|
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2019
|
|
or
|
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
FOR THE TRANSITION PERIOD FROM
TO
|
Massachusetts
|
04-3039129
|
(State or other jurisdiction of
incorporation or organization) |
(I.R.S. Employer
Identification No.) |
50 Northern Avenue, Boston, Massachusetts
|
02210
|
(Address of principal executive offices)
|
(Zip Code)
|
Large accelerated filer
x
|
Accelerated filer
o
|
Non-accelerated filer
o
|
Smaller reporting company
o
|
|
|
|
|
Emerging growth company
o
|
|
Common Stock, par value $0.01 per share
|
256,121,360
|
Class
|
Outstanding at April 24, 2019
|
|
|
Three Months Ended March 31,
|
||||||
|
2019
|
|
2018
|
||||
Revenues:
|
|
|
|
||||
Product revenues, net
|
$
|
857,253
|
|
|
$
|
637,729
|
|
Collaborative and royalty revenues
|
1,182
|
|
|
3,070
|
|
||
Total revenues
|
858,435
|
|
|
640,799
|
|
||
Costs and expenses:
|
|
|
|
||||
Cost of sales
|
95,092
|
|
|
71,613
|
|
||
Research and development expenses
|
339,490
|
|
|
310,553
|
|
||
Sales, general and administrative expenses
|
147,045
|
|
|
129,808
|
|
||
Restructuring income
|
—
|
|
|
(76
|
)
|
||
Total costs and expenses
|
581,627
|
|
|
511,898
|
|
||
Income from operations
|
276,808
|
|
|
128,901
|
|
||
Interest income
|
15,615
|
|
|
5,789
|
|
||
Interest expense
|
(14,868
|
)
|
|
(16,886
|
)
|
||
Other income, net
|
42,610
|
|
|
96,838
|
|
||
Income before provision for (benefit from) income taxes
|
320,165
|
|
|
214,642
|
|
||
Provision for (benefit from) income taxes
|
51,534
|
|
|
(12,659
|
)
|
||
Net income
|
268,631
|
|
|
227,301
|
|
||
Income attributable to noncontrolling interest
|
—
|
|
|
(17,038
|
)
|
||
Net income attributable to Vertex
|
$
|
268,631
|
|
|
$
|
210,263
|
|
|
|
|
|
||||
Amounts per share attributable to Vertex common shareholders:
|
|
|
|
||||
Net income:
|
|
|
|
||||
Basic
|
$
|
1.05
|
|
|
$
|
0.83
|
|
Diluted
|
$
|
1.03
|
|
|
$
|
0.81
|
|
Shares used in per share calculations:
|
|
|
|
||||
Basic
|
255,695
|
|
|
253,231
|
|
||
Diluted
|
260,175
|
|
|
258,526
|
|
|
Three Months Ended March 31,
|
||||||
|
2019
|
|
2018
|
||||
Net income
|
$
|
268,631
|
|
|
$
|
227,301
|
|
Changes in other comprehensive income (loss):
|
|
|
|
||||
Unrealized holding gains (losses) on marketable securities, net
|
596
|
|
|
(460
|
)
|
||
Unrealized losses on foreign currency forward contracts, net of tax of $1.5 million and $0.3 million, respectively
|
(222
|
)
|
|
(862
|
)
|
||
Foreign currency translation adjustment
|
4,967
|
|
|
(2,729
|
)
|
||
Total changes in other comprehensive income (loss)
|
5,341
|
|
|
(4,051
|
)
|
||
Comprehensive income
|
273,972
|
|
|
223,250
|
|
||
Comprehensive income attributable to noncontrolling interest
|
—
|
|
|
(17,038
|
)
|
||
Comprehensive income attributable to Vertex
|
$
|
273,972
|
|
|
$
|
206,212
|
|
|
March 31,
|
|
December 31,
|
||||
|
2019
|
|
2018
|
||||
Assets
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
2,893,885
|
|
|
$
|
2,650,134
|
|
Marketable securities
|
584,150
|
|
|
518,108
|
|
||
Accounts receivable, net
|
438,297
|
|
|
409,688
|
|
||
Inventories
|
136,698
|
|
|
124,360
|
|
||
Prepaid expenses and other current assets
|
130,009
|
|
|
140,819
|
|
||
Total current assets
|
4,183,039
|
|
|
3,843,109
|
|
||
Property and equipment, net
|
742,559
|
|
|
812,005
|
|
||
Goodwill
|
50,384
|
|
|
50,384
|
|
||
Deferred tax assets
|
1,467,518
|
|
|
1,499,672
|
|
||
Operating lease assets
|
60,573
|
|
|
—
|
|
||
Other assets
|
39,041
|
|
|
40,728
|
|
||
Total assets
|
$
|
6,543,114
|
|
|
$
|
6,245,898
|
|
Liabilities and Shareholders’ Equity
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
82,262
|
|
|
$
|
110,987
|
|
Accrued expenses
|
532,745
|
|
|
604,495
|
|
||
Early access sales accrual
|
382,703
|
|
|
354,404
|
|
||
Other current liabilities
|
108,758
|
|
|
50,406
|
|
||
Total current liabilities
|
1,106,468
|
|
|
1,120,292
|
|
||
Long-term finance lease liabilities
|
560,381
|
|
|
581,550
|
|
||
Long-term operating lease liabilities
|
63,484
|
|
|
—
|
|
||
Long-term advance from collaborator
|
83,471
|
|
|
82,573
|
|
||
Other long-term liabilities
|
5,997
|
|
|
26,280
|
|
||
Total liabilities
|
1,819,801
|
|
|
1,810,695
|
|
||
Commitments and contingencies
|
—
|
|
|
—
|
|
||
Shareholders’ equity:
|
|
|
|
||||
Preferred stock, $0.01 par value; 1,000 shares authorized; none issued and outstanding
|
—
|
|
|
—
|
|
||
Common stock, $0.01 par value; 500,000 shares authorized, 256,351 and 255,172 shares issued and outstanding, respectively
|
2,561
|
|
|
2,546
|
|
||
Additional paid-in capital
|
7,475,909
|
|
|
7,421,476
|
|
||
Accumulated other comprehensive income
|
6,000
|
|
|
659
|
|
||
Accumulated deficit
|
(2,761,157
|
)
|
|
(2,989,478
|
)
|
||
Total shareholders’ equity
|
4,723,313
|
|
|
4,435,203
|
|
||
Total liabilities and shareholders’ equity
|
$
|
6,543,114
|
|
|
$
|
6,245,898
|
|
|
Common Stock
|
|
Additional
Paid-in Capital |
|
Accumulated
Other Comprehensive (Loss) Income |
|
Accumulated Deficit
|
|
Total Vertex
Shareholders’ Equity |
|
Noncontrolling
Interest |
|
Total
Shareholders’ Equity |
|||||||||||||||||
|
Shares
|
|
Amount
|
|
|
|
|
|
|
|||||||||||||||||||||
Balance at December 31, 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 loss, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,051
|
)
|
|
—
|
|
|
(4,051
|
)
|
|
—
|
|
|
(4,051
|
)
|
|||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
210,263
|
|
|
210,263
|
|
|
17,038
|
|
|
227,301
|
|
|||||||
