|
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 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
|
(Do not check if a smaller reporting company)
|
Common Stock, par value $0.01 per share
|
252,902,848
|
Class
|
Outstanding at October 20, 2017
|
|
|
|
Page
|
|
||
|
||
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Condensed Consolidated Statements of Operations - Three and Nine Months Ended September 30, 2017 and 2016
|
|
|
Condensed Consolidated Statements of Comprehensive Income (Loss) - Three and Nine Months Ended September 30, 2017 and 2016
|
|
|
Condensed Consolidated Balance Sheets - September 30, 2017 and December 31, 2016
|
|
|
Condensed Consolidated Statements of Shareholders' Equity and Noncontrolling Interest - Nine Months Ended September 30, 2017 and 2016
|
|
|
Condensed Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2017 and 2016
|
|
|
||
|
||
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Revenues:
|
|
|
|
|
|
|
|
||||||||
Product revenues, net
|
$
|
549,642
|
|
|
$
|
409,689
|
|
|
$
|
1,544,252
|
|
|
$
|
1,229,750
|
|
Royalty revenues
|
2,231
|
|
|
3,835
|
|
|
6,643
|
|
|
12,713
|
|
||||
Collaborative revenues
|
26,292
|
|
|
259
|
|
|
286,123
|
|
|
1,008
|
|
||||
Total revenues
|
578,165
|
|
|
413,783
|
|
|
1,837,018
|
|
|
1,243,471
|
|
||||
Costs and expenses:
|
|
|
|
|
|
|
|
||||||||
Cost of product revenues
|
72,186
|
|
|
53,222
|
|
|
188,963
|
|
|
147,165
|
|
||||
Royalty expenses
|
688
|
|
|
855
|
|
|
2,104
|
|
|
2,813
|
|
||||
Research and development expenses
|
454,947
|
|
|
272,370
|
|
|
1,017,961
|
|
|
799,238
|
|
||||
Sales, general and administrative expenses
|
120,710
|
|
|
106,055
|
|
|
361,285
|
|
|
322,921
|
|
||||
Restructuring expenses, net
|
337
|
|
|
8
|
|
|
13,859
|
|
|
1,038
|
|
||||
Intangible asset impairment charge
|
255,340
|
|
|
—
|
|
|
255,340
|
|
|
—
|
|
||||
Total costs and expenses
|
904,208
|
|
|
432,510
|
|
|
1,839,512
|
|
|
1,273,175
|
|
||||
Loss from operations
|
(326,043
|
)
|
|
(18,727
|
)
|
|
(2,494
|
)
|
|
(29,704
|
)
|
||||
Interest expense, net
|
(13,574
|
)
|
|
(20,140
|
)
|
|
(45,003
|
)
|
|
(60,993
|
)
|
||||
Other (expenses) income, net
|
(77,553
|
)
|
|
(167
|
)
|
|
(80,634
|
)
|
|
3,025
|
|
||||
Loss before (benefit from) provision for income taxes
|
(417,170
|
)
|
|
(39,034
|
)
|
|
(128,131
|
)
|
|
(87,672
|
)
|
||||
(Benefit from) provision for income taxes
|
(125,903
|
)
|
|
503
|
|
|
(117,581
|
)
|
|
24,118
|
|
||||
Net loss
|
(291,267
|
)
|
|
(39,537
|
)
|
|
(10,550
|
)
|
|
(111,790
|
)
|
||||
Loss (income) attributable to noncontrolling interest
|
188,315
|
|
|
696
|
|
|
173,350
|
|
|
(33,207
|
)
|
||||
Net (loss) income attributable to Vertex
|
$
|
(102,952
|
)
|
|
$
|
(38,841
|
)
|
|
$
|
162,800
|
|
|
$
|
(144,997
|
)
|
|
|
|
|
|
|
|
|
||||||||
Amounts per share attributable to Vertex common shareholders:
|
|
|
|
|
|
|
|
||||||||
Net (loss) income:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
(0.41
|
)
|
|
$
|
(0.16
|
)
|
|
$
|
0.66
|
|
|
$
|
(0.59
|
)
|
Diluted
|
$
|
(0.41
|
)
|
|
$
|
(0.16
|
)
|
|
$
|
0.64
|
|
|
$
|
(0.59
|
)
|
Shares used in per share calculations:
|
|
|
|
|
|
|
|
||||||||
Basic
|
250,268
|
|
|
244,920
|
|
|
247,963
|
|
|
244,529
|
|
||||
Diluted
|
250,268
|
|
|
244,920
|
|
|
252,095
|
|
|
244,529
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Net loss
|
$
|
(291,267
|
)
|
|
$
|
(39,537
|
)
|
|
$
|
(10,550
|
)
|
|
$
|
(111,790
|
)
|
Changes in other comprehensive loss:
|
|
|
|
|
|
|
|
||||||||
Unrealized holding gains (losses) on marketable securities, net of tax of zero, respectively
|
5,961
|
|
|
(96
|
)
|
|
(7,786
|
)
|
|
104
|
|
||||
Unrealized (losses) gains on foreign currency forward contracts, net of tax of $0.9 million, $0.2 million, $2.9 million and $(0.4) million, respectively
|
(5,453
|
)
|
|
2,149
|
|
|
(27,379
|
)
|
|
1,936
|
|
||||
Foreign currency translation adjustment
|
(3,884
|
)
|
|
(2,508
|
)
|
|
(11,137
|
)
|
|
(7,709
|
)
|
||||
Total changes in other comprehensive loss
|
(3,376
|
)
|
|
(455
|
)
|
|
(46,302
|
)
|
|
(5,669
|
)
|
||||
Comprehensive loss
|
(294,643
|
)
|
|
(39,992
|
)
|
|
(56,852
|
)
|
|
(117,459
|
)
|
||||
Comprehensive loss (income) attributable to noncontrolling interest
|
188,315
|
|
|
696
|
|
|
173,350
|
|
|
(33,207
|
)
|
||||
Comprehensive (loss) income attributable to Vertex
|
$
|
(106,328
|
)
|
|
$
|
(39,296
|
)
|
|
$
|
116,498
|
|
|
$
|
(150,666
|
)
|
|
September 30,
|
|
December 31,
|
||||
|
2017
|
|
2016
|
||||
Assets
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
1,384,966
|
|
|
$
|
1,183,945
|
|
Marketable securities, available for sale
|
427,282
|
|
|
250,612
|
|
||
Restricted cash and cash equivalents (VIE)
|
1,803
|
|
|
47,762
|
|
||
Accounts receivable, net
|
263,493
|
|
|
201,083
|
|
||
Inventories
|
98,192
|
|
|
77,604
|
|
||
Prepaid expenses and other current assets
|
152,238
|
|
|
70,534
|
|
||
Total current assets
|
2,327,974
|
|
|
1,831,540
|
|
||
Property and equipment, net
|
759,978
|
|
|
698,362
|
|
||
Intangible assets
|
29,000
|
|
|
284,340
|
|
||
Goodwill
|
50,384
|
|
|
50,384
|
|
||
Cost method investments
|
20,447
|
|
|
20,276
|
|
||
Other assets
|
10,542
|
|
|
11,885
|
|
||
Total assets
|
$
|
3,198,325
|
|
|
$
|
2,896,787
|
|
Liabilities and Shareholders’ Equity
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
77,138
|
|
|
$
|
61,451
|
|
Accrued expenses
|
378,554
|
|
|
315,249
|
|
||
Deferred revenues, current portion
|
13,003
|
|
|
6,005
|
|
||
Accrued restructuring expenses, current portion
|
4,205
|
|
|
6,047
|
|
||
Capital lease obligations, current portion
|
19,881
|
|
|
19,426
|
|
||
Customer deposits
|
190,272
|
|
|
73,416
|
|
||
Credit facility
|
—
|
|
|
300,000
|
|
||
Other liabilities, current portion
|
27,686
|
|
|
10,943
|
|
||
Total current liabilities
|
710,739
|
|
|
792,537
|
|
||
Deferred revenues, excluding current portion
|
2,917
|
|
|
6,632
|
|
||
Accrued restructuring expenses, excluding current portion
|
146
|
|
|
1,907
|
|
||
Capital lease obligations, excluding current portion
|
20,259
|
|
|
34,976
|
|
||
Deferred tax liability
|
10,682
|
|
|
134,063
|
|
||
Construction financing lease obligation, excluding current portion
|
547,051
|
|
|
486,359
|
|
||
Advance from collaborator
|
77,258
|
|
|
73,423
