|
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2016
|
|
or
|
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
FOR THE TRANSITION PERIOD FROM
TO
|
Massachusetts
|
04-3039129
|
(State or other jurisdiction of
incorporation or organization) |
(I.R.S. Employer
Identification No.) |
50 Northern Avenue, Boston, Massachusetts
|
02210
|
(Address of principal executive offices)
|
(Zip Code)
|
Large accelerated filer
x
|
Accelerated filer
o
|
Non-accelerated filer
o
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Smaller reporting company
o
|
|
(Do not check if a smaller reporting company)
|
Common Stock, par value $0.01 per share
|
247,778,698
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Class
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Outstanding at July 22, 2016
|
|
|
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Page
|
|
||
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||
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Condensed Consolidated Statements of Operations - Three and Six Months Ended June 30, 2016 and 2015
|
|
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Condensed Consolidated Statements of Comprehensive Loss - Three and Six Months Ended June 30, 2016 and 2015
|
|
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Condensed Consolidated Balance Sheets - June 30, 2016 and December 31, 2015
|
|
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Condensed Consolidated Statements of Shareholders' Equity and Noncontrolling Interest - Six Months Ended June 30, 2016 and 2015
|
|
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Condensed Consolidated Statements of Cash Flows - Six Months Ended June 30, 2016 and 2015
|
|
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||
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||
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Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
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2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Revenues:
|
|
|
|
|
|
|
|
||||||||
Product revenues, net
|
$
|
425,651
|
|
|
$
|
160,388
|
|
|
$
|
820,061
|
|
|
$
|
291,263
|
|
Royalty revenues
|
5,282
|
|
|
5,077
|
|
|
8,878
|
|
|
11,869
|
|
||||
Collaborative revenues
|
675
|
|
|
611
|
|
|
749
|
|
|
1,453
|
|
||||
Total revenues
|
431,608
|
|
|
166,076
|
|
|
829,688
|
|
|
304,585
|
|
||||
Costs and expenses:
|
|
|
|
|
|
|
|
||||||||
Cost of product revenues
|
44,154
|
|
|
15,409
|
|
|
93,943
|
|
|
24,790
|
|
||||
Royalty expenses
|
1,098
|
|
|
1,451
|
|
|
1,958
|
|
|
4,377
|
|
||||
Research and development expenses
|
271,008
|
|
|
223,858
|
|
|
526,868
|
|
|
439,457
|
|
||||
Sales, general and administrative expenses
|
111,652
|
|
|
94,394
|
|
|
216,866
|
|
|
180,254
|
|
||||
Restructuring expenses (income), net
|
343
|
|
|
2,128
|
|
|
1,030
|
|
|
(1,144
|
)
|
||||
Total costs and expenses
|
428,255
|
|
|
337,240
|
|
|
840,665
|
|
|
647,734
|
|
||||
Income (loss) from operations
|
3,353
|
|
|
(171,164
|
)
|
|
(10,977
|
)
|
|
(343,149
|
)
|
||||
Interest expense, net
|
(20,155
|
)
|
|
(21,111
|
)
|
|
(40,853
|
)
|
|
(42,418
|
)
|
||||
Other (expenses) income, net
|
(1,219
|
)
|
|
1,414
|
|
|
3,192
|
|
|
(3,699
|
)
|
||||
Loss before provision for income taxes
|
(18,021
|
)
|
|
(190,861
|
)
|
|
(48,638
|
)
|
|
(389,266
|
)
|
||||
Provision for income taxes
|
18,130
|
|
|
30,131
|
|
|
23,615
|
|
|
30,430
|
|
||||
Net loss
|
(36,151
|
)
|
|
(220,992
|
)
|
|
(72,253
|
)
|
|
(419,696
|
)
|
||||
(Income) loss attributable to noncontrolling interest
|
(28,374
|
)
|
|
32,144
|
|
|
(33,903
|
)
|
|
32,242
|
|
||||
Net loss attributable to Vertex
|
$
|
(64,525
|
)
|
|
$
|
(188,848
|
)
|
|
$
|
(106,156
|
)
|
|
$
|
(387,454
|
)
|
|
|
|
|
|
|
|
|
||||||||
Amounts per share attributable to Vertex common shareholders:
|
|
|
|
|
|
|
|
||||||||
Net loss:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
(0.26
|
)
|
|
$
|
(0.78
|
)
|
|
$
|
(0.43
|
)
|
|
$
|
(1.61
|
)
|
Diluted
|
$
|
(0.26
|
)
|
|
$
|
(0.78
|
)
|
|
$
|
(0.43
|
)
|
|
$
|
(1.61
|
)
|
Shares used in per share calculations:
|
|
|
|
|
|
|
|
||||||||
Basic
|
244,482
|
|
|
240,757
|
|
|
244,124
|
|
|
240,129
|
|
||||
Diluted
|
244,482
|
|
|
240,757
|
|
|
244,124
|
|
|
240,129
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Net loss
|
$
|
(36,151
|
)
|
|
$
|
(220,992
|
)
|
|
$
|
(72,253
|
)
|
|
$
|
(419,696
|
)
|
Changes in other comprehensive loss:
|
|
|
|
|
|
|
|
||||||||
Unrealized holding gains (losses) on marketable securities
|
(29
|
)
|
|
(46
|
)
|
|
200
|
|
|
130
|
|
||||
Unrealized gains (losses) on foreign currency forward contracts, net of tax
|
4,999
|
|
|
(4,280
|
)
|
|
(213
|
)
|
|
(3,974
|
)
|
||||
Foreign currency translation adjustment
|
(3,461
|
)
|
|
1,828
|
|
|
(5,201
|
)
|
|
1,220
|
|
||||
Total changes in other comprehensive loss
|
1,509
|
|
|
(2,498
|
)
|
|
(5,214
|
)
|
|
(2,624
|
)
|
||||
Comprehensive loss
|
(34,642
|
)
|
|
(223,490
|
)
|
|
(77,467
|
)
|
|
(422,320
|
)
|
||||
Comprehensive (income) loss attributable to noncontrolling interest
|
(28,374
|
)
|
|
32,144
|
|
|
(33,903
|
)
|
|
32,242
|
|
||||
Comprehensive loss attributable to Vertex
|
$
|
(63,016
|
)
|
|
$
|
(191,346
|
)
|
|
$
|
(111,370
|
)
|
|
$
