x
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the Fiscal Year Ended December 31, 2018
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or
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from
to
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Massachusetts
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04-3039129
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(State or other jurisdiction of
incorporation or organization) |
(I.R.S. Employer
Identification No.) |
50 Northern Avenue, Boston, Massachusetts
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02210
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(Address of principal executive offices)
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(Zip Code)
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Title of Each Class
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Name of Each Exchange on Which Registered
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||
Common Stock, $0.01 Par Value Per Share
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The Nasdaq Global Select Market
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Large accelerated filer
x
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Accelerated filer
o
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Non-accelerated filer
o
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Smaller reporting company
o
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Emerging growth company
o
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ITEM 1.
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BUSINESS
|
•
|
Pain.
We are evaluating VX-150, a NaV1.8 inhibitor, in Phase 2 clinical development as a potential treatment for pain. We have obtained proof-of-concept data from Phase 2 clinical trials evaluating VX-150 in acute, chronic inflammatory and neuropathic pain. We have an ongoing Phase 2b dose-ranging clinical trial in acute pain, which, if successful, could support the initiation of Phase 3 development.
|
•
|
Sickle cell disease and beta-thalassemia.
We are co-developing CTX001, an investigational gene editing treatment, for the treatment of beta-thalassemia and sickle cell disease, with CRISPR Therapeutics AG, or CRISPR. We recently initiated two Phase 1/2 clinical trials to evaluate CTX001.
|
•
|
Alpha-1 Antitrypsin Deficiency.
In December 2018, we initiated a Phase 1 clinical trial for a novel drug candidate that is a potential treatment for alpha-1 antitrypsin, or AAT, deficiency.
|
Product
|
Scientific Name
|
Region/ Initial Approval
|
Indication
|
Eligible Age Group
|
|
ivacaftor/tezacaftor
|
U.S. (2018)
|
CF patients (i) homozygous for the F508del mutation or (ii) with one copy of certain mutations that result in residual CFTR activity
|
12 years of age and older
|
|
ivacaftor/tezacaftor
|
European Union (2018)
|
CF patients (i) homozygous for the F508del mutation and (ii) with one copy of the F508del mutation and one copy of certain mutations that result in residual CFTR activity
|
12 years of age and older
|
|
ivacaftor/lumacaftor
|
U.S. (2015)
|
CF patients homozygous for the F508del mutation
|
2 years of age and older
|
ivacaftor/lumacaftor
|
European Union (2015)
|
CF patients homozygous for the F508del mutation
|
2 years of age and older
|
|
|
ivacaftor
|
U.S. (2012)
|
CF patients with G551D and other specified mutations
|
1 year of age and older
|
ivacaftor
|
European Union (2012)
|
CF patients with G551D and other specified mutations
|
1 year of age and older
|
•
|
We have obtained positive data from a Phase 3 clinical trial evaluating tezacaftor in combination with ivacaftor in patients with CF six to eleven years of age who are F508del homozygous or who have one copy of the F508del mutation and one mutation that results in residual CFTR activity. The clinical trial met its primary safety endpoint,
|
•
|
In October 2018, we announced positive data from a Phase 3 clinical trial of ivacaftor in patients with CF six to less than twelve months of age. We submitted a sNDA to the FDA and a line extension to the EMA in late 2018.
|
•
|
generating biological assays and identifying clinical biomarkers that we believe will be predictive of clinical responses;
|
•
|
targeting the discovery and development of medicines that have the potential to offer transformative benefit;
|
•
|
identifying efficient clinical and regulatory paths to bring new medicines to patients; and
|
•
|
focusing on treatments for life-threatening diseases with a high unmet medical need.
|
•
|
In the first quarter of 2017, we announced data from a 14-day Phase 2 randomized, double-blind, placebo-controlled, clinical trial of VX-150 in patients with chronic pain from osteoarthritis of the knee.
|
•
|
In the first quarter of 2018, we announced data from a Phase 2 randomized, double-blind, placebo-controlled clinical trial evaluating VX-150 as a treatment for patients with acute pain following bunionectomy surgery.
|
•
|
In the fourth quarter of 2018, we announced data from a Phase 2 randomized, double-blind, placebo-controlled clinical trial evaluating VX-150 as a treatment for patients with pain caused by small fiber neuropathy.
|
•
|
CRISPR Therapeutics AG
. In 2015, we entered into a collaboration with CRISPR for the discovery and development of potential new treatments aimed at the underlying genetic causes of human diseases using CRISPR-Cas9 gene editing technology. We currently are co-developing CTX001 for the treatment of sickle cell disease and beta-thalassemia and, if successful, have agreed to co-commercialize CTX001. In addition, we are collaborating with CRISPR on additional research targets, including CF, and will have the option to exclusively license the resulting therapeutics for these targets.
|
•
|
Arbor Biotechnologies, Inc.
In the fourth quarter of 2018, we entered into a collaboration with Arbor Biotechnologies, pursuant to which we are focusing on the discovery of novel proteins, including DNA endonucleases, to advance the development of new gene-editing therapies.
|
•
|
Moderna Therapeutics, Inc.
In 2016, we entered into a collaboration with Moderna Therapeutics, pursuant to which we are seeking to identify and develop messenger ribonucleic acid, or mRNA, therapeutics for the treatment of CF.
|
•
|
Other Arrangements
. In 2018, we entered into agreements with Genomics plc, Merck KGaA, Darmstadt, Germany, and X-Chem, Inc. in order to support our research efforts.
|
•
|
Janssen Pharmaceuticals, Inc.
In 2014, we entered into an agreement with Janssen. Pursuant to this agreement, Janssen Inc. is developing pimodivir for the treatment of influenza. Janssen is evaluating pimodivir in Phase 3 clinical trials in patients with influenza A infection.
|
•
|
Merck KGaA, Darmstadt, Germany.
In 2017, we entered into a Strategic Collaboration and License Agreement with Merck KGaA, Darmstadt, Germany, pursuant to which we granted an exclusive worldwide license to research, develop and commercialize four oncology research and development programs.
|
Product/Drug Candidate
|
Status of United States Patent
(Projected Expiration)
|
Status of European Union Patent
(Projected Expiration)
|
KALYDECO
|
Granted (2027)
|
Granted (2025)
1
|
ORKAMBI
|
Granted (2030)
|
Granted (2026)
2
|
SYMDEKO/SYMKEVI
|
Granted (2027)
|
Granted (2028)
3
|
VX-659/tezacaftor/ivacaftor
|
Pending (2037)
|
Pending (2037)
|
VX-445/tezacaftor/ivacaftor
|
Pending (2037)
|
Pending (2037)
|
•
|
CF potentiators and correctors and many other related compounds, and the use of those compounds to treat CF.
|
•
|
VX-150 and the use of VX-150 to treat pain indications.
|
•
|
Other pre-clinical and clinical drug candidates and the use of such drug candidates to treat specified diseases.
|
•
|
The manufacture, pharmaceutical compositions, related solid forms, formulations, dosing regimens and methods of use of many of the above compounds.
|
•
|
completion of preclinical laboratory tests, animal studies and formulation studies conducted according to Good Laboratory Practices, or GLP, and other applicable regulations;
|
•
|
submission to the FDA of an IND application, which must become effective before clinical trials in the United States may begin;
|
•
|
performance of adequate and well-controlled clinical trials according to Good Clinical Practices, or GCP, to establish the safety and efficacy of the proposed drug for its intended use;
|
•
|
submission to the FDA of an NDA;
|
•
|
satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product will be produced to assess compliance with cGMP; and
|
•
|
FDA review and approval of the NDA.
|
•
|
Phase 1.
The drug initially is introduced into healthy human subjects and tested for safety, dosage tolerance, absorption, metabolism, distribution and elimination. In the case of some drug candidates for severe or life-threatening diseases, such as cancer, especially when the drug candidate may be inherently too toxic to ethically administer to healthy volunteers, the initial human testing is often conducted in patients.
|
•
|
Phase 2.
Clinical trials are initiated in a limited patient population intended to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the drug candidate for specific targeted diseases and to determine dosage tolerance and optimal dosage.
|
•
|
Phase 3.
Clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population at geographically dispersed clinical trial sites. These clinical trials are intended to establish the overall risk-benefit ratio of the drug candidate and provide an adequate basis for regulatory approval and product labeling.
|
•
|
record-keeping requirements;
|
•
|
reporting of adverse experiences with the product;
|
•
|
providing the FDA with updated safety and efficacy information;
|
•
|
drug sampling and distribution requirements;
|
•
|
notifying the FDA and gaining its approval of specified manufacturing or labeling changes;
|
•
|
complying with certain electronic records and signature requirements; and
|
•
|
complying with FDA promotion and advertising requirements.
|
•
|
refusal to approve or delay in review of pending applications;
|
•
|
withdrawal of an approval or the implementation of limitations on a previously approved indication for use;
|
•
|
imposition of a clinical hold, a risk mitigation and evaluation strategy or other safety-related limitations;
|
•
|
warning letters or “untitled letters”;
|
•
|
product seizures;
|
•
|
total or partial suspension of production or distribution; or
|
•
|
injunctions, fines, disgorgement, refusals of government contracts, or civil or criminal penalties.
|
Name
|
|
Age
|
Position
|
Jeffrey M. Leiden, M.D., Ph.D.
|
63
|
Chairman of the Board, Chief Executive Officer and President
|
|
David Altshuler, M.D., Ph.D.
|
54
|
Executive Vice President, Global Research and Chief Scientific Officer
|
|
Stuart A. Arbuckle
|
53
|
Executive Vice President and Chief Commercial Officer
|
|
Reshma Kewalramani, M.D.
|
46
|
Executive Vice President, Global Medicines Development and Medical Affairs, and Chief Medical Officer
|
|
Michael Parini, J.D.
|
44
|
Executive Vice President and Chief Legal and Administrative Officer
|
|
Amit K. Sachdev, J.D.
|
51
|
Executive Vice President and Chief Regulatory Officer
|
|
Paul M. Silva
|
52
|
Senior Vice President and Corporate Controller and Interim Chief Financial Officer
|
|
Sangeeta M. Bhatia, M.D., Ph.D.
|
50
|
Director
|
|
Alan Garber, M.D., Ph.D.
|
63
|
Director
|
|
Terrence C. Kearney
|
64
|
Director
|
|
Yuchun Lee
|
53
|
Director
|
|
Margaret G. McGlynn
|
59
|
Director
|
|
Bruce I. Sachs
|
59
|
Director
|
|
Elaine S. Ullian
|
71
|
Director
|
|
William Young
|
74
|
Director
|
•
|
that one or more competing therapies may successfully be developed as a treatment for patients with CF;
|
•
|
that we may experience adverse developments with respect to development or commercialization of our CF medicines and/or CF drug candidates; and
|
•
|
that reimbursement policies of payors and other third parties may make it difficult to obtain reimbursement or reduce the net price we receive for our products.
|
•
|
prevalence and severity of adverse side effects;
|
•
|
lack of reimbursement availability from third-party payors, including governmental entities;
|
•
|
lower demonstrated efficacy, safety and/or tolerability compared to alternative treatment methods;
|
•
|
lack of cost-effectiveness;
|
•
|
a decision to wait for the approval of other therapies in development that have significant perceived advantages over our drug;
|
•
|
convenience and ease of administration;
|
•
|
other potential advantages of alternative treatment methods; and
|
•
|
ineffective sales, marketing and/or distribution support.
|
•
|
offer therapeutic or other improvement over existing competitive therapies;
|
•
|
show the level of safety and efficacy, including the level of statistical significance, required by the FDA or other regulatory authorities for approval of a drug candidate;
|
•
|
meet applicable regulatory standards;
|
•
|
be capable of being produced in commercial quantities at acceptable costs; or
|
•
|
if approved for commercial sale, be successfully marketed as pharmaceutical products.
|
•
|
ongoing discussions with the FDA or comparable foreign authorities regarding the scope or design of our clinical trials and the number of clinical trials we must conduct;
|
•
|
delays in enrolling volunteers or patients into clinical trials, including as a result of low numbers of patients that meet the eligibility criteria for the trial;
|
•
|
a lower than anticipated retention rate of volunteers or patients in clinical trials;
|
•
|
the need to repeat clinical trials as a result of inconclusive results, unforeseen complications in testing or clinical investigator error;
|
•
|
inadequate supply or deficient quality of drug candidate materials or other materials necessary for the conduct of our clinical trials;
|
•
|
unfavorable FDA or foreign regulatory authority inspection and review of a manufacturing facility that supplied clinical trial materials or its relevant manufacturing records or a clinical trial site or records of any clinical or preclinical investigation;
|
•
|
unfavorable scientific results from clinical trials;
|
•
|
serious and unexpected drug-related side-effects experienced by participants in our clinical trials or by participants in clinical trials being conducted by our competitors to evaluate drug candidates with similar mechanisms of action or structures to drug candidates that we are developing;
|
•
|
favorable results in testing of our competitors’ drug candidates, or FDA or foreign regulatory authority approval of our competitors’ drug candidates; or
|
•
|
action by the FDA or a foreign regulatory authority to place a clinical hold or partial clinical hold on a trial or compound or deeming the clinical trial conduct as problematic.
|
•
|
failure to successfully develop and commercialize the drugs, drug candidates or technologies that we acquire or license or to achieve other strategic objectives;
|
•
|
inadequate or unfavorable data from clinical trials evaluating the acquired or licensed drug or drug candidates;
|
•
|
entry into markets in which we have no or limited direct prior experience or where competitors in such markets have stronger market positions;
|
•
|
disruption of our ongoing business and distraction of our management and employees from other opportunities and challenges;
|
•
|
potential failure of the due diligence processes to identify significant problems, liabilities or other shortcomings or challenges of an acquired company, or acquired or licensed drug, drug candidate or technology, including but not limited to, problems, liabilities or other shortcomings or challenges with respect to intellectual property, product quality, safety, accounting practices, employee, customer or third party relations and other known and unknown liabilities;
|
•
|
liability for activities of the acquired company or licensor before the acquisition or license, including intellectual property infringement claims, violations of laws, commercial disputes, tax liabilities, and other known and unknown liabilities;
|
•
|
exposure to litigation or other claims in connection with, or inheritance of claims or litigation risk as a result of an acquisition or license, including but not limited to, claims from terminated employees, customers, former equity holders or other third-parties;
|
•
|
difficulty in integrating the drugs, drug candidates, technologies, business operations and personnel of an acquired asset or company; and
|
•
|
difficulties in the integration of the acquired company’s departments, systems, including accounting, human resource and other administrative systems, technologies, books and records, and procedures, as well as in
|
•
|
Our collaborators may change the focus of their development and commercialization efforts or may have insufficient resources to effectively develop our drug candidates. The ability of some of our products and drug candidates to reach their potential could be limited if collaborators decrease or fail to increase development or commercialization efforts related to those products or drug candidates. Our collaboration agreements provide our collaborators with a level of discretion in determining the amount and timing of efforts and resources that they will apply to these collaborations.
|
•
|
Any future collaboration agreements may have the effect of limiting the areas of research and development that we may pursue, either alone or in collaboration with third parties.
|
•
|
Collaborators may develop and commercialize, either alone or with others, drugs that are similar to or competitive with the drugs or drug candidates that are the subject of their collaborations with us.
|
•
|
Disagreements with collaborators, including disagreements over proprietary rights, contract interpretation or the preferred course of development, might cause delays or termination of the research, development or commercialization of drug candidates, might lead to additional responsibilities for us with respect to drug candidates, or might result in litigation or arbitration. Any such disagreements would divert management attention and resources and be time-consuming and expensive.
|
•
|
Collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential litigation.
|
•
|
Collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability.
|
•
|
Investigations and/or compliance or enforcement actions against a collaborator, which may expose us to indirect liability as a result of our partnership with such collaborator.
|
•
|
Our collaboration agreements are subject to termination under various circumstances.