|
|
||
Other liabilities, excluding current portion
|
26,029
|
|
|
28,699
|
|
||
Total liabilities
|
1,395,081
|
|
|
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; 252,683,346 and 248,300,517 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively
|
2,500
|
|
|
2,450
|
|
||
Additional paid-in capital
|
7,034,113
|
|
|
6,506,795
|
|
||
Accumulated other comprehensive (loss) income
|
(25,129
|
)
|
|
21,173
|
|
||
Accumulated deficit
|
(5,220,407
|
)
|
|
(5,373,836
|
)
|
||
Total Vertex shareholders’ equity
|
1,791,077
|
|
|
1,156,582
|
|
||
Noncontrolling interest
|
12,167
|
|
|
181,609
|
|
||
Total shareholders’ equity
|
1,803,244
|
|
|
1,338,191
|
|
||
Total liabilities and shareholders’ equity
|
$
|
3,198,325
|
|
|
$
|
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
|
—
|
|
|
—
|
|
|
—
|
|
|
(5,669
|
)
|
|
—
|
|
|
(5,669
|
)
|
|
—
|
|
|
(5,669
|
)
|
|||||||
Net (loss) income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(144,997
|
)
|
|
(144,997
|
)
|
|
33,207
|
|
|
(111,790
|
)
|
|||||||
Issuance of common stock under benefit plans
|
1,722
|
|
|
19
|
|
|
50,875
|
|
|
—
|
|
|
—
|
|
|
50,894
|
|
|
—
|
|
|
50,894
|
|
|||||||
Stock-based compensation expense
|
—
|
|
|
—
|
|
|
181,351
|
|
|
—
|
|
|
—
|
|
|
181,351
|
|
|
(73
|
)
|
|
181,278
|
|
|||||||
Balance at September 30, 2016
|
248,029
|
|
|
$
|
2,446
|
|
|
$
|
6,429,726
|
|
|
$
|
(3,845
|
)
|
|
$
|
(5,406,781
|
)
|
|
$
|
1,021,546
|
|
|
$
|
186,795
|
|
|
$
|
1,208,341
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
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
|
—
|
|
|
—
|
|
|
—
|
|
|
(46,302
|
)
|
|
—
|
|
|
(46,302
|
)
|
|
—
|
|
|
(46,302
|
)
|
|||||||
Net income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
162,800
|
|
|
162,800
|
|
|
(173,350
|
)
|
|
(10,550
|
)
|
|||||||
Issuance of common stock under benefit plans
|
4,382
|
|
|
50
|
|
|
298,956
|
|
|
—
|
|
|
—
|
|
|
299,006
|
|
|
33
|
|
|
299,039
|
|
|||||||
Stock-based compensation expense
|
—
|
|
|
—
|
|
|
218,991
|
|
|
—
|
|
|
—
|
|
|
218,991
|
|
|
—
|
|
|
218,991
|
|
|||||||
VIE noncontrolling interest upon deconsolidation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,910
|
|
|
3,910
|
|
|||||||
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(35
|
)
|
|
(35
|
)
|
|||||||
Balance at September 30, 2017
|
252,683
|
|
|
$
|
2,500
|
|
|
$
|
7,034,113
|
|
|
$
|
(25,129
|
)
|
|
$
|
(5,220,407
|
)
|
|
$
|
1,791,077
|
|
|
$
|
12,167
|
|
|
$
|
1,803,244
|
|
|
Nine Months Ended September 30,
|
||||||
|
2017
|
|
2016
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net loss
|
$
|
(10,550
|
)
|
|
$
|
(111,790
|
)
|
Adjustments to reconcile net loss to net cash provided by operating activities:
|
|
|
|
||||
Stock-based compensation expense
|
215,334
|
|
|
178,623
|
|
||
Depreciation and amortization expense
|
44,965
|
|
|
45,947
|
|
||
Write-downs of inventories to net realizable value
|
11,138
|
|
|
—
|
|
||
Deferred income taxes
|
(113,969
|
)
|
|
23,544
|
|
||
Impairment of property and equipment
|
1,946
|
|
|
—
|
|
||
Intangible asset impairment charge
|
255,340
|
|
|
—
|
|
||
Acquired in-process research & development
|
160,000
|
|
|
—
|
|
||
Deconsolidation of VIE
|
76,644
|
|
|
—
|
|
||
Other non-cash items, net
|
(4,787
|
)
|
|
(904
|
)
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable, net
|
(54,455
|
)
|
|
(9,760
|
)
|
||
Inventories
|
(28,570
|
)
|
|
(11,536
|
)
|
||
Prepaid expenses and other assets
|
(90,006
|
)
|
|
(8,979
|
)
|
||
Accounts payable
|
6,925
|
|
|
(21,532
|
)
|
||
Accrued expenses and other liabilities
|
148,102
|
|
|
26,121
|
|
||
Accrued restructuring expense
|
(3,863
|
)
|
|
(8,151
|
)
|
||
Deferred revenues
|
3,237
|
|
|
(10,204
|
)
|
||
Net cash provided by operating activities
|
617,431
|
|
|
91,379
|
|
||
Cash flows from investing activities:
|
|
|
|
||||
Purchases of marketable securities
|
(431,653
|
)
|
|
(616,625
|
)
|
||
Maturities of marketable securities
|
247,149
|
|
|
535,379
|
|
||
Expenditures for property and equipment
|
(56,817
|
)
|
|
(41,775
|
)
|
||
Purchase of in-process research & development
|
(160,000
|
)
|
|
—
|
|
||
(Decrease) increase in restricted cash and cash equivalents (VIE)
|
(15,643
|
)
|
|
20,490
|
|
||
Investment in equity securities
|
—
|
|
|
(23,075
|
)
|
||
Decrease (increase) in other assets
|
380
|
|
|
(93
|
)
|
||
Net cash used in investing activities
|
(416,584
|
)
|
|
(125,699
|
)
|
||
Cash flows from financing activities:
|
|
|
|
||||
Issuances of common stock under benefit plans
|
298,205
|
|
|
51,165
|
|
||
Payments on revolving credit facility
|
(300,000
|
)
|
|
—
|
|
||
Advance from collaborator
|
10,000
|
|
|
—
|
|
||
Payments on capital lease obligations
|
(14,188
|
)
|
|
(13,330
|
)
|
||
Proceeds from capital lease financing
|
—
|
|
|
2,030
|
|
||
Payments on construction financing lease obligation
|
(412
|
)
|
|
(356
|
)
|
||
Proceeds related to construction financing lease obligation
|
4,700
|
|
|
—
|
|
||
Repayments of advanced funding
|
(3,132
|
)
|
|
—
|
|
||
Net cash (used in) provided by financing activities
|
(4,827
|
)
|
|
39,509
|
|
||
Effect of changes in exchange rates on cash
|
5,001
|
|
|
(265
|
)
|
||
Net increase in cash and cash equivalents
|
201,021
|
|
|
4,924
|
|
||
Cash and cash equivalents—beginning of period
|
1,183,945
|
|
|
714,768
|
|
||
Cash and cash equivalents—end of period
|
$
|
1,384,966
|
|
|
$
|
719,692
|
|
|
|
|
|
||||
Supplemental disclosure of cash flow information:
|
|
|
|
||||
Cash paid for interest
|
$
|
51,990
|
|
|
$
|
64,662
|
|
Cash paid for income taxes
|
$
|
4,154
|
|
|
$
|
1,617
|
|
Capitalization of costs related to construction financing lease obligation
|
$
|
33,827
|
|
|
$
|
824
|
|
Issuances of common stock from employee benefit plans receivable
|
$
|
868
|
|
|
$
|
19
|
|
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
|
18,776
|
|
|
118,592
|
|
|
3,603
|
|
|
12,238
|
|
|
153,209
|
|
|||||
Adjustments related to prior period sales
|
(188
|
)
|
|
(4,327
|
)
|
|
(13
|
)
|
|
(355
|
)
|
|
(4,883
|
)
|
|||||
Credits/payments made
|
(18,409
|
)
|
|
(97,393
|
)
|
|
(1,809
|
)
|
|
(10,021
|
)
|
|
(127,632
|
)
|
|||||
Balance at September 30, 2017
|
$
|
2,747
|
|
|
$
|
98,799
|
|
|
$
|
5,273
|
|
|
$
|
3,076
|
|
|
$
|
109,895
|
|
C.