|
(390,078
|
)
|
|
June 30,
|
|
December 31,
|
||||
|
2016
|
|
2015
|
||||
Assets
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
605,866
|
|
|
$
|
714,768
|
|
Marketable securities, available for sale
|
465,570
|
|
|
327,694
|
|
||
Restricted cash and cash equivalents (VIE)
|
70,513
|
|
|
78,910
|
|
||
Accounts receivable, net
|
189,356
|
|
|
177,639
|
|
||
Inventories
|
66,589
|
|
|
57,207
|
|
||
Prepaid expenses and other current assets
|
56,256
|
|
|
50,935
|
|
||
Total current assets
|
1,454,150
|
|
|
1,407,153
|
|
||
Property and equipment, net
|
690,607
|
|
|
697,715
|
|
||
Intangible assets
|
284,340
|
|
|
284,340
|
|
||
Goodwill
|
50,384
|
|
|
50,384
|
|
||
Cost method investment in CRISPR
|
33,213
|
|
|
—
|
|
||
Notes receivable
|
—
|
|
|
30,000
|
|
||
Restricted cash
|
22,085
|
|
|
22,083
|
|
||
Other assets
|
14,203
|
|
|
6,912
|
|
||
Total assets
|
$
|
2,548,982
|
|
|
$
|
2,498,587
|
|
Liabilities and Shareholders’ Equity
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
51,302
|
|
|
$
|
74,942
|
|
Accrued expenses
|
275,165
|
|
|
305,820
|
|
||
Deferred revenues, current portion
|
11,468
|
|
|
16,296
|
|
||
Accrued restructuring expenses, current portion
|
7,683
|
|
|
7,894
|
|
||
Capital lease obligations, current portion
|
17,446
|
|
|
15,545
|
|
||
Senior secured term loan, current portion
|
221,576
|
|
|
71,296
|
|
||
Other liabilities, current portion
|
38,215
|
|
|
14,374
|
|
||
Total current liabilities
|
622,855
|
|
|
506,167
|
|
||
Deferred revenues, excluding current portion
|
7,411
|
|
|
9,714
|
|
||
Accrued restructuring expenses, excluding current portion
|
4,801
|
|
|
7,464
|
|
||
Capital lease obligations, excluding current portion
|
34,317
|
|
|
42,923
|
|
||
Deferred tax liability
|
132,810
|
|
|
110,439
|
|
||
Construction financing lease obligation, excluding current portion
|
472,374
|
|
|
472,611
|
|
||
Senior secured term loan, net of current portion and discount
|
74,921
|
|
|
223,863
|
|
||
Other liabilities, excluding current portion
|
30,648
|
|
|
31,778
|
|
||
Total liabilities
|
1,380,137
|
|
|
1,404,959
|
|
||
Commitments and contingencies
|
|
|
|
|
|
||
Shareholders’ equity:
|
|
|
|
||||
Preferred stock, $0.01 par value; 1,000,000 shares authorized; none issued and outstanding at June 30, 2016 and December 31, 2015
|
—
|
|
|
—
|
|
||
Common stock, $0.01 par value; 500,000,000 and 500,000,000 shares authorized at June 30, 2016 and December 31, 2015, respectively; 247,703,932 and 246,306,818 shares issued and outstanding at June 30, 2016 and December 31, 2015, respectively
|
2,440
|
|
|
2,427
|
|
||
Additional paid-in capital
|
6,350,244
|
|
|
6,197,500
|
|
||
Accumulated other comprehensive (loss) income
|
(3,390
|
)
|
|
1,824
|
|
||
Accumulated deficit
|
(5,367,940
|
)
|
|
(5,261,784
|
)
|
||
Total Vertex shareholders' equity
|
981,354
|
|
|
939,967
|
|
||
Noncontrolling interest
|
187,491
|
|
|
153,661
|
|
||
Total shareholders’ equity
|
1,168,845
|
|
|
1,093,628
|
|
||
Total liabilities and shareholders’ equity
|
$
|
2,548,982
|
|
|
$
|
2,498,587
|
|
|
Common Stock
|
|
Additional
Paid-in Capital |
|
Accumulated
Other Comprehensive (Loss) Income |
|
Accumulated Deficit
|
|
Total Vertex
Shareholders’ Equity |
|
Noncontrolling
Interest |
|
Total
Shareholders’ Equity |
|||||||||||||||||
|
Shares
|
|
Amount
|
|
|
|
|
|
|
|||||||||||||||||||||
Balance at December 31, 2014
|
241,764
|
|
|
$
|
2,385
|
|
|
$
|
5,777,154
|
|
|
$
|
917
|
|
|
$
|
(4,705,450
|
)
|
|
$
|
1,075,006
|
|
|
$
|
21,177
|
|
|
$
|
1,096,183
|
|
Other comprehensive loss, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,624
|
)
|
|
—
|
|
|
(2,624
|
)
|
|
—
|
|
|
(2,624
|
)
|
|||||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(387,454
|
)
|
|
(387,454
|
)
|
|
(32,242
|
)
|
|
(419,696
|
)
|
|||||||
Issuance of common stock under benefit plans
|
2,578
|
|
|
21
|
|
|
87,333
|
|
|
—
|
|
|
—
|
|
|
87,354
|
|
|
—
|
|
|
87,354
|
|
|||||||
Stock-based compensation expense
|
—
|
|
|
—
|
|
|
122,682
|
|
|
—
|
|
|
—
|
|
|
122,682
|
|
|
—
|
|
|
122,682
|
|
|||||||
Noncontrolling interest upon consolidation
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
164,317
|
|
|
$
|
164,317
|
|
Balance at June 30, 2015
|
244,342
|
|
|
$
|
2,406
|
|
|
$
|
5,987,169
|
|
|
$
|
(1,707
|
)
|
|
$
|
(5,092,904
|
)
|
|
$
|
894,964
|
|
|
$
|
153,252
|
|
|
$
|
1,048,216
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance at December 31, 2015
|
246,307
|
|
|
$
|
2,427
|
|
|
$
|
6,197,500
|
|
|
$
|
1,824
|
|
|
$
|
(5,261,784
|
)
|
|
$
|
939,967
|
|
|
$
|
153,661
|
|
|
$
|
1,093,628
|
|
Other comprehensive loss, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
(5,214
|
)
|
|
—
|
|
|
(5,214
|
)
|
|
—
|
|
|
(5,214
|
)
|
|||||||
Net (loss) income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(106,156
|
)
|
|
(106,156
|
)
|
|
33,903
|
|
|
(72,253
|
)
|
|||||||
Issuance of common stock under benefit plans
|
1,397
|
|
|
13
|
|
|
33,557
|
|
|
—
|
|
|
—
|
|
|
33,570
|
|
|
—
|
|
|
33,570
|
|
|||||||
Stock-based compensation expense
|
—
|
|
|
—
|
|
|
119,187
|
|
|
—
|
|
|
—
|
|
|
119,187
|
|
|
(73
|
)
|
|
119,114
|
|
|||||||
Balance at June 30, 2016
|
247,704
|
|
|
$
|
2,440
|
|
|
$
|
6,350,244
|
|
|
$
|
(3,390
|
)
|
|
$
|
(5,367,940
|