|
•
|
differing regulatory requirements for drug approvals and regulation of approved drugs in foreign countries;
|
•
|
varying reimbursement regimes and difficulties or the inability to obtain reimbursement for our products in foreign countries in a timely manner;
|
•
|
differing patient treatment infrastructures, particularly since our business is focused on the treatment of serious diseases that affect relatively smaller numbers of patients and are typically prescribed by specialist physicians;
|
•
|
collectibility of accounts receivable;
|
•
|
changes in tariffs, trade barriers and regulatory requirements, the risks of which appear to have increased in the current political environment;
|
•
|
economic weakness, including recession and inflation, or political instability in particular foreign economies and markets;
|
•
|
differing levels of enforcement and/or recognition of contractual and intellectual property rights;
|
•
|
complying with local laws and regulations, which are interpreted and enforced differently across jurisdictions and which can change significantly over time;
|
•
|
foreign taxes, including withholding of payroll taxes;
|
•
|
foreign currency fluctuations, which could result in reduced revenues or increased operating expenses, and other obligations incident to doing business or operating in another country;
|
•
|
workforce uncertainty in countries where labor unrest is more common than in the United States;
|
•
|
import and export licensing requirements, tariffs, and other trade and travel restrictions;
|
•
|
production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and
|
•
|
business interruptions resulting from geo-political actions, including war and terrorism.
|
•
|
implement and clearly communicate our corporate-wide strategies;
|
•
|
enhance our operational and financial infrastructure, including our controls over records and information;
|
•
|
enhance our operational, financial and management processes, including our cross-functional decision-making processes and our budget prioritization systems;
|
•
|
train and manage our global employee base; and
|
•
|
enhance our compliance and legal resources.
|
•
|
the information contained in our quarterly earnings releases, including our net product revenues and operating expenses for completed periods and guidance regarding future periods;
|
•
|
announcements of FDA actions with respect to our drugs or our competitors’ drugs, or regulatory filings for our drug candidates or those of our competitors, or announcements of interim or final results of clinical trials or nonclinical studies relating to our drugs, drug candidates or those of our competitors;
|
•
|
developments in domestic and international governmental policy or regulation, for example, relating to drug pricing or intellectual property rights;
|
•
|
technological innovations or the introduction of new drugs by our competitors;
|
•
|
government regulatory action;
|
•
|
public concern as to the safety of drugs developed by us or our competitors;
|
•
|
developments in patent or other intellectual property rights or announcements relating to these matters;
|
•
|
information disclosed by third parties regarding our business or products;
|
•
|
developments relating specifically to other companies and market conditions for pharmaceutical and biotechnology stocks or stocks in general;
|
•
|
business development, capital structuring or financing activities; and
|
•
|
general worldwide or national economic, political and capital market conditions.
|
•
|
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 our CF net product revenues;
|
•
|
our expectations regarding clinical trials, development timelines and regulatory authority filings and submissions for ivacaftor, lumacaftor, tezacaftor, VX-659, VX-445, VX-150 and the timelines for regulatory filings for a triple combination regimen;
|
•
|
our ability to obtain reimbursement for our medicines in ex-U.S. markets and our ability to otherwise successfully market our medicines or any drug candidates for which we obtain regulatory approval;
|
•
|
our expectations regarding the timing and structure of clinical trials of our drugs and drug candidates and the expected timing of our receipt of data from our ongoing and planned clinical trials;
|
•
|
the data that will be generated by ongoing and planned clinical trials and the ability to use that data to advance compounds, continue development or support regulatory filings;
|
•
|
our beliefs regarding the support provided by clinical trials and preclinical and nonclinical studies of our drug candidates for further investigation, clinical trials or potential use as a treatment;
|
•
|
our plan to continue investing in our research and development programs and our strategy to develop our drug candidates, alone or with third party-collaborators;
|
•
|
the establishment, development and maintenance of collaborative relationships;
|
•
|
potential business development activities;
|
•
|
potential fluctuations in foreign currency exchange rates;
|
•
|
our ability to use our research programs to identify and develop new drug candidates to address serious diseases and significant unmet medical needs; and
|
•
|
our liquidity and our expectations regarding the possibility of raising additional capital.
|
ITEM 1B.
|
UNRESOLVED STAFF COMMENTS
|
ITEM 2.
|
PROPERTIES
|
ITEM 3.
|
LEGAL PROCEEDINGS
|
ITEM 4.
|
MINE SAFETY DISCLOSURES
|
ITEM 5.
|
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|
Period
|
|
Total Number
of Shares Purchased (1) |
Average Price
Paid per Share |
Total Number of Shares
Purchased as Part of Publicly Announced Plans or Programs (2) |
Maximum Number of
Shares (or approximate dollar amount) that May Yet be Purchased Under the Plans or Programs (2) |
||||||
Oct. 1, 2018 to Oct. 31, 2018
|
278,920
|
|
$
|
174.24
|
|
275,351
|
|
$
|
240,390,554
|
|
|
Nov. 1, 2018 to Nov. 30, 2018
|
346,159
|
|
$
|
165.80
|
|
338,979
|
|
$
|
182,995,963
|
|
|
Dec. 1, 2018 to Dec. 31, 2018
|
197,930
|
|
$
|
166.70
|
|
196,878
|
|
$
|
150,000,059
|
|
|
Total
|
823,009
|
|
$
|
168.88
|
|
811,208
|
|
$
|
150,000,059
|
|
(1)
|
Consists of 811,208 shares repurchased pursuant to our share repurchase program (described in footnote 2 below) at an average price of $171.33 per share and 11,801 restricted shares repurchased for $0.01 per share from our employees pursuant to our equity plans. While we have restricted shares that are continuing to vest under our equity plans that are subject to repurchase rights upon termination of service, we have transitioned our equity program to granting restricted stock units. Unvested restricted stock units are forfeited upon termination of service and do not result in an issuer repurchase that would be reflected in this table.
|
(2)
|
Our board of directors has approved a share repurchase program pursuant to which we are authorized to repurchase up to $500.0 million of our common stock by December 31, 2019; the program was announced on January 31, 2018. Under the share repurchase program, we are authorized to purchase shares from time to time through open market or privately negotiated transactions and such purchases may be made pursuant to Rule 10b5-1 plans or other means as determined by our management and in accordance with the requirements of the Securities and Exchange Commission. The approximate dollar value of shares that may yet be repurchased is based solely on shares that may be repurchased under the share repurchase program and excludes any shares that may be repurchased under our employee equity programs.
|
ITEM 6.
|
SELECTED FINANCIAL DATA
|
|
Year Ended December 31,
|
||||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
||||||||||
Consolidated Statements of Operations Data:
|
(in thousands, except per share amounts)
|
||||||||||||||||||
Product revenues, net
|
$
|
3,038,325
|
|
|
$
|
2,165,480
|
|
|
$
|
1,683,632
|
|
|
$
|
1,000,324
|
|
|
$
|
487,821
|
|
Collaborative and royalty revenues (1)
|
9,272
|
|
|
323,172
|
|
|
18,545
|
|
|
32,012
|
|
|
92,594
|
|
|||||
Total revenues
|
3,047,597
|
|
|
2,488,652
|
|
|
1,702,177
|
|
|
1,032,336
|
|
|
580,415
|
|
|||||
Total costs and expenses (2)
|
2,412,447
|
|
|
2,365,409
|
|
|
1,692,241
|
|
|
1,499,215
|
|
|
1,272,827
|
|
|||||
(Benefit from) provision for income taxes (3)
|
(1,486,862
|
)
|
|
(107,324
|
)
|
|
16,665
|
|
|
30,381
|
|
|
6,958
|
|
|||||
Net income (loss) attributable to Vertex
|
$
|
2,096,896
|
|
|
$
|
263,484
|
|
|
$
|
(112,052
|
)
|
|
$
|
(556,334
|
)
|
|
$
|
(738,555
|
)
|
Diluted income (loss) from continuing operations per share attributable to Vertex common shareholders
|
$
|
8.09
|
|
|
$
|
1.04
|
|
|
$
|
(0.46
|
)
|
|
$
|
(2.31
|
)
|
|
$
|
(3.14
|
)
|
Shares used in per diluted share calculations
|
259,185
|
|
|
253,225
|
|
|
244,685
|
|
|
241,312
|
|
|
235,307
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
|
As of December 31,
|
||||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
||||||||||
Consolidated Balance Sheet Data:
|
(in thousands)
|
||||||||||||||||||
Cash, cash equivalents and marketable securities
|
$
|
3,168,242
|
|
|
$
|
2,088,666
|
|
|
$
|
1,434,557
|
|
|
$
|
1,042,462
|
|
|
$
|
1,387,106
|
|
Deferred tax assets (3)
|
1,499,672
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Total assets
|
6,245,898
|
|
|
3,546,014
|
|
|
2,896,787
|
|
|
2,498,587
|
|
|
2,334,679
|
|
|||||
Total current liabilities (4)
|
1,120,292
|
|
|
807,260
|
|
|
792,537
|
|
|
506,167
|
|
|
368,254
|
|
|||||
Long-term debt obligations, excluding current portion
|
—
|
|
|
—
|
|
|
—
|
|
|
223,863
|
|
|
280,569
|
|
|||||
Construction financing lease obligation, excluding current portion (5)
|
561,892
|
|
|
563,406
|
|
|
486,359
|
|
|
472,611
|
|
|
473,073
|
|
|||||
Other long-term obligations
|
128,511
|
|
|
133,042
|
|
|
279,700
|
|
|
202,318
|
|
|
116,600
|
|
(1)
|
In 2017, we recorded $230.0 million of collaborative and royalty revenues related to an upfront payment made to us pursuant to our collaboration agreement with Merck KGaA, Darmstadt, Germany. See
Note B, “Collaborative Arrangements and Acquisitions.”
|
(2)
|
Total costs and expenses included (i) in 2018 and 2017, intangible asset impairment charges of $29.0 million and $255.3 million, respectively, (ii)
$111.9 million
collaborative expenses in 2018 primarily related to strategic license agreements;
$168.7 million
collaborative expenses in 2017 primarily related to an asset acquisition and (iii) in 2014, $50.9 million of restructuring charges primarily related to the relocation of our corporate headquarters. See
Note J, “Intangible Assets and Goodwill,”
and
Note B, “Collaborative Arrangements and Acquisitions.”
|
(3)
|
In 2018, we released the valuation allowance on the majority of our net operating losses and other deferred tax assets resulting in a benefit from income taxes of
$1.56 billion
in the fourth quarter of 2018 and we recorded a
$1.50 billion
deferred tax asset on our consolidated balance sheet as of December 31, 2018. In 2018 and 2017, we recorded benefits from income taxes related to the impairment of intangible assets. See
Note J, “Intangible Assets and Goodwill.”
|
(4)
|
As of December 31,
2018
and 2017, we had
$354.4 million
and
$232.4 million
, respectively, recorded as current liabilities related to cash received by us for sales of ORKAMBI in France for which the price has not been established. See
Note A, “Nature of Business and Accounting Policies.”
|
(5)
|
We have entered into several leases in which we are deemed to be the owner for accounting purposes. See
Note L, “Long-term Obligations.”
|
ITEM 7.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
Announced positive data from two Phase 3 clinical trials evaluating the triple combination of VX-659, tezacaftor and ivacaftor in F508del/Min patients and F508del homozygous patients 12 years of age or older.
|
•
|
Completed enrollment in two Phase 3 clinical trials evaluating the triple combination of VX-445, tezacaftor and ivacaftor in F508del/Min patients and F508del homozygous patients 12 years of age or older. Data from these clinical trials is expected in the first quarter of 2019.
|
•
|
Obtained approval for SYMDEKO in the United States in the first quarter of 2018 for F508del homozygous patients 12 years of age or older.
|
•
|
Successfully launched SYMDEKO in the United States.
|
•
|
Obtained approval for SYMKEVI in the European Union in the fourth quarter of 2018 for F508del homozygous patients 12 years of age or older.
|
•
|
Obtained approvals from the FDA and EMA for label expansions for KALYDECO and ORKAMBI for younger patient groups.
|
•
|
Entered into innovative long-term access agreements in ex-U.S markets, including Australia and Denmark.
|
•
|
Initiated a Phase 1 clinical trial to evaluate VX-121, an additional next-generation CFTR corrector.
|
•
|
Demonstrated proof-of-concept for VX-150, a NaV1.8 inhibitor, in acute and neuropathic pain and initiated a Phase 2b dosing ranging clinical trial.
|
•
|
Initiated first clinical trials of CTX001, an investigational gene-editing treatment that we are evaluating as a potential treatment for beta-thalassemia and sickle cell disease.
|
•
|
Initiated a Phase 1 clinical trial for a novel drug candidate for alpha-1 antitrypsin deficiency.
|
•
|
Established a collaboration with Arbor Biotechnologies to enhance our ongoing efforts to develop innovative gene-editing therapies for a range of serious diseases.
|
•
|
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;
|
•
|
Arbor Biotechnologies, Inc., or Arbor, pursuant to which we are collaborating
on the discovery of novel proteins, including DNA endonucleases, to advance the development of new gene-editing therapies
; and
|
•
|
Moderna Therapeutics, Inc., or Moderna, pursuant to which we
are seeking to identify and develop messenger ribonucleic acid, or mRNA, therapeutics for the treatment of CF
.
|
•
|
Janssen Pharmaceuticals, Inc., or Janssen, which is evaluating pimodivir in Phase 3 clinical trials for the treatment of influenza; and
|
•
|
Merck KGaA, Darmstadt, Germany, which licensed oncology research and development programs from us in early 2017.