|
Collaborative Arrangements and Acquisitions
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
(in thousands)
|
||||||||||||||
Loss attributable to noncontrolling interest before (benefit from) provision for income taxes and changes in fair value of contingent payments
|
$
|
238,946
|
|
|
$
|
2,406
|
|
|
$
|
222,448
|
|
|
$
|
6,080
|
|
(Benefit from) provision for income taxes
|
(120,181
|
)
|
|
(510
|
)
|
|
(111,658
|
)
|
|
20,063
|
|
||||
Decrease (increase) in fair value of contingent payments
|
69,550
|
|
|
(1,200
|
)
|
|
62,560
|
|
|
(59,350
|
)
|
||||
Net loss (income) attributable to noncontrolling interest
|
$
|
188,315
|
|
|
$
|
696
|
|
|
$
|
173,350
|
|
|
$
|
(33,207
|
)
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
(in thousands)
|
||||||||||||||
Parion
|
$
|
69,550
|
|
|
$
|
(1,100
|
)
|
|
$
|
63,460
|
|
|
$
|
(58,500
|
)
|
BioAxone
|
—
|
|
|
(100
|
)
|
|
(900
|
)
|
|
(850
|
)
|
|
September 30, 2017
|
|
December 31, 2016
|
||||
|
(in thousands)
|
||||||
Parion
|
$
|
—
|
|
|
$
|
238,800
|
|
BioAxone
|
18,900
|
|
|
18,000
|
|
|
September 30, 2017
|
|
December 31, 2016
|
||||
|
(in thousands)
|
||||||
Restricted cash and cash equivalents (VIE)
|
$
|
1,803
|
|
|
$
|
47,762
|
|
Prepaid expenses and other current assets
|
42
|
|
|
6,812
|
|
||
Intangible assets
|
29,000
|
|
|
284,340
|
|
||
Other assets
|
280
|
|
|
399
|
|
||
Accounts payable
|
455
|
|
|
415
|
|
||
Accrued expenses
|
1,021
|
|
|
1,330
|
|
||
Other liabilities, current portion
|
119
|
|
|
2,137
|
|
||
Deferred tax liability
|
8,338
|
|
|
131,446
|
|
||
Other liabilities, excluding current portion
|
—
|
|
|
300
|
|
||
Noncontrolling interest
|
12,167
|
|
|
181,609
|
|
D.
|
Earnings Per Share
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 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
|
$
|
(102,952
|
)
|
|
$
|
(38,841
|
)
|
|
$
|
162,800
|
|
|
$
|
(144,997
|
)
|
Less: Undistributed earnings allocated to participating securities
|
—
|
|
|
—
|
|
|
(203
|
)
|
|
—
|
|
||||
Net income (loss) attributable to Vertex common shareholders—basic
|
$
|
(102,952
|
)
|
|
$
|
(38,841
|
)
|
|
$
|
162,597
|
|
|
$
|
(144,997
|
)
|
|
|
|
|
|
|
|
|
||||||||
Basic weighted-average common shares outstanding
|
250,268
|
|
|
244,920
|
|
|
247,963
|
|
|
244,529
|
|
||||
Basic net income (loss) attributable to Vertex per common share
|
$
|
(0.41
|
)
|
|
$
|
(0.16
|
)
|
|
$
|
0.66
|
|
|
$
|
(0.59
|
)
|
|
|
|
|
|
|
|
|
||||||||
Diluted net income (loss) attributable to Vertex per common share calculation:
|
|
|
|
|
|
|
|
||||||||
Net income (loss) attributable to Vertex common shareholders
|
$
|
(102,952
|
)
|
|
$
|
(38,841
|
)
|
|
$
|
162,800
|
|
|
$
|
(144,997
|
)
|
Less: Undistributed earnings allocated to participating securities
|
—
|
|
|
—
|
|
|
(200
|
)
|
|
—
|
|
||||
Net income (loss) attributable to Vertex common shareholders—diluted
|
$
|
(102,952
|
)
|
|
$
|
(38,841
|
)
|
|
$
|
162,600
|
|
|
$
|
(144,997
|
)
|
|
|
|
|
|
|
|
|
||||||||
Weighted-average shares used to compute basic net income (loss) per common share
|
250,268
|
|
|
244,920
|
|
|
247,963
|
|
|
244,529
|
|
||||
Effect of potentially dilutive securities:
|
|
|
|
|
|
|
|
||||||||
Stock options
|
—
|
|
|
—
|
|
|
2,700
|
|
|
—
|
|
||||
Restricted stock and restricted stock units
|
—
|
|
|
—
|
|
|
1,204
|
|
|
—
|
|
||||
Other
|
—
|
|
|
—
|
|
|
228
|
|
|
—
|
|
||||
Weighted-average shares used to compute diluted net income (loss) per common share
|
250,268
|
|
|
244,920
|
|
|
252,095
|
|
|
244,529
|
|
||||
Diluted net income (loss) attributable to Vertex per common share
|
$
|
(0.41
|
)
|
|
$
|
(0.16
|
)
|
|
$
|
0.64
|
|
|
$
|
(0.59
|
)
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||
|
(in thousands)
|
||||||||||
Stock options
|
10,278
|
|
|
12,947
|
|
|
3,904
|
|
|
12,947
|
|
Unvested restricted stock and restricted stock units
|
4,241
|
|
|
3,624
|
|
|
281
|
|
|
3,624
|
|
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 September 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
|
$
|
466,702
|
|
|
$
|
466,702
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Government-sponsored enterprise securities
|
14,979
|
|
|
14,979
|
|
|
—
|
|
|
—
|
|
||||
Corporate debt securities
|
4,488
|
|
|
—
|
|
|
4,488
|
|
|
—
|
|
||||
Commercial paper
|
14,608
|
|
|
—
|
|
|
14,608
|
|
|
—
|
|
||||
Marketable securities:
|
|
|
|
|
|
|
|
||||||||
Corporate equity securities
|
56,944
|
|
|
56,944
|
|
|
—
|
|
|
—
|
|
||||
Corporate debt securities
|
295,171
|
|
|
—
|
|
|
295,171
|
|
|
—
|
|
||||
Commercial paper
|
75,167
|
|
|
—
|
|
|
75,167
|
|
|
—
|
|
||||
Prepaid and other current assets:
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward contracts
|
42
|
|
|
—
|
|
|
42
|
|
|
—
|
|
||||
Other assets:
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward contracts
|
8
|
|
|
—
|
|
|
8
|
|
|
—
|
|
||||
Total financial assets
|
$
|
928,109
|
|
|
$
|
538,625
|
|
|
$
|
389,484
|
|
|
$
|
—
|
|
Financial instruments carried at fair value (liability position):
|
|
|
|
|
|
|
|
||||||||
Other liabilities, current portion:
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward contracts
|
$
|
(13,897
|
)
|