)
|
|
$
|
981,354
|
|
|
$
|
187,491
|
|
|
$
|
1,168,845
|
|
|
Six Months Ended June 30,
|
||||||
|
2016
|
|
2015
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net loss
|
$
|
(72,253
|
)
|
|
$
|
(419,696
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
||||
Stock-based compensation expense
|
117,414
|
|
|
120,645
|
|
||
Depreciation and amortization expense
|
31,378
|
|
|
30,428
|
|
||
Deferred income taxes
|
22,858
|
|
|
6,346
|
|
||
Other non-cash items, net
|
3,436
|
|
|
6,045
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable, net
|
(12,954
|
)
|
|
(21,197
|
)
|
||
Inventories
|
(7,779
|
)
|
|
(9,426
|
)
|
||
Prepaid expenses and other assets
|
(7,971
|
)
|
|
(15,397
|
)
|
||
Accounts payable
|
(23,821
|
)
|
|
(3,033
|
)
|
||
Accrued expenses and other liabilities
|
(14,562
|
)
|
|
8,098
|
|
||
Accrued restructuring expense
|
(2,892
|
)
|
|
(26,012
|
)
|
||
Deferred revenues
|
(7,131
|
)
|
|
(9,303
|
)
|
||
Net cash provided by (used in) operating activities
|
25,723
|
|
|
(332,502
|
)
|
||
Cash flows from investing activities:
|
|
|
|
||||
Purchases of marketable securities
|
(470,077
|
)
|
|
(125,655
|
)
|
||
Maturities of marketable securities
|
332,316
|
|
|
741,725
|
|
||
Payment for acquisition of variable interest entity
|
—
|
|
|
(80,000
|
)
|
||
Expenditures for property and equipment
|
(27,892
|
)
|
|
(23,978
|
)
|
||
Increase in restricted cash and cash equivalents
|
—
|
|
|
(21,975
|
)
|
||
Investment in CRISPR Series B preferred stock
|
(3,075
|
)
|
|
—
|
|
||
Decrease in restricted cash and cash equivalents (VIE)
|
8,397
|
|
|
2,277
|
|
||
(Increase) decrease in other assets
|
(159
|
)
|
|
87
|
|
||
Net cash (used in) provided by investing activities
|
(160,490
|
)
|
|
492,481
|
|
||
Cash flows from financing activities:
|
|
|
|
||||
Issuances of common stock under benefit plans
|
33,702
|
|
|
87,850
|
|
||
Payments on capital lease obligations
|
(7,538
|
)
|
|
(14,441
|
)
|
||
Proceeds from capital lease financing
|
—
|
|
|
13,386
|
|
||
Payments on construction financing lease obligation
|
(209
|
)
|
|
(184
|
)
|
||
Net cash provided by financing activities
|
25,955
|
|
|
86,611
|
|
||
Effect of changes in exchange rates on cash
|
(90
|
)
|
|
(1,306
|
)
|
||
Net (decrease) increase in cash and cash equivalents
|
(108,902
|
)
|
|
245,284
|
|
||
Cash and cash equivalents—beginning of period
|
714,768
|
|
|
625,259
|
|
||
Cash and cash equivalents—end of period
|
$
|
605,866
|
|
|
$
|
870,543
|
|
|
|
|
|
||||
Supplemental disclosure of cash flow information:
|
|
|
|
||||
Cash paid for interest
|
$
|
41,325
|
|
|
$
|
42,885
|
|
Cash paid for income taxes
|
$
|
1,237
|
|
|
$
|
1,022
|
|
Issuances of common stock exercises from employee benefit plans receivable
|
$
|
161
|
|
|
$
|
166
|
|
B.
|
Product Revenues, Net
|
|
Trade
Allowances |
|
Rebates,
Chargebacks and Discounts |
|
Product
Returns |
|
Other
Incentives |
|
Total
|
||||||||||
|
(in thousands)
|
||||||||||||||||||
Balance at December 31, 2015
|
$
|
2,089
|
|
|
$
|
44,669
|
|
|
$
|
1,228
|
|
|
$
|
1,310
|
|
|
$
|
49,296
|
|
Provision related to current period sales
|
9,935
|
|
|
65,066
|
|
|
1,288
|
|
|
4,220
|
|
|
80,509
|
|
|||||
Adjustments related to prior period sales
|
(77
|
)
|
|
(1,712
|
)
|
|
(205
|
)
|
|
5
|
|
|
(1,989
|
)
|
|||||
Credits/payments made
|
(9,762
|
)
|
|
(44,113
|
)
|
|
(260
|
)
|
|
(4,638
|
)
|
|
(58,773
|
)
|
|||||
Balance at June 30, 2016
|
$
|
2,185
|
|
|
$
|
63,910
|
|
|
$
|
2,051
|
|
|
$
|
897
|
|
|
$
|
69,043
|
|
C.
|
Collaborative Arrangements
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
(in thousands)
|
||||||||||||||
Loss attributable to noncontrolling interest before provision for income taxes
|
$
|
2,835
|
|
|
$
|
1,293
|
|
|
$
|
3,674
|
|
|
$
|
1,579
|
|
Provision for income taxes
|
17,511
|
|
|
29,653
|
|
|
20,573
|
|
|
29,590
|
|
||||
(Increase) decrease in fair value of contingent milestone and royalty payments
|
(48,720
|
)
|
|
1,198
|
|
|
(58,150
|
)
|
|
1,073
|
|
||||
Net (income) loss attributable to noncontrolling interest
|
$
|
(28,374
|
)
|
|
$
|
32,144
|
|
|
$
|
(33,903
|
)
|
|
$
|
32,242
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
(in thousands)
|
||||||||||||||
Parion
|
$
|
48,400
|
|
|
$
|
(1,621
|
)
|
|
$
|
57,400
|
|
|
$
|
(1,621
|
)
|
BioAxone
|
320
|
|
|
423
|
|
|
750
|
|
|
548
|
|
|
June 30, 2016
|
|
December 31, 2015
|
||||
|
(in thousands)
|
||||||
Restricted cash and cash equivalents (VIE)
|
$
|
70,513
|
|
|
$
|
78,910
|
|
Prepaid expenses and other current assets
|
3,001
|
|
|
3,138
|
|
||
Intangible assets
|
284,340
|
|
|
284,340
|
|
||
Goodwill
|
19,391
|
|
|
19,391
|
|
||
Other assets
|
383
|
|
|
455
|
|
||
Accounts payable
|
1,129
|
|
|
676
|
|
||
Taxes payable
|
11,723
|
|
|
24,554
|
|
||
Other current liabilities
|
7,059
|
|
|
7,100
|
|
||
Deferred tax liability, net
|
132,810
|
|
|
110,438
|
|
||
Other liabilities
|
310
|
|
|
300
|
|
||
Noncontrolling interest
|
187,491
|
|
|
153,661
|
|
D.
|
Earnings Per Share
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||
|
(in thousands)
|
||||||||||
Stock options
|
12,231
|
|
|
11,933
|
|
|
12,231
|
|
|
11,933
|
|
Unvested restricted stock and restricted stock units
|
3,506
|
|
|
3,355
|
|
|
3,506
|
|
|
3,355
|
|
E.