|
|
|
|
|
|
|
|
2018/2017
Comparison |
|
2017/2016
Comparison |
||||||||||||||||
|
|
|
|
|
|
|
Increase/(Decrease)
|
|
Increase/(Decrease)
|
||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
|
(in thousands)
|
|
(in thousands, except percentages)
|
||||||||||||||||||||||
Revenues
|
$
|
3,047,597
|
|
|
$
|
2,488,652
|
|
|
$
|
1,702,177
|
|
|
$
|
558,945
|
|
|
22
|
%
|
|
$
|
786,475
|
|
|
46
|
%
|
Operating costs and expenses
|
2,412,447
|
|
|
2,365,409
|
|
|
1,692,241
|
|
|
47,038
|
|
|
2
|
%
|
|
673,168
|
|
|
40
|
%
|
|||||
Other items, net
|
1,461,746
|
|
|
140,241
|
|
|
(121,988
|
)
|
|
1,321,505
|
|
|
**
|
|
|
262,229
|
|
|
**
|
|
|||||
Net income (loss) attributable to Vertex
|
$
|
2,096,896
|
|
|
$
|
263,484
|
|
|
$
|
(112,052
|
)
|
|
$
|
1,833,412
|
|
|
**
|
|
|
$
|
375,536
|
|
|
**
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net income (loss) per diluted share attributable to Vertex common shareholders
|
$
|
8.09
|
|
|
$
|
1.04
|
|
|
$
|
(0.46
|
)
|
|
|
|
** Not meaningful
|
||||||||||
Diluted shares used in per share calculations
|
259,185
|
|
|
253,225
|
|
|
244,685
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in thousands)
|
||||||||||
SYMDEKO/SYMKEVI
|
$
|
768,657
|
|
|
$
|
—
|
|
|
$
|
—
|
|
ORKAMBI
|
1,262,166
|
|
|
1,320,850
|
|
|
979,590
|
|
|||
KALYDECO
|
1,007,502
|
|
|
844,630
|
|
|
703,432
|
|
|||
Total CF product revenues, net
|
$
|
3,038,325
|
|
|
$
|
2,165,480
|
|
|
$
|
1,683,022
|
|
|
|
|
|
|
|
|
2018/2017
Comparison |
|
2017/2016
Comparison |
||||||||||||||||
|
|
|
|
|
|
|
Increase/(Decrease)
|
|
Increase/(Decrease)
|
||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
|
(in thousands)
|
|
(in thousands, except percentages)
|
||||||||||||||||||||||
Research expenses
|
$
|
438,360
|
|
|
$
|
311,206
|
|
|
$
|
314,602
|
|
|
$
|
127,154
|
|
|
41
|
%
|
|
$
|
(3,396
|
)
|
|
(1
|
)%
|
Development expenses
|
978,116
|
|
|
1,013,419
|
|
|
733,088
|
|
|
(35,303
|
)
|
|
(3
|
)%
|
|
280,331
|
|
|
38
|
%
|
|||||
Total research and development expenses
|
$
|
1,416,476
|
|
|
$
|
1,324,625
|
|
|
$
|
1,047,690
|
|
|
$
|
91,851
|
|
|
7
|
%
|
|
$
|
276,935
|
|
|
26
|
%
|
|
|
|
|
|
|
|
2018/2017
Comparison |
|
2017/2016
Comparison |
||||||||||||||||
|
|
|
|
|
|
|
Increase/(Decrease)
|
|
Increase/(Decrease)
|
||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
|
(in thousands)
|
|
(in thousands, except percentages)
|
||||||||||||||||||||||
Research Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Salary and benefits
|
$
|
87,773
|
|
|
$
|
81,229
|
|
|
$
|
80,845
|
|
|
$
|
6,544
|
|
|
8
|
%
|
|
$
|
384
|
|
|
<1%
|
|
Stock-based compensation expense
|
62,925
|
|
|
60,122
|
|
|
51,034
|
|
|
2,803
|
|
|
5
|
%
|
|
9,088
|
|
|
18
|
%
|
|||||
Laboratory supplies and other direct expenses
|
50,578
|
|
|
45,822
|
|
|
43,151
|
|
|
4,756
|
|
|
10
|
%
|
|
2,671
|
|
|
6
|
%
|
|||||
Outsourced services
|
38,777
|
|
|
39,497
|
|
|
33,682
|
|
|
(720
|
)
|
|
(2
|
)%
|
|
5,815
|
|
|
17
|
%
|
|||||
Collaboration and asset acquisition expenses
|
111,600
|
|
|
8,425
|
|
|
33,000
|
|
|
103,175
|
|
|
**
|
|
|
(24,575
|
)
|
|
**
|
|
|||||
Infrastructure costs
|
86,707
|
|
|
76,111
|
|
|
72,890
|
|
|
10,596
|
|
|
14
|
%
|
|
3,221
|
|
|
4
|
%
|
|||||
Total research expenses
|
$
|
438,360
|
|
|
$
|
311,206
|
|
|
$
|
314,602
|
|
|
$
|
127,154
|
|
|
41
|
%
|
|
$
|
(3,396
|
)
|
|
(1
|
)%
|
|
|
|
|
|
|
|
|
|
** Not meaningful
|
|
|
|
|
|
|
|
2018/2017
Comparison |
|
2017/2016
Comparison |
||||||||||||||||
|
|
|
|
|
|
|
Increase/(Decrease)
|
|
Increase/(Decrease)
|
||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
|
(in thousands)
|
|
(in thousands, except percentages)
|
||||||||||||||||||||||
Development Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Salary and benefits
|
$
|
220,128
|
|
|
$
|
208,769
|
|
|
$
|
177,399
|
|
|
$
|
11,359
|
|
|
5
|
%
|
|
$
|
31,370
|
|
|
18
|
%
|
Stock-based compensation expense
|
140,187
|
|
|
121,778
|
|
|
102,417
|
|
|
18,409
|
|
|
15
|
%
|
|
19,361
|
|
|
19
|
%
|
|||||
Laboratory supplies and other direct expenses
|
84,900
|
|
|
45,594
|
|
|
42,861
|
|
|
39,306
|
|
|
86
|
%
|
|
2,733
|
|
|
6
|
%
|
|||||
Outsourced services
|
344,339
|
|
|
337,901
|
|
|
282,137
|
|
|
6,438
|
|
|
2
|
%
|
|
55,764
|
|
|
20
|
%
|
|||||
Collaboration and asset acquisition expenses
|
250
|
|
|
160,250
|
|
|
—
|
|
|
(160,000
|
)
|
|
**
|
|
|
160,250
|
|
|
**
|
|
|||||
Drug supply costs
|
42,099
|
|
|
13,660
|
|
|
12,510
|
|
|
28,439
|
|
|
208
|
%
|
|
1,150
|
|
|
9
|
%
|
|||||
Infrastructure costs
|
146,213
|
|
|
125,467
|
|
|
115,764
|
|
|
20,746
|
|
|
17
|
%
|
|
9,703
|
|
|
8
|
%
|
|||||
Total development expenses
|
$
|
978,116
|
|
|
$
|
1,013,419
|
|
|
$
|
733,088
|
|
|
$
|
(35,303
|
)
|
|
(3
|
)%
|
|
$
|
280,331
|
|
|
38
|
%
|
|
|
|
|
|
|
|
|
|
** Not meaningful
|
|
|
|
|
|
|
|
2018/2017
Comparison |
|
2017/2016
Comparison |
||||||||||||||||
|
|
|
|
|
|
|
Increase/(Decrease)
|
|
Increase/(Decrease)
|
||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
|
(in thousands)
|
|
(in thousands, except percentages)
|
||||||||||||||||||||||
Sales, general and administrative expenses
|
$
|
557,616
|
|
|
$
|
496,079
|
|
|
$
|
432,829
|
|
|
$
|
61,537
|
|
|
12
|
%
|
|
$
|
63,250
|
|
|
15
|
%
|
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in thousands)
|
||||||||||
Loss attributable to noncontrolling interest before (benefit from) provision for income taxes and changes in fair value of contingent payments
|
$
|
31,191
|
|
|
$
|
223,379
|
|
|
$
|
10,086
|
|
(Benefit from) provision for income taxes
|
(3,668
|
)
|
|
(114,090
|
)
|
|
16,743
|
|
|||
(Increase) decrease in fair value of contingent payments
|
(17,730
|
)
|
|
62,560
|
|
|
(54,850
|
)
|
|||
Net loss (income) attributable to noncontrolling interest
|
$
|
9,793
|
|
|
$
|
171,849
|
|
|
$
|
(28,021
|
)
|
•
|
incurring substantial operating expenses to conduct research and development activities and to operate our organization; and
|
•
|
having substantial facility and capital lease obligations, including leases for two buildings in Boston, Massachusetts that continue through 2028 and a lease in San Diego, California that continues through 2034.
|
•
|
As of December 31,
2018
, we have accrued approximately
$354.4 million
from ORKAMBI early access programs in France. We expect we will be required to repay a portion of the collected amounts to the French government
|
•
|
We have entered into certain collaboration agreements with third parties that include the funding of certain research, development and commercialization efforts with the potential for future milestone and royalty payments by us upon the achievement of pre-established developmental and regulatory targets and/or commercial targets, and we may enter into additional business development transactions, including acquisitions, collaborations and equity investments, that require additional capital. For example, in 2018 and 2017, we made
$100.4 million
and
$168.7 million
of upfront and milestone payments related to collaborations and asset acquisitions.
|
•
|
To the extent we borrow amounts under the credit agreement we entered into in October 2016, we would be required to repay any outstanding principal amounts in 2021.
|
|
Payments Due by Period
|
||||||||||||||||||
|
2019
|
|
2020-2021
|
|
2022-2023
|
|
2024 and later
|
|
Total
|
||||||||||
|
(in thousands)
|
||||||||||||||||||
Fan Pier Leases
|
$
|
66,540
|
|
|
$
|
145,178
|
|
|
$
|
145,178
|
|
|
$
|
389,855
|
|
|
$
|
746,751
|
|
Facility leases, excluding Fan Pier Leases
|
18,531
|
|
|
45,053
|
|
|
42,654
|
|
|
185,336
|
|
|
291,574
|
|
|||||
Capital lease obligations
|
10,770
|
|
|
12,931
|
|
|
5,274
|
|
|
3,085
|
|
|
32,060
|
|
|||||
Research, development and drug supply costs
|
20,579
|
|
|
3,316
|
|
|
314
|
|
|
—
|
|
|
24,209
|
|
|||||
Other
|
5,563
|
|
|
2,995
|
|
|
106
|
|
|
5,619
|
|
|
14,283
|
|
|||||
Total contractual commitments and obligations
|
$
|
121,983
|
|
|
$
|
209,473
|
|
|
$
|
193,526
|
|
|
$
|
583,895
|
|
|
$
|
1,108,877
|
|
•
|
CFF:
CFF has the right to tiered royalties ranging from single digits to sub-teens on any approved drugs first synthesized and/or tested during a research term on or before February 28, 2014, including KALYDECO, ORKAMBI, SYMDEKO/SYMKEVI, lumacaftor, ivacaftor and tezacaftor and royalties ranging from low single digits to mid-single digits on potential sales of certain compounds first synthesized and/or tested between March 1, 2014 and August 31, 2016, including VX-659 and VX-445. For combination products, such as ORKAMBI and SYMDEKO/SYMKEVI, sales are allocated equally to each of the active pharmaceutical ingredients in the combination product.
|
•
|
Research and Development Milestones:
Our collaborations and certain other business development arrangements, including our asset acquisition from Concert, have milestone and royalty payments payable by us upon the successful achievement of pre-established developmental, regulatory and/or commercial targets or net sales.
|
•
|
revenue recognition;
|
•
|
income taxes;
|
•
|
research and development accruals;
|
•
|
leases; and
|
•
|
collaborations; intangible assets and variable interest entities.
|
•
|
Until December 31, 2018, we were required to determine whether we would be deemed for accounting purposes to be the owner of these buildings as they were constructed. Upon completion of these buildings, we were required to determine whether or not the underlying leases met the criteria for “sale-leaseback” treatment.
|
•
|
Beginning on January 1, 2019, in accordance with ASC 842,
Leases
(“ASC 842”)
,
we will be required to determine whether the leases associated with these buildings will be reflected as financing leases or operating leases.
|
•
|
In periods in which we consolidate a VIE, we record net income (loss) attributable to our VIEs’ noncontrolling interest. This net income (loss) reflects our VIEs’ net income (loss) for the period as adjusted for gains and losses in the fair value of the contingent payments, which consist of milestone, royalty and option payments, payable by us to our VIEs. The changes in the fair value of contingent payments decrease or increase our net loss attributable to Vertex on a dollar-for-dollar basis.
|
•
|
We recorded
$255.3 million
and $29.0 million, respectively, of intangible assets on our consolidated balance sheet based on our estimate of the fair value of Parion’s and BioAxone’s indefinite-lived in-process research and development assets as of the applicable transaction date. We maintain these assets on our consolidated balance sheet until either the research and development project underlying it is completed or the asset becomes impaired. When we determine that an asset has become impaired or we abandon a project, we write down the carrying value of the related intangible asset to its fair value and record an impairment charge in the period in which the impairment occurs. We assess the fair value of these assets using a variety of methods, including present-value models that are based on multiple probability-weighted scenarios involving the development and potential commercialization of the underlying drug candidates. In 2017 and 2018, we recorded full impairment changes for the indefinite-lived in-process research and development assets that were related to our collaborations with Parion and BioAxone, respectively. As a result, we did not have any indefinite-lived intangible assets recorded on our consolidated balance sheet as of December 31,
2018
.
|
•
|
In order to account for the fair value of the intangible assets and contingent payments related to collaborations with our VIEs, we use present-value models based on assumptions regarding the probability of achieving the relevant milestones, estimates regarding the timing of achieving the milestones, estimates of future product sales and the appropriate discount rates. Significant judgment is used in determining the appropriateness of these assumptions during each reporting period. Changes in these assumptions could have a material effect on the fair value of the contingent payments and affect the analysis of whether or not an intangible asset is impaired.
|
•
|
The revenues, research and development expenses and sales, general and administrative expenses of our VIEs that are unrelated to the programs that we in-license from our VIEs and that are consolidated into our financial statements are set forth in the table below and represent approximately 2% or less of our revenues, research and development expenses and sales, general and administrative expenses in each period:
|
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in thousands)
|
||||||||||
Revenues
|
$
|
1,840
|
|
|
$
|
43,376
|
|
|
$
|
944
|
|
Research and development expenses
|
(2,114
|
)
|
|
(7,729
|
)
|
|
(6,762
|
)
|
|||
Sales, general and administrative expenses
|
(2,029
|
)
|
|
(3,826
|
)
|
|
(4,160
|
)
|
|||
Other items, net
|
(28,888
|
)
|
|
(255,200
|
)
|
|
(108
|
)
|
|||
Loss attributable to noncontrolling interest before (benefit from) provision for income taxes and changes in fair value of contingent payments
|
$
|
(31,191
|
)
|
|
$
|
(223,379
|
)
|
|
$
|
(10,086
|
)
|
ITEM 7A.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
ITEM 8.
|
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|
ITEM 9.
|
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|
ITEM 9A.
|
CONTROLS AND PROCEDURES
|
•
|
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;
|
•
|
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and
|
•
|
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
|
/s/ Ernst & Young LLP
|
|
ITEM 9B.
|
OTHER INFORMATION
|
ITEM 10.
|
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
ITEM 11.
|
EXECUTIVE COMPENSATION
|
ITEM 12.
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|
ITEM 13.
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
|
ITEM 14.
|
PRINCIPAL ACCOUNTANT FEES AND SERVICES
|
ITEM 15.
|
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|
|
Page Number in
this Form 10-K |
Report of Independent Registered Public Accounting Firm
|
|
Consolidated Statements of Operations for the years ended December 31, 2018, 2017 and 2016
|
|
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2018, 2017 and 2016
|
|
Consolidated Balance Sheets as of December 31, 2018 and 2017
|
|
Consolidated Statements of Shareholders’ Equity and Noncontrolling Interest for the years ended December 31, 2018, 2017 and 2016
|
|
Consolidated Statements of Cash Flows for the years ended December 31, 2018, 2017 and 2016
|
|
Notes to Consolidated Financial Statements
|
Exhibit Number
|
Exhibit Description
|
Filed with
this report |
Incorporated by
Reference herein from—Form or Schedule |
Filing Date/
Period Covered |
SEC File/
Reg. Number |
3.1
|
|
10-Q
(Exhibit 3.1)
|
July 26, 2018
|
000-19319
|
|
3.2
|
|
10-Q
(Exhibit 3.2)
|
July 26, 2018
|
000-19319
|
|
4.1
|
|
10-K (Exhibit 4.1)
|
February 15, 2018
|
000-19319
|
|
Collaboration Agreement
|
|
|
|
||
10.1
|
|
10-Q/A
(Exhibit 10.2)
|
August 19, 2011
|
000-19319
|
|
10.2
|
|
10-K
(Exhibit 10.9)
|
March 16, 2006
|
000-19319
|
|
10.3
|
|
10-Q/A
(Exhibit 10.6)
|
August 19, 2011
|
000-19319
|
|
10.4
|
|
10-Q
(Exhibit 10.3)
|
August 9, 2011
|
000-19319
|
|
10.5
|
|
10-K
(Exhibit 10.05)
|
February 23, 2017
|
000-19319
|
|
Leases
|
|
|
|
||
10.6
|
|
10-Q
(Exhibit 10.4)
|
August 9, 2011
|
000-19319
|
|
10.7
|
|
10-Q
(Exhibit 10.5)
|
August 9, 2011
|
000-19319
|
|
10.8
|
|
10-K
(Exhibit 10.10)
|
February 16, 2016
|
000-19319
|
|
10.9
|
|
10-Q
(Exhibit 10.3)
|
April 28, 2017
|
000-19319
|
Exhibit Number
|
Exhibit Description
|
Filed with
this report |
Incorporated by
Reference herein from—Form or Schedule |
Filing Date/
Period Covered |
SEC File/
Reg. Number |
Financing Agreements
|
|||||
10.10
|
|
10-K
(Exhibit 10.12)
|
February 23, 2017
|
000-19319
|
|
10.11
|
|
10-K
(Exhibit 10.13)
|
February 23, 2017
|
000-19319
|
|
Equity Plans
|
|
|
|
||
10.12
|
|
10-Q
(Exhibit 10.1)
|
October 25, 2018
|
000-19319
|
|
10.13
|
|
8-K
(Exhibit 10.2)
|
May 15, 2006
|
000-19319
|
|
10.14
|
|
10-K
(Exhibit 10.20)
|
February 13, 2015
|
000-19319
|
|
10.15
|
|
10-Q
(Exhibit 10.2)
|
October 25, 2018
|
000-19319
|
|
10.16
|
|
10-K
(Exhibit 10.17)
|
February 13, 2015
|
000-19319
|
|
10.17
|
|
10-K
(Exhibit 10.18)
|
February 13, 2015
|
000-19319
|
|
10.18
|
|
10-K
(Exhibit 10.25)
|
February 16, 2016
|
000-19319
|
|
10.19
|
|
10-K
(Exhibit 10.19)
|
February 13, 2015
|
000-19319
|
|
10.20
|
|
10-K
(Exhibit 10.27)
|
February 16, 2016
|
000-19319
|
|
10.21
|
|
10-Q
(Exhibit 10.1)
|
August 1, 2016
|
000-19319
|
|
Agreements with Executive Officers and Directors
|
|
|
|
||
10.22
|
|
8-K
(Exhibit 10.1)
|
December 2, 2016
|
000-19319
|
|
10.23
|
|
10-K
(Exhibit 10.35)
|
February 22, 2012
|
000-19319
|
|
10.24
|
|
10-Q
(Exhibit 10.1)
|
November 6, 2012
|
000-19319
|
|
10.25
|
|
10-Q
(Exhibit 10.2)
|
November 6, 2012
|
000-19319
|
|
10.26
|
|
10-K
(Exhibit 10.34)
|
February 16, 2016
|
000-19319
|
|
10.27
|
|
10-K
(Exhibit 10.35)
|
February 16, 2016
|
000-19319
|
|
10.28
|
|
10-Q
(Exhibit 10.13)
|
November 9, 2004
|
000-19319
|
|
10.29
|
|
10-K
(Exhibit 10.66)
|
February 17, 2009
|
000-19319
|
|
10.32
|
|
10-K
(Exhibit 10.40)
|
February 23, 2017
|
000-19319
|
|
10.33
|
|
10-K
(Exhibit 10.41)
|
February 23, 2017
|
000-19319
|
|
10.34
|
|
10-K
(Exhibit 10.42)
|
February 23, 2017
|
000-19319
|
|
10.35
|
|
10-K
(Exhibit 10.43)
|
February 23, 2017
|
000-19319
|
|
10.36
|
|
10-Q
(Exhibit 10.1)
|
October 30, 2017
|
000-19319
|
|
10.37
|
|
10-Q
(Exhibit 10.2)
|
October 30, 2017
|
000-19319
|
Exhibit Number
|
Exhibit Description
|
Filed with
this report |
Incorporated by
Reference herein from—Form or Schedule |
Filing Date/
Period Covered |
SEC File/
Reg. Number |
10.38
|
|
10-K (Exhibit 10.46)
|
February 15, 2018
|
000-19319
|
|
10.39
|
X
|
|
|
|
|
Subsidiaries
|
|
|
|
|
|
21.1
|
X
|
|
|
|
|
Consent
|
|
|
|
|
|
23.1
|
X
|
|
|
|
|
Certifications
|
|
|
|
|
|
31.1
|
X
|
|
|
|
|
31.2
|
X
|
|
|
|
|
32.1
|
X
|
|
|
|
|
101.INS
|
XBRL Instance
|
X
|
|
|
|
101.SCH
|
XBRL Taxonomy Extension Schema
|
X
|
|
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation
|
X
|
|
|
|
101.LAB
|
XBRL Taxonomy Extension Labels
|
X
|
|
|
|
101.PRE
|
XBRL Taxonomy Extension Presentation
|
X
|
|
|
|
101.DEF
|
XBRL Taxonomy Extension Definition
|
X
|
|
|
|
†
|
Confidential portions of this document have been filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment.