|
$
|
—
|
|
|
$
|
(13,897
|
)
|
|
$
|
—
|
|
Other liabilities, excluding current portion:
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward contracts
|
(977
|
)
|
|
—
|
|
|
(977
|
)
|
|
—
|
|
||||
Total financial liabilities
|
$
|
(14,874
|
)
|
|
$
|
—
|
|
|
$
|
(14,874
|
)
|
|
$
|
—
|
|
|
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 September 30, 2017
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Cash and money market funds
|
$
|
1,350,891
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,350,891
|
|
Government-sponsored enterprise securities
|
14,979
|
|
|
—
|
|
|
—
|
|
|
14,979
|
|
||||
Commercial paper
|
14,610
|
|
|
—
|
|
|
(2
|
)
|
|
14,608
|
|
||||
Corporate debt securities
|
4,488
|
|
|
—
|
|
|
—
|
|
|
4,488
|
|
||||
Total cash and cash equivalents
|
$
|
1,384,968
|
|
|
$
|
—
|
|
|
$
|
(2
|
)
|
|
$
|
1,384,966
|
|
Marketable securities:
|
|
|
|
|
|
|
|
||||||||
Corporate equity securities
|
43,213
|
|
|
13,731
|
|
|
—
|
|
|
56,944
|
|
||||
Commercial paper (matures within 1 year)
|
75,186
|
|
|
1
|
|
|
(20
|
)
|
|
75,167
|
|
||||
Corporate debt securities (matures within 1 year)
|
235,679
|
|
|
8
|
|
|
(106
|
)
|
|
235,581
|
|
||||
Corporate debt securities (matures after 1 year)
|
59,651
|
|
|
—
|
|
|
(61
|
)
|
|
59,590
|
|
||||
Total marketable securities
|
$
|
413,729
|
|
|
$
|
13,740
|
|
|
$
|
(187
|
)
|
|
$
|
427,282
|
|
Total cash, cash equivalents and marketable securities
|
$
|
1,798,697
|
|
|
$
|
13,740
|
|
|
$
|
(189
|
)
|
|
$
|
1,812,248
|
|
|
|
|
|
|
|
|
|
||||||||
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
|
(11,137
|
)
|
|
(7,786
|
)
|
|
(25,981
|
)
|
|
(44,904
|
)
|
||||
Amounts reclassified from accumulated other comprehensive income (loss)
|
—
|
|
|
—
|
|
|
(1,398
|
)
|
|
(1,398
|
)
|
||||
Net current period other comprehensive (loss) income
|
$
|
(11,137
|
)
|
|
$
|
(7,786
|
)
|
|
$
|
(27,379
|
)
|
|
$
|
(46,302
|
)
|
Balance at September 30, 2017
|
$
|
(18,999
|
)
|
|
$
|
9,735
|
|
|
$
|
(15,865
|
)
|
|
$
|
(25,129
|
)
|
|
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
|
(7,709
|
)
|
|
104
|
|
|
6,715
|
|
|
(890
|
)
|
||||
Amounts reclassified from accumulated other comprehensive income (loss)
|
—
|
|
|
—
|
|
|
(4,779
|
)
|
|
(4,779
|
)
|
||||
Net current period other comprehensive (loss) income
|
$
|
(7,709
|
)
|
|
$
|
104
|
|
|
$
|
1,936
|
|
|
$
|
(5,669
|
)
|
Balance at September 30, 2016
|
$
|
(9,789
|
)
|
|
$
|
230
|
|
|
$
|
5,714
|
|
|
$
|
(3,845
|
)
|
H.
|
Hedging
|
|
As of September 30, 2017
|
|
As of December 31, 2016
|
||||
Foreign Currency
|
(in thousands)
|
||||||
Euro
|
$
|
234,477
|
|
|
$
|
164,368
|
|
British pound sterling
|
77,387
|
|
|
65,237
|
|
||
Australian dollar
|
31,283
|
|
|
23,776
|
|
||
Total foreign currency forward contracts
|
$
|
343,147
|
|
|
$
|
253,381
|
|
As of September 30, 2017
|
||||||||||
Assets
|
|
Liabilities
|
||||||||
Classification
|
|
Fair Value
|
|
Classification
|
|
Fair Value
|
||||
(in thousands)
|
||||||||||
Prepaid and other current assets
|
|
$
|
42
|
|
|
Other liabilities, current portion
|
|
$
|
(13,897
|
)
|
Other assets
|
|
8
|
|
|
Other liabilities, excluding current portion
|
|
(977
|
)
|
||
Total assets
|
|
$
|
50
|
|
|
Total liabilities
|
|
$
|
(14,874
|
)
|
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 September 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
|
$
|
50
|
|
|
$
|
—
|
|
|
$
|
50
|
|
|
$
|
(50
|
)
|
|
$
|
—
|
|
Total liabilities
|
$
|
(14,874
|
)
|
|
$
|
—
|
|
|
$
|
(14,874
|
)
|
|
$
|
50
|
|
|
$
|
(14,824
|
)
|
|
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 September 30, 2017
|
|
As of December 31, 2016
|
||||
|
(in thousands)
|
||||||
Prepaid expenses and other current assets
|
$
|
1,709
|
|
|
$
|
660
|
|
|
As of September 30, 2017
|
|
As of December 31, 2016
|
||||
|
(in thousands)
|
||||||
Raw materials
|
$
|
12,678
|
|
|
$
|
6,348
|
|
Work-in-process
|
67,826
|
|
|
56,672
|
|
||
Finished goods
|
17,688
|
|
|
14,584
|
|
||
Total
|
$
|
98,192
|
|
|
$
|
77,604
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
(in thousands)
|
||||||||||||||
Stock-based compensation expense by type of award:
|
|
|
|
|
|
|
|
||||||||
Stock options
|
$
|
25,969
|
|
|
$
|
28,773
|
|
|
$
|
80,865
|
|
|
$
|
86,859
|
|
Restricted stock and restricted stock units
|
46,737
|
|
|
30,966
|
|
|
131,388
|
|
|
88,107
|
|
||||
ESPP share issuances
|
2,428
|
|
|
2,425
|
|
|
6,738
|
|
|
6,385
|
|
||||
Less stock-based compensation expense capitalized to inventories
|
(1,364
|
)
|
|
(955
|
)
|
|
(3,657
|
)
|
|
(2,728
|
)
|
||||
Total stock-based compensation included in costs and expenses
|
$
|
73,770
|
|
|
$
|
61,209
|
|
|
$
|
215,334
|
|
|
$
|
178,623
|
|
|
|
|
|
|
|
|
|
|
|||||||
Stock-based compensation expense by line item:
|
|
|
|
|
|
|
|
||||||||
Research and development expenses
|
$
|
46,186
|
|
|
$
|
39,980
|
|
|
$
|
134,855
|
|
|
$
|
115,068
|
|
Sales, general and administrative expenses
|
27,584
|
|
|
21,229
|
|
|
80,479
|
|
|
63,555
|
|
||||
Total stock-based compensation included in costs and expenses
|
$
|
73,770
|
|
|
$
|
61,209
|
|
|
$
|
215,334
|
|
|
$
|
178,623
|
|
|
As of September 30, 2017
|
