporated by
Reference herein from—Form or Schedule |
Filing Date/
Period Covered |
SEC File/
Reg. Number |
Financing Agreements
|
|||||
10.8
|
Credit Agreement, dated as of July 9, 2014, among Vertex Pharmaceuticals Incorporated, Macquarie US Trading LLC and the other lenders party thereto.
|
|
10-Q
(Exhibit 10.2)
|
July 31, 2014
|
000-19319
|
Equity Plans
|
|
|
|
||
10.9
|
1996 Stock and Option Plan, as amended and restated as of March 14, 2005.*
|
|
10-K
(Exhibit 10.3)
|
March 16, 2005
|
000-19319
|
10.10
|
Form of Stock Option Grant under 1996 Stock and Option Plan.*
|
|
8-K
(Exhibit 10.1)
|
February 9, 2005
|
000-19319
|
10.11
|
Amended and Restated 2006 Stock and Option Plan.*
|
|
10-Q
(Exhibit 10.3)
|
August 8, 2012
|
000-19319
|
10.12
|
Form of Stock Option Grant under 2006 Stock and Option Plan (granted prior to July 30, 2013).*
|
|
8-K
(Exhibit 10.2)
|
May 15, 2006
|
000-19319
|
10.13
|
Form of Restricted Stock Award under 2006 Stock and Option Plan (granted prior to July 30, 2013).*
|
|
8-K
(Exhibit 10.3)
|
May 15, 2006
|
000-19319
|
10.14
|
Form of Restricted Stock Award (Performance Accelerated Restricted Stock) under 2006 Stock and Option Plan (granted prior to July 30, 2013).*
|
|
8-K
(Exhibit 10.4)
|
May 15, 2006
|
000-19319
|
10.15
|
Form of Stock Option Grant-Performance Accelerated 2009 Stock-Options.*
|
|
10-K
(Exhibit 10.33)
|
February 19, 2010
|
000-19319
|
10.16
|
2013 Stock and Option Plan, as amended .*
|
|
DEF 14A
(Appendix A)
|
March 28, 2014
|
000-19319
|
10.17
|
Form of Non-Qualified Stock Option Agreement under 2013 Stock and Option Plan.*
|
X
|
|
|
|
10.18
|
Form of Restricted Stock Agreement under 2013 Stock and Option Plan.*
|
X
|
|
|
|
10.19
|
Form of Restricted Stock Unit Agreement under 2013 Stock and Option Plan.*
|
X
|
|
|
|
10.20
|
Form of Non-Qualified Stock Option Agreement under Amended and Restated 2006 Stock and Option Plan (granted on or after July 30, 2013).*
|
X
|
|
|
|
10.21
|
Form of Restricted Stock Agreement under Amended and Restated 2006 Stock and Option Plan (granted on or after July 30, 2013).*
|
X
|
|
|
|
10.22
|
Form of Restricted Stock Unit Agreement under Amended and Restated 2006 Stock and Option Plan (granted on or after July 30, 2013).*
|
X
|
|
|
|
10.23
|
Vertex Pharmaceuticals Incorporated Employee Stock Purchase Plan, as amended and restated.*
|
|
10-Q
(Exhibit 10.4)
|
August 8, 2012
|
000-19319
|
Agreements with Executive Officers and Directors
|
|
|
|
||
10.24
|
Agreement between Jeffrey M. Leiden and Vertex, dated December 14, 2011.*
|
|
10-K
(Exhibit 10.34)
|
February 22, 2012
|
000-19319
|
10.25
|
First Amendment to Employment Agreement, dated December 10, 2014, by and between Vertex Pharmaceuticals Incorporated and Jeffrey M. Leiden.*
|
|
8-K
(Exhibit 10.1)
|
December 15, 2014
|
000-19319
|
10.26
|
Employee Non-disclosure, Non-competition and Inventions Agreement between Jeffrey M. Leiden and Vertex, dated December 14, 2011.*
|
|
10-K
(Exhibit 10.35)
|
February 22, 2012
|
000-19319
|
10.27
|
Employment Agreement, dated as of August 27, 2012, between Vertex Pharmaceuticals Incorporated and Stuart Arbuckle.*
|
|
10-Q
(Exhibit 10.1)
|
November 6, 2012
|
000-19319
|
10.28
|
Change of Control Agreement, dated as of August 27, 2012, between Vertex Pharmaceuticals Incorporated and Stuart Arbuckle.*
|
|
10-Q
(Exhibit 10.2)
|
November 6, 2012
|
000-19319
|
10.29
|
Employment Agreement, dated as of June 11, 2012, between Vertex Pharmaceuticals Incorporated and Kenneth L. Horton.*
|
|
10-Q
(Exhibit 10.1)
|
August 8, 2012
|
000-19319
|
10.30
|
Change of Control Agreement, dated as of June 11, 2012, between Vertex Pharmaceuticals Incorporated and Kenneth L. Horton.*
|
|
10-Q
(Exhibit 10.2)
|
August 8, 2012
|
000-19319
|
10.31
|
Amended and Restated Employment Agreement, dated as of November 8, 2004, between Vertex Pharmaceuticals Incorporated and Ian F. Smith.*
|
|
10-Q
(Exhibit 10.13)
|
November 9, 2004
|
000-19319
|
10.32
|
Amendment No. 1 to Amended and Restated Employment Agreement between Ian F. Smith and Vertex Pharmaceuticals Incorporated, dated December 29, 2008.*
|
|
10-K
(Exhibit 10.66)
|
February 17, 2009
|
000-19319
|
Exhibit Number
|
Exhibit Description
|
Filed with
this report |
Incorporated by
Reference herein from—Form or Schedule |
Filing Date/
Period Covered |
SEC File/
Reg. Number |
10.33
|
Form of Employee Non-Disclosure and Inventions Agreement.*
|
|
S-1
(Exhibit 10.4)
|
May 30, 1991
|
33-40966
|
10.34
|
Vertex Employee Compensation Plan.*
|
X
|
|
|
|
10.35
|
Vertex Pharmaceuticals Non-Employee Board Compensation.*
|
|
10-K
(Exhibit 10.57)
|
February 22, 2012
|
000-19319
|
Subsidiaries
|
|
|
|
|
|
21.1
|
Subsidiaries of Vertex Pharmaceuticals Incorporated.
|
X
|
|
|
|
Consent
|
|
|
|
|
|
23.1
|
Consent of Independent Registered Public Accounting Firm, Ernst & Young LLP.
|
X
|
|
|
|
Certifications
|
|
|
|
|
|
31.1
|
Certification of the Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
|
X
|
|
|
|
31.2
|
Certification of the Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
|
X
|
|
|
|
32.1
|
Certification of the Chief Executive Officer and the Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002.
|
X
|
|
|
|
101.INS
|
XBRL Instance
|
X
|
|
|
|
101.SCH
|
XBRL Taxonomy Extension Schema
|
X
|
|
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation
|
X
|
|
|
|
101.LAB
|
XBRL Taxonomy Extension Labels
|
X
|
|
|
|
101.PRE
|
XBRL Taxonomy Extension Presentation
|
X
|
|
|
|
101.DEF
|
XBRL Taxonomy Extension Definition
|
X
|
|
|
|
†
|
Confidential portions of this document have been filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment.
|
|
Vertex Pharmaceuticals Incorporated
|
|
|
|
|
February 13, 2015
|
By:
|
/s/ Jeffrey M. Leiden
|
|
|
Jeffrey M. Leiden
Chief Executive Officer
|
|
|
Name
|
|
|
|
Title
|
|
|
|
|
Date
|
|
|
|
|
|
|||||||||||
/s/ Jeffrey M. Leiden
|
Chair of the Board, President and Chief Executive Officer (Principal Executive Officer)
|
|
|||||||||||
Jeffrey M. Leiden
|
February 13, 2015
|
||||||||||||
|
|
|
|||||||||||
/s/ Ian F. Smith
|
Executive Vice President and Chief Financial Officer (Principal Financial Officer)
|
|
|||||||||||
Ian F. Smith
|
February 13, 2015
|
||||||||||||
|
|
|
|||||||||||
/s/ Paul M. Silva
|
Senior Vice President and Corporate Controller (Principal Accounting Officer)
|
|
|||||||||||
Paul M. Silva
|
February 13, 2015
|
||||||||||||
|
|
|
|||||||||||
/s/ Joshua S. Boger
|
Director
|
|
|||||||||||
Joshua S. Boger
|
February 13, 2015
|
||||||||||||
|
|
|
|||||||||||
/s/ Terrence C. Kearney
|
Director
|
|
|||||||||||
Terrence C. Kearney
|
February 13, 2015
|
||||||||||||
|
|
|
|||||||||||
/s/ Yuchun Lee
|
Director
|
|
|||||||||||
Yuchun Lee
|
February 13, 2015
|
||||||||||||
|
|
|
|||||||||||
/s/ Margaret G. McGlynn
|
Director
|
|
|||||||||||
Margaret G. McGlynn
|
February 13, 2015
|
||||||||||||
|
|
|
|||||||||||
/s/ Wayne J. Riley
|
Director
|
|
|||||||||||
Wayne J. Riley
|
February 13, 2015
|
||||||||||||
|
|
|
|||||||||||
/s/ Bruce I. Sachs
|
Director
|
|
|||||||||||
Bruce I. Sachs
|
February 13, 2015
|
||||||||||||
|
|
|
|||||||||||
/s/ Elaine S. Ullian
|
Director
|
|
|||||||||||
Elaine S. Ullian
|
February 13, 2015
|
||||||||||||
|
|||||||||||||
/s/ William D. Young
|
Director
|
|
|||||||||||
William D. Young
|
February 13, 2015
|
|
/s/ Ernst & Young LLP
|
VERTEX PHARMACEUTICALS INCORPORATED
Consolidated Statements of Operations
(in thousands, except per share amounts)
|
|||||||||||
|
Year Ended December 31,
|
||||||||||
|
2014
|
|
2013
|
|
2012
|
||||||
Revenues:
|
|
|
|
|
|
||||||
Product revenues, net
|
$
|
487,821
|
|
|
$
|
837,645
|
|
|
$
|
1,333,458
|
|
Royalty revenues
|
40,919
|
|
|
156,592
|
|
|
141,498
|
|
|||
Collaborative revenues
|
51,675
|
|
|
217,738
|
|
|
52,086
|
|
|||