|
|
Vertex Pharmaceuticals Incorporated
|
|
|
|
|
February 13, 2019
|
By:
|
/s/ Jeffrey M. Leiden
|
|
|
Jeffrey M. Leiden
Chief Executive Officer
|
|
|
Name
|
|
|
|
Title
|
|
|
|
|
Date
|
|
|
|
|
|
|||||||||||
/s/ Jeffrey M. Leiden
|
|
|
|||||||||||
Jeffrey M. Leiden
|
Chair of the Board, President and Chief Executive Officer (Principal Executive Officer)
|
February 13, 2019
|
|||||||||||
|
|
|
|||||||||||
/s/ Paul M. Silva
|
|
|
|||||||||||
Paul M. Silva
|
Senior Vice President, Corporate Controller and Interim Chief Financial Officer (Principal Accounting Officer and Principal Financial Officer)
|
February 13, 2019
|
|||||||||||
|
|
|
|||||||||||
/s/ Sangeeta N. Bhatia
|
|
|
|||||||||||
Sangeeta N. Bhatia
|
Director
|
February 13, 2019
|
|||||||||||
|
|
|
|||||||||||
/s/ Alan Garber
|
|
|
|||||||||||
Alan Garber
|
Director
|
February 13, 2019
|
|||||||||||
|
|
|
|||||||||||
/s/ Terrence C. Kearney
|
|
|
|||||||||||
Terrence C. Kearney
|
Director
|
February 13, 2019
|
|||||||||||
|
|
|
|||||||||||
/s/ Yuchun Lee
|
|
|
|||||||||||
Yuchun Lee
|
Director
|
February 13, 2019
|
|||||||||||
|
|
|
|||||||||||
/s/ Margaret G. McGlynn
|
|
|
|||||||||||
Margaret G. McGlynn
|
Director
|
February 13, 2019
|
|||||||||||
|
|
|
|||||||||||
/s/ Bruce I. Sachs
|
|
|
|||||||||||
Bruce I. Sachs
|
Director
|
February 13, 2019
|
|||||||||||
|
|
|
|||||||||||
/s/ Elaine S. Ullian
|
|
|
|||||||||||
Elaine S. Ullian
|
Director
|
February 13, 2019
|
|||||||||||
|
|||||||||||||
/s/ William D. Young
|
|
|
|||||||||||
William D. Young
|
Director
|
February 13, 2019
|
/s/ Ernst & Young LLP
|
|
VERTEX PHARMACEUTICALS INCORPORATED
Consolidated Statements of Operations
(in thousands, except per share amounts)
|
|||||||||||
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Revenues:
|
|
|
|
|
|
||||||
Product revenues, net
|
$
|
3,038,325
|
|
|
$
|
2,165,480
|
|
|
$
|
1,683,632
|
|
Collaborative and royalty revenues
|
9,272
|
|
|
323,172
|
|
|
18,545
|
|
|||
Total revenues
|
3,047,597
|
|
|
2,488,652
|
|
|
1,702,177
|
|
|||
Costs and expenses:
|
|
|
|
|
|
||||||
Cost of sales
|
409,539
|
|
|
275,119
|
|
|
210,460
|
|
|||
Research and development expenses
|
1,416,476
|
|
|
1,324,625
|
|
|
1,047,690
|
|
|||
Sales, general and administrative expenses
|
557,616
|
|
|
496,079
|
|
|
432,829
|
|
|||
Restructuring (income) expenses
|
(184
|
)
|
|
14,246
|
|
|
1,262
|
|
|||
Intangible asset impairment charges
|
29,000
|
|
|
255,340
|
|
|
—
|
|
|||
Total costs and expenses
|
2,412,447
|
|
|
2,365,409
|
|
|
1,692,241
|
|
|||
Income from operations
|
635,150
|
|
|
123,243
|
|
|
9,936
|
|
|||
Interest expense, net
|
(34,119
|
)
|
|
(57,550
|
)
|
|
(81,432
|
)
|
|||
Other (expense) income, net
|
(790
|
)
|
|
(81,382
|
)
|
|
4,130
|
|
|||
Income (loss) before (benefit from) provision for income taxes
|
600,241
|
|
|
(15,689
|
)
|
|
(67,366
|
)
|
|||
(Benefit from) provision for income taxes
|
(1,486,862
|
)
|
|
(107,324
|
)
|
|
16,665
|
|
|||
Net income (loss)
|
2,087,103
|
|
|
91,635
|
|
|
(84,031
|
)
|
|||
Loss (income) attributable to noncontrolling interest
|
9,793
|
|
|
171,849
|
|
|
(28,021
|
)
|
|||
Net income (loss) attributable to Vertex
|
$
|
2,096,896
|
|
|
$
|
263,484
|
|
|
$
|
(112,052
|
)
|
|
|
|
|
|
|
||||||
Amounts per share attributable to Vertex common shareholders:
|
|
|
|
|
|
||||||
Net income (loss):
|
|
|
|
|
|
||||||
Basic
|
$
|
8.24
|
|
|
$
|
1.06
|
|
|
$
|
(0.46
|
)
|
Diluted
|
$
|
8.09
|
|
|
$
|
1.04
|
|
|
$
|
(0.46
|
)
|
Shares used in per share calculations:
|
|
|
|
|
|
||||||
Basic
|
254,292
|
|
|
248,858
|
|
|
244,685
|
|
|||
Diluted
|
259,185
|
|
|
253,225
|
|
|
244,685
|
|
VERTEX PHARMACEUTICALS INCORPORATED
Consolidated Statements of Comprehensive Income (Loss)
(in thousands)
|
|||||||||||
|
Year ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Net income (loss)
|
$
|
2,087,103
|
|
|
$
|
91,635
|
|
|
$
|
(84,031
|
)
|
Changes in other comprehensive income (loss):
|
|
|
|
|
|
||||||
Unrealized holding gains on marketable securities, net of tax of zero, $(2.7) million and $(3.8) million, respectively
|
58
|
|
|
6,954
|
|
|
17,395
|
|
|||
Unrealized gains (losses) on foreign currency forward contracts, net of tax of $(7.1) million, $3.4 million and $(3.9) million, respectively
|
27,438
|
|
|
(26,530
|
)
|
|
7,736
|
|
|||
Foreign currency translation adjustment
|
8,855
|
|
|
(13,169
|
)
|
|
(5,782
|
)
|
|||
Total changes in other comprehensive income (loss)
|
36,351
|
|
|
(32,745
|
)
|
|
19,349
|
|
|||
Comprehensive income (loss)
|
2,123,454
|
|
|
58,890
|
|
|
(64,682
|
)
|
|||
Comprehensive loss (income) attributable to noncontrolling interest
|
9,793
|
|
|
171,849
|
|
|
(28,021
|
)
|
|||
Comprehensive income (loss) attributable to Vertex
|
$
|
2,133,247
|
|
|
$
|
230,739
|
|
|
$
|
(92,703
|
)
|
VERTEX PHARMACEUTICALS INCORPORATED
Consolidated Balance Sheets
(in thousands, except share and per share amounts)
|
|||||||
|
December 31,
|
||||||
|
2018
|
|
2017
|
||||
Assets
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
2,650,134
|
|
|
$
|
1,665,412
|
|
Marketable securities
|
518,108
|
|
|
423,254
|
|
||
Accounts receivable, net
|
409,688
|
|
|
281,343
|
|
||
Inventories
|
124,360
|
|
|
111,830
|
|
||
Prepaid expenses and other current assets
|
140,819
|
|
|
167,124
|
|
||
Total current assets
|
3,843,109
|
|
|
2,648,963
|
|
||
Property and equipment, net
|
812,005
|
|
|
789,437
|
|
||
Intangible assets
|
—
|
|
|
29,000
|
|
||
Goodwill
|
50,384
|
|
|
50,384
|
|
||
Deferred tax assets
|
1,499,672
|
|
|
834
|
|
||
Other assets
|
40,728
|
|
|
27,396
|
|
||
Total assets
|
$
|
6,245,898
|
|
|
$
|
3,546,014
|
|
Liabilities and Shareholders’ Equity
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
110,987
|
|
|
$
|
73,994
|
|
Accrued expenses
|
604,495
|
|
|
443,961
|
|
||
Capital lease obligations, current portion
|
9,817
|
|
|
22,531
|
|
||
Early access sales accrual
|
354,404
|
|
|
232,401
|
|
||
Other liabilities, current portion
|
40,589
|
|
|
34,373
|
|
||
Total current liabilities
|
1,120,292
|
|
|
807,260
|
|
||
Capital lease obligations, excluding current portion
|
19,658
|
|
|
20,496
|
|
||
Deferred tax liabilities
|
—
|
|
|
6,341
|
|
||
Construction financing lease obligation, excluding current portion
|
561,892
|
|
|
563,406
|
|
||
Advance from collaborator, excluding current portion
|
82,573
|
|
|
78,431
|
|
||
Other liabilities, excluding current portion
|
26,280
|
|
|
27,774
|
|
||
Total liabilities
|
1,810,695
|
|
|
1,503,708
|
|
||
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, 255,172,328 and 253,253,362 shares issued and outstanding, respectively
|
2,546
|
|
|
2,512
|
|
||
Additional paid-in capital
|
7,421,476
|
|
|
7,157,362
|
|
||
Accumulated other comprehensive income (loss)
|
659
|
|
|
(11,572
|
)
|
||
Accumulated deficit
|
(2,989,478
|
)
|
|
(5,119,723
|
)
|
||
Total Vertex shareholders’ equity
|
4,435,203
|
|
|
2,028,579
|
|
||
Noncontrolling interest
|
—
|
|
|
13,727
|
|
||
Total shareholders’ equity
|
4,435,203
|
|
|
2,042,306
|
|
||
Total liabilities and shareholders’ equity
|
$
|
6,245,898
|
|
|
$
|
3,546,014
|
|
VERTEX PHARMACEUTICALS INCORPORATED
Consolidated Statements of Shareholders’ Equity and Noncontrolling Interest
(in thousands)
|
||||||||||||||||||||||||||||||
|
Common Stock
|
|
Additional
Paid-in Capital |
|
Accumulated
Other Comprehensive Income (Loss) |
|
Accumulated Deficit
|
|
Total Vertex
Shareholders’ Equity |
|
Noncontrolling
Interest |
|
Total
Shareholders’ Equity |
|||||||||||||||||
|
Shares
|
|
Amount
|
|
|
|
|
|
|
|||||||||||||||||||||
Balance, December 31, 2015
|
246,307
|
|
|
$
|
2,427
|
|
|
$
|
6,197,500
|
|
|
$
|
1,824
|
|
|
$
|
(5,261,784
|
)
|
|
$
|
939,967
|
|
|
$
|
153,661
|
|
|
$
|
1,093,628
|
|
Other comprehensive income, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
19,349
|
|
|
—
|
|
|
19,349
|
|
|
—
|
|
|
19,349
|
|
|||||||
Net (loss) income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(112,052
|
)
|
|
(112,052
|
)
|
|
28,021
|
|
|
(84,031
|
)
|
|||||||
Issuance of common stock under benefit plans
|
1,994
|
|
|
23
|
|
|
67,983
|
|
|
—
|
|
|
—
|
|
|
68,006
|
|
|
—
|
|
|
68,006
|
|
|||||||
Stock-based compensation expense
|
—
|
|
|
—
|
|
|
241,312
|
|
|
—
|
|
|
—
|
|
|
241,312
|
|
|
(73
|
)
|
|
241,239
|
|
|||||||
Balance, 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
|
—
|
|
|
—
|
|
|
—
|
|
|
(32,745
|
)
|
|
—
|
|
|
(32,745
|
)
|
|
—
|
|
|
(32,745
|
)
|
|||||||
Net income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
263,484
|
|
|
263,484
|
|
|
(171,849
|
)
|
|
91,635
|
|
|||||||
Issuance of common stock under benefit plans
|
4,952
|
|
|
62
|
|
|
345,554
|
|
|
—
|
|
|
—
|
|
|
345,616
|
|
|
57
|
|
|
345,673
|
|
|||||||
Stock-based compensation expense
|
—
|
|
|
—
|
|
|
295,642
|
|
|
—
|
|
|
—
|
|
|
295,642
|
|
|
—
|
|
|
295,642
|
|
|||||||
VIE noncontrolling interest upon deconsolidation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,910
|
|
|
3,910
|
|
|||||||
Balance, December 31, 2017
|
253,253
|
|
|
$
|
2,512
|
|
|
$
|
7,157,362
|
|
|
$
|
(11,572
|
)
|
|
$
|
(5,119,723
|
)
|
|
$
|
2,028,579
|
|
|
$
|
13,727
|
|
|
$
|
2,042,306
|
|
Cumulative effect adjustment for adoption of new accounting guidance
|
—
|
|
|
—
|
|
|
—
|
|
|
(24,120
|
)
|
|
33,349
|
|
|
9,229
|
|
|
—
|
|
|
9,229
|
|
|||||||
Other comprehensive income, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
36,351
|
|
|
—
|
|
|
36,351
|
|
|
—
|
|
|
36,351
|
|
|||||||
Net income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,096,896
|
|
|
2,096,896
|
|
|
(9,793
|
)
|
|
2,087,103
|
|
|||||||
Repurchases of common stock
|
(2,094
|
)
|
|
(21
|
)
|
|
(350,022
|
)
|
|
—
|
|
|
—
|
|
|
(350,043
|
)
|
|
—
|
|
|
(350,043
|
)
|
|||||||
Issuance of common stock under benefit plans
|
4,013
|
|
|
55
|
|
|
288,480
|
|
|
—
|
|
|
—
|
|
|
288,535
|
|
|
—
|
|
|
288,535
|
|
|||||||
Stock-based compensation expense
|
—
|
|
|
—
|
|
|
325,656
|
|
|
—
|
|
|
—
|
|
|
325,656
|
|
|
—
|
|
|
325,656
|
|
|||||||
VIE noncontrolling interest upon deconsolidation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,540
|
)
|
|
(3,540
|
)
|
|||||||
Other VIE activity
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(394
|
)
|
|
(394
|
)
|
|||||||
Balance, December 31, 2018
|
255,172
|
|
|
$
|
2,546
|
|
|
$
|
7,421,476
|
|
|
$
|
659
|
|
|
$
|
(2,989,478
|
)
|
|
$
|
4,435,203
|
|
|
$
|
—
|
|
|
$
|
4,435,203
|
|
VERTEX PHARMACEUTICALS INCORPORATED
Consolidated Statements of Cash Flows
(in thousands)
|
|||||||||||
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Cash flows from operating activities:
|
|
|
|
|
|
||||||
Net income (loss)
|
$
|
2,087,103
|
|
|
$
|
91,635
|
|
|
$
|
(84,031
|
)
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
|
|
|
|
|
||||||
Stock-based compensation expense
|
325,047
|
|
|
293,236
|
|
|
240,623
|
|
|||
Depreciation expense
|
72,420
|
|
|
61,397
|
|
|
61,398
|
|
|||
