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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Vertex Pharmaceuticals Inc | NASDAQ:VRTX | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.92 | 0.23% | 401.08 | 371.34 | 408.70 | 405.665 | 397.59 | 401.50 | 1,063,962 | 05:00:08 |
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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, 2013
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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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(Do not check if a smaller reporting company)
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Page
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ITEM 1.
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BUSINESS
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•
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Patients 18 years of age and older:
50 patients 18 years of age and older were enrolled in this clinical trial and had a mean baseline percent predicted FEV
1
of 65 percent. A pre-specified subset analysis in these patients showed statistically significant improvements in lung function and other key secondary endpoints. In these patients, the mean absolute improvement in percent predicted FEV
1
between treatment with ivacaftor and placebo was 5.0 percentage points (p=0.01) and the mean relative improvement in percent predicted FEV
1
was 9.1 percent (p=0.008) in each case through the 24-week treatment period. An additional analysis was conducted on percent predicted FEV
1
four weeks following the completion of treatment with ivacaftor. Mean lung function returned toward baseline in the patients who received ivacaftor, who showed a -3.1 percentage point (p=0.001) mean absolute within-group change from Week 24 to Week 28 (four weeks after the end of treatment). Data from these subgroup analyses of patients 18 years of age and older are provided below:
|
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Ivacaftor (n=24)
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Placebo (n=26)
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Treatment Difference
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Mean Absolute Change in FEV
1
*
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4.5 (p=0.002)
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-0.5 (p=0.728)
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5.0 (p=0.01)
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Mean Relative Change in FEV
1
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7.7 (p=0.002)
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-1.5 (p=0.526)
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9.1 (p=0.008)
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Proportion of Patients with Mean Absolute Improvement in FEV
1
of 5 percentage points or more
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54.2%
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15.4%
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38.8% (p=0.007)
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CFQ-R Score (respiratory domain)*
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12.2 (p=<0.0001)
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-0.5 (p=0.861)
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12.6 (p=0.002)
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•
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Patients 12 to 17 years of age:
Two patients 12 to 17 years of age enrolled in this clinical trial; one received placebo and one received ivacaftor. There were too few patients to make a statistical comparison of patients in this age range.
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•
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Patients six to eleven years of age:
Seventeen patients six to eleven years of age enrolled in this clinical trial and had a mean baseline percent predicted FEV
1
of 96 percent. In these patients, there was a mean absolute decline from baseline in percent predicted FEV
1
of -2.8 percentage points (p=0.132) in patients who received ivacaftor (n=9) compared to a mean absolute increase from baseline in percent predicted FEV
1
of 3.5 percentage points (p=0.084) for patients who received placebo (n=8). The mean absolute treatment difference was -6.3 percentage points (p=0.03).
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•
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Cohort 2 -
We evaluated the 600mg once-daily (QD) dose of lumacaftor in combination with ivacaftor (250mg q12h) in Cohort 2 in 21 patients with CF who are homozygous for the F508del mutation. This regimen resulted in statistically significant improvements in lung function (within group and versus placebo) during the combination dosing period, as set forth in the following table:
|
|
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Mean Absolute and Relative Changes in Percent Predicted FEV
1
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||
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Day 0 - 28; lumacaftor alone
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Day 28 - 56; lumacaftor + ivacaftor
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Day 0 - 56
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lumacaftor (600mg QD) + ivacaftor (250mg q12h)
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Within Group
|
|
|
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Absolute
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-2.9 (p=0.07)
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+6.1 (p<0.001)
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+3.4 (p=0.03)
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Relative
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-3.5 (p=0.13)
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+9.7 (p<0.001)
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+5.3 (p=0.02)
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Versus Placebo
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Absolute
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-2.0 (p=0.36)
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+8.6 (p <0.001)
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+6.7 (p=0.002)
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Relative
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-3.9 (p=0.21)
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+12.8 (p<0.001)
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+9.2 (p=0.004)
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•
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Cohort 3 -
We evaluated the 400mg (q12h) dose of lumacaftor in combination with ivacaftor in Cohort 3 in 11 patients with CF who are homozygous for the F508del mutation. Cohort 3 also included the randomization of four patients to placebo to allow for a blinded safety assessment. Three patients completed treatment in the placebo group. The pattern of lung function response observed in Cohort 3 was similar to that observed in the 600mg (QD) dose group in Cohort 2, with a decline in FEV
1
during the lumacaftor monotherapy dosing period followed by a statistically significant increase in FEV
1
during the lumacaftor and ivacaftor combination dosing period. Additional lung function results for Cohort 3 are provided below:
|
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Mean Absolute and Relative Changes in Percent Predicted FEV
1
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||
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Day 0 - 28; lumacaftor alone
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Day 28 - 56; lumacaftor + ivacaftor
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Day 0 - 56
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lumacaftor (400mg q12h) + ivacaftor (250mg q12h)
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Within Group
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Absolute
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-4.3 (p=0.04)
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+6.6 (p=0.01)
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+1.9 (p=0.57)
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Relative
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-6.3 (p=0.08)
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+8.8 (p=0.01)
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+2.5 (p=0.67)
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Mean Changes in Lung Function
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Mean Relative Change in Percent Predicted FEV
1
From Baseline
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Mean Absolute Change in Percent Predicted FEV
1
From Baseline
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Day 0 - 28
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28 Days Post-Treatment
(Within-Group Mean)*
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Day 0 - 28
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28 Days Post-Treatment
(Within-Group Mean)*
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Placebo (n=23) (within group)
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0.03 (NS)
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1.6
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-0.4 (NS)
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0.6
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Combination Treatment Arms
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vs. Placebo
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vs. Placebo
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VX-661 (10 mg) + ivacaftor (150 mg) (n=17)
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4.1 (NS)
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1.7
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2.3 (NS)
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0.8
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VX-661 (30 mg) + ivacaftor (150 mg) (n=17)
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5.4 (NS)
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1.2
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3.4 (NS)
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0.5
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VX-661 (100 mg) + ivacaftor (150 mg) (n=15)
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9.0 (p=0.01)
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1.7
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4.8 (p=0.01)
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0.5
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VX-661 (150 mg) + ivacaftor (150 mg) (n=16)
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7.5 (p=0.02)
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1.4
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4.5 (p=0.01)
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0.7
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•
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200 mg of VX-135 in Combination with Daclatasvir (60 mg):
Based on the intent-to-treat analysis, 58 percent (7 of 12) of patients in this treatment arm had undetectable HCV RNA levels after 4 weeks of treatment and 83 percent (10 of 12) of these patients had undetectable HCV RNA levels four weeks after the completion of treatment, or SVR4. One patient in this treatment arm experienced a serious adverse event (vomiting/nausea) and discontinued treatment after the first dose. This patient did not achieve SVR4. The eleven other patients in this arm completed 12 weeks of treatment and 91 percent (10 of 11) of these patients achieved SVR4. One patient relapsed during the follow-up period and did not achieve SVR4.
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•
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100 mg of VX-135 in Combination with Daclatasvir (60 mg):
Based on an intent-to-treat analysis, 73 percent (8 of 11) of patients in this treatment arm achieved undetectable HCV RNA levels after 4 weeks of treatment and 73 percent (8 of 11) of patients had undetectable HCV RNA levels four weeks after the completion of treatment (SVR4). Two patients in this arm experienced viral breakthrough while receiving the combination regimen, and one patient relapsed during the follow-up period.
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Drug/Drug Candidate
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Status of United States Patent
(Anticipated Expiration, Subject to Potential Extensions) |
Status of European Union Patent
(Anticipated Expiration, Subject to Potential Extensions) |
KALYDECO (ivacaftor)
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Granted (2027)
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Application Pending (2025)
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lumacaftor
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Application Pending (2026)
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Application Pending (2026)
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VX-661
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Granted (2027)
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Application Pending (2027)
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INCIVEK/INCIVO (telaprevir)
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Granted (2025)
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Granted (2026)
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VX-135
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Application Pending (2031)
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Application Pending (2031)
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VX-509
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Granted (2026)
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Application Pending (2025)
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VX-787
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Application Pending (2030)
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Application Pending (2030)
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•
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U.S. and foreign patent applications covering potentiator compounds and corrector compounds for the CFTR protein, including ivacaftor, lumacaftor and VX-661 and many other related compounds, and the use of those potentiators and correctors to treat CF.
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•
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U.S. and foreign patents and patent applications covering telaprevir and other HCV protease and polymerase inhibitors and the use of these compounds to treat HCV infection.
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•
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U.S. and foreign patent applications licensed from Alios covering VX-135 and the use of VX-135 to treat HCV infection.
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•
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U.S. and foreign patents and patent applications covering inhibitors of a variety of kinase proteins, including VX-509, and the use of those inhibitors to treat autoimmune disease, including rheumatoid arthritis.
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•
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U.S. and foreign patents and patent applications covering influenza virus inhibitors, including VX-787.
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•
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U.S. and foreign patents and patent applications covering the manufacture, pharmaceutical compositions, related solid forms, formulations, dosing regimens and methods of use of these compounds, including our two marketed products ivacaftor and telaprevir.
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•
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refusal to approve pending applications;
|
•
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withdrawal of an approval;
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•
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imposition of a clinical hold;
|
•
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warning letters;
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•
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product seizures;
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•
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total or partial suspension of production or distribution; or
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•
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injunctions, fines, disgorgement, or civil or criminal penalties.
|
•
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completion of preclinical laboratory tests, animal studies and formulation studies conducted according to Good Laboratory Practices, or GLP, and other applicable regulations;
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•
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submission to the FDA of an investigational new drug, or IND, application, which must become effective before clinical trials in the United States may begin;
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•
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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;
|
•
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submission to the FDA of an NDA;
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•
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satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product will be produced to assess compliance with cGMP to assure that the facilities, methods and controls are adequate to preserve the product’s identity, strength, quality and purity; and
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•
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FDA review and approval of the NDA.
|
•
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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.
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•
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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.
|
•
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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.
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Phase
|
Estimated Duration
|
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Discovery
|
2 to 4 years
|
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Preclinical
|
1 to 2 years
|
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Phase 1
|
1 to 2 years
|
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Phase 2
|
2 to 4 years
|
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Phase 3
|
2 to 4 years
|
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FDA approval
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6 months to 2 years
|
•
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record-keeping requirements;
|
•
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reporting of adverse experiences with the product;
|
•
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providing the FDA with updated safety and efficacy information;
|
•
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drug sampling and distribution requirements;
|
•
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notifying the FDA and gaining its approval of specified manufacturing or labeling changes;
|
•
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complying with certain electronic records and signature requirements; and
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•
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complying with FDA promotion and advertising requirements.
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Name
|
|
Age
|
Position
|
Jeffrey M. Leiden, M.D., Ph.D.
|
58
|
Chairman of the Board, Chief Executive Officer and President
|
|
Stuart A. Arbuckle
|
48
|
Executive Vice President and Chief Commercial Officer
|
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Kenneth L. Horton, J.D.
|
47
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Executive Vice President and Chief Legal Officer
|
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Peter Mueller, Ph.D.
|
57
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Executive Vice President, Global Research and Development, and Chief Scientific Officer
|
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Ian F. Smith
|
48
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Executive Vice President and Chief Financial Officer
|
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Thomas Connolly
|
56
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Senior Vice President, Human Resources
|
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Megan Pace
|
41
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Senior Vice President, Corporate Communications
|
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Amit K. Sachdev, J.D.
|
46
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Senior Vice President, Global Government Strategy, Market Access and Value
|
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Paul M. Silva
|
48
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Senior Vice President and Corporate Controller
|
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David Altshuler, M.D., Ph.D.
|
49
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Director
|
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Joshua S. Boger, Ph.D.
|
62
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Director
|
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Terrence C. Kearney
|
59
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Director
|
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Yuchun Lee
|
48
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Director
|
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Margaret G. McGlynn
|
54
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Director
|
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Wayne J. Riley, M.D.
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54
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Director
|
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Bruce I. Sachs
|
54
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Director
|
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Elaine S. Ullian
|
66
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Director
|
•
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lower demonstrated efficacy, safety and/or tolerability compared to other drugs;
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•
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prevalence and severity of adverse side-effects;
|
•
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lack of cost-effectiveness;
|
•
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lack of reimbursement availability from third-party payors;
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•
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a decision to wait for the approval of other therapies in development that have significant perceived advantages over our drug;
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•
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convenience and ease of administration;
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•
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other potential advantages of alternative treatment methods; and
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•
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ineffective marketing and/or distribution support.
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•
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offer therapeutic or other improvement over existing competitive drugs;
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•
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be proven safe and effective in clinical trials;
|
•
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meet applicable regulatory standards;
|
•
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be capable of being produced in commercial quantities at acceptable costs; or
|
•
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if approved for commercial sale, be successfully marketed as pharmaceutical products.
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•
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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;
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•
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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;
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•
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a lower than anticipated retention rate of volunteers or patients in clinical trials;
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•
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the need to repeat clinical trials as a result of inconclusive results, unforeseen complications in testing or clinical investigator error;
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•
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inadequate supply or deficient quality of drug candidate materials or other materials necessary for the conduct of our clinical trials;
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•
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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;
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•
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unfavorable scientific results from clinical trials;
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•
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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;
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•
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favorable results in testing of our competitors’ drug candidates, or FDA or foreign regulatory authority approval of our competitors’ drug candidates; or
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•
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action by the FDA or a foreign regulatory authority to place a clinical hold or partial clinical hold on a trial or compound.
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•
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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.
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•
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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.
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•
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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.
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•
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Our collaboration agreements are subject to termination under various circumstances.
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•
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implement and clearly communicate our corporate-wide strategies;
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•
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enhance our operational and financial infrastructure, including our controls over records and information;
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•
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enhance our operational, financial and management processes, including our cross-functional decision-making processes and our budget prioritization systems;
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•
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train and manage our global employee base;
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•
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transition from a U.S.-centric company into an organization capable of developing and commercializing multiple drug candidates in international markets; and
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•
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enhance our compliance and legal resources.
|
•
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differing regulatory requirements for drug approvals and regulation of approved drugs in foreign countries;
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•
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collectibility of accounts receivable;
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•
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unexpected changes in tariffs, trade barriers and regulatory requirements;
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•
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economic weakness, including inflation, or political instability in particular foreign economies and markets;
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•
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compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;
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•
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foreign taxes, including withholding of payroll taxes;
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•
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foreign currency fluctuations, which could result in increased operating expenses or reduced revenues, and other obligations incident to doing business or operating in another country;
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•
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workforce uncertainty in countries where labor unrest is more common than in the United States;
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•
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production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and
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•
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business interruptions resulting from geo-political actions, including war and terrorism.