Total revenues
|
580,415
|
|
|
1,211,975
|
|
|
1,527,042
|
|
|||
Costs and expenses:
|
|
|
|
|
|
||||||
Cost of product revenues
|
39,725
|
|
|
88,979
|
|
|
236,742
|
|
|||
Royalty expenses
|
21,262
|
|
|
41,298
|
|
|
43,143
|
|
|||
Research and development expenses
|
855,506
|
|
|
882,097
|
|
|
765,905
|
|
|||
Sales, general and administrative expenses
|
305,409
|
|
|
356,188
|
|
|
432,681
|
|
|||
Restructuring expenses
|
50,925
|
|
|
40,521
|
|
|
1,844
|
|
|||
Intangible asset impairment charges
|
—
|
|
|
412,900
|
|
|
—
|
|
|||
Total costs and expenses
|
1,272,827
|
|
|
1,821,983
|
|
|
1,480,315
|
|
|||
(Loss) income from operations
|
(692,412
|
)
|
|
(610,008
|
)
|
|
46,727
|
|
|||
Interest expense, net
|
(72,863
|
)
|
|
(22,926
|
)
|
|
(15,040
|
)
|
|||
Other income, net
|
30,400
|
|
|
6,890
|
|
|
309
|
|
|||
(Loss) income from continuing operations before provision for (benefit from) income taxes
|
(734,875
|
)
|
|
(626,044
|
)
|
|
31,996
|
|
|||
Provision for (benefit from) income taxes
|
6,958
|
|
|
(122,422
|
)
|
|
(275
|
)
|
|||
(Loss) income from continuing operations
|
(741,833
|
)
|
|
(503,622
|
)
|
|
32,271
|
|
|||
Loss from discontinued operations, net of tax (benefit) provision of $0, $(166,145) and $39,029, respectively
|
(912
|
)
|
|
(183,928
|
)
|
|
(83,406
|
)
|
|||
Net loss
|
(742,745
|
)
|
|
(687,550
|
)
|
|
(51,135
|
)
|
|||
Loss (income) from discontinued operations attributable to noncontrolling interest
|
—
|
|
|
242,522
|
|
|
(55,897
|
)
|
|||
Loss attributable to noncontrolling interest
|
4,190
|
|
|
—
|
|
|
—
|
|
|||
Net loss attributable to Vertex
|
$
|
(738,555
|
)
|
|
$
|
(445,028
|
)
|
|
$
|
(107,032
|
)
|
|
|
|
|
|
|
||||||
Amounts attributable to Vertex:
|
|
|
|
|
|
||||||
(Loss) income from continuing operations
|
$
|
(737,643
|
)
|
|
$
|
(503,622
|
)
|
|
$
|
32,271
|
|
(Loss) income from discontinued operations
|
(912
|
)
|
|
58,594
|
|
|
(139,303
|
)
|
|||
Net loss attributable to Vertex
|
$
|
(738,555
|
)
|
|
$
|
(445,028
|
)
|
|
$
|
(107,032
|
)
|
|
|
|
|
|
|
||||||
Amounts per share attributable to Vertex common shareholders:
|
|
|
|
|
|
||||||
Net (loss) income from continuing operations:
|
|
|
|
|
|
||||||
Basic
|
$
|
(3.14
|
)
|
|
$
|
(2.24
|
)
|
|
$
|
0.15
|
|
Diluted
|
$
|
(3.14
|
)
|
|
$
|
(2.24
|
)
|
|
$
|
0.15
|
|
Net income (loss) from discontinued operations:
|
|
|
|
|
|
||||||
Basic
|
$
|
—
|
|
|
$
|
0.26
|
|
|
$
|
(0.65
|
)
|
Diluted
|
$
|
—
|
|
|
$
|
0.26
|
|
|
$
|
(0.65
|
)
|
Net loss:
|
|
|
|
|
|
||||||
Basic
|
$
|
(3.14
|
)
|
|
$
|
(1.98
|
)
|
|
$
|
(0.50
|
)
|
Diluted
|
$
|
(3.14
|
)
|
|
$
|
(1.98
|
)
|
|
$
|
(0.50
|
)
|
Shares used in per share calculations:
|
|
|
|
|
|
||||||
Basic
|
235,307
|
|
|
224,906
|
|
|
211,946
|
|
|||
Diluted
|
235,307
|
|
|
224,906
|
|
|
215,262
|
|
VERTEX PHARMACEUTICALS INCORPORATED
Consolidated Statements of Comprehensive Income (Loss)
(in thousands)
|
|||||||||||
|
Year ended December 31,
|
||||||||||
|
2014
|
|
2013
|
|
2012
|
||||||
Net loss
|
$
|
(742,745
|
)
|
|
$
|
(687,550
|
)
|
|
$
|
(51,135
|
)
|
Changes in other comprehensive loss:
|
|
|
|
|
|
||||||
Unrealized holding (losses) gains on marketable securities
|
(165
|
)
|
|
(154
|
)
|
|
305
|
|
|||
Unrealized gains (losses) on foreign currency forward contracts
|
2,034
|
|
|
(23
|
)
|
|
—
|
|
|||
Foreign currency translation adjustment
|
(646
|
)
|
|
421
|
|
|
198
|
|
|||
Total changes in other comprehensive loss
|
1,223
|
|
|
244
|
|
|
503
|
|
|||
Comprehensive loss
|
(741,522
|
)
|
|
(687,306
|
)
|
|
(50,632
|
)
|
|||
Comprehensive loss attributable to noncontrolling interest
|
4,190
|
|
|
—
|
|
|
—
|
|
|||
Comprehensive loss attributable to Vertex
|
$
|
(737,332
|
)
|
|
$
|
(687,306
|
)
|
|
$
|
(50,632
|
)
|
VERTEX PHARMACEUTICALS INCORPORATED
Consolidated Balance Sheets
(in thousands, except share and per share amounts)
|
|||||||
|
December 31,
|
||||||
|
2014
|
|
2013
|
||||
Assets
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
625,259
|
|
|
$
|
569,299
|
|
Marketable securities, available for sale
|
761,847
|
|
|
895,777
|
|
||
Accounts receivable, net
|
75,964
|
|
|
85,517
|
|
||
Inventories
|
30,848
|
|
|
14,147
|
|
||
Prepaid expenses and other current assets
|
52,593
|
|
|
23,836
|
|
||
Total current assets
|
1,546,511
|
|
|
1,588,576
|
|
||
Property and equipment, net
|
715,812
|
|
|
696,911
|
|
||
Intangible assets
|
29,000
|
|
|
—
|
|
||
Goodwill
|
39,915
|
|
|
30,992
|
|
||
Other assets
|
3,441
|
|
|
2,562
|
|
||
Total assets
|
$
|
2,334,679
|
|
|
$
|
2,319,041
|
|
Liabilities and Shareholders’ Equity
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
71,194
|
|
|
$
|
49,327
|
|
Accrued expenses
|
209,676
|
|
|
271,077
|
|
||
Deferred revenues, current portion
|
17,468
|
|
|
21,510
|
|
||
Accrued restructuring expense, current portion
|
33,107
|
|
|
14,286
|
|
||
Capital lease obligations, current portion
|
17,806
|
|
|
16,893
|
|
||
Senior secured term loan, current portion
|
14,206
|
|
|
—
|
|
||
Other liabilities, current portion
|
4,797
|
|
|
24,736
|
|
||
Total current liabilities
|
368,254
|
|
|
397,829
|
|
||
Deferred revenues, excluding current portion
|
27,808
|
|
|
49,459
|
|
||
Accrued restructuring expense, excluding current portion
|
12,748
|
|
|
14,067
|
|
||
Capital lease obligations, excluding current portion
|
39,293
|
|
|
48,754
|
|
||
Deferred tax liability
|
15,044
|
|
|
—
|
|
||
Construction financing lease obligation, excluding current portion
|
473,073
|
|
|
440,937
|
|
||
Senior secured term loan, excluding current portion
|
280,569
|
|
|
—
|
|
||
Other liabilities, excluding current portion
|
21,707
|
|
|
11,590
|
|
||
Total liabilities
|
1,238,496
|
|
|
962,636
|
|
||
Commitments and contingencies
|
|
|
|
|
|
||
Shareholders’ equity:
|
|
|
|
||||
Preferred stock, $0.01 par value; 1,000,000 shares authorized; none issued and outstanding at December 31, 2014 and 2013
|
—
|
|
|
—
|
|
||
Common stock, $0.01 par value; 300,000,000 shares authorized at December 31, 2014 and 2013; 241,764,398 and 233,788,852 shares issued and outstanding at December 31, 2014 and 2013, respectively
|
2,385
|
|
|
2,320
|
|
||
Additional paid-in capital
|
5,777,154
|
|
|
5,321,286
|
|
||
Accumulated other comprehensive income (loss)
|
917
|
|
|
(306
|
)
|
||
Accumulated deficit
|
(4,705,450
|
)
|
|
(3,966,895
|
)
|
||
Total Vertex shareholders’ equity
|
1,075,006
|
|
|
1,356,405
|
|
||
Noncontrolling interest
|
21,177
|
|
|
—
|
|
||
Total shareholders’ equity
|
1,096,183
|
|
|
1,356,405
|
|
||
Total liabilities and shareholders’ equity
|
$
|
2,334,679
|
|
|
$
|
2,319,041
|
|
VERTEX PHARMACEUTICALS INCORPORATED
Consolidated Statements of Shareholders’ Equity and Noncontrolling Interest
(in thousands)
|
||||||||||||||||||||||||||||||||||
|
Common Stock
|
|
Additional
Paid-in Capital |
|
Accumulated
Other Comprehensive Loss |
|
Accumulated Deficit
|
|
Total Vertex
Shareholders’ Equity |
|
Noncontrolling
Interest |
|
Total
Shareholders’ Equity |
|
Redeemable
Noncontrolling Interest |
|||||||||||||||||||
|
Shares
|
|
Amount
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Balance, December 31, 2011
|
209,304
|
|
|
$
|
2,072
|
|
|
$
|
4,200,659
|
|
|
$
|
(1,053
|
)
|
|
$
|
(3,414,835
|
)
|
|
$
|
786,843
|
|
|
$
|
141,633
|
|
|
$
|
928,476
|
|
|
$
|
37,036
|
|
Unrealized holding gains on marketable securities
|
|
|
|
|
|
|
305
|
|
|
|
|
305
|
|
|
|
|
305
|
|
|
|
||||||||||||||
Foreign currency translation adjustment
|
|
|
|
|
|
|
198
|
|
|
|
|
198
|
|
|
|
|
198
|
|
|
|
||||||||||||||
Net (loss) income
|
|
|
|
|
|
|
|
|
(107,032
|
)
|
|
(107,032
|
)
|
|
55,897
|
|
|
(51,135
|
)
|
|
|
|||||||||||||
Issuance of common stock under benefit plans
|
7,983
|
|
|
77
|
|
|
201,760
|
|
|
|
|
|
|
201,837
|
|
|
155
|
|
|
201,992
|
|
|
|
|||||||||||
Stock-based compensation expense