Write-downs of inventories to net realizable value
|
20,413
|
|
|
15,292
|
|
|
—
|
|
|||
Deferred income taxes (including benefit from valuation allowance release)
|
(1,512,325
|
)
|
|
(120,513
|
)
|
|
16,961
|
|
|||
Unrealized gain on equity securities
|
(2,558
|
)
|
|
—
|
|
|
—
|
|
|||
Intangible asset impairment charges
|
29,000
|
|
|
255,340
|
|
|
—
|
|
|||
Acquired in-process research and development
|
—
|
|
|
160,000
|
|
|
—
|
|
|||
Deconsolidation of VIE
|
1,077
|
|
|
76,644
|
|
|
—
|
|
|||
Other non-cash items, net
|
12,089
|
|
|
(853
|
)
|
|
6,140
|
|
|||
Changes in operating assets and liabilities:
|
|
|
|
|
|
||||||
Accounts receivable, net
|
(108,152
|
)
|
|
(71,759
|
)
|
|
(39,095
|
)
|
|||
Inventories
|
(31,965
|
)
|
|
(47,484
|
)
|
|
(19,368
|
)
|
|||
Prepaid expenses and other assets
|
16,684
|
|
|
(111,063
|
)
|
|
(2,631
|
)
|
|||
Accounts payable
|
36,554
|
|
|
8,753
|
|
|
(11,745
|
)
|
|||
Accrued expenses and other liabilities
|
195,623
|
|
|
75,332
|
|
|
(5,565
|
)
|
|||
Early access sales accrual
|
129,276
|
|
|
158,985
|
|
|
73,416
|
|
|||
Net cash provided by operating activities
|
1,270,286
|
|
|
844,942
|
|
|
236,103
|
|
|||
Cash flows from investing activities:
|
|
|
|
|
|
||||||
Maturities of available-for-sale debt securities
|
431,576
|
|
|
369,214
|
|
|
757,562
|
|
|||
Purchases of available-for-sale debt securities
|
(431,918
|
)
|
|
(532,581
|
)
|
|
(616,625
|
)
|
|||
Expenditures for property and equipment
|
(95,524
|
)
|
|
(99,421
|
)
|
|
(56,563
|
)
|
|||
Purchase of in-process research and development
|
—
|
|
|
(160,000
|
)
|
|
—
|
|
|||
Investment in note receivable
|
(15,000
|
)
|
|
—
|
|
|
(20,000
|
)
|
|||
Investment in equity securities
|
(83,471
|
)
|
|
—
|
|
|
(13,075
|
)
|
|||
Decrease in restricted cash due to deconsolidation of VIE
|
(7,896
|
)
|
|
(61,602
|
)
|
|
—
|
|
|||
Other investing activities
|
75
|
|
|
1,061
|
|
|
(61
|
)
|
|||
Net cash used in (provided by) investing activities
|
(202,158
|
)
|
|
(483,329
|
)
|
|
51,238
|
|
|||
Cash flows from financing activities:
|
|
|
|
|
|
||||||
Issuances of common stock under benefit plans
|
289,293
|
|
|
344,840
|
|
|
68,230
|
|
|||
Repurchase of common stock
|
(350,043
|
)
|
|
—
|
|
|
—
|
|
|||
Payments on revolving credit facility
|
—
|
|
|
(300,000
|
)
|
|
—
|
|
|||
Advance from collaborator
|
7,500
|
|
|
12,500
|
|
|
75,000
|
|
|||
Payments related to construction financing lease obligation
|
(5,462
|
)
|
|
(541
|
)
|
|
(432
|
)
|
|||
Proceeds related to construction financing lease obligation
|
9,566
|
|
|
27,182
|
|
|
—
|
|
|||
Proceeds from capital lease financing
|
11,274
|
|
|
7,484
|
|
|
11,208
|
|
|||
Payments on capital lease obligations
|
(27,926
|
)
|
|
(18,795
|
)
|
|
(17,597
|
)
|
|||
Repayments of advanced funding
|
(5,027
|
)
|
|
(4,266
|
)
|
|
—
|
|
|||
Payments on senior secured term loan
|
—
|
|
|
—
|
|
|
(75,000
|
)
|
|||
Proceeds from revolving credit facility
|
—
|
|
|
—
|
|
|
74,965
|
|
|||
Payments of debt issuance costs
|
—
|
|
|
—
|
|
|
(3,103
|
)
|
|||
Other financing activities
|
(394
|
)
|
|
—
|
|
|
—
|
|
|||
Net cash (used in) provided by financing activities
|
(71,219
|
)
|
|
68,404
|
|
|
133,271
|
|
|||
Effect of changes in exchange rates on cash
|
(6,182
|
)
|
|
5,802
|
|
|
(4,666
|
)
|
|||
Net increase in cash, cash equivalents and restricted cash
|
990,727
|
|
|
435,819
|
|
|
415,946
|
|
|||
Cash, cash equivalents and restricted cash—beginning of period
|
1,667,526
|
|
|
1,231,707
|
|
|
815,761
|
|
|||
Cash, cash equivalents and restricted cash—end of period
|
$
|
2,658,253
|
|
|
$
|
1,667,526
|
|
|
$
|
1,231,707
|
|
|
|
|
|
|
|
||||||
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
||||||
Cash paid for interest
|
$
|
66,458
|
|
|
$
|
68,696
|
|
|
$
|
83,656
|
|
Cash paid for (received from) income taxes
|
$
|
12,402
|
|
|
$
|
6,414
|
|
|
$
|
(2,579
|
)
|
Non-cash investing and financing activities:
|
|
|
|
|
|
||||||
Capitalization of costs related to construction financing lease obligation
|
$
|
3,389
|
|
|
$
|
40,855
|
|
|
$
|
14,238
|
|
Issuances of common stock from employee benefit plans receivable
|
$
|
86
|
|
|
$
|
844
|
|
|
$
|
68
|
|
Proceeds from revolving credit facility directly paid to settle all outstanding obligations under the term loan
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
225,000
|
|
A.
|
Nature of Business and Accounting Policies
|
|
Balance as of
|
|
|
|
Balance as of
|
||||||
|
December 31, 2017
|
|
Adjustments
|
|
January 1, 2018
|
||||||
Assets
|
(in thousands)
|
||||||||||
Accounts receivable, net
|
$
|
281,343
|
|
|
$
|
29,881
|
|
|
$
|
311,224
|
|
Inventories
|
111,830
|
|
|
(90
|
)
|
|
111,740
|
|
|||
Prepaid expenses and other current assets
|
167,124
|
|
|
(17,166
|
)
|
|
149,958
|
|
|||
Total assets
|
$
|
3,546,014
|
|
|
$
|
12,625
|
|
|
$
|
3,558,639
|
|
Liabilities and Shareholders’ Equity
|
|
|
|
|
|
||||||
Accrued expenses
|
$
|
443,961
|
|
|
$
|
8,586
|
|
|
$
|
452,547
|
|
Early access sales accrual
|
232,401
|
|
|
(7,273
|
)
|
|
225,128
|
|
|||
Other liabilities, current portion
|
34,373
|
|
|
2,083
|
|
|
36,456
|
|
|||
Accumulated other comprehensive income (loss)
|
(11,572
|
)
|
|
949
|
|
|
(10,623
|
)
|
|||
Accumulated deficit
|
(5,119,723
|
)
|
|
8,280
|
|
|
(5,111,443
|
)
|
|||
Total liabilities and shareholders’ equity
|
$
|
3,546,014
|
|
|
$
|
12,625
|
|
|
$
|
3,558,639
|
|
|
As of December 31, 2018
|
||||||||||
|
As Reported
under ASC 606 |
|
Balances
without Adoption of ASC 606 |
|
Effect of Change
Higher/(Lower) |
||||||
Assets
|
(in thousands)
|
||||||||||
Accounts receivable, net
|
$
|
409,688
|
|
|
$
|
376,949
|
|
|
$
|
32,739
|
|
Inventories
|
124,360
|
|
|
124,506
|
|
|
(146
|
)
|
|||
Prepaid expenses and other current assets
|
140,819
|
|
|
167,522
|
|
|
(26,703
|
)
|
|||
Total assets
|
$
|
6,245,898
|
|
|
$
|
6,240,008
|
|
|
$
|
5,890
|
|
Liabilities and Shareholders’ Equity
|
|
|
|
|
|
||||||
Accrued expenses
|
$
|
604,495
|
|
|
$
|
618,873
|
|
|
$
|
(14,378
|
)
|
Early access sales accrual
|
354,404
|
|
|
380,609
|
|
|
(26,205
|
)
|
|||
Other liabilities, current portion
|
40,589
|
|
|
14,355
|
|
|
26,234
|
|
|||
Accumulated other comprehensive income (loss)
|
659
|
|
|
927
|
|
|
(268
|
)
|
|||
Accumulated deficit
|
(2,989,478
|
)
|
|
(3,009,985
|
)
|
|
20,507
|
|
|||
Total liabilities and shareholders’ equity
|
$
|
6,245,898
|
|
|
$
|
6,240,008
|
|
|
$
|
5,890
|
|
|
Year Ended December 31, 2018
|
||||||||||
|
As Reported
under ASC 606 |
|
Balances
without Adoption of ASC 606 |
|
Effect of Change
Higher/(Lower) |
||||||
|
(in thousands)
|
||||||||||
Product revenues, net
|
$
|
3,038,325
|
|
|
$
|
3,019,484
|
|
|
$
|
18,841
|
|
Cost of sales
|
409,539
|
|
|
402,925
|
|
|
6,614
|
|
|||
Income from operations
|
635,150
|
|
|
622,923
|
|
|
12,227
|
|
|||
Net income attributable to Vertex
|
$
|
2,096,896
|
|
|
$
|
2,084,669
|
|
|
$
|
12,227
|
|
|
|
|
|
|
|
||||||
Amounts per share attributable to Vertex common shareholders:
|
|
|
|
|
|
||||||
Net income:
|
|
|
|
|
|
||||||
Basic
|
$
|
8.24
|
|
|
$
|
8.20
|
|
|
$
|
0.04
|
|
Diluted
|
$
|
8.09
|
|
|
$
|
8.04
|
|
|
$
|
0.05
|
|
|
As of December 31,
|
||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
2015
|
||||||||
|
(in thousands)
|
||||||||||||||
Cash and cash equivalents
|
$
|
2,650,134
|
|
|
$
|
1,665,412
|
|
|
$
|
1,183,945
|
|
|
$
|
714,768
|
|
Prepaid expenses and other current assets
|
4,910
|
|
|
2,114
|
|
|
47,762
|
|
|
78,910
|
|
||||
Other assets
|
3,209
|
|
|
—
|
|
|
—
|
|
|
22,083
|
|
||||
Cash, cash equivalents and restricted cash per statement of cash flows
|
$
|
2,658,253
|
|
|
$
|
1,667,526
|
|
|
$
|
1,231,707
|
|
|
$
|
815,761
|
|
B.
|
Collaborative Arrangements and Acquisitions
|
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in thousands)
|
||||||||||
Loss attributable to noncontrolling interest before (benefit from) provision for income taxes and changes in fair value of contingent payments
|
$
|
31,191
|
|
|
$
|
223,379
|
|
|
$
|
10,086
|
|
(Benefit from) provision for income taxes
|
(3,668
|
)
|
|
(114,090
|
)
|
|
16,743
|
|
|||
(Increase) decrease in fair value of contingent payments
|
(17,730
|
)
|
|
62,560
|
|
|
(54,850
|
)
|
|||
Net loss (income) attributable to noncontrolling interest
|
$
|
9,793
|
|
|
$
|
171,849
|
|
|
$
|
(28,021
|
)
|
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in thousands)
|
||||||||||
Parion
|
$
|
—
|
|
|
$
|
63,460
|
|
|
$
|
(64,800
|
)
|
BioAxone
|
(17,730
|
)
|
|
(900
|
)
|
|
9,950
|
|
|
December 31, 2017
|
||
|
(in thousands)
|
||
Intangible assets
|
$
|
29,000
|
|
Deferred tax liabilities
|
4,756
|
|
|
Noncontrolling interest
|
13,727
|
|
C.
|
Earnings Per Share
|
|
2018
|
|
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
|
$
|
2,096,896
|
|
|
$
|
263,484
|
|
|
$
|
(112,052
|
)
|
Less: Undistributed earnings allocated to participating securities
|
(501
|
)
|
|
(293
|
)
|
|
—
|
|
|||
Net income (loss) attributable to Vertex common shareholders—basic
|
$
|
2,096,395
|
|
|
$
|
263,191
|
|
|
$
|
(112,052
|
)
|
|
|
|
|
|
|
||||||
Basic weighted-average common shares outstanding
|
254,292
|
|
|
248,858
|
|
|
244,685
|
|
|||
Basic net income (loss) attributable to Vertex per common share
|
$
|
8.24
|
|
|
$
|
1.06
|
|
|
$
|
(0.46
|
)
|
|
|
|
|
|
|
||||||
Diluted net income (loss) attributable to Vertex per common share calculation:
|
|
|
|
|
|
||||||
Net income (loss) attributable to Vertex common shareholders
|
$
|
2,096,896
|
|
|
$
|
263,484
|
|
|
$
|
(112,052
|
)
|
Less: Undistributed earnings allocated to participating securities
|
(492
|
)
|
|
(288
|
)
|
|
—
|
|
|||
Net income (loss) attributable to Vertex common shareholders—diluted
|
$
|
2,096,404
|
|
|
$
|
263,196
|
|
|
$
|
(112,052
|
)
|
|
|
|
|
|
|
||||||
Weighted-average shares used to compute basic net income (loss) per common share
|
254,292
|
|
|
248,858
|
|
|
244,685
|
|
|||
Effect of potentially dilutive securities:
|
|
|
|
|
|
||||||
Stock options
|
2,913
|
|
|
2,797
|
|
|
—
|
|
|||
Restricted stock and restricted stock units (including PSUs)
|
1,963
|
|
|
1,542
|
|
|
—
|
|
|||
Employee stock purchase plan
|
17
|
|
|
28
|
|
|
—
|
|
|||
Weighted-average shares used to compute diluted net income (loss) per common share
|
259,185
|
|
|
253,225
|
|
|
244,685
|
|
|||
Diluted net income (loss) attributable to Vertex per common share
|
$
|
8.09
|
|
|
$
|
1.04
|
|
|
$
|
(0.46
|
)
|
|
2018
|
|
2017
|
|
2016
|
|||
|
(in thousands)
|
|||||||
Stock options
|
2,217
|
|
|
3,554
|
|
|
12,642
|
|
Unvested restricted stock and restricted stock units (including PSUs)
|
5
|
|
|
411
|
|
|
3,546
|
|
D.
|
Fair Value Measurements
|
Level 1:
|
Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
|
Level 2:
|
Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.
|
Level 3:
|
Unobservable inputs based on the Company’s assessment of the assumptions that market participants would use in pricing the asset or liability.