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•
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the information contained in our quarterly earnings releases, including our net product revenues and operating expenses for completed periods and guidance regarding future periods;
|
•
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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 of results of clinical trials or nonclinical studies relating to our drugs, drug candidates or those of our competitors;
|
•
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prescription data and other information disclosed by third-parties regarding our business or products;
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•
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technological innovations or the introduction of new drugs by our competitors;
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•
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government regulatory action;
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•
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public concern as to the safety of drugs developed by us or our competitors;
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•
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developments in patent or other intellectual property rights or announcements relating to these matters;
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•
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developments in domestic and international governmental policy or regulation, for example, relating to intellectual property rights;
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•
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developments relating specifically to other companies and market conditions for pharmaceutical and biotechnology stocks or stocks in general;
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•
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business development, capital structuring or financing activities; and
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•
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general worldwide or national economic, political and capital market conditions.
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•
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our expectations regarding the amount of, timing of and trends with respect to our revenues, costs and expenses and other gains and losses, including those related to net product revenues from KALYDECO and INCIVEK;
|
•
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our expectations regarding clinical trials, development timelines and regulatory authority filings and submissions for ivacaftor, lumacaftor, VX-135 and VX-661;
|
•
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our expectations regarding the timing of data from our clinical trials of ivacaftor and lumacaftor in combination with ivacaftor, the possibility of using that data to support regulatory submissions and the timing of those potential submissions;
|
•
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our ability to successfully market our products or any of our other drug candidates for which we obtain regulatory approval;
|
•
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our expectations regarding the timing and structure of clinical trials of our drugs and drug candidates, including, ivacaftor, lumacaftor, VX-135 and VX-661, 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;
|
•
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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;
|
•
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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;
|
•
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the establishment, development and maintenance of collaborative relationships;
|
•
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potential business development activities;
|
•
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our estimates regarding the charges associated with our October 2013 workforce reduction and our other restructuring activities;
|
•
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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
|
Year Ended December 31, 2013:
|
|
High
|
|
Low
|
||||
First quarter
|
$
|
55.93
|
|
|
$
|
42.72
|
|
|
Second quarter
|
87.47
|
|
|
51.28
|
|
|||
Third quarter
|
89.96
|
|
|
73.43
|
|
|||
Fourth quarter
|
78.38
|
|
|
58.06
|
|
Year Ended December 31, 2012:
|
|
High
|
|
Low
|
||||
First quarter
|
$
|
43.13
|
|
|
$
|
32.04
|
|
|
Second quarter
|
66.10
|
|
|
35.26
|
|
|||
Third quarter
|
59.98
|
|
|
46.03
|
|
|||
Fourth quarter
|
60.00
|
|
|
38.44
|
|
Period
|
|
Total Number
of Shares Purchased |
Average Price
Paid per Share |
Total Number of Shares
Purchased as Part of Publicly Announced Plans or Programs |
Maximum Number of
Shares that May Yet be Purchased Under the Plans or Programs |
|||
Oct. 1, 2013 to Oct. 31, 2013
|
21,833
|
|
$
|
0.01
|
|
—
|
—
|
|
Nov. 1, 2013 to Nov. 30, 2013
|
462,198
|
|
$
|
0.01
|
|
—
|
—
|
|
Dec. 1, 2013 to Dec. 31, 2013
|
20,287
|
|
$
|
0.01
|
|
—
|
—
|
ITEM 6.
|
SELECTED FINANCIAL DATA
|
|
Year Ended December 31,
|
||||||||||||||||||
|
2013
|
|
2012
|
|
2011
|
|
2010
|
|
2009
|
||||||||||
|
(in thousands, except per share amounts)
|
||||||||||||||||||
Consolidated Statements of Operations Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Product revenues, net
|
$
|
837,645
|
|
|
$
|
1,333,458
|
|
|
$
|
950,889
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Royalty revenues
|
156,592
|
|
|
141,498
|
|
|
50,015
|
|
|
30,244
|
|
|
28,320
|
|
|||||
Collaborative revenues (1)
|
217,738
|
|
|
52,086
|
|
|
409,722
|
|
|
113,126
|
|
|
73,569
|
|
|||||
Total revenues
|
1,211,975
|
|
|
1,527,042
|
|
|
1,410,626
|
|
|
143,370
|
|
|
101,889
|
|
|||||
Total costs and expenses (2)
|
2,115,423
|
|
|
1,524,710
|
|
|
1,296,806
|
|
|
839,447
|
|
|
715,901
|
|
|||||
Income (loss) from operations
|
(903,448
|
)
|
|
2,332
|
|
|
113,820
|
|
|
(696,077
|
)
|
|
(614,012
|
)
|
|||||
Net loss (income) attributable to noncontrolling interest (Alios) (3)
|
242,522
|
|
|
(55,897
|
)
|
|
(11,605
|
)
|
|
—
|
|
|
—
|
|
|||||
Net income (loss) attributable to Vertex (4)
|
$
|
(445,028
|
)
|
|
$
|
(107,032
|
)
|
|
$
|
29,574
|
|
|
$
|
(754,626
|
)
|
|
$
|
(642,178
|
)
|
Net income (loss) per diluted share attributable to Vertex common shareholders
|
$
|
(1.98
|
)
|
|
$
|
(0.50
|
)
|
|
$
|
0.14
|
|
|
$
|
(3.77
|
)
|
|
$
|
(3.71
|
)
|
Shares used in per diluted share calculations
|
224,906
|
|
|
211,946
|
|
|
208,807
|
|
|
200,402
|
|
|
173,259
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
|
As of December 31,
|
||||||||||||||||||
|
2013
|
|
2012
|
|
2011
|
|
2010
|
|
2009
|
||||||||||
|
(in thousands)
|
||||||||||||||||||
Consolidated Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash, cash equivalents and marketable securities
|
$
|
1,465,076
|
|
|
$
|
1,321,215
|
|
|
$
|
968,922
|
|
|
$
|
1,031,411
|
|
|
$
|
1,284,913
|
|
Total assets
|
2,319,041
|
|
|
2,759,288
|
|
|
2,204,280
|
|
|
1,725,446
|
|
|
1,955,488
|
|
|||||
Total current liabilities
|
397,829
|
|
|
432,624
|
|
|
392,348
|
|
|
474,783
|
|
|
284,883
|
|
|||||
Long-term debt obligations (5)
|
—
|
|
|
400,000
|
|
|
400,000
|
|
|
400,000
|
|
|
159,972
|
|
|||||
Construction financing lease obligation (6)
|
440,937
|
|
|
268,031
|
|
|
55,950
|
|
|
—
|
|
|
—
|
|
|||||
Other long-term obligations
|
123,870
|
|
|
424,251
|
|
|
390,470
|
|
|
346,690
|
|
|
414,287
|
|
(1)
|
In
2013
, we recorded
$203.4 million
of collaborative revenues from Janssen Pharmaceutica NV, which was primarily attributable to a 2013 amendment to our collaboration agreement with Janssen. In 2011, we recognized
$318.5 million
in milestone revenues from Janssen and Mitsubishi Tanabe Pharma Corporation. See Note B, "Collaborative Arrangements."
|
(2)
|
In
2013
and
2012
, total costs and expenses included an aggregate of
$10.4 million
and
$133.2 million
, respectively, of write-offs for excess and obsolete inventories. See Note G, "Inventories." In
2013
, total costs and expenses included intangible asset impairment charges of
$663.5 million
. In
2011
, total costs and expenses included an intangible asset impairment charge of
$105.8 million
. See Note J, "Intangible Assets and Goodwill."
|
(3)
|
Net loss (income) attributable to noncontrolling interest (Alios) relates to our collaboration with Alios BioPharma, Inc, which we deconsolidated as of December 31, 2013. See
Note B, "Collaborative Arrangements,"
and Note J, "Intangible Assets and Goodwill."
|
(4)
|
In
2013
, net loss attributable to Vertex included a deconsolidation gain of
$68.2 million
related to Alios. See Note B, "Collaborative Arrangements."
|
(5)
|
In
2013
, $400.0 million in aggregate principal amount of convertible senior subordinated notes (due 2015) was converted into common stock or redeemed. See Note L, "Convertible Senior Subordinated Notes."
|
(6)
|
In
2011
, we entered into two leases for our corporate headquarters, which we occupied in December 2013. We are deemed for accounting purposes to be the owner of the buildings. See Note I, "Fan Pier Leases."
|
ITEM 7.
|
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
|
|
|
|
|
|
2013/2012
Comparison |
|
2012/2011
Comparison |
||||||||||||||||
|
|
|
|
|
|
|
Increase/(Decrease)
|
|
Increase/(Decrease)
|
||||||||||||||||
|
2013
|
|
2012
|
|
2011
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
|
(in thousands)
|
|
(in thousands, except percentages)
|
||||||||||||||||||||||
Revenues
|
$
|
1,211,975
|
|
|
$
|
1,527,042
|
|
|
$
|
1,410,626
|
|
|
$
|
(315,067
|
)
|
|
(21
|
)%
|
|
$
|
116,416
|
|
|
8
|
%
|
Operating costs and expenses
|
2,115,423
|
|
|
1,524,710
|
|
|
1,296,806
|
|
|
590,713
|
|
|
39
|
%
|
|
227,904
|
|
|
18
|
%
|
|||||
Other income (loss), net
|
215,898
|
|
|
(53,467
|
)
|
|
(72,641
|
)
|
|
n/a
|
|
n/a
|
|
19,174
|
|
|
26
|
%
|
|||||||
Net loss (income) attributable to noncontrolling interest (Alios)
|
242,522
|
|
|
(55,897
|
)
|
|
(11,605
|
)
|
|
n/a
|
|
n/a
|
|
44,292
|
|
|
382
|
%
|
|||||||
Net income (loss) attributable to Vertex
|
$
|
(445,028
|
)
|
|
$
|
(107,032
|
)
|
|
$
|
29,574
|
|
|
(337,996
|
)
|
|
(316
|
)%
|
|
n/a
|
|
n/a
|
|
|
|
|
|
|
|
2013/2012
Comparison |
|
2012/2011
Comparison |
||||||||||||||||
|
|
|
|
|
|
|
Increase/(Decrease)
|
|
Increase/(Decrease)
|
||||||||||||||||
|
2013
|
|
2012
|
|
2011
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
|
(in thousands)
|
|
(in thousands, except percentages)
|
||||||||||||||||||||||
Product revenues, net
|
$
|
837,645
|
|
|
$
|
1,333,458
|
|
|
$
|
950,889
|
|
|
$
|
(495,813
|
)
|
|
(37
|
)%
|
|
$
|
382,569
|
|
|
40
|
%
|
Royalty revenues
|
156,592
|
|
|
141,498
|
|
|
50,015
|
|
|
15,094
|
|
|
11
|
%
|
|
91,483
|
|
|
183
|
%
|
|||||
Collaborative revenues
|
217,738
|
|
|
52,086
|
|
|
409,722
|
|
|
165,652
|
|
|
318
|
%
|
|
(357,636
|
)
|
|
(87
|
)%
|
|||||
Total revenues
|
$
|
1,211,975
|
|
|
$
|
1,527,042
|
|
|
$
|
1,410,626
|
|
|
$
|
(315,067
|
)
|
|
(21
|
)%
|
|
$
|
116,416
|
|
|
8
|
%
|
|
2013
|
|
2012
|
|
2011
|
||||||
|
(in thousands)
|
||||||||||
INCIVEK
|
$
|
466,360
|
|
|
$
|
1,161,813
|
|
|
$
|
950,889
|
|
KALYDECO
|
371,285
|
|
|
171,645
|
|
|
—
|
|
|||
Total product revenues, net
|
$
|
837,645
|
|
|
$
|
1,333,458
|
|
|
$
|
950,889
|
|
|
2013
|
|
2012
|
|
2011
|
||||||
|
(in thousands)
|
||||||||||
Collaborative revenues:
|
|
|
|
|
|
||||||
Janssen
|
$
|
203,437
|
|
|
$
|
16,178
|
|
|
$
|
274,393
|
|
CFFT
|
14,322
|
|
|
16,960
|
|
|
13,654
|
|
|||
Mitsubishi Tanabe
|
—
|
|
|
18,879
|
|
|
121,675
|
|
|||
Other
|
(21
|
)
|
|
69
|
|
|
—
|
|
|||
Total collaborative revenues
|
$
|
217,738
|
|
|
$
|
52,086
|
|
|
$
|
409,722
|
|
|
|
|
|
|
|
|
2013/2012
Comparison |
|
2012/2011
Comparison |
||||||||||||||||
|
|
|
|
|
|
|