||||
|
Unrecognized Expense
|
|
Weighted-average
Recognition Period |
||
|
(in thousands)
|
|
(in years)
|
||
Type of award:
|
|
|
|
||
Stock options
|
$
|
175,298
|
|
|
2.60
|
Restricted stock and restricted stock units
|
$
|
289,008
|
|
|
2.64
|
ESPP share issuances
|
$
|
2,636
|
|
|
0.46
|
|
|
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
|
|
128
|
|
|
0.35
|
|
$
|
18.93
|
|
|
128
|
|
|
$
|
18.93
|
|
$20.01–$40.00
|
|
834
|
|
|
2.21
|
|
$
|
34.51
|
|
|
834
|
|
|
$
|
34.51
|
|
$40.01–$60.00
|
|
877
|
|
|
4.83
|
|
$
|
49.17
|
|
|
877
|
|
|
$
|
49.17
|
|
$60.01–$80.00
|
|
821
|
|
|
6.46
|
|
$
|
75.62
|
|
|
649
|
|
|
$
|
75.44
|
|
$80.01–$100.00
|
|
4,587
|
|
|
8.33
|
|
$
|
89.37
|
|
|
1,397
|
|
|
$
|
89.47
|
|
$100.01–$120.00
|
|
1,137
|
|
|
7.36
|
|
$
|
109.34
|
|
|
586
|
|
|
$
|
109.24
|
|
$120.01–$140.00
|
|
1,260
|
|
|
7.88
|
|
$
|
130.24
|
|
|
688
|
|
|
$
|
129.86
|
|
$140.01–$160.00
|
|
—
|
|
|
0.00
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
$160.01–$163.74
|
|
634
|
|
|
9.80
|
|
$
|
162.94
|
|
|
3
|
|
|
$
|
162.94
|
|
Total
|
|
10,278
|
|
|
7.22
|
|
$
|
91.28
|
|
|
5,162
|
|
|
$
|
77.92
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||
|
2017
|
|
2017
|
||||
|
(in thousands)
|
||||||
Liability, beginning of the period
|
$
|
3,507
|
|
|
$
|
—
|
|
Restructuring (credits) expense
|
(125
|
)
|
|
12,315
|
|
||
Cash payments
|
(750
|
)
|
|
(7,869
|
)
|
||
Asset impairments and other non-cash items
|
—
|
|
|
(1,814
|
)
|
||
Liability, end of the period
|
$
|
2,632
|
|
|
$
|
2,632
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
(in thousands)
|
||||||||||||||
Liability, beginning of the period
|
$
|
1,990
|
|
|
$
|
6,388
|
|
|
$
|
4,328
|
|
|
$
|
7,944
|
|
Restructuring expense
|
227
|
|
|
30
|
|
|
1,054
|
|
|
222
|
|
||||
Cash payments
|
(4,003
|
)
|
|
(5,340
|
)
|
|
(12,962
|
)
|
|
(13,104
|
)
|
||||
Cash received from subleases
|
2,732
|
|
|
2,866
|
|
|
8,526
|
|
|
8,882
|
|
||||
Liability, end of the period
|
$
|
946
|
|
|
$
|
3,944
|
|
|
$
|
946
|
|
|
$
|
3,944
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
(in thousands)
|
||||||||||||||
Liability, beginning of the period
|
$
|
1,521
|
|
|
$
|
4,863
|
|
|
$
|
3,626
|
|
|
$
|
5,964
|
|
Restructuring expense
|
235
|
|
|
90
|
|
|
490
|
|
|
472
|
|
||||
Cash payments
|
(3,262
|
)
|
|
(4,199
|
)
|
|
(10,578
|
)
|
|
(10,451
|
)
|
||||
Cash received from subleases
|
2,279
|
|
|
2,539
|
|
|
7,235
|
|
|
7,308
|
|
||||
Liability, end of the period
|
$
|
773
|
|
|
$
|
3,293
|
|
|
$
|
773
|
|
|
$
|
3,293
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||
|
2016
|
|
2016
|
||||
|
(in thousands)
|
||||||
Liability, beginning of the period
|
$
|
1,233
|
|
|
$
|
1,450
|
|
Restructuring expense
|
(112
|
)
|
|
344
|
|
||
Cash payments
|
(1,121
|
)
|
|
(1,794
|
)
|
||
Liability, end of the period
|
$
|
—
|
|
|
$
|
—
|
|
•
|
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.
|
|
Three Months Ended September 30,
|
|
Increase/(Decrease)
|
|
Nine Months Ended September 30,
|
|
Increase/(Decrease)
|
||||||||||||||||||||||
|
2017
|
|
2016
|
|
$
|
|
%
|
|
2017
|
|
2016
|
|
$
|
|
%
|
||||||||||||||
|
(in thousands)
|
|
|
|
(in thousands)
|
|
|
||||||||||||||||||||||
Revenues
|
$
|
578,165
|
|
|
$
|
413,783
|
|
|
$
|
164,382
|
|
|
40
|
%
|
|
$
|
1,837,018
|
|
|
$
|
1,243,471
|
|
|
$
|
593,547
|
|
|
48
|
%
|
Operating costs and expenses
|
904,208
|
|
|
432,510
|
|
|
471,698
|
|
|
109
|
%
|
|
1,839,512
|
|
|
1,273,175
|
|
|
566,337
|
|
|
44
|
%
|
||||||
Other items, net
|
223,091
|
|
|
(20,114
|
)
|
|
243,205
|
|
|
n/a
|
|
|
165,294
|
|
|
(115,293
|
)
|
|
280,587
|
|
|
n/a
|
|
||||||
Net (loss) income attributable to Vertex
|
$
|
(102,952
|
)
|
|
$
|
(38,841
|
)
|
|
$
|
(64,111
|
)
|
|
n/a
|
|
|
$
|
162,800
|
|
|
$
|
(144,997
|
)
|
|
$
|
307,797
|
|
|
n/a
|
|
|
Three Months Ended September 30,
|
|
Increase/(Decrease)
|
|
Nine Months Ended September 30,
|
|
Increase/(Decrease)
|
||||||||||||||||||||||
|
2017
|
|
2016
|
|
$
|
|
%
|
|
2017
|
|
2016
|
|
$
|
|
%
|
||||||||||||||
|
(in thousands)
|
|
|
|
(in thousands)
|
|
|
||||||||||||||||||||||
Product revenues, net
|
$
|
549,642
|
|
|
$
|
409,689
|
|
|
$
|
139,953
|
|
|
34
|
%
|
|
$
|
1,544,252
|
|
|
$
|
1,229,750
|
|
|
$
|
314,502
|
|
|
26
|
%
|
Royalty revenues
|
2,231
|
|
|
3,835
|
|
|
(1,604
|
)
|
|
(42
|
)%
|
|
6,643
|
|
|
12,713
|
|
|
(6,070
|
)
|
|
(48
|
)%
|
||||||
Collaborative revenues
|
26,292
|
|
|
259
|
|
|
26,033
|
|
|
n/a
|
|
|
286,123
|
|
|
1,008
|
|
|
285,115
|
|
|
n/a
|
|
||||||
Total revenues
|
$
|
578,165
|
|
|
$
|
413,783
|
|
|
$
|
164,382
|
|
|
40
|
%
|
|
$
|
1,837,018
|
|
|
$
|
1,243,471
|
|
|
$
|
593,547
|
|
|
48
|
%
|
|
Three Months Ended September 30,
|
|
Increase/(Decrease)
|
|
Nine Months Ended September 30,
|
|
Increase/(Decrease)
|
||||||||||||||||||||||
|
2017
|
|
2016
|
|
$
|
|
%
|
|
2017
|
|
2016
|
|
$
|
|
%
|
||||||||||||||
|
(in thousands)
|
|
|
|
(in thousands)
|
|
|
||||||||||||||||||||||
ORKAMBI
|
$
|
336,183
|
|
|
$
|
234,046
|
|
|
$
|
102,137
|
|
|
44
|
%
|
|
$
|
955,451
|
|
|
$
|
702,670
|
|
|
$
|
252,781
|
|
|
36
|
%
|
KALYDECO
|
213,461
|
|
|
175,608
|
|
|
37,853
|
|
|
22
|
%
|
|
$
|
588,809