|
|
Fair Value Measurements as of December 31, 2018
|
||||||||||||||
|
|
|
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
|
$
|
1,226,603
|
|
|
$
|
1,226,603
|
|
|
$
|
—
|
|
|
$
|
—
|
|
U.S. Treasury securities
|
5,966
|
|
|
5,966
|
|
|
—
|
|
|
—
|
|
||||
Government-sponsored enterprise securities
|
7,123
|
|
|
7,123
|
|
|
—
|
|
|
—
|
|
||||
Commercial paper
|
58,268
|
|
|
—
|
|
|
58,268
|
|
|
—
|
|
||||
Marketable securities:
|
|
|
|
|
|
|
|
||||||||
Corporate equity securities
|
167,323
|
|
|
153,733
|
|
|
13,590
|
|
|
—
|
|
||||
U.S. Treasury securities
|
6,026
|
|
|
6,026
|
|
|
—
|
|
|
—
|
|
||||
Government-sponsored enterprise securities
|
10,704
|
|
|
10,704
|
|
|
—
|
|
|
—
|
|
||||
Corporate debt securities
|
233,665
|
|
|
—
|
|
|
233,665
|
|
|
—
|
|
||||
Commercial paper
|
100,390
|
|
|
—
|
|
|
100,390
|
|
|
—
|
|
||||
Prepaid and other current assets:
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward contracts
|
19,023
|
|
|
—
|
|
|
19,023
|
|
|
—
|
|
||||
Other assets:
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward contracts
|
1,514
|
|
|
—
|
|
|
1,514
|
|
|
—
|
|
||||
Total financial assets
|
$
|
1,836,605
|
|
|
$
|
1,410,155
|
|
|
$
|
426,450
|
|
|
$
|
—
|
|
Financial instruments carried at fair value (liability position):
|
|
|
|
|
|
|
|
||||||||
Other liabilities, current portion:
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward contracts
|
$
|
(340
|
)
|
|
$
|
—
|
|
|
$
|
(340
|
)
|
|
$
|
—
|
|
Other liabilities, excluding current portion:
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward contracts
|
(108
|
)
|
|
—
|
|
|
(108
|
)
|
|
—
|
|
||||
Total financial liabilities
|
$
|
(448
|
)
|
|
$
|
—
|
|
|
$
|
(448
|
)
|
|
$
|
—
|
|
|
Fair Value Measurements as of December 31, 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
|
$
|
614,951
|
|
|
$
|
614,951
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Government-sponsored enterprise securities
|
12,678
|
|
|
12,678
|
|
|
—
|
|
|
—
|
|
||||
Commercial paper
|
57,357
|
|
|
—
|
|
|
57,357
|
|
|
—
|
|
||||
Marketable securities:
|
|
|
|
|
|
|
|
||||||||
Corporate equity securities
|
74,821
|
|
|
74,821
|
|
|
—
|
|
|
—
|
|
||||
Government-sponsored enterprise securities
|
2,303
|
|
|
2,303
|
|
|
—
|
|
|
—
|
|
||||
Corporate debt securities
|
265,867
|
|
|
—
|
|
|
265,867
|
|
|
—
|
|
||||
Commercial paper
|
80,263
|
|
|
—
|
|
|
80,263
|
|
|
—
|
|
||||
Prepaid and other current assets:
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward contracts
|
13
|
|
|
—
|
|
|
13
|
|
|
—
|
|
||||
Total financial assets
|
$
|
1,108,253
|
|
|
$
|
704,753
|
|
|
$
|
403,500
|
|
|
$
|
—
|
|
Financial instruments carried at fair value (liability position):
|
|
|
|
|
|
|
|
||||||||
Other liabilities, current portion:
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward contracts
|
$
|
(13,642
|
)
|
|
$
|
—
|
|
|
$
|
(13,642
|
)
|
|
$
|
—
|
|
Other liabilities, excluding current portion:
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward contracts
|
(866
|
)
|
|
—
|
|
|
(866
|
)
|
|
—
|
|
||||
Total financial liabilities
|
$
|
(14,508
|
)
|
|
$
|
—
|
|
|
$
|
(14,508
|
)
|
|
$
|
—
|
|
E.
|
Marketable Securities and Equity Investments
|
|
Amortized Cost
|
|
Gross
Unrealized Gains |
|
Gross
Unrealized Losses |
|
Fair Value
|
||||||||
|
(in thousands)
|
||||||||||||||
As of December 31, 2018
|
|
|
|
|
|
|
|
||||||||
Cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
$
|
1,226,603
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,226,603
|
|
U.S. Treasury securities
|
5,967
|
|
|
—
|
|
|
(1
|
)
|
|
5,966
|
|
||||
Government-sponsored enterprise securities
|
7,124
|
|
|
—
|
|
|
(1
|
)
|
|
7,123
|
|
||||
Commercial paper
|
58,271
|
|
|
—
|
|
|
(3
|
)
|
|
58,268
|
|
||||
Total cash equivalents
|
1,297,965
|
|
|
—
|
|
|
(5
|
)
|
|
1,297,960
|
|
||||
Marketable securities:
|
|
|
|
|
|
|
|
||||||||
U.S Treasury securities (matures within 1 year)
|
6,026
|
|
|
—
|
|
|
—
|
|
|
6,026
|
|
||||
Government-sponsored enterprise securities (matures within 1 year)
|
10,704
|
|
|
—
|
|
|
—
|
|
|
10,704
|
|
||||
Corporate debt securities (matures within 1 year)
|
232,845
|
|
|
25
|
|
|
(450
|
)
|
|
232,420
|
|
||||
Corporate debt securities (matures after 1 year through 5 years)
|
1,243
|
|
|
2
|
|
|
—
|
|
|
1,245
|
|
||||
Commercial paper (matures within 1 year)
|
100,498
|
|
|
—
|
|
|
(108
|
)
|
|
100,390
|
|
||||
Total marketable debt securities
|
351,316
|
|
|
27
|
|
|
(558
|
)
|
|
350,785
|
|
||||
Corporate equity securities
|
133,157
|
|
|
40,619
|
|
|
(6,453
|
)
|
|
167,323
|
|
||||
Total marketable securities
|
$
|
484,473
|
|
|
$
|
40,646
|
|
|
$
|
(7,011
|
)
|
|
$
|
518,108
|
|
|
|
|
|
|
|
|
|
||||||||
As of December 31, 2017
|
|
|
|
|
|
|
|
||||||||
Cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
$
|
614,951
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
614,951
|
|
Government-sponsored enterprise securities
|
12,679
|
|
|
—
|
|
|
(1
|
)
|
|
12,678
|
|
||||
Commercial paper
|
57,371
|
|
|
—
|
|
|
(14
|
)
|
|
57,357
|
|
||||
Total cash equivalents
|
685,001
|
|
|
—
|
|
|
(15
|
)
|
|
684,986
|
|
||||
Marketable securities:
|
|
|
|
|
|
|
|
||||||||
Government-sponsored enterprise securities (matures within 1 year)
|
2,304
|
|
|
—
|
|
|
(1
|
)
|
|
2,303
|
|
||||
Corporate debt securities (matures within 1 year)
|
215,639
|
|
|
—
|
|
|
(363
|
)
|
|
215,276
|
|
||||
Corporate debt securities (matures after 1 year through 5 years)
|
50,697
|
|
|
—
|
|
|
(106
|
)
|
|
50,591
|
|
||||
Commercial paper (matures within 1 year)
|
80,372
|
|
|
—
|
|
|
(109
|
)
|
|
80,263
|
|
||||
Total marketable debt securities
|
349,012
|
|
|
—
|
|
|
(579
|
)
|
|
348,433
|
|
||||
Available-for-sale corporate equity securities
|
43,213
|
|
|
31,608
|
|
|
—
|
|
|
74,821
|
|
||||
Total marketable securities
|
$
|
392,225
|
|
|
$
|
31,608
|
|
|
$
|
(579
|
)
|
|
$
|
423,254
|
|
|
As of December 31,
|
||||||
|
2018
|
|
2017
|
||||
|
(in thousands)
|
||||||
Cash and cash equivalents
|
$
|
1,297,960
|
|
|
$
|
684,986
|
|
Marketable securities
|
350,785
|
|
|
348,433
|
|
||
Total
|
$
|
1,648,745
|
|
|
$
|
1,033,419
|
|
F.
|
Accumulated Other Comprehensive Income (Loss)
|
|
|
|
Unrealized Holding Gains (Losses), Net of Tax
|
|
|
||||||||||||||
|
Foreign Currency Translation Adjustment
|
|
On Available-For-Sale Debt Securities
|
|
On Equity Securities
|
|
On Foreign Currency Forward Contracts
|
|
Total
|
||||||||||
|
(in thousands)
|
||||||||||||||||||
Balance at December 31, 2015
|
$
|
(2,080
|
)
|
|
$
|
126
|
|
|
$
|
—
|
|
|
$
|
3,778
|
|
|
$
|
1,824
|
|
Other comprehensive (loss) income before reclassifications
|
(5,782
|
)
|
|
(136
|
)
|
|
17,531
|
|
|
17,383
|
|
|
28,996
|
|
|||||
Amounts reclassified from accumulated other comprehensive income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
(9,647
|
)
|
|
(9,647
|
)
|
|||||
Net current period other comprehensive (loss) income
|
(5,782
|
)
|
|
(136
|
)
|
|
17,531
|
|
|
7,736
|
|
|
19,349
|
|
|||||
Balance at December 31, 2016
|
$
|
(7,862
|
)
|
|
$
|
(10
|
)
|
|
$
|
17,531
|
|
|
$
|
11,514
|
|
|
$
|
21,173
|
|
Other comprehensive (loss) income before reclassifications
|
(13,169
|
)
|
|
(584
|
)
|
|
7,538
|
|
|
(29,175
|
)
|
|
(35,390
|
)
|
|||||
Amounts reclassified from accumulated other comprehensive income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
2,645
|
|
|
2,645
|
|
|||||
Net current period other comprehensive (loss) income
|
(13,169
|
)
|
|
(584
|
)
|
|
7,538
|
|
|
(26,530
|
)
|
|
(32,745
|
)
|
|||||
Balance as of December 31, 2017
|
$
|
(21,031
|
)
|
|
$
|
(594
|
)
|
|
$
|
25,069
|
|
|
$
|
(15,016
|
)
|
|
$
|
(11,572
|
)
|
Other comprehensive income before reclassifications
|
8,855
|
|
|
58
|
|
|
—
|
|
|
25,664
|
|
|
34,577
|
|
|||||
Amounts reclassified from accumulated other comprehensive income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
1,774
|
|
|
1,774
|
|
|||||
Net current period other comprehensive income
|
8,855
|
|
|
58
|
|
|
—
|
|
|
27,438
|
|
|
36,351
|
|
|||||
Amounts reclassified to accumulated deficit pursuant to adoption of new accounting standard
|
949
|
|
|
—
|
|
|
(25,069
|
)
|
|
—
|
|
|
(24,120
|
)
|
|||||
Balance as of December 31, 2018
|
$
|
(11,227
|
)
|
|
$
|
(536
|
)
|
|
$
|
—
|
|
|
$
|
12,422
|
|
|
$
|
659
|
|
G.
|
Hedging
|
|
As of December 31,
|
||||||
|
2018
|
|
2017
|
||||
Foreign Currency
|
(in thousands)
|
||||||
Euro
|
$
|
335,179
|
|
|
$
|
257,230
|
|
British pound sterling
|
73,460
|
|
|
77,481
|
|
||
Australian dollar
|
52,820
|
|
|
30,501
|
|
||
Canadian dollar
|
43,759
|
|
|
—
|
|
||
Total foreign currency forward contracts
|
$
|
505,218
|
|
|
$
|
365,212
|
|
|
December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in thousands)
|
||||||||||
Designated as hedging instruments - Reclassified from AOCI
|
|
|
|
|
|
||||||
Product revenues, net
|
$
|
(1,252
|
)
|
|
$
|
768
|
|
|
$
|
10,543
|
|
Not designated as hedging instruments
|
|
|
|
|
|
||||||
Other (expense) income, net
|
$
|
623
|
|
|
$
|
14,129
|
|
|
$
|
(6,917
|
)
|
As of December 31, 2018
|
||||||||||
Assets
|
|
Liabilities
|
||||||||
Classification
|
|
Fair Value
|
|
Classification
|
|
Fair Value
|
||||
(in thousands)
|
||||||||||
Prepaid and other current assets
|
|
$
|
19,023
|
|
|
Other liabilities, current portion
|
|
$
|
(340
|
)
|
Other assets
|
|
1,514
|
|
|
Other liabilities, excluding current portion
|
|
(108
|
)
|
||
Total assets
|
|
$
|
20,537
|
|
|
Total liabilities
|
|
$
|
(448
|
)
|
As of December 31, 2017
|
||||||||||
Assets
|
|
Liabilities
|
||||||||
Classification
|
|
Fair Value
|
|
Classification
|
|
Fair Value
|
||||
(in thousands)
|
||||||||||
Prepaid and other current assets
|
|
$
|
13
|
|
|
Other liabilities, current portion
|
|
$
|
(13,642
|
)
|
Other assets
|
|
—
|
|
|
Other liabilities, excluding current portion
|
|
(866
|
)
|
||
Total assets
|
|
$
|
13
|
|
|
Total liabilities
|
|
$
|
(14,508
|
)
|
|
As of December 31, 2018
|
||||||||||||||||||
|
Gross Amounts Recognized
|
|
Gross Amounts Offset
|
|
Gross Amounts Presented
|
|
Gross Amounts Not Offset
|
|
Legal Offset
|
||||||||||
Foreign currency forward contracts
|
(in thousands)
|
||||||||||||||||||
Total assets
|
$
|
20,537
|
|
|
$
|
—
|
|
|
$
|
20,537
|
|
|
$
|
(448
|
)
|
|
$
|
20,089
|
|
Total liabilities
|
(448
|
)
|
|
—
|
|
|
(448
|
)
|
|
448
|
|
|
—
|
|
|
As of December 31, 2017
|
||||||||||||||||||
|
Gross Amounts Recognized
|
|
Gross Amounts Offset
|
|
Gross Amounts Presented
|
|
Gross Amounts Not Offset
|
|
Legal Offset
|
||||||||||
Foreign currency forward contracts
|
(in thousands)
|
||||||||||||||||||
Total assets
|
$
|
13
|
|
|
$
|
—
|
|
|
$
|
13
|
|
|
$
|
(13
|
)
|
|
$
|
—
|
|
Total liabilities
|
(14,508
|
)
|
|
—
|
|
|
(14,508
|
)
|
|
13
|
|
|
(14,495
|
)
|
H.
|
Inventories
|
|
As of December 31,
|
||||||
|
2018
|
|
2017
|
||||
|
(in thousands)
|
||||||
Raw materials
|
$
|
9,677
|
|
|
$
|
20,924
|
|
Work-in-process
|
87,944
|
|
|
74,237
|
|
||
Finished goods
|
26,739
|
|
|
16,669
|
|
||
Total
|
$
|
124,360
|
|
|
$
|
111,830
|
|
I.
|
Property and Equipment
|
|
As of December 31,
|
||||||
|
2018
|
|
2017
|
||||
|
(in thousands)
|
||||||
Buildings
|
$
|
657,438
|
|
|
$
|
634,061
|
|
Furniture and equipment
|
280,908
|
|
|
256,509
|
|
||
Software
|
162,601
|
|
|
151,890
|
|
||
Leasehold improvements
|
103,428
|
|
|
117,806
|
|
||
Computers
|
59,073
|
|
|
61,294
|
|
||
Total property and equipment, gross
|
1,263,448
|
|
|
1,221,560
|
|
||
Less: accumulated depreciation
|
(451,443
|
)
|
|
(432,123
|
)
|
||
Total property and equipment, net
|
$
|
812,005
|
|
|
$
|
789,437
|
|
J.
|
Intangible Assets and Goodwill
|
K.