Increase/(Decrease)
|
|
Increase/(Decrease)
|
||||||||||||||||
|
2013
|
|
2012
|
|
2011
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
|
(in thousands)
|
|
(in thousands, except percentages)
|
||||||||||||||||||||||
Cost of product revenues
|
$
|
88,979
|
|
|
$
|
236,742
|
|
|
$
|
63,625
|
|
|
$
|
(147,763
|
)
|
|
(62
|
)%
|
|
$
|
173,117
|
|
|
272
|
%
|
Royalty expenses
|
41,298
|
|
|
43,143
|
|
|
16,880
|
|
|
(1,845
|
)
|
|
(4
|
)%
|
|
26,263
|
|
|
156
|
%
|
|||||
Research and development expenses
|
918,783
|
|
|
806,185
|
|
|
707,706
|
|
|
112,598
|
|
|
14
|
%
|
|
98,479
|
|
|
14
|
%
|
|||||
Sales, general and administrative expenses
|
362,342
|
|
|
436,796
|
|
|
400,721
|
|
|
(74,454
|
)
|
|
(17
|
)%
|
|
36,075
|
|
|
9
|
%
|
|||||
Restructuring expenses
|
40,521
|
|
|
1,844
|
|
|
2,074
|
|
|
38,677
|
|
|
2,097
|
%
|
|
(230
|
)
|
|
(11
|
)%
|
|||||
Intangible asset impairment charges
|
663,500
|
|
|
—
|
|
|
105,800
|
|
|
663,500
|
|
|
n/a
|
|
(105,800
|
)
|
|
(100
|
)%
|
||||||
Total costs and expenses
|
$
|
2,115,423
|
|
|
$
|
1,524,710
|
|
|
$
|
1,296,806
|
|
|
$
|
590,713
|
|
|
39
|
%
|
|
$
|
227,904
|
|
|
18
|
%
|
|
|
|
|
|
|
|
2013/2012
Comparison |
|
2012/2011
Comparison |
||||||||||||||||
|
|
|
|
|
|
|
Increase/(Decrease)
|
|
Increase/(Decrease)
|
||||||||||||||||
|
2013
|
|
2012
|
|
2011
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
|
(in thousands)
|
|
(in thousands, except percentages)
|
||||||||||||||||||||||
Research expenses
|
$
|
252,989
|
|
|
$
|
235,588
|
|
|
$
|
216,903
|
|
|
$
|
17,401
|
|
|
7
|
%
|
|
$
|
18,685
|
|
|
9
|
%
|
Development expenses
|
665,794
|
|
|
570,597
|
|
|
490,803
|
|
|
95,197
|
|
|
17
|
%
|
|
79,794
|
|
|
16
|
%
|
|||||
Total research and development expenses
|
$
|
918,783
|
|
|
$
|
806,185
|
|
|
$
|
707,706
|
|
|
$
|
112,598
|
|
|
14
|
%
|
|
$
|
98,479
|
|
|
14
|
%
|
|
|
|
|
|
|
|
2013/2012
Comparison |
|
2012/2011
Comparison |
||||||||||||||||
|
|
|
|
|
|
|
Increase/(Decrease)
|
|
Increase/(Decrease)
|
||||||||||||||||
|
2013
|
|
2012
|
|
2011
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
|
(in thousands)
|
|
(in thousands, except percentages)
|
||||||||||||||||||||||
Research Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Salary and benefits
|
$
|
86,499
|
|
|
$
|
78,488
|
|
|
$
|
76,355
|
|
|
$
|
8,011
|
|
|
10
|
%
|
|
$
|
2,133
|
|
|
3
|
%
|
Stock-based compensation expense
|
27,599
|
|
|
25,147
|
|
|
25,305
|
|
|
2,452
|
|
|
10
|
%
|
|
(158
|
)
|
|
(1
|
)%
|
|||||
Laboratory supplies and other direct expenses
|
46,173
|
|
|
40,005
|
|
|
35,641
|
|
|
6,168
|
|
|
15
|
%
|
|
4,364
|
|
|
12
|
%
|
|||||
Contractual services
|
23,600
|
|
|
21,471
|
|
|
13,213
|
|
|
2,129
|
|
|
10
|
%
|
|
8,258
|
|
|
62
|
%
|
|||||
Infrastructure costs
|
69,118
|
|
|
70,477
|
|
|
66,389
|
|
|
(1,359
|
)
|
|
(2
|
)%
|
|
4,088
|
|
|
6
|
%
|
|||||
Total research expenses
|
$
|
252,989
|
|
|
$
|
235,588
|
|
|
$
|
216,903
|
|
|
$
|
17,401
|
|
|
7
|
%
|
|
$
|
18,685
|
|
|
9
|
%
|
|
|
|
|
|
|
|
2013/2012
Comparison |
|
2012/2011
Comparison |
||||||||||||||||
|
|
|
|
|
|
|
Increase/(Decrease)
|
|
Increase/(Decrease)
|
||||||||||||||||
|
2013
|
|
2012
|
|
2011
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
|
(in thousands)
|
|
(in thousands, except percentages)
|
||||||||||||||||||||||
Development Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Salary and benefits
|
$
|
170,042
|
|
|
$
|
147,574
|
|
|
$
|
126,441
|
|
|
$
|
22,468
|
|
|
15
|
%
|
|
$
|
21,133
|
|
|
17
|
%
|
Stock-based compensation expense
|
53,868
|
|
|
46,386
|
|
|
50,269
|
|
|
7,482
|
|
|
16
|
%
|
|
(3,883
|
)
|
|
(8
|
)%
|
|||||
Laboratory supplies and other direct expenses
|
47,794
|
|
|
36,585
|
|
|
33,588
|
|
|
11,209
|
|
|
31
|
%
|
|
2,997
|
|
|
9
|
%
|
|||||
Contractual services
|
244,778
|
|
|
217,406
|
|
|
149,033
|
|
|
27,372
|
|
|
13
|
%
|
|
68,373
|
|
|
46
|
%
|
|||||
Drug supply costs
|
38,767
|
|
|
14,044
|
|
|
34,133
|
|
|
24,723
|
|
|
176
|
%
|
|
(20,089
|
)
|
|
(59
|
)%
|
|||||
Infrastructure costs
|
110,545
|
|
|
108,602
|
|
|
97,339
|
|
|
1,943
|
|
|
2
|
%
|
|
11,263
|
|
|
12
|
%
|
|||||
Total development expenses
|
$
|
665,794
|
|
|
$
|
570,597
|
|
|
$
|
490,803
|
|
|
$
|
95,197
|
|
|
17
|
%
|
|
$
|
79,794
|
|
|
16
|
%
|
|
|
|
|
|
|
|
2013/2012
Comparison |
|
2012/2011
Comparison |
||||||||||||||||
|
|
|
|
|
|
|
Increase/(Decrease)
|
|
Increase/(Decrease)
|
||||||||||||||||
|
2013
|
|
2012
|
|
2011
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
|
(in thousands)
|
|
(in thousands, except percentages)
|
||||||||||||||||||||||
Sales, general and administrative expenses
|
$
|
362,342
|
|
|
$
|
436,796
|
|
|
$
|
400,721
|
|
|
$
|
(74,454
|
)
|
|
(17
|
)%
|
|
$
|
36,075
|
|
|
9
|
%
|
|
2013
|
|
2012
|
|
2011
|
||||||
|
(in thousands)
|
|
|
||||||||
Loss before provision for (benefit from) income taxes
|
$
|
283,747
|
|
|
$
|
20,044
|
|
|
$
|
9,536
|
|
Decrease (increase) in fair value of contingent milestone and royalty payments
|
124,920
|
|
|
(114,970
|
)
|
|
(69,950
|
)
|
|||
Provision for (benefit from) income taxes
|
(166,145
|
)
|
|
39,029
|
|
|
48,809
|
|
|||
Net loss (income) attributable to noncontrolling interest (Alios)
|
$
|
242,522
|
|
|
$
|
(55,897
|
)
|
|
$
|
(11,605
|
)
|
|
Payments Due by Period
|
||||||||||||||||||
|
2014
|
|
2015-2016
|
|
2017-2018
|
|
2019 and later
|
|
Total
|
||||||||||
|
(in thousands)
|
||||||||||||||||||
Fan Pier Leases
|
$
|
67,206
|
|
|
$
|
134,412
|
|
|
$
|
134,412
|
|
|
$
|
752,798
|
|
|
$
|
1,088,828
|
|
Facility operating leases, excluding Fan Pier Leases
|
60,641
|
|
|
87,590
|
|
|
52,341
|
|
|
75,344
|
|
|
275,916
|
|
|||||
Capital lease obligations
|
19,957
|
|
|
30,155
|
|
|
21,326
|
|
|
2,121
|
|
|
73,559
|
|
|||||
Research, development and drug supply costs
|
17,617
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
17,617
|
|
|||||
Other
|
6,760
|
|
|
5,040
|
|
|
84
|
|
|
—
|
|
|
11,884
|
|
|||||
Total contractual commitments and obligations
|
$
|
172,181
|
|
|
$
|
257,197
|
|
|
$
|
208,163
|
|
|
$
|
830,263
|
|
|
$
|
1,467,804
|
|
•
|
revenue recognition;
|
•
|
intangible assets;
|
•
|
consolidation and deconsolidation of variable interest entity;
|
•
|
accruals;
|
•
|
commercial supplies and inventories;
|
•
|
income taxes; and
|
•
|
leases.
|
•
|
there is persuasive evidence that an arrangement exists between us and our customer;
|
•
|
collectability is reasonably assured; and
|
•
|
the price is fixed or determinable.
|
•
|
In 2013, the deconsolidation of Alios resulted in a gain of
$68.2 million
attributable to Vertex. The
$68.2 million
gain is approximately equal to the difference between (i) losses we recorded in 2011 and 2012 based on increases in the fair value of contingent milestone payments and royalties payable by us to Alios and (ii) the aggregate of
$120.0 million
in up-front and milestone payments that we made to Alios pursuant to the Alios collaboration.
|
•
|
In each period, we recorded net loss (income) attributable to the Alios noncontrolling interest. This net loss (income) reflected Alios’ net loss (income) for the period as adjusted for gains and losses in the fair value of the contingent milestone payments and royalties payable by us to Alios. Determining the fair value of the contingent milestone payments and royalties payable by us to Alios required us to make significant estimates regarding the probability and potential timing of achieving each of the milestones pursuant to the agreement, future potential net sales of the HCV nucleotide analogues licensed from Alios and appropriate discount and tax rates. We based our estimate of the probability of achieving the relevant milestones on industry data for similar assets and our own experience. The discount rates used in the valuation model represented a measure of credit risk associated with settling the liability. Significant judgment was used in determining the appropriateness of these assumptions at each reporting period. Increases in 2011 and 2012 in the fair value of the contingent milestone payments and royalties payable by us to Alios resulted in a decrease in net income attributable to Vertex (or an increase in net loss attributable to Vertex) on a dollar-for-dollar basis.
|
•
|
From June 2011 through December 31, 2013, we consolidated all of Alios’ expenses and revenues into our consolidated statements of operations, eliminating all intercompany balances and transactions. As of December 31, 2013, our consolidated balance sheet excludes Alios' balances.
|
•
|
We continue to have significant involvement with Alios due to the Alios agreement; therefore, the deconsolidation of Alios does not qualify for discontinued operations presentation in our consolidated financial statements as of December 31, 2013. We will evaluate whether we continue to have significant involvement with Alios for a period of one year from the December 31, 2013 deconsolidation date. If we determine that we no longer have significant continuing involvement with Alios during the year following the deconsolidation of Alios, we will retroactively adjust our consolidated financial statements to reflect discontinued operations presentation.
|
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.
|
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
|
F-1
|
Consolidated Statements of Operations for the years ended December 31, 2013, 2012 and 2011
|
F-2
|
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2013, 2012 and 2011
|
F-3
|
Consolidated Balance Sheets as of December 31, 2013 and 2012
|
F-4
|
Consolidated Statements of Shareholders’ Equity and Noncontrolling Interest for the years ended December 31, 2013, 2012 and 2011
|
F-5
|
Consolidated Statements of Cash Flows for the years ended December 31, 2013, 2012 and 2011
|
F-6
|
Notes to Consolidated Financial Statements
|
F-7
|
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
|
Restated Articles of Organization of Vertex Pharmaceuticals Incorporated, as amended.
|
|
10-Q
(Exhibit 3.1)
|
August 11, 2008
|
000-19319
|
3.2
|
By-laws of Vertex Pharmaceuticals Incorporated, as amended and restated as of February 5, 2014.
|
|
8-K
(Exhibit 3.1)
|
February 5, 2014
|
000-19319
|
4.1
|
Specimen stock certificate.
|
|
S-1
(Exhibit 4.1)
|
July 18, 1991
|
33-40966
|
Collaboration Agreements
|
|
|
|
||
10.1
|
License, Development, Manufacturing and Commercialization Agreement, dated June 30, 2006, by and between Vertex Pharmaceuticals Incorporated and Janssen Pharmaceutica, N.V.†
|
|
10-K
(Exhibit 10.1)
|
February 22, 2012
|
000-19319
|
10.2
|
2013 Amendment, dated November 19, 2013, to the License, Development, Manufacturing and Commercialization Agreement by and between Vertex Pharmaceuticals Incorporated and Janssen Pharmaceutica NV.†
|
X
|
|
|
|
10.3
|
License, Development and Commercialization Agreement, dated as of June 11, 2004, between Vertex Pharmaceuticals Incorporated and Mitsubishi Pharma Corporation.†
|
|
10-Q
(Exhibit 10.1)
|
November 9, 2009
|
000-19319
|
10.4
|
Second Amendment to License, Development and Commercialization Agreement, dated July 30, 2009, between Mitsubishi Tanabe Pharma Corporation and Vertex Pharmaceuticals Incorporated.†
|
|
10-Q
(Exhibit 10.2)
|
November 9, 2009
|
000-19319
|
10.5
|
Research, Development and Commercialization Agreement, dated as of May 24, 2004, between Vertex Pharmaceuticals Incorporated and Cystic Fibrosis Foundation Therapeutics Incorporated.†
|
|
10-Q/A
(Exhibit 10.2)
|
August 19, 2011
|
000-19319
|
10.6
|
Amendment No. 1 to Research, Development and Commercialization Agreement, dated as of January 6, 2006, between Vertex Pharmaceuticals Incorporated and Cystic Fibrosis Foundation Therapeutics Incorporated.†
|
|
10-K
(Exhibit 10.9)
|
March 16, 2006
|
000-19319
|
10.7
|
Amendment No. 2 to Research, Development and Commercialization Agreement, dated as of March 17, 2006, between Vertex Pharmaceuticals Incorporated and Cystic Fibrosis Foundation Therapeutics Incorporated.
