|
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2017
|
|
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
|
Smaller reporting company
o
|
|
|
|
|
Emerging growth company
o
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(Do not check if a smaller reporting company)
|
Common Stock, par value $0.01 per share
|
252,118,869
|
Class
|
Outstanding at July 21, 2017
|
|
|
|
Page
|
|
||
|
||
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Condensed Consolidated Statements of Operations - Three and Six Months Ended June 30, 2017 and 2016
|
|
|
Condensed Consolidated Statements of Comprehensive Loss - Three and Six Months Ended June 30, 2017 and 2016
|
|
|
Condensed Consolidated Balance Sheets - June 30, 2017 and December 31, 2016
|
|
|
Condensed Consolidated Statements of Shareholders' Equity and Noncontrolling Interest - Six Months Ended June 30, 2017 and 2016
|
|
|
Condensed Consolidated Statements of Cash Flows - Six Months Ended June 30, 2017 and 2016
|
|
|
||
|
||
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Revenues:
|
|
|
|
|
|
|
|
||||||||
Product revenues, net
|
$
|
513,988
|
|
|
$
|
425,651
|
|
|
$
|
994,610
|
|
|
$
|
820,061
|
|
Royalty revenues
|
2,861
|
|
|
5,282
|
|
|
4,412
|
|
|
8,878
|
|
||||
Collaborative revenues
|
27,286
|
|
|
675
|
|
|
259,831
|
|
|
749
|
|
||||
Total revenues
|
544,135
|
|
|
431,608
|
|
|
1,258,853
|
|
|
829,688
|
|
||||
Costs and expenses:
|
|
|
|
|
|
|
|
||||||||
Cost of product revenues
|
70,535
|
|
|
44,154
|
|
|
116,777
|
|
|
93,943
|
|
||||
Royalty expenses
|
670
|
|
|
1,098
|
|
|
1,416
|
|
|
1,958
|
|
||||
Research and development expenses
|
289,451
|
|
|
271,008
|
|
|
563,014
|
|
|
526,868
|
|
||||
Sales, general and administrative expenses
|
127,249
|
|
|
111,652
|
|
|
240,575
|
|
|
216,866
|
|
||||
Restructuring expenses, net
|
3,523
|
|
|
343
|
|
|
13,522
|
|
|
1,030
|
|
||||
Total costs and expenses
|
491,428
|
|
|
428,255
|
|
|
935,304
|
|
|
840,665
|
|
||||
Income (loss) from operations
|
52,707
|
|
|
3,353
|
|
|
323,549
|
|
|
(10,977
|
)
|
||||
Interest expense, net
|
(14,664
|
)
|
|
(20,155
|
)
|
|
(31,429
|
)
|
|
(40,853
|
)
|
||||
Other (expenses) income, net
|
(2,537
|
)
|
|
(1,219
|
)
|
|
(3,081
|
)
|
|
3,192
|
|
||||
Income (loss) before provision for income taxes
|
35,506
|
|
|
(18,021
|
)
|
|
289,039
|
|
|
(48,638
|
)
|
||||
Provision for income taxes
|
4,337
|
|
|
18,130
|
|
|
8,322
|
|
|
23,615
|
|
||||
Net income (loss)
|
31,169
|
|
|
(36,151
|
)
|
|
280,717
|
|
|
(72,253
|
)
|
||||
Income attributable to noncontrolling interest
|
(13,173
|
)
|
|
(28,374
|
)
|
|
(14,965
|
)
|
|
(33,903
|
)
|
||||
Net income (loss) attributable to Vertex
|
$
|
17,996
|
|
|
$
|
(64,525
|
)
|
|
$
|
265,752
|
|
|
$
|
(106,156
|
)
|
|
|
|
|
|
|
|
|
||||||||
Amounts per share attributable to Vertex common shareholders:
|
|
|
|
|
|
|
|
||||||||
Net income (loss):
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
0.07
|
|
|
$
|
(0.26
|
)
|
|
$
|
1.08
|
|
|
$
|
(0.43
|
)
|
Diluted
|
$
|
0.07
|
|
|
$
|
(0.26
|
)
|
|
$
|
1.06
|
|
|
$
|
(0.43
|
)
|
Shares used in per share calculations:
|
|
|
|
|
|
|
|
||||||||
Basic
|
247,521
|
|
|
244,482
|
|
|
246,782
|
|
|
244,124
|
|
||||
Diluted
|
251,635
|
|
|
244,482
|
|
|
250,199
|
|
|
244,124
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Net income (loss)
|
$
|
31,169
|
|
|
$
|
(36,151
|
)
|
|
$
|
280,717
|
|
|
$
|
(72,253
|
)
|
Changes in other comprehensive income (loss):
|
|
|
|
|
|
|
|
||||||||
Unrealized holding (losses) gains on marketable securities, net of tax of $1.0 million, zero, zero and zero, respectively
|
(17,281
|
)
|
|
(29
|
)
|
|
(13,747
|
)
|
|
200
|
|
||||
Unrealized (losses) gains on foreign currency forward contracts, net of tax of $1.1 million, $0.2 million, $2.0 million and $(0.6) million, respectively
|
(15,245
|
)
|
|
4,999
|
|
|
(21,926
|
)
|
|
(213
|
)
|
||||
Foreign currency translation adjustment
|
(5,252
|
)
|
|
(3,461
|
)
|
|
(7,253
|
)
|
|
(5,201
|
)
|
||||
Total changes in other comprehensive (loss) income
|
(37,778
|
)
|
|
1,509
|
|
|
(42,926
|
)
|
|
(5,214
|
)
|
||||
Comprehensive (loss) income
|
(6,609
|
)
|
|
(34,642
|
)
|
|
237,791
|
|
|
(77,467
|
)
|
||||
Comprehensive income attributable to noncontrolling interest
|
(13,173
|
)
|
|
(28,374
|
)
|
|
(14,965
|
)
|
|
(33,903
|
)
|
||||
Comprehensive (loss) income attributable to Vertex
|
$
|
(19,782
|
)
|
|
$
|
(63,016
|
)
|
|
$
|
222,826
|
|
|
$
|
(111,370
|
)
|
|
June 30,
|
|
December 31,
|
||||
|
2017
|
|
2016
|
||||
Assets
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
1,223,130
|
|
|
$
|
1,183,945
|
|
Marketable securities, available for sale
|
445,520
|
|
|
250,612
|
|
||
Restricted cash and cash equivalents (VIE)
|
64,628
|
|
|
47,762
|
|
||
Accounts receivable, net
|
247,949
|
|
|
201,083
|
|
||
Inventories
|
92,263
|
|
|
77,604
|
|
||
Prepaid expenses and other current assets
|
107,082
|
|
|
70,534
|
|
||
Total current assets
|
2,180,572
|
|
|
1,831,540
|
|
||
Property and equipment, net
|
740,103
|
|
|
698,362
|
|
||
Intangible assets
|
284,340
|
|
|
284,340
|
|
||
Goodwill
|
50,384
|
|
|
50,384
|
|
||
Cost method investments
|
20,252
|
|
|
20,276
|
|
||
Other assets
|
9,943
|
|
|
11,885
|
|
||
Total assets
|
$
|
3,285,594
|
|
|
$
|
2,896,787
|
|
Liabilities and Shareholders’ Equity
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
75,941
|
|
|
$
|
61,451
|
|
Accrued expenses
|
345,062
|
|
|
315,249
|
|
||
Deferred revenues, current portion
|
7,277
|
|
|
6,005
|
|
||
Accrued restructuring expenses, current portion
|
6,491
|
|
|
6,047
|
|
||
Capital lease obligations, current portion
|
18,179
|
|
|
19,426
|
|
||
Customer deposits
|
147,686
|
|
|
73,416
|
|
||
Credit facility
|
—
|
|
|
300,000
|
|
||
Other liabilities, current portion