Repurchase of common stock
|
(67
|
)
|
|
(1
|
)
|
|
(11,250
|
)
|
|
—
|
|
|
—
|
|
|
(11,251
|
)
|
|
—
|
|
|
(11,251
|
)
|
|||||||
Issuance of common stock under benefit plans
|
1,682
|
|
|
30
|
|
|
89,656
|
|
|
—
|
|
|
—
|
|
|
89,686
|
|
|
—
|
|
|
89,686
|
|
|||||||
Stock-based compensation expense
|
—
|
|
|
—
|
|
|
78,601
|
|
|
—
|
|
|
—
|
|
|
78,601
|
|
|
—
|
|
|
78,601
|
|
|||||||
Other VIE activity
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,000
|
)
|
|
(1,000
|
)
|
|||||||
Balance at March 31, 2018
|
254,868
|
|
|
$
|
2,541
|
|
|
$
|
7,314,369
|
|
|
$
|
(39,743
|
)
|
|
$
|
(4,876,111
|
)
|
|
$
|
2,401,056
|
|
|
$
|
29,765
|
|
|
$
|
2,430,821
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance at December 31, 2018
|
255,172
|
|
|
$
|
2,546
|
|
|
$
|
7,421,476
|
|
|
$
|
659
|
|
|
$
|
(2,989,478
|
)
|
|
$
|
4,435,203
|
|
|
$
|
—
|
|
|
$
|
4,435,203
|
|
Cumulative effect adjustment for adoption of new accounting guidance
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(40,310
|
)
|
|
(40,310
|
)
|
|
—
|
|
|
(40,310
|
)
|
|||||||
Other comprehensive income, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
5,341
|
|
|
—
|
|
|
5,341
|
|
|
—
|
|
|
5,341
|
|
|||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
268,631
|
|
|
268,631
|
|
|
—
|
|
|
268,631
|
|
|||||||
Repurchases of common stock
|
(564
|
)
|
|
(6
|
)
|
|
(103,833
|
)
|
|
—
|
|
|
—
|
|
|
(103,839
|
)
|
|
—
|
|
|
(103,839
|
)
|
|||||||
Issuance of common stock under benefit plans
|
1,743
|
|
|
21
|
|
|
64,023
|
|
|
—
|
|
|
—
|
|
|
64,044
|
|
|
—
|
|
|
64,044
|
|
|||||||
Stock-based compensation expense
|
—
|
|
|
—
|
|
|
94,243
|
|
|
—
|
|
|
—
|
|
|
94,243
|
|
|
—
|
|
|
94,243
|
|
|||||||
Balance at March 31, 2019
|
256,351
|
|
|
$
|
2,561
|
|
|
$
|
7,475,909
|
|
|
$
|
6,000
|
|
|
$
|
(2,761,157
|
)
|
|
$
|
4,723,313
|
|
|
$
|
—
|
|
|
$
|
4,723,313
|
|
|
Three Months Ended March 31,
|
||||||
|
2019
|
|
2018
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net income
|
$
|
268,631
|
|
|
$
|
227,301
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Stock-based compensation expense
|
93,791
|
|
|
78,136
|
|
||
Depreciation expense
|
27,140
|
|
|
16,343
|
|
||
Write-downs of inventories to net realizable value
|
1,270
|
|
|
3,619
|
|
||
Deferred income taxes
|
43,425
|
|
|
3,587
|
|
||
Unrealized gain on equity securities
|
(43,551
|
)
|
|
(95,458
|
)
|
||
Other non-cash items, net
|
(3,701
|
)
|
|
5,827
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable, net
|
(30,136
|
)
|
|
(13,473
|
)
|
||
Inventories
|
(13,139
|
)
|
|
(8,208
|
)
|
||
Prepaid expenses and other assets
|
7,941
|
|
|
25,482
|
|
||
Accounts payable
|
(24,145
|
)
|
|
2,154
|
|
||
Accrued expenses and other liabilities
|
(38,425
|
)
|
|
(31,469
|
)
|
||
Early access sales accrual
|
35,683
|
|
|
38,816
|
|
||
Net cash provided by operating activities
|
324,784
|
|
|
252,657
|
|
||
Cash flows from investing activities:
|
|
|
|
||||
Purchases of available-for-sale debt securities
|
(128,215
|
)
|
|
(38,653
|
)
|
||
Maturities of available-for-sale debt securities
|
107,118
|
|
|
94,365
|
|
||
Expenditures for property and equipment
|
(18,041
|
)
|
|
(29,279
|
)
|
||
Investment in equity securities
|
—
|
|
|
(21,500
|
)
|
||
Net cash (used in) provided by investing activities
|
(39,138
|
)
|
|
4,933
|
|
||
Cash flows from financing activities:
|
|
|
|
||||
Issuances of common stock under benefit plans
|
63,620
|
|
|
88,403
|
|
||
Repurchase of common stock
|
(99,839
|
)
|
|
(10,000
|
)
|
||
Advance from collaborator
|
5,000
|
|
|
2,500
|
|
||
Payments on capital lease and construction financing lease obligations
|
—
|
|
|
(9,331
|
)
|
||
Payments on finance leases
|
(9,385
|
)
|
|
—
|
|
||
Proceeds related to construction financing lease obligation
|
—
|
|
|
9,566
|
|
||
Repayments of advanced funding
|
(1,385
|
)
|
|
(1,182
|
)
|
||
Other financing activities
|
—
|
|
|
(1,000
|
)
|
||
Net cash (used in) provided by financing activities
|
(41,989
|
)
|
|
78,956
|
|
||
Effect of changes in exchange rates on cash
|
(378
|
)
|
|
1,656
|
|
||
Net increase in cash and cash equivalents
|
243,279
|
|
|
338,202
|
|
||
Cash, cash equivalents and restricted cash—beginning of period
|
2,658,253
|
|
|
1,667,526
|
|
||
Cash, cash equivalents and restricted cash—end of period
|
$
|
2,901,532
|
|
|
$
|
2,005,728
|
|
|
|
|
|
||||
Supplemental disclosure of cash flow information:
|
|
|
|
||||
Cash paid for interest
|
$
|
13,148
|
|
|
$
|
16,825
|
|
Cash paid for income taxes
|
$
|
1,835
|
|
|
$
|
1,897
|
|
Capitalization of costs related to construction financing lease obligation
|
$
|
—
|
|
|
$
|
3,716
|
|
Issuances of common stock from employee benefit plans receivable
|
$
|
510
|
|
|
$
|
2,124
|
|
Accrued share repurchase liability
|
$
|
4,000
|
|
|
$
|
—
|
|
B.
|
Revenue Recognition
|
|
Three Months Ended March 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(in thousands)
|
||||||
SYMDEKO/SYMKEVI
|
$
|
320,275
|
|
|
$
|
34,124
|
|
ORKAMBI
|
293,007
|
|
|
354,066
|
|
||
KALYDECO
|
243,971
|
|
|
249,539
|
|
||
Total product revenues, net
|
$
|
857,253
|
|
|
$
|
637,729
|
|
|
Three Months Ended March 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(in thousands)
|
||||||
United States
|
$
|
641,104
|
|
|
$
|
482,667
|
|
Outside of the United States
|
|
|
|
||||
Europe
|
167,751
|
|
|
131,895
|
|
||
Other
|
49,580
|
|
|
26,237
|
|
||
Total revenues outside of the United States
|
217,331
|
|
|
158,132
|
|
||
Total revenues
|
$
|
858,435
|
|
|
$
|
640,799
|
|
C.