|
|
10-Q/A
(Exhibit 10.6)
|
August 19, 2011
|
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 |
10.8
|
Amendment No. 5 to Research, Development and Commercialization Agreement, effective as of April 1, 2011, between Vertex Pharmaceuticals Incorporated and Cystic Fibrosis Foundation Therapeutics Incorporated.†
|
|
10-Q
(Exhibit 10.3)
|
August 9, 2011
|
000-19319
|
10.9
|
License and Collaboration Agreement, dated June 13, 2011, by and between Alios BioPharma, Inc. and Vertex Pharmaceuticals Incorporated and Vertex Pharmaceuticals (Switzerland) LLC.†
|
|
10-Q
(Exhibit 10.1)
|
August 9, 2011
|
000-19319
|
Leases
|
|
|
|
||
10.10
|
Lease, dated May 5, 2011, between Fifty Northern Avenue LLC and Vertex Pharmaceuticals Incorporated.†
|
|
10-Q
(Exhibit 10.4)
|
August 9, 2011
|
000-19319
|
10.11
|
Lease, dated May 5, 2011, between Eleven Fan Pier Boulevard LLC and Vertex Pharmaceuticals Incorporated.†
|
|
10-Q
(Exhibit 10.5)
|
August 9, 2011
|
000-19319
|
10.12
|
Lease, dated as of January 18, 2001, between Kendall Square, LLC and Vertex Pharmaceuticals Incorporated.†
|
|
10-K
(Exhibit 10.16)
|
March 26, 2001
|
000-19319
|
Equity Plans
|
|
|
|
||
10.13
|
1996 Stock and Option Plan, as amended and restated as of March 14, 2005.*
|
|
10-K
(Exhibit 10.3)
|
March 16, 2005
|
000-19319
|
10.14
|
Form of Stock Option Grant under 1996 Stock and Option Plan.*
|
|
8-K
(Exhibit 10.1)
|
February 9, 2005
|
000-19319
|
10.15
|
Amended and Restated 2006 Stock and Option Plan.*
|
|
10-Q
(Exhibit 10.3)
|
August 8, 2012
|
000-19319
|
10.16
|
Form of Stock Option Grant under 2006 Stock and Option Plan.*
|
|
8-K
(Exhibit 10.2)
|
May 15, 2006
|
000-19319
|
10.17
|
Form of Restricted Stock Award under 2006 Stock and Option Plan.*
|
|
8-K
(Exhibit 10.3)
|
May 15, 2006
|
000-19319
|
10.18
|
Form of Restricted Stock Award (Performance Accelerated Restricted Stock) under 2006 Stock and Option Plan.*
|
|
8-K
(Exhibit 10.4)
|
May 15, 2006
|
000-19319
|
10.19
|
Form of Stock Option Grant-Performance Accelerated 2009 Stock-Options.*
|
|
10-K
(Exhibit 10.33)
|
February 19, 2010
|
000-19319
|
10.20
|
2013 Stock and Option Plan.*
|
|
8-K
(Exhibit 10.1)
|
May 8, 2013
|
000-19319
|
10.21
|
Form of Non-Qualified Stock Option Agreement under 2013 Stock and Option Plan.*
|
X
|
|
|
000-19319
|
10.22
|
Form of Restricted Stock Agreement under 2013 Stock and Option Plan.*
|
X
|
|
|
000-19319
|
10.23
|
Form of Restricted Stock Unit Agreement under 2013 Stock and Option Plan.*
|
X
|
|
|
000-19319
|
10.24
|
Form of Non-Qualified Stock Option Agreement under Amended and Restated 2006 Stock and Option Plan (granted on or after July 30, 2013).*
|
X
|
|
|
000-19319
|
10.25
|
Form of Restricted Stock Agreement under Amended and Restated 2006 Stock and Option Plan (granted on or after July 30, 2013).*
|
X
|
|
|
000-19319
|
10.26
|
Form of Restricted Stock Unit Agreement under Amended and Restated 2006 Stock and Option Plan (granted on or after July 30, 2013).*
|
X
|
|
|
000-19319
|
10.27
|
Vertex Pharmaceuticals Incorporated Employee Stock Purchase Plan, as amended and restated.*
|
|
10-Q
(Exhibit 10.4)
|
August 8, 2012
|
000-19319
|
Agreements with Executive Officers and Directors
|
|
|
|
||
10.28
|
Agreement between Jeffrey M. Leiden and Vertex, dated December 14, 2011.*
|
|
10-K
(Exhibit 10.34)
|
February 22, 2012
|
000-19319
|
10.29
|
Employee Non-disclosure, Non-competition and Inventions Agreement between Jeffrey M. Leiden and Vertex, dated December 14, 2011.*
|
|
10-K
(Exhibit 10.35)
|
February 22, 2012
|
000-19319
|
10.30
|
Transition Agreement between Matthew W. Emmens and Vertex, dated December 14, 2011.*
|
|
10-K
(Exhibit 10.38)
|
February 22, 2012
|
000-19319
|
10.31
|
Employment Agreement, dated as of August 27, 2012, between Vertex Pharmaceuticals Incorporated and Stuart Arbuckle.*
|
|
10-Q
(Exhibit 10.1)
|
November 6, 2012
|
000-19319
|
10.32
|
Change of Control Agreement, dated as of August 27, 2012, between Vertex Pharmaceuticals Incorporated and Stuart Arbuckle.*
|
|
10-Q
(Exhibit 10.2)
|
November 6, 2012
|
000-19319
|
10.33
|
Employment Agreement, dated as of June 11, 2012, between Vertex Pharmaceuticals Incorporated and Kenneth L. Horton.*
|
|
10-Q
(Exhibit 10.1)
|
August 8, 2012
|
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 |
10.34
|
Change of Control Agreement, dated as of June 11, 2012, between Vertex Pharmaceuticals Incorporated and Kenneth L. Horton.*
|
|
10-Q
(Exhibit 10.2)
|
August 8, 2012
|
000-19319
|
10.35
|
Second Amended and Restated Employment Agreement, dated November 15, 2012, between Peter Mueller and Vertex Pharmaceuticals Incorporated.*
|
|
10-K
(Exhibit 10.38)
|
March 1, 2013
|
000-19319
|
10.36
|
Second Amended and Restated Change of Control Agreement, dated November 15, 2012, between Vertex Pharmaceuticals Incorporated and Peter Mueller.*
|
|
10-K
(Exhibit 10.39)
|
March 1, 2013
|
000-19319
|
10.37
|
Amended and Restated Employment Agreement, dated as of November 8, 2004, between Vertex Pharmaceuticals Incorporated and Ian F. Smith.*
|
|
10-Q
(Exhibit 10.13)
|
November 9, 2004
|
000-19319
|
10.38
|
Amendment No. 1 to Amended and Restated Employment Agreement between Ian F. Smith and Vertex Pharmaceuticals Incorporated, dated December 29, 2008.*
|
|
10-K
(Exhibit 10.66)
|
February 17, 2009
|
000-19319
|
10.39
|
Form of Employee Non-Disclosure and Inventions Agreement.*
|
|
S-1
(Exhibit 10.4)
|
May 30, 1991
|
33-40966
|
10.40
|
Vertex Employee Compensation Plan.*
|
X
|
|
|
|
10.41
|
Vertex Pharmaceuticals Non-Employee Board Compensation.*
|
|
10-K
(Exhibit 10.57)
|
February 22, 2012
|
000-19319
|
Subsidiaries
|
|
|
|
|
|
21.1
|
Subsidiaries of Vertex Pharmaceuticals Incorporated.
|
X
|
|
|
|
Consent
|
|
|
|
|
|
23.1
|
Consent of Independent Registered Public Accounting Firm, Ernst & Young LLP.
|
X
|
|
|
|
Certifications
|
|
|
|
|
|
31.1
|
Certification of the Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
|
X
|
|
|
|
31.2
|
Certification of the Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
|
X
|
|
|
|
32.1
|
Certification of the Chief Executive Officer and the Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002.
|
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 11, 2014
|
By:
|
/s/ Jeffrey M. Leiden
|
|
|
Jeffrey M. Leiden
Chief Executive Officer
|
|
|
Name
|
|
|
|
Title
|
|
|
|
|
Date
|
|
|
|
|
|
|||||||||||
/s/ Jeffrey M. Leiden
|
Chair of the Board, President and Chief Executive Officer (Principal Executive Officer)
|
|
|||||||||||
Jeffrey M. Leiden
|
February 11, 2014
|
||||||||||||
|
|
|
|||||||||||
/s/ Ian F. Smith
|
Executive Vice President and Chief Financial Officer (Principal Financial Officer)
|
|
|||||||||||
Ian F. Smith
|
February 11, 2014
|
||||||||||||
|
|
|
|||||||||||
/s/ Paul M. Silva
|
Senior Vice President and Corporate Controller (Principal Accounting Officer)
|
|
|||||||||||
Paul M. Silva
|
February 11, 2014
|
||||||||||||
|
|
|
|||||||||||
/s/ David Altshuler
|
Director
|
|
|||||||||||
David Altshuler
|
February 11, 2014
|
||||||||||||
|
|
|
|||||||||||
/s/ Joshua S. Boger
|
Director
|
|
|||||||||||
Joshua S. Boger
|
February 11, 2014
|
||||||||||||
|
|
|
|||||||||||
/s/ Terrence C. Kearney
|
Director
|
|
|||||||||||
Terrence C. Kearney
|
February 11, 2014
|
||||||||||||
|
|
|
|||||||||||
/s/ Yuchun Lee
|
Director
|
|
|||||||||||
Yuchun Lee
|
February 11, 2014
|
||||||||||||
|
|
|
|||||||||||
/s/ Margaret G. McGlynn
|
Director
|
|
|||||||||||
Margaret G. McGlynn
|
February 11, 2014
|
||||||||||||
|
|
|
|||||||||||
/s/ Wayne J. Riley
|
Director
|
|
|||||||||||
Wayne J. Riley
|
February 11, 2014
|
||||||||||||
|
|
|
|||||||||||
/s/ Bruce I. Sachs
|
Director
|
|
|||||||||||
Bruce I. Sachs
|
February 11, 2014
|
||||||||||||
|
|
|
|||||||||||
/s/ Elaine S. Ullian
|
Director
|
|
|||||||||||
Elaine S. Ullian
|
February 11, 2014
|
|
/s/ Ernst & Young LLP
|
VERTEX PHARMACEUTICALS INCORPORATED
Consolidated Statements of Operations
(in thousands, except per share amounts)
|
|||||||||||
|
Year Ended December 31,
|
||||||||||
|
2013
|
|
2012
|
|
2011
|
||||||
Revenues:
|
|
|
|
|
|
||||||
Product revenues, net
|
$
|
837,645
|
|
|
$
|
1,333,458
|
|
|
$
|
950,889
|
|
Royalty revenues
|
156,592
|
|
|
141,498
|
|
|
50,015
|
|
|||
Collaborative revenues
|
217,738
|
|
|
52,086
|
|
|
409,722
|
|
|||
Total revenues
|
1,211,975
|
|
|
1,527,042
|
|
|
1,410,626
|
|
|||
Costs and expenses:
|
|
|
|
|
|
||||||
Cost of product revenues
|
88,979
|
|
|
236,742
|
|
|
63,625
|
|
|||
Royalty expenses
|
41,298
|
|
|
43,143
|
|
|
16,880
|
|
|||
Research and development expenses
|
918,783
|
|
|
806,185
|
|
|
707,706
|
|
|||
Sales, general and administrative expenses
|
362,342
|
|
|
436,796
|
|
|
400,721
|
|
|||
Restructuring expenses
|
40,521
|
|
|
1,844
|
|
|
2,074
|
|
|||
Intangible asset impairment charges
|
663,500
|
|
|
—
|
|
|
105,800
|
|
|||
Total costs and expenses
|
2,115,423
|
|
|
1,524,710
|
|
|
1,296,806
|
|
|||
Income (loss) from operations
|
(903,448
|
)
|
|
2,332
|
|
|
113,820
|
|
|||
Interest expense, net
|
(22,730
|
)
|
|
(15,022
|
)
|
|
(37,681
|
)
|
|||
Other income (expense), net
|
(49,939
|
)
|
|
309
|
|
|
(15,694
|
)
|
|||
Income (loss) before provision for (benefit from) income taxes
|
(976,117
|
)
|
|
(12,381
|
)
|
|
60,445
|
|
|||
Provision for (benefit from) income taxes
|
(288,567
|
)
|
|
38,754
|
|
|
19,266
|
|
|||
Net income (loss)
|
(687,550
|
)
|
|
(51,135
|
)
|
|
41,179
|
|
|||
Net loss (income) attributable to noncontrolling interest (Alios)
|
242,522
|
|
|
(55,897
|
)
|
|
(11,605
|
)
|
|||
Net income (loss) attributable to Vertex
|
$
|
(445,028
|
)
|
|
$
|
(107,032
|
)
|
|
$
|
29,574
|
|
Net income (loss) per share attributable to Vertex common shareholders:
|
|
|
|
|
|
||||||
Basic
|
$
|
(1.98
|
)
|
|
$
|
(0.50
|
)
|
|
$
|
0.14
|
|
Diluted
|
$
|
(1.98
|
)
|
|
$
|
(0.50
|
)
|
|
$
|
0.14
|
|
Shares used in per share calculations:
|
|
|
|
|
|
||||||
Basic
|
224,906
|
|
|
211,946
|
|
|
204,891
|
|
|||
Diluted
|
224,906
|
|
|
211,946
|
|
|
208,807
|
|
VERTEX PHARMACEUTICALS INCORPORATED
Consolidated Statements of Comprehensive Income (Loss)
(in thousands)
|
|||||||||||
|
Year ended December 31,
|
||||||||||
|
2013
|
|
2012
|
|
2011
|
||||||
Net income (loss)
|
$
|
(687,550
|
)
|
|
$
|
(51,135
|
)
|
|
$
|
41,179
|
|
Changes in other comprehensive income (loss):
|
|
|
|
|
|
||||||
Unrealized holding gains (losses) on marketable securities
|
(154
|
)
|
|
305
|
|
|
(119
|
)
|
|||
Unrealized losses on foreign currency forward contracts
|
(23
|
)
|
|
—
|
|
|
—
|
|
|||
Foreign currency translation adjustment
|
421
|
|
|
198
|
|
|
133
|
|
|||
Total changes in other comprehensive income (loss)
|
244
|
|
|
503
|
|
|
14
|
|
|||
Comprehensive income (loss)
|
(687,306
|
)
|
|
(50,632
|
)
|
|
41,193
|
|
|||
Comprehensive loss (income) attributable to noncontrolling interest (Alios)
|
242,522
|
|
|
(55,897
|
)
|
|
(11,605
|
)
|
|||
Comprehensive income (loss) attributable to Vertex
|
$
|
(444,784
|
)
|
|
$
|
(106,529
|
)
|
|
$
|
29,588
|
|
VERTEX PHARMACEUTICALS INCORPORATED
Consolidated Balance Sheets
(in thousands, except share and per share amounts)
|
|||||||
|
December 31,
|
||||||
|
2013(1)
|
|
2012(1)
|
||||
Assets
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
569,299
|
|
|
$
|
489,407
|
|
Marketable securities, available for sale
|
895,777
|
|
|
831,808
|
|
||
Restricted cash and cash equivalents (Alios)
|
—
|
|
|
69,983
|
|
||
Accounts receivable, net
|
85,517
|
|
|
143,250
|
|
||
Inventories
|
14,147
|
|
|
30,464
|
|
||
Prepaid expenses and other current assets
|
23,836
|
|
|
24,673
|
|
||
Total current assets
|
1,588,576
|
|
|
1,589,585
|
|
||
Restricted cash
|
130
|
|
|
31,934
|
|
||
Property and equipment, net
|
696,911
|
|
|
433,609
|
|
||
Intangible assets
|
—
|
|
|
663,500
|
|
||
Goodwill
|
30,992
|
|
|
30,992
|
|
||
Other assets
|
2,432
|
|
|
9,668
|
|
||
Total assets
|
$
|
2,319,041
|
|
|
$
|
2,759,288
|
|
Liabilities and Shareholders’ Equity
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
49,327
|
|
|
$
|
101,292
|
|
Accrued expenses
|
271,077
|
|
|
264,884
|
|
||
Deferred revenues, current portion
|
21,510
|
|
|
27,566
|
|
||
Accrued restructuring expense, current portion
|
14,286
|
|
|
4,758
|
|
||
Capital lease obligations, current portion
|
16,893
|
|
|
13,707
|
|
||
Income taxes payable (Alios)
|
—
|
|
|
715
|
|
||
Other liabilities, current portion
|
24,736
|
|
|
19,702
|
|
||
Total current liabilities
|
397,829
|
|
|
432,624
|
|
||
Deferred revenues, excluding current portion
|
49,459
|
|
|
96,242
|
|
||
Accrued restructuring expense, excluding current portion
|
14,067
|
|
|
18,570
|
|
||
Capital lease obligations, excluding current portion
|
48,754
|
|
|
15,170
|
|
||
Convertible senior subordinated notes (due 2015)
|
—
|
|
|
400,000
|
|
||
Deferred tax liability
|
—
|
|
|
280,367
|
|
||
Construction financing lease obligation
|
440,937
|
|
|
268,031
|
|
||
Other liabilities, excluding current portion
|
11,590
|
|
|
13,902
|
|
||
Total liabilities
|
962,636
|
|
|
1,524,906
|
|
||
Commitments and contingencies (Note T and Note V)
|
|
|
|
|
|
||
Redeemable noncontrolling interest (Alios)
|
—
|
|
|
38,530
|
|
||
Shareholders’ equity:
|
|
|
|
||||
Preferred stock, $0.01 par value; 1,000,000 shares authorized; none issued and outstanding at December 31, 2013 and 2012
|
—
|
|
|
—
|
|
||
Common stock, $0.01 par value; 300,000,000 shares authorized at December 31, 2013 and 2012; 233,788,852 and 217,286,868 shares issued and outstanding at December 31, 2013 and 2012, respectively
|
2,320
|
|
|
2,149
|
|
||
Additional paid-in capital
|
5,321,286
|
|
|
4,519,448
|
|
||
Accumulated other comprehensive loss
|
(306
|
)
|
|
(550
|
)
|
||
Accumulated deficit
|
(3,966,895
|
)
|
|
(3,521,867
|
)
|
||
Total Vertex shareholders’ equity
|
1,356,405
|
|
|
999,180
|
|
||
Noncontrolling interest (Alios)
|
—
|
|
|
196,672
|
|
||
Total shareholders’ equity
|
1,356,405
|
|
|
1,195,852
|
|
||
Total liabilities and shareholders’ equity
|
$
|
2,319,041
|
|
|
$
|
2,759,288
|
|
(1)
|
Amounts as of
December 31, 2012
include the assets and liabilities of Vertex’s variable interest entity (“VIE”), Alios BioPharma, Inc. (“Alios”). The Company deconsolidated Alios as of
December 31, 2013
. Vertex’s interests and obligations with respect to the VIE’s assets and liabilities are limited to those accorded to Vertex in its agreement with Alios. See
Note B, "Collaborative Arrangements,"
to these consolidated financial statements for amounts.