|
|
|
|
|
115,058
|
|
|
|
|
|
|
115,058
|
|
|
481
|
|
|
115,539
|
|
|
|
|||||||||||||
Tax benefit from equity compensation
|
|
|
|
|
1,971
|
|
|
|
|
|
|
1,971
|
|
|
|
|
1,971
|
|
|
|
||||||||||||||
Change in liquidation value of noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,494
|
)
|
|
(1,494
|
)
|
|
1,494
|
|
||||||||||||||
Balance, December 31, 2012
|
217,287
|
|
|
$
|
2,149
|
|
|
$
|
4,519,448
|
|
|
$
|
(550
|
)
|
|
$
|
(3,521,867
|
)
|
|
$
|
999,180
|
|
|
$
|
196,672
|
|
|
$
|
1,195,852
|
|
|
$
|
38,530
|
|
Unrealized holding losses on marketable securities
|
|
|
|
|
|
|
(154
|
)
|
|
|
|
(154
|
)
|
|
|
|
(154
|
)
|
|
|
||||||||||||||
Unrealized losses on foreign currency forward contracts
|
|
|
|
|
|
|
(23
|
)
|
|
|
|
(23
|
)
|
|
|
|
(23
|
)
|
|
|
||||||||||||||
Foreign currency translation adjustment
|
|
|
|
|
|
|
421
|
|
|
|
|
421
|
|
|
|
|
421
|
|
|
|
||||||||||||||
Net loss
|
|
|
|
|
|
|
|
|
(445,028
|
)
|
|
(445,028
|
)
|
|
(242,522
|
)
|
|
(687,550
|
)
|
|
|
|||||||||||||
Issuance of common stock under benefit plans
|
8,226
|
|
|
88
|
|
|
271,713
|
|
|
|
|
|
|
271,801
|
|
|
(63
|
)
|
|
271,738
|
|
|
|
|||||||||||
Convertible senior subordinated notes (due 2015) conversion
|
8,276
|
|
|
83
|
|
|
402,182
|
|
|
|
|
|
|
402,265
|
|
|
|
|
402,265
|
|
|
|
||||||||||||
Stock-based compensation expense
|
|
|
|
|
127,883
|
|
|
|
|
|
|
127,883
|
|
|
468
|
|
|
128,351
|
|
|
|
|||||||||||||
Restructuring expense related to benefit plans
|
|
|
|
|
1,312
|
|
|
|
|
|
|
1,312
|
|
|
|
|
1,312
|
|
|
|
||||||||||||||
Tax benefit from equity compensation
|
|
|
|
|
(1,252
|
)
|
|
|
|
|
|
(1,252
|
)
|
|
|
|
|
(1,252
|
)
|
|
|
|||||||||||||
Noncontrolling interest upon deconsolidation
|
|
|
|
|
|
|
|
|
|
|
|
|
45,445
|
|
|
45,445
|
|
|
(38,530
|
)
|
||||||||||||||
Balance, December 31, 2013
|
233,789
|
|
|
$
|
2,320
|
|
|
$
|
5,321,286
|
|
|
$
|
(306
|
)
|
|
$
|
(3,966,895
|
)
|
|
$
|
1,356,405
|
|
|
$
|
—
|
|
|
$
|
1,356,405
|
|
|
$
|
—
|
|
Unrealized holding losses on marketable securities
|
|
|
|
|
|
|
(165
|
)
|
|
|
|
(165
|
)
|
|
|
|
|
(165
|
)
|
|
|
|||||||||||||
Unrealized gains on foreign currency forward contracts
|
|
|
|
|
|
|
2,034
|
|
|
|
|
2,034
|
|
|
|
|
|
2,034
|
|
|
|
|||||||||||||
Foreign currency translation adjustment
|
|
|
|
|
|
|
(646
|
)
|
|
|
|
(646
|
)
|
|
|
|
|
(646
|
)
|
|
|
|||||||||||||
Net loss
|
|
|
|
|
|
|
|
|
(738,555
|
)
|
|
(738,555
|
)
|
|
(4,190
|
)
|
|
(742,745
|
)
|
|
|
|||||||||||||
Issuance of common stock under benefit plans
|
7,975
|
|
|
65
|
|
|
274,743
|
|
|
|
|
|
|
274,808
|
|
|
|
|
|
274,808
|
|
|
|
|||||||||||
Stock-based compensation expense
|
|
|
|
|
178,965
|
|
|
|
|
|
|
178,965
|
|
|
|
|
|
178,965
|
|
|
|
|||||||||||||
Tax benefit from equity compensation
|
|
|
|
|
2,160
|
|
|
|
|
|
|
2,160
|
|
|
|
|
2,160
|
|
|
|
||||||||||||||
Noncontrolling interest upon consolidation
|
|
|
|
|
|
|
|
|
|
|
|
|
25,367
|
|
|
25,367
|
|
|
|
|||||||||||||||
Balance, December 31, 2014
|
241,764
|
|
|
$
|
2,385
|
|
|
$
|
5,777,154
|
|
|
$
|
917
|
|
|
$
|
(4,705,450
|
)
|
|
$
|
1,075,006
|
|
|
$
|
21,177
|
|
|
$
|
1,096,183
|
|
|
$
|
—
|
|
VERTEX PHARMACEUTICALS INCORPORATED
Consolidated Statements of Cash Flows
(in thousands)
|
|||||||||||
|
Year Ended December 31,
|
||||||||||
|
2014
|
|
2013
|
|
2012
|
||||||
Cash flows from operating activities:
|
|
|
|
|
|
||||||
Net loss
|
$
|
(742,745
|
)
|
|
$
|
(687,550
|
)
|
|
$
|
(51,135
|
)
|
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
|
|
|
|
|
|
||||||
Depreciation and amortization expense
|
63,257
|
|
|
48,365
|
|
|
38,191
|
|
|||
Stock-based compensation expense
|
177,542
|
|
|
127,303
|
|
|
114,285
|
|
|||
Other non-cash based compensation expense
|
—
|
|
|
5,860
|
|
|
10,261
|
|
|||
Intangible asset impairment charges
|
—
|
|
|
663,500
|
|
|
—
|
|
|||
Deferred income taxes
|
281
|
|
|
(285,053
|
)
|
|
36,660
|
|
|||
Impairment of property and equipment
|
1,689
|
|
|
7,594
|
|
|
—
|
|
|||
Deconsolidation of variable interest entity
|
—
|
|
|
55,110
|
|
|
—
|
|
|||
Write-downs of inventories to net realizable value
|
—
|
|
|
10,358
|
|
|
133,189
|
|
|||
Excess tax benefit from share-based payment arrangements
|
(2,160
|
)
|
|
1,252
|
|
|
(1,971
|
)
|
|||
Other non-cash items, net
|
—
|
|
|
6,742
|
|
|
178
|
|
|||
Changes in operating assets and liabilities, excluding the effects of the acquisition and deconsolidation of variable interest entities:
|
|
|
|
|
|
||||||
Accounts receivable, net
|
7,428
|
|
|
53,363
|
|
|
39,912
|
|
|||
Inventories
|
(16,469
|
)
|
|
7,142
|
|
|
(29,925
|
)
|
|||
Prepaid expenses and other assets
|
(15,771
|
)
|
|
(12,061
|
)
|
|
(23,619
|
)
|
|||
Accounts payable
|
25,048
|
|
|
(49,234
|
)
|
|
14,892
|
|
|||
Accrued expenses and other liabilities
|
(3,270
|
)
|
|
43,725
|
|
|
29,232
|
|
|||
Accrued restructuring expense
|
17,502
|
|
|
5,025
|
|
|
(2,985
|
)
|
|||
Deferred revenues
|
(25,531
|
)
|
|
(53,011
|
)
|
|
(39,324
|
)
|
|||
Net cash (used in) provided by operating activities
|
(513,199
|
)
|
|
(51,570
|
)
|
|
267,841
|
|
|||
Cash flows from investing activities:
|
|
|
|
|
|
||||||
Purchases of marketable securities
|
(1,424,172
|
)
|
|
(2,412,418
|
)
|
|
(1,705,829
|
)
|
|||
Sales and maturities of marketable securities
|
1,557,938
|
|
|
2,348,295
|
|
|
1,367,927
|
|
|||
Payment for acquisition of variable interest entity
|
(10,000
|
)
|
|
—
|
|
|
—
|
|
|||
Expenditures for property and equipment
|
(51,201
|
)
|
|
(51,393
|
)
|
|
(71,140
|
)
|
|||
Decrease in restricted cash and cash equivalents
|
—
|
|
|
31,804
|
|
|
2,156
|
|
|||
Decrease (increase) in restricted cash and cash equivalents (VIE)
|
1,638
|
|
|
27,884
|
|
|
(18,105
|
)
|
|||
(Increase) decrease in other assets
|
(244
|
)
|
|
1,698
|
|
|
(826
|
)
|
|||
Net cash provided by (used in) investing activities
|
73,959
|
|
|
(54,130
|
)
|
|
(425,817
|
)
|
|||
Cash flows from financing activities:
|
|
|
|
|
|
||||||
Excess tax benefit from share-based payment arrangements
|
2,160
|
|
|
(1,252
|
)
|
|
1,971
|
|
|||
Issuances of common stock under benefit plans
|
274,615
|
|
|
265,878
|
|
|
191,721
|
|
|||
Payments to redeem secured notes
|
—
|
|
|
(158
|
)
|
|
—
|
|
|||
Payments on capital lease obligations
|
(21,443
|
)
|
|
(16,057
|
)
|
|
(2,615
|
)
|
|||
Payments on construction financing lease obligation
|
(60,249
|
)
|
|
(67,527
|
)
|
|
(18,873
|
)
|
|||
Proceeds from senior secured term loan
|
294,243
|
|
|
—
|
|
|
—
|
|
|||
Payments returned related to construction financing lease obligation
|
8,050
|
|
|
—
|
|
|
—
|
|
|||
Net cash provided by financing activities
|
497,376
|
|
|
180,884
|
|
|
172,204
|
|
|||
Effect of changes in exchange rates on cash
|
(2,176
|
)
|
|
4,708
|
|
|
(141
|
)
|
|||
Net increase in cash and cash equivalents
|
55,960
|
|
|
79,892
|
|
|
14,087
|
|
|||
Cash and cash equivalents—beginning of period
|
569,299
|
|
|
489,407
|
|
|
475,320
|
|
|||
Cash and cash equivalents—end of period
|
$
|
625,259
|
|
|
$
|
569,299
|
|
|
$
|
489,407
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
||||||
Cash paid for interest
|
$
|
8,714
|
|
|
$
|
11,015
|
|
|
$
|
13,400
|
|
Cash paid for income taxes
|
$
|
1,210
|
|
|
$
|
2,840
|
|
|
$
|
9,318
|
|
Conversion of convertible senior subordinated notes (due 2015) for common stock
|
$
|
—
|
|
|
$
|
399,842
|
|
|
$
|
—
|
|
Unamortized deferred debt issuance costs exchanged
|
$
|
—
|
|
|
$
|
4,230
|
|
|
$
|
—
|
|
Capitalization of construction in-process related to construction financing lease obligation
|
$
|
25,564
|
|
|
$
|
215,013
|
|
|
$
|
235,594
|
|
Assets acquired under capital lease obligations
|
$
|
9,188
|
|
|
$
|
50,972
|
|
|
$
|
31,101
|
|
Issuances of common stock exercises from employee benefit plans receivable
|
$
|
637
|
|
|
$
|
—
|
|
|
$
|
—
|
|
A.