|
24,770
|
|
|
10,943
|
|
||
Total current liabilities
|
625,406
|
|
|
792,537
|
|
||
Deferred revenues, excluding current portion
|
4,161
|
|
|
6,632
|
|
||
Accrued restructuring expenses, excluding current portion
|
527
|
|
|
1,907
|
|
||
Capital lease obligations, excluding current portion
|
25,346
|
|
|
34,976
|
|
||
Deferred tax liability
|
136,649
|
|
|
134,063
|
|
||
Construction financing lease obligation, excluding current portion
|
525,019
|
|
|
486,359
|
|
||
Advance from collaborator
|
76,034
|
|
|
73,423
|
|
||
Other liabilities, excluding current portion
|
25,221
|
|
|
28,699
|
|
||
Total liabilities
|
1,418,363
|
|
|
1,558,596
|
|
||
Commitments and contingencies
|
|
|
|
|
|
||
Shareholders’ equity:
|
|
|
|
||||
Preferred stock, $0.01 par value; 1,000,000 shares authorized; none issued and outstanding
|
—
|
|
|
—
|
|
||
Common stock, $0.01 par value; 500,000,000 shares authorized; 250,769,906 and 248,300,517 shares issued and outstanding at June 30, 2017 and December 31, 2016, respectively
|
2,479
|
|
|
2,450
|
|
||
Additional paid-in capital
|
6,808,002
|
|
|
6,506,795
|
|
||
Accumulated other comprehensive (loss) income
|
(21,753
|
)
|
|
21,173
|
|
||
Accumulated deficit
|
(5,117,455
|
)
|
|
(5,373,836
|
)
|
||
Total Vertex shareholders’ equity
|
1,671,273
|
|
|
1,156,582
|
|
||
Noncontrolling interest
|
195,958
|
|
|
181,609
|
|
||
Total shareholders’ equity
|
1,867,231
|
|
|
1,338,191
|
|
||
Total liabilities and shareholders’ equity
|
$
|
3,285,594
|
|
|
$
|
2,896,787
|
|
|
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, 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
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance at December 31, 2016
|
248,301
|
|
|
$
|
2,450
|
|
|
$
|
6,506,795
|
|
|
$
|
21,173
|
|
|
$
|
(5,373,836
|
)
|
|
$
|
1,156,582
|
|
|
$
|
181,609
|
|
|
$
|
1,338,191
|
|
Cumulative effect adjustment for adoption of new accounting guidance
|
—
|
|
|
—
|
|
|
9,371
|
|
|
|
|
(9,371
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Other comprehensive loss, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
(42,926
|
)
|
|
—
|
|
|
(42,926
|
)
|
|
—
|
|
|
(42,926
|
)
|
|||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
265,752
|
|
|
265,752
|
|
|
14,965
|
|
|
280,717
|
|
|||||||
Issuance of common stock under benefit plans
|
2,469
|
|
|
29
|
|
|
147,979
|
|
|
—
|
|
|
—
|
|
|
148,008
|
|
|
—
|
|
|
148,008
|
|
|||||||
Stock-based compensation expense
|
—
|
|
|
—
|
|
|
143,857
|
|
|
—
|
|
|
—
|
|
|
143,857
|
|
|
—
|
|
|
143,857
|
|
|||||||
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(616
|
)
|
|
(616
|
)
|
|||||||
Balance at June 30, 2017
|
250,770
|
|
|
$
|
2,479
|
|
|
$
|
6,808,002
|
|
|
$
|
(21,753
|
)
|
|
$
|
(5,117,455
|
)
|
|
$
|
1,671,273
|
|
|
$
|
195,958
|
|
|
$
|
1,867,231
|
|
|
Six Months Ended June 30,
|
||||||
|
2017
|
|
2016
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net income (loss)
|
$
|
280,717
|
|
|
$
|
(72,253
|
)
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
|
|
|
||||
Stock-based compensation expense
|
141,564
|
|
|
117,414
|
|
||
Depreciation and amortization expense
|
29,740
|
|
|
31,378
|
|
||
Write-downs of inventories to net realizable value
|
9,479
|
|
|
—
|
|
||
Deferred income taxes
|
4,626
|
|
|
22,858
|
|
||
Impairment of property and equipment
|
1,946
|
|
|
—
|
|
||
Other non-cash items, net
|
(4,834
|
)
|
|
3,436
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable, net
|
(41,450
|
)
|
|
(12,954
|
)
|
||
Inventories
|
(22,028
|
)
|
|
(7,779
|
)
|
||
Prepaid expenses and other assets
|
(47,848
|
)
|
|
(7,971
|
)
|
||
Accounts payable
|
14,047
|
|
|
(23,821
|
)
|
||
Accrued expenses and other liabilities
|
83,643
|
|
|
(14,562
|
)
|
||
Accrued restructuring expense
|
(1,058
|
)
|
|
(2,892
|
)
|
||
Deferred revenues
|
(1,199
|
)
|
|
(7,131
|
)
|
||
Net cash provided by operating activities
|
447,345
|
|
|
25,723
|
|
||
Cash flows from investing activities:
|
|
|
|
||||
Purchases of marketable securities
|
(377,667
|
)
|
|
(470,077
|
)
|
||
Maturities of marketable securities
|
168,882
|
|
|
332,316
|
|
||
Expenditures for property and equipment
|
(28,866
|
)
|
|
(27,892
|
)
|
||
(Increase) decrease in restricted cash and cash equivalents (VIE)
|
(16,865
|
)
|
|
8,397
|
|
||
Investment in CRISPR Series B preferred stock
|
—
|
|
|
(3,075
|
)
|
||
Decrease (increase) in other assets
|
388
|
|
|
(159
|
)
|
||
Net cash used in investing activities
|
(254,128
|
)
|
|
(160,490
|
)
|
||
Cash flows from financing activities:
|
|
|
|
||||
Issuances of common stock under benefit plans
|
147,887
|
|
|
33,702
|
|
||
Payments on revolving credit facility
|
(300,000
|
)
|
|
—
|
|
||
Advance from collaborator
|
7,500
|
|
|
—
|
|
||
Payments on capital lease obligations
|
(10,637
|
)
|
|
(7,538
|
)
|
||
Payments on construction financing lease obligation
|
(238
|
)
|
|
(209
|
)
|
||
Repayments of advanced funding
|
(2,044
|
)
|
|
—
|
|
||
Net cash (used in) provided by financing activities
|
(157,532
|
)
|
|
25,955
|
|
||
Effect of changes in exchange rates on cash
|
3,500
|
|
|
(90
|
)
|
||
Net increase (decrease) in cash and cash equivalents
|
39,185
|
|
|
(108,902
|
)
|
||
Cash and cash equivalents—beginning of period
|
1,183,945
|
|
|
714,768
|
|
||
Cash and cash equivalents—end of period
|
$
|
1,223,130
|
|
|
$
|
605,866
|
|
|
|
|
|
||||
Supplemental disclosure of cash flow information:
|
|
|
|
||||
Cash paid for interest
|
$
|
35,003
|
|
|
$
|
41,325
|
|
Cash paid for income taxes
|
$
|
2,218
|
|
|
$
|
1,237
|
|
Capitalization of costs related to construction financing lease obligation
|
$
|
38,930
|
|
|
$
|
—
|
|
Issuances of common stock from employee benefit plans receivable
|
$
|
188
|
|
|
$
|
161
|
|
B.