|
VERTEX PHARMACEUTICALS INCORPORATED
Consolidated Statements of Shareholders’ Equity and Noncontrolling Interest
(in thousands)
|
||||||||||||||||||||||||||||||||||
|
Common Stock
|
|
Additional
Paid-in Capital |
|
Accumulated
Other Comprehensive Loss |
|
Accumulated Deficit
|
|
Total Vertex
Shareholders’ Equity |
|
Noncontrolling
Interest (Alios) |
|
Total
Shareholders’ Equity |
|
Redeemable
Noncontrolling Interest (Alios) |
|||||||||||||||||||
|
Shares
|
|
Amount
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Balance, December 31, 2010
|
203,523
|
|
|
$
|
2,016
|
|
|
$
|
3,947,433
|
|
|
$
|
(1,067
|
)
|
|
$
|
(3,444,409
|
)
|
|
$
|
503,973
|
|
|
$
|
—
|
|
|
$
|
503,973
|
|
|
$
|
—
|
|
Unrealized holding losses on marketable securities
|
|
|
|
|
|
|
(119
|
)
|
|
|
|
(119
|
)
|
|
|
|
(119
|
)
|
|
|
||||||||||||||
Foreign currency translation adjustment
|
|
|
|
|
|
|
133
|
|
|
|
|
133
|
|
|
|
|
133
|
|
|
|
||||||||||||||
Net income
|
|
|
|
|
|
|
|
|
29,574
|
|
|
29,574
|
|
|
11,605
|
|
|
41,179
|
|
|
|
|||||||||||||
Issuance of common stock under benefit plans
|
5,781
|
|
|
56
|
|
|
133,362
|
|
|
|
|
|
|
133,418
|
|
|
(25
|
)
|
|
133,393
|
|
|
|
|||||||||||
Stock-based compensation expense
|
|
|
|
|
118,964
|
|
|
|
|
|
|
118,964
|
|
|
304
|
|
|
119,268
|
|
|
|
|||||||||||||
Tax benefit from equity compensation
|
|
|
|
|
900
|
|
|
|
|
|
|
900
|
|
|
|
|
900
|
|
|
|
||||||||||||||
Alios noncontrolling interest upon consolidation
|
|
|
|
|
|
|
|
|
|
|
|
|
130,486
|
|
|
130,486
|
|
|
36,299
|
|
||||||||||||||
Change in liquidation value of noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
|
|
(737
|
)
|
|
(737
|
)
|
|
737
|
|
||||||||||||||
Balance, December 31, 2011
|
209,304
|
|
|
$
|
2,072
|
|
|
$
|
4,200,659
|
|
|
$
|
(1,053
|
)
|
|
$
|
(3,414,835
|
)
|
|
$
|
786,843
|
|
|
$
|
141,633
|
|
|
$
|
928,476
|
|
|
$
|
37,036
|
|
Unrealized holding gains on marketable securities
|
|
|
|
|
|
|
305
|
|
|
|
|
305
|
|
|
|
|
305
|
|
|
|
||||||||||||||
Foreign currency translation adjustment
|
|
|
|
|
|
|
198
|
|
|
|
|
198
|
|
|
|
|
198
|
|
|
|
||||||||||||||
Net income (loss)
|
|
|
|
|
|
|
|
|
(107,032
|
)
|
|
(107,032
|
)
|
|
55,897
|
|
|
(51,135
|
)
|
|
|
|||||||||||||
Issuance of common stock under benefit plans
|
7,983
|
|
|
77
|
|
|
201,760
|
|
|
|
|
|
|
201,837
|
|
|
155
|
|
|
201,992
|
|
|
|
|||||||||||
Stock-based compensation expense
|
|
|
|
|
115,058
|
|
|
|
|
|
|
115,058
|
|
|
481
|
|
|
115,539
|
|
|
|
|||||||||||||
Tax benefit from equity compensation
|
|
|
|
|
1,971
|
|
|
|
|
|
|
1,971
|
|
|
|
|
|
1,971
|
|
|
|
|||||||||||||
Change in liquidation value of noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,494
|
)
|
|
(1,494
|
)
|
|
1,494
|
|
||||||||||||||
Balance, December 31, 2012
|
217,287
|
|
|
$
|
2,149
|
|
|
$
|
4,519,448
|
|
|
$
|
(550
|
)
|
|
$
|
(3,521,867
|
)
|
|
$
|
999,180
|
|
|
$
|
196,672
|
|
|
$
|
1,195,852
|
|
|
$
|
38,530
|
|
Unrealized holding losses on marketable securities
|
|
|
|
|
|
|
(154
|
)
|
|
|
|
(154
|
)
|
|
|
|
|
(154
|
)
|
|
|
|||||||||||||
Unrealized losses on foreign currency forward contracts
|
|
|
|
|
|
|
(23
|
)
|
|
|
|
(23
|
)
|
|
|
|
|
(23
|
)
|
|
|
|||||||||||||
Foreign currency translation adjustment
|
|
|
|
|
|
|
421
|
|
|
|
|
421
|
|
|
|
|
|
421
|
|
|
|
|||||||||||||
Net loss
|
|
|
|
|
|
|
|
|
(445,028
|
)
|
|
(445,028
|
)
|
|
(242,522
|
)
|
|
(687,550
|
)
|
|
|
|||||||||||||
Issuance of common stock under benefit plans
|
8,226
|
|
|
88
|
|
|
271,713
|
|
|
|
|
|
|
271,801
|
|
|
(63
|
)
|
|
271,738
|
|
|
|
|||||||||||
Convertible senior subordinated notes (due 2015) conversion
|
8,276
|
|
|
83
|
|
|
402,182
|
|
|
|
|
|
|
402,265
|
|
|
|
|
|
402,265
|
|
|
|
|||||||||||
Stock-based compensation expense
|
|
|
|
|
127,883
|
|
|
|
|
|
|
127,883
|
|
|
468
|
|
|
128,351
|
|
|
|
|||||||||||||
Restructuring expense related to benefit plans
|
|
|
|
|
1,312
|
|
|
|
|
|
|
1,312
|
|
|
|
|
|
1,312
|
|
|
|
|||||||||||||
Tax benefit from equity compensation
|
|
|
|
|
(1,252
|
)
|
|
|
|
|
|
(1,252
|
)
|
|
|
|
|
(1,252
|
)
|
|
|
|||||||||||||
Alios noncontrolling interest upon deconsolidation
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
45,445
|
|
|
45,445
|
|
|
(38,530
|
)
|
|||||||||||||
Balance, December 31, 2013
|
233,789
|
|
|
$
|
2,320
|
|
|
$
|
5,321,286
|
|
|
$
|
(306
|
)
|
|
$
|
(3,966,895
|
)
|
|
$
|
1,356,405
|
|
|
$
|
—
|
|
|
$
|
1,356,405
|
|
|
$
|
—
|
|
VERTEX PHARMACEUTICALS INCORPORATED
Consolidated Statements of Cash Flows
(in thousands)
|
|||||||||||
|
Year Ended December 31,
|
||||||||||
|
2013
|
|
2012
|
|
2011
|
||||||
Cash flows from operating activities:
|
|
|
|
|
|
||||||
Net income (loss)
|
$
|
(687,550
|
)
|
|
$
|
(51,135
|
)
|
|
$
|
41,179
|
|
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
|
|
|
|
|
|
||||||
Depreciation and amortization expense
|
48,365
|
|
|
38,191
|
|
|
35,041
|
|
|||
Stock-based compensation expense
|
127,303
|
|
|
114,285
|
|
|
118,226
|
|
|||
Other non-cash based compensation expense
|
5,860
|
|
|
10,261
|
|
|
8,525
|
|
|||
Intangible asset impairment charges
|
663,500
|
|
|
—
|
|
|
105,800
|
|
|||
Secured notes (due 2012) discount amortization expense
|
—
|
|
|
—
|
|
|
18,409
|
|
|||
Change in fair value of derivative instruments
|
—
|
|
|
—
|
|
|
16,801
|
|
|||
Deferred income taxes
|
(285,053
|
)
|
|
36,660
|
|
|
(7,501
|
)
|
|||
Non-cash restructuring charges
|
7,594
|
|
|
—
|
|
|
—
|
|
|||
Deconsolidation of variable interest entity (Alios)
|
55,110
|
|
|
—
|
|
|
—
|
|
|||
Write-downs of inventories to net realizable value
|
10,358
|
|
|
133,189
|
|
|
—
|
|
|||
Excess tax benefit from share-based payment arrangements
|
1,252
|
|
|
(1,971
|
)
|
|
(900
|
)
|
|||
Other non-cash items, net
|
6,742
|
|
|
178
|
|
|
319
|
|
|||
Changes in operating assets and liabilities, excluding the effects of the acquisition and deconsolidation of a variable interest entity (Alios):
|
|
|
|
|
|
||||||
Accounts receivable, net
|
53,363
|
|
|
39,912
|
|
|
(170,606
|
)
|
|||
Inventories
|
7,142
|
|
|
(29,925
|
)
|
|
(111,388
|
)
|
|||
Prepaid expenses and other current assets
|
(12,061
|
)
|
|
(23,619
|
)
|
|
10,358
|
|
|||
Accounts payable
|
(49,234
|
)
|
|
14,892
|
|
|
37,468
|
|
|||
Accrued expenses and other liabilities
|
43,725
|
|
|
29,232
|
|
|
116,822
|
|
|||
Accrued restructuring expense
|
5,025
|
|
|
(2,985
|
)
|
|
(3,282
|
)
|
|||
Deferred revenues
|
(53,011
|
)
|
|
(39,324
|
)
|
|
(71,536
|
)
|
|||
Net cash provided by (used in) operating activities
|
(51,570
|
)
|
|
267,841
|
|
|
143,735
|
|
|||
Cash flows from investing activities:
|
|
|
|
|
|
||||||
Purchases of marketable securities
|
(2,412,418
|
)
|
|
(1,705,829
|
)
|
|
(721,545
|
)
|
|||
Sales and maturities of marketable securities
|
2,348,295
|
|
|
1,367,927
|
|
|
1,016,040
|
|
|||
Payment for acquisition of variable interest entity (Alios)
|
—
|
|
|
—
|
|
|
(60,000
|
)
|
|||
Expenditures for property and equipment
|
(51,393
|
)
|
|
(71,140
|
)
|
|
(34,595
|
)
|
|||
Decrease in restricted cash and cash equivalents
|
31,804
|
|
|
2,156
|
|
|
—
|
|
|||
Decrease (increase) in restricted cash and cash equivalents (Alios)
|
27,884
|
|
|
(18,105
|
)
|
|
12,695
|
|
|||
Decrease (increase) in other assets
|
1,698
|
|
|
(826
|
)
|
|
(183
|
)
|
|||
Net cash provided by (used in) investing activities
|
(54,130
|
)
|
|
(425,817
|
)
|
|
212,412
|
|
|||
Cash flows from financing activities:
|
|
|
|
|
|
||||||
Excess tax benefit from share-based payment arrangements
|
(1,252
|
)
|
|
1,971
|
|
|
900
|
|
|||
Issuances of common stock under benefit plans
|
265,878
|
|
|
191,721
|
|
|
124,862
|
|
|||
Payments to redeem secured notes
|
(158
|
)
|
|
—
|
|
|
(155,000
|
)
|
|||
Settlement of milestone derivatives
|
—
|
|
|
—
|
|
|
(95,000
|
)
|
|||
Payments on capital lease obligations
|
(16,057
|
)
|
|
(2,615
|
)
|
|
—
|
|
|||
Payments on construction financing lease obligation
|
(67,527
|
)
|
|
(18,873
|
)
|
|
—
|
|
|||
Net cash provided by (used in) financing activities
|
180,884
|
|
|
172,204
|
|
|
(124,238
|
)
|
|||
Effect of changes in exchange rates on cash
|
4,708
|
|
|
(141
|
)
|
|
214
|
|
|||
Net increase in cash and cash equivalents
|
79,892
|
|
|
14,087
|
|
|
232,123
|
|
|||
Cash and cash equivalents—beginning of period
|
489,407
|
|
|
475,320
|
|
|
243,197
|
|
|||
Cash and cash equivalents—end of period
|
$
|
569,299
|
|
|
$
|
489,407
|
|
|
$
|
475,320
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
||||||
Cash paid for interest
|
$
|
11,015
|
|
|
$
|
13,400
|
|
|
$
|
13,512
|
|
Cash paid for income taxes
|
$
|
2,840
|
|
|
$
|
9,318
|
|
|
$
|
—
|
|
Conversion of convertible senior subordinated notes (due 2015) for common stock
|
$
|
399,842
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Capitalization of construction in-process related to construction financing lease obligation
|
$
|
215,013
|
|
|
$
|
235,594
|
|
|
$
|
54,655
|
|
Assets acquired under capital lease obligations
|
$
|
50,972
|
|
|
$
|
30,101
|
|
|
$
|
—
|
|
Unamortized deferred debt issuance costs exchanged
|
$
|
4,230
|
|
|
$
|
—
|
|
|
$
|
—
|
|
A.