|
Collaborative Arrangements and Acquisitions
|
D.
|
Earnings Per Share
|
|
Three Months Ended March 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(in thousands, except per share amounts)
|
||||||
Basic net income attributable to Vertex per common share calculation:
|
|
|
|
||||
Net income attributable to Vertex common shareholders
|
$
|
268,631
|
|
|
$
|
210,263
|
|
Less: Undistributed earnings allocated to participating securities
|
—
|
|
|
(99
|
)
|
||
Net income attributable to Vertex common shareholders—basic
|
$
|
268,631
|
|
|
$
|
210,164
|
|
|
|
|
|
||||
Basic weighted-average common shares outstanding
|
255,695
|
|
|
253,231
|
|
||
Basic net income attributable to Vertex per common share
|
$
|
1.05
|
|
|
$
|
0.83
|
|
|
|
|
|
||||
Diluted net income attributable to Vertex per common share calculation:
|
|
|
|
||||
Net income attributable to Vertex common shareholders
|
$
|
268,631
|
|
|
$
|
210,263
|
|
Less: Undistributed earnings allocated to participating securities
|
—
|
|
|
(97
|
)
|
||
Net income attributable to Vertex common shareholders—diluted
|
$
|
268,631
|
|
|
$
|
210,166
|
|
|
|
|
|
||||
Weighted-average shares used to compute basic net income per common share
|
255,695
|
|
|
253,231
|
|
||
Effect of potentially dilutive securities:
|
|
|
|
||||
Stock options
|
2,585
|
|
|
3,248
|
|
||
Restricted stock and restricted stock units (including PSUs)
|
1,870
|
|
|
2,013
|
|
||
Employee stock purchase program
|
25
|
|
|
34
|
|
||
Weighted-average shares used to compute diluted net income per common share
|
260,175
|
|
|
258,526
|
|
||
Diluted net income attributable to Vertex per common share
|
$
|
1.03
|
|
|
$
|
0.81
|
|
|
Three Months Ended March 31,
|
||||
|
2019
|
|
2018
|
||
|
(in thousands)
|
||||
Stock options
|
2,837
|
|
|
1,633
|
|
Unvested restricted stock and restricted stock units (including PSUs)
|
6
|
|
|
4
|
|
E.
|
Fair Value Measurements
|
Level 1:
|
Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
|
Level 2:
|
Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.
|
Level 3:
|
Unobservable inputs based on the Company’s assessment of the assumptions that market participants would use in pricing the asset or liability.
|
|
Fair Value Measurements as of March 31, 2019
|
||||||||||||||
|
|
|
Fair Value Hierarchy
|
||||||||||||
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
|
(in thousands)
|
||||||||||||||
Financial instruments carried at fair value (asset positions):
|
|
|
|
|
|
|
|
||||||||
Cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
$
|
1,354,656
|
|
|
$
|
1,354,656
|
|
|
$
|
—
|
|
|
$
|
—
|
|
U.S. Treasury securities
|
5,996
|
|
|
5,996
|
|
|
—
|
|
|
—
|
|
||||
Government-sponsored enterprise securities
|
11,786
|
|
|
11,786
|
|
|
—
|
|
|
—
|
|
||||
Corporate debt securities
|
4,519
|
|
|
—
|
|
|
4,519
|
|
|
—
|
|
||||
Commercial paper
|
35,955
|
|
|
—
|
|
|
35,955
|
|
|
—
|
|
||||
Marketable securities:
|
|
|
|
|
|
|
|
||||||||
Corporate equity securities
|
210,874
|
|
|
192,207
|
|
|
18,667
|
|
|
—
|
|
||||
Government-sponsored enterprise securities
|
15,181
|
|
|
15,181
|
|
|
—
|
|
|
—
|
|
||||
Corporate debt securities
|
231,572
|
|
|
—
|
|
|
231,572
|
|
|
—
|
|
||||
Commercial paper
|
126,523
|
|
|
—
|
|
|
126,523
|
|
|
—
|
|
||||
Prepaid expenses and other current assets:
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward contracts
|
19,210
|
|
|
—
|
|
|
19,210
|
|
|
—
|
|
||||
Other assets:
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward contracts
|
973
|
|
|
—
|
|
|
973
|
|
|
—
|
|
||||
Total financial assets
|
$
|
2,017,245
|
|
|
$
|
1,579,826
|
|
|
$
|
437,419
|
|
|
$
|
—
|
|
Financial instruments carried at fair value (liability positions):
|
|
|
|
|
|
|
|
||||||||
Other current liabilities:
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward contracts
|
$
|
(310
|
)
|
|
$
|
—
|
|
|
$
|
(310
|
)
|
|
$
|
—
|
|
Other long-term liabilities:
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward contracts
|
(68
|
)
|
|
—
|
|
|
(68
|
)
|
|
—
|
|
||||
Total financial liabilities
|
$
|
(378
|
)
|
|
$
|
—
|
|
|
$
|
(378
|
)
|
|
$
|
—
|
|
|
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 positions):
|
|
|
|
|
|
|
|
||||||||
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 expenses 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 positions):
|
|
|
|
|
|
|
|
||||||||
Other current liabilities:
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward contracts
|
$
|
(340
|
)
|
|
$
|
—
|
|
|
$
|
(340
|
)
|
|
$
|
—
|
|
Other long-term liabilities:
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward contracts
|
(108
|
)
|
|
—
|
|
|
(108
|
)
|
|
—
|
|
||||
Total financial liabilities
|
$
|
(448
|
)
|
|
$
|
—
|
|
|
$
|
(448
|
)
|
|
$
|
—
|
|
F.
