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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 | 400.68 | 408.70 | 405.665 | 397.59 | 401.50 | 1,063,962 | 01:00:00 |
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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, 2016
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or
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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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ITEM 1.
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BUSINESS
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•
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Tezacaftor (VX-661) is a corrector compound that we are evaluating in a Phase 3 development program in combination with ivacaftor in multiple CF patient populations who have at least one copy of the F508del mutation in their
CFTR
gene. We expect data from this Phase 3 development program in the first half of 2017. If supported by data from the Phase 3 development program, we plan to submit a New Drug Application, or NDA, to the United States Food and Drug Administration, or FDA for tezacaftor in combination with ivacaftor in the second half of 2017.
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•
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VX-152, VX-440, VX-659 and VX-445 are next-generation CFTR corrector compounds that we are evaluating as part of combination treatment regimens. We have initiated Phase 2 clinical trials of VX-152 and VX-440 and expect data from these clinical trials in the second half of 2017. We have initiated Phase 1 clinical trials of VX-659 and VX-445.
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•
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VX-371 is an investigational epithelial sodium channel, or ENaC, inhibitor that is being evaluated in a Phase 2 development program and which we exclusively licensed from Parion Sciences, Inc., or Parion, in 2015.
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•
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Two copies of the F508del in their CFTR gene
: We have completed enrollment in this clinical trial and expect data from this clinical trial to be available in the first half of 2017;
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•
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One copy of the F508del mutation in their CFTR gene and a second mutation in their CFTR gene that results in residual CFTR function
: We have completed enrollment in this clinical trial and expect data from this clinical trial to be available in the first half of 2017; and
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•
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One copy of the F508del mutation in their CFTR gene and a second mutation in their CFTR gene that results in a gating defect in the CFTR protein
: We plan to complete enrollment in this clinical trial in the first half of 2017. Data from this clinical trial are not expected to be included in the initial regulatory applications for tezacaftor in combination with ivacaftor.
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•
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VX-440 to evaluate the safety and efficacy of four-week dosing of VX-440 in combination with tezacaftor and ivacaftor in approximately 40 patients with CF who have one copy of the F508del mutation in their
CFTR
gene and a second mutation that results in minimal CFTR function and approximately 25 patients with CF who have two copies of the F508del mutation in their
CFTR
gene; and
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•
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VX-152 to evaluate the safety and efficacy of two-week dosing of VX-152 in combination with tezacaftor and ivacaftor in approximately 35 patients with CF who have one copy of the F508del mutation in their
CFTR
gene and a second mutation that results in minimal CFTR function and approximately 25 patients with CF who have two copies of the F508del mutation in their
CFTR
gene.
|
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) |
Ivacaftor
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Granted (2027)
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Granted (2025)
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Lumacaftor
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Granted (2030)
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Granted (2026)
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Tezacaftor
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Granted (2027)
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Granted (2028)
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•
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U.S. and foreign patent applications covering CF potentiators, correctors and ENaC inhibitors, including ivacaftor, lumacaftor, tezacaftor, VX-371, VX-152, VX-440, VX-659 and VX-445 and many other related compounds, and the use of those potentiators, correctors and ENaC inhibitors to treat CF.
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•
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U.S. and foreign patents and patent applications covering VX-150 and VX-241 and the use of VX-150 and VX-241 to treat pain indications.
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•
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U.S. and foreign patents and patent applications covering VX-210 and the use of VX-210 to treat neurology indications.
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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 ivacaftor and lumacaftor.
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•
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refusal to approve or delay in review of pending applications;
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•
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withdrawal of an approval or the implementation of limitations on a previously approved indication for use;
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•
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imposition of a clinical hold, a risk mitigation and evaluation strategy or other safety-related limitations;
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•
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warning letters or “untitled 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, refusals of government contracts, or civil or criminal penalties.
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•
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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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•
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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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•
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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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•
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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
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Estimated Duration
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Discovery
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2 to 4 years
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Preclinical
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1 to 2 years
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Phase 1
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1 to 2 years
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Phase 2
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2 to 4 years
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Phase 3
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2 to 4 years
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FDA approval
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8 months to 2 years
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•
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record-keeping requirements;
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•
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reporting of adverse experiences with the product;
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•
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providing the FDA with updated safety and efficacy information;
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•
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drug sampling and distribution requirements;
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•
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notifying the FDA and gaining its approval of specified manufacturing or labeling changes;
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•
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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
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Age
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Position
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Jeffrey M. Leiden, M.D., Ph.D.
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61
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Chairman of the Board, Chief Executive Officer and President
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David Altshuler, M.D., Ph.D.
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52
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Executive Vice President, Global Research and Chief Scientific Officer
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Stuart A. Arbuckle
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51
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Executive Vice President and Chief Commercial Officer
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Jeffrey A. Chodakewitz, M.D.
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61
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Executive Vice President, Global Medicines Development and Medical Affairs, and Chief Medical Officer
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Michael Parini, J.D.
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42
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Executive Vice President and Chief Legal and Administrative Officer
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Amit K. Sachdev, J.D.
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49
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Executive Vice President, Chief Regulatory Officer and Chief of Staff to the CEO
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Ian F. Smith
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51
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Executive Vice President, Chief Operating Officer and Chief Financial Officer
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Paul M. Silva
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51
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Senior Vice President and Corporate Controller
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Sangeeta M. Bhatia, M.D., Ph.D.
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48
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Director
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Joshua S. Boger, Ph.D.
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65
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Director
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Terrence C. Kearney
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62
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Director
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Yuchun Lee
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51
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Director
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Margaret G. McGlynn
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57
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Director
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Bruce I. Sachs
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57
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Director
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Elaine S. Ullian
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69
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Director
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William Young
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72
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Director
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•
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our ability to obtain, and the timing and terms of obtaining, reimbursement for ORKAMBI in ex-U.S. markets;
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•
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the number of additional patients who begin treatment with ORKAMBI, including patients six to eleven years of age in the United States;
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•
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the rate at which additional patients initiate treatment;
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•
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the proportion of initiated patients who remain on treatment; and
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•
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the compliance rate for patients who remain on treatment.
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•
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prevalence and severity of adverse side-effects;
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lack of reimbursement availability from third-party payors;
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•
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lower demonstrated efficacy, safety and/or tolerability compared to alternative treatment methods;
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•
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lack of cost-effectiveness;
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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 sales, marketing and/or distribution support.
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•
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offer therapeutic or other improvement over existing competitive therapies;
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•
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be proven safe and effective in clinical trials;
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•
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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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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 or deeming the clinical trial conduct as problematic.
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•
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failure to successfully further develop the acquired or licensed drugs or technology or to achieve strategic objectives, including successfully developing and commercializing the drugs, drug candidates or technologies that we acquire or license;
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•
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inadequate or unfavorable data from clinical trials evaluating the acquired or licensed drug or drug candidates;
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•
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entry into markets in which we have no or limited direct prior experience or where competitors in such markets have stronger market positions;
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•
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disruption of our ongoing business and distraction of our management and employees from other opportunities and challenges;
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•
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potential failure of the due diligence processes to identify significant problems, liabilities or other shortcomings or challenges of an acquired company, or acquired or licensed product or technology, including but not limited to, problems, liabilities or other shortcomings or challenges with respect to intellectual property, product quality, safety, accounting practices, employee, customer or third party relations and other known and unknown liabilities;
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•
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liability for activities of the acquired company or licensor before the acquisition or license, including intellectual property infringement claims, violations of laws, commercial disputes, tax liabilities, and other known and unknown liabilities;
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•
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exposure to litigation or other claims in connection with, or inheritance of claims or litigation risk as a result of an acquisition or license, including but not limited to, claims from terminated employees, customers, former equity holders or other third-parties;
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difficulty in integrating the drugs, drug candidates, technologies, business operations and personnel of an acquired company; and
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•
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difficulties in the integration of the acquired company’s departments, systems, including accounting, human resource and other administrative systems, technologies, books and records, and procedures, as well as in maintaining uniform standards, controls, including internal control over financial reporting required by the Sarbanes-Oxley Act of 2002 and related procedures and policies.
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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. Our collaboration agreements provide our collaborators with a level of discretion in determining the amount and timing of efforts and resources that they will apply to these collaborations.
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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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Disagreements with collaborators, including disagreements over proprietary rights, contract interpretation or the preferred course of development, might cause delays or termination of the research, development or commercialization of drug candidates, might lead to additional responsibilities for us with respect to drug candidates, or might result in litigation or arbitration. Any such disagreements would divert management attention and resources and be time-consuming and expensive.
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•
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Collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential litigation.
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•
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Collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability.
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•
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Investigations and/or compliance or enforcement actions against a collaborator, which may expose us to indirect liability as a result of our partnership with such collaborator.