|
Nature of Business and Accounting Policies
|
|
Trade
Allowances |
|
Rebates,
Chargebacks and Discounts |
|
Product
Returns |
|
Other
Incentives |
|
Total
|
||||||||||
|
(in thousands)
|
||||||||||||||||||
2013
|
|
|
|
|
|
|
|
|
|
||||||||||
Beginning Balance
|
$
|
5,416
|
|
|
$
|
63,560
|
|
|
$
|
2,852
|
|
|
$
|
3,565
|
|
|
$
|
75,393
|
|
Provision related to current period sales
|
31,395
|
|
|
204,459
|
|
|
5,795
|
|
|
9,295
|
|
|
250,944
|
|
|||||
Adjustments related to prior period sales
|
343
|
|
|
4,474
|
|
|
15,149
|
|
|
(228
|
)
|
|
19,738
|
|
|||||
Credits/payments made
|
(35,619
|
)
|
|
(204,249
|
)
|
|
(7,997
|
)
|
|
(11,077
|
)
|
|
(258,942
|
)
|
|||||
Ending Balance
|
$
|
1,535
|
|
|
$
|
68,244
|
|
|
$
|
15,799
|
|
|
$
|
1,555
|
|
|
$
|
87,133
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
2012
|
|
|
|
|
|
|
|
|
|
||||||||||
Beginning Balance
|
$
|
11,162
|
|
|
$
|
52,659
|
|
|
$
|
340
|
|
|
$
|
5,202
|
|
|
$
|
69,363
|
|
Provision related to current period sales
|
55,913
|
|
|
216,942
|
|
|
2,067
|
|
|
19,103
|
|
|
294,025
|
|
|||||
Adjustments related to prior period sales
|
29
|
|
|
3,883
|
|
|
1,498
|
|
|
72
|
|
|
5,482
|
|
|||||
Credits/payments made
|
(61,688
|
)
|
|
(209,924
|
)
|
|
(1,053
|
)
|
|
(20,812
|
)
|
|
(293,477
|
)
|
|||||
Ending Balance
|
$
|
5,416
|
|
|
$
|
63,560
|
|
|
$
|
2,852
|
|
|
$
|
3,565
|
|
|
$
|
75,393
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
2011
|
|
|
|
|
|
|
|
|
|
||||||||||
Beginning Balance
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Provision related to current period sales
|
38,228
|
|
|
75,145
|
|
|
553
|
|
|
9,692
|
|
|
123,618
|
|
|||||
Credits/payments made
|
(27,066
|
)
|
|
(22,486
|
)
|
|
(213
|
)
|
|
(4,490
|
)
|
|
(54,255
|
)
|
|||||
Ending Balance
|
$
|
11,162
|
|
|
$
|
52,659
|
|
|
$
|
340
|
|
|
$
|
5,202
|
|
|
$
|
69,363
|
|
B.
|
Collaborative Arrangements
|
|
2013
|
|
2012
|
|
2011
|
||||||
|
(in thousands)
|
||||||||||
Royalty revenues
|
$
|
130,724
|
|
|
$
|
117,592
|
|
|
$
|
20,289
|
|
Collaborative revenues:
|
|
|
|
|
|
||||||
Up-front and amendment payments revenues
|
$
|
190,345
|
|
|
$
|
12,428
|
|
|
$
|
12,428
|
|
Milestone revenues
|
—
|
|
|
—
|
|
|
250,000
|
|
|||
Net reimbursement (payment) for telaprevir development costs
|
2,793
|
|
|
(3,507
|
)
|
|
(8,418
|
)
|
|||
Reimbursement for manufacturing services
|
10,299
|
|
|
7,257
|
|
|
20,383
|
|
|||
Total collaborative revenues attributable to the Janssen collaboration
|
$
|
203,437
|
|
|
$
|
16,178
|
|
|
$
|
274,393
|
|
Total revenues attributable to the Janssen collaboration
|
$
|
334,161
|
|
|
$
|
133,770
|
|
|
$
|
294,682
|
|
|
2012
|
|
2011
|
||||
|
(in thousands)
|
||||||
Amortized portion of up-front payments
|
$
|
12,744
|
|
|
$
|
38,232
|
|
Milestone revenues
|
485
|
|
|
68,515
|
|
||
Payments for manufacturing services
|
5,650
|
|
|
14,928
|
|
||
Total collaborative revenues attributable to the Mitsubishi Tanabe collaboration
|
$
|
18,879
|
|
|
$
|
121,675
|
|
|
2013
|
|
2012
|
|
2011
|
||||||
|
(in thousands)
|
|
|
||||||||
Loss before provision for (benefit from) income taxes
|
$
|
283,747
|
|
|
$
|
20,044
|
|
|
$
|
9,536
|
|
Decrease (increase) in fair value of contingent milestone and royalty payments
|
124,920
|
|
|
(114,970
|
)
|
|
(69,950
|
)
|
|||
Provision for (benefit from) income taxes
|
(166,145
|
)
|
|
39,029
|
|
|
48,809
|
|
|||
Net loss (income) attributable to noncontrolling interest (Alios)
|
$
|
242,522
|
|
|
$
|
(55,897
|
)
|
|
$
|
(11,605
|
)
|
|
As of December 31, 2012
|
|||
|
|
(in thousands)
|
||
Restricted cash and cash equivalents (Alios)
|
|
$
|
69,983
|
|
Prepaid expenses and other current assets
|
|
$
|
672
|
|
Property and equipment, net
|
|
$
|
1,728
|
|
Intangible assets
|
|
$
|
250,600
|
|
Other assets
|
|
$
|
861
|
|
Accounts payable
|
|
$
|
1,054
|
|
Accrued expenses
|
|
$
|
6,099
|
|
Income taxes payable (Alios)
|
|
$
|
715
|
|
Deferred tax liability
|
|
$
|
152,781
|
|
Other liabilities, excluding current portion
|
|
$
|
910
|
|
Redeemable noncontrolling interest (Alios)
|
|
$
|
38,530
|
|
Noncontrolling interest (Alios)
|
|
$
|
196,672
|
|
C.
|
Net Income (Loss) Per Share Attributable to Vertex Common Shareholders
|
|
2013
|
|
2012
|
|
2011
|
||||||
|
(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
|
$
|
(445,028
|
)
|
|
$
|
(107,032
|
)
|
|
$
|
29,574
|
|
Less: Undistributed earnings allocated to participating securities
|
—
|
|
|
—
|
|
|
(291
|
)
|
|||
Net income (loss) attributable to Vertex common shareholders—basic
|
$
|
(445,028
|
)
|
|
$
|
(107,032
|
)
|
|
$
|
29,283
|
|
Basic weighted-average common shares outstanding
|
224,906
|
|
|
211,946
|
|
|
204,891
|
|
|||
Basic net income (loss) attributable to Vertex per common share
|
$
|
(1.98
|
)
|
|
$
|
(0.50
|
)
|
|
$
|
0.14
|
|
Diluted net income (loss) attributable to Vertex per common share calculation:
|
|
|
|
|
|
||||||
Net income (loss) attributable to Vertex common shareholders
|
$
|
(445,028
|
)
|
|
$
|
(107,032
|
)
|
|
$
|
29,574
|
|
Less: Undistributed earnings allocated to participating securities
|
—
|
|
|
—
|
|
|
(285
|
)
|
|||
Net income (loss) attributable to Vertex common shareholders—diluted
|
$
|
(445,028
|
)
|
|
$
|
(107,032
|
)
|
|
$
|
29,289
|
|
Weighted-average shares used to compute basic net income (loss) per common share
|
224,906
|
|
|
211,946
|
|
|
204,891
|
|
|||
Effect of potentially dilutive securities:
|
|
|
|
|
|
||||||
Stock options
|
—
|
|
|
—
|
|
|
3,863
|
|
|||
Other
|
—
|
|
|
—
|
|
|
53
|
|
|||
Weighted-average shares used to compute diluted net income (loss) per common share
|
224,906
|
|
|
211,946
|
|
|
208,807
|
|
|||
Diluted net income (loss) attributable to Vertex per common share
|
$
|
(1.98
|
)
|
|
$
|
(0.50
|
)
|
|
$
|
0.14
|
|
|
2013
|
|
2012
|
|
2011
|
|||
|
(in thousands)
|
|||||||
Stock options
|
15,729
|
|
|
19,726
|
|
|
9,626
|
|
Convertible senior subordinated notes
|
—
|
|
|
8,192
|
|
|
8,192
|
|
Unvested restricted stock and restricted stock units
|
2,165
|
|
|
2,350
|
|
|
8
|
|
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, 2013 |
||||||||||||||
|
|
|
Fair Value Hierarchy
|
||||||||||||
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
|
(in thousands)
|
||||||||||||||
Financial assets carried at fair value:
|
|
|
|
|
|
|
|
||||||||
Cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
$
|
255,689
|
|
|
$
|
255,689
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Marketable securities:
|
|
|
|
|
|
|
|
||||||||
Government-sponsored enterprise securities
|
600,450
|
|
|
600,450
|
|
|
—
|
|
|
—
|
|
||||
Commercial paper
|
83,493
|
|
|
—
|
|
|
83,493
|
|
|
—
|
|
||||
Corporate debt securities
|
211,834
|
|
|
—
|
|
|
211,834
|
|
|
—
|
|
||||
Total
|
$
|
1,151,466
|
|
|
$
|
856,139
|
|
|
$
|
295,327
|
|
|
$
|
—
|
|
E.
|
Marketable Securities
|
|
Amortized Cost
|
|
Gross
Unrealized Gains |
|
Gross
Unrealized Losses |
|
Fair Value
|
||||||||
|
(in thousands)
|
||||||||||||||
December 31, 2013
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Cash and money market funds
|
$
|
569,299
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
569,299
|
|
Total cash and cash equivalents
|
$
|
569,299
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
569,299
|
|
Marketable securities:
|
|
|
|
|
|
|
|
||||||||
Government-sponsored enterprise securities (due within 1 year)
|
$
|
600,496
|
|
|
$
|
7
|
|
|
$
|
(53
|
)
|
|
$
|
600,450
|
|
Commercial paper (due within 1 year)
|
83,384
|
|
|
109
|
|
|
—
|
|
|
83,493
|
|
||||
Corporate debt securities (due within 1 year)
|
189,674
|
|
|
14
|
|
|
(34
|
)
|
|
189,654
|
|
||||
Corporate debt securities (due after 1 year through 5 years)
|
22,181
|
|
|
6
|
|
|
(7
|
)
|
|
22,180
|
|
||||
Total marketable securities
|
$
|
895,735
|
|
|
$
|
136
|
|
|
$
|
(94
|
)
|
|
$
|
895,777
|
|
Total cash, cash equivalents and marketable securities
|
$
|
1,465,034
|
|
|
$
|
136
|
|
|
$
|
(94
|
)
|
|
$
|
1,465,076
|
|
|
|
|
|
|
|
|
|
||||||||
December 31, 2012
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Cash and money market funds
|
$
|
489,407
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
489,407
|
|
Total cash and cash equivalents
|
$
|
489,407
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
489,407
|
|
Marketable securities:
|
|
|
|
|
|
|
|
||||||||
U.S. Treasury securities (due within 1 year)
|
$
|
111,350
|
|
|
$
|
2
|
|
|
$
|
(2
|
)
|
|
$
|
111,350
|
|
Government-sponsored enterprise securities (due within 1 year)
|
440,181
|
|
|
49
|
|
|
(5
|
)
|
|
440,225
|
|
||||
Commercial paper (due within 1 year)
|
225,294
|
|
|
155
|
|
|
—
|
|
|
225,449
|
|
||||
Corporate debt securities (due within 1 year)
|
15,429
|
|
|
1
|
|
|
(1
|
)
|
|
15,429
|
|
||||
Corporate debt securities (due after 1 year through 5 years)
|
39,358
|
|
|
10
|
|
|
(13
|
)
|
|
39,355
|
|
||||
Total marketable securities
|
$
|
831,612
|
|
|
$
|
217
|
|
|
$
|
(21
|
)
|
|
$
|
831,808
|
|
Total cash, cash equivalents and marketable securities
|
$
|
1,321,019
|
|
|
$
|
217
|
|
|
$
|
(21
|
)
|
|
$
|
1,321,215
|
|
F.
|
Accumulated Other Comprehensive Loss
|
|
Foreign currency translation adjustment
|
|
Unrealized holding gains on marketable securities
|
|
Unrealized losses on foreign currency forward contracts
|
|
Total
|
||||||||
|
(in thousands)
|
||||||||||||||
Balance at December 31, 2012
|
$
|
(746
|
)
|
|
$
|
196
|
|
|
$
|
—
|
|
|
$
|
(550
|
)
|
Other comprehensive income (loss) before reclassifications
|
421
|
|
|
(154
|
)
|
|
(23
|
)
|
|
244
|
|
||||
Amounts reclassified from accumulated other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Net current period other comprehensive income (loss)
|
421
|
|
|
(154
|
)
|
|
(23
|
)
|
|
244
|
|
||||
Balance at December 31, 2013
|
$
|
(325
|
)
|
|
$
|
42
|
|
|
$
|
(23
|
)
|
|
$
|
(306
|
)
|
G.
|
Inventories
|
H.
|
Property and Equipment
|
|
As of December 31,
|
||||||
|
2013
|
|
2012
|
||||
|
(in thousands)
|
||||||
Buildings
|
$
|
506,056
|
|
|
$
|
—
|
|
Furniture and equipment
|
190,555
|
|
|
173,766
|
|
||
Leasehold improvements
|
163,019
|
|
|
123,770
|
|
||
Software
|
102,520
|
|
|
101,276
|
|
||
Computers
|
43,096
|
|
|
40,779
|
|
||
Construction-in-process
|
—
|
|
|
290,703
|
|
||
Total property and equipment, gross
|
1,005,246
|
|
|
730,294
|
|
||
Less: accumulated depreciation
|
(308,335
|
)
|
|
(296,685
|
)
|
||
Total property and equipment, net
|
$
|
696,911
|
|
|
$
|
433,609
|
|
I.
|
Fan Pier Leases
|
J.
|
Intangible Assets and Goodwill
|
K.
|
Accrued Expenses and Other Liabilities, Current Portion
|
|
As of December 31,
|
||||||
|
2013
|
|
2012
|
||||
|
(in thousands)
|
||||||
Product revenue allowances
|
$
|
85,510
|
|
|
$
|
69,936
|
|
Payroll and benefits
|
76,785
|
|
|
62,140
|
|
||
Research, development and commercial contract costs
|
52,468
|
|
|
63,960
|
|
||
Royalty payable
|
18,334
|
|
|
29,007
|
|
||
Other
|
16,241
|
|
|
18,932
|
|
||
Professional fees
|
10,593
|
|
|
11,226
|
|
||
Taxes payable
|
8,362
|
|
|
2,182
|
|
||
Unrecognized tax benefits
|
2,784
|
|
|
4,106
|
|
||
Interest
|
—
|
|
|
3,395
|
|
||
Total
|
$
|
271,077
|
|
|
$
|
264,884
|
|
L.