|
|
|
$
|
526,352
|
|
|
$
|
62,457
|
|
|
12
|
%
|
|||
INCIVEK
|
(2
|
)
|
|
35
|
|
|
(37
|
)
|
|
n/a
|
|
|
(8
|
)
|
|
728
|
|
|
(736
|
)
|
|
n/a
|
|
||||||
Total product revenues, net
|
$
|
549,642
|
|
|
$
|
409,689
|
|
|
$
|
139,953
|
|
|
34
|
%
|
|
$
|
1,544,252
|
|
|
$
|
1,229,750
|
|
|
$
|
314,502
|
|
|
26
|
%
|
`
|
Three Months Ended September 30,
|
|
Increase/(Decrease)
|
|
Nine Months Ended September 30,
|
|
Increase/(Decrease)
|
||||||||||||||||||||||
|
2017
|
|
2016
|
|
$
|
|
%
|
|
2017
|
|
2016
|
|
$
|
|
%
|
||||||||||||||
|
(in thousands)
|
|
|
|
(in thousands)
|
|
|
||||||||||||||||||||||
Cost of product revenues
|
$
|
72,186
|
|
|
$
|
53,222
|
|
|
$
|
18,964
|
|
|
36
|
%
|
|
$
|
188,963
|
|
|
$
|
147,165
|
|
|
$
|
41,798
|
|
|
28
|
%
|
Royalty expenses
|
688
|
|
|
855
|
|
|
(167
|
)
|
|
(20
|
)%
|
|
2,104
|
|
|
2,813
|
|
|
(709
|
)
|
|
(25
|
)%
|
||||||
Research and development expenses
|
454,947
|
|
|
272,370
|
|
|
182,577
|
|
|
67
|
%
|
|
1,017,961
|
|
|
799,238
|
|
|
218,723
|
|
|
27
|
%
|
||||||
Sales, general and administrative expenses
|
120,710
|
|
|
106,055
|
|
|
14,655
|
|
|
14
|
%
|
|
361,285
|
|
|
322,921
|
|
|
38,364
|
|
|
12
|
%
|
||||||
Restructuring expenses, net
|
337
|
|
|
8
|
|
|
329
|
|
|
n/a
|
|
|
13,859
|
|
|
1,038
|
|
|
12,821
|
|
|
n/a
|
|
||||||
Intangible asset impairment charge
|
255,340
|
|
|
—
|
|
|
255,340
|
|
|
n/a
|
|
|
255,340
|
|
|
—
|
|
|
255,340
|
|
|
n/a
|
|
||||||
Total costs and expenses
|
$
|
904,208
|
|
|
$
|
432,510
|
|
|
$
|
471,698
|
|
|
109
|
%
|
|
$
|
1,839,512
|
|
|
$
|
1,273,175
|
|
|
$
|
566,337
|
|
|
44
|
%
|
|
Three Months Ended September 30,
|
|
Increase/(Decrease)
|
|
Nine Months Ended September 30,
|
|
Increase/(Decrease)
|
||||||||||||||||||||||
|
2017
|
|
2016
|
|
$
|
|
%
|
|
2017
|
|
2016
|
|
$
|
|
%
|
||||||||||||||
|
(in thousands)
|
|
|
|
(in thousands)
|
|
|
||||||||||||||||||||||
Research expenses
|
$
|
76,131
|
|
|
$
|
99,162
|
|
|
$
|
(23,031
|
)
|
|
(23
|
)%
|
|
$
|
226,409
|
|
|
$
|
242,058
|
|
|
$
|
(15,649
|
)
|
|
(6
|
)%
|
Development expenses
|
378,816
|
|
|
173,208
|
|
|
205,608
|
|
|
119
|
%
|
|
791,552
|
|
|
557,180
|
|
|
234,372
|
|
|
42
|
%
|
||||||
Total research and development expenses
|
$
|
454,947
|
|
|
$
|
272,370
|
|
|
$
|
182,577
|
|
|
67
|
%
|
|
$
|
1,017,961
|
|
|
$
|
799,238
|
|
|
$
|
218,723
|
|
|
27
|
%
|
|
Three Months Ended September 30,
|
|
Increase/(Decrease)
|
|
Nine Months Ended September 30,
|
|
Increase/(Decrease)
|
||||||||||||||||||||||
|
2017
|
|
2016
|
|
$
|
|
%
|
|
2017
|
|
2016
|
|
$
|
|
%
|
||||||||||||||
|
(in thousands)
|
|
|
|
(in thousands)
|
|
|
||||||||||||||||||||||
Research Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Salary and benefits
|
$
|
20,445
|
|
|
$
|
21,525
|
|
|
$
|
(1,080
|
)
|
|
(5
|
)%
|
|
$
|
61,486
|
|
|
$
|
61,503
|
|
|
$
|
(17
|
)
|
|
—
|
%
|
Stock-based compensation expense
|
15,641
|
|
|
14,023
|
|
|
1,618
|
|
|
12
|
%
|
|
44,366
|
|
|
38,088
|
|
|
6,278
|
|
|
16
|
%
|
||||||
Laboratory supplies and other direct expenses
|
10,791
|
|
|
11,726
|
|
|
(935
|
)
|
|
(8
|
)%
|
|
33,980
|
|
|
33,410
|
|
|
570
|
|
|
2
|
%
|
||||||
Outsourced services
|
10,230
|
|
|
10,054
|
|
|
176
|
|
|
2
|
%
|
|
29,644
|
|
|
20,749
|
|
|
8,895
|
|
|
43
|
%
|
||||||
Collaboration and asset acquisition payments
|
425
|
|
|
22,000
|
|
|
(21,575
|
)
|
|
(98
|
)%
|
|
425
|
|
|
33,000
|
|
|
(32,575
|
)
|
|
(99
|
)%
|
||||||
Infrastructure costs
|
18,599
|
|
|
19,834
|
|
|
(1,235
|
)
|
|
(6
|
)%
|
|
56,508
|
|
|
55,308
|
|
|
1,200
|
|
|
2
|
%
|
||||||
Total research expenses
|
$
|
76,131
|
|
|
$
|
99,162
|
|
|
$
|
(23,031
|
)
|
|
(23
|
)%
|
|
$
|
226,409
|
|
|
$
|
242,058
|
|
|
$
|
(15,649
|
)
|
|
(6
|
)%
|
|
Three Months Ended September 30,
|
|
Increase/(Decrease)
|
|
Nine Months Ended September 30,
|
|
Increase/(Decrease)
|
||||||||||||||||||||||
|
2017
|
|
2016
|
|
$
|
|
%
|
|
2017
|
|
2016
|
|
$
|
|
%
|
||||||||||||||
|
(in thousands)
|
|
|
|
(in thousands)
|
|
|
||||||||||||||||||||||
Development Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Salary and benefits
|
$
|
54,125
|
|
|
$
|
44,788
|
|
|
$
|
9,337
|
|
|
21
|
%
|
|
$
|
156,759
|
|
|
$
|
134,201
|
|
|
$
|
22,558
|
|
|
17
|
%
|
Stock-based compensation expense
|
30,545
|
|
|
25,957
|
|
|
4,588
|
|
|
18
|
%
|
|
90,489
|
|
|
76,980
|
|
|
13,509
|
|
|
18
|
%
|
||||||
Laboratory supplies and other direct expenses
|
10,828
|
|
|
10,784
|
|
|
44
|
|
|
—
|
%
|
|
34,171
|
|
|
32,039
|
|
|
2,132
|
|
|
7
|
%
|
||||||
Outsourced services
|
89,637
|
|
|
60,838
|
|
|
28,799
|
|
|
47
|
%
|
|
251,677
|
|
|
216,881
|
|
|
34,796
|
|
|
16
|
%
|
||||||
Collaboration and asset acquisition payments
|
160,000
|
|
|
—
|
|
|
160,000
|
|
|
n/a
|
|
|
160,250
|
|
|
—
|
|
|
160,250
|
|
|
n/a
|
|
||||||
Drug supply costs
|
3,151
|
|
|
2,655
|
|
|
496
|
|
|
19
|
%
|
|
6,143
|
|
|
9,512
|
|
|
(3,369
|
)
|
|
(35
|
)%
|
||||||
Infrastructure costs
|
30,530
|
|
|
28,186
|
|
|
2,344
|
|
|
8
|
%
|
|
92,063
|
|
|
87,567
|
|
|
4,496
|
|
|
5
|
%
|
||||||
Total development expenses
|
$
|
378,816
|
|
|
$
|
173,208
|
|
|
$
|
205,608
|
|
|
119
|
%
|
|
$
|
791,552
|
|
|
$
|
557,180
|
|
|
$
|
234,372
|
|
|