|
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 June 30, 2016 |
||||||||||||||
|
|
|
Fair Value Hierarchy
|
||||||||||||
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
|
(in thousands)
|
||||||||||||||
Financial assets carried at fair value:
|
|
|
|
|
|
|
|
||||||||
Cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
$
|
110,696
|
|
|
$
|
110,696
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Marketable securities:
|
|
|
|
|
|
|
|
||||||||
U.S. Treasury securities
|
33,142
|
|
|
33,142
|
|
|
—
|
|
|
—
|
|
||||
Government-sponsored enterprise securities
|
131,900
|
|
|
131,900
|
|
|
—
|
|
|
—
|
|
||||
Corporate debt securities
|
135,675
|
|
|
—
|
|
|
135,675
|
|
|
—
|
|
||||
Commercial paper
|
164,853
|
|
|
—
|
|
|
164,853
|
|
|
—
|
|
||||
Prepaid and other current assets:
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward contracts
|
9,966
|
|
|
—
|
|
|
9,966
|
|
|
—
|
|
||||
Other assets:
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward contracts
|
1,604
|
|
|
—
|
|
|
1,604
|
|
|
—
|
|
||||
Total financial assets
|
$
|
587,836
|
|
|
$
|
275,738
|
|
|
$
|
312,098
|
|
|
$
|
—
|
|
Financial liabilities carried at fair value:
|
|
|
|
|
|
|
|
||||||||
Other liabilities, current portion:
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward contracts
|
$
|
(7,317
|
)
|
|
$
|
—
|
|
|
$
|
(7,317
|
)
|
|
$
|
—
|
|
Other liabilities, excluding current portion:
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward contracts
|
(88
|
)
|
|
—
|
|
|
(88
|
)
|
|
—
|
|
||||
Total financial liabilities
|
$
|
(7,405
|
)
|
|
$
|
—
|
|
|
$
|
(7,405
|
)
|
|
$
|
—
|
|
|
Fair Value Measurements as
of December 31, 2015 |
||||||||||||||
|
|
|
Fair Value Hierarchy
|
||||||||||||
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
|
(in thousands)
|
||||||||||||||
Financial instruments carried at fair value (asset position):
|
|
|
|
|
|
|
|
||||||||
Cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
$
|
199,507
|
|
|
$
|
199,507
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Government-sponsored enterprise securities
|
85,994
|
|
|
85,994
|
|
|
—
|
|
|
—
|
|
||||
Commercial paper
|
34,889
|
|
|
—
|
|
|
34,889
|
|
|
—
|
|
||||
Corporate debt securities
|
11,533
|
|
|
—
|
|
|
11,533
|
|
|
—
|
|
||||
Marketable securities:
|
|
|
|
|
|
|
|
||||||||
Government-sponsored enterprise securities
|
87,162
|
|
|
87,162
|
|
|
—
|
|
|
—
|
|
||||
Commercial paper
|
99,123
|
|
|
—
|
|
|
99,123
|
|
|
—
|
|
||||
Corporate debt securities
|
141,409
|
|
|
—
|
|
|
141,409
|
|
|
—
|
|
||||
Prepaid and other current assets:
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward contracts
|
5,161
|
|
|
—
|
|
|
5,161
|
|
|
—
|
|
||||
Other assets:
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward contracts
|
605
|
|
|
$
|
—
|
|
|
605
|
|
|
$
|
—
|
|
||
Total financial assets
|
$
|
665,383
|
|
|
$
|
372,663
|
|
|
$
|
292,720
|
|
|
$
|
—
|
|
Financial instruments carried at fair value (liability position):
|
|
|
|
|
|
|
|
||||||||
Other liabilities, current portion:
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward contracts
|
$
|
(769
|
)
|
|
$
|
—
|
|
|
$
|
(769
|
)
|
|
$
|
—
|
|
Other liabilities, excluding current portion:
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward contracts
|
(132
|
)
|
|
—
|
|
|
(132
|
)
|
|
—
|
|
||||
Total financial liabilities
|
$
|
(901
|
)
|
|
$
|
—
|
|
|
$
|
(901
|
)
|
|
$
|
—
|
|
F.
|
Marketable Securities
|
|
Amortized Cost
|
|
Gross
Unrealized Gains |
|
Gross
Unrealized Losses |
|
Fair Value
|
||||||||
|
(in thousands)
|
||||||||||||||
As of June 30, 2016
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Cash and money market funds
|
$
|
605,866
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
605,866
|
|
Total cash and cash equivalents
|
$
|
605,866
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
605,866
|
|
Marketable securities:
|
|
|
|
|
|
|
|
||||||||
U.S. Treasury securities (due within 1 year)
|
$
|
33,138
|
|
|
$
|
4
|
|
|
$
|
—
|
|
|
$
|
33,142
|
|
Government-sponsored enterprise securities (due within 1 year)
|
131,868
|
|
|
35
|
|
|
(3
|
)
|
|
131,900
|
|
||||
Commercial paper (due within 1 year)
|
164,575
|
|
|
278
|
|
|
—
|
|
|
164,853
|
|
||||
Corporate debt securities (due within 1 year)
|
135,663
|
|
|
34
|
|
|
(22
|
)
|
|
135,675
|
|
||||
Total marketable securities
|
$
|
465,244
|
|
|
$
|
351
|
|
|
$
|
(25
|
)
|
|
$
|
465,570
|
|
Total cash, cash equivalents and marketable securities
|
$
|
1,071,110
|
|
|
$
|
351
|
|
|
$
|
(25
|
)
|
|
$
|
1,071,436
|
|
|
|
|
|
|
|
|
|
||||||||
As of December 31, 2015
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Cash and money market funds
|
$
|
582,352
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
582,352
|
|
Government-sponsored enterprise securities
|
85,994
|
|
|
—
|
|
|
—
|
|
|
85,994
|
|
||||
Commercial paper
|
34,889
|
|
|
—
|
|
|
—
|
|
|
34,889
|
|
||||
Corporate debt securities
|
11,533
|
|
|
—
|
|
|
—
|
|
|
11,533
|
|
||||
Total cash and cash equivalents
|
$
|
714,768
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
714,768
|
|
Marketable securities:
|
|
|
|
|
|
|
|
||||||||
Government-sponsored enterprise securities (due within 1 year)
|
$
|
87,176
|
|
|
$
|
—
|
|
|
$
|
(14
|
)
|
|
$
|
87,162
|
|
Commercial paper (due within 1 year)
|
98,877
|
|
|
246
|
|
|
—
|
|
|
99,123
|
|
||||
Corporate debt securities (due within 1 year)
|
141,515
|
|
|
—
|
|
|
(106
|
)
|
|
141,409
|
|
||||
Total marketable securities
|
$
|
327,568
|
|
|
$
|
246
|
|
|
$
|
(120
|
)
|
|
$
|
327,694
|
|
Total cash, cash equivalents and marketable securities
|
$
|
1,042,336
|
|
|
$
|
246
|
|
|
$
|
(120
|
)
|
|
$
|
1,042,462
|
|
G.