|
Convertible Senior Subordinated Notes
|
M.
|
Common Stock, Preferred Stock and Equity Plans
|
|
|
|
|
|
|
As of December 31, 2013
|
||||
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, ISO,
RS and RSU |
|
1,170,827
|
|
|
2,129,173
|
|
2006 Stock and Option Plan
|
|
Employees, Non-employee Directors and Consultants
|
|
NSO, ISO,
RS and RSU |
|
15,748,949
|
|
|
3,282,178
|
|
1996 Stock and Option Plan
|
|
Employees, Non-employee Directors, Advisors and Consultants
|
|
NSO, ISO and RS
|
|
974,303
|
|
|
—
|
|
Total
|
|
|
|
|
|
17,894,079
|
|
|
5,411,351
|
|
|
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, 2012
|
19,726
|
|
|
$
|
38.09
|
|
|
|
|
|
||
Granted
|
4,840
|
|
|
$
|
57.87
|
|
|
|
|
|
||
Exercised
|
(6,995
|
)
|
|
$
|
35.28
|
|
|
|
|
|
||
Forfeited
|
(1,822
|
)
|
|
$
|
46.89
|
|
|
|
|
|
||
Expired
|
(20
|
)
|
|
$
|
46.64
|
|
|
|
|
|
||
Outstanding at December 31, 2013
|
15,729
|
|
|
$
|
44.40
|
|
|
6.67
|
|
$
|
481,311
|
|
Exercisable at December 31, 2013
|
7,950
|
|
|
$
|
38.84
|
|
|
5.13
|
|
$
|
283,146
|
|
Exercisable and Expected to Vest at December 31, 2013
|
14,967
|
|
|
$
|
43.95
|
|
|
6.56
|
|
$
|
463,885
|
|
|
|
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)
|
||||||
$ 9.09–$20.00
|
|
432
|
|
|
2.37
|
|
$
|
15.37
|
|
|
432
|
|
|
$
|
15.37
|
|
$20.01–$30.00
|
|
1,055
|
|
|
5.74
|
|
$
|
29.38
|
|
|
812
|
|
|
$
|
29.23
|
|
$30.01–$40.00
|
|
6,842
|
|
|
5.07
|
|
$
|
36.55
|
|
|
4,773
|
|
|
$
|
36.06
|
|
$40.01–$50.00
|
|
4,136
|
|
|
8.74
|
|
$
|
46.32
|
|
|
787
|
|
|
$
|
46.62
|
|
$50.01–$60.00
|
|
1,713
|
|
|
7.16
|
|
$
|
53.78
|
|
|
874
|
|
|
$
|
54.35
|
|
$60.01–$70.00
|
|
80
|
|
|
9.08
|
|
$
|
65.54
|
|
|
14
|
|
|
$
|
63.20
|
|
$70.01-$80.00
|
|
87
|
|
|
9.31
|
|
$
|
77.55
|
|
|
9
|
|
|
$
|
77.73
|
|
$80.01–$88.18
|
|
1,384
|
|
|
9.50
|
|
$
|
83.11
|
|
|
249
|
|
|
$
|
82.13
|
|
Total
|
|
15,729
|
|
|
6.67
|
|
$
|
44.40
|
|
|
7,950
|
|
|
$
|
38.84
|
|
|
Restricted
Stock |
|
Weighted-average
Grant-date Fair Value |
|||
|
(in thousands)
|
|
(per share)
|
|||
Unvested at December 31, 2012
|
2,270
|
|
|
$
|
42.92
|
|
Granted
|
1,356
|
|
|
$
|
62.16
|
|
Vested
|
(800
|
)
|
|
$
|
42.27
|
|
Cancelled
|
(780
|
)
|
|
$
|
51.47
|
|
Unvested at December 31, 2013
|
2,046
|
|
|
$
|
52.66
|
|
|
Year Ended December 31, 2013
|
||
|
(in thousands,
except per share amount) |
||
Number of shares
|
527
|
|
|
Average price paid per share
|
$
|
36.21
|
|
N.
|
Stock-based Compensation Expense
|
|
2013
|
|
2012
|
|
2011
|
||||||
|
(in thousands)
|
||||||||||
Stock-based compensation expense by line item:
|
|
|
|
|
|
||||||
Research and development expenses
|
$
|
81,467
|
|
|
$
|
71,533
|
|
|
$
|
75,574
|
|
Sales, general and administrative expenses
|
45,836
|
|
|
42,752
|
|
|
42,652
|
|
|||
Total stock-based compensation expense included in costs and expenses
|
$
|
127,303
|
|
|
$
|
114,285
|
|
|
$
|
118,226
|
|
|
2013
|
|
2012
|
|
2011
|
||||||
|
(in thousands)
|
||||||||||
Stock-based compensation expense by type of award:
|
|
|
|
|
|
||||||
Stock options
|
$
|
85,067
|
|
|
$
|
79,047
|
|
|
$
|
83,098
|
|
Restricted stock and restricted stock units
|
36,479
|
|
|
29,194
|
|
|
30,708
|
|
|||
ESPP share issuances
|
6,805
|
|
|
7,298
|
|
|
5,462
|
|
|||
Less: stock-based compensation expense capitalized to inventories
|
(1,048
|
)
|
|
(1,254
|
)
|
|
(1,042
|
)
|
|||
Total stock-based compensation expense included in costs and expenses
|
$
|
127,303
|
|
|
$
|
114,285
|
|
|
$
|
118,226
|
|
|
As of December 31, 2013
|
||||
|
Unrecognized Expense
Net of Estimated Forfeitures |
|
Weighted-average
Recognition Period |
||
|
(in thousands)
|
|
(in years)
|
||
Type of award:
|
|
|
|
||
Stock options
|
$
|
141,283
|
|
|
2.56
|
Restricted stock and restricted stock units
|
$
|
73,490
|
|
|
2.47
|
ESPP share issuances
|
$
|
5,956
|
|
|
0.67
|
|
2013
|
|
2012
|
|
2011
|
|||
Expected stock price volatility
|
46.20
|
%
|
|
47.93
|
%
|
|
49.53
|
%
|
Risk-free interest rate
|
1.25
|
%
|
|
0.95
|
%
|
|
2.09
|
%
|
Expected term of options (in years)
|
5.81
|
|
|
5.78
|
|
|
5.74
|
|
Expected annual dividends
|
—
|
|
|
—
|
|
|
—
|
|
•
|
Expected stock price volatility:
Options to purchase the Company’s stock with remaining terms of greater than one year are regularly traded in the market. Expected stock price volatility is calculated using the trailing one month average of daily implied volatilities prior to grant date.
|
•
|
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.
|
September 2009 Financial Transactions
|
|
2011
|
||
|
(in thousands)
|
||
Expenses and Losses (Gains):
|
|
||
Interest expense related to 2012 Notes
|
$
|
21,687
|
|
Change in fair value of embedded derivative related to 2012 Notes
|
(400
|
)
|
|
Change in fair value of free-standing derivatives related to the sale of milestone payments
|
17,201
|
|
|
Total September 2009 financial transaction expenses
|
$
|
38,488
|
|
P.
|
Sale of HIV Protease Inhibitor Royalty Stream
|
Q.
|
Income Taxes
|
|
2013
|
|
2012
|
|
2011
|
||||||
|
(in thousands)
|
||||||||||
United States
|
$
|
(390,009
|
)
|
|
$
|
256,816
|
|
|
$
|
343,515
|
|
Foreign
|
(586,108
|
)
|
|
(269,197
|
)
|
|
(283,070
|
)
|
|||
Income (loss) before provision for (benefit from) income taxes
|
$
|
(976,117
|
)
|
|
$
|
(12,381
|
)
|
|
$
|
60,445
|
|
|
2013
|
|
2012
|
|
2011
|
||||||
|
(in thousands)
|
||||||||||
Current taxes:
|
|
|
|
|
|
||||||
United States
|
$
|
(11,420
|
)
|
|
$
|
2,057
|
|
|
$
|
22,275
|
|
Foreign
|
1,084
|
|
|
(1,865
|
)
|
|
(561
|
)
|
|||
State
|
2,136
|
|
|
1,902
|
|
|
8,655
|
|
|||
Total current taxes
|
$
|
(8,200
|
)
|
|
$
|
2,094
|
|
|
$
|
30,369
|
|
Deferred taxes:
|
|
|
|
|
|
||||||
United States
|
$
|
(131,281
|
)
|
|
$
|
31,308
|
|
|
$
|
19,629
|
|
Foreign
|
(127,587
|
)
|
|
—
|
|
|
(32,692
|
)
|
|||
State
|
(21,499
|
)
|
|
5,352
|
|
|
1,960
|
|
|||
Total deferred taxes
|
$
|
(280,367
|
)
|
|
$
|
36,660
|
|
|
$
|
(11,103
|
)
|
Provision for (benefit from) income taxes
|
$
|
(288,567
|
)
|
|
$
|
38,754
|
|
|
$
|
19,266
|
|
|
2013
|
|
2012
|
|
2011
|
||||||
|
(in thousands)
|
||||||||||
Income (loss) before provision for (benefit from) income taxes
|
$
|
(976,117
|
)
|
|
$
|
(12,381
|
)
|
|
$
|
60,445
|
|
Expected tax provision (benefit)
|
(341,641
|
)
|
|
(4,333
|
)
|
|
21,156
|
|
|||
State taxes, net of federal benefit
|
(19,268
|
)
|
|
7,075
|
|
|
10,624
|
|
|||
Foreign rate differential
|
72,961
|
|
|
62,425
|
|
|
43,629
|
|
|||
Tax credits
|
(16,775
|
)
|
|
(1,980
|
)
|
|
(51,086
|
)
|
|||
Unbenefited operating losses
|
(43,570
|
)
|
|
(30,364
|
)
|
|
(6,286
|
)
|
|||
Non-deductible expenses
|
9,614
|
|
|
3,198
|
|
|
1,953
|
|
|||
Rate change
|
50,076
|
|
|
3,275
|
|
|
—
|
|
|||
Other
|
36
|
|
|
(542
|
)
|
|
(724
|
)
|
|||
Provision for (benefit from) income taxes
|
$
|
(288,567
|
)
|
|
$
|
38,754
|
|
|
$
|
19,266
|
|
|
As of December 31,
|
||||||
|
2013
|
|
2012
|
||||
|
(in thousands)
|
||||||
Deferred tax assets:
|
|
|
|
||||
Net operating loss
|
$
|
850,946
|
|
|
$
|
777,687
|
|
Tax credit carryforwards
|
180,380
|
|
|
147,074
|
|
||
Property and equipment
|
—
|
|
|
10,701
|
|
||
Intangible assets
|
26,105
|
|
|
63,353
|
|
||
Deferred revenues
|
25,158
|
|
|
44,867
|
|
||
Stock-based compensation
|
63,521
|
|
|
83,979
|
|
||
Inventories
|
26,278
|
|
|
56,564
|
|
||
Accrued expenses
|
52,470
|
|
|
27,945
|
|
||
Currency translation adjustment
|
217
|
|
|
—
|
|
||
Construction financing lease obligation
|
152,688
|
|
|
—
|
|
||
Gross deferred tax assets
|
1,377,763
|
|
|
1,212,170
|
|
||
Valuation allowance
|
(1,243,664
|
)
|
|
(1,211,561
|
)
|
||
Total deferred tax assets
|
134,099
|
|
|
609
|
|
||
Deferred tax liabilities:
|
|
|
|
||||
Property and equipment
|
(134,099
|
)
|
|
—
|
|
||
Unrealized gain
|
—
|
|
|
(376
|
)
|
||
Contingent milestone and royalty payment obligation
|
—
|
|
|
(50,904
|
)
|
||
Acquired intangibles
|
—
|
|
|
(229,696
|
)
|
||
Net deferred tax liabilities
|
$
|
—
|
|
|
$
|
(280,367
|
)
|
|
2013
|
|
2012
|
||||
|
(in thousands)
|
||||||
Unrecognized tax benefits beginning of year
|
$
|
4,106
|
|
|
$
|
4,360
|
|
Gross change for current year positions
|
1,325
|
|
|
598
|
|
||
Increase for prior period positions
|
—
|
|
|
—
|
|
||
Decrease for prior period positions
|
(290
|
)
|
|
—
|
|
||
Decrease due to settlements and payments
|
—
|
|
|
—
|
|
||
Decrease due to statute limitations
|
(185
|
)
|
|
(852
|
)
|
||
Deconsolidation of Alios
|
(2,932
|
)
|
|
—
|
|
||
Unrecognized tax benefits end of year
|
$
|
2,024
|
|
|
$
|
4,106
|
|
R.
|
Restructuring Expenses
|
|
Restructuring Expense
|
|
Cash
Payments |
|
Non-cash
Expense |
|
Liability as of
December 31, 2003 |
||||||||
|
(in thousands)
|
||||||||||||||
Lease restructuring and other operating lease expense
|
$
|
84,726
|
|
|
$
|
(15,200
|
)
|
|
$
|
—
|
|
|
$
|
69,526
|
|
Employee severance, benefits and related costs
|
2,616
|
|
|
(2,616
|
)
|
|
—
|
|
|
—
|
|
||||
Leasehold improvements and asset impairments
|
4,482
|
|
|
—
|
|
|
(4,482
|
)
|
|
—
|
|
||||
Total
|
$
|
91,824
|
|
|
$
|
(17,816
|
)
|
|
$
|
(4,482
|
)
|
|
$
|
69,526
|
|
|
2013
|
|
2012
|
|
2011
|
|
2004-2013
|
||||||||
|
(in thousands)
|
||||||||||||||
Liability, beginning of the period
|
$
|
23,328
|
|
|
$
|
26,313
|
|
|
$
|
29,595
|
|
|
$
|
69,526
|
|
Cash payments
|
(15,255
|
)
|
|
(14,853
|
)
|
|
(14,904
|
)
|
|
(178,952
|
)
|
||||
Cash received from subleases
|
10,670
|
|
|
10,024
|
|
|
9,548
|
|
|
75,708
|
|
||||
Credit for portion of facility Vertex decided to occupy in 2005
|
—
|
|
|
—
|
|
|
—
|
|
|
(10,018
|
)
|
||||
Restructuring expense
|
372
|
|
|
1,844
|
|
|
2,074
|
|
|
62,851
|
|
||||
Liability, end of the period
|
$
|
19,115
|
|
|
$
|
23,328
|
|
|
$
|
26,313
|
|
|
$
|
19,115
|
|
|
Restructuring Expense
|
|
Cash
Payments |
|
Non-cash Expense
|
|
Liability as of
December 31, 2013 |
||||||||
|
(in thousands)
|
||||||||||||||
Employee severance, benefits and related costs
|
$
|
25,060
|
|
|
$
|
(21,458
|
)
|
|
$
|
(1,312
|
)
|
|
$
|
2,290
|
|
Asset impairments
|
6,282
|
|
|
—
|
|
|
(6,282
|
)
|
|
—
|
|
||||
Contract termination and other associated costs
|
7,609
|
|
|
(1,458
|
)
|
|
—
|
|
|
6,151
|
|
||||
Total
|
$
|
38,951
|
|
|
$
|
(22,916
|
)
|
|
$
|
(7,594
|
)
|
|
$
|
8,441
|
|
S.