42
|
%
|
|
Three Months Ended September 30,
|
|
Increase/(Decrease)
|
|
Nine Months Ended September 30,
|
|
Increase/(Decrease)
|
||||||||||||||||||||||
|
2017
|
|
2016
|
|
$
|
|
%
|
|
2017
|
|
2016
|
|
$
|
|
%
|
||||||||||||||
|
(in thousands)
|
|
|
|
(in thousands)
|
|
|
||||||||||||||||||||||
Sales, general and administrative expenses
|
$
|
120,710
|
|
|
$
|
106,055
|
|
|
$
|
14,655
|
|
|
14
|
%
|
|
$
|
361,285
|
|
|
$
|
322,921
|
|
|
$
|
38,364
|
|
|
12
|
%
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
(in thousands)
|
|
|
|
|
||||||||||
Loss attributable to noncontrolling interest before (benefit from) provision for income taxes and changes in fair value of contingent payments
|
$
|
238,946
|
|
|
$
|
2,406
|
|
|
$
|
222,448
|
|
|
$
|
6,080
|
|
(Benefit from) provision for income taxes
|
(120,181
|
)
|
|
(510
|
)
|
|
(111,658
|
)
|
|
20,063
|
|
||||
Decrease (increase) in fair value of contingent payments
|
69,550
|
|
|
(1,200
|
)
|
|
62,560
|
|
|
(59,350
|
)
|
||||
Net loss (income) attributable to noncontrolling interest
|
$
|
188,315
|
|
|
$
|
696
|
|
|
$
|
173,350
|
|
|
$
|
(33,207
|
)
|
•
|
In February 2017, we repaid the outstanding $300 million balance of our revolving credit facility.
|
•
|
In July 2017, we acquired certain CF assets including VX-561 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 VX-561 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 VX-561 into our pipeline in order to achieve our strategic objectives;
|
•
|
that we receive inadequate or unfavorable data from clinical trials evaluating the VX-561 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 VX-561 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 |
July 1, 2017 to July 31, 2017
|
2,040
|
$0.01
|
—
|
—
|
|
August 1, 2017 to August 31, 2017
|
15,811
|
$0.01
|
—
|
—
|
|
September 1, 2017 to September 30, 2017
|
2,589
|
$0.01
|
—
|
—
|
|
Total
|
20,440
|
$0.01
|
—
|
—
|
Exhibit Number
|
Exhibit Description
|
10.1
|
|
10.2
|
|
31.1
|
|
31.2
|
|
32.1
|
|
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
|
|
|
|
|
October 30, 2017
|
By:
|
/s/ Thomas Graney
|
|
|
Thomas Graney
|
|
|
Senior Vice President and Chief Financial Officer
(principal financial officer and duly authorized officer) |
(i)
|
the Executive’s duties are materially diminished to an extent that results in the Executive no longer being an “officer,” as such term is defined in Rule 16a-1(f) promulgated under the Securities Exchange Act of 1934; or
|
(ii)
|
the Executive’s Base Salary is decreased unless such reduction is part of an across-the-board proportionate reduction in the salaries of the Company’s senior management team; or
|
(iii)
|
the office to which the Executive is assigned is relocated to a place 35 or more miles away and such relocation is not at the Executive’s request or with the Executive’s prior agreement (and other than, for Executives assigned to the Company’s principal executive offices, in connection with a change in location of the Company’s principal executive offices);
|
(i)
|
Base Salary earned by Executive but not paid through the date of termination of Executive’s employment under this Section 9(b); and
|
(ii)
|
any amounts earned, accrued or owing to the Executive but not yet paid under Sections 5, 6, or 7 above.
|
(i)
|
Base Salary earned by Executive but not paid through the date of termination of Executive’s employment under this Section 9(c);
|
(ii)
|
all incentive compensation awards earned by Executive but not paid prior to the date of termination of Executive’s employment under this Section 9(c);
|
(iii)
|
a lump sum cash payment to the Executive in an amount equal to the Severance Payment, payable within ten days after the execution of a general release and expiration, without revocation, of any applicable revocation periods under the general release provided that if the 60-day period during which the release is required to become effective and irrevocable begins in one calendar year and ends in another calendar year, the Severance Payment shall not be made before the first day of the second calendar year;
|
(iv)
|
any amounts earned, accrued or owing to the Executive but not yet paid under Sections 5, 6 or 7 above;
|
(v)
|
if COBRA coverage is elected by the Executive, the Company shall pay the cost of insurance continuation premiums on the Executive’s behalf (whether or not covered by COBRA) to continue standard medical, dental and life insurance coverage for the Executive (or the cash equivalent of same in the event the Executive is ineligible for continued coverage), on a monthly basis, until the earlier of:
|
(A)
|
the date 12 months after the date the Executive’s employment is terminated; or
|
(B)
|
the date, or dates, on which the Executive receives equivalent coverage and benefits under the plans, programs and/or arrangements of a subsequent
|
By:
|
/s/ Ian Smith
|
|
Executive Vice President, Chief Operating and Financial Officer
|
/s/ Tom Graney
|
Tom Graney
|
I.
|
Definitions
. For the purposes of this Amended and Restated Change of Control Agreement (this “
Agreement
”), capitalized terms shall have the following meanings:
|
1.