|
Product Revenues, Net
|
|
Trade
Allowances |
|
Rebates,
Chargebacks and Discounts |
|
Product
Returns |
|
Other
Incentives |
|
Total
|
||||||||||
|
(in thousands)
|
||||||||||||||||||
Balance at December 31, 2016
|
$
|
2,568
|
|
|
$
|
81,927
|
|
|
$
|
3,492
|
|
|
$
|
1,214
|
|
|
$
|
89,201
|
|
Provision related to current period sales
|
11,941
|
|
|
69,669
|
|
|
1,777
|
|
|
9,224
|
|
|
92,611
|
|
|||||
Adjustments related to prior period sales
|
(194
|
)
|
|
(3,268
|
)
|
|
(48
|
)
|
|
(145
|
)
|
|
(3,655
|
)
|
|||||
Credits/payments made
|
(11,683
|
)
|
|
(58,121
|
)
|
|
(631
|
)
|
|
(6,966
|
)
|
|
(77,401
|
)
|
|||||
Balance at June 30, 2017
|
$
|
2,632
|
|
|
$
|
90,207
|
|
|
$
|
4,590
|
|
|
$
|
3,327
|
|
|
$
|
100,756
|
|
C.
|
Collaborative Arrangements and Acquisitions
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
(in thousands)
|
||||||||||||||
(Income) loss attributable to noncontrolling interest before provision for income taxes and changes in fair value of contingent payments
|
$
|
(18,045
|
)
|
|
$
|
2,835
|
|
|
$
|
(16,498
|
)
|
|
$
|
3,674
|
|
Provision for income taxes
|
8,132
|
|
|
17,511
|
|
|
8,523
|
|
|
20,573
|
|
||||
Increase in fair value of contingent payments
|
(3,260
|
)
|
|
(48,720
|
)
|
|
(6,990
|
)
|
|
(58,150
|
)
|
||||
Net income attributable to noncontrolling interest
|
$
|
(13,173
|
)
|
|
$
|
(28,374
|
)
|
|
$
|
(14,965
|
)
|
|
$
|
(33,903
|
)
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
(in thousands)
|
||||||||||||||
Parion
|
$
|
3,260
|
|
|
$
|
48,400
|
|
|
$
|
6,090
|
|
|
$
|
57,400
|
|
BioAxone
|
—
|
|
|
320
|
|
|
900
|
|
|
750
|
|
|
June 30, 2017
|
|
December 31, 2016
|
||||
|
(in thousands)
|
||||||
Parion
|
$
|
244,890
|
|
|
$
|
238,800
|
|
BioAxone
|
18,900
|
|
|
18,000
|
|
|
June 30, 2017
|
|
December 31, 2016
|
||||
|
(in thousands)
|
||||||
Restricted cash and cash equivalents (VIE)
|
$
|
64,628
|
|
|
$
|
47,762
|
|
Prepaid expenses and other current assets
|
1,198
|
|
|
6,812
|
|
||
Intangible assets
|
284,340
|
|
|
284,340
|
|
||
Goodwill
|
19,391
|
|
|
19,391
|
|
||
Other assets
|
752
|
|
|
399
|
|
||
Accounts payable
|
702
|
|
|
415
|
|
||
Accrued expenses
|
4,118
|
|
|
1,330
|
|
||
Other liabilities, current portion
|
1,610
|
|
|
2,137
|
|
||
Deferred tax liability
|
134,305
|
|
|
131,446
|
|
||
Other liabilities, excluding current portion
|
300
|
|
|
300
|
|
||
Noncontrolling interest
|
195,958
|
|
|
181,609
|
|
D.
|
Earnings Per Share
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
(in thousands, except per share amounts)
|
||||||||||||||
Basic net income (loss) attributable to Vertex per common share calculation:
|
|
|
|
|
|
|
|
||||||||
Net income (loss) attributable to Vertex common shareholders
|
$
|
17,996
|
|
|
$
|
(64,525
|
)
|
|
$
|
265,752
|
|
|
$
|
(106,156
|
)
|
Less: Undistributed earnings allocated to participating securities
|
(23
|
)
|
|
—
|
|
|
(387
|
)
|
|
—
|
|
||||
Net income (loss) attributable to Vertex common shareholders—basic
|
$
|
17,973
|
|
|
$
|
(64,525
|
)
|
|
$
|
265,365
|
|
|
$
|
(106,156
|
)
|
|
|
|
|
|
|
|
|
||||||||
Basic weighted-average common shares outstanding
|
247,521
|
|
|
244,482
|
|
|
246,782
|
|
|
244,124
|
|
||||
Basic net income (loss) attributable to Vertex per common share
|
$
|
0.07
|
|
|
$
|
(0.26
|
)
|
|
$
|
1.08
|
|
|
$
|
(0.43
|
)
|
|
|
|
|
|
|
|
|
||||||||
Diluted net income (loss) attributable to Vertex per common share calculation:
|
|
|
|
|
|
|
|
||||||||
Net income (loss) attributable to Vertex common shareholders
|
$
|
17,996
|
|
|
$
|
(64,525
|
)
|
|
$
|
265,752
|
|
|
$
|
(106,156
|
)
|
Less: Undistributed earnings allocated to participating securities
|
(23
|
)
|
|
—
|
|
|
(382
|
)
|
|
—
|
|
||||
Net income (loss) attributable to Vertex common shareholders—diluted
|
$
|
17,973
|
|
|
$
|
(64,525
|
)
|
|
$
|
265,370
|
|
|
$
|
(106,156
|
)
|
|
|
|
|
|
|
|
|
||||||||
Weighted-average shares used to compute basic net income (loss) per common share
|
247,521
|
|
|
244,482
|
|
|
246,782
|
|
|
244,124
|
|
||||
Effect of potentially dilutive securities:
|
|
|
|
|
|
|
|
||||||||
Stock options
|
2,787
|
|
|
—
|
|
|
2,407
|
|
|
—
|
|
||||
Restricted stock and restricted stock units
|
1,264
|
|
|
—
|
|
|
958
|
|
|
—
|
|
||||
Other
|
63
|
|
|
—
|
|
|
52
|
|
|
—
|
|
||||
Weighted-average shares used to compute diluted net income (loss) per common share
|
251,635
|
|
|
244,482
|
|
|
250,199
|
|
|
244,124
|
|
||||
Diluted net income (loss) attributable to Vertex per common share
|
$
|
0.07
|
|
|
$
|
(0.26
|
)
|
|
$
|
1.06
|
|
|
$
|
(0.43
|
)
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||
|
(in thousands)
|
||||||||||
Stock options
|
3,112
|
|
|
12,231
|
|
|
7,065
|
|
|
12,231
|
|
Unvested restricted stock and restricted stock units
|
6
|
|
|
3,506
|
|
|
32
|
|
|
3,506
|
|
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, 2017
|
||||||||||||||
|
|
|
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
|
$
|
318,411
|
|
|
$
|
318,411
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Commercial paper
|
5,996
|
|
|
—
|
|
|
5,996
|
|
|
—
|
|
||||
Marketable securities:
|
|
|
|
|
|
|
|
||||||||
Corporate equity securities
|
51,049
|
|
|
51,049
|
|
|
—
|
|
|
—
|
|
||||
Corporate debt securities
|
291,124
|
|
|
—
|
|
|
291,124
|
|
|
—
|
|
||||
Commercial paper
|
103,347
|
|