|
Accumulated Other Comprehensive (Loss) Income
|
|
Foreign Currency Translation Adjustment
|
|
Unrealized Holding Gains (Losses) on Marketable Securities
|
|
Unrealized Gains on Foreign Currency Forward Contracts, net of tax
|
|
Total
|
||||||||
|
(in thousands)
|
||||||||||||||
Balance at December 31, 2015
|
$
|
(2,080
|
)
|
|
$
|
126
|
|
|
$
|
3,778
|
|
|
$
|
1,824
|
|
Other comprehensive (loss) income before reclassifications
|
(5,201
|
)
|
|
200
|
|
|
1,847
|
|
|
(3,154
|
)
|
||||
Amounts reclassified from accumulated other comprehensive loss
|
—
|
|
|
—
|
|
|
(2,060
|
)
|
|
(2,060
|
)
|
||||
Net current period other comprehensive (loss) income
|
$
|
(5,201
|
)
|
|
$
|
200
|
|
|
$
|
(213
|
)
|
|
$
|
(5,214
|
)
|
Balance at June 30, 2016
|
$
|
(7,281
|
)
|
|
$
|
326
|
|
|
$
|
3,565
|
|
|
$
|
(3,390
|
)
|
|
Foreign Currency Translation Adjustment
|
|
Unrealized Holding (Losses) Gains on Marketable Securities
|
|
Unrealized Gains (Losses) on Foreign Currency Forward Contracts
|
|
Total
|
||||||||
|
(in thousands)
|
||||||||||||||
Balance at December 31, 2014
|
$
|
(971
|
)
|
|
$
|
(123
|
)
|
|
$
|
2,011
|
|
|
$
|
917
|
|
Other comprehensive (loss) income before reclassifications
|
1,220
|
|
|
130
|
|
|
(1,370
|
)
|
|
(20
|
)
|
||||
Amounts reclassified from accumulated other comprehensive loss
|
—
|
|
|
—
|
|
|
(2,604
|
)
|
|
(2,604
|
)
|
||||
Net current period other comprehensive (loss) income
|
$
|
1,220
|
|
|
$
|
130
|
|
|
$
|
(3,974
|
)
|
|
$
|
(2,624
|
)
|
Balance at June 30, 2015
|
$
|
249
|
|
|
$
|
7
|
|
|
$
|
(1,963
|
)
|
|
$
|
(1,707
|
)
|
H.
|
Hedging
|
|
As of June 30, 2016
|
|
As of December 31, 2015
|
||||
Foreign Currency
|
(in thousands)
|
||||||
Euro
|
$
|
193,542
|
|
|
$
|
103,362
|
|
British pound sterling
|
79,845
|
|
|
78,756
|
|
||
Australian dollar
|
28,318
|
|
|
27,167
|
|
||
Total foreign currency forward contracts
|
$
|
301,705
|
|
|
$
|
209,285
|
|
As of June 30, 2016
|
||||||||||
Assets
|
|
Liabilities
|
||||||||
Classification
|
|
Fair Value
|
|
Classification
|
|
Fair Value
|
||||
(in thousands)
|
||||||||||
Prepaid and other current assets
|
|
$
|
9,966
|
|
|
Other liabilities, current portion
|
|
$
|
(7,317
|
)
|
Other assets
|
|
1,604
|
|
|
Other liabilities, excluding current portion
|
|
(88
|
)
|
||
Total assets
|
|
$
|
11,570
|
|
|
Total liabilities
|
|
$
|
(7,405
|
)
|
As of December 31, 2015
|
||||||||||
Assets
|
|
Liabilities
|
||||||||
Classification
|
|
Fair Value
|
|
Classification
|
|
Fair Value
|
||||
(in thousands)
|
||||||||||
Prepaid and other current assets
|
|
$
|
5,161
|
|
|
Other liabilities, current portion
|
|
$
|
(769
|
)
|
Other assets
|
|
605
|
|
|
Other liabilities, excluding current portion
|
|
(132
|
)
|
||
Total assets
|
|
$
|
5,766
|
|
|
Total liabilities
|
|
$
|
(901
|
)
|
|
As of June 30, 2016
|
||||||||||||||||||
|
Gross Amounts Recognized
|
|
Gross Amounts Offset
|
|
Gross Amounts Presented
|
|
Gross Amounts Not Offset
|
|
Legal Offset
|
||||||||||
Foreign currency forward contracts
|
(in thousands)
|
||||||||||||||||||
Total assets
|
$
|
11,570
|
|
|
$
|
—
|
|
|
$
|
11,570
|
|
|
$
|
(7,405
|
)
|
|
$
|
4,165
|
|
Total liabilities
|
$
|
(7,405
|
)
|
|
$
|
—
|
|
|
$
|
(7,405
|
)
|
|
$
|
7,405
|
|
|
$
|
—
|
|
|
As of December 31, 2015
|
||||||||||||||||||
|
Gross Amounts Recognized
|
|
Gross Amounts Offset
|
|
Gross Amounts Presented
|
|
Gross Amounts Not Offset
|
|
Legal Offset
|
||||||||||
Foreign currency forward contracts
|
(in thousands)
|
||||||||||||||||||
Total assets
|
$
|
5,766
|
|
|
$
|
—
|
|
|
$
|
5,766
|
|
|
$
|
(901
|
)
|
|
$
|
4,865
|
|
Total liabilities
|
$
|
(901
|
)
|
|
$
|
—
|
|
|
$
|
(901
|
)
|
|
$
|
901
|
|
|
$
|
—
|
|
|
As of June 30, 2016
|
|
As of December 31, 2015
|
||||
|
(in thousands)
|
||||||
Raw materials
|
$
|
5,408
|
|
|
$
|
8,696
|
|
Work-in-process
|
45,807
|
|
|
40,695
|
|
||
Finished goods
|
15,374
|
|
|
7,816
|
|
||
Total
|
$
|
66,589
|
|
|
$
|
57,207
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
(in thousands)
|
||||||||||||||
Stock-based compensation expense by type of award:
|
|
|
|
|
|
|
|
||||||||
Stock options
|
$
|
31,826
|
|
|
$
|
37,687
|
|
|
$
|
58,086
|
|
|
$
|
66,646
|
|
Restricted stock and restricted stock units