|
“
Cause
” shall mean:
|
(a)
|
your conviction of a crime involving moral turpitude;
|
(b)
|
your willful refusal or failure to follow a lawful directive or instruction of the Company’s Board of Directors or the individual(s) to whom you report,
provided
that you receive prior written notice of the directive(s) or instruction(s) that you failed to follow, and
provided
further
that the Company, in good faith, gives you 30 days to correct such failure and
further
provided
that if you correct the failure(s), any termination of your employment on account of such failure shall not be treated for purposes of this Agreement as a termination of employment for “Cause”;
|
(c)
|
in carrying out your duties you commit (i) willful gross negligence, or (ii) willful gross misconduct, resulting in either case in material harm to the Company,
unless
such act, or failure to act, was believed by you, in good faith, to be in the best interests of the Company; or
|
(d)
|
your violation of the Company’s policies made known to you regarding confidentiality, securities trading or inside information.
|
2.
|
“
Change of Control
” shall mean that:
|
(a)
|
any “person” or “group” as such terms are used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934 (the “
Act
”), becomes a beneficial owner, as such term is used in Rule 13d-3 promulgated under the Act, of securities of the Company representing more than 50% of the combined voting power of the outstanding securities of the Company having the right to vote in the election of directors; or
|
(b)
|
all or substantially all the business or assets of the Company are sold or disposed of, or the Company or a subsidiary of the Company combines with another company pursuant to a merger, consolidation, or other similar transaction,
other
than
(i) a transaction solely for the purpose of reincorporating the Company or one of its subsidiaries in a different jurisdiction or recapitalizing or reclassifying the Company’s stock; or (ii) a merger or consolidation in which the shareholders of the Company immediately prior to such merger or consolidation continue to own at least a majority of the outstanding voting securities of the Company or the surviving entity immediately after the merger or consolidation.
|
3.
|
“
Code
” shall mean the Internal Revenue Code of 1986, as amended.
|
4.
|
“
Disability
” shall mean a disability as determined under the Company's long-term disability plan or program in effect at the time the disability first occurs, or if no such plan or program exists at the time of disability, then a “disability” as defined Section 22(e)(3) of the Code.
|
5.
|
“
Good Reason
” shall mean one of the following events has occurred without your consent:
|
(a)
|
You suffer a material reduction in the authorities, duties or job title and responsibilities associated with your position as Senior Vice President, Chief Financial Officer for the Company as of the date hereof;
|
(b)
|
your annual base salary is decreased;
|
(c)
|
the office to which you are assigned is relocated to a place 35 or more miles away; or
|
(d)
|
following a Change of Control, the Company’s successor fails to assume the Company’s rights and obligations under this Agreement;
|
6.
|
“
Termination Date
” shall mean the last day of your employment with the Company.
|
II.
|
Severance Benefits upon Change of Control
. If:
|
(A)
|
your employment is terminated by the Company (except for termination for Cause or due to a Disability) and the Termination Date is within 90 days prior to a Change of Control or within 12 months after a Change of Control; or
|
(B)
|
you, of your own initiative, (i) terminate your employment for Good Reason (in accordance with the notice and cure provisions set forth in Section I.5 above) and (ii) the event giving rise to Good Reason occurs within 90 days prior to a Change of Control or within 12 months after a Change of Control;
|
1.
|
Severance Payment
. In exchange for your execution within 60 days of the Termination Date of a general release, in a form satisfactory to the Company, of all claims against the Company, its subsidiaries, and its and their officers, directors and representatives, that becomes enforceable and irrevocable within such 60-day period, the Company shall make a cash payment (the “
Severance Payment
”) to you in an amount equal to:
|
(a)
|
(i) your annual base salary (provided, however, that if you terminate your employment for Good Reason based on a reduction in your annual base salary, then the annual base salary to be used in calculating the Severance Payment shall be your annual base salary in effect immediately prior to such reduction in annual base salary) plus your target bonus under any bonus program applicable to you for the year in which the Termination Date occurs; plus
|
(b)
|
a prorata portion of your target bonus for the portion of the year in which the Termination Date occurs under any bonus program applicable to you; plus
|
(c)
|
all cash incentive compensation awards earned by you but not paid prior to the Termination Date; provided that, if a fiscal year has been completed and the incentive award for such fiscal year has not been determined, the incentive compensation for such completed fiscal year shall equal the target bonus for such fiscal year.
|
2.
|
Accelerated Vesting.
|
(a)
|
On the Termination Date, stock options for the purchase of the Company’s securities held by you as of the Termination Date and not then exercisable shall immediately become exercisable in full. The options to which this accelerated vesting applies shall remain exercisable until the earlier of (a) the end of the 90-day period immediately following the later of (i) the Termination Date or (ii) the date of the Change of Control and (b) the date the stock option(s) would otherwise expire; and
|
(b)
|
On the Termination Date, the Company’s lapsing repurchase right with respect to shares of restricted stock held by you shall lapse in full (subject to your making satisfactory arrangements with the Company providing for the payment to the Company of all required withholding taxes).
|
3.
|
Continued Insurance Coverage
. If COBRA coverage is elected by you, the Company shall pay the cost of insurance continuation premiums on your behalf (whether or not covered by
|
4.
|
No Mitigation.
You shall not be required to mitigate the amount of the Severance Payment or any other benefit provided under this Agreement by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this Agreement be reduced (except as provided in Article II Section 3(ii)) by any compensation earned by you as the result of other employment, by retirement benefits, or be offset against any amount claimed to be owed by you to the Company or otherwise (except for any required withholding taxes); provided, that if the Company makes any other severance payments to you under any other program or agreement, such amounts shall be offset against the payments the Company is obligated to make pursuant to this Agreement.
|
III.
|
Miscellaneous
.
|
1.
|
Employee’s Obligations
. Upon the termination of employment, you shall promptly deliver to the Company all property of the Company and all material documents, statistics, account records, programs and other similar tangible items which may by in your possession or under your control and which relate in a material way to the business or affairs of the Company or its subsidiaries, and no copies of any such documents or any part thereof shall be retained by you.
|
2.
|
Entire Agreement
. This Agreement and the “
Employee Non-Disclosure, Non-Competition & Inventions Agreement
” previously executed by you covers the entire understanding of the parties as to the subject matter hereof, superseding all prior understandings and agreements related hereto, including the previous Change of Control Agreement between you and the Company. No modification or amendment of the terms and conditions of this Agreement shall be effective unless in writing and signed by the parties or their respective duly authorized agents, provided, however, that the Company may, without your consent, unilaterally adopt amendments that may be required so that this Agreement continues to comply with applicable law or regulation, including without limitation Section 409A of the Code, provided such amendments do not adversely affect the benefits to be provided to you under Section II of this Agreement.
|
3.
|
Governing Law
. This Agreement shall be governed by the laws of The Commonwealth of Massachusetts, as applied to contracts entered into and performed entirely in Massachusetts by Massachusetts residents.
|
4.
|
Successors and Assigns
. This Agreement may be assigned by the Company upon a sale, transfer or reorganization of the Company. Upon a Change of Control, the Company shall
|
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:
|
October 30, 2017
|
/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:
|
October 30, 2017
|
/s/ Thomas Graney
|
|
|
|
|
|
Thomas Graney
|
|
|
Senior Vice President and Chief Financial Officer
|
Date:
|
October 30, 2017
|
|
|
|
/s/ Jeffrey M. Leiden
|
|
|
|
|
|
Jeffrey M. Leiden
|
|
|
Chief Executive Officer and President
|
|
|
|
Date:
|
October 30, 2017
|
|
|
|
/s/ Thomas Graney
|
|
|
|
|
|
Thomas Graney
|
|
|
Senior Vice President and Chief Financial Officer
|
|