|
Marketable Securities and Equity Investments
|
|
Amortized Cost
|
|
Gross
Unrealized Gains |
|
Gross
Unrealized Losses |
|
Fair Value
|
||||||||
|
(in thousands)
|
||||||||||||||
As of March 31, 2019
|
|
|
|
|
|
|
|
||||||||
Cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
$
|
1,354,656
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,354,656
|
|
U.S. Treasury securities
|
5,996
|
|
|
—
|
|
|
—
|
|
|
5,996
|
|
||||
Government-sponsored enterprise securities
|
11,787
|
|
|
—
|
|
|
(1
|
)
|
|
11,786
|
|
||||
Corporate debt securities
|
4,519
|
|
|
—
|
|
|
—
|
|
|
4,519
|
|
||||
Commercial paper
|
35,959
|
|
|
—
|
|
|
(4
|
)
|
|
35,955
|
|
||||
Total cash equivalents
|
1,412,917
|
|
|
—
|
|
|
(5
|
)
|
|
1,412,912
|
|
||||
Marketable securities:
|
|
|
|
|
|
|
|
||||||||
Government-sponsored enterprise securities
|
15,180
|
|
|
2
|
|
|
(1
|
)
|
|
15,181
|
|
||||
Corporate debt securities
|
231,516
|
|
|
88
|
|
|
(32
|
)
|
|
231,572
|
|
||||
Commercial paper
|
126,515
|
|
|
34
|
|
|
(26
|
)
|
|
126,523
|
|
||||
Total marketable debt securities
|
373,211
|
|
|
124
|
|
|
(59
|
)
|
|
373,276
|
|
||||
Corporate equity securities
|
133,157
|
|
|
79,093
|
|
|
(1,376
|
)
|
|
210,874
|
|
||||
Total marketable securities
|
$
|
506,368
|
|
|
$
|
79,217
|
|
|
$
|
(1,435
|
)
|
|
$
|
584,150
|
|
|
|
|
|
|
|
|
|
||||||||
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
|
6,026
|
|
|
—
|
|
|
—
|
|
|
6,026
|
|
||||
Government-sponsored enterprise securities
|
10,704
|
|
|
—
|
|
|
—
|
|
|
10,704
|
|
||||
Corporate debt securities
|
234,088
|
|
|
27
|
|
|
(450
|
)
|
|
233,665
|
|
||||
Commercial paper
|
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 March 31, 2019
|
|
As of December 31, 2018
|
||||
|
(in thousands)
|
||||||
Cash and cash equivalents
|
$
|
1,412,912
|
|
|
$
|
1,297,960
|
|
Marketable securities
|
373,276
|
|
|
350,785
|
|
||
Total
|
$
|
1,786,188
|
|
|
$
|
1,648,745
|
|
|
As of March 31, 2019
|
|
As of December 31, 2018
|
||||
|
(in thousands)
|
||||||
Matures within one year
|
$
|
1,775,571
|
|
|
$
|
1,647,500
|
|
Matures after one year through five years
|
10,617
|
|
|
1,245
|
|
||
Total
|
$
|
1,786,188
|
|
|
$
|
1,648,745
|
|
G.
|
Accumulated Other Comprehensive Income (Loss)
|
|
|
|
Unrealized Holding Gains (Losses), Net of Tax
|
|
|
||||||||||
|
Foreign Currency Translation Adjustment
|
|
On Available-For-Sale Debt Securities
|
|
On Foreign Currency Forward Contracts
|
|
Total
|
||||||||
|
(in thousands)
|
||||||||||||||
Balance at December 31, 2018
|
$
|
(11,227
|
)
|
|
$
|
(536
|
)
|
|
$
|
12,422
|
|
|
$
|
659
|
|
Other comprehensive income before reclassifications
|
4,967
|
|
|
596
|
|
|
5,126
|
|
|
10,689
|
|
||||
Amounts reclassified from accumulated other comprehensive income
|
—
|
|
|
—
|
|
|
(5,348
|
)
|
|
(5,348
|
)
|
||||
Net current period other comprehensive income (loss)
|
4,967
|
|
|
596
|
|
|
(222
|
)
|
|
5,341
|
|
||||
Balance at March 31, 2019
|
$
|
(6,260
|
)
|
|
$
|
60
|
|
|
$
|
12,200
|
|
|
$
|
6,000
|
|
|
|
|
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, 2017
|
$
|
(21,031
|
)
|
|
$
|
(594
|
)
|
|
$
|
25,069
|
|
|
$
|
(15,016
|
)
|
|
$
|
(11,572
|
)
|
Other comprehensive loss before reclassifications
|
(2,729
|
)
|
|
(460
|
)
|
|
—
|
|
|
(7,639
|
)
|
|
(10,828
|
)
|
|||||
Amounts reclassified from accumulated other comprehensive income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
6,777
|
|
|
6,777
|
|
|||||
Net current period other comprehensive loss
|
(2,729
|
)
|
|
(460
|
)
|
|
—
|
|
|
(862
|
)
|
|
(4,051
|
)
|
|||||
Amounts reclassified to accumulated deficit pursuant to adoption of new accounting standard
|
949
|
|
|
—
|
|
|
(25,069
|
)
|
|
—
|
|
|
(24,120
|
)
|
|||||
Balance at March 31, 2018
|
$
|
(22,811
|
)
|
|
$
|
(1,054
|
)
|
|
$
|
—
|
|
|
$
|
(15,878
|
)
|
|
$
|
(39,743
|
)
|
H.
|
Hedging
|
|
As of March 31, 2019
|
|
As of December 31, 2018
|
||||
Foreign Currency
|
(in thousands)
|
||||||
Euro
|
$
|
373,264
|
|
|
$
|
335,179
|
|
British pound sterling
|
76,685
|
|
|
73,460
|
|
||
Australian dollar
|
70,889
|
|
|
52,820
|
|
||
Canadian dollar
|
40,089
|
|
|
43,759
|
|
||
Total foreign currency forward contracts
|
$
|
560,927
|
|
|
$
|
505,218
|
|
|
Three Months Ended March 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(in thousands)
|
||||||
Designated as hedging instruments - Reclassified from AOCI
|
|
|
|
||||
Product revenues, net
|
$
|
6,839
|
|
|
$
|
(6,485
|
)
|
Not designated as hedging instruments
|
|
|
|
||||
Other income, net
|
$
|
3,151
|
|
|
$
|
1,539
|
|
As of March 31, 2019
|
||||||||||
Assets
|
|
Liabilities
|
||||||||
Classification
|
|
Fair Value
|
|
Classification
|
|
Fair Value
|
||||
(in thousands)
|
||||||||||
Prepaid expenses and other current assets
|
|
$
|
19,210
|
|
|
Other current liabilities
|
|
$
|
(310
|
)
|
Other assets
|
|
973
|
|
|
Other long-term liabilities
|
|
(68
|
)
|
||
Total assets
|
|
$
|
20,183
|
|
|
Total liabilities
|
|
$
|
(378
|
)
|
As of December 31, 2018
|
||||||||||
Assets
|
|
Liabilities
|
||||||||
Classification
|
|
Fair Value
|
|
Classification
|
|
Fair Value
|
||||
(in thousands)
|
||||||||||
Prepaid expenses and other current assets
|
|
$
|
19,023
|
|
|
Other current liabilities
|
|
$
|
(340
|
)
|
Other assets
|
|
1,514
|
|
|
Other long-term liabilities
|
|
(108
|
)
|
||
Total assets
|
|
$
|
20,537
|
|
|
Total liabilities
|
|
$
|
(448
|
)
|
|
As of March 31, 2019
|
||||||||||||||||||
|
Gross Amounts Recognized
|
|
Gross Amounts Offset
|
|
Gross Amounts Presented
|
|
Gross Amounts Not Offset
|
|
Legal Offset
|
||||||||||
Foreign currency forward contracts
|
(in thousands)
|
||||||||||||||||||
Total assets
|
$
|
20,183
|
|
|
$
|
—
|
|
|
$
|
20,183