|
29,608
|
|
|
24,902
|
|
|
57,141
|
|
|
52,071
|
|
||||
ESPP share issuances
|
1,436
|
|
|
1,825
|
|
|
3,960
|
|
|
3,965
|
|
||||
Less stock-based compensation expense capitalized to inventories
|
(928
|
)
|
|
(1,153
|
)
|
|
(1,773
|
)
|
|
(2,037
|
)
|
||||
Total stock-based compensation included in costs and expenses
|
$
|
61,942
|
|
|
$
|
63,261
|
|
|
$
|
117,414
|
|
|
$
|
120,645
|
|
|
|
|
|
|
|
|
|
|
|||||||
Stock-based compensation expense by line item:
|
|
|
|
|
|
|
|
||||||||
Research and development expenses
|
$
|
40,640
|
|
|
$
|
41,632
|
|
|
$
|
75,088
|
|
|
$
|
79,849
|
|
Sales, general and administrative expenses
|
21,302
|
|
|
21,629
|
|
|
42,326
|
|
|
40,796
|
|
||||
Total stock-based compensation included in costs and expenses
|
$
|
61,942
|
|
|
$
|
63,261
|
|
|
$
|
117,414
|
|
|
$
|
120,645
|
|
|
As of June 30, 2016
|
||||
|
Unrecognized Expense,
Net of Estimated Forfeitures |
|
Weighted-average
Recognition Period |
||
|
(in thousands)
|
|
(in years)
|
||
Type of award:
|
|
|
|
||
Stock options
|
$
|
176,251
|
|
|
2.66
|
Restricted stock and restricted stock units
|
$
|
201,858
|
|
|
2.57
|
ESPP share issuances
|
$
|
5,546
|
|
|
0.64
|
|
|
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)
|
||||||
$18.93–$20.00
|
|
137
|
|
|
1.61
|
|
$
|
18.93
|
|
|
137
|
|
|
$
|
18.93
|
|
$20.01–$40.00
|
|
1,964
|
|
|
3.45
|
|
$
|
34.24
|
|
|
1,962
|
|
|
$
|
34.23
|
|
$40.01–$60.00
|
|
2,066
|
|
|
6.07
|
|
$
|
48.14
|
|
|
1,657
|
|
|
$
|
48.66
|
|
$60.01–$80.00
|
|
1,368
|
|
|
7.62
|
|
$
|
75.90
|
|
|
734
|
|
|
$
|
75.39
|
|
$80.01–$100.00
|
|
3,555
|
|
|
8.60
|
|
$
|
90.68
|
|
|
1,080
|
|
|
$
|
88.91
|
|
$100.01–$120.00
|
|
1,644
|
|
|
8.57
|
|
$
|
109.32
|
|
|
500
|
|
|
$
|
109.27
|
|
$120.01–$134.69
|
|
1,497
|
|
|
9.05
|
|
$
|
130.61
|
|
|
420
|
|
|
$
|
129.84
|
|
Total
|
|
12,231
|
|
|
7.21
|
|
$
|
79.37
|
|
|
6,490
|
|
|
$
|
63.32
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
(in thousands)
|
|
|
|
|
||||||||||
Liability, beginning of the period
|
$
|
7,224
|
|
|
$
|
9,506
|
|
|
$
|
7,944
|
|
|
$
|
11,596
|
|
Cash payments
|
(3,833
|
)
|
|
(2,584
|
)
|
|
(7,764
|
)
|
|
(6,569
|
)
|
||||
Cash received from subleases
|
3,008
|
|
|
2,799
|
|
|
6,016
|
|
|
5,275
|
|
||||
Restructuring expense (income)
|
(11
|
)
|
|
203
|
|
|
192
|
|
|
(378
|
)
|
||||
Liability, end of the period
|
$
|
6,388
|
|
|
$
|
9,924
|
|
|
$
|
6,388
|
|
|
$
|
9,924
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
(in thousands)
|
|
|
|
|
||||||||||
Liability, beginning of the period
|
$
|
5,449
|
|
|
$
|
11,137
|
|
|
$
|
5,964
|
|
|
$
|
33,390
|
|
Cash payments
|
(3,096
|
)
|
|
(3,095
|
)
|
|
(6,252
|
)
|
|
(22,351
|
)
|
||||
Cash received from subleases
|
2,361
|
|
|
—
|
|
|
4,769
|
|
|
—
|
|
||||
Restructuring expense (income)
|
149
|
|
|
975
|
|
|
382
|
|
|
(2,022
|
)
|
||||
Liability, end of the period
|
$
|
4,863
|
|
|
$
|
9,017
|
|
|
$
|
4,863
|
|
|
$
|
9,017
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
(in thousands)
|
|
|
|
|
||||||||||
Liability, beginning of the period
|
$
|
1,262
|
|
|
$
|
845
|
|
|
$
|
1,450
|
|
|
$
|
869
|
|
Cash payments
|
(234
|
)
|
|
(893
|
)
|
|
(673
|
)
|
|
(1,223
|
)
|
||||
Restructuring expense
|
205
|
|
|
950
|
|
|
456
|
|
|
1,256
|
|
||||
Liability, end of the period
|
$
|
1,233
|
|
|
$
|
902
|
|
|
$
|
1,233
|
|
|
$
|
902
|
|
•
|
Two copies of the F508del in their CFTR gene
: We plan to complete enrollment in this clinical trial in August 2016 and expect data from this clinical trial to be available in the first half of 2017.
|
•
|
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
: We plan to complete enrollment in this clinical trial in late 2016 or early 2017.
|
•
|
One copy of the F508del mutation in their CFTR gene and a second mutation in their CFTR gene that results in residual CFTR function
: We expect to complete enrollment in this clinical trial in the second half of 2016.
|
•
|
One copy of the F508del mutation in their CFTR gene and a second mutation that results in minimal CFTR function
: Enrollment is complete in the first part of this clinical trial and we expect an interim futility analysis of efficacy data to be completed in the third quarter of 2016.