|
—
|
|
|
103,347
|
|
|
—
|
|
||||
Prepaid and other current assets:
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward contracts
|
985
|
|
|
—
|
|
|
985
|
|
|
—
|
|
||||
Total financial assets
|
$
|
770,912
|
|
|
$
|
369,460
|
|
|
$
|
401,452
|
|
|
$
|
—
|
|
Financial instruments carried at fair value (liability position):
|
|
|
|
|
|
|
|
||||||||
Other liabilities, current portion:
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward contracts
|
$
|
(8,067
|
)
|
|
$
|
—
|
|
|
$
|
(8,067
|
)
|
|
$
|
—
|
|
Other liabilities, excluding current portion:
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward contracts
|
(1,435
|
)
|
|
—
|
|
|
(1,435
|
)
|
|
—
|
|
||||
Total financial liabilities
|
$
|
(9,502
|
)
|
|
$
|
—
|
|
|
$
|
(9,502
|
)
|
|
$
|
—
|
|
|
Fair Value Measurements as of December 31, 2016
|
||||||||||||||
|
|
|
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
|
$
|
280,560
|
|
|
$
|
280,560
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Marketable securities:
|
|
|
|
|
|
|
|
||||||||
Government-sponsored enterprise securities
|
15,508
|
|
|
15,508
|
|
|
—
|
|
|
—
|
|
||||
Corporate equity securities
|
64,560
|
|
|
64,560
|
|
|
—
|
|
|
—
|
|
||||
Commercial paper
|
59,404
|
|
|
—
|
|
|
59,404
|
|
|
—
|
|
||||
Corporate debt securities
|
111,140
|
|
|
—
|
|
|
111,140
|
|
|
—
|
|
||||
Prepaid and other current assets:
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward contracts
|
14,407
|
|
|
—
|
|
|
14,407
|
|
|
—
|
|
||||
Other assets:
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward contracts
|
1,186
|
|
|
$
|
—
|
|
|
1,186
|
|
|
$
|
—
|
|
||
Total financial assets
|
$
|
546,765
|
|
|
$
|
360,628
|
|
|
$
|
186,137
|
|
|
$
|
—
|
|
Financial instruments carried at fair value (liability position):
|
|
|
|
|
|
|
|
||||||||
Other liabilities, current portion:
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward contracts
|
$
|
(144
|
)
|
|
$
|
—
|
|
|
$
|
(144
|
)
|
|
$
|
—
|
|
Total financial liabilities
|
$
|
(144
|
)
|
|
$
|
—
|
|
|
$
|
(144
|
)
|
|
$
|
—
|
|
F.
|
Marketable Securities
|
|
Amortized Cost
|
|
Gross
Unrealized Gains |
|
Gross
Unrealized Losses |
|
Fair Value
|
||||||||
|
(in thousands)
|
||||||||||||||
As of June 30, 2017
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Cash and money market funds
|
$
|
1,217,134
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,217,134
|
|
Commercial paper
|
5,996
|
|
|
—
|
|
|
—
|
|
|
5,996
|
|
||||
Total cash and cash equivalents
|
$
|
1,223,130
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,223,130
|
|
Marketable securities:
|
|
|
|
|
|
|
|
||||||||
Corporate equity securities
|
43,213
|
|
|
7,836
|
|
|
—
|
|
|
51,049
|
|
||||
Commercial paper (matures within 1 year)
|
103,386
|
|
|
1
|
|
|
(40
|
)
|
|
103,347
|
|
||||
Corporate debt securities (matures within 1 year)
|
218,216
|
|
|
4
|
|
|
(143
|
)
|
|
218,077
|
|
||||
Corporate debt securities (matures after 1 year)
|
73,115
|
|
|
2
|
|
|
(70
|
)
|
|
73,047
|
|
||||
Total marketable securities
|
$
|
437,930
|
|
|
$
|
7,843
|
|
|
$
|
(253
|
)
|
|
$
|
445,520
|
|
Total cash, cash equivalents and marketable securities
|
$
|
1,661,060
|
|
|
$
|
7,843
|
|
|
$
|
(253
|
)
|
|
$
|
1,668,650
|
|
|
|
|
|
|
|
|
|
||||||||
As of December 31, 2016
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Cash and money market funds
|
$
|
1,183,945
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,183,945
|
|
Total cash and cash equivalents
|
$
|
1,183,945
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,183,945
|
|
Marketable securities:
|
|
|
|
|
|
|
|
||||||||
Government-sponsored enterprise securities (matures within 1 year)
|
$
|
15,506
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
15,508
|
|
Corporate equity securities
|
43,213
|
|
|
21,347
|
|
|
—
|
|
|
64,560
|
|
||||
Commercial paper (matures within 1 year)
|
59,331
|
|
|
73
|
|
|
—
|
|
|
59,404
|
|
||||
Corporate debt securities (matures within 1 year)
|
111,225
|
|
|
—
|
|
|
(85
|
)
|
|
111,140
|
|
||||
Total marketable securities
|
$
|
229,275
|
|
|
$
|
21,422
|
|
|
$
|
(85
|
)
|
|
$
|
250,612
|
|
Total cash, cash equivalents and marketable securities
|
$
|
1,413,220
|
|
|
$
|
21,422
|
|
|
$
|
(85
|
)
|
|
$
|
1,434,557
|
|
G.
|
Accumulated Other Comprehensive Income (Loss)
|
|
Foreign Currency Translation Adjustment
|
|
Unrealized Holding Gains (Losses) on Marketable Securities, Net of Tax
|
|
Unrealized Gains (Losses) on Foreign Currency Forward Contracts, Net of Tax
|
|
Total
|
||||||||
|
(in thousands)
|
||||||||||||||
Balance at December 31, 2016
|
$
|
(7,862
|
)
|
|
$
|
17,521
|
|
|
$
|
11,514
|
|
|
$
|
21,173
|
|
Other comprehensive loss before reclassifications
|
(7,253
|
)
|
|
(13,747
|
)
|
|
(17,215
|
)
|
|
(38,215
|
)
|
||||
Amounts reclassified from accumulated other comprehensive loss
|
—
|
|
|
—
|
|
|
(4,711
|
)
|
|
(4,711
|
)
|
||||
Net current period other comprehensive (loss) income
|
$
|
(7,253
|
)
|
|
$
|
(13,747
|
)
|
|
$
|
(21,926
|
)
|
|
$
|
(42,926
|
)
|
Balance at June 30, 2017
|
$
|
(15,115
|
)
|
|
$
|
3,774
|
|
|
$
|
(10,412
|
)
|
|
$
|
(21,753
|
)
|
|
Foreign Currency Translation Adjustment
|
|
Unrealized Holding Gains on Marketable Securities
|
|
Unrealized Gains (Losses) 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
|
)
|
H.