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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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differing regulatory requirements for drug approvals and regulation of approved drugs in foreign countries;
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•
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varying reimbursement regimes and difficulties or the inability to obtain reimbursement for our products in a timely manner;
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•
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differing patient treatment infrastructures, particularly since our business is focused on the treatment of rare diseases that are typically prescribed by specialist physicians;
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•
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collectibility of accounts receivable;
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•
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changes in tariffs, trade barriers and regulatory requirements, the risks of which appear to have increased in the current political environment;
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•
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economic weakness, including recession and inflation, or political instability in particular foreign economies and markets;
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•
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differing levels of enforcement and/or recognition of contractual and intellectual property rights;
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•
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complying with local laws and regulations, which are interpreted and enforced differently across jurisdictions and which can change significantly over time;
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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 reduced revenues or increased operating expenses, 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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import and export licensing requirements, tariffs, and other trade and travel restrictions;
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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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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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•
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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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•
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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 announcements of interim or final results of clinical trials or nonclinical studies relating to our drugs, drug candidates or those of our competitors;
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•
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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 ORKAMBI;
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•
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our expectations regarding clinical trials, development timelines and regulatory authority filings and submissions for ivacaftor, lumacaftor, tezacaftor, VX-371, VX-440, VX-152, VX-659, VX-445, VX-150 and VX-210, as well as the MAA for ORKAMBI for patients with CF six to eleven years of age who are homozygous for the F508del mutation in their
CFTR
gene and the NDA for tezacaftor in combination with ivacaftor;
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•
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our ability to obtain reimbursement for ORKAMBI in ex-U.S. markets and our ability to otherwise successfully market ORKAMBI and KALYDECO or any of our other drug candidates for which we obtain regulatory approval;
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•
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our expectations regarding the timing and structure of clinical trials of our drugs and drug candidates, including ivacaftor, lumacaftor, tezacaftor, VX-371, VX-440, VX-152, VX-659, VX-445, VX-150 and VX-210, and the expected timing of our receipt of data from our ongoing and planned clinical trials;
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•
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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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•
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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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•
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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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•
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the establishment, development and maintenance of collaborative relationships;
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•
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potential business development activities;
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•
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potential fluctuations in foreign currency exchange rates;
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•
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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
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•
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our liquidity and our expectations regarding the possibility of raising additional capital.
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ITEM 1B.
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UNRESOLVED STAFF COMMENTS
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ITEM 2.
|
PROPERTIES
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ITEM 3.
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LEGAL PROCEEDINGS
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ITEM 4.
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MINE SAFETY DISCLOSURES
|
ITEM 5.
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MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|
Year Ended December 31, 2016:
|
|
High
|
|
Low
|
||||
First quarter
|
$
|
124.96
|
|
|
$
|
75.90
|
|
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Second quarter
|
96.49
|
|
|
75.92
|
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|||
Third quarter
|
103.73
|
|
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83.50
|
|
|||
Fourth quarter
|
97.93
|
|
|
71.46
|
|
Year Ended December 31, 2015:
|
|
High
|
|
Low
|
||||
First quarter
|
$
|
136.33
|
|
|
$
|
103.75
|
|
|
Second quarter
|
137.50
|
|
|
113.68
|
|
|||
Third quarter
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143.45
|
|
|
97.45
|
|
|||
Fourth quarter
|
134.71
|
|
|
101.49
|
|
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, 2016 to Oct. 31, 2016
|
23,701
|
|
$
|
0.01
|
|
—
|
—
|
|
Nov. 1, 2016 to Nov. 30, 2016
|
16,880
|
|
$
|
0.01
|
|
—
|
—
|
|
Dec. 1, 2016 to Dec. 31, 2016
|
10,946
|
|
$
|
0.01
|
|
—
|
—
|
ITEM 6.
|
SELECTED FINANCIAL DATA
|
|
Year Ended December 31,
|
||||||||||||||||||
|
2016
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
||||||||||
|
(in thousands, except per share amounts)
|
||||||||||||||||||
Consolidated Statements of Operations Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Product revenues, net
|
|
|
|
|
|
|
|
|
|
||||||||||
KALYDECO product revenues, net
|
$
|
703,432
|
|
|
$
|
631,674
|
|
|
$
|
463,750
|
|
|
$
|
371,285
|
|
|
$
|
171,645
|
|
ORKAMBI product revenues, net
|
979,590
|
|
|
350,663
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
INCIVEK product revenues, net
|
610
|
|
|
17,987
|
|
|
24,071
|
|
|
466,360
|
|
|
1,161,813
|
|
|||||
Total product revenues, net
|
1,683,632
|
|
|
1,000,324
|
|
|
487,821
|
|
|
837,645
|
|
|
1,333,458
|
|
|||||
Royalty revenues
|
16,600
|
|
|
23,959
|
|
|
40,919
|
|
|
156,592
|
|
|
141,498
|
|
|||||
Collaborative revenues (1)
|
1,945
|
|
|
8,053
|
|
|
51,675
|
|
|
217,738
|
|
|
52,086
|
|
|||||
Total revenues
|
1,702,177
|
|
|
1,032,336
|
|
|
580,415
|
|
|
1,211,975
|
|
|
1,527,042
|
|
|||||
Total costs and expenses (2)
|
1,692,241
|
|
|
1,499,215
|
|
|
1,272,827
|
|
|
1,821,983
|
|
|
1,480,315
|
|
|||||
(Loss) income from continuing operations attributable to Vertex
|
(112,052
|
)
|
|
(556,334
|
)
|
|
(737,643
|
)
|
|
(503,622
|
)
|
|
32,271
|
|
|||||
(Loss) income from discontinued operations attributable to Vertex (3)
|
—
|
|
|
—
|
|
|
(912
|
)
|
|
58,594
|
|
|
(139,303
|
)
|
|||||
Net (loss) income attributable to Vertex
|
$
|
(112,052
|
)
|
|
$
|
(556,334
|
)
|
|
$
|
(738,555
|
)
|
|
$
|
(445,028
|
)
|
|
$
|
(107,032
|
)
|
Diluted (loss) income from continuing operations attributable to Vertex per common share
|
$
|
(0.46
|
)
|
|
$
|
(2.31
|
)
|
|
$
|
(3.14
|
)
|
|
$
|
(2.24
|
)
|
|
$
|
0.15
|
|
Shares used in per diluted share calculations
|
244,685
|
|
|
241,312
|
|
|
235,307
|
|
|
224,906
|
|
|
215,262
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
|
As of December 31,
|
||||||||||||||||||
|
2016
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
||||||||||
|
(in thousands)
|
||||||||||||||||||
Consolidated Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash, cash equivalents and marketable securities
|
$
|
1,434,557
|
|
|
$
|
1,042,462
|
|
|
$
|
1,387,106
|
|
|
$
|
1,465,076
|
|
|
$
|
1,321,215
|
|
Total assets
|
2,896,787
|
|
|
2,498,587
|
|
|
2,334,679
|
|
|
2,319,041
|
|
|
2,759,288
|
|
|||||
Total current liabilities (4)
|
792,537
|
|
|
506,167
|
|
|
368,254
|
|
|
397,829
|
|
|
432,624
|
|
|||||
Long-term debt obligations, excluding current portion (5)
|
—
|
|
|
223,863
|
|
|
280,569
|
|
|
—
|
|
|
400,000
|
|
|||||
Construction financing lease obligation, excluding current portion (6)
|
486,359
|
|
|
472,611
|
|
|
473,073
|
|
|
440,937
|
|
|
268,031
|
|
|||||
Other long-term obligations
|
279,700
|
|
|
202,318
|
|
|
116,600
|
|
|
123,870
|
|
|
424,251
|
|
(1)
|
In 2013, we recorded
$203.4 million
of collaborative revenues from Janssen NV, which were primarily attributable to a 2013 amendment to our collaboration agreement with Janssen NV. See Note B, “Collaborative Arrangements.”
|
(2)
|
Total costs and expenses included (i) in 2013 and 2012, an aggregate of
$10.4 million
and $133.2 million, respectively, of write-offs for excess and obsolete inventories, (ii) in 2013 and 2012, total costs and expenses included intangible asset impairment charges of
$412.9 million
and
$105.8 million
, respectively and (iii) in 2016, 2015, 2014 and 2013,
$1.3 million
,
$2.2 million
,
$50.9 million
and $40.5 million, respectively, of restructuring charges. See Note H, “Inventories,” Note J, “Intangible Assets and Goodwill” and Note Q, “Restructuring Expenses.”
|
(3)
|
(Loss) income from discontinued operations attributable to Vertex relates to our collaboration with Alios BioPharma, Inc., in 2012 through 2013, which we deconsolidated as of December 31, 2013. See Note B, “Collaborative Arrangements.”
|
(4)
|
In 2016, we borrowed $300.0 million pursuant to a revolving credit facility that matures in October 2021. In February 2017, we repaid the
$300.0 million
that was outstanding under our revolving credit facility. See Note L, “Long Term Obligations.”
|
(5)
|
In 2013, our convertible senior subordinated notes (due 2015) with an aggregate principal amount of $400.0 million were converted into common stock or redeemed. During 2016, we terminated and repaid all outstanding obligations under our term loan. See Note L, “Long Term Obligations.”
|
(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 L, “Long Term Obligations.”
|
ITEM 7.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
Tezacaftor (VX-661) is a corrector compound that we are evaluating in a Phase 3 development program in combination with ivacaftor in multiple CF patient populations who have at least one copy of the F508del mutation in their
CFTR
gene. We expect data from this Phase 3 development program in the first half of 2017. If supported by data from the Phase 3 development program, we plan to submit a New Drug Application, or NDA, to the United States Food and Drug Administration, or FDA for tezacaftor in combination with ivacaftor in the second half of 2017.
|
•
|
VX-152, VX-440, VX-659 and VX-445 are next-generation CFTR corrector compounds that we are evaluating as part of combination treatment regimens. We have initiated Phase 2 clinical trials of VX-152 and VX-440 and expect data from these clinical trials in the second half of 2017. We have initiated Phase 1 clinical trials of VX-659 and VX-445.
|
•
|
VX-371, an investigational epithelial sodium channel, or ENaC, inhibitor, is being evaluated in a Phase 2 development program and which we exclusively licensed from Parion Sciences, Inc., or Parion, in 2015.
|
•
|
CRISPR Therapeutics AG, or CRISPR, pursuant to which we are collaborating on the discovery and development of potential new treatments aimed at the underlying genetic causes of human diseases using CRISPR-Cas9 gene editing technology;
|
•
|
Parion Sciences, Inc., or Parion, pursuant to which we are developing epithelial sodium channel, or ENaC, inhibitors for the treatment of pulmonary diseases;
|
•
|
Moderna Therapeutics, Inc., or Moderna, pursuant to which we are seeking to identify and develop mRNA therapeutics for the treatment of CF; and
|
•
|
BioAxone Biosciences, Inc., or BioAxone, pursuant to which we are evaluating VX-210 as a potential treatment for patients who have spinal cord injuries.