|
|
Three Months Ended June 30,
|
|
Increase/(Decrease)
|
|
Six Months Ended June 30,
|
|
Increase/(Decrease)
|
||||||||||||||||||||||
|
2016
|
|
2015
|
|
$
|
|
%
|
|
2016
|
|
2015
|
|
$
|
|
%
|
||||||||||||||
|
(in thousands)
|
|
|
|
(in thousands)
|
|
|
||||||||||||||||||||||
Revenues
|
$
|
431,608
|
|
|
$
|
166,076
|
|
|
$
|
265,532
|
|
|
160
|
%
|
|
$
|
829,688
|
|
|
$
|
304,585
|
|
|
$
|
525,103
|
|
|
172
|
%
|
Operating costs and expenses
|
428,255
|
|
|
337,240
|
|
|
91,015
|
|
|
27
|
%
|
|
840,665
|
|
|
647,734
|
|
|
192,931
|
|
|
30
|
%
|
||||||
Other items, net
|
(67,878
|
)
|
|
(17,684
|
)
|
|
(50,194
|
)
|
|
(284
|
)%
|
|
(95,179
|
)
|
|
(44,305
|
)
|
|
$
|
(50,874
|
)
|
|
(115
|
)%
|
|||||
Net loss attributable to Vertex
|
$
|
(64,525
|
)
|
|
$
|
(188,848
|
)
|
|
$
|
(124,323
|
)
|
|
(66
|
)%
|
|
$
|
(106,156
|
)
|
|
$
|
(387,454
|
)
|
|
$
|
(281,298
|
)
|
|
(73
|
)%
|
|
Three Months Ended June 30,
|
|
Increase/(Decrease)
|
|
Six Months Ended June 30,
|
|
Increase/(Decrease)
|
||||||||||||||||||||||
|
2016
|
|
2015
|
|
$
|
|
%
|
|
2016
|
|
2015
|
|
$
|
|
%
|
||||||||||||||
|
(in thousands)
|
|
|
|
(in thousands)
|
|
|
||||||||||||||||||||||
Product revenues, net
|
$
|
425,651
|
|
|
$
|
160,388
|
|
|
$
|
265,263
|
|
|
165
|
%
|
|
$
|
820,061
|
|
|
$
|
291,263
|
|
|
$
|
528,798
|
|
|
182
|
%
|
Royalty revenues
|
5,282
|
|
|
5,077
|
|
|
205
|
|
|
4
|
%
|
|
8,878
|
|
|
11,869
|
|
|
(2,991
|
)
|
|
(25
|
)%
|
||||||
Collaborative revenues
|
675
|
|
|
611
|
|
|
64
|
|
|
10
|
%
|
|
749
|
|
|
1,453
|
|
|
(704
|
)
|
|
(48
|
)%
|
||||||
Total revenues
|
$
|
431,608
|
|
|
$
|
166,076
|
|
|
$
|
265,532
|
|
|
160
|
%
|
|
$
|
829,688
|
|
|
$
|
304,585
|
|
|
$
|
525,103
|
|
|
172
|
%
|
|
Three Months Ended June 30,
|
|
Increase/(Decrease)
|
|
Six Months Ended June 30,
|
|
Increase/(Decrease)
|
||||||||||||||||||||||
|
2016
|
|
2015
|
|
$
|
|
%
|
|
2016
|
|
2015
|
|
$
|
|
%
|
||||||||||||||
|
(in thousands)
|
|
|
|
(in thousands)
|
|
|
||||||||||||||||||||||
ORKAMBI
|
$
|
245,496
|
|
|
$
|
—
|
|
|
N/A
|
|
|
N/A
|
|
|
$
|
468,624
|
|
|
$
|
—
|
|
|
N/A
|
|
|
N/A
|
|
||
KALYDECO
|
180,235
|
|
|
154,888
|
|
|
25,347
|
|
|
16
|
%
|
|
$
|
350,744
|
|
|
$
|
285,062
|
|
|
$
|
65,682
|
|
|
23
|
%
|
|||
INCIVEK
|
(80
|
)
|
|
5,500
|
|
|
N/A
|
|
|
N/A
|
|
|
693
|
|
|
6,201
|
|
|
(5,508
|
)
|
|
(89
|
)%
|
||||||
Total product revenues, net
|
$
|
425,651
|
|
|
$
|
160,388
|
|
|
$
|
265,263
|
|
|
165
|
%
|
|
$
|
820,061
|
|
|
$
|
291,263
|
|
|
$
|
528,798
|
|
|
182
|
%
|
|
Three Months Ended June 30,
|
|
Increase/(Decrease)
|
|
Six Months Ended June 30,
|
|
Increase/(Decrease)
|
||||||||||||||||||||||
|
2016
|
|
2015
|
|
$
|
|
%
|
|
2016
|
|
2015
|
|
$
|
|
%
|
||||||||||||||
|
(in thousands)
|
|
|
|
(in thousands)
|
|
|
||||||||||||||||||||||
Cost of product revenues
|
$
|
44,154
|
|
|
$
|
15,409
|
|
|
$
|
28,745
|
|
|
187
|
%
|
|
$
|
93,943
|
|
|
$
|
24,790
|
|
|
$
|
69,153
|
|
|
279
|
%
|
Royalty expenses
|
1,098
|
|
|
1,451
|
|
|
(353
|
)
|
|
(24
|
)%
|
|
1,958
|
|
|
4,377
|
|
|
(2,419
|
)
|
|
(55
|
)%
|
||||||
Research and development expenses
|
271,008
|
|
|
223,858
|
|
|
47,150
|
|
|
21
|
%
|
|
526,868
|
|
|
439,457
|
|
|
87,411
|
|
|
20
|
%
|
||||||
Sales, general and administrative expenses
|
111,652
|
|
|
94,394
|
|
|
17,258
|
|
|
18
|
%
|
|
216,866
|
|
|
180,254
|
|
|
36,612
|
|
|
20
|
%
|
||||||
Restructuring expenses (income), net
|
343
|
|
|
2,128
|
|
|
(1,785
|
)
|
|
(84
|
)%
|
|
1,030
|
|
|
(1,144
|
)
|
|
N/A
|
|
|
N/A
|
|
||||||
Total costs and expenses
|
$
|
428,255
|
|
|
$
|
337,240
|
|
|
$
|
91,015
|
|
|
27
|
%
|
|
$
|
840,665
|
|
|
$
|
647,734
|
|
|
$
|
192,931
|
|
|
30
|
%
|
|
Three Months Ended June 30,
|
|
Increase/(Decrease)
|
|
Six Months Ended June 30,
|
|
Increase/(Decrease)
|
||||||||||||||||||||||
|
2016
|
|
2015
|
|
$
|
|
%
|
|
2016
|
|
2015
|
|
$
|
|
%
|
||||||||||||||
|
(in thousands)
|
|
|
|
(in thousands)
|
|
|
||||||||||||||||||||||
Research expenses
|
$
|
79,886
|
|
|
$
|
65,195
|
|
|
$
|
14,691
|
|
|
23
|
%
|
|
$
|
142,896
|
|
|
$
|
130,757
|
|
|
$
|
12,139
|
|
|
9
|
%
|
Development expenses
|
191,122
|
|
|
158,663
|
|
|
32,459
|
|
|
20
|
%
|
|
383,972
|
|
|
308,700
|
|
|
75,272
|
|
|
24
|
%
|
||||||
Total research and development expenses
|
$
|
271,008
|
|
|
$
|
223,858
|
|
|
$
|
47,150
|
|
|
21
|
%
|
|
$
|
526,868
|
|
|
$
|
439,457
|
|
|
$
|
87,411
|
|
|
20
|
%
|
|
Three Months Ended June 30,
|
|
Increase/(Decrease)
|
|
Six Months Ended June 30,
|
|
Increase/(Decrease)
|
||||||||||||||||||||||
|
2016
|
|
2015
|
|
$
|
|
%
|
|
2016
|
|
2015
|
|
$
|
|
%
|
||||||||||||||
|
(in thousands)
|
|
|
|
(in thousands)
|
|
|
||||||||||||||||||||||
Research Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Salary and benefits
|
$
|
19,268
|
|
|
$
|
19,798
|
|
|
$
|
(530
|
)
|
|
(3
|
)%
|
|
$
|
39,978
|
|
|
$
|
40,254
|
|
|
$
|
(276
|
)
|
|
(1
|
)%
|
Stock-based compensation expense
|
13,409
|
|
|
13,081
|
|
|
328
|
|
|
3
|
%
|
|
24,065
|
|
|
26,857
|
|
|
(2,792
|
)
|
|
(10
|
)%
|
||||||
Laboratory supplies and other direct expenses
|
11,810
|
|
|
10,416
|
|
|
1,394
|
|
|
13
|
%
|
|
21,684
|
|
|
19,584
|
|
|
2,100
|
|
|
11
|
%
|
||||||
Outsourced services and acquired research assets
|
17,534
|
|
|
4,947
|
|
|
12,587
|