|
Hedging
|
|
As of June 30, 2017
|
|
As of December 31, 2016
|
||||
Foreign Currency
|
(in thousands)
|
||||||
Euro
|
$
|
209,800
|
|
|
$
|
164,368
|
|
British pound sterling
|
71,917
|
|
|
65,237
|
|
||
Australian dollar
|
28,680
|
|
|
23,776
|
|
||
Total foreign currency forward contracts
|
$
|
310,397
|
|
|
$
|
253,381
|
|
As of June 30, 2017
|
||||||||||
Assets
|
|
Liabilities
|
||||||||
Classification
|
|
Fair Value
|
|
Classification
|
|
Fair Value
|
||||
(in thousands)
|
||||||||||
Prepaid and other current assets
|
|
$
|
985
|
|
|
Other liabilities, current portion
|
|
$
|
(8,067
|
)
|
Other assets
|
|
—
|
|
|
Other liabilities, excluding current portion
|
|
(1,435
|
)
|
||
Total assets
|
|
$
|
985
|
|
|
Total liabilities
|
|
$
|
(9,502
|
)
|
As of December 31, 2016
|
||||||||||
Assets
|
|
Liabilities
|
||||||||
Classification
|
|
Fair Value
|
|
Classification
|
|
Fair Value
|
||||
(in thousands)
|
||||||||||
Prepaid and other current assets
|
|
$
|
14,407
|
|
|
Other liabilities, current portion
|
|
$
|
(144
|
)
|
Other assets
|
|
1,186
|
|
|
Other liabilities, excluding current portion
|
|
—
|
|
||
Total assets
|
|
$
|
15,593
|
|
|
Total liabilities
|
|
$
|
(144
|
)
|
|
As of June 30, 2017
|
||||||||||||||||||
|
Gross Amounts Recognized
|
|
Gross Amounts Offset
|
|
Gross Amounts Presented
|
|
Gross Amounts Not Offset
|
|
Legal Offset
|
||||||||||
Foreign currency forward contracts
|
(in thousands)
|
||||||||||||||||||
Total assets
|
$
|
985
|
|
|
$
|
—
|
|
|
$
|
985
|
|
|
$
|
(985
|
)
|
|
$
|
—
|
|
Total liabilities
|
$
|
(9,502
|
)
|
|
$
|
—
|
|
|
$
|
(9,502
|
)
|
|
$
|
985
|
|
|
$
|
(8,517
|
)
|
|
As of December 31, 2016
|
||||||||||||||||||
|
Gross Amounts Recognized
|
|
Gross Amounts Offset
|
|
Gross Amounts Presented
|
|
Gross Amounts Not Offset
|
|
Legal Offset
|
||||||||||
Foreign currency forward contracts
|
(in thousands)
|
||||||||||||||||||
Total assets
|
$
|
15,593
|
|
|
$
|
—
|
|
|
$
|
15,593
|
|
|
$
|
(144
|
)
|
|
$
|
15,449
|
|
Total liabilities
|
$
|
(144
|
)
|
|
$
|
—
|
|
|
$
|
(144
|
)
|
|
$
|
144
|
|
|
$
|
—
|
|
|
As of June 30, 2017
|
|
As of December 31, 2016
|
||||
|
(in thousands)
|
||||||
Raw materials
|
$
|
13,876
|
|
|
$
|
6,348
|
|
Work-in-process
|
63,116
|
|
|
56,672
|
|
||
Finished goods
|
15,271
|
|
|
14,584
|
|
||
Total
|
$
|
92,263
|
|
|
$
|
77,604
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
(in thousands)
|
||||||||||||||
Stock-based compensation expense by type of award:
|
|
|
|
|
|
|
|
||||||||
Stock options
|
$
|
27,915
|
|
|
$
|
31,826
|
|
|
$
|
54,896
|
|
|
$
|
58,086
|
|
Restricted stock and restricted stock units
|
43,906
|
|
|
29,608
|
|
|
84,651
|
|
|
57,141
|
|
||||
ESPP share issuances
|
2,246
|
|
|
1,436
|
|
|
4,310
|
|
|
3,960
|
|
||||
Less stock-based compensation expense capitalized to inventories
|
(1,485
|
)
|
|
(928
|
)
|
|
(2,293
|
)
|
|
(1,773
|
)
|
||||
Total stock-based compensation included in costs and expenses
|
$
|
72,582
|
|
|
$
|
61,942
|
|
|
$
|
141,564
|
|
|
$
|
117,414
|
|
|
|
|
|
|
|
|
|
|
|||||||
Stock-based compensation expense by line item:
|
|
|
|
|
|
|
|
||||||||
Research and development expenses
|
$
|
43,832
|
|
|
$
|
40,640
|
|
|
$
|
88,669
|
|
|
$
|
75,088
|
|
Sales, general and administrative expenses
|
28,750
|
|
|
21,302
|
|
|
52,895
|
|
|
42,326
|
|
||||
Total stock-based compensation included in costs and expenses
|
$
|
72,582
|
|
|
$
|
61,942
|
|
|
$
|
141,564
|
|
|
$
|
117,414
|
|
|
As of June 30, 2017
|
||||
|
Unrecognized Expense
|
|
Weighted-average
Recognition Period |
||
|
(in thousands)
|
|
(in years)
|
||
Type of award:
|
|
|
|
||
Stock options
|
$
|
165,047
|
|
|
2.51
|
Restricted stock and restricted stock units
|
$
|
249,474
|
|
|
2.41
|
ESPP share issuances
|
$
|
5,064
|
|
|
0.62
|
|
|
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
|
|
129
|
|
|
0.61
|
|
$
|
18.93
|
|
|
129
|
|
|
$
|
18.93
|
|
$20.01–$40.00
|
|
943
|
|
|
2.57
|
|
$
|
34.74
|
|
|
943
|
|
|
$
|
34.74
|
|
$40.01–$60.00
|
|
1,233
|
|
|
5.15
|
|
$
|
48.58
|
|
|
1,233
|
|
|
$
|
48.58
|
|
$60.01–$80.00
|
|
1,042
|
|
|
6.69
|
|
$
|
75.83
|
|
|
784
|
|
|
$
|
75.63
|
|
$80.01–$100.00
|
|
5,336
|
|
|
8.45
|
|
$
|
89.52
|
|
|
1,733
|
|
|
$
|
89.89
|
|
$100.01–$120.00
|
|
1,437
|
|
|
7.56
|
|
$
|
109.35
|
|
|
786
|
|
|
$
|
109.27
|
|
$120.01–$131.89
|
|
1,416
|
|
|
8.03
|
|
$
|
130.34
|
|
|
763
|
|
|
$
|
130.00
|
|
Total
|
|
11,536
|
|
|
7.21
|
|
$
|
86.12
|
|
|
6,371
|
|
|
$
|
77.74
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||
|
2017
|
|
2017
|
||||
|
(in thousands)
|
||||||
Liability, beginning of the period
|
$
|
3,727
|
|
|
$
|
—
|
|
Restructuring expense
|
3,222
|
|
|
12,440
|
|
||
Cash payments
|
(3,861
|
)
|
|
(7,119
|
)
|
||
Asset impairments and other non-cash items
|
419
|
|
|
(1,814
|
)
|
||
Liability, end of the period
|
$
|
3,507
|
|
|
$
|
3,507
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
(in thousands)
|
||||||||||||||
Liability, beginning of the period
|
$
|
2,525
|
|
|
$
|
7,224
|
|
|
$
|
4,328
|
|
|
$
|
7,944
|
|
Restructuring expense
|
342
|
|
|
(11
|
)
|
|
827
|
|
|
192
|
|
||||
Cash payments
|
(3,695
|
)
|
|
(3,833
|
)
|
|
(8,959
|
)
|
|
(7,764
|
)
|
||||
Cash received from subleases
|
2,818
|
|
|
3,008
|
|
|
5,794
|
|
|
6,016
|
|
||||
Liability, end of the period
|
$
|
1,990
|
|
|
$
|
6,388
|
|
|
$
|
1,990
|
|
|
$
|
6,388
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
(in thousands)
|
||||||||||||||
Liability, beginning of the period
|
$
|
1,995
|
|
|
$
|
5,449
|
|
|
$
|
3,626
|
|
|
$
|
5,964
|
|
Restructuring expense
|
(41
|
)
|
|
149
|
|
|
255
|
|
|
382
|
|
||||
Cash payments
|
(2,911
|
)
|
|
(3,096
|
)
|
|
(7,316
|
)
|
|
(6,252
|
)
|
||||
Cash received from subleases
|
2,478
|
|
|
2,361
|
|
|
4,956
|
|
|
4,769
|
|
||||
Liability, end of the period
|
$
|
1,521
|
|
|
$
|
4,863
|
|
|
$
|
1,521
|
|
|
$
|
4,863
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||
|
2016
|
|
2016
|
||||
|
(in thousands)
|
||||||
Liability, beginning of the period
|
$
|
1,262
|
|
|
$
|
1,450
|
|
Restructuring expense
|
205
|
|
|
456
|
|
||
Cash payments
|
(234
|
)
|
|
(673
|
)
|
||
Liability, end of the period
|
$
|
1,233
|
|
|
$
|
1,233
|
|
•
|
CRISPR Therapeutics AG, or CRISPR, pursuant to which we are collaborating on the discovery and development of potential new treatments aimed at the underlying genetic causes of human diseases using CRISPR-Cas9 gene editing technology;
|
•
|
Parion, pursuant to which we are developing ENaC inhibitors for the treatment of pulmonary diseases;