|
•
|
Merck KGaA, pursuant to which Merck KGaA will, subject to regulatory approval, obtain rights to four oncology research and development programs; and
|
•
|
Janssen Pharmaceuticals, Inc. which is developing JNJ-3872 (formerly VX-787) for the treatment of influenza.
|
|
|
|
|
|
|
|
2016/2015
Comparison |
|
2015/2014
Comparison |
||||||||||||||||
|
|
|
|
|
|
|
Increase/(Decrease)
|
|
Increase/(Decrease)
|
||||||||||||||||
|
2016
|
|
2015
|
|
2014
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
|
(in thousands)
|
|
(in thousands, except percentages)
|
||||||||||||||||||||||
Revenues
|
$
|
1,702,177
|
|
|
$
|
1,032,336
|
|
|
$
|
580,415
|
|
|
$
|
669,841
|
|
|
65
|
%
|
|
$
|
451,921
|
|
|
78
|
%
|
Operating costs and expenses
|
1,692,241
|
|
|
1,499,215
|
|
|
1,272,827
|
|
|
193,026
|
|
|
13
|
%
|
|
226,388
|
|
|
18
|
%
|
|||||
Other items, net
|
(121,988
|
)
|
|
(89,455
|
)
|
|
(45,231
|
)
|
|
$
|
32,533
|
|
|
36
|
%
|
|
44,224
|
|
|
98
|
%
|
||||
Loss from continuing operations attributable to Vertex
|
(112,052
|
)
|
|
(556,334
|
)
|
|
(737,643
|
)
|
|
(444,282
|
)
|
|
(80
|
)%
|
|
(181,309
|
)
|
|
(25
|
)%
|
|||||
Loss from discontinued operations attributable to Vertex
|
—
|
|
|
—
|
|
|
(912
|
)
|
|
n/a
|
|
|
n/a
|
|
|
n/a
|
|
|
n/a
|
|
|||||
Net loss attributable to Vertex
|
$
|
(112,052
|
)
|
|
$
|
(556,334
|
)
|
|
$
|
(738,555
|
)
|
|
$
|
(444,282
|
)
|
|
(80
|
)%
|
|
$
|
(182,221
|
)
|
|
(25
|
)%
|
|
|
|
|
|
|
|
2016/2015
Comparison |
|
2015/2014
Comparison |
||||||||||||||||
|
|
|
|
|
|
|
Increase/(Decrease)
|
|
Increase/(Decrease)
|
||||||||||||||||
|
2016
|
|
2015
|
|
2014
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
|
(in thousands)
|
|
(in thousands, except percentages)
|
||||||||||||||||||||||
Product revenues, net
|
$
|
1,683,632
|
|
|
$
|
1,000,324
|
|
|
$
|
487,821
|
|
|
$
|
683,308
|
|
|
68
|
%
|
|
$
|
512,503
|
|
|
105
|
%
|
Royalty revenues
|
16,600
|
|
|
23,959
|
|
|
40,919
|
|
|
(7,359
|
)
|
|
(31
|
)%
|
|
(16,960
|
)
|
|
(41
|
)%
|
|||||
Collaborative revenues
|
1,945
|
|
|
8,053
|
|
|
51,675
|
|
|
(6,108
|
)
|
|
(76
|
)%
|
|
(43,622
|
)
|
|
(84
|
)%
|
|||||
Total revenues
|
$
|
1,702,177
|
|
|
$
|
1,032,336
|
|
|
$
|
580,415
|
|
|
$
|
669,841
|
|
|
65
|
%
|
|
$
|
451,921
|
|
|
78
|
%
|
|
2016
|
|
2015
|
|
2014
|
||||||
|
(in thousands)
|
||||||||||
ORKAMBI
|
$
|
979,590
|
|
|
$
|
350,663
|
|
|
$
|
—
|
|
KALYDECO
|
$
|
703,432
|
|
|
$
|
631,674
|
|
|
$
|
463,750
|
|
INCIVEK
|
610
|
|
|
17,987
|
|
|
24,071
|
|
|||
Total product revenues, net
|
$
|
1,683,632
|
|
|
$
|
1,000,324
|
|
|
$
|
487,821
|
|
|
|
|
|
|
|
|
2016/2015
Comparison |
|
2015/2014
Comparison |
||||||||||||||||
|
|
|
|
|
|
|
Increase/(Decrease)
|
|
Increase/(Decrease)
|
||||||||||||||||
|
2016
|
|
2015
|
|
2014
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
|
(in thousands)
|
|
(in thousands, except percentages)
|
||||||||||||||||||||||
Cost of product revenues
|
$
|
206,811
|
|
|
$
|
117,151
|
|
|
$
|
39,725
|
|
|
$
|
89,660
|
|
|
77
|
%
|
|
$
|
77,426
|
|
|
195
|
%
|
Royalty expenses
|
3,649
|
|
|
7,361
|
|
|
21,262
|
|
|
(3,712
|
)
|
|
(50
|
)%
|
|
(13,901
|
)
|
|
(65
|
)%
|
|||||
Research and development expenses
|
1,047,690
|
|
|
995,922
|
|
|
855,506
|
|
|
51,768
|
|
|
5
|
%
|
|
140,416
|
|
|
16
|
%
|
|||||
Sales, general and administrative expenses
|
432,829
|
|
|
376,575
|
|
|
305,409
|
|
|
56,254
|
|
|
15
|
%
|
|
71,166
|
|
|
23
|
%
|
|||||
Restructuring expenses
|
1,262
|
|
|
2,206
|
|
|
50,925
|
|
|
(944
|
)
|
|
(43
|
)%
|
|
(48,719
|
)
|
|
(96
|
)%
|
|||||
Total costs and expenses
|
$
|
1,692,241
|
|
|
$
|
1,499,215
|
|
|
$
|
1,272,827
|
|
|
$
|
193,026
|
|
|
13
|
%
|
|
$
|
226,388
|
|
|
18
|
%
|
|
|
|
|
|
|
|
2016/2015
Comparison |
|
2015/2014
Comparison |
||||||||||||||||
|
|
|
|
|
|
|
Increase/(Decrease)
|
|
Increase/(Decrease)
|
||||||||||||||||
|
2016
|
|
2015
|
|
2014
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
|
(in thousands)
|
|
(in thousands, except percentages)
|
||||||||||||||||||||||
Research expenses
|
$
|
314,602
|
|
|
$
|
337,797
|
|
|
$
|
257,483
|
|
|
$
|
(23,195
|
)
|
|
(7
|
)%
|
|
$
|
80,314
|
|
|
31
|
%
|
Development expenses
|
733,088
|
|
|
658,125
|
|
|
598,023
|
|
|
74,963
|
|
|
11
|
%
|
|
60,102
|
|
|
10
|
%
|
|||||
Total research and development expenses
|
$
|
1,047,690
|
|
|
$
|
995,922
|
|
|
$
|
855,506
|
|
|
$
|
51,768
|
|
|
5
|
%
|
|
$
|
140,416
|
|
|
16
|
%
|
|
|
|
|
|
|
|
2016/2015
Comparison |
|
2015/2014
Comparison |
||||||||||||||||
|
|
|
|
|
|
|
Increase/(Decrease)
|
|
Increase/(Decrease)
|
||||||||||||||||
|
2016
|
|
2015
|
|
2014
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
|
(in thousands)
|
|
(in thousands, except percentages)
|
||||||||||||||||||||||
Research Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Salary and benefits
|
$
|
80,845
|
|
|
$
|
81,752
|
|
|
$
|
82,975
|
|
|
$
|
(907
|
)
|
|
(1
|
)%
|
|
$
|
(1,223
|
)
|
|
(1
|
)%
|
Stock-based compensation expense
|
51,034
|
|
|
49,744
|
|
|
40,531
|
|
|
1,290
|
|
|
3
|
%
|
|
9,213
|
|
|
23
|
%
|
|||||
Laboratory supplies and other direct expenses
|
43,151
|
|
|
37,058
|
|
|
38,082
|
|
|
6,093
|
|
|
16
|
%
|
|
(1,024
|
)
|
|
(3
|
)%
|
|||||
Outsourced services
|
33,682
|
|
|
24,210
|
|
|
17,401
|
|
|
9,472
|
|
|
39
|
%
|
|
6,809
|
|
|
39
|
%
|
|||||
Collaboration payments
|
33,000
|
|
|
75,000
|
|
|
—
|
|
|
(42,000
|
)
|
|
(56
|
)%
|
|
n/a
|
|
|
n/a
|
|
|||||
Infrastructure costs
|
72,890
|
|
|
70,033
|
|
|
78,494
|
|
|
2,857
|
|
|
4
|
%
|
|
(8,461
|
)
|
|
(11
|
)%
|
|||||
Total research expenses
|
$
|
314,602
|
|
|
$
|
337,797
|
|
|
$
|
257,483
|
|
|
$
|
(23,195
|
)
|
|
(7
|
)%
|
|
$
|
5,314
|
|
|
2
|
%
|
|
|
|
|
|
|
|
2016/2015
Comparison |
|
2015/2014
Comparison |
||||||||||||||||
|
|
|
|
|
|
|
Increase/(Decrease)
|
|
Increase/(Decrease)
|
||||||||||||||||
|
2016
|
|
2015
|
|
2014
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||
|
(in thousands)
|
|
(in thousands, except percentages)
|
||||||||||||||||||||||
Sales, general and administrative expenses
|
$
|
432,829
|
|
|
$
|
376,575
|
|
|
$
|
305,409
|
|
|
$
|
56,254
|
|
|
15
|
%
|
|
$
|
71,166
|
|
|
23
|
%
|
|
2016
|
|
2015
|
|
2014
|
||||||
|
(in thousands)
|
||||||||||
Loss attributable to noncontrolling interest before provision for income taxes
|
$
|
10,086
|
|
|
$
|
6,646
|
|
|
$
|
764
|
|
Provision for income taxes
|
16,743
|
|
|
29,731
|
|
|
3,876
|
|
|||
Increase in fair value of contingent payments
|
(54,850
|
)
|
|
(4,530
|
)
|
|
(450
|
)
|
|||
Net (income) loss attributable to noncontrolling interest
|
$
|
(28,021
|
)
|
|
$
|
31,847
|
|
|
$
|
4,190
|
|
|
Payments Due by Period
|
||||||||||||||||||
|
2017
|
|
2018-2019
|
|
2020-2021
|
|
2022 and later
|
|
Total
|
||||||||||
|
(in thousands)
|
||||||||||||||||||
Fan Pier Leases
|
$
|
67,206
|
|
|
$
|
139,795
|
|
|
$
|
145,178
|
|
|
$
|
535,032
|
|
|
$
|
887,211
|
|
Facility leases, excluding Fan Pier Leases
|
36,391
|
|
|
41,568
|
|
|
39,816
|
|
|
200,626
|
|
|
318,401
|
|
|||||
Capital lease obligations
|
21,995
|
|
|
30,171
|
|
|
5,793
|
|
|
543
|
|
|
58,502
|
|
|||||
Revolving credit facility
|
300,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
300,000
|
|
|||||
Research, development and drug supply costs
|
24,061
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
24,061
|
|
|||||
Other
|
3,119
|
|
|
3,004
|
|
|
226
|
|
|
6,108
|
|
|
12,457
|
|
|||||
Total contractual commitments and obligations
|
$
|
452,772
|
|
|
$
|
214,538
|
|
|
$
|
191,013
|
|
|
$
|
742,309
|
|
|
$
|
1,600,632
|
|
•
|
CFFT:
CFFT has the right to tiered royalties ranging from single digits to sub-teens on any approved drugs first synthesized and/or tested during a research term on or before February 28, 2014, including KALYDECO, ORKAMBI, lumacaftor and tezacaftor and royalties ranging from low single digits to mid-single digits on potential sales of certain compounds first synthesized and/or tested between March 1, 2014 and August 31, 2016.