|
Nature of Business and Accounting Policies
|
|
Trade
Allowances |
|
Rebates,
Chargebacks and Discounts |
|
Product
Returns |
|
Other
Incentives |
|
Total
|
||||||||||
|
(in thousands)
|
||||||||||||||||||
2014
|
|
|
|
|
|
|
|
|
|
||||||||||
Beginning Balance
|
$
|
1,535
|
|
|
$
|
68,244
|
|
|
$
|
15,799
|
|
|
$
|
1,555
|
|
|
$
|
87,133
|
|
Provision related to current period sales
|
8,468
|
|
|
35,713
|
|
|
2,478
|
|
|
1,347
|
|
|
48,006
|
|
|||||
Adjustments related to prior period sales
|
(43
|
)
|
|
329
|
|
|
3,056
|
|
|
(72
|
)
|
|
3,270
|
|
|||||
Credits/payments made
|
(8,497
|
)
|
|
(75,184
|
)
|
|
(16,620
|
)
|
|
(2,085
|
)
|
|
(102,386
|
)
|
|||||
Ending Balance
|
$
|
1,463
|
|
|
$
|
29,102
|
|
|
$
|
4,713
|
|
|
$
|
745
|
|
|
$
|
36,023
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
2013
|
|
|
|
|
|
|
|
|
|
||||||||||
Beginning Balance
|
$
|
5,416
|
|
|
$
|
63,560
|
|
|
$
|
2,852
|
|
|
$
|
3,565
|
|
|
$
|
75,393
|
|
Provision related to current period sales
|
31,395
|
|
|
204,459
|
|
|
5,795
|
|
|
9,295
|
|
|
250,944
|
|
|||||
Adjustments related to prior period sales
|
343
|
|
|
4,474
|
|
|
15,149
|
|
|
(228
|
)
|
|
19,738
|
|
|||||
Credits/payments made
|
(35,619
|
)
|
|
(204,249
|
)
|
|
(7,997
|
)
|
|
(11,077
|
)
|
|
(258,942
|
)
|
|||||
Ending Balance
|
$
|
1,535
|
|
|
$
|
68,244
|
|
|
$
|
15,799
|
|
|
$
|
1,555
|
|
|
$
|
87,133
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
2012
|
|
|
|
|
|
|
|
|
|
||||||||||
Beginning Balance
|
$
|
11,162
|
|
|
$
|
52,659
|
|
|
$
|
340
|
|
|
$
|
5,202
|
|
|
$
|
69,363
|
|
Provision related to current period sales
|
55,913
|
|
|
216,942
|
|
|
2,067
|
|
|
19,103
|
|
|
294,025
|
|
|||||
Adjustments related to prior period sales
|
29
|
|
|
3,883
|
|
|
1,498
|
|
|
72
|
|
|
5,482
|
|
|||||
Credits/payments made
|
(61,688
|
)
|
|
(209,924
|
)
|
|
(1,053
|
)
|
|
(20,812
|
)
|
|
(293,477
|
)
|
|||||
Ending Balance
|
$
|
5,416
|
|
|
$
|
63,560
|
|
|
$
|
2,852
|
|
|
$
|
3,565
|
|
|
$
|
75,393
|
|
B.
|
Collaborative Arrangements
|
|
2014
|
|
2013
|
|
2012
|
||||||
|
(in thousands)
|
||||||||||
Royalty revenues
|
$
|
13,481
|
|
|
$
|
130,724
|
|
|
$
|
117,592
|
|
Collaborative revenues:
|
|
|
|
|
|
||||||
Up-front and amendment payments revenues
|
$
|
—
|
|
|
$
|
190,345
|
|
|
$
|
12,428
|
|
Net reimbursement (payment) for telaprevir development costs
|
7,104
|
|
|
2,793
|
|
|
(3,507
|
)
|
|||
Reimbursement for manufacturing services
|
—
|
|
|
10,299
|
|
|
7,257
|
|
|||
Total collaborative revenues attributable to the Janssen HCV collaboration
|
$
|
7,104
|
|
|
$
|
203,437
|
|
|
$
|
16,178
|
|
Total revenues attributable to the Janssen HCV collaboration
|
$
|
20,585
|
|
|
$
|
334,161
|
|
|
$
|
133,770
|
|
|
2013
|
|
2012
|
||||
|
(in thousands)
|
||||||
Loss before provision for (benefit from) income taxes
|
$
|
283,747
|
|
|
$
|
20,044
|
|
Decrease (increase) in fair value of contingent milestone and royalty payments
|
124,920
|
|
|
(114,970
|
)
|
||
Provision for (benefit from) income taxes
|
(166,145
|
)
|
|
39,029
|
|
||
Net loss (income) attributable to noncontrolling interest (Alios)
|
$
|
242,522
|
|
|
$
|
(55,897
|
)
|
C.
|
Earnings Per Share
|
|
2014
|
|
2013
|
|
2012
|
||||||
|
(in thousands, except per share amounts)
|
||||||||||
Basic (loss) income from continuing operations per share attributable to Vertex common shareholder calculation:
|
|
|
|
|
|
||||||
(Loss) income from continuing operations attributable to Vertex common shareholders
|
$
|
(737,643
|
)
|
|
$
|
(503,622
|
)
|
|
$
|
32,271
|
|
Less: Undistributed earnings allocated to participating securities
|
—
|
|
|
—
|
|
|
(322
|
)
|
|||
(Loss) income from continuing operations attributable to Vertex common shareholders—basic
|
$
|
(737,643
|
)
|
|
$
|
(503,622
|
)
|
|
$
|
31,949
|
|
Basic weighted-average common shares outstanding
|
235,307
|
|
|
224,906
|
|
|
211,946
|
|
|||
Basic (loss) income from continuing operations per common share attributable to Vertex
|
$
|
(3.14
|
)
|
|
$
|
(2.24
|
)
|
|
$
|
0.15
|
|
Diluted (loss) income from continuing operations per share attributable to Vertex common shareholder calculation:
|
|
|
|
|
|
||||||
(Loss) income from continuing operations attributable to Vertex common shareholders
|
$
|
(737,643
|
)
|
|
$
|
(503,622
|
)
|
|
$
|
32,271
|
|
Less: Undistributed earnings allocated to participating securities
|
—
|
|
|
—
|
|
|
(317
|
)
|
|||
(Loss) income from continuing operations attributable to Vertex common shareholders—diluted
|
$
|
(737,643
|
)
|
|
$
|
(503,622
|
)
|
|
$
|
31,954
|
|
Basic weighted-average common shares outstanding
|
235,307
|
|
|
224,906
|
|
|
211,946
|
|
|||
Effect of potentially dilutive securities:
|
|
|
|
|
|
||||||
Stock options
|
—
|
|
|
—
|
|
|
3,219
|
|
|||
Other
|
—
|
|
|
—
|
|
|
97
|
|
|||
Diluted weighted-average common shares outstanding
|
235,307
|
|
|
224,906
|
|
|
215,262
|
|
|||
Diluted (loss) income from continuing operations per common share attributable to Vertex
|
$
|
(3.14
|
)
|
|
$
|
(2.24
|
)
|
|
$
|
0.15
|
|
|
2014
|
|
2013
|
|
2012
|
|||
|
(in thousands)
|
|||||||
Stock options
|
12,003
|
|
|
15,729
|
|
|
16,507
|
|
Convertible senior subordinated notes
|
—
|
|
|
—
|
|
|
8,192
|
|
Unvested restricted stock and restricted stock units
|
3,091
|
|
|
2,165
|
|
|
2,253
|
|
D.
|
Fair Value Measurements
|
Level 1:
|
Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
|
Level 2:
|
Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.
|
Level 3:
|
Unobservable inputs based on the Company’s assessment of the assumptions that market participants would use in pricing the asset or liability.
|
|
Fair Value Measurements as
of December 31, 2014 |
||||||||||||||
|
|
|
Fair Value Hierarchy
|
||||||||||||
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
|
(in thousands)
|
||||||||||||||
Financial assets carried at fair value:
|
|
|
|
|
|
|
|
||||||||
Cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
$
|
290,531
|
|
|
$
|
290,531
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Marketable securities:
|
|
|
|
|
|
|
|
||||||||
Government-sponsored enterprise securities
|
463,750
|
|
|
463,750
|
|
|
—
|
|
|
—
|
|
||||
Commercial paper
|
51,746
|
|
|
—
|
|
|
51,746
|
|
|
—
|
|
||||
Corporate debt securities
|
246,351
|
|
|
—
|
|
|
246,351
|
|
|
—
|
|
||||
Prepaid and other current assets:
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward contracts
|
2,011
|
|
|
—
|
|
|
2,011
|
|
|
—
|
|
||||
Total
|
$
|
1,054,389
|
|
|
$
|
754,281
|
|
|
$
|
300,108
|
|
|
$
|
—
|
|
E.