|
Employee Benefits
|
|
2013
|
|
2012
|
|
2011
|
||||||
|
(in thousands)
|
||||||||||
Discretionary matching contributions during the year ended December 31,
|
$
|
5,930
|
|
|
$
|
10,261
|
|
|
$
|
8,619
|
|
Shares issued during the year ended December 31,
|
99
|
|
|
242
|
|
|
183
|
|
|||
Shares issuable as of the year ended December 31,
|
0
|
|
|
53
|
|
|
62
|
|
T.
|
Commitments
|
Year
|
|
Fan Pier
Leases |
|
Kendall Square
Lease |
|
Kendall Sublease
Income |
|
Other
Operating Leases |
|
Total Lease
Commitments
(Net of Sublease Income)
|
||||||||||
|
|
(in thousands)
|
||||||||||||||||||
2014
|
|
$
|
67,206
|
|
|
$
|
19,879
|
|
|
$
|
(8,546
|
)
|
|
$
|
40,762
|
|
|
$
|
119,301
|
|
2015
|
|
67,206
|
|
|
19,879
|
|
|
(3,996
|
)
|
|
33,398
|
|
|
116,487
|
|
|||||
2016
|
|
67,206
|
|
|
19,879
|
|
|
—
|
|
|
14,434
|
|
|
101,519
|
|
|||||
2017
|
|
67,206
|
|
|
19,879
|
|
|
—
|
|
|
12,995
|
|
|
100,080
|
|
|||||
2018
|
|
67,206
|
|
|
6,626
|
|
|
—
|
|
|
12,841
|
|
|
86,673
|
|
|||||
Thereafter
|
|
752,798
|
|
|
—
|
|
|
—
|
|
|
75,344
|
|
|
828,142
|
|
|||||
Total minimum lease payments
|
|
$
|
1,088,828
|
|
|
$
|
86,142
|
|
|
$
|
(12,542
|
)
|
|
$
|
189,774
|
|
|
$
|
1,352,202
|
|
Year
|
|
(in thousands)
|
||
2014
|
|
$
|
19,957
|
|
2015
|
|
18,346
|
|
|
2016
|
|
11,809
|
|
|
2017
|
|
10,714
|
|
|
2018
|
|
10,612
|
|
|
Thereafter
|
|
2,121
|
|
|
Total payments
|
|
73,559
|
|
|
Less: amount representing interest
|
|
(7,912
|
)
|
|
Present value of payments
|
|
$
|
65,647
|
|
U.
|
Legal Proceedings
|
V.
|
Contingencies
|
W.
|
Guarantees
|
X.
|
Segment Information
|
|
2013
|
|
2012
|
|
2011
|
||||||
|
(in thousands)
|
||||||||||
INCIVEK
|
$
|
466,360
|
|
|
$
|
1,161,813
|
|
|
$
|
950,889
|
|
KALYDECO
|
371,285
|
|
|
171,645
|
|
|
—
|
|
|||
Total product revenues, net
|
$
|
837,645
|
|
|
$
|
1,333,458
|
|
|
$
|
950,889
|
|
|
2013
|
|
2012
|
|
2011
|
||||||
|
(in thousands)
|
||||||||||
United States
|
$
|
896,952
|
|
|
$
|
1,373,516
|
|
|
$
|
1,389,568
|
|
Outside of the United States
|
|
|
|
|
|
||||||
Europe
|
279,557
|
|
|
129,786
|
|
|
20,289
|
|
|||
Other
|
35,466
|
|
|
23,740
|
|
|
769
|
|
|||
Total revenues outside of the United States
|
315,023
|
|
|
153,526
|
|
|
21,058
|
|
|||
Total revenues
|
$
|
1,211,975
|
|
|
$
|
1,527,042
|
|
|
$
|
1,410,626
|
|
|
Percent of Total Gross Revenues
|
|
Percent of Gross Accounts Receivable
|
|||||||||||
|
Year Ended December 31,
|
|
As of December 31,
|
|||||||||||
|
2013
|
|
2012
|
|
2011
|
|
2013
|
|
2012
|
|||||
Janssen
|
22
|
%
|
|
<10
|
%
|
|
19
|
%
|
|
28
|
%
|
|
26
|
%
|
AmerisourceBergen Drug Corporation
|
21
|
%
|
|
32
|
%
|
|
25
|
%
|
|
<10
|
%
|
|
22
|
%
|
McKesson Corporation
|
21
|
%
|
|
29
|
%
|
|
24
|
%
|
|
<10
|
%
|
|
26
|
%
|
Cardinal Health Incorporated
|
<10
|
%
|
|
15
|
%
|
|
15
|
%
|
|
<10
|
%
|
|
<10
|
%
|
Bupa Home Healthcare Limited
|
<10
|
%
|
|
N/A
|
|
|
N/A
|
|
|
14
|
%
|
|
N/A
|
|
|
As of December 31,
|
||||||
|
2013
|
|
2012
|
||||
|
(in thousands)
|
||||||
United States
|
$
|
657,587
|
|
|
$
|
400,102
|
|
Outside of the United States
|
|
|
|
||||
United Kingdom
|
29,970
|
|
|
30,622
|
|
||
Other
|
9,354
|
|
|
2,885
|
|
||
Total property and equipment, net outside of the United States
|
39,324
|
|
|
33,507
|
|
||
Total property and equipment, net
|
$
|
696,911
|
|
|
$
|
433,609
|
|
Y.
|
Quarterly Financial Data (unaudited)
|
|
Three Months Ended
|
||||||||||||||
|
March 31,
2013 |
|
June 30,
2013 |
|
September 30,
2013 |
|
December 31,
2013 |
||||||||
|
(in thousands, except per share amounts)
|
||||||||||||||
Revenues:
|
|
|
|
|
|
|
|
||||||||
Product revenues, net
|
$
|
267,381
|
|
|
$
|
254,789
|
|
|
$
|
186,653
|
|
|
$
|
128,822
|
|
Royalty revenues
|
43,573
|
|
|
49,120
|
|
|
27,012
|
|
|
36,887
|
|
||||
Collaborative revenues (1)
|
17,414
|
|
|
6,841
|
|
|
8,035
|
|
|
185,448
|
|
||||
Total revenues
|
328,368
|
|
|
310,750
|
|
|
221,700
|
|
|
351,157
|
|
||||
Costs and expenses:
|
|
|
|
|
|
|
|
||||||||
Cost of product revenues (2)
|
30,955
|
|
|
24,695
|
|
|
20,048
|
|
|
13,281
|
|
||||
Royalty expenses
|
11,788
|
|
|
13,236
|
|
|
7,291
|
|
|
8,983
|
|
||||
Research and development expenses
|
218,095
|
|
|
222,455
|
|
|
228,624
|
|
|
249,609
|
|
||||
Sales, general and administrative expenses
|
92,879
|
|
|
106,521
|
|
|
87,754
|
|
|
75,188
|
|
||||
Restructuring expenses
|
39
|
|
|
776
|
|
|
12,048
|
|
|
27,658
|
|
||||
Intangible asset impairment charges (3)(4)
|
412,900
|
|
|
—
|
|
|
—
|
|
|
250,600
|
|
||||
Total costs and expenses
|
766,656
|
|
|
367,683
|
|
|
355,765
|
|
|
625,319
|
|
||||
Loss from operations
|
(438,288
|
)
|
|
(56,933
|
)
|
|
(134,065
|
)
|
|
(274,162
|
)
|
||||
Interest expense, net
|
(3,465
|
)
|
|
(6,551
|
)
|
|
(95
|
)
|
|
(12,619
|
)
|
||||
Other income (expense), net (4)
|
(1,187
|
)
|
|
(27
|
)
|
|
4,747
|
|
|
(53,472
|
)
|
||||
Loss before benefit from income taxes
|
(442,940
|
)
|
|
(63,511
|
)
|
|
(129,413
|
)
|
|
(340,253
|
)
|
||||
Benefit from income taxes (3)(4)
|
(130,313
|
)
|
|
(1,799
|
)
|
|
(751
|
)
|
|
(155,704
|
)
|
||||
Net loss
|
(312,627
|
)
|
|
(61,712
|
)
|
|
(128,662
|
)
|
|
(184,549
|
)
|
||||
Net loss attributable to noncontrolling interest (Alios)
|
4,611
|
|
|
4,547
|
|
|
4,530
|
|
|
228,834
|
|
||||
Net income (loss) attributable to Vertex
|
$
|
(308,016
|
)
|
|
$
|
(57,165
|
)
|
|
$
|
(124,132
|
)
|
|
$
|
44,285
|
|
Net income (loss) per share attributable to Vertex common shareholders:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
(1.43
|
)
|
|
$
|
(0.26
|
)
|
|
$
|
(0.54
|
)
|
|
$
|
0.19
|
|
Diluted
|
$
|
(1.43
|
)
|
|
$
|
(0.26
|
)
|
|
$
|
(0.54
|
)
|
|
$
|
0.19
|
|
Shares used in per share calculations:
|
|
|
|
|
|
|
|
||||||||
Basic
|
215,421
|
|
|
222,053
|
|
|
230,505
|
|
|
231,264
|
|
||||
Diluted
|
215,421
|
|
|
222,053
|
|
|
230,505
|
|
|
235,717
|
|
|
Three Months Ended
|
||||||||||||||
|
March 31,
2012 |
|
June 30,
2012 |
|
September 30,
2012 |
|
December 31,
2012 |
||||||||
|
(in thousands, except per share amounts)
|
||||||||||||||
Revenues:
|
|
|
|
|
|
|
|
||||||||
Product revenues, net
|
$
|
375,375
|
|
|
$
|
373,273
|
|
|
$
|
303,501
|
|
|
$
|
281,309
|
|
Royalty revenues
|
38,981
|
|
|
33,480
|
|
|
25,586
|
|
|
43,451
|
|
||||
Collaborative revenues
|
24,381
|
|
|
11,552
|
|
|
6,919
|
|
|
9,234
|
|
||||
Total revenues
|
438,737
|
|
|
418,305
|
|
|
336,006
|
|
|
333,994
|
|
||||
Costs and expenses:
|
|
|
|
|
|
|
|
||||||||
Cost of product revenues (2)
|
25,918
|
|
|
104,549
|
|
|
30,680
|
|
|
75,595
|
|
||||
Royalty expenses
|
13,293
|
|
|
9,874
|
|
|
7,856
|
|
|
12,120
|
|
||||
Research and development expenses
|
196,371
|
|
|
196,544
|
|
|
200,161
|
|
|
213,109
|
|
||||
Sales, general and administrative expenses
|
111,146
|
|
|
117,514
|
|
|
97,684
|
|
|
110,452
|
|
||||
Restructuring expenses
|
360
|
|
|
594
|
|
|
696
|
|
|
194
|
|
||||
Intangible asset impairment charge
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Total costs and expenses
|
347,088
|
|
|
429,075
|
|
|
337,077
|
|
|
411,470
|
|
||||
Income (loss) from operations
|
91,649
|
|
|
(10,770
|
)
|
|
(1,071
|
)
|
|
(77,476
|
)
|
||||
Interest expense, net
|
(3,891
|
)
|
|
(3,814
|
)
|
|
(4,054
|
)
|
|
(3,263
|
)
|
||||
Other income (expense), net
|
150
|
|
|
179
|
|
|
13
|
|
|
(33
|
)
|
||||
Income (loss) before provision for (benefit from) income taxes
|
87,908
|
|
|
(14,405
|
)
|
|
(5,112
|
)
|
|
(80,772
|
)
|
||||
Provision for (benefit from) income taxes
|
32
|
|
|
20,063
|
|
|
21,355
|
|
|
(2,696
|
)
|
||||
Net income (loss)
|
87,876
|
|
|
(34,468
|
)
|
|
(26,467
|
)
|
|
(78,076
|
)
|
||||
Net loss (income) attributable to noncontrolling interest (Alios)
|
3,714
|
|
|
(30,463
|
)
|
|
(31,076
|
)
|
|
1,928
|
|
||||
Net income (loss) attributable to Vertex
|
$
|
91,590
|
|
|
$
|
(64,931
|
)
|
|
$
|
(57,543
|
)
|
|
$
|
(76,148
|
)
|
Net income (loss) per share attributable to Vertex common shareholders:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
0.44
|
|
|
$
|
(0.31
|
)
|
|
$
|
(0.27
|
)
|
|
$
|
(0.35
|
)
|
Diluted
|
$
|
0.43
|
|
|
$
|
(0.31
|
)
|
|
$
|
(0.27
|
)
|
|
$
|
(0.35
|
)
|
Shares used in per share calculations:
|
|
|
|
|
|
|
|
||||||||
Basic
|
208,018
|
|
|
211,344
|
|
|
213,767
|
|
|
214,607
|
|
||||
Diluted
|
219,264
|
|
|
211,344
|
|
|
213,767
|
|
|
214,607
|
|
1.
|
During the fourth quarter of 2013, the Company recorded
$182.4 million
of collaborative revenue related to its Janssen collaboration, which was primarily attributable to an amendment to its collaboration agreement with Janssen. See
Note B, "Collaborative Arrangements,"
for further information.
|
2.
|
During 2013 and 2012, the Company recorded within cost of product revenues lower-of-cost or market charges for excess or obsolete inventories. See
Note G, "Inventories,"
for further information.
|
3.
|
During the first quarter of 2013, the Company recorded a
$412.9 million
intangible asset impairment charge related to its VX-222 indefinite-lived in-process research and development asset. In connection with this impairment charge, the Company recorded a credit of
$127.6 million
in its provision for income taxes. See
Note J, "Intangible Assets and Goodwill,"
for further information.
|
4.
|
During the fourth quarter of 2013, the Company deconsolidated Alios, which included certain charges related to deconsolidation recorded in other income (expense), net, and was preceded by a
$250.6 million
intangible asset impairment charge related to the HCV nucleotide analogue program indefinite-lived in-process research and development asset. In connection with this impairment charge, a credit of
$102.1 million
was recorded to the provision for income taxes attributable to Alios. See
Note B, "Collaborative Arrangements,"
and
Note J, "Intangible Assets and Goodwill,"
for further information.
|
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