|
•
|
Parion
: Parion has the potential to receive milestone and royalty payments, including up to $490.0 million in development and regulatory milestone payments for the development of VX-371 and/or VX-551 to treat CF.
|
•
|
CRISPR
: CRISPR has the potential to receive milestone and royalty payments, including up to $420.0 million in development, regulatory and commercial milestone payments for each of up to six targets pursuant to the collaboration.
|
•
|
Moderna
: Moderna has the potential to receive milestone and royalty payments, including up to $275.0 million in development and regulatory milestones.
|
•
|
BioAxone
: BioAxone has the potential to receive milestone and royalty payments, including up to $90.0 million in development and regulatory milestone payments (including a license continuation fee).
|
•
|
revenue recognition;
|
•
|
intangible assets;
|
•
|
collaborations and variable interest entities;
|
•
|
research and development accruals;
|
•
|
commercial supplies and inventories;
|
•
|
income taxes;
|
•
|
leases;
|
•
|
restructuring expenses; and
|
•
|
stock-based compensation expense.
|
•
|
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 each period, we record net income (loss) attributable to our VIEs noncontrolling interest. This net income (loss) reflects our VIEs net income (loss) for the period as adjusted for gains and losses in the fair value of the contingent payments, which consist of milestone, royalty and option payments, payable by us to our VIEs. Determining the fair value of the contingent payments payable by us to our VIEs requires 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 licensed products and appropriate discount rates. We expect that the net income (loss) attributed to noncontrolling interest will continue to be affected by changes in the fair value of the contingent payments. In 2016, 2015 and 2014, the fair value of contingent payments payable by us increased by
$54.9 million
,
$4.5 million
and
$0.5 million
, respectively. The increase in fair value of the contingent payments in 2016 primarily related to a Phase 2 clinical trial of VX-371, a compound in-licensed from Parion, achieving its primary safety endpoint in the second quarter of 2016. The increases in the fair value of contingent payments increased our net loss attributable to Vertex on a dollar-for-dollar basis.
|
•
|
We recorded
$255.3 million
and
$29.0 million
, respectively, of intangible assets on our consolidated balance sheet based on our estimate of the fair value of Parion’s and BioAxone’s in-process research and development assets as of the transaction date and made significant estimates regarding: the probability of obtaining regulatory approval of licensed products; the timing and expected costs of clinical trials and other development activities; future potential cash flows from sales of drugs and the appropriate discount rates. If we are successful in developing a drug candidate, we will amortize the carrying value of the relevant intangible asset as part of cost of product revenues. We test these in-process research and development assets for impairment on an annual basis as of October 1, and more frequently if indicators are present or changes in circumstances suggest that impairment may exist. If the fair value of a licensed program becomes impaired as the result of safety or efficacy data from any ongoing or future clinical trial conducted by us or our competitors or because of any other information regarding the prospects of successfully developing or commercializing the licensed drug candidate, we could incur significant charges in the period in which the impairment occurs. We determined the fair value of these in-process research and development assets using probability-weighted present-value models.
|
•
|
The revenues and expenses of our VIEs that are unrelated to the programs that we in-license from our VIEs and that are consolidated into our financial statements are set forth in the table below and represent less than 1% of our revenues and expenses in each period:
|
|
2016
|
|
2015
|
|
2014
|
||||||
|
(in thousands)
|
||||||||||
Revenues
|
$
|
944
|
|
|
$
|
2,888
|
|
|
$
|
—
|
|
Research and development expenses
|
(6,762
|
)
|
|
(3,642
|
)
|
|
(286
|
)
|
|||
Sales, general and administrative expenses
|
(4,160
|
)
|
|
(5,836
|
)
|
|
(491
|
)
|
|||
Other (expenses) income, net
|
(108
|
)
|
|
(56
|
)
|
|
13
|
|
|||
Loss attributable to noncontrolling interest before provision for income taxes
|
$
|
(10,086
|
)
|
|
$
|
(6,646
|
)
|
|
$
|
(764
|
)
|
•
|
We reflect all of our VIEs' cash and cash equivalents under the heading “restricted cash and cash equivalents (VIE)” on our consolidated balance sheets. We do not have any rights to our VIEs cash or cash equivalents, these resources are not available to fund research and development programs pursuant to the collaborations and these amounts do not provide us with any additional liquidity. Our VIEs have control over the restricted cash and cash equivalents (VIE), including the ability to distribute the restricted cash and cash equivalents to their equity holders, and as a result, these assets, although carried on our consolidated balance sheets, are not included in the discussion of our liquidity and should be disregarded when evaluating our financial condition.
|
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
|
|
Consolidated Statements of Operations for the years ended December 31, 2016, 2015 and 2014
|
|
Consolidated Statements of Comprehensive Loss for the years ended December 31, 2016, 2015 and 2014
|
|
Consolidated Balance Sheets as of December 31, 2016 and 2015
|
|
Consolidated Statements of Shareholders’ Equity and Noncontrolling Interest for the years ended December 31, 2016, 2015 and 2014
|
|
Consolidated Statements of Cash Flows for the years ended December 31, 2016, 2015 and 2014
|
|
Notes to Consolidated Financial Statements
|
Exhibit Number
|
Exhibit Description
|
Filed with
this report |
Incorporated by
Reference herein from—Form or Schedule |
Filing Date/
Period Covered |
SEC File/
Reg. Number |
3.1
|
Restated Articles of Organization of Vertex Pharmaceuticals Incorporated, as amended.
|
|
10-Q
(Exhibit 3.1)
|
August 4, 2015
|
000-19319
|
3.2
|
Amended and Restated By-Laws of Vertex Pharmaceuticals Incorporated, as subsequently amended on April 26, 2016.
|
|
10-Q
(Exhibit 3.1)
|
May 3, 2016
|
000-19319
|
4.1
|
Specimen stock certificate.
|
|
S-1
(Exhibit 4.1)
|
July 18, 1991
|
33-40966
|
Collaboration Agreements
|
|
|
|
||
10.1
|
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
|
10.2
|
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
|
10.3
|
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
|
10.4
|
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
|
10.5
|
Amendment No. 7 to Research, Development and Commercialization Agreement, dated October 13, 2016, between Vertex Pharmaceuticals Incorporated and Cystic Fibrosis Foundation Therapeutics Incorporated. †
|
X
|
|
|
|
10.6
|
Strategic Collaboration and License Agreement, dated as of June 4, 2015, by and among Parion Sciences, Inc., Vertex Pharmaceuticals Incorporated and Vertex Pharmaceuticals (Europe) Limited.†
|
|
10-Q
(Exhibit 10.2)
|
August 4, 2015
|
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 |
10.7
|
Strategic Collaboration, Option and License Agreement, dated October 26, 2015, by and among CRISPR Therapeutics AG, CRISPR Therapeutics Limited, CRISPR Therapeutics, Inc., Tracr Hematology Ltd., Vertex Pharmaceuticals Incorporated and Vertex Pharmaceuticals (Europe) Limited.†
|
|
10-K
(Exhibit 10.6)
|
February 16, 2016
|
000-19319
|
Leases
|
|
|
|
||
10.8
|
Lease, dated May 5, 2011, between Fifty Northern Avenue LLC and Vertex Pharmaceuticals Incorporated.†
|
|
10-Q
(Exhibit 10.4)
|
August 9, 2011
|
000-19319
|
10.9
|
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
|
10.10
|
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
|
10.11
|
Lease, dated December 2, 2015, between ARE-SD Region No. 23, LLC and Vertex Pharmaceuticals Incorporated.