|
Marketable Securities
|
|
Amortized Cost
|
|
Gross
Unrealized Gains |
|
Gross
Unrealized Losses |
|
Fair Value
|
||||||||
|
(in thousands)
|
||||||||||||||
December 31, 2014
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Cash and money market funds
|
$
|
625,259
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
625,259
|
|
Total cash and cash equivalents
|
$
|
625,259
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
625,259
|
|
Marketable securities:
|
|
|
|
|
|
|
|
||||||||
Government-sponsored enterprise securities (due within 1 year)
|
$
|
463,788
|
|
|
$
|
14
|
|
|
$
|
(52
|
)
|
|
$
|
463,750
|
|
Commercial paper (due within 1 year)
|
51,674
|
|
|
72
|
|
|
—
|
|
|
51,746
|
|
||||
Corporate debt securities (due within 1 year)
|
196,065
|
|
|
2
|
|
|
(66
|
)
|
|
196,001
|
|
||||
Corporate debt securities (due after 1 year through 5 years)
|
50,443
|
|
|
—
|
|
|
(93
|
)
|
|
50,350
|
|
||||
Total marketable securities
|
$
|
761,970
|
|
|
$
|
88
|
|
|
$
|
(211
|
)
|
|
$
|
761,847
|
|
Total cash, cash equivalents and marketable securities
|
$
|
1,387,229
|
|
|
$
|
88
|
|
|
$
|
(211
|
)
|
|
$
|
1,387,106
|
|
|
|
|
|
|
|
|
|
||||||||
December 31, 2013
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Cash and money market funds
|
$
|
569,299
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
569,299
|
|
Total cash and cash equivalents
|
$
|
569,299
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
569,299
|
|
Marketable securities:
|
|
|
|
|
|
|
|
||||||||
Government-sponsored enterprise securities (due within 1 year)
|
$
|
600,496
|
|
|
$
|
7
|
|
|
$
|
(53
|
)
|
|
$
|
600,450
|
|
Commercial paper (due within 1 year)
|
83,384
|
|
|
109
|
|
|
—
|
|
|
83,493
|
|
||||
Corporate debt securities (due within 1 year)
|
189,674
|
|
|
14
|
|
|
(34
|
)
|
|
189,654
|
|
||||
Corporate debt securities (due after 1 year through 5 years)
|
22,181
|
|
|
6
|
|
|
(7
|
)
|
|
22,180
|
|
||||
Total marketable securities
|
$
|
895,735
|
|
|
$
|
136
|
|
|
$
|
(94
|
)
|
|
$
|
895,777
|
|
Total cash, cash equivalents and marketable securities
|
$
|
1,465,034
|
|
|
$
|
136
|
|
|
$
|
(94
|
)
|
|
$
|
1,465,076
|
|
F.
|
Accumulated Other Comprehensive Loss
|
|
Foreign currency translation adjustment
|
|
Unrealized holding gains (losses) on marketable securities
|
|
Unrealized (losses) gains on foreign currency forward contracts
|
|
Total
|
||||||||
|
(in thousands)
|
||||||||||||||
Balance at December 31, 2013
|
$
|
(325
|
)
|
|
$
|
42
|
|
|
$
|
(23
|
)
|
|
$
|
(306
|
)
|
Other comprehensive (loss) income before reclassifications
|
(646
|
)
|
|
(165
|
)
|
|
3,591
|
|
|
2,780
|
|
||||
Amounts reclassified from accumulated other comprehensive loss
|
—
|
|
|
—
|
|
|
(1,557
|
)
|
|
(1,557
|
)
|
||||
Net current period other comprehensive (loss) income
|
(646
|
)
|
|
(165
|
)
|
|
2,034
|
|
|
1,223
|
|
||||
Balance at December 31, 2014
|
$
|
(971
|
)
|
|
$
|
(123
|
)
|
|
$
|
2,011
|
|
|
$
|
917
|
|
G.
|
Hedging
|
|
As of December 31, 2014
|
|
As of December 31, 2013
|
||||
Foreign Currency
|
(in thousands)
|
||||||
Euro
|
$
|
20,209
|
|
|
$
|
17,468
|
|
British pound sterling
|
13,515
|
|
|
—
|
|
||
Total foreign currency forward contracts
|
$
|
33,724
|
|
|
$
|
17,468
|
|
|
As of December 31, 2014
|
|
As of December 31, 2013
|
||||
|
(in thousands)
|
||||||
Fair value - assets
|
$
|
2,011
|
|
|
$
|
—
|
|
Fair value - liabilities
|
—
|
|
|
(23
|
)
|
||
Net carrying value
|
$
|
2,011
|
|
|
$
|
(23
|
)
|
H.
|
Inventories
|
|
As of December 31,
|
||||||
|
2014
|
|
2013
|
||||
|
(in thousands)
|
||||||
Raw materials
|
$
|
8,506
|
|
|
$
|
489
|
|
Work-in-process
|
20,508
|
|
|
9,981
|
|
||
Finished goods
|
1,834
|
|
|
3,677
|
|
||
Total
|
$
|
30,848
|
|
|
$
|
14,147
|
|
I.
|
Property and Equipment
|
|
As of December 31,
|
||||||
|
2014
|
|
2013
|
||||
|
(in thousands)
|
||||||
Buildings
|
$
|
531,642
|
|
|
$
|
506,056
|
|
Furniture and equipment
|
202,846
|
|
|
190,555
|
|
||
Software
|
113,875
|
|
|
102,520
|
|
||
Leasehold improvements
|
99,942
|
|
|
163,019
|
|
||
Computers
|
45,893
|
|
|
43,096
|
|
||
Total property and equipment, gross
|
994,198
|
|
|
1,005,246
|
|
||
Less: accumulated depreciation
|
(278,386
|
)
|
|
(308,335
|
)
|
||
Total property and equipment, net
|
$
|
715,812
|
|
|
$
|
696,911
|
|
J.
|
Intangible Assets and Goodwill
|
K.
|
Additional Balance Sheet Detail
|
|
As of December 31,
|
||||||
|
2014
|
|
2013
|
||||
|
(in thousands)
|
||||||
Prepaid expenses
|
$
|
17,569
|
|
|
$
|
15,353
|
|
Taxes receivable
|
14,093
|
|
|
7,959
|
|
||
Restricted Cash (VIE)
|
8,418
|
|
|
—
|
|
||
Deferred tax asset
|
3,500
|
|
|
—
|
|
||
Fair value foreign currency forward contracts
|
2,011
|
|
|
—
|
|
||
Other
|
7,002
|
|
|
524
|
|
||
Total
|
$
|
52,593
|
|
|
$
|
23,836
|
|
|
As of December 31,
|
||||||
|
2014
|
|
2013
|
||||
|
(in thousands)
|
||||||
Payroll and benefits
|
$
|
91,175
|
|
|
$
|
76,785
|
|
Research, development and commercial contract costs
|
38,143
|
|
|
52,468
|
|
||
Product revenue allowances
|
34,554
|
|
|
85,510
|
|
||
Royalty payable
|
12,218
|
|
|
18,334
|
|
||
Taxes payable and reserves (including VIE taxes payable)
|
10,038
|
|
|
11,146
|
|
||
Professional fees
|
7,004
|
|
|
10,593
|
|
||
Interest
|
5,444
|
|
|
—
|
|
||
Other
|
11,100
|
|
|
16,241
|
|
||
Total
|
$
|
209,676
|
|
|
$
|
271,077
|
|
L.
|
Long Term Obligations
|
M.
|
Common Stock, Preferred Stock and Equity Plans
|
|
|
|
|
|
|
As of December 31, 2014
|
||||
Title of Plan
|
|
Group Eligible
|
|
Type of Award
Granted |
|
Awards
Outstanding |
|
Additional Awards
Authorized for Grant |
||
2013 Stock and Option Plan
|
|
Employees, Non-employee Directors and Consultants
|
|
NSO,
RS and RSU |
|
2,857,275
|
|
|
9,362,898
|
|
2006 Stock and Option Plan
|
|
Employees, Non-employee Directors and Consultants
|
|
NSO,
RS and RSU |
|
11,428,741
|
|
|
1,189,473
|
|
1996 Stock and Option Plan
|
|
Employees, Non-employee Directors, Advisors and Consultants
|
|
NSO, ISO and RS
|
|
623,789
|
|
|
—
|
|
|
|
|
|
Total
|
|
14,909,805
|
|
|
10,552,371
|
|
|
Stock Options
|
|
Weighted-average
Exercise Price |
|
Weighted-average
Remaining Contractual Life |
|
Aggregate Intrinsic
Value |
|||||
|
(in thousands)
|
|
(per share)
|
|
(in years)
|
|
(in thousands)
|
|||||
Outstanding at December 31, 2013
|
15,729
|
|
|
$
|
44.40
|
|
|
|
|
|
||
Granted
|
3,614
|
|
|
$
|
84.33
|
|
|
|
|
|
||
Exercised
|
(6,153
|
)
|
|
$
|
41.53
|
|
|
|
|
|
||
Forfeited
|
(1,173
|
)
|
|
$
|
55.28
|
|
|
|
|
|
||
Expired
|
(14
|
)
|
|
$
|
66.43
|
|
|
|
|
|
||
Outstanding at December 31, 2014
|
12,003
|
|
|
$
|
56.81
|
|
|
6.94
|
|
$
|
761,274
|
|
Exercisable at December 31, 2014
|
5,553
|
|
|
$
|
45.61
|
|
|
5.43
|
|
$
|
414,345
|
|
Exercisable and Expected to Vest at December 31, 2014
|
11,380
|
|
|
$
|
55.94
|
|
|
6.85
|
|
$
|
731,677
|
|
|
|
Options Outstanding
|
|
Options Exercisable
|
||||||||||||
Range of Exercise Prices
|
|
Number
Outstanding |
|
Weighted-average
Remaining Contractual Life |
|
Weighted-average
Exercise Price |
|
Number
Exercisable |
|
Weighted-average
Exercise Price |
||||||
|
|
(in thousands)
|
|
(in years)
|
|
(per share)
|
|
(in thousands)
|
|
(per share)
|
||||||
$10.41–$20.00
|
|
214
|
|
|
2.25
|
|
$
|
17.66
|
|
|
214
|
|
|
$
|
17.66
|
|
$20.01–$40.00
|
|
3,702
|
|
|
4.40
|
|
$
|
35.07
|
|
|
2,989
|
|
|
$
|
34.73
|
|
$40.01–$60.00
|
|
3,690
|
|
|
7.46
|
|
$
|
48.52
|
|
|
1,435
|
|
|
$
|
50.48
|
|
$60.01–$80.00
|
|
1,980
|
|
|
8.85
|
|
$
|
76.13
|
|
|
442
|
|
|
$
|
74.76
|
|
$80.01–$100.00
|
|
2,401
|
|
|
8.87
|
|
$
|
90.23
|
|
|
473
|
|
|
$
|
84.9
|
|
$100.01–$112.48
|
|
16
|
|
|
9.83
|
|
$
|
110.58
|
|
|
—
|
|
|
$
|
—
|
|
Total
|
|
12,003
|
|
|
6.94
|
|
$
|
56.81
|
|
|
5,553
|
|
|
$
|
45.61
|
|
|
Restricted
Stock |
|
Weighted-average
Grant-date Fair Value |
|||
|
(in thousands)
|
|
(per share)
|
|||
Unvested at December 31, 2013
|
2,046
|
|
|
$
|
52.66
|
|
Granted
|
1,897
|
|
|
$
|
92.00
|
|
Vested
|
(595
|
)
|
|
$
|
50.65
|
|
Cancelled
|
(441
|
)
|
|
$
|
56.36
|
|
Unvested at December 31, 2014
|
2,907
|
|
|
$
|
78.18
|
|
|
Year Ended December 31, 2014
|
||
|
(in thousands,
except per share amount) |
||
Number of shares
|
357
|
|
|
Average price paid per share
|
$
|
53.65
|
|
N.