|
•
|
Moderna Therapeutics, Inc., or Moderna, pursuant to which we are seeking to identify and develop mRNA therapeutics for the treatment of CF; and
|
•
|
BioAxone Biosciences, Inc., or BioAxone, pursuant to which we are evaluating VX-210 as a potential treatment for patients who have spinal cord injuries.
|
•
|
Merck KGaA, which is advancing four oncology research and development programs; and
|
•
|
Janssen Pharmaceuticals, Inc., which is developing JNJ-3872 (formerly VX-787) for the treatment of influenza.
|
VX-440 in
F508del
/Min Patients
|
||
Mean Absolute Within-Group Change From Baseline Through Day 29*
|
Mean Absolute Within-Group Change in ppFEV
1
(percentage points)
|
Mean Absolute Within-Group Change in Sweat Chloride (mmol/L)
|
Triple placebo
|
+1.4
(p=0.4908) |
+1.6
(p=0.6800) |
VX-440 (200mg q12h) + tezacaftor (50mg q12h or 100mg QD) + ivacaftor (150mg q12h)
|
+10.0
(p<0.0001) |
-20.7
(p<0.0001) |
VX-440 (600mg q12h) + tezacaftor (50mg q12h) + ivacaftor (300mg q12h)
|
+12.0
(p<0.0001) |
-33.1
(p<0.0001) |
* all p values are within group p-values based on mixed effect models; values expressed as ‘Through Day 29’ are the average of Day 15 and Day 29 measures
|
|
Three Months Ended June 30,
|
|
Increase/(Decrease)
|
|
Six Months Ended June 30,
|
|
Increase/(Decrease)
|
||||||||||||||||||||||
|
2017
|
|
2016
|
|
$
|
|
%
|
|
2017
|
|
2016
|
|
$
|
|
%
|
||||||||||||||
|
(in thousands)
|
|
|
|
(in thousands)
|
|
|
||||||||||||||||||||||
Revenues
|
$
|
544,135
|
|
|
$
|
431,608
|
|
|
$
|
112,527
|
|
|
26
|
%
|
|
$
|
1,258,853
|
|
|
$
|
829,688
|
|
|
$
|
429,165
|
|
|
52
|
%
|
Operating costs and expenses
|
491,428
|
|
|
428,255
|
|
|
63,173
|
|
|
15
|
%
|
|
935,304
|
|
|
840,665
|
|
|
94,639
|
|
|
11
|
%
|
||||||
Other items, net
|
(34,711
|
)
|
|
(67,878
|
)
|
|
33,167
|
|
|
49
|
%
|
|
(57,797
|
)
|
|
(95,179
|
)
|
|
37,382
|
|
|
39
|
%
|
||||||
Net income (loss) attributable to Vertex
|
$
|
17,996
|
|
|
$
|
(64,525
|
)
|
|
$
|
82,521
|
|
|
n/a
|
|
|
$
|
265,752
|
|
|
$
|
(106,156
|
)
|
|
$
|
371,908
|
|
|
n/a
|
|
|
Three Months Ended June 30,
|
|
Increase/(Decrease)
|
|
Six Months Ended June 30,
|
|
Increase/(Decrease)
|
||||||||||||||||||||||
|
2017
|
|
2016
|
|
$
|
|
%
|
|
2017
|
|
2016
|
|
$
|
|
%
|
||||||||||||||
|
(in thousands)
|
|
|
|
(in thousands)
|
|
|
||||||||||||||||||||||
Product revenues, net
|
$
|
513,988
|
|
|
$
|
425,651
|
|
|
$
|
88,337
|
|
|
21
|
%
|
|
$
|
994,610
|
|
|
$
|
820,061
|
|
|
$
|
174,549
|
|
|
21
|
%
|
Royalty revenues
|
2,861
|
|
|
5,282
|
|
|
(2,421
|
)
|
|
(46
|
)%
|
|
4,412
|
|
|
8,878
|
|
|
(4,466
|
)
|
|
(50
|
)%
|
||||||
Collaborative revenues
|
27,286
|
|
|
675
|
|
|
26,611
|
|
|
n/a
|
|
|
259,831
|
|
|
749
|
|
|
259,082
|
|
|
n/a
|
|
||||||
Total revenues
|
$
|
544,135
|
|
|
$
|
431,608
|
|
|
$
|
112,527
|
|
|
26
|
%
|
|
$
|
1,258,853
|
|
|
$
|
829,688
|
|
|
$
|
429,165
|
|
|
52
|
%
|
|
Three Months Ended June 30,
|
|
Increase/(Decrease)
|
|
Six Months Ended June 30,
|
|
Increase/(Decrease)
|
||||||||||||||||||||||
|
2017
|
|
2016
|
|
$
|
|
%
|
|
2017
|
|
2016
|
|
$
|
|
%
|
||||||||||||||
|
(in thousands)
|
|
|
|
(in thousands)
|
|
|
||||||||||||||||||||||
ORKAMBI
|
$
|
324,407
|
|
|
$
|
245,496
|
|
|
$
|
78,911
|
|
|
32
|
%
|
|
$
|
619,268
|
|
|
$
|
468,624
|
|
|
$
|
150,644
|
|
|
32
|
%
|
KALYDECO
|
189,633
|
|
|
180,235
|
|
|
9,398
|
|
|
5
|
%
|
|
$
|
375,348
|
|
|
$
|
350,744
|
|
|
$
|
24,604
|
|
|
7
|
%
|
|||
INCIVEK
|
(52
|
)
|
|
(80
|
)
|
|
28
|
|
|
35
|
%
|
|
(6
|
)
|
|
693
|
|
|
(699
|
)
|
|
n/a
|
|
||||||
Total product revenues, net
|
$
|
513,988
|
|
|
$
|
425,651
|
|
|
$
|
88,337
|
|
|
21
|
%
|
|
$
|
994,610
|
|
|
$
|
820,061
|
|
|
$
|
174,549
|
|
|
21
|
%
|
`
|
Three Months Ended June 30,
|
|
Increase/(Decrease)
|
|
Six Months Ended June 30,
|
|
Increase/(Decrease)
|
||||||||||||||||||||||
|
2017
|
|
2016
|
|
$
|
|
%
|
|
2017
|
|
2016
|
|
$
|
|
%
|
||||||||||||||
|
(in thousands)
|
|
|
|
(in thousands)
|
|
|
||||||||||||||||||||||
Cost of product revenues
|
$
|
70,535
|
|
|
$
|
44,154
|
|
|
$
|
26,381
|
|
|
60
|
%
|
|
$
|
116,777
|
|
|
$
|
93,943
|
|
|
$
|
22,834
|
|
|
24
|
%
|
Royalty expenses
|
670
|
|
|
1,098
|
|
|
(428
|
)
|
|
(39
|
)%
|
|
1,416
|
|
|
1,958
|
|
|
(542
|
)
|
|
(28
|
)%
|
||||||
Research and development expenses
|
289,451
|
|
|
271,008
|
|
|
18,443
|
|
|
7
|
%
|
|
563,014
|
|
|
526,868
|
|
|
36,146
|
|
|
7
|
%
|
||||||
Sales, general and administrative expenses
|
127,249
|
|
|
111,652
|
|
|
15,597
|
|
|
14
|
%
|
|
240,575
|
|
|
216,866
|
|
|
23,709
|
|
|
11
|
%
|
||||||
Restructuring expenses, net
|
3,523
|
|
|
343
|
|
|
3,180
|
|
|
n/a
|
|
|
13,522
|
|
|
1,030
|
|
|
12,492
|
|
|
n/a
|
|
||||||
Total costs and expenses
|
$
|
491,428
|
|
|
$
|
428,255
|
|
|
$
|
63,173
|
|
|
15
|
%
|
|
$
|
935,304
|
|
|
$
|
840,665
|
|
|
$
|
94,639
|
|
|
11
|
%
|
|
Three Months Ended June 30,
|
|
Increase/(Decrease)
|
|
Six Months Ended June 30,
|
|
Increase/(Decrease)
|
||||||||||||||||||||||
|
2017
|
|
2016
|
|
$
|
|
%
|
|
2017
|
|
2016
|
|
$
|
|
%
|
||||||||||||||
|
(in thousands)
|
|
|
|
(in thousands)
|
|
|
||||||||||||||||||||||
Research expenses
|
$
|
77,222
|
|
|
$
|
79,886
|
|
|
$
|
(2,664
|
)
|
|
(3
|
)%
|
|
$
|
150,278
|
|
|
$
|
142,896
|
|
|
$
|
7,382
|
|
|
5
|
%
|
Development expenses
|
212,229
|
|
|
191,122
|
|
|
21,107
|
|
|
11
|
%
|
|
412,736
|
|
|
383,972
|
|
|
28,764
|
|
|
7
|
%
|
||||||
Total research and development expenses
|
$
|
289,451
|
|
|
$
|
271,008
|
|
|
$
|
18,443
|
|
|
7
|
%
|
|
$
|
563,014
|
|
|
$
|
526,868
|
|
|
$
|
36,146
|
|
|
7
|
%
|
|
Three Months Ended June 30,
|
|
Increase/(Decrease)
|
|
Six Months Ended June 30,
|
|
Increase/(Decrease)
|
||||||||||||||||||||||
|
2017
|
|
2016
|
|
$
|
|
%
|
|
2017
|
|
2016
|
|
$
|
|
%
|
||||||||||||||
|
(in thousands)
|
|
|
|
(in thousands)
|
|
|
||||||||||||||||||||||
Research Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Salary and benefits
|
$
|
19,508
|
|
|
$
|
19,268
|
|
|
$
|
240
|
|
|
1
|
%
|
|
$
|
41,041
|
|
|
$
|
39,978
|
|
|
$
|
1,063
|
|
|
3
|
%
|
Stock-based compensation expense
|
15,034
|
|
|
13,409
|
|
|
1,625
|
|
|
12
|
%
|
|
28,725
|
|
|
24,065
|
|
|
4,660
|
|
|
19
|
%
|
||||||
Laboratory supplies and other direct expenses
|
11,824
|
|
|
11,810
|
|
|
14
|
|
|
—
|
%
|
|
23,189
|
|
|
21,684
|
|
|
1,505
|
|
|
7
|
%
|
||||||
Outsourced services
|
12,077
|
|
|
6,534
|
|
|
5,543
|
|
|
85
|
%
|
|
19,414
|
|
|
10,695
|
|
|
8,719
|
|
|
82
|
%
|
||||||
Collaboration and asset acquisition payments
|
—
|
|
|
11,000
|
|