|
|
10-K
(Exhibit 10.10)
|
February 16, 2016
|
000-19319
|
Financing Agreements
|
|||||
10.12
|
Credit Agreement, dated as of October 13, 2016, among Vertex Pharmaceuticals Incorporated, Bank of America, N.A. and the other lenders party thereto.
|
X
|
|
|
|
10.13
|
First Amendment to Credit Agreement, dated as of February 9, 2017, among Vertex Pharmaceuticals Incorporated, Bank of America, N.A. and the other lenders party thereto.
|
X
|
|
|
|
Equity Plans
|
|
|
|
||
10.14
|
1996 Stock and Option Plan, as amended and restated as of March 14, 2005.*
|
|
10-K
(Exhibit 10.3)
|
March 16, 2005
|
000-19319
|
10.15
|
Form of Stock Option Grant under 1996 Stock and Option Plan.*
|
|
8-K
(Exhibit 10.1)
|
February 9, 2005
|
000-19319
|
10.16
|
Amended and Restated 2006 Stock and Option Plan.*
|
|
10-Q
(Exhibit 10.3)
|
August 8, 2012
|
000-19319
|
10.17
|
Form of Stock Option Agreement under Amended and Restated 2006 Stock and Option Plan (granted prior to July 30, 2013).*
|
|
8-K
(Exhibit 10.2)
|
May 15, 2006
|
000-19319
|
10.18
|
Form of Restricted Stock Agreement under Amended and Restated 2006 Stock and Option Plan (granted prior to July 30, 2013).*
|
|
8-K
(Exhibit 10.3)
|
May 15, 2006
|
000-19319
|
10.19
|
Form of Restricted Stock Agreement (Performance Accelerated Restricted Stock) under Amended and Restated 2006 Stock and Option Plan (granted prior to July 30, 2013).*
|
|
8-K
(Exhibit 10.4)
|
May 15, 2006
|
000-19319
|
10.20
|
Form of Stock Option Agreement under Amended and Restated 2006 Stock and Option Plan (granted on or after July 30, 2013).*
|
|
10-K
(Exhibit 10.20)
|
February 13, 2015
|
000-19319
|
10.21
|
Form of Restricted Stock Agreement under Amended and Restated 2006 Stock and Option Plan (granted on or after July 30, 2013).*
|
|
10-K
(Exhibit 10.21)
|
February 13, 2015
|
000-19319
|
10.22
|
Form of Restricted Stock Unit Agreement under Amended and Restated 2006 Stock and Option Plan (granted on or after July 30, 2013).*
|
|
10-K
(Exhibit 10.22)
|
February 13, 2015
|
000-19319
|
10.23
|
Amended and Restated 2013 Stock and Option Plan.*
|
|
DEF 14A
(Appendix A)
|
April 30, 2015
|
000-19319
|
10.24
|
Form of Non-Qualified Stock Option Agreement under 2013 Stock and Option Plan.*
|
|
10-K
(Exhibit 10.17)
|
February 13, 2015
|
000-19319
|
10.25
|
Form of Restricted Stock Agreement under 2013 Stock and Option Plan.*
|
|
10-K
(Exhibit 10.18)
|
February 13, 2015
|
000-19319
|
10.26
|
Form of Restricted Stock Unit Agreement under 2013 Stock and Option Plan (U.S.).*
|
|
10-K
(Exhibit 10.25)
|
February 16, 2016
|
000-19319
|
10.27
|
Form of Restricted Stock Unit Agreement under 2013 Stock and Option Plan (International).*
|
|
10-K
(Exhibit 10.19)
|
February 13, 2015
|
000-19319
|
10.28
|
Non-Employee Director Deferred Compensation Plan.*
|
|
10-K
(Exhibit 10.27)
|
February 16, 2016
|
000-19319
|
10.29
|
Vertex Pharmaceuticals Incorporated Employee Stock Purchase Plan, as amended and restated as of July 12, 2016.*
|
|
10-Q
(Exhibit 10.1)
|
August 1, 2016
|
000-19319
|
Agreements with Executive Officers and Directors
|
|
|
|
||
10.30
|
Amended and Restated Employment Agreement, dated November 30, 2016, by and between Vertex Pharmaceuticals Incorporated and Jeffrey M. Leiden, M.D., Ph.D*
|
|
8-K
(Exhibit 10.1)
|
November 29, 2016
|
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 |
10.31
|
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
|
10.32
|
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
|
10.33
|
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
|
10.34
|
Employment Agreement, dated as of December 12, 2014, between Vertex Pharmaceuticals Incorporated and David Altshuler.*
|
|
10-K
(Exhibit 10.34)
|
February 16, 2016
|
000-19319
|
10.35
|
Change of Control Agreement, dated as of December 12, 2014, between Vertex Pharmaceuticals Incorporated and David Altshuler.*
|
|
10-K
(Exhibit 10.35)
|
February 16, 2016
|
000-19319
|
10.36
|
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
|
10.37
|
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
|
10.38
|
Employment Agreement, dated as of December 2, 2013, between Vertex Pharmaceuticals Incorporated and Jeffrey Chodakewicz.*
|
|
10-Q
(Exhibit 10.1)
|
March 31, 2015
|
000-19319
|
10.39
|
Change of Control Agreement, dated as of December 2, 2013, between Vertex Pharmaceuticals Incorporated and Jeffrey Chodakewicz.*
|
|
10-Q
(Exhibit 10.2)
|
March 31, 2015
|
000-19319
|
10.40
|
Employment Agreement, dated as of November 14, 2015, between Vertex Pharmaceuticals Incorporated and Michael Parini.*
|
X
|
|
|
|
10.41
|
Change of Control Agreement, dated as of November 9, 2015, between Vertex Pharmaceuticals Incorporated and Michael Parini.*
|
X
|
|
|
|
10.42
|
Third Amended and Restated Employment Agreement, dated as of February 26, 2013, between Vertex Pharmaceuticals Incorporated and Amit Sachdev.*
|
X
|
|
|
|
10.43
|
Third Amended and Restated Change of Control Agreement, dated as of February 26, 2013, between Vertex Pharmaceuticals Incorporated and Amit Sachdev.*
|
X
|
|
|
|
10.44
|
Form of Employee Non-Disclosure and Inventions Agreement.*
|
|
S-1
(Exhibit 10.4)
|
May 30, 1991
|
33-40966
|
10.45
|
Vertex Employee Compensation Plan.*
|
|
10-K
(Exhibit 10.41)
|
February 16, 2016
|
000-19319
|
10.46
|
Vertex Pharmaceuticals Non-Employee Board Compensation.*
|
|
10-K
(Exhibit 10.42)
|
February 16, 2016
|
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 23, 2017
|
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 23, 2017
|
||||||||||||
|
|
|
|||||||||||
/s/ Ian F. Smith
|
Executive Vice President, Chief Operating Officer and Chief Financial Officer (Principal Financial Officer)
|
|
|||||||||||
Ian F. Smith
|
February 23, 2017
|
||||||||||||
|
|
|
|||||||||||
/s/ Paul M. Silva
|
Senior Vice President and Corporate Controller (Principal Accounting Officer)
|
|
|||||||||||
Paul M. Silva
|
February 23, 2017
|
||||||||||||
|
|
|
|||||||||||
/s/ Sangeeta N. Bhatia
|
Director
|
|
|||||||||||
Sangeeta N. Bhatia
|
February 23, 2017
|
||||||||||||
|
|
|
|||||||||||
/s/ Joshua S. Boger
|
Director
|
|
|||||||||||
Joshua S. Boger
|
February 23, 2017
|
||||||||||||
|
|
|
|||||||||||
/s/ Terrence C. Kearney
|
Director
|
|
|||||||||||
Terrence C. Kearney
|
February 23, 2017
|
||||||||||||
|
|
|
|||||||||||
/s/ Yuchun Lee
|
Director
|
|
|||||||||||
Yuchun Lee
|
February 23, 2017
|
||||||||||||
|
|
|
|||||||||||
/s/ Margaret G. McGlynn
|
Director
|
|
|||||||||||
Margaret G. McGlynn
|
February 23, 2017
|
||||||||||||
|
|
|
|||||||||||
/s/ Bruce I. Sachs
|
Director
|
|
|||||||||||
Bruce I. Sachs
|
February 23, 2017
|
||||||||||||
|
|
|
|||||||||||
/s/ Elaine S. Ullian
|
Director
|
|
|||||||||||
Elaine S. Ullian
|
February 23, 2017
|
||||||||||||
|
|||||||||||||
/s/ William D. Young
|
Director
|
|
|||||||||||
William D. Young
|
February 23, 2017
|
|
/s/ Ernst & Young LLP
|
VERTEX PHARMACEUTICALS INCORPORATED
Consolidated Statements of Operations
(in thousands, except per share amounts)
|
|||||||||||
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Revenues:
|
|
|
|
|
|
||||||
Product revenues, net
|
$
|
1,683,632
|
|
|