|
Stock-based Compensation Expense
|
|
2014
|
|
2013
|
|
2012
|
||||||
|
(in thousands)
|
||||||||||
Stock-based compensation expense by line item:
|
|
|
|
|
|
||||||
Research and development expenses
|
$
|
116,998
|
|
|
$
|
81,183
|
|
|
$
|
71,243
|
|
Sales, general and administrative expenses
|
60,544
|
|
|
45,652
|
|
|
42,561
|
|
|||
Total stock-based compensation expense included in costs and expenses
|
$
|
177,542
|
|
|
$
|
126,835
|
|
|
$
|
113,804
|
|
|
2014
|
|
2013
|
|
2012
|
||||||
|
(in thousands)
|
||||||||||
Stock-based compensation expense by type of award:
|
|
|
|
|
|
||||||
Stock options
|
$
|
99,961
|
|
|
$
|
84,599
|
|
|
$
|
78,566
|
|
Restricted stock and restricted stock units
|
70,678
|
|
|
36,479
|
|
|
29,194
|
|
|||
ESPP share issuances
|
8,326
|
|
|
6,805
|
|
|
7,298
|
|
|||
Less: stock-based compensation expense capitalized to inventories
|
(1,423
|
)
|
|
(1,048
|
)
|
|
(1,254
|
)
|
|||
Total stock-based compensation expense included in costs and expenses
|
$
|
177,542
|
|
|
$
|
126,835
|
|
|
$
|
113,804
|
|
|
As of December 31, 2014
|
||||
|
Unrecognized Expense
Net of Estimated Forfeitures |
|
Weighted-average
Recognition Period |
||
|
(in thousands)
|
|
(in years)
|
||
Type of award:
|
|
|
|
||
Stock options
|
$
|
156,969
|
|
|
2.13
|
Restricted stock and restricted stock units
|
$
|
148,037
|
|
|
2.79
|
ESPP share issuances
|
$
|
4,262
|
|
|
0.61
|
|
2014
|
|
2013
|
|
2012
|
|||
Expected stock price volatility
|
50.86
|
%
|
|
46.20
|
%
|
|
47.93
|
%
|
Risk-free interest rate
|
1.77
|
%
|
|
1.25
|
%
|
|
0.95
|
%
|
Expected term of options (in years)
|
5.47
|
|
|
5.81
|
|
|
5.78
|
|
Expected annual dividends
|
—
|
|
|
—
|
|
|
—
|
|
•
|
Expected stock price volatility:
Options to purchase the Company’s stock with remaining terms of greater than one year are regularly traded in the market. Expected stock price volatility is calculated using the trailing one month average of daily implied volatilities prior to grant date.
|
•
|
Risk-free interest rate:
The Company bases the risk-free interest rate on the interest rate payable on U.S. Treasury securities in effect at the time of grant for a period that is commensurate with the assumed expected option term.
|
•
|
Expected term of options:
The expected term of options represents the period of time options are expected to be outstanding. The Company uses historical data to estimate employee exercise and post-vest termination behavior. The Company believes that all groups of employees exhibit similar exercise and post-vest termination behavior and therefore does not stratify employees into multiple groups in determining the expected term of options.
|
•
|
Expected annual dividends:
The estimate for annual dividends is
$0.00
because the Company has not historically paid, and does not intend for the foreseeable future to pay, a dividend.
|
O.
|
Other Arrangements
|
P.
|
Income Taxes
|
|
2014
|
|
2013
|
|
2012
|
||||||
|
(in thousands)
|
||||||||||
United States
|
$
|
(645,465
|
)
|
|
$
|
(10,638
|
)
|
|
$
|
231,542
|
|
Foreign
|
(89,410
|
)
|
|
(615,406
|
)
|
|
(199,546
|
)
|
|||
(Loss) income from continuing operations before provision for (benefit from) income taxes
|
$
|
(734,875
|
)
|
|
$
|
(626,044
|
)
|
|
$
|
31,996
|
|
|
2014
|
|
2013
|
|
2012
|
||||||
|
(in thousands)
|
||||||||||
Current taxes:
|
|
|
|
|
|
||||||
United States
|
$
|
2,853
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Foreign
|
2,457
|
|
|
1,085
|
|
|
(1,865
|
)
|
|||
State
|
1,366
|
|
|
4,080
|
|
|
1,590
|
|
|||
Total current taxes
|
$
|
6,676
|
|
|
$
|
5,165
|
|
|
$
|
(275
|
)
|
Deferred taxes:
|
|
|
|
|
|
||||||
United States
|
$
|
244
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Foreign
|
—
|
|
|
(127,587
|
)
|
|
—
|
|
|||
State
|
38
|
|
|
—
|
|
|
—
|
|
|||
Total deferred taxes
|
$
|
282
|
|
|
$
|
(127,587
|
)
|
|
$
|
—
|
|
Provision for (benefit from) income taxes
|
$
|
6,958
|
|
|
$
|
(122,422
|
)
|
|
$
|
(275
|
)
|
|
2014
|
|
2013
|
|
2012
|
||||||
|
(in thousands)
|
||||||||||
(Loss) income from continuing operations before provision for (benefit from) income taxes
|
$
|
(734,875
|
)
|
|
$
|
(626,044
|
)
|
|
$
|
31,996
|
|
Expected tax provision (benefit)
|
(257,206
|
)
|
|
(219,115
|
)
|
|
11,199
|
|
|||
State taxes, net of federal benefit
|
1,124
|
|
|
3,844
|
|
|
1,693
|
|
|||
Foreign rate differential
|
39,335
|
|
|
79,799
|
|
|
46,168
|
|
|||
Tax credits
|
(33,788
|
)
|
|
(16,775
|
)
|
|
(1,791
|
)
|
|||
Unbenefitted operating losses
|
241,037
|
|
|
(29,900
|
)
|
|
(63,189
|
)
|
|||
Non-deductible expenses
|
18,756
|
|
|
9,614
|
|
|
3,084
|
|
|||
Rate change
|
(1,826
|
)
|
|
50,076
|
|
|
3,275
|
|
|||
Other
|
(474
|
)
|
|
35
|
|
|
(714
|
)
|
|||
Provision for (benefit from) income taxes
|
$
|
6,958
|
|
|
$
|
(122,422
|
)
|
|
$
|
(275
|
)
|
|
As of December 31,
|
||||||
|
2014
|
|
2013
|
||||
|
(in thousands)
|
||||||
Deferred tax assets:
|
|
|
|
||||
Net operating loss
|
$
|
996,172
|
|
|
$
|
850,946
|
|
Tax credit carryforwards
|
265,339
|
|
|
180,380
|
|
||
Intangible assets
|
3,174
|
|
|
26,105
|
|
||
Deferred revenues
|
15,771
|
|
|
25,158
|
|
||
Stock-based compensation
|
61,527
|
|
|
63,521
|
|
||
Inventories
|
13,395
|
|
|
26,278
|
|
||
Accrued expenses
|
37,699
|
|
|
52,470
|
|
||
Currency translation adjustment
|
—
|
|
|
217
|
|
||
Construction financing lease obligation
|
175,853
|
|
|
152,688
|
|
||
Gross deferred tax assets
|
1,568,930
|
|
|
1,377,763
|
|
||
Valuation allowance
|
(1,409,936
|
)
|
|
(1,243,664
|
)
|
||
Total deferred tax assets
|
158,994
|
|
|
134,099
|
|
||
Deferred tax liabilities:
|
|
|
|
||||
Property and equipment
|
(158,994
|
)
|
|
(134,099
|
)
|
||
Acquired intangibles
|
(11,544
|
)
|
|
—
|
|
||
Net deferred tax liabilities
|
$
|
(11,544
|
)
|
|
$
|
—
|
|
|
2014
|
|
2013
|
||||
|
(in thousands)
|
||||||
Unrecognized tax benefits beginning of year
|
$
|
2,024
|
|
|
$
|
4,106
|
|
Gross change for current year positions
|
—
|
|
|
1,325
|
|
||
Decrease for prior period positions
|
(27
|
)
|
|
(290
|
)
|
||
Decrease due to settlements and payments
|
(1,117
|
)
|
|
—
|
|
||
Decrease due to statute limitations
|
—
|
|
|
(185
|
)
|
||
Deconsolidation of Alios
|
—
|
|
|
(2,932
|
)
|
||
Unrecognized tax benefits end of year
|
$
|
880
|
|
|
$
|
2,024
|
|
Q.
|
Restructuring Expenses
|
|
Restructuring Expense
|
|
Cash
Payments |
|
Non-cash
Expense |
|
Liability as of
December 31, 2003 |
||||||||
|
(in thousands)
|
||||||||||||||
Lease restructuring and other operating lease expense
|
$
|
84,726
|
|
|
$
|
(15,200
|
)
|
|
$
|
—
|
|
|
$
|
69,526
|
|
Employee severance, benefits and related costs
|
2,616
|
|
|
(2,616
|
)
|
|
—
|
|
|
—
|
|
||||
Leasehold improvements and asset impairments
|
4,482
|
|
|
—
|
|
|
(4,482
|
)
|
|
—
|
|
||||
Total
|
$
|
91,824
|
|
|
$
|
(17,816
|
)
|
|
$
|
(4,482
|
)
|
|
$
|
69,526
|
|
|
2014
|
|
2013
|
|
2012
|
|
2004-2014
|
||||||||
|
(in thousands)
|
||||||||||||||
Liability, beginning of the period
|
$
|
19,115
|
|
|
$
|
23,328
|
|
|
$
|
26,313
|
|
|
$
|
69,526
|
|
Cash payments
|
(17,494
|
)
|
|
(15,255
|
)
|
|
(14,853
|
)
|
|
(196,446
|
)
|
||||
Cash received from subleases
|
12,912
|
|
|
10,670
|
|
|
10,024
|
|
|
88,620
|
|
||||
Credit for portion of facility Vertex decided to occupy in 2005
|
—
|
|
|
—
|
|
|
—
|
|
|
(10,018
|
)
|
||||
Restructuring expense
|
(2,937
|
)
|
|
372
|
|
|
1,844
|
|
|
59,914
|
|
||||
Liability, end of the period
|
$
|
11,596
|
|
|
$
|
19,115
|
|
|
$
|
23,328
|
|
|
$
|
11,596
|
|
|
2014
|
|
2013
|
||||
|
(in thousands)
|
||||||
Liability, beginning of the period
|
$
|
797
|
|
|
$
|
—
|
|
Cash payments
|
(18,271
|
)
|
|
(401
|
)
|
||
Restructuring expense
|
50,864
|
|
|
1,198
|
|
||
Liability, end of the period
|
$
|
33,390
|
|
|
$
|
797
|
|
|
2014
|
|
2013
|
||||
|
(in thousands)
|
||||||
Liability, beginning of the period
|
$
|
8,441
|
|
|
$
|
—
|
|
Cash payments
|
(10,570
|
)
|
|
(22,916
|
)
|
||
Asset impairments and other non-cash expense
|
—
|
|
|
(7,594
|
)
|
||
Restructuring expense
|
2,998
|
|
|
38,951
|
|
||
Liability, end of the period
|
$
|
869
|
|
|
$
|
8,441
|
|
R.