|
(11,000
|
)
|
|
(100
|
)%
|
|
—
|
|
|
11,000
|
|
|
(11,000
|
)
|
|
(100
|
)%
|
||||||
Infrastructure costs
|
18,779
|
|
|
17,865
|
|
|
914
|
|
|
5
|
%
|
|
37,909
|
|
|
35,474
|
|
|
2,435
|
|
|
7
|
%
|
||||||
Total research expenses
|
$
|
77,222
|
|
|
$
|
79,886
|
|
|
$
|
(2,664
|
)
|
|
(3
|
)%
|
|
$
|
150,278
|
|
|
$
|
142,896
|
|
|
$
|
7,382
|
|
|
5
|
%
|
|
Three Months Ended June 30,
|
|
Increase/(Decrease)
|
|
Six Months Ended June 30,
|
|
Increase/(Decrease)
|
||||||||||||||||||||||
|
2017
|
|
2016
|
|
$
|
|
%
|
|
2017
|
|
2016
|
|
$
|
|
%
|
||||||||||||||
|
(in thousands)
|
|
|
|
(in thousands)
|
|
|
||||||||||||||||||||||
Development Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Salary and benefits
|
$
|
50,680
|
|
|
$
|
45,062
|
|
|
$
|
5,618
|
|
|
12
|
%
|
|
$
|
102,634
|
|
|
$
|
89,413
|
|
|
$
|
13,221
|
|
|
15
|
%
|
Stock-based compensation expense
|
28,798
|
|
|
27,231
|
|
|
1,567
|
|
|
6
|
%
|
|
59,944
|
|
|
51,023
|
|
|
8,921
|
|
|
17
|
%
|
||||||
Laboratory supplies and other direct expenses
|
12,313
|
|
|
13,005
|
|
|
(692
|
)
|
|
(5
|
)%
|
|
23,343
|
|
|
21,255
|
|
|
2,088
|
|
|
10
|
%
|
||||||
Outsourced services
|
88,855
|
|
|
71,555
|
|
|
17,300
|
|
|
24
|
%
|
|
162,290
|
|
|
156,043
|
|
|
6,247
|
|
|
4
|
%
|
||||||
Drug supply costs
|
1,043
|
|
|
4,204
|
|
|
(3,161
|
)
|
|
(75
|
)%
|
|
2,992
|
|
|
6,857
|
|
|
(3,865
|
)
|
|
(56
|
)%
|
||||||
Infrastructure costs
|
30,540
|
|
|
30,065
|
|
|
475
|
|
|
2
|
%
|
|
61,533
|
|
|
59,381
|
|
|
2,152
|
|
|
4
|
%
|
||||||
Total development expenses
|
$
|
212,229
|
|
|
$
|
191,122
|
|
|
$
|
21,107
|
|
|
11
|
%
|
|
$
|
412,736
|
|
|
$
|
383,972
|
|
|
$
|
28,764
|
|
|
7
|
%
|
|
Three Months Ended June 30,
|
|
Increase/(Decrease)
|
|
Six Months Ended June 30,
|
|
Increase/(Decrease)
|
||||||||||||||||||||||
|
2017
|
|
2016
|
|
$
|
|
%
|
|
2017
|
|
2016
|
|
$
|
|
%
|
||||||||||||||
|
(in thousands)
|
|
|
|
(in thousands)
|
|
|
||||||||||||||||||||||
Sales, general and administrative expenses
|
$
|
127,249
|
|
|
$
|
111,652
|
|
|
$
|
15,597
|
|
|
14
|
%
|
|
$
|
240,575
|
|
|
$
|
216,866
|
|
|
$
|
23,709
|
|
|
11
|
%
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
(in thousands)
|
|
|
|
|
||||||||||
(Income) loss attributable to noncontrolling interest before provision for income taxes and changes in fair value of contingent payments
|
$
|
(18,045
|
)
|
|
$
|
2,835
|
|
|
$
|
(16,498
|
)
|
|
$
|
3,674
|
|
Provision for income taxes
|
8,132
|
|
|
17,511
|
|
|
8,523
|
|
|
20,573
|
|
||||
Increase in fair value of contingent payments
|
(3,260
|
)
|
|
(48,720
|
)
|
|
(6,990
|
)
|
|
(58,150
|
)
|
||||
Net income attributable to noncontrolling interest
|
$
|
(13,173
|
)
|
|
$
|
(28,374
|
)
|
|
$
|
(14,965
|
)
|
|
$
|
(33,903
|
)
|
•
|
In February 2017, we repaid the outstanding $300 million balance of our revolving credit facility.
|
•
|
In July 2017, we acquired certain CF assets including CTP-656 from Concert pursuant to an asset purchase agreement. At closing, we paid Concert $160 million in cash for all worldwide development and commercialization rights to CTP-656 and may be required to pay up to an additional $90 million in milestones based on regulatory approval in the U.S. and reimbursement in the UK, Germany or France.
|
•
|
the rate at which patients initiate treatment of ORKAMBI, the proportion of initiated patients who remain on treatment and the compliance rate for patients who remain on treatment;
|
•
|
the safety and efficacy profile of ORKAMBI;
|
•
|
our ability to obtain reimbursement for ORKAMBI and any changes in reimbursement policies of payors and other third parties; and
|
•
|
legal, administrative, regulatory or legislative developments, including pricing limitations.
|
•
|
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 the combination regimen is safe; and
|
•
|
whether or not the FDA and European regulatory authorities are satisfied that the manufacturing facilities, processes and controls for the combination are adequate, that the labeling is satisfactory and that plans for post-marketing studies, safety monitoring and risk evaluation and mitigation are sufficient.
|
•
|
that we fail to successfully develop and/or integrate CTP-656 into our pipeline in order to achieve our strategic objectives;
|
•
|
that we receive inadequate or unfavorable data from clinical trials evaluating the CTP-656 in combination with other CFTR modulators; and
|
•
|
the potential failure of the due diligence processes to identify significant problems, liabilities or other shortcomings or challenges of CTP-656 or any of the other assets acquired from Concert, including but not limited to, problems, liabilities or other shortcomings or challenges with respect to intellectual property, product quality, safety, and other known and unknown liabilities.
|
•
|
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, timing of our receipt of data from our ongoing and planned clinical trials and regulatory authority filings and submissions for our products and drug candidates, including the NDA and MAA submission for tezacaftor in combination with ivacaftor and the ongoing and planned clinical trials to evaluate our next-generation CFTR correctors;
|
•
|
our ability to successfully market KALYDECO and ORKAMBI or any of our other drug candidates for which we obtain regulatory approval;
|
•
|
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;
|
•
|
our post-closing integration of the assets acquired from Concert;
|
•
|
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, 2017 to April 30, 2017
|
22,818
|
$0.01
|
—
|
—
|
|
May 1, 2017 to May 31, 2017
|
28,883
|
$0.01
|
—
|
—
|
|
June 1, 2017 to June 30, 2017
|
5,972
|
$0.01
|
—
|
—
|
|
Total
|
57,673
|
$0.01
|
—
|
—
|
Exhibit Number
|
Exhibit Description
|
3.1
|
Restated Articles of Organization of Vertex Pharmaceuticals Incorporated, as amended.
|
3.2
|
Amended and Restated By-Laws of Vertex Pharmaceuticals Incorporated, as subsequently amended on April 26, 2016 and June 8, 2017.
|
10.1
|
Amended and Restated 2013 Stock and Option Plan. (1) *
|
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
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101.PRE
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XBRL Taxonomy Extension Presentation
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101.DEF
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XBRL Taxonomy Extension Definition
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Vertex Pharmaceuticals Incorporated