$
|
1,000,324
|
|
|
$
|
487,821
|
|
Royalty revenues
|
16,600
|
|
|
23,959
|
|
|
40,919
|
|
|||
Collaborative revenues
|
1,945
|
|
|
8,053
|
|
|
51,675
|
|
|||
Total revenues
|
1,702,177
|
|
|
1,032,336
|
|
|
580,415
|
|
|||
Costs and expenses:
|
|
|
|
|
|
||||||
Cost of product revenues
|
206,811
|
|
|
117,151
|
|
|
39,725
|
|
|||
Royalty expenses
|
3,649
|
|
|
7,361
|
|
|
21,262
|
|
|||
Research and development expenses
|
1,047,690
|
|
|
995,922
|
|
|
855,506
|
|
|||
Sales, general and administrative expenses
|
432,829
|
|
|
376,575
|
|
|
305,409
|
|
|||
Restructuring expenses
|
1,262
|
|
|
2,206
|
|
|
50,925
|
|
|||
Total costs and expenses
|
1,692,241
|
|
|
1,499,215
|
|
|
1,272,827
|
|
|||
Income (loss) from operations
|
9,936
|
|
|
(466,879
|
)
|
|
(692,412
|
)
|
|||
Interest expense, net
|
(81,432
|
)
|
|
(84,206
|
)
|
|
(72,863
|
)
|
|||
Other income (expense), net
|
4,130
|
|
|
(6,715
|
)
|
|
30,400
|
|
|||
Loss from continuing operations before provision for income taxes
|
(67,366
|
)
|
|
(557,800
|
)
|
|
(734,875
|
)
|
|||
Provision for income taxes
|
16,665
|
|
|
30,381
|
|
|
6,958
|
|
|||
Loss from continuing operations
|
(84,031
|
)
|
|
(588,181
|
)
|
|
(741,833
|
)
|
|||
Loss from discontinued operations, net of tax benefit of $0, $0 and $0, respectively
|
—
|
|
|
—
|
|
|
(912
|
)
|
|||
Net loss
|
(84,031
|
)
|
|
(588,181
|
)
|
|
(742,745
|
)
|
|||
(Income) loss attributable to noncontrolling interest
|
(28,021
|
)
|
|
31,847
|
|
|
4,190
|
|
|||
Net loss attributable to Vertex
|
$
|
(112,052
|
)
|
|
$
|
(556,334
|
)
|
|
$
|
(738,555
|
)
|
|
|
|
|
|
|
||||||
Amounts attributable to Vertex:
|
|
|
|
|
|
||||||
Loss from continuing operations
|
$
|
(112,052
|
)
|
|
$
|
(556,334
|
)
|
|
$
|
(737,643
|
)
|
Loss from discontinued operations
|
—
|
|
|
—
|
|
|
(912
|
)
|
|||
Net loss attributable to Vertex
|
$
|
(112,052
|
)
|
|
$
|
(556,334
|
)
|
|
$
|
(738,555
|
)
|
|
|
|
|
|
|
||||||
Amounts per share attributable to Vertex common shareholders:
|
|
|
|
|
|
||||||
Net loss from continuing operations:
|
|
|
|
|
|
||||||
Basic
|
$
|
(0.46
|
)
|
|
$
|
(2.31
|
)
|
|
$
|
(3.14
|
)
|
Diluted
|
$
|
(0.46
|
)
|
|
$
|
(2.31
|
)
|
|
$
|
(3.14
|
)
|
Net loss from discontinued operations:
|
|
|
|
|
|
||||||
Basic
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Diluted
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Net loss:
|
|
|
|
|
|
||||||
Basic
|
$
|
(0.46
|
)
|
|
$
|
(2.31
|
)
|
|
$
|
(3.14
|
)
|
Diluted
|
$
|
(0.46
|
)
|
|
$
|
(2.31
|
)
|
|
$
|
(3.14
|
)
|
Shares used in per share calculations:
|
|
|
|
|
|
||||||
Basic
|
244,685
|
|
|
241,312
|
|
|
235,307
|
|
|||
Diluted
|
244,685
|
|
|
241,312
|
|
|
235,307
|
|
VERTEX PHARMACEUTICALS INCORPORATED
Consolidated Statements of Comprehensive Loss
(in thousands)
|
|||||||||||
|
Year ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Net loss
|
$
|
(84,031
|
)
|
|
$
|
(588,181
|
)
|
|
$
|
(742,745
|
)
|
Changes in other comprehensive income (loss):
|
|
|
|
|
|
||||||
Unrealized holding gains (losses) on marketable securities, net of tax
|
17,395
|
|
|
249
|
|
|
(165
|
)
|
|||
Unrealized gains on foreign currency forward contracts, net of tax
|
7,736
|
|
|
1,767
|
|
|
2,034
|
|
|||
Foreign currency translation adjustment
|
(5,782
|
)
|
|
(1,109
|
)
|
|
(646
|
)
|
|||
Total changes in other comprehensive income (loss)
|
19,349
|
|
|
907
|
|
|
1,223
|
|
|||
Comprehensive loss
|
(64,682
|
)
|
|
(587,274
|
)
|
|
(741,522
|
)
|
|||
Comprehensive (income) loss attributable to noncontrolling interest
|
(28,021
|
)
|
|
31,847
|
|
|
4,190
|
|
|||
Comprehensive loss attributable to Vertex
|
$
|
(92,703
|
)
|
|
$
|
(555,427
|
)
|
|
$
|
(737,332
|
)
|
VERTEX PHARMACEUTICALS INCORPORATED
Consolidated Balance Sheets
(in thousands, except share and per share amounts)
|
|||||||
|
December 31,
|
||||||
|
2016
|
|
2015
|
||||
Assets
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
1,183,945
|
|
|
$
|
714,768
|
|
Marketable securities, available-for-sale
|
250,612
|
|
|
327,694
|
|
||
Restricted cash and cash equivalents (VIE)
|
47,762
|
|
|
78,910
|
|
||
Accounts receivable, net
|
201,083
|
|
|
173,838
|
|
||
Inventories
|
77,604
|
|
|
57,207
|
|
||
Prepaid expenses and other current assets
|
70,534
|
|
|
54,736
|
|
||
Total current assets
|
1,831,540
|
|
|
1,407,153
|
|
||
Property and equipment, net
|
698,362
|
|
|
697,715
|
|
||
Intangible assets
|
284,340
|
|
|
284,340
|
|
||
Goodwill
|
50,384
|
|
|
50,384
|
|
||
Cost method investments
|
20,276
|
|
|
—
|
|
||
Note receivable
|
—
|
|
|
30,000
|
|
||
Restricted cash
|
52
|
|
|
22,083
|
|
||
Other assets
|
11,833
|
|
|
6,912
|
|
||
Total assets
|
$
|
2,896,787
|
|
|
$
|
2,498,587
|
|
Liabilities and Shareholders’ Equity
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
61,451
|
|
|
$
|
74,942
|
|
Accrued expenses
|
315,249
|
|
|
305,820
|
|
||
Deferred revenues, current portion
|
6,005
|
|
|
16,296
|
|
||
Accrued restructuring expense, current portion
|
6,047
|
|
|
7,894
|
|
||
Capital lease obligations, current portion
|
19,426
|
|
|
15,545
|
|
||
Senior secured term loan, current portion
|
—
|
|
|
71,296
|
|
||
Customer deposits
|
73,416
|
|
|
—
|
|
||
Credit facility
|
300,000
|
|
|
—
|
|
||
Other liabilities, current portion
|
10,943
|
|
|
14,374
|
|
||
Total current liabilities
|
792,537
|
|
|
506,167
|
|
||
Deferred revenues, excluding current portion
|
6,632
|
|
|
9,714
|
|
||
Accrued restructuring expense, excluding current portion
|
1,907
|
|
|
7,464
|
|
||
Capital lease obligations, excluding current portion
|
34,976
|
|
|
42,923
|
|
||
Deferred tax liability
|
134,063
|
|
|
110,439
|
|
||
Construction financing lease obligation, excluding current portion
|
486,359
|
|
|
472,611
|
|
||
Senior secured term loan, excluding current portion
|
—
|
|
|
223,863
|
|
||
Other liabilities, excluding current portion
|
102,122
|
|
|
31,778
|
|
||
Total liabilities
|
1,558,596
|
|
|
1,404,959
|
|
||
Commitments and contingencies
|
|
|
|
|
|
||
Shareholders’ equity:
|
|
|
|
||||
Preferred stock, $0.01 par value; 1,000,000 shares authorized; none issued and outstanding at December 31, 2015 and 2014
|
—
|
|
|
—
|
|
||
Common stock, $0.01 par value; 500,000,000 shares authorized at December 31, 2016 and 2015; 248,300,517 and 246,306,818 shares issued and outstanding at December 31, 2016 and 2015, respectively
|
2,450
|
|
|
2,427
|
|
||
Additional paid-in capital
|
6,506,795
|
|
|
6,197,500
|
|
||
Accumulated other comprehensive income
|
21,173
|
|
|
1,824
|
|
||
Accumulated deficit
|
(5,373,836
|
)
|
|
(5,261,784
|
)
|
||
Total Vertex shareholders’ equity
|
1,156,582
|
|
|
939,967
|
|
||
Noncontrolling interest
|
181,609
|
|
|
153,661
|
|
||
Total shareholders’ equity
|
1,338,191
|
|
|
1,093,628
|
|
||
Total liabilities and shareholders’ equity
|
$
|
2,896,787
|
|
|
$
|
2,498,587
|
|
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 |
|
Total
Shareholders’ Equity |
|||||||||||||||||
|
Shares
|
|
Amount
|
|
|
|
|
|
|
|||||||||||||||||||||
Balance, December 31, 2013
|
233,789
|
|
|
$
|
2,320
|
|
|
$
|
5,321,286
|
|
|
$
|
(306
|
)
|
|
$
|
(3,966,895
|
)
|
|
$
|
1,356,405
|
|
|
$