|
Employee Benefits
|
|
2013
|
|
2012
|
||||
|
(in thousands)
|
||||||
Discretionary matching contributions during the year ended December 31,
|
$
|
5,930
|
|
|
$
|
10,261
|
|
Shares issued during the year ended December 31,
|
99
|
|
|
242
|
|
||
Shares issuable as of the year ended December 31,
|
—
|
|
|
53
|
|
S.
|
Commitments and Contingencies
|
Year
|
|
Fan Pier
Leases |
|
Kendall Square
Lease |
|
Kendall Sublease
Income |
|
Other
Operating Leases |
|
Total Lease
Commitments
(Net of Sublease Income)
|
||||||||||
|
|
(in thousands)
|
||||||||||||||||||
2015
|
|
$
|
67,206
|
|
|
$
|
19,879
|
|
|
$
|
(11,405
|
)
|
|
$
|
28,710
|
|
|
$
|
104,390
|
|
2016
|
|
67,206
|
|
|
19,879
|
|
|
(15,355
|
)
|
|
12,953
|
|
|
84,683
|
|
|||||
2017
|
|
67,206
|
|
|
19,879
|
|
|
(15,355
|
)
|
|
12,792
|
|
|
84,522
|
|
|||||
2018
|
|
67,206
|
|
|
6,626
|
|
|
(5,118
|
)
|
|
12,582
|
|
|
81,296
|
|
|||||
2019
|
|
72,589
|
|
|
—
|
|
|
—
|
|
|
9,330
|
|
|
81,919
|
|
|||||
Thereafter
|
|
680,209
|
|
|
—
|
|
|
—
|
|
|
78,612
|
|
|
758,821
|
|
|||||
Total minimum lease payments
|
|
$
|
1,021,622
|
|
|
$
|
66,263
|
|
|
$
|
(47,233
|
)
|
|
$
|
154,979
|
|
|
$
|
1,195,631
|
|
Year
|
|
(in thousands)
|
||
2015
|
|
$
|
20,792
|
|
2016
|
|
14,254
|
|
|
2017
|
|
13,129
|
|
|
2018
|
|
13,027
|
|
|
2019
|
|
3,047
|
|
|
Thereafter
|
|
—
|
|
|
Total payments
|
|
64,249
|
|
|
Less: amount representing interest
|
|
(7,150
|
)
|
|
Present value of payments
|
|
$
|
57,099
|
|
T.
|
Segment Information
|
|
2014
|
|
2013
|
|
2012
|
||||||
|
(in thousands)
|
||||||||||
KALYDECO
|
$
|
463,750
|
|
|
$
|
371,285
|
|
|
$
|
171,645
|
|
INCIVEK
|
24,071
|
|
|
466,360
|
|
|
1,161,813
|
|
|||
Total product revenues, net
|
$
|
487,821
|
|
|
$
|
837,645
|
|
|
$
|
1,333,458
|
|
|
2014
|
|
2013
|
|
2012
|
||||||
|
(in thousands)
|
||||||||||
United States
|
$
|
361,074
|
|
|
$
|
896,952
|
|
|
$
|
1,373,516
|
|
Outside of the United States
|
|
|
|
|
|
||||||
Europe
|
197,611
|
|
|
279,557
|
|
|
129,786
|
|
|||
Other
|
21,730
|
|
|
35,466
|
|
|
23,740
|
|
|||
Total revenues outside of the United States
|
219,341
|
|
|
315,023
|
|
|
153,526
|
|
|||
Total revenues
|
$
|
580,415
|
|
|
$
|
1,211,975
|
|
|
$
|
1,527,042
|
|
|
Percent of Total Gross Revenues
|
|
Percent of Gross Accounts Receivable
|
|||||||||||
|
Year Ended December 31,
|
|
As of December 31,
|
|||||||||||
|
2014
|
|
2013
|
|
2012
|
|
2014
|
|
2013
|
|||||
Walgreen Co.
|
12
|
%
|
|
<10
|
%
|
|
<10
|
%
|
|
11
|
%
|
|
<10
|
%
|
Bupa Home Healthcare Limited
|
<10
|
%
|
|
<10
|
%
|
|
N/A
|
|
|
20
|
%
|
|
14
|
%
|
Janssen Inc.
|
<10
|
%
|
|
N/A
|
|
|
N/A
|
|
|
12
|
%
|
|
N/A
|
|
Janssen NV
|
<10
|
%
|
|
22
|
%
|
|
<10
|
%
|
|
<10
|
%
|
|
28
|
%
|
AmerisourceBergen Drug Corporation
|
<10
|
%
|
|
21
|
%
|
|
32
|
%
|
|
<10
|
%
|
|
<10
|
%
|
McKesson Corporation
|
<10
|
%
|
|
21
|
%
|
|
29
|
%
|
|
<10
|
%
|
|
<10
|
%
|
Cardinal Health Incorporated
|
<10
|
%
|
|
<10
|
%
|
|
15
|
%
|
|
<10
|
%
|
|
<10
|
%
|
|
As of December 31,
|
||||||
|
2014
|
|
2013
|
||||
|
(in thousands)
|
||||||
United States
|
$
|
676,968
|
|
|
$
|
657,587
|
|
Outside of the United States
|
|
|
|
||||
United Kingdom
|
33,628
|
|
|
29,970
|
|
||
Other
|
5,216
|
|
|
9,354
|
|
||
Total property and equipment, net outside of the United States
|
38,844
|
|
|
39,324
|
|
||
Total property and equipment, net
|
$
|
715,812
|
|
|
$
|
696,911
|
|
U.
|
Quarterly Financial Data (unaudited)
|
|
Three Months Ended
|
||||||||||||||
|
March 31,
2014 |
|
June 30,
2014 |
|
September 30,
2014 |
|
December 31,
2014 |
||||||||
|
(in thousands, except per share amounts)
|
||||||||||||||
Revenues:
|
|
|
|
|
|
|
|
||||||||
Product revenues, net
|
$
|
103,461
|
|
|
$
|
122,319
|
|
|
$
|
137,099
|
|
|
$
|
124,942
|
|
Royalty revenues
|
10,733
|
|
|
13,015
|
|
|
8,386
|
|
|
8,785
|
|
||||
Collaborative revenues (1)
|
4,257
|
|
|
3,087
|
|
|
33,502
|
|
|
10,829
|
|
||||
Total revenues
|
118,451
|
|
|
138,421
|
|
|
178,987
|
|
|
144,556
|
|
||||
Costs and expenses:
|
|
|
|
|
|
|
|
||||||||
Cost of product revenues
|
8,572
|
|
|
9,655
|
|
|
10,208
|
|
|
11,290
|
|
||||
Royalty expenses
|
6,904
|
|
|
7,645
|
|
|
3,976
|
|
|
2,737
|
|
||||
Research and development expenses
|
238,617
|
|
|
224,487
|
|
|
190,939
|
|
|
201,463
|
|
||||
Sales, general and administrative expenses
|
74,212
|
|
|
77,446
|
|
|
75,224
|
|
|
78,527
|
|
||||
Restructuring expenses (2)
|
6,188
|
|
|
(270
|
)
|
|
40,843
|
|
|
4,164
|
|
||||
Total costs and expenses
|
334,493
|
|
|
318,963
|
|
|
321,190
|
|
|
298,181
|
|
||||
Loss from operations
|
(216,042
|
)
|
|
(180,542
|
)
|
|
(142,203
|
)
|
|
(153,625
|
)
|
||||
Interest expense, net
|
(15,717
|
)
|
|
(15,585
|
)
|
|
(20,384
|
)
|
|
(21,177
|
)
|
||||
Other income (expense), net (3)
|
451
|
|
|
37,731
|
|
|
(3,990
|
)
|
|
(3,792
|
)
|
||||
Loss from continuing operations before provision for income taxes
|
(231,308
|
)
|
|
(158,396
|
)
|
|
(166,577
|
)
|
|
(178,594
|
)
|
||||
Provision for income taxes
|
803
|
|
|
693
|
|
|
3,419
|
|
|
2,043
|
|
||||
Loss from continuing operations
|
(232,111
|
)
|
|
(159,089
|
)
|
|
(169,996
|
)
|
|
(180,637
|
)
|
||||
Loss from discontinued operations (4)
|
(346
|
)
|
|
(293
|
)
|
|
(64
|
)
|
|
(209
|
)
|
||||
Net loss
|
(232,457
|
)
|
|
(159,382
|
)
|
|
(170,060
|
)
|
|
(180,846
|
)
|
||||
Loss attributable to noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
4,190
|
|
||||
Net loss attributable to Vertex
|
$
|
(232,457
|
)
|
|
$
|
(159,382
|
)
|
|
$
|
(170,060
|
)
|
|
$
|
(176,656
|
)
|
|
|
|
|
|
|
|
|
||||||||
Amounts attributable to Vertex:
|
|
|
|
|
|
|
|
||||||||
Loss from continuing operations attributable to Vertex
|
$
|
(232,111
|
)
|
|
$
|
(159,089
|
)
|
|
$
|
(169,996
|
)
|
|
$
|
(176,447
|
)
|
Loss from discontinued operations (4)
|
(346
|
)
|
|
(293
|
)
|
|
(64
|
)
|
|
(209
|
)
|
||||
Net loss attributable to Vertex
|
$
|
(232,457
|
)
|
|
$
|
(159,382
|
)
|
|
$
|
(170,060
|
)
|
|
$
|
(176,656
|
)
|
|
|
|
|
|
|
|
|
||||||||
Amounts per share attributable to Vertex common shareholders:
|
|
|
|
|
|
|
|
||||||||
Net loss from continuing operations:
|
|
|
|
|
|
|
|
||||||||
Basic and diluted
|
$
|
(1.00
|
)
|
|
$
|
(0.68
|
)
|
|
$
|
(0.72
|
)
|
|
$
|
(0.74
|
)
|
Net loss from discontinued operations:
|
|
|
|
|
|
|
|
||||||||
Basic and diluted
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Net loss:
|
|
|
|
|
|
|
|
||||||||
Basic and diluted
|
$
|
(1.00
|
)
|
|
$
|
(0.68
|
)
|
|
$
|
(0.72
|
)
|
|
$
|
(0.74
|
)
|
Shares used in per share calculations:
|
|
|
|
|
|
|
|
||||||||
Basic and diluted
|
232,887
|
|
|
233,808
|
|
|
236,137
|
|
|
238,272
|
|
|
Three Months Ended
|
||||||||||||||
|
March 31,
2013 |
|
June 30,
2013 |
|
September 30,
2013 |
|
December 31,
2013 |
||||||||
|
(in thousands, except per share amounts)
|
||||||||||||||
Revenues:
|
|
|
|
|
|
|
|
||||||||
Product revenues, net
|
$
|
267,381
|
|
|
$
|
254,789
|
|
|
$
|
186,653
|
|
|
$
|
128,822
|
|
Royalty revenues
|
43,573
|
|
|
49,120
|
|
|
27,012
|
|
|
36,887
|
|
||||
Collaborative revenues (5)
|
17,414
|
|
|
6,841
|
|
|
8,035
|
|
|
185,448
|
|
||||
Total revenues
|
328,368
|
|
|
310,750
|
|
|
221,700
|
|
|
351,157
|
|
||||
Costs and expenses:
|
|
|
|
|
|
|
|
||||||||
Cost of product revenues
|
30,955
|
|
|
24,695
|
|
|
20,048
|
|
|
13,281
|
|
||||
Royalty expenses
|
11,788
|
|
|
13,236
|
|
|
7,291
|
|
|
8,983
|
|
||||
Research and development expenses
|
210,200
|
|
|
213,994
|
|
|
219,442
|
|
|
238,461
|
|
||||
Sales, general and administrative expenses
|
91,625
|
|
|
105,081
|
|
|
86,427
|
|
|
73,055
|
|
||||
Restructuring expenses
|
39
|
|
|
776
|
|
|
12,048
|
|
|
27,658
|
|
||||
Intangible asset impairment charge (4)
|
412,900
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Total costs and expenses
|
757,507
|
|
|