|
Additional Balance Sheet Detail
|
|
As of December 31,
|
||||||
|
2018
|
|
2017
|
||||
|
(in thousands)
|
||||||
Prepaid expenses
|
$
|
74,045
|
|
|
$
|
62,475
|
|
Collaborative accounts receivable
|
5,182
|
|
|
28,907
|
|
||
Other receivables and assets
|
61,592
|
|
|
75,742
|
|
||
Total
|
$
|
140,819
|
|
|
$
|
167,124
|
|
|
As of December 31,
|
||||||
|
2018
|
|
2017
|
||||
|
(in thousands)
|
||||||
Payroll and benefits
|
$
|
124,753
|
|
|
$
|
113,026
|
|
Research, development and commercial contract costs
|
115,300
|
|
|
98,411
|
|
||
Product revenue allowances
|
195,598
|
|
|
119,919
|
|
||
Royalty payable
|
101,108
|
|
|
73,044
|
|
||
Other
|
67,736
|
|
|
39,561
|
|
||
Total
|
$
|
604,495
|
|
|
$
|
443,961
|
|
L.
|
Long-term Obligations
|
|
As of December 31,
|
||||||
|
2018
|
|
2017
|
||||
|
(in thousands)
|
||||||
Property and equipment, net
|
|
|
|
||||
Fan Pier Buildings
|
$
|
462,863
|
|
|
$
|
475,725
|
|
San Diego Building
|
$
|
113,296
|
|
|
$
|
94,602
|
|
|
|
|
|
||||
Construction financing lease obligation
|
|
|
|
||||
Fan Pier Buildings
|
$
|
471,058
|
|
|
$
|
472,070
|
|
San Diego Building
|
$
|
96,105
|
|
|
$
|
87,392
|
|
M.
|
Common Stock, Preferred Stock and Equity Plans
|
|
|
|
|
|
|
As of December 31, 2018
|
||||
Title of Plan
|
|
Group Eligible
|
|
Type of Award
Granted |
|
Awards
Outstanding |
|
Additional Awards
Authorized for Grant |
||
2013 Stock and Option Plan
|
|
Employees, Non-employee Directors and Consultants
|
|
NSO,
RS, RSU and PSU |
|
10,735,107
|
|
|
14,737,360
|
|
2006 Stock and Option Plan
|
|
Employees, Non-employee Directors and Consultants
|
|
NSO,
RS and RSU |
|
1,770,994
|
|
|
—
|
|
|
|
|
|
Total
|
|
12,506,101
|
|
|
14,737,360
|
|
|
Stock Options
|
|
Weighted-average
Exercise Price |
|
Weighted-average
Remaining Contractual Life |
|
Aggregate Intrinsic
Value |
|||||
|
(in thousands)
|
|
(per share)
|
|
(in years)
|
|
(in thousands)
|
|||||
Outstanding at December 31, 2017
|
9,767
|
|
|
$
|
91.57
|
|
|
|
|
|
||
Granted
|
2,297
|
|
|
$
|
164.11
|
|
|
|
|
|
||
Exercised
|
(3,076
|
)
|
|
$
|
85.66
|
|
|
|
|
|
||
Forfeited
|
(431
|
)
|
|
$
|
125.37
|
|
|
|
|
|
||
Expired
|
(6
|
)
|
|
$
|
98.30
|
|
|
|
|
|
||
Outstanding at December 31, 2018
|
8,551
|
|
|
$
|
111.46
|
|
|
6.92
|
|
$
|
462,563
|
|
Exercisable at December 31, 2018
|
4,577
|
|
|
$
|
93.21
|
|
|
5.63
|
|
$
|
325,382
|
|
|
|
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)
|
||||||
$29.07–$40.00
|
|
532
|
|
|
1.08
|
|
$
|
34.89
|
|
|
532
|
|
|
$
|
35.89
|
|
$40.01–$60.00
|
|
470
|
|
|
3.51
|
|
$
|
50.04
|
|
|
470
|
|
|
$
|
50.04
|
|
$60.01–$80.00
|
|
543
|
|
|
5.25
|
|
$
|
74.90
|
|
|
533
|
|
|
$
|
74.89
|
|
$80.01–$100.00
|
|
2,839
|
|
|
7.18
|
|
$
|
89.19
|
|
|
1320
|
|
|
$
|
89.85
|
|
$100.01–$120.00
|
|
693
|
|
|
6.09
|
|
$
|
109.30
|
|
|
603
|
|
|
$
|
109.22
|
|
$120.01–$140.00
|
|
839
|
|
|
6.62
|
|
$
|
130.27
|
|
|
642
|
|
|
$
|
130.24
|
|
$140.01–$160.00
|
|
1,400
|
|
|
9.06
|
|
$
|
155.52
|
|
|
271
|
|
|
$
|
155.30
|
|
$160.01–$180.00
|
|
526
|
|
|
8.50
|
|
$
|
162.94
|
|
|
156
|
|
|
$
|
162.94
|
|
$180.01–$181.60
|
|
709
|
|
|
9.53
|
|
$
|
181.60
|
|
|
50
|
|
|
$
|
181.60
|
|
Total
|
|
8,551
|
|
|
6.92
|
|
$
|
111.46
|
|
|
4,577
|
|
|
$
|
93.21
|
|
|
Restricted Stock
|
|
Restricted Stock Units (excluding PSUs)
|
||||||||||
|
Number of Units
|
|
Weighted-average
Grant-date Fair Value |
|
Number of Shares
|
|
Weighted-average
Grant-date Fair Value |
||||||
|
(in thousands)
|
|
(per share)
|
|
(in thousands)
|
|
(per share)
|
||||||
Unvested at December 31, 2017
|
1,229
|
|
|
$
|
102.12
|
|
|
2,011
|
|
|
$
|
109.27
|
|
Granted
|
—
|
|
|
$
|
—
|
|
|
1,600
|
|
|
$
|
164.70
|
|
Vested
|
(690
|
)
|
|
$
|
100.07
|
|
|
(629
|
)
|
|
$
|
108.02
|
|
Cancelled
|
(59
|
)
|
|
$
|
101.55
|
|
|
(265
|
)
|
|
$
|
132.26
|
|
Unvested at December 31, 2018
|
480
|
|
|
$
|
104.91
|
|
|
2,717
|
|
|
$
|
140.10
|
|
|
Year Ended December 31, 2018
|
||
|
(in thousands,
except per share amount) |
||
Number of shares
|
213,654
|
|
|
Average price paid per share
|
$
|
117.52
|
|
N.
|
Stock-based Compensation Expense
|
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in thousands)
|
||||||||||
Stock-based compensation expense by line item:
|
|
|
|
|
|
||||||
Cost of sales
|
$
|
4,543
|
|
|
$
|
2,500
|
|
|
$
|
2,918
|
|
Research and development expenses
|
203,112
|
|
|
181,900
|
|
|
153,451
|
|
|||
Sales, general and administrative expenses
|
117,392
|
|
|
108,836
|
|
|
84,254
|
|
|||
Total stock-based compensation expense included in costs and expenses
|
$
|
325,047
|
|
|
$
|
293,236
|
|
|
$
|
240,623
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in thousands)
|
||||||||||
Stock-based compensation expense by type of award:
|
|
|
|
|
|
||||||
Stock options
|
$
|
107,854
|
|
|
$
|
105,367
|
|
|
$
|
114,768
|
|
Restricted stock and restricted stock units (including PSUs)
|
207,845
|
|
|
181,258
|
|
|
118,709
|
|
|||
ESPP share issuances
|
9,933
|
|
|
9,017
|
|
|
7,835
|
|
|||
Stock-based compensation expense related to inventories
|
(585
|
)
|
|
(2,406
|
)
|
|
(689
|
)
|
|||
Total stock-based compensation expense included in costs and expenses
|
$
|
325,047
|
|
|
$
|
293,236
|
|
|
$
|
240,623
|
|
|
As of December 31, 2018
|
||||
|
Unrecognized Expense
|
|
Weighted-average Recognition Period
|
||
|
(in thousands)
|
|
(in years)
|
||
Type of award:
|
|
|
|
||
Stock options
|
$
|
155,465
|
|
|
2.64
|
Restricted stock and restricted stock units (including PSUs)
|
$
|
321,683
|
|
|
2.58
|
ESPP share issuances
|
$
|
5,132
|
|
|
0.58
|
|
2018
|
|
2017
|
|
2016
|
|||
Expected stock price volatility
|
40.50
|
%
|
|
45.31
|
%
|
|
46.77
|
%
|
Risk-free interest rate
|
2.61
|
%
|
|
1.94
|
%
|
|
1.32
|
%
|
Expected term of options (in years)
|
4.55
|
|
|
4.68
|
|
|
4.91
|
|
Expected annual dividends
|
—
|
|
|
—
|
|
|
—
|
|
•
|
Expected stock price volatility:
Expected stock price volatility is calculated using the trailing one month average of daily implied volatilities prior to the grant date. Implied volatility is based on options to purchase the Company’s stock with remaining terms of greater than one year that are regularly traded in the market.
|
•
|
Risk-free interest rate:
The Company bases the risk-free interest rate on the interest rate payable on U.S. Treasury securities in effect at the time of grant for a period that is commensurate with the assumed expected option term.
|
•
|
Expected term of options:
The expected term of options represents the period of time options are expected to be outstanding. The Company uses historical data to estimate employee exercise and post-vest termination behavior. The Company believes that all groups of employees exhibit similar exercise and post-vest termination behavior and therefore does not stratify employees into multiple groups in determining the expected term of options.
|
•
|
Expected annual dividends:
The estimate for annual dividends is
$0.00
because the Company has not historically paid, and does not intend for the foreseeable future to pay, a dividend.
|
O.
|
Income Taxes
|
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in thousands)
|
||||||||||
United States
|
$
|
812,086
|
|
|
$
|
330,340
|
|
|
$
|
(147,860
|
)
|
Foreign
|
(211,845
|
)
|
|
(346,029
|
)
|
|
80,494
|
|
|||
Income (loss) before (benefit from) provision for income taxes
|
$
|
600,241
|
|
|
$
|
(15,689
|
)
|
|
$
|
(67,366
|
)
|
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in thousands)
|
||||||||||
Current taxes:
|
|
|
|
|
|
||||||
United States
|
$
|
772
|
|
|
$
|
11,559
|
|
|
$
|
(3,821
|
)
|
Foreign
|
15,600
|
|
|
3,576
|
|
|
1,794
|
|
|||
State
|
9,018
|
|
|
5,025
|
|
|
1,836
|
|
|||
Total current taxes
|
25,390
|
|
|
20,160
|
|
|
(191
|
)
|
|||
Deferred taxes:
|
|
|
|
|
|
||||||
United States
|
(1,105,053
|
)
|
|
(113,805
|
)
|
|
18,659
|
|
|||
Foreign
|
(364,919
|
)
|
|
(3,222
|
)
|
|
(3,359
|
)
|
|||
State
|
(42,280
|
)
|
|
(10,457
|
)
|
|
1,556
|
|
|||
Total deferred taxes
|
(1,512,252
|
)
|
|
(127,484
|
)
|
|
16,856
|
|
|||
(Benefit from) provision for income taxes
|
$
|
(1,486,862
|
)
|
|
$
|
(107,324
|
)
|
|
$
|
16,665
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in thousands)
|
||||||||||
Income (loss) before (benefit from) provision for income taxes
|
$
|
600,241
|
|
|
$
|
(15,689
|
)
|
|
$
|
(67,366
|
)
|
|
|
|
|
|
|
||||||
Expected provision for (benefit from) income taxes
|
126,051
|
|
|
(5,491
|
)
|
|
(23,578
|
)
|
|||
State taxes, net of federal benefit
|
8,680
|
|
|
4,742
|
|
|
3,621
|
|
|||
Foreign income tax rate differential
|
23,427
|
|
|
77,801
|
|
|
21,346
|
|
|||
Tax credits
|
(52,629
|
)
|
|
(58,204
|
)
|
|
(47,773
|
)
|
|||
(Benefit from) provision for income taxes attributable to valuation allowances
|
(1,563,169
|
)
|
|
(575,801
|
)
|
|
14,837
|
|
|||
Permanent items
|
1,421
|
|
|
15,324
|
|
|
24,663
|
|
|||
Rate change
|
—
|
|
|
575,192
|
|
|
12,836
|
|
|||
Stock compensation (benefit) shortfalls and cancellations
|
(49,044
|
)
|
|
(21,453
|
)
|
|
4,162
|
|
|||
Officer’s compensation
|
8,310
|
|
|
6,501
|
|
|
86
|
|
|||
Tax attribute expiration
|
—
|
|
|
—
|
|
|
9,947
|
|
|||
Deconsolidation of VIE
|
(9,390
|
)
|
|
(126,183
|
)
|
|
—
|
|
|||
Uncertain tax positions
|
15,431
|
|
|
—
|
|
|
—
|
|
|||
Other
|
4,050
|
|
|
248
|
|
|
(3,482
|
)
|
|||
(Benefit from) provision for income taxes
|
$
|
(1,486,862
|
)
|
|
$
|
(107,324
|
)
|
|
$
|
16,665
|
|
|
As of December 31,
|
||||||
|
2018
|
|
2017
|
||||
|
(in thousands)
|
||||||
Deferred tax assets:
|
|
|
|
||||
Net operating loss
|
$
|
882,014
|
|
|
$
|
1,004,404
|
|
Tax credit carryforwards
|
487,635
|
|
|
440,429
|
|
||
Intangible assets
|
241,775
|
|
|
54,091
|
|
||
Deferred revenues
|
19,311
|
|
|
19,593
|
|
||
Stock-based compensation
|
93,915
|
|
|
83,196
|
|
||
Accrued expenses
|
17,795
|
|
|
17,808
|
|
||
Construction financing lease obligation
|
130,849
|
|
|
109,354
|
|
||
Other
|
6,831
|
|
|
5,667
|
|
||
Gross deferred tax assets
|
1,880,125
|
|
|
1,734,542
|
|
||
Valuation allowance
|
(168,491
|
)
|
|
(1,552,942
|
)
|
||
Total deferred tax assets
|
1,711,634
|
|
|
181,600
|
|
||
Deferred tax liabilities:
|
|
|
|
||||
Property and equipment
|
(128,407
|
)
|
|
(101,019
|
)
|
||
Acquired intangibles
|
—
|
|
|
(6,341
|
)
|
||
Deferred revenue
|
(73,357
|
)
|
|
(73,357
|
)
|
||
Unrealized gain
|
(10,198
|
)
|
|
(6,401
|
)
|
||
Net deferred tax assets (liabilities)
|
$
|
1,499,672
|
|
|
$
|
(5,518
|
)
|
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in thousands)
|
||||||||||
Balance at beginning of the period
|
$
|
3,814
|
|
|
$
|
—
|
|
|
$
|
425
|
|
Increases related to current period tax positions
|
9,704
|
|
|
3,814
|
|
|
—
|
|
|||
Increases related to prior period tax positions
|
6,031
|
|
|
—
|
|
|
—
|
|
|||
Decrease due to statute limitations
|
—
|
|
|
—
|
|
|
(425
|
)
|
|||
Balance at end of period
|
$
|
19,549
|
|
|
$
|
3,814
|
|
|
$
|
—
|
|
P.
|
Employee Benefits
|
Q.
|
Commitments and Contingencies
|
Year
|
|
Fan Pier
Leases |
|
San Diego
Lease
|
|
Other
Leases |
|
Total Lease
Commitments |
||||||||
|
|
(in thousands)
|
||||||||||||||
2019
|
|
$
|
66,540
|
|
|
$
|
5,324
|
|
|
$
|
13,207
|
|
|
$
|
85,071
|
|
2020
|
|
72,589
|
|
|
9,127
|
|
|
14,270
|
|
|
95,986
|
|
||||
2021
|
|
72,589
|
|
|
9,127
|
|
|
12,529
|
|
|
94,245
|
|
||||
2022
|
|
72,589
|
|
|
9,127
|
|
|
12,045
|
|
|
93,761
|
|
||||
2023
|
|
72,589
|
|
|
9,530
|
|
|
11,952
|
|
|
94,071
|
|
||||
Thereafter
|
|
389,855
|
|
|
119,864
|
|
|
65,472
|
|
|
575,191
|
|
||||
Total minimum lease payments
|
|
$
|
746,751
|
|
|
$
|
162,099
|
|
|
$
|
129,475
|
|
|
$
|
1,038,325
|
|
Year
|
|
(in thousands)
|
||
2019
|
|
$
|
10,770
|
|
2020
|
|
7,282
|
|
|
2021
|
|
5,649
|
|
|
2022
|
|
3,300
|
|
|
2023
|
|
1,974
|
|
|
Thereafter
|
|
3,085
|
|
|
Total payments
|
|
32,060
|
|
|
Less: amount representing interest
|
|
(2,585
|
)
|
|
Present value of payments
|
|
$
|
29,475
|
|
R.