|
|
|
$
|
(378
|
)
|
|
$
|
19,805
|
|
Total liabilities
|
$
|
(378
|
)
|
|
$
|
—
|
|
|
$
|
(378
|
)
|
|
$
|
378
|
|
|
$
|
—
|
|
|
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 March 31, 2019
|
|
As of December 31, 2018
|
||||
|
(in thousands)
|
||||||
Raw materials
|
$
|
11,649
|
|
|
$
|
9,677
|
|
Work-in-process
|
80,529
|
|
|
87,944
|
|
||
Finished goods
|
44,520
|
|
|
26,739
|
|
||
Total
|
$
|
136,698
|
|
|
$
|
124,360
|
|
|
Three Months Ended March 31, 2019
|
||
|
(in thousands)
|
||
Operating lease cost
|
$
|
2,639
|
|
Finance lease cost
|
|
||
Amortization of leased assets
|
12,365
|
|
|
Interest on lease liabilities
|
13,449
|
|
|
Variable lease cost
|
6,762
|
|
|
Sublease income
|
(1,484
|
)
|
|
Net lease cost
|
$
|
33,731
|
|
Year
|
|
Finance Leases
|
|
Operating Leases
|
|
Total
|
||||||
|
|
(in thousands)
|
||||||||||
Remainder of 2019
|
|
$
|
61,339
|
|
|
$
|
7,331
|
|
|
$
|
68,670
|
|
2020
|
|
88,998
|
|
|
10,366
|
|
|
99,364
|
|
|||
2021
|
|
87,365
|
|
|
8,658
|
|
|
96,023
|
|
|||
2022
|
|
85,016
|
|
|
8,233
|
|
|
93,249
|
|
|||
2023
|
|
84,092
|
|
|
8,151
|
|
|
92,243
|
|
|||
Thereafter
|
|
512,804
|
|
|
46,212
|
|
|
559,016
|
|
|||
Total lease payments
|
|
919,614
|
|
|
88,951
|
|
|
1,008,565
|
|
|||
Less: amount representing interest
|
|
(323,508
|
)
|
|
(17,947
|
)
|
|
(341,455
|
)
|
|||
Present value of lease liabilities
|
|
$
|
596,106
|
|
|
$
|
71,004
|
|
|
$
|
667,110
|
|
|
Three Months Ended March 31, 2019
|
|
Weighted-average remaining lease term (in years)
|
|
|
Finance leases
|
10.45
|
|
Operating leases
|
10.91
|
|
|
|
|
Weighted-average discount rate
|
|
|
Finance leases
|
9.11
|
%
|
Operating leases
|
4.05
|
%
|
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
|
|
|
Three Months Ended March 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(in thousands)
|
||||||
Stock-based compensation expense by type of award:
|
|
|
|
||||
Restricted stock and restricted stock units (including PSUs)
|
$
|
63,510
|
|
|
$
|
50,418
|
|
Stock options
|
28,156
|
|
|
26,055
|
|
||
ESPP share issuances
|
2,577
|
|
|
2,128
|
|
||
Stock-based compensation expense related to inventories
|
(452
|
)
|
|
(465
|
)
|
||
Total stock-based compensation included in costs and expenses
|
$
|
93,791
|
|
|
$
|
78,136
|
|
|
|
|
|
||||
Stock-based compensation expense by line item:
|
|
|
|
|
|||
Cost of sales
|
$
|
1,338
|
|
|
$
|
813
|
|
Research and development expenses
|
59,715
|
|
|
48,488
|
|
||
Sales, general and administrative expenses
|
32,738
|
|
|
28,835
|
|
||
Total stock-based compensation included in costs and expenses
|
93,791
|
|
|
78,136
|
|
||
Income tax effect
|
(39,524
|
)
|
|
(21,859
|
)
|
||
Total stock-based compensation included in costs and expenses, net of tax
|
$
|
54,267
|
|
|
$
|
56,277
|
|
|
As of March 31, 2019
|
||||
|
Unrecognized Expense
|
|
Weighted-average
Recognition Period |
||
|
(in thousands)
|
|
(in years)
|
||
Type of award:
|
|
|
|
||
Restricted stock and restricted stock units (including PSUs)
|
$
|
475,787
|
|
|
2.55
|
Stock options
|
$
|
193,321
|
|
|
2.84
|
ESPP share issuances
|
$
|
2,555
|
|
|
0.43
|
|
|
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
|
|
252
|
|
|
1.67
|
|
$
|
35.87
|
|
|
252
|
|
|
$
|
35.87
|
|
$40.01–$60.00
|
|
437
|
|
|
3.20
|
|
$
|
50.23
|
|
|
437
|
|
|
$
|
50.23
|
|
$60.01–$80.00
|
|
525
|
|
|
5.02
|
|
$
|
74.83
|
|
|
516
|
|
|
$
|
74.82
|
|
$80.01–$100.00
|
|
2,481
|
|
|
6.95
|
|
$
|
89.20
|
|
|
1,315
|
|
|
$
|
89.81
|
|
$100.01–$120.00
|
|
622
|
|
|
5.88
|
|
$
|
109.32
|
|
|
614
|
|
|
$
|
109.24
|
|
$120.01–$140.00
|
|
773
|
|
|
6.36
|
|
$
|
130.20
|
|
|
653
|
|
|
$
|
130.24
|
|
$140.01–$160.00
|
|
1,287
|
|
|
8.82
|
|
$
|
155.51
|
|
|
333
|
|
|
$
|
155.35
|
|
$160.01–$180.00
|
|
502
|
|
|
8.30
|
|
$
|
162.94
|
|
|
177
|
|
|
$
|
162.95
|
|
$180.01–$187.53
|
|
1,823
|
|
|
9.65
|
|
$
|
185.29
|
|
|
115
|
|
|
$
|
182.72
|
|
Total
|
|
8,702
|
|
|
7.28
|
|
$
|
124.11
|
|
|
4,412
|
|
|
$
|
100.04
|
|
|
Three Months Ended March 31,
|
||||||||||||||
|
2019
|
|
2018
|
||||||||||||
|
Beginning of period
|
|
End of period
|
|
Beginning of period
|
|
End of period
|
||||||||
|
(in thousands)
|
||||||||||||||
Cash and cash equivalents
|
$
|
2,650,134
|
|
|
$
|
2,893,885
|
|
|
$
|
1,665,412
|
|
|
$
|
1,995,893
|
|
Prepaid expenses and other current assets
|
4,910
|
|
|
6,250
|
|
|
2,114
|
|
|
9,835
|
|
||||
Other assets
|
3,209
|
|
|
1,397
|
|
|
—
|
|
|
—
|
|
||||
Cash, cash equivalents and restricted cash per statement of cash flows
|
$
|
2,658,253
|
|
|
$
|
2,901,532
|
|
|
$
|
1,667,526
|
|
|
$
|
2,005,728
|
|
•
|
Announced positive data from 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.
|
•
|
Obtained approval for SYMDEKO in Australia for certain patients 12 years of age or older.
|
•
|
Obtained approval for ORKAMBI in the European Union for children 2 to 5 years of age.
|
•
|
Initiated Phase 2 dose-ranging clinical trial to evaluate the potentiator VX-561 as a potential once-daily monotherapy.
|
•
|
Obtained approval for KALYDECO in the United States for infants 6 to <12 months of age.
|
•
|
Initiated Phase 2 clinical trial evaluating the potential once-daily triple combination of VX-121 (an additional next-generation corrector) with VX-561 and tezacaftor.
|
•
|
Obtained Fast Track Designation for VX-814, our first small molecule alpha-1 antitrypsin deficiency corrector.
|
•
|
Announced with CRISPR Therapeutics that the first patient has been treated with CTX001 in a Phase 1/2 clinical trial of patients with transfusion-dependent beta thalassemia.
|
•
|
Announced with CRISPR Therapeutics that first patient has been enrolled in a Phase 1/2 clinical trial of patients with sickle cell disease.