|
|
254
|
%
|
|
21,695
|
|
|
9,505
|
|
|
12,190
|
|
|
128
|
%
|
||||||
Infrastructure costs
|
17,865
|
|
|
16,953
|
|
|
912
|
|
|
5
|
%
|
|
35,474
|
|
|
34,557
|
|
|
917
|
|
|
3
|
%
|
||||||
Total research expenses
|
$
|
79,886
|
|
|
$
|
65,195
|
|
|
$
|
14,691
|
|
|
23
|
%
|
|
$
|
142,896
|
|
|
$
|
130,757
|
|
|
$
|
12,139
|
|
|
9
|
%
|
|
Three Months Ended June 30,
|
|
Increase/(Decrease)
|
|
Six Months Ended June 30,
|
|
Increase/(Decrease)
|
||||||||||||||||||||||
|
2016
|
|
2015
|
|
$
|
|
%
|
|
2016
|
|
2015
|
|
$
|
|
%
|
||||||||||||||
|
(in thousands)
|
|
|
|
(in thousands)
|
|
|
||||||||||||||||||||||
Development Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Salary and benefits
|
$
|
45,062
|
|
|
$
|
39,427
|
|
|
$
|
5,635
|
|
|
14
|
%
|
|
$
|
89,413
|
|
|
$
|
81,622
|
|
|
$
|
7,791
|
|
|
10
|
%
|
Stock-based compensation expense
|
27,231
|
|
|
28,551
|
|
|
(1,320
|
)
|
|
(5
|
)%
|
|
51,023
|
|
|
52,992
|
|
|
(1,969
|
)
|
|
(4
|
)%
|
||||||
Laboratory supplies and other direct expenses
|
13,005
|
|
|
8,473
|
|
|
4,532
|
|
|
53
|
%
|
|
21,255
|
|
|
15,417
|
|
|
5,838
|
|
|
38
|
%
|
||||||
Outsourced services
|
71,555
|
|
|
56,303
|
|
|
15,252
|
|
|
27
|
%
|
|
156,043
|
|
|
106,397
|
|
|
49,646
|
|
|
47
|
%
|
||||||
Drug supply costs
|
4,204
|
|
|
2,702
|
|
|
1,502
|
|
|
56
|
%
|
|
6,857
|
|
|
4,285
|
|
|
2,572
|
|
|
60
|
%
|
||||||
Infrastructure costs
|
30,065
|
|
|
23,207
|
|
|
6,858
|
|
|
30
|
%
|
|
59,381
|
|
|
47,987
|
|
|
11,394
|
|
|
24
|
%
|
||||||
Total development expenses
|
$
|
191,122
|
|
|
$
|
158,663
|
|
|
$
|
32,459
|
|
|
20
|
%
|
|
$
|
383,972
|
|
|
$
|
308,700
|
|
|
$
|
75,272
|
|
|
24
|
%
|
|
Three Months Ended June 30,
|
|
Increase/(Decrease)
|
|
Six Months Ended June 30,
|
|
Increase/(Decrease)
|
||||||||||||||||||||||
|
2016
|
|
2015
|
|
$
|
|
%
|
|
2016
|
|
2015
|
|
$
|
|
%
|
||||||||||||||
|
(in thousands)
|
|
|
|
(in thousands)
|
|
|
||||||||||||||||||||||
Sales, general and administrative expenses
|
$
|
111,652
|
|
|
$
|
94,394
|
|
|
$
|
17,258
|
|
|
18
|
%
|
|
$
|
216,866
|
|
|
$
|
180,254
|
|
|
$
|
36,612
|
|
|
20
|
%
|
•
|
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 ORKAMBI;
|
•
|
our expectations regarding clinical trials, development timelines and regulatory authority filings and submissions for our drug candidates including, ivacaftor, lumacaftor, VX-661, VX-371 (formerly P-1037), VX-152, VX-440, VX-970, VX-803, VX-984, VX-150, VX-241 and VX-210, as well as the sNDA for ORKAMBI for the treatment of patients with CF six to eleven years of age who are homozygous for the F508del mutation in their
CFTR
gene and the NDA for VX-661 in combination with ivacaftor;
|
•
|
our expectations regarding planned clinical trials for next-generation correctors based upon pre-clinical data;
|
•
|
our ability to successfully market KALYDECO and ORKAMBI or any of our other drug candidates for which we obtain regulatory approval;
|
•
|
our expectations regarding the timing and structure of clinical trials of our drugs and drug candidates, including ivacaftor, lumacaftor, VX-661, VX-371 (formerly P-1037), VX-152, VX-440, VX-970, VX-803, VX-984, VX-150, VX-241 and VX-210, 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.
|
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 |
April 1, 2016 to April 30, 2016
|
35,566
|
$0.01
|
—
|
—
|
|
May 1, 2016 to May 31, 2016
|
12,960
|
$0.01
|
—
|
—
|
|
June 1, 2016 to June 30, 2016
|
18,772
|
$0.01
|
—
|
—
|
Exhibit Number
|
Exhibit Description
|
3.1
|
Amended and Restated By-Laws of Vertex Pharmaceuticals Incorporated, as subsequently amended on April 26, 2016. (1)
|
10.1
|
Vertex Pharmaceuticals Incorporated Employee Stock Purchase Plan, as amended and restated as of July 12, 2016*
|
31.1
|
Certification of the Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
|
31.2
|
Certification of the Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
|
32.1
|
Certification of the Chief Executive Officer and the Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002.
|
101.INS
|
XBRL Instance
|
101.SCH
|
XBRL Taxonomy Extension Schema
|
101.CAL
|
XBRL Taxonomy Extension Calculation
|
101.LAB
|
XBRL Taxonomy Extension Labels
|
101.PRE
|
XBRL Taxonomy Extension Presentation
|
101.DEF
|
XBRL Taxonomy Extension Definition
|
|
Vertex Pharmaceuticals Incorporated
|
|
|
|
|
August 1, 2016
|
By:
|
/s/ Ian F. Smith
|
|
|
Ian F. Smith
|
|
|
Executive Vice President and Chief Financial Officer
(principal financial officer and duly authorized officer) |
1.
|
I have reviewed this Quarterly Report on Form 10-Q 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:
|
August 1, 2016
|
/s/ Jeffrey M. Leiden
|
|
|
|
|
|
Jeffrey M. Leiden
|
|
|
Chief Executive Officer and President
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q 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:
|
August 1, 2016
|
/s/ Ian F. Smith
|
|
|
|
|
|
Ian F. Smith
|
|
|
Executive Vice President and Chief Financial Officer
|
Date:
|
August 1, 2016
|
|
|
|
/s/ Jeffrey M. Leiden
|
|
|
|
|
|
Jeffrey M. Leiden
|
|
|
Chief Executive Officer and President
|
|
|
|
Date:
|
August 1, 2016
|
|
|
|
/s/ Ian F. Smith
|
|
|
|
|
|
Ian F. Smith
|
|
|
Executive Vice President and Chief Financial Officer
|
|