|
—
|
|
|
$
|
1,356,405
|
|
Other comprehensive income, net of tax
|
|
|
|
|
|
|
1,223
|
|
|
|
|
1,223
|
|
|
|
|
1,223
|
|
||||||||||||
Net (loss) income
|
|
|
|
|
|
|
|
|
(738,555
|
)
|
|
(738,555
|
)
|
|
(4,190
|
)
|
|
(742,745
|
)
|
|||||||||||
Issuance of common stock under benefit plans
|
7,975
|
|
|
65
|
|
|
274,743
|
|
|
|
|
|
|
274,808
|
|
|
|
|
|
274,808
|
|
|||||||||
Stock-based compensation expense
|
|
|
|
|
178,965
|
|
|
|
|
|
|
178,965
|
|
|
|
|
|
178,965
|
|
|||||||||||
Tax benefit from equity compensation
|
|
|
|
|
2,160
|
|
|
|
|
|
|
2,160
|
|
|
|
|
2,160
|
|
||||||||||||
Noncontrolling interest upon consolidation
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
25,367
|
|
|
25,367
|
|
||||||||||||
Balance, December 31, 2014
|
241,764
|
|
|
$
|
2,385
|
|
|
$
|
5,777,154
|
|
|
$
|
917
|
|
|
$
|
(4,705,450
|
)
|
|
$
|
1,075,006
|
|
|
$
|
21,177
|
|
|
$
|
1,096,183
|
|
Other comprehensive income, net of tax
|
|
|
|
|
|
|
907
|
|
|
|
|
907
|
|
|
|
|
907
|
|
||||||||||||
Net loss
|
|
|
|
|
|
|
|
|
(556,334
|
)
|
|
(556,334
|
)
|
|
(31,847
|
)
|
|
(588,181
|
)
|
|||||||||||
Issuance of common stock under benefit plans
|
4,543
|
|
|
42
|
|
|
185,234
|
|
|
|
|
|
|
185,276
|
|
|
14
|
|
|
185,290
|
|
|||||||||
Stock-based compensation expense
|
|
|
|
|
235,112
|
|
|
|
|
|
|
235,112
|
|
|
|
|
235,112
|
|
||||||||||||
Tax benefit from equity compensation
|
|
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
|
|
—
|
|
||||||||||||
Noncontrolling interest upon consolidation
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
164,317
|
|
|
164,317
|
|
||||||||||||
Balance, December 31, 2015
|
246,307
|
|
|
$
|
2,427
|
|
|
$
|
6,197,500
|
|
|
$
|
1,824
|
|
|
$
|
(5,261,784
|
)
|
|
$
|
939,967
|
|
|
$
|
153,661
|
|
|
$
|
1,093,628
|
|
Other comprehensive income, net of tax
|
|
|
|
|
|
|
19,349
|
|
|
|
|
19,349
|
|
|
|
|
19,349
|
|
||||||||||||
Net loss
|
|
|
|
|
|
|
|
|
(112,052
|
)
|
|
(112,052
|
)
|
|
28,021
|
|
|
(84,031
|
)
|
|||||||||||
Issuance of common stock under benefit plans
|
1,994
|
|
|
23
|
|
|
67,983
|
|
|
|
|
|
|
68,006
|
|
|
—
|
|
|
68,006
|
|
|||||||||
Stock-based compensation expense
|
|
|
|
|
241,312
|
|
|
|
|
|
|
241,312
|
|
|
(73
|
)
|
|
241,239
|
|
|||||||||||
Balance, December 31, 2016
|
248,301
|
|
|
$
|
2,450
|
|
|
$
|
6,506,795
|
|
|
$
|
21,173
|
|
|
$
|
(5,373,836
|
)
|
|
$
|
1,156,582
|
|
|
$
|
181,609
|
|
|
$
|
1,338,191
|
|
VERTEX PHARMACEUTICALS INCORPORATED
Consolidated Statements of Cash Flows
(in thousands)
|
|||||||||||
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Cash flows from operating activities:
|
|
|
|
|
|
||||||
Net loss
|
$
|
(84,031
|
)
|
|
$
|
(588,181
|
)
|
|
$
|
(742,745
|
)
|
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
|
|
|
|
|
|
||||||
Stock-based compensation expense
|
237,705
|
|
|
231,025
|
|
|
177,542
|
|
|||
Depreciation and amortization expense
|
61,398
|
|
|
62,343
|
|
|
63,257
|
|
|||
Deferred income taxes
|
16,961
|
|
|
3,283
|
|
|
281
|
|
|||
Impairment of property and equipment
|
—
|
|
|
2,516
|
|
|
1,689
|
|
|||
Excess tax benefit from share-based payment arrangements
|
—
|
|
|
—
|
|
|
(2,160
|
)
|
|||
Other non-cash items, net
|
6,140
|
|
|
9,532
|
|
|
—
|
|
|||
Changes in operating assets and liabilities, excluding the effects of the acquisition and deconsolidation of variable interest entities:
|
|
|
|
|
|
||||||
Accounts receivable, net
|
(33,027
|
)
|
|
(104,847
|
)
|
|
7,428
|
|
|||
Inventories
|
(16,450
|
)
|
|
(23,146
|
)
|
|
(16,469
|
)
|
|||
Prepaid expenses and other assets
|
(8,699
|
)
|
|
(9,260
|
)
|
|
(15,771
|
)
|
|||
Accounts payable
|
(11,745
|
)
|
|
(1,709
|
)
|
|
25,048
|
|
|||
Accrued expenses and other liabilities
|
88,649
|
|
|
102,746
|
|
|
(63,183
|
)
|
|||
Accrued restructuring expense
|
(7,426
|
)
|
|
(30,492
|
)
|
|
17,502
|
|
|||
Deferred revenues
|
(13,372
|
)
|
|
(19,242
|
)
|
|
(25,531
|
)
|
|||
Net cash provided by provided by (used in) operating activities
|
236,103
|
|
|
(365,432
|
)
|
|
(573,112
|
)
|
|||
Cash flows from investing activities:
|
|
|
|
|
|
||||||
Maturities of marketable securities
|
757,562
|
|
|
1,067,443
|
|
|
1,557,938
|
|
|||
Purchases of marketable securities
|
(616,625
|
)
|
|
(633,041
|
)
|
|
(1,424,172
|
)
|
|||
Payment for acquisition of variable interest entity
|
—
|
|
|
(80,000
|
)
|
|
(10,000
|
)
|
|||
Expenditures for property and equipment
|
(56,563
|
)
|
|
(45,302
|
)
|
|
(51,201
|
)
|
|||
Investment in note receivable
|
(20,000
|
)
|
|
(30,000
|
)
|
|
—
|
|
|||
Investment in CRISPR
|
(13,075
|
)
|
|
—
|
|
|
—
|
|
|||
(Decrease) increase in restricted cash and cash equivalents
|
22,029
|
|
|
(21,981
|
)
|
|
—
|
|
|||
Decrease in restricted cash and cash equivalents (VIE)
|
31,148
|
|
|
11,685
|
|
|
1,638
|
|
|||
Increase (decrease) in other assets
|
(7
|
)
|
|
52
|
|
|
(244
|
)
|
|||
Payments returned related to construction financing lease obligation
|
—
|
|
|
—
|
|
|
8,050
|
|
|||
Net cash provided by investing activities
|
104,469
|
|
|
268,856
|
|
|
82,009
|
|
|||
Cash flows from financing activities:
|
|
|
|
|
|
||||||
Issuances of common stock under benefit plans
|
68,230
|
|
|
185,592
|
|
|
274,615
|
|
|||
Payments on construction financing lease obligation
|
(432
|
)
|
|
(381
|
)
|
|
(336
|
)
|
|||
Proceeds from lease financing
|
11,208
|
|
|
23,662
|
|
|
—
|
|
|||
Payments on capital lease financing
|
(17,597
|
)
|
|
(19,954
|
)
|
|
(21,443
|
)
|
|||
Proceeds from senior secured term loan
|
—
|
|
|
—
|
|
|
294,243
|
|
|||
Payments on senior secured term loan
|
(75,000
|
)
|
|
—
|
|
|
—
|
|
|||
Proceeds from revolving credit facility
|
74,965
|
|
|
—
|
|
|
—
|
|
|||
Payments of debt issuance costs
|
(3,103
|
)
|
|
—
|
|
|
—
|
|
|||
Advance from CFFT
|
75,000
|
|
|
—
|
|
|
—
|
|
|||
Excess tax benefit from share-based payment arrangements
|
—
|
|
|
—
|
|
|
2,160
|
|
|||
Net cash provided by financing activities
|
133,271
|
|
|
188,919
|
|
|
549,239
|
|
|||
Effect of changes in exchange rates on cash
|
(4,666
|
)
|
|
(2,834
|
)
|
|
(2,176
|
)
|
|||
Net increase in cash and cash equivalents
|
469,177
|
|
|
89,509
|
|
|
55,960
|
|
|||
Cash and cash equivalents—beginning of period
|
714,768
|
|
|
625,259
|
|
|
569,299
|
|
|||
Cash and cash equivalents—end of period
|
$
|
1,183,945
|
|
|
$
|
714,768
|
|
|
$
|
625,259
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
||||||
Cash paid for interest
|
$
|
83,656
|
|
|
$
|
85,613
|
|
|
$
|
68,963
|
|
Cash (received from) paid for income taxes
|
$
|
(2,579
|
)
|
|
$
|
1,806
|
|
|
$
|
1,210
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
||||||
Capitalization of costs related to construction financing lease obligation
|
$
|
14,238
|
|
|
$
|
—
|
|
|
$
|
25,564
|
|
Assets acquired under capital lease obligations
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
9,188
|
|
Issuances of common stock exercises from employee benefit plans receivable
|
$
|
68
|
|
|
$
|
361
|
|
|
$
|
637
|
|
Proceeds from revolving credit facility directly paid to settle all outstanding obligations under the term loan
|
$
|
225,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
A.