|
•
|
Obtained Fast Track designation for CTX001 for both transfusion-dependent beta thalassemia and sickle cell disease.
|
•
|
CRISPR Therapeutics AG and its affiliates, 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.
|
|
Three Months Ended March 31,
|
|
Increase/(Decrease)
|
|||||||||||
|
2019
|
|
2018
|
|
$
|
|
%
|
|||||||
|
(in thousands)
|
|
|
|||||||||||
Revenues
|
$
|
858,435
|
|
|
$
|
640,799
|
|
|
$
|
217,636
|
|
|
34
|
%
|
Operating costs and expenses
|
581,627
|
|
|
511,898
|
|
|
69,729
|
|
|
14
|
%
|
|||
Other non-operating income, net
|
43,357
|
|
|
68,703
|
|
|
(25,346
|
)
|
|
**
|
|
|||
Provision for (benefit from) income taxes
|
51,534
|
|
|
(12,659
|
)
|
|
**
|
|
|
**
|
|
|||
Net income attributable to Vertex
|
$
|
268,631
|
|
|
$
|
210,263
|
|
|
$
|
58,368
|
|
|
28
|
%
|
|
|
|
|
|
|
|
|
|||||||
Net income per diluted share attributable to Vertex common shareholders
|
$
|
1.03
|
|
|
$
|
0.81
|
|
|
|
|||||
Diluted shares used in per share calculations
|
260,175
|
|
|
258,526
|
|
|
|
|
|
|||||
|
|
|
|
|
** Not meaningful
|
|
Three Months Ended March 31,
|
|
Increase/(Decrease)
|
|||||||||||
|
2019
|
|
2018
|
|
$
|
|
%
|
|||||||
|
(in thousands)
|
|
|
|||||||||||
Product revenues, net
|
$
|
857,253
|
|
|
$
|
637,729
|
|
|
$
|
219,524
|
|
|
34
|
%
|
Collaborative and royalty revenues
|
1,182
|
|
|
3,070
|
|
|
(1,888
|
)
|
|
(61
|
)%
|
|||
Total revenues
|
$
|
858,435
|
|
|
$
|
640,799
|
|
|
$
|
217,636
|
|
|
34
|
%
|
|
Three Months Ended March 31,
|
|
Increase/(Decrease)
|
|||||||||||
|
2019
|
|
2018
|
|
$
|
|
%
|
|||||||
|
(in thousands)
|
|
|
|||||||||||
SYMDEKO/SYMKEVI
|
$
|
320,275
|
|
|
$
|
34,124
|
|
|
$
|
286,151
|
|
|
839
|
%
|
ORKAMBI
|
293,007
|
|
|
354,066
|
|
|
(61,059
|
)
|
|
(17
|
)%
|
|||
KALYDECO
|
243,971
|
|
|
249,539
|
|
|
(5,568
|
)
|
|
(2
|
)%
|
|||
Total product revenues, net
|
$
|
857,253
|
|
|
$
|
637,729
|
|
|
$
|
219,524
|
|
|
34
|
%
|
`
|
Three Months Ended March 31,
|
|
Increase/(Decrease)
|
|||||||||||
|
2019
|
|
2018
|
|
$
|
|
%
|
|||||||
|
(in thousands)
|
|
|
|||||||||||
Cost of sales
|
$
|
95,092
|
|
|
$
|
71,613
|
|
|
$
|
23,479
|
|
|
33
|
%
|
Research and development expenses
|
339,490
|
|
|
310,553
|
|
|
28,937
|
|
|
9
|
%
|
|||
Sales, general and administrative expenses
|
147,045
|
|
|
129,808
|
|
|
17,237
|
|
|
13
|
%
|
|||
Restructuring income
|
—
|
|
|
(76
|
)
|
|
76
|
|
|
**
|
|
|||
Total costs and expenses
|
$
|
581,627
|
|
|
$
|
511,898
|
|
|
$
|
69,729
|
|
|
14
|
%
|
|
|
|
|
|
** Not Meaningful
|
|
Three Months Ended March 31,
|
|
Increase/(Decrease)
|
|||||||||||
|
2019
|
|
2018
|
|
$
|
|
%
|
|||||||
|
(in thousands)
|
|
|
|||||||||||
Research expenses
|
$
|
90,463
|
|
|
$
|
77,942
|
|
|
$
|
12,521
|
|
|
16
|
%
|
Development expenses
|
249,027
|
|
|
232,611
|
|
|
16,416
|
|
|
7
|
%
|
|||
Total research and development expenses
|
$
|
339,490
|
|
|
$
|
310,553
|
|
|
$
|
28,937
|
|
|
9
|
%
|
|
Three Months Ended March 31,
|
|
Increase/(Decrease)
|
|||||||||||
|
2019
|
|
2018
|
|
$
|
|
%
|
|||||||
|
(in thousands)
|
|
|
|||||||||||
Research Expenses:
|
|
|
|
|
|
|
|
|||||||
Salary and benefits
|
$
|
24,379
|
|
|
$
|
24,088
|
|
|
$
|
291
|
|
|
1
|
%
|
Stock-based compensation expense
|
17,535
|
|
|
14,760
|
|
|
2,775
|
|
|
19
|
%
|
|||
Outsourced services and other direct expenses
|
23,364
|
|
|
18,813
|
|
|
4,551
|
|
|
24
|
%
|
|||
Collaboration and asset acquisition payments
|
—
|
|
|
308
|
|
|
(308
|
)
|
|
**
|
|
|||
Infrastructure costs
|
25,185
|
|
|
19,973
|
|
|
5,212
|
|
|
26
|
%
|
|||
Total research expenses
|
$
|
90,463
|
|
|
$
|
77,942
|
|
|
$
|
12,521
|
|
|
16
|
%
|
|
|
|
|
|
** Not meaningful
|
|
Three Months Ended March 31,
|
|
Increase/(Decrease)
|
|||||||||||
|
2019
|
|
2018
|
|
$
|
|
%
|
|||||||
|
(in thousands)
|
|
|
|||||||||||
Development Expenses:
|
|
|
|
|
|
|
|
|||||||
Salary and benefits
|
$
|
60,507
|
|
|
$
|
57,002
|
|
|
$
|
3,505
|
|
|
6
|
%
|
Stock-based compensation expense
|
42,180
|
|
|
33,728
|
|
|
8,452
|
|
|
25
|
%
|
|||
Outsourced services and other direct expenses
|
89,874
|
|
|
99,192
|
|
|
(9,318
|
)
|
|
(9
|
)%
|
|||
Collaboration and asset acquisition payments
|
5,250
|
|
|
250
|
|
|
5,000
|
|
|
**
|
|
|||
Drug supply costs
|
7,894
|
|
|
8,421
|
|
|
(527
|
)
|
|
(6
|
)%
|
|||
Infrastructure costs
|
43,322
|
|
|
34,018
|
|
|
9,304
|
|
|
27
|
%
|
|||
Total development expenses
|
$
|
249,027
|
|
|
$
|
232,611
|
|
|
$
|
16,416
|
|
|
7
|
%
|
|
|
|
|
|
** Not meaningful
|
|
Three Months Ended March 31,
|
|
Increase/(Decrease)
|
|||||||||||
|
2019
|
|
2018
|
|
$
|
|
%
|
|||||||
|
(in thousands)
|
|
|
|||||||||||
Sales, general and administrative expenses
|
$
|
147,045
|
|
|
$
|
129,808
|
|
|
$
|
17,237
|
|
|
13
|
%
|
|
March 31,
|
|
December 31,
|
|
Increase/(Decrease)
|
|||||||||
|
2019
|
|
2018
|
|
$
|
|
%
|
|||||||
|
(in thousands)
|
|
|
|||||||||||
Cash, cash equivalents and marketable securities
|
$
|
3,478,035
|
|
|
$
|
3,168,242
|
|
|
$
|
309,793
|
|
|
10
|
%
|
Working Capital
|
|
|
|
|
|
|
|
|||||||
Total current assets
|
4,183,039
|
|
|
3,843,109
|
|
|
339,930
|
|
|
9
|
%
|
|||
Total current liabilities
|
(1,106,468
|
)
|
|
(1,120,292
|
)
|
|
(13,824
|
)
|
|
(1
|
)%
|
|||
Total working capital
|
$
|
3,076,571
|
|
|
$
|
2,722,817
|
|
|
$
|
353,754
|
|
|
13
|
%
|
•
|
significant expected operating expenses to conduct research and development activities and to operate our organization; and
|
•
|
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
March 31, 2019
, we have accrued approximately
$382.7 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 based
|
•
|
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, we made
$100.4 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.