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July 28, 2017
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By:
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/s/ Ian F. Smith
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Ian F. Smith
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Executive Vice President, Chief Operating Officer and Chief Financial Officer
(principal financial officer and duly authorized officer) |
VOTED:
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To increase the number of shares of Common Stock, $.01 par value per share that the Corporation shall have authority to issue from 25,000,000 shares to 50,000,000 shares; and that Article 3 of the
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Corporation's Restated Articles of Organization be, and hereby is, amended to read as follows:
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3.
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The total number of shares and the par value, if any, of each class of stock which the Corporation shall be authorized to issue is as follows: 1,000,000 shares of Preferred Stock, $.01 par value per share and 50,000,000 shares of Common Stock, $.01 par value per share.
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1.
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I have reviewed this Quarterly Report on Form 10-Q of Vertex Pharmaceuticals Incorporated;
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2.
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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;
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3.
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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;
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4.
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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:
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a)
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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;
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b)
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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;
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c)
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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
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d)
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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
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5.
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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):
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a)
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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
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b)
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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.
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Date:
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July 28, 2017
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/s/ Jeffrey M. Leiden
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Jeffrey M. Leiden
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Chief Executive Officer and President
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1.
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I have reviewed this Quarterly Report on Form 10-Q of Vertex Pharmaceuticals Incorporated;
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2.
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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;
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3.
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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;
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4.
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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:
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a)
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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;
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b)
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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;
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c)
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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
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d)
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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
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5.
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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):
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a)
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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
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b)
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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.
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Date:
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July 28, 2017
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/s/ Ian F. Smith
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Ian F. Smith
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Executive Vice President, Chief Operating Officer and Chief Financial Officer
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Date:
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July 28, 2017
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/s/ Jeffrey M. Leiden
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Jeffrey M. Leiden
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Chief Executive Officer and President
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Date:
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July 28, 2017
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/s/ Ian F. Smith
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Ian F. Smith
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Executive Vice President, Chief Operating Officer and Chief Financial Officer
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