357,782
|
|
|
345,256
|
|
|
361,438
|
|
||||
Loss from operations
|
(429,139
|
)
|
|
(47,032
|
)
|
|
(123,556
|
)
|
|
(10,281
|
)
|
||||
Interest expense, net
|
(3,469
|
)
|
|
(6,727
|
)
|
|
(104
|
)
|
|
(12,626
|
)
|
||||
Other (expense) income, net
|
(1,175
|
)
|
|
(34
|
)
|
|
4,760
|
|
|
3,339
|
|
||||
Loss from continuing operations before (benefit from) provision for income taxes
|
(433,783
|
)
|
|
(53,793
|
)
|
|
(118,900
|
)
|
|
(19,568
|
)
|
||||
(Benefit from) provision for income taxes (6)
|
(126,887
|
)
|
|
558
|
|
|
2,555
|
|
|
1,352
|
|
||||
Loss from continuing operations
|
(306,896
|
)
|
|
(54,351
|
)
|
|
(121,455
|
)
|
|
(20,920
|
)
|
||||
Loss from discontinued operations, net of tax benefit (4)
|
(5,731
|
)
|
|
(7,361
|
)
|
|
(7,207
|
)
|
|
(163,629
|
)
|
||||
Net loss
|
(312,627
|
)
|
|
(61,712
|
)
|
|
(128,662
|
)
|
|
(184,549
|
)
|
||||
Loss from discontinued operations attributable to noncontrolling interest (4)
|
4,611
|
|
|
4,547
|
|
|
4,530
|
|
|
228,834
|
|
||||
Net (loss) income attributable to Vertex
|
$
|
(308,016
|
)
|
|
$
|
(57,165
|
)
|
|
$
|
(124,132
|
)
|
|
$
|
44,285
|
|
|
|
|
|
|
|
|
|
||||||||
Amounts attributable to Vertex:
|
|
|
|
|
|
|
|
||||||||
Loss from continuing operations attributable to Vertex
|
$
|
(306,896
|
)
|
|
$
|
(54,351
|
)
|
|
$
|
(121,455
|
)
|
|
$
|
(20,920
|
)
|
(Loss) income from discontinued operations (4)
|
(1,120
|
)
|
|
(2,814
|
)
|
|
(2,677
|
)
|
|
65,205
|
|
||||
Net (loss) income attributable to Vertex
|
$
|
(308,016
|
)
|
|
$
|
(57,165
|
)
|
|
$
|
(124,132
|
)
|
|
$
|
44,285
|
|
|
|
|
|
|
|
|
|
||||||||
Amounts per share attributable to Vertex common shareholders:
|
|
|
|
|
|
|
|
||||||||
Net loss from continuing operations:
|
|
|
|
|
|
|
|
||||||||
Basic and diluted
|
$
|
(1.42
|
)
|
|
$
|
(0.25
|
)
|
|
$
|
(0.53
|
)
|
|
$
|
(0.09
|
)
|
Net (loss) income from discontinued operations:
|
|
|
|
|
|
|
|
||||||||
Basic and diluted
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
0.28
|
|
Net (loss) income:
|
|
|
|
|
|
|
|
||||||||
Basic and diluted
|
$
|
(1.43
|
)
|
|
$
|
(0.26
|
)
|
|
$
|
(0.54
|
)
|
|
$
|
0.19
|
|
Shares used in per share calculations:
|
|
|
|
|
|
|
|
||||||||
Basic and diluted
|
215,421
|
|
|
222,053
|
|
|
230,505
|
|
|
231,264
|
|
1.
|
During the third quarter of 2014, the Company received a non-refundable up-front payment of
$30.0 million
from Janssen Inc., which was recorded as collaborative revenue in the third quarter. See
Note B, “Collaborative Arrangements,”
for further information.
|
2.
|
During the third quarter of 2014, the Company recorded
$40.8 million
of restructuring expenses primarily related to the relocation of its corporate headquarters to Boston from Cambridge. See
Note Q, “Restructuring Expenses,”
for further information.
|
3.
|
During the second quarter of 2014, the Company received a one-time cash payment of
$36.7 million
from its landlord pursuant to the Fan Pier Leases, which was recorded as other income in the second quarter. See
Note O, “Other Arrangements,”
for further information.
|
4.
|
During the fourth quarter of 2013, the Company deconsolidated Alios, which included certain charges attributable to Vertex related to the deconsolidation recorded in other income (expense), net, and was preceded by a
$250.6 million
intangible asset impairment charge related to the HCV nucleotide analogue program indefinite-lived in-process research and development asset. In connection with this impairment charge, a credit of
$102.1 million
was recorded to the provision for income taxes attributable to Alios. As of September 30, 2014, the Company concluded that it no longer had significant continuing involvement with Alios due to its intent and ability to terminate the Alios Agreement; therefore, the operations of Alios, including collaboration expenses reimbursed by Vertex are presented as discontinued operations for the periods presented in these consolidated financial statements.
|
5.
|
During the fourth quarter of 2013, the Company recorded
$182.4 million
of collaborative revenue related to its Janssen collaboration, which was primarily attributable to an amendment to its collaboration agreement with Janssen. See
Note B, “Collaborative Arrangements,”
for further information.
|
6.
|
During the first quarter of 2013, the Company recorded a
$412.9 million
intangible asset impairment charge related to its VX-222 indefinite-lived in-process research and development asset. In connection with this impairment charge, the Company recorded a credit of
$127.6 million
in its provision for income taxes. See
Note J, “Intangible Assets and Goodwill,”
for further information.
|
(1)
|
Applicable to grants made on or after February 5, 2014.
|
(1)
|
Applicable to grants made on or after February 5, 2014.
|
(2)
|
For Section 16 Officers, replace bracketed language with the following: “By accepting this Agreement, the Participant agrees and acknowledges that (i) the Company promptly will withhold from the Participant's pay the amount of taxes the Company is required to withhold upon any vesting of Shares pursuant to this Agreement, and (ii) the Participant shall make immediate payment to the Company in the amount of any tax required to be withheld by the Company in excess of the Participant's pay available for such withholding.”
|
(1)
|
Applicable to grants made on or after February 5, 2014.
|
(1)
|
Applicable to grants made on or after February 5, 2014.
|
(1)
|
Applicable to grants made on or after February 5, 2014.
|
(2)
|
For Section 16 Officers, replace bracketed language with the following: “By accepting this Agreement, the Participant agrees and acknowledges that (i) the Company promptly will withhold from the Participant's pay the amount of taxes the Company is required to withhold upon any vesting of Shares pursuant to this Agreement, and (ii) the Participant shall make immediate payment to the Company in the amount of any tax required to be withheld by the Company in excess of the Participant's pay available for such withholding.”
|
(1)
|
Applicable to grants made on or after February 5, 2014.
|
•
|
Registration Statement (Form S-3 No. 333-186993) of Vertex Pharmaceuticals Incorporated,
|
•
|
Registration Statement (Form S-8 No. 333-104362) pertaining to the Vertex Pharmaceuticals 1996 Stock and Option Plan, as amended,
|
•
|
Registration Statement (Form S-8 Nos. 333-134482, 333-150946, 333-160442, 333-166803 and 333-184787) pertaining to the Vertex Pharmaceuticals Incorporated Amended and Restated 2006 Stock and Option Plan (formerly known as the Vertex Pharmaceuticals Incorporated 2006 Stock and Option Plan),
|
•
|
Registration Statement (Form S-8 No. 333-184784) pertaining to the Vertex Pharmaceuticals Incorporated Employee Stock Purchase Plan, and
|
•
|
Registration Statement (Form S-8 Nos. 333-188737 and 333-197466) pertaining to the Vertex Pharmaceuticals Incorporated
2013 Stock and Option Plan
;
|
1.
|
I have reviewed this Annual Report on Form 10-K of Vertex Pharmaceuticals Incorporated;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
Date:
|
February 13, 2015
|
/s/ Jeffrey M. Leiden
|
|
|
|
|
|
Jeffrey M. Leiden
|
|
|
Chief Executive Officer and President
|
1.
|
I have reviewed this Annual Report on Form 10-K of Vertex Pharmaceuticals Incorporated;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
Date:
|
February 13, 2015
|
/s/ Ian F. Smith
|
|
|
|
|
|
Ian F. Smith
|
|
|
Executive Vice President and Chief Financial Officer
|
Date:
|
February 13, 2015
|
|
|
|
/s/ Jeffrey M. Leiden
|
|
|
|
|
|
Jeffrey M. Leiden
|
|
|
Chief Executive Officer and President
|
|
|
|
Date:
|
February 13, 2015
|
|
|
|
/s/ Ian F. Smith
|
|
|
|
|
|
Ian F. Smith
|
|
|
Executive Vice President and Chief Financial Officer
|
|