|
•
|
our expectations regarding the amount of, timing of and trends with respect to our revenues, costs and expenses and other gains and losses, including those related to net product revenues;
|
•
|
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 of our other drug candidates for which we obtain regulatory approval;
|
•
|
our expectations regarding the timing and structure of clinical trials of our drugs and drug candidates and the expected timing of our receipt of data from our ongoing and planned clinical trials;
|
•
|
the data that will be generated by ongoing and planned clinical trials and the ability to use that data to advance compounds, continue development or support regulatory filings;
|
•
|
our beliefs regarding the support provided by clinical trials and preclinical and nonclinical studies of our drug candidates for further investigation, clinical trials or potential use as a treatment;
|
•
|
our plan to continue investing in our research and development programs and our strategy to develop our drug candidates, alone or with third party-collaborators;
|
•
|
the establishment, development and maintenance of collaborative relationships;
|
•
|
potential business development activities;
|
•
|
potential fluctuations in foreign currency exchange rates;
|
•
|
our ability to use our research programs to identify and develop new drug candidates to address serious diseases and significant unmet medical needs; and
|
•
|
our liquidity and our expectations regarding the possibility of raising additional capital.
|
Period
|
|
Total Number
of Shares Purchased (1) |
Average Price
Paid per Share |
Total Number of Shares
Purchased as Part of Publicly Announced Plans or Programs (2) |
Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (2)
|
January 1, 2019 to January 31, 2019
|
70,691
|
$169.74
|
69,778
|
$138,000,783
|
|
February 1, 2019 to February 28, 2019
|
183,914
|
$184.86
|
183,366
|
$104,002,661
|
|
March 1, 2019 to March 31, 2019
|
285,909
|
$181.87
|
283,874
|
$52,004,541
|
|
Total
|
540,514
|
$181.30
|
537,018
|
$52,004,541
|
Exhibit Number
|
Exhibit Description
|
10.1
|
|
10.2
|
|
31.1
|
|
31.2
|
|
32.1
|
|
101.INS
|
XBRL Instance
|
101.SCH
|
XBRL Taxonomy Extension Schema
|
101.CAL
|
XBRL Taxonomy Extension Calculation
|
101.LAB
|
XBRL Taxonomy Extension Labels
|
101.PRE
|
XBRL Taxonomy Extension Presentation
|
101.DEF
|
XBRL Taxonomy Extension Definition
|
|
Vertex Pharmaceuticals Incorporated
|
|
|
|
|
May 1, 2019
|
By:
|
/s/ Charles Wagner
|
|
|
Charles Wagner
|
|
|
Executive Vice President, Chief Financial Officer
(principal financial officer and duly authorized officer) |
(i)
|
the Executive’s duties are materially diminished to an extent that results in the Executive no longer being an “officer,” as such term is defined in Rule 16a-1(f) promulgated under the Securities Exchange Act of 1934; or
|
(ii)
|
the Executive’s Base Salary is decreased unless such reduction is part of an across-the-board proportionate reduction in the salaries of the Company’s senior management team; or
|
(iii)
|
the office to which the Executive is assigned is relocated to a place 35 or more miles away and such relocation is not at the Executive’s request or with the Executive’s prior agreement (and other than, for Executives assigned to the Company’s principal executive offices, in connection with a change in location of the Company’s principal executive offices);
|
(i)
|
Base Salary earned by Executive but not paid through the date of termination of Executive’s employment under this Section 9(b); and
|
(ii)
|
any amounts earned to the Executive but not yet paid under Sections 5 or 7 above.
|
(i)
|
Base Salary earned by Executive but not paid through the date of termination of Executive’s employment under this Section 9(c);
|
(ii)
|
all cash incentive compensation awards earned by Executive but not paid prior to the date of termination of Executive’s employment under this Section 9(c);
|
(iii)
|
a lump sum cash payment to the Executive in an amount equal to the Severance Payment, payable within ten days after the execution of a general release and expiration, without revocation, of any applicable revocation periods under the general release provided that if the 60-day period during which the release is required to become effective and irrevocable begins in one calendar year and ends in another calendar year, the Severance Payment shall not be made before the first day of the second calendar year;
|
(iv)
|
any amounts earned but not yet paid under Sections 5 or 7 above;
|
(v)
|
if COBRA coverage is elected by the Executive, the Company shall pay the cost of insurance continuation premiums on the Executive’s behalf (whether or not covered by COBRA) to continue standard medical, dental and life insurance coverage for the Executive
|
(A)
|
the date 12 months after the date the Executive’s employment is terminated; or
|
(B)
|
the date, or dates, on which the Executive receives equivalent coverage and benefits under the plans, programs and/or arrangements of a subsequent employer (such coverage and benefits to be determined on a coverage-by-coverage or benefit-by-benefit basis).
|
I.
|
Definitions
. For the purposes of this Change of Control Agreement (this “
Agreement
”), capitalized terms shall have the following meanings:
|
1.
|
“
Cause
” shall mean:
|
(a)
|
your conviction of a crime involving moral turpitude;
|
(b)
|
your willful refusal or failure to follow a lawful directive or instruction of the Company’s Board of Directors or the individual(s) to whom you report,
provided
that you receive prior written notice of the directive(s) or instruction(s) that you failed to follow, and
provided
further
that the Company, in good faith, gives you 30 days to correct such failure and
further
provided
that if you correct the failure(s), any termination of your employment on account of such failure shall not be treated for purposes of this Agreement as a termination of employment for “Cause”;
|
(c)
|
in carrying out your duties you commit (i) willful gross negligence, or (ii) willful gross misconduct, resulting in either case in material harm to the Company,
unless
such act, or failure to act, was believed by you, in good faith, to be in the best interests of the Company; or
|
(d)
|
your violation of the Company’s policies made known to you regarding confidentiality, securities trading or inside information.
|
2.