|
Segment Information
|
|
2018
(as reported under ASC 606) |
|
2017
(as reported under ASC 605) |
|
2016
(as reported under ASC 605) |
||||||
|
(in thousands)
|
||||||||||
SYMDEKO/SYMKEVI
|
$
|
768,657
|
|
|
$
|
—
|
|
|
$
|
—
|
|
ORKAMBI
|
1,262,166
|
|
|
1,320,850
|
|
|
979,590
|
|
|||
KALYDECO
|
1,007,502
|
|
|
844,630
|
|
|
703,432
|
|
|||
Other
|
—
|
|
|
—
|
|
|
610
|
|
|||
Total product revenues, net
|
$
|
3,038,325
|
|
|
$
|
2,165,480
|
|
|
$
|
1,683,632
|
|
|
2018
(as reported under ASC 606) |
|
2017
(as reported under ASC 605) |
|
2016
(as reported under ASC 605) |
||||||
|
(in thousands)
|
||||||||||
United States
|
$
|
2,365,079
|
|
|
$
|
1,986,786
|
|
|
$
|
1,321,807
|
|
Outside of the United States
|
|
|
|
|
|
||||||
Europe
|
543,179
|
|
|
420,317
|
|
|
320,456
|
|
|||
Other
|
139,339
|
|
|
81,549
|
|
|
59,914
|
|
|||
Total revenues outside of the United States
|
682,518
|
|
|
501,866
|
|
|
380,370
|
|
|||
Total revenues
|
$
|
3,047,597
|
|
|
$
|
2,488,652
|
|
|
$
|
1,702,177
|
|
|
Percent of Total Gross
Revenues
|
|
Percent of Gross Accounts Receivable
|
|||||||||||
|
Year Ended December 31,
|
|
As of December 31,
|
|||||||||||
|
2018
(as reported under
ASC 606)
|
|
2017
(as reported under
ASC 605)
|
|
2016
(as reported under
ASC 605)
|
|
2018
|
|
2017
|
|||||
Walgreen Co.
|
20
|
%
|
|
17
|
%
|
|
19
|
%
|
|
16
|
%
|
|
20
|
%
|
Accredo/Curascript
|
14
|
%
|
|
14
|
%
|
|
15
|
%
|
|
10
|
%
|
|
12
|
%
|
McKesson Corporation
|
14
|
%
|
|
<10
|
%
|
|
<10
|
%
|
|
16
|
%
|
|
<10
|
%
|
CVS/Caremark
|
n/a
|
|
|
<10
|
%
|
|
19
|
%
|
|
n/a
|
|
|
n/a
|
|
|
As of December 31,
|
||||||
|
2018
|
|
2017
|
||||
|
(in thousands)
|
||||||
United States
|
$
|
778,157
|
|
|
$
|
753,128
|
|
Outside of the United States
|
|
|
|
||||
United Kingdom
|
30,496
|
|
|
31,279
|
|
||
Other
|
3,352
|
|
|
5,030
|
|
||
Total property and equipment, net outside of the United States
|
33,848
|
|
|
36,309
|
|
||
Total property and equipment, net
|
$
|
812,005
|
|
|
$
|
789,437
|
|
S.
|
Quarterly Financial Data (unaudited)
|
|
Three Months Ended
|
||||||||||||||
|
March 31,
2018 |
|
June 30,
2018 |
|
September 30,
2018 |
|
December 31,
2018 |
||||||||
|
(in thousands, except per share amounts)
|
||||||||||||||
Revenues:
|
|
|
|
|
|
|
|
||||||||
Product revenues, net
|
$
|
637,729
|
|
|
$
|
749,912
|
|
|
$
|
782,511
|
|
|
$
|
868,173
|
|
Collaborative and royalty revenues
|
3,070
|
|
|
2,245
|
|
|
2,024
|
|
|
1,933
|
|
||||
Total revenues
|
640,799
|
|
|
752,157
|
|
|
784,535
|
|
|
870,106
|
|
||||
Costs and expenses:
|
|
|
|
|
|
|
|
||||||||
Cost of sales
|
71,613
|
|
|
104,382
|
|
|
111,255
|
|
|
122,289
|
|
||||
Research and development expenses (1)
|
310,553
|
|
|
337,532
|
|
|
330,510
|
|
|
437,881
|
|
||||
Sales, general and administrative expenses
|
129,808
|
|
|
137,303
|
|
|
137,295
|
|
|
153,210
|
|
||||
Restructuring (income) expenses
|
(76
|
)
|
|
62
|
|
|
(174
|
)
|
|
4
|
|
||||
Intangible asset impairment charge (2)
|
—
|
|
|
—
|
|
|
—
|
|
|
29,000
|
|
||||
Total costs and expenses
|
511,898
|
|
|
579,279
|
|
|
578,886
|
|
|
742,384
|
|
||||
Income from operations
|
128,901
|
|
|
172,878
|
|
|
205,649
|
|
|
127,722
|
|
||||
Interest expense, net
|
(11,097
|
)
|
|
(10,106
|
)
|
|
(8,143
|
)
|
|
(4,773
|
)
|
||||
Other income (expense), net (3)
|
96,838
|
|
|
53,819
|
|
|
(60,995
|
)
|
|
(90,452
|
)
|
||||
Income before (benefit from) provision for income taxes
|
214,642
|
|
|
216,591
|
|
|
136,511
|
|
|
32,497
|
|
||||
(Benefit from) provision for income taxes (4)
|
(12,659
|
)
|
|
10,341
|
|
|
8,055
|
|
|
(1,492,599
|
)
|
||||
Net income
|
227,301
|
|
|
206,250
|
|
|
128,456
|
|
|
1,525,096
|
|
||||
(Income) loss attributable to noncontrolling interest
|
(17,038
|
)
|
|
1,110
|
|
|
290
|
|
|
25,431
|
|
||||
Net income attributable to Vertex
|
$
|
210,263
|
|
|
$
|
207,360
|
|
|
$
|
128,746
|
|
|
$
|
1,550,527
|
|
|
|
|
|
|
|
|
|
||||||||
Amounts per share attributable to Vertex common shareholders:
|
|
|
|
|
|
|
|
||||||||
Net income:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
0.83
|
|
|
$
|
0.82
|
|
|
$
|
0.51
|
|
|
$
|
6.08
|
|
Diluted
|
$
|
0.81
|
|
|
$
|
0.80
|
|
|
$
|
0.50
|
|
|
$
|
5.97
|
|
Shares used in per share calculations:
|
|
|
|
|
|
|
|
||||||||
Basic
|
253,231
|
|
|
254,135
|
|
|
254,905
|
|
|
254,868
|
|
||||
Diluted
|
258,526
|
|
|
258,584
|
|
|
259,788
|
|
|
259,812
|
|
|
Three Months Ended
|
||||||||||||||
|
March 31,
2017 |
|
June 30,
2017 |
|
September 30,
2017 |
|
December 31,
2017 |
||||||||
|
(in thousands, except per share amounts)
|
||||||||||||||
Revenues:
|
|
|
|
|
|
|
|
||||||||
Product revenues, net
|
$
|
480,622
|
|
|
$
|
513,988
|
|
|
$
|
549,642
|
|
|
$
|
621,228
|
|
Collaborative and royalty revenues (5)
|
234,096
|
|
|
30,147
|
|
|
28,523
|
|
|
30,406
|
|
||||
Total revenues
|
714,718
|
|
|
544,135
|
|
|
578,165
|
|
|
651,634
|
|
||||
Costs and expenses:
|
|
|
|
|
|
|
|
||||||||
Cost of sales
|
46,988
|
|
|
71,205
|
|
|
72,874
|
|
|
84,052
|
|
||||
Research and development expenses (6)
|
273,563
|
|
|
289,451
|
|
|
454,947
|
|
|
306,664
|
|
||||
Sales, general and administrative expenses
|
113,326
|
|
|
127,249
|
|
|
120,710
|
|
|
134,794
|
|
||||
Restructuring expenses
|
9,999
|
|
|
3,523
|
|
|
337
|
|
|
387
|
|
||||
Intangible asset impairment charge (7)
|
—
|
|
|
—
|
|
|
255,340
|
|
|
—
|
|
||||
Total costs and expenses
|
443,876
|
|
|
491,428
|
|
|
904,208
|
|
|
525,897
|
|
||||
Income (loss) from operations
|
270,842
|
|
|
52,707
|
|
|
(326,043
|
)
|
|
125,737
|
|
||||
Interest expense, net
|
(16,765
|
)
|
|
(14,664
|
)
|
|
(13,574
|
)
|
|
(12,547
|
)
|
||||
Other expense, net (7)
|
(544
|
)
|
|
(2,537
|
)
|
|
(77,553
|
)
|
|
(748
|
)
|
||||
Income (loss) before provision for (benefit from) income taxes
|
253,533
|
|
|
35,506
|
|
|
(417,170
|
)
|
|
112,442
|
|
||||
Provision for (benefit from) income taxes (7)
|
3,985
|
|
|
4,337
|
|
|
(125,903
|
)
|
|
10,257
|
|
||||
Net income (loss)
|
249,548
|
|
|
31,169
|
|
|
(291,267
|
)
|
|
102,185
|
|
||||
(Income) loss attributable to noncontrolling interest (7)
|
(1,792
|
)
|
|
(13,173
|
)
|
|
188,315
|
|
|
(1,501
|
)
|
||||
Net income (loss) attributable to Vertex
|
$
|
247,756
|
|
|
$
|
17,996
|
|
|
$
|
(102,952
|
)
|
|
$
|
100,684
|
|
|
|
|
|
|
|
|
|
||||||||
Amounts per share attributable to Vertex common shareholders:
|
|
|
|
|
|
|
|
||||||||
Net income (loss):
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
1.01
|
|
|
$
|
0.07
|
|
|
$
|
(0.41
|
)
|
|
$
|
0.40
|
|
Diluted
|
$
|
0.99
|
|
|
$
|
0.07
|
|
|
$
|
(0.41
|
)
|
|
$
|
0.39
|
|
Shares used in per share calculations:
|
|
|
|
|
|
|
|
||||||||
Basic
|
246,024
|
|
|
247,521
|
|
|
250,268
|
|
|
251,557
|
|
||||
Diluted
|
248,700
|
|
|
251,635
|
|
|
250,268
|
|
|
256,804
|
|
1.
|
In the fourth quarter of 2018, the Company incurred research and development expenses of
$95.0 million
to related license agreements with Merck KGaA, Darmstadt, Germany, and Arbor. See
Note B, “Collaborative Arrangements and Acquisitions.”
|
2.
|
In the fourth quarter of 2018, the Company recorded a
$29.0 million
intangible asset impairment charge related to its VX-210 indefinite-lived in-process research and development asset. See
Note J, “Intangible Assets and Goodwill.”
|
3.
|
In 2018, other income (expense), net was primarily related to changes in the fair value of the Company’s equity investment in CRISPR. See
Note E, “Marketable Securities and Equity Investments.”
|
4.
|
In the fourth quarter of 2018, the Company released the valuation allowance on the majority of its net operating losses and other deferred tax assets as of December 31, 2018 resulting in a benefit from income taxes of
$1.56 billion
. See
Note O, “Income Taxes.”
|
5.
|
In the first quarter of 2017, the Company recognized
$230.0 million
of collaborative revenues related to an upfront payment from Merck KGaA, Darmstadt, Germany, pursuant to a collaboration. In each of the second and third quarters of 2017, the Company recognized
$20.0 million
of collaborative revenues related to payments that Parion, which was a variable interest entity during these periods, received from Shire pursuant to a license agreement. In the fourth quarter of 2017, the Company recognized
$25.0 million
of collaborative revenues related to a milestone achieved pursuant to its license agreement with Janssen pursuant to which Janssen is developing pimodivir for the treatment of influenza. See
Note B, “Collaborative Arrangements and Acquisitions.”
|
6.
|
In the third quarter of 2017, the Company incurred research and development expenses of
$160.0 million
to acquire certain CF assets including VX-561 from Concert. See
Note B, “Collaborative Arrangements and Acquisitions.”
|
7.
|
In the third quarter of 2017, the Company recorded a
$255.3 million
intangible asset impairment charge related to Parion’s pulmonary ENaC platform indefinite-lived in-process research and development asset, a decrease in the fair value of the contingent payments payable by the Company to Parion of
$69.6 million
and benefit from income taxes of
$126.2 million
resulting from these charges. These charges and benefit from income taxes were attributable to noncontrolling interest. See
Note B, “Collaborative Arrangements and Acquisitions,”
and
Note J, “Intangible Assets and Goodwill.”
|
Vertex Pharmaceuticals Annual Non-Employee Board Compensation
|
|||
|
|
|
|
Annual Retainer
|
$100,000
|
|
|
|
|
|
|
Committee Chair Compensation
|
|
|
|
|
Audit & Finance Committee Chair
|
$30,000 annual retainer
|
|
|
Management Development & Compensation Committee Chair
|
$25,000 annual retainer
|
|
|
Corporate Governance & Nominating Committee Chair
|
$20,000 annual retainer
|
|
|
Science & Technology Committee Chair
|
$20,000 annual retainer
|
|
|
|
|
|
Committee Membership Fee (Non Chairs)
|
|
||
|
Audit & Finance Committee Member
|
$15,000 annual retainer
|
|
|
Management Development & Compensation Committee Member
|
$12,500 annual retainer
|
|
|
Corporate Governance & Nominating Committee Member
|
$10,000 annual retainer
|
|
|
Science & Technology Committee Member
|
$10,000 annual retainer
|
|
|
|
|
|
Lead Independent Director Compensation
|
$40,000 annual retainer
|
||
|
|
|
|
Annual Equity Grants
|
|
|
|
|
Annually on June 1, $400,000 in value-based awards, comprised at the director's election of restricted stock units and/or options
•
Options are fully vested upon grant
•
Restricted stock units cliff vest on the 1 year anniversary of the grant date
|
||
Initial Equity Grants
|
|
|
|
|
On date director joins the board of directors, a $400,000 restricted stock unit award that vests on the first anniversary of the grant date.
|
|
|
|
|
|
|
Each of our non-employee directors is eligible to defer the cash and restricted stock portion of his/her compensation set forth above and elect to receive deferred stock units that convert to common stock in specified circumstances.
|
(1)
|
Registration Statement (Form S-3 No. 333-211096) of Vertex Pharmaceuticals Incorporated,
|
(2)
|
Registration Statements (Form S-8 Nos. 333-134482, 333-150946, 333-160442, 333-166803 and 333-184787) pertaining to the Vertex Pharmaceuticals Incorporated Amended and Restated 2006 Stock and Option Plan (formerly known as the Vertex Pharmaceuticals Incorporated 2006 Stock and Option Plan),
|
(3)
|
Registration Statement (Form S-8 No. 333-184784) pertaining to the Vertex Pharmaceuticals Incorporated Employee Stock Purchase Plan, and
|
(4)
|
Registration Statements (Form S-8 Nos. 333-226363, 333-219559, 333-188737, 333-197466 and 333-206075) pertaining to the Amended and Restated Vertex Pharmaceuticals Incorporated 2013 Stock and Option Plan (formerly known as the Vertex Pharmaceuticals Incorporated 2013 Stock and Option Plan);
|
1.
|
I have reviewed this Annual Report on Form 10-K of Vertex Pharmaceuticals Incorporated;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
Date:
|
February 13, 2019
|
/s/ Jeffrey M. Leiden
|
|
|
|
|
|
Jeffrey M. Leiden
|
|
|
Chief Executive Officer and President
|
1.
|
I have reviewed this Annual Report on Form 10-K of Vertex Pharmaceuticals Incorporated;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
Date:
|
February 13, 2019
|
/s/ Paul M. Silva
|
|
|
|
|
|
Paul M. Silva
|
|
|
Senior Vice President, Corporate Controller and Interim Chief Financial Officer
|
Date:
|
February 13, 2019
|
|
|
|
/s/ Jeffrey M. Leiden
|
|
|
|
|
|
Jeffrey M. Leiden
|
|
|
Chief Executive Officer and President
|
|
|
|
Date:
|
February 13, 2019
|
|
|
|
/s/ Paul M. Silva
|
|
|
|
|
|
Paul M. Silva
|
|
|
Senior Vice President, Corporate Controller and Interim Chief Financial Officer
|
|