|
“
Change of Control
” shall mean that:
|
(a)
|
any “person” or “group” as such terms are used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934 (the “
Act
”), becomes a beneficial owner, as such term is used in Rule 13d-3 promulgated under the Act, of securities of the Company representing more than 50% of the combined voting power of the outstanding securities of the Company having the right to vote in the election of directors; or
|
(b)
|
all or substantially all the business or assets of the Company are sold or disposed of, or the Company or a subsidiary of the Company combines with another company pursuant to a merger,
|
3.
|
“
Code
” shall mean the Internal Revenue Code of 1986, as amended.
|
4.
|
“
Disability
” shall mean a disability as determined under the Company's long-term disability plan or program in effect at the time the disability first occurs, or if no such plan or program exists at the time of disability, then a “disability” as defined Section 22(e)(3) of the Code.
|
5.
|
“
Good Reason
” shall mean one of the following events has occurred without your consent:
|
(a)
|
You suffer a material reduction in the authorities, duties or job title and responsibilities associated with your position as Executive Vice President, Chief Financial Officer for the Company as of the date hereof;
|
(b)
|
your annual base salary is decreased;
|
(c)
|
the office to which you are assigned is relocated to a place 35 or more miles away; or
|
(d)
|
following a Change of Control, the Company’s successor fails to assume the Company’s rights and obligations under this Agreement;
|
6.
|
“
Termination Date
” shall mean the last day of your employment with the Company.
|
I.
|
Severance Benefits upon Change of Control
. If:
|
(A)
|
your employment is terminated by the Company (except for termination for Cause or due to a Disability or death) and the Termination Date is within 90 days prior to a Change of Control or within 12 months after a Change of Control; or
|
(B)
|
you, of your own initiative, (i) terminate your employment for Good Reason (in accordance with the notice and cure provisions set forth in Section I.5 above) and (ii) the event giving rise to Good Reason occurs within 90 days prior to a Change of Control or within 12 months after a Change of Control;
|
1.
|
Severance Payment
. In exchange for your execution within 60 days of the Termination Date of a general release, in a form satisfactory to the Company, of all claims against the Company, its subsidiaries, and its and their officers, directors and representatives, that becomes enforceable and irrevocable within such 60-day period, the Company shall make a cash payment (the “
Severance Payment
”) to you in an amount equal to:
|
(a)
|
(i) your annual base salary (provided, however, that if you terminate your employment for Good Reason based on a reduction in your annual base salary, then the annual base salary to
|
(b)
|
a prorata portion of your target bonus for the portion of the year in which the Termination Date occurs under any bonus program applicable to you; plus
|
(c)
|
all other cash incentive compensation awards earned by you but not paid prior to the Termination Date; provided that, if a fiscal year has been completed and the incentive award for such fiscal year has not been determined, the incentive compensation for such completed fiscal year shall equal the target bonus for such fiscal year.
|
2.
|
Accelerated Vesting.
|
(a)
|
On the Termination Date, stock options for the purchase of the Company’s securities held by you as of the Termination Date and not then exercisable shall immediately become exercisable in full. The options to which this accelerated vesting applies shall remain exercisable until the earlier of (a) the end of the 90-day period immediately following the later of (i) the Termination Date or (ii) the date of the Change of Control and (b) the date the stock option(s) would otherwise expire; and
|
(b)
|
On the Termination Date, each outstanding restricted stock unit grant shall be accelerated and the Shares shall be delivered to you within two business days (subject to (i) your making satisfactory arrangements with the Company providing for the payment to the Company of all required withholding taxes and (ii) with the number of shares subject to the restricted stock unit grants that contain performance criteria vesting at target or based on earned shares as set forth in the applicable restricted stock grant). 1-year financial performance stock unit awards vest as to target shares until the initial vesting date and based on earned performance shares thereafter. 3-year non-financial performance stock unit awards vest as to target shares.
|
3.
|
Continued Insurance Coverage
. If COBRA coverage is elected by you, the Company shall pay the cost of insurance continuation premiums on your behalf (whether or not covered by COBRA) to continue standard medical, dental and life insurance coverage for you (or the cash equivalent of same if you are ineligible for continued coverage) until the earlier of (i) the date 12 months after the Termination Date or (ii) the date you begin receiving substantially equivalent coverage and benefits through a subsequent employer.
|
4.
|
No Mitigation.
You shall not be required to mitigate the amount of the Severance Payment or any other benefit provided under this Agreement by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this Agreement be reduced (except as provided in Article II Section 3(ii)) by any compensation earned by you as the result of other employment, by retirement benefits, or be offset against any amount claimed to be owed by you to the Company or otherwise (except for any required withholding taxes); provided, that if the Company makes any other severance payments to you under any other program or agreement, such amounts shall be offset against the payments the Company is obligated to make pursuant to this Agreement.
|
II.
|
Miscellaneous
.
|
1.
|
Employee’s Obligations
. Upon the termination of employment, you shall promptly deliver to the Company all property of the Company and all material documents, statistics, account records, programs and other similar tangible items which may by in your possession or under your control and which relate in a material way to the business or affairs of the Company or its subsidiaries, and no copies of any such documents or any part thereof shall be retained by you.
|
2.
|
Entire Agreement
. This Agreement, the “
Employment Agreement
” and the “
Employee Non-Disclosure, Non-Competition & Intellectual Property Assignment Agreement
” executed by you covers the entire understanding of the parties as to the subject matter hereof, superseding all prior understandings and agreements related hereto. No modification or amendment of the terms and conditions of this Agreement shall be effective unless in writing and signed by the parties or their respective duly authorized agents, provided, however, that the Company may, without your consent, unilaterally adopt amendments that may be required so that this Agreement continues to comply with applicable law or regulation, including without limitation Section 409A of the Code, provided such amendments do not adversely affect the benefits to be provided to you under Section II of this Agreement. In no event shall the Company have any liability relating to the failure or alleged failure of any payment or benefit under this Agreement to comply with or be exempt from, the requirements of Section 409A.
|
3.
|
Governing Law
. This Agreement shall be governed by the laws of The Commonwealth of Massachusetts, as applied to contracts entered into and performed entirely in Massachusetts by Massachusetts residents.
|
4.
|
Successors and Assigns
. This Agreement may be assigned by the Company upon a sale, transfer or reorganization of the Company. Upon a Change of Control, the Company shall require the successor to assume the Company’s rights and obligations under this Agreement. The Company’s failure to do so shall constitute Good Reason and a material breach of this Agreement. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their successors, permitted assigns, legal representatives and heirs.
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Vertex Pharmaceuticals Incorporated;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
Date:
|
May 1, 2019
|
/s/ Jeffrey M. Leiden
|
|
|
|
|
|
Jeffrey M. Leiden
|
|
|
Chief Executive Officer and President
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Vertex Pharmaceuticals Incorporated;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
Date:
|
May 1, 2019
|
/s/ Charles Wagner
|
|
|
|
|
|
Charles Wagner
|
|
|
Executive Vice President and Chief Financial Officer
|
Date:
|
May 1, 2019
|
|
|
|
/s/ Jeffrey M. Leiden
|
|
|
|
|
|
Jeffrey M. Leiden
|
|
|
Chief Executive Officer and President
|
|
|
|
Date:
|
May 1, 2019
|
|
|
|
/s/ Charles Wagner
|
|
|
|
|
|
Charles Wagner
|
|
|
Executive Vice President and Chief Financial Officer
|
|