|
Nature of Business and Accounting Policies
|
|
Trade
Allowances |
|
Rebates,
Chargebacks and Discounts |
|
Product
Returns |
|
Other
Incentives |
|
Total
|
||||||||||
|
(in thousands)
|
||||||||||||||||||
2016
|
|
|
|
|
|
|
|
|
|
||||||||||
Beginning Balance
|
$
|
2,089
|
|
|
$
|
44,669
|
|
|
$
|
1,228
|
|
|
$
|
1,310
|
|
|
$
|
49,296
|
|
Provision related to current period sales
|
20,075
|
|
|
134,198
|
|
|
3,047
|
|
|
6,602
|
|
|
163,922
|
|
|||||
Adjustments related to prior period sales
|
(90
|
)
|
|
154
|
|
|
(17
|
)
|
|
(151
|
)
|
|
(104
|
)
|
|||||
Credits/payments made
|
(19,506
|
)
|
|
(97,094
|
)
|
|
(766
|
)
|
|
(6,547
|
)
|
|
(123,913
|
)
|
|||||
Ending Balance
|
$
|
2,568
|
|
|
$
|
81,927
|
|
|
$
|
3,492
|
|
|
$
|
1,214
|
|
|
$
|
89,201
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
2015
|
|
|
|
|
|
|
|
|
|
||||||||||
Beginning Balance
|
$
|
1,463
|
|
|
$
|
29,102
|
|
|
$
|
4,713
|
|
|
$
|
745
|
|
|
$
|
36,023
|
|
Provision related to current period sales
|
10,890
|
|
|
65,781
|
|
|
779
|
|
|
3,755
|
|
|
81,205
|
|
|||||
Adjustments related to prior period sales
|
(214
|
)
|
|
(19,410
|
)
|
|
(993
|
)
|
|
(235
|
)
|
|
(20,852
|
)
|
|||||
Credits/payments made
|
(10,050
|
)
|
|
(30,804
|
)
|
|
(3,271
|
)
|
|
(2,955
|
)
|
|
(47,080
|
)
|
|||||
Ending Balance
|
$
|
2,089
|
|
|
$
|
44,669
|
|
|
$
|
1,228
|
|
|
$
|
1,310
|
|
|
$
|
49,296
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
2014
|
|
|
|
|
|
|
|
|
|
||||||||||
Beginning Balance
|
$
|
1,535
|
|
|
$
|
68,244
|
|
|
$
|
15,799
|
|
|
$
|
1,555
|
|
|
$
|
87,133
|
|
Provision related to current period sales
|
8,468
|
|
|
35,713
|
|
|
2,478
|
|
|
1,347
|
|
|
48,006
|
|
|||||
Adjustments related to prior period sales
|
(43
|
)
|
|
329
|
|
|
3,056
|
|
|
(72
|
)
|
|
3,270
|
|
|||||
Credits/payments made
|
(8,497
|
)
|
|
(75,184
|
)
|
|
(16,620
|
)
|
|
(2,085
|
)
|
|
(102,386
|
)
|
|||||
Ending Balance
|
$
|
1,463
|
|
|
$
|
29,102
|
|
|
$
|
4,713
|
|
|
$
|
745
|
|
|
$
|
36,023
|
|
B.
|
Collaborative Arrangements
|
|
June 4, 2015
|
||
|
(in thousands)
|
||
Up-front payment
|
$
|
80,000
|
|
Fair value of contingent payments
|
175,340
|
|
|
Total
|
$
|
255,340
|
|
|
June 4, 2015
|
||
|
(in thousands)
|
||
Consideration transferred
|
$
|
—
|
|
Noncontrolling interest
|
164,317
|
|
|
Intangible assets
|
(255,340
|
)
|
|
Net other liabilities
|
10,468
|
|
|
Deferred tax liability
|
91,023
|
|
|
Goodwill
|
$
|
10,468
|
|
|
2016
|
|
2015
|
|
2014
|
||||||
|
(in thousands)
|
||||||||||
Loss attributable to noncontrolling interest before provision for income taxes
|
$
|
10,086
|
|
|
$
|
6,646
|
|
|
$
|
764
|
|
Provision for income taxes
|
16,743
|
|
|
29,731
|
|
|
3,876
|
|
|||
Increase in fair value of contingent payments
|
(54,850
|
)
|
|
(4,530
|
)
|
|
(450
|
)
|
|||
Net (income) loss attributable to noncontrolling interest
|
$
|
(28,021
|
)
|
|
$
|
31,847
|
|
|
$
|
4,190
|
|
|
December 31, 2016
|
|
December 31, 2015
|
||||
|
(in thousands)
|
||||||
Restricted cash and cash equivalents (VIE)
|
$
|
47,762
|
|
|
$
|
78,910
|
|
Prepaid expenses and other current assets
|
6,812
|
|
|
3,138
|
|
||
Intangible assets
|
284,340
|
|
|
284,340
|
|
||
Goodwill
|
19,391
|
|
|
19,391
|
|
||
Other assets
|
399
|
|
|
455
|
|
||
Accounts payable
|
415
|
|
|
676
|
|
||
Taxes payable
|
1,330
|
|
|
24,554
|
|
||
Other current liabilities
|
2,137
|
|
|
7,100
|
|
||
Deferred tax liability, net
|
131,446
|
|
|
110,438
|
|
||
Other liabilities
|
300
|
|
|
300
|
|
||
Noncontrolling interest
|
181,609
|
|
|
153,661
|
|
|
2016
|
|
2015
|
|
2014
|
||||||
|
(in thousands)
|
||||||||||
Royalty revenues
|
$
|
71
|
|
|
$
|
1,518
|
|
|
$
|
13,481
|
|
Collaborative revenues
|
$
|
(155
|
)
|
|
$
|
1,946
|
|
|
$
|
7,104
|
|
Total revenues attributable to the Janssen HCV collaboration
|
$
|
(84
|
)
|
|
$
|
3,464
|
|
|
$
|
20,585
|
|
C.
|
Earnings Per Share
|
|
2016
|
|
2015
|
|
2014
|
|||
|
(in thousands)
|
|||||||
Stock options
|
12,642
|
|
|
11,145
|
|
|
12,003
|
|
Unvested restricted stock and restricted stock units
|
3,546
|
|
|
3,024
|
|
|
3,091
|
|
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, 2016 |
||||||||||||||
|
|
|
Fair Value Hierarchy
|
||||||||||||
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
|
(in thousands)
|
||||||||||||||
Financial instruments carried at fair value (asset position):
|
|
|
|
|
|
|
|
||||||||
Cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
$
|
280,560
|
|
|
$
|
280,560
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Marketable securities:
|
|
|
|
|
|
|
|
||||||||
Government-sponsored enterprise securities
|
15,508
|
|
|
15,508
|
|
|
—
|
|
|
—
|
|
||||
Corporate equity securities
|
64,560
|
|
|
64,560
|
|
|
—
|
|
|
—
|
|
||||
Commercial paper
|
59,404
|
|
|
—
|
|
|
59,404
|
|
|
—
|
|
||||
Corporate debt securities
|
111,140
|
|
|
—
|
|
|
111,140
|
|
|
—
|
|
||||
Prepaid and other current assets:
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward contracts
|
14,407
|
|
|
—
|
|
|
14,407
|
|
|
—
|
|
||||
Other assets:
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward contracts
|
1,186
|
|
|
$
|
—
|
|
|
1,186
|
|
|
$
|
—
|
|
||
Total financial assets
|
$
|
546,765
|
|
|
$
|
360,628
|
|
|
$
|
186,137
|
|
|
$
|
—
|
|
Financial instruments carried at fair value (liability position):
|
|
|
|
|
|
|
|
||||||||
Other liabilities, current portion:
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward contracts
|
$
|
(144
|
)
|
|
$
|
—
|
|
|
$
|
(144
|
)
|
|
$
|
—
|
|
Total financial liabilities
|
$
|
(144
|
)
|
|
$
|
—
|
|
|
$
|
(144
|
)
|
|
$
|
—
|
|
|
Fair Value Measurements as
of December 31, 2015 |
||||||||||||||
|
|
|
Fair Value Hierarchy
|
||||||||||||
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
|
(in thousands)
|
||||||||||||||
Financial instruments carried at fair value (asset position):
|
|
|
|
|
|
|
|
||||||||
Cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
$
|
199,507
|
|
|
$
|
199,507
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Government-sponsored enterprise securities
|
85,994
|
|
|
85,994
|
|
|
—
|
|
|
—
|
|
||||
Commercial paper
|
34,889
|
|
|
—
|
|
|
34,889
|
|
|
—
|
|
||||
Corporate debt securities
|
11,533
|
|
|
—
|
|
|
11,533
|
|
|
—
|
|
||||
Marketable securities:
|
|
|
|
|
|
|
|
||||||||
Government-sponsored enterprise securities
|
87,162
|
|
|
87,162
|
|
|
—
|
|
|
—
|
|
||||
Commercial paper
|
99,123
|
|
|
—
|
|
|
99,123
|
|
|
—
|
|
||||
Corporate debt securities
|
141,409
|
|
|
—
|
|
|
141,409
|
|
|
—
|
|
||||
Prepaid and other current assets:
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward contracts
|
5,161
|
|
|
—
|
|
|
5,161
|
|
|
—
|
|
||||
Other assets:
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward contracts
|
605
|
|
|
$
|
—
|
|
|
605
|
|
|
$
|
—
|
|
||
Total financial assets
|
$
|
665,383
|
|
|
$
|
372,663
|
|
|
$
|
292,720
|
|
|
$
|
—
|
|
Financial instruments carried at fair value (liability position):
|
|
|
|
|
|
|
|
||||||||
Other liabilities, current portion:
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward contracts
|
$
|
(769
|
)
|
|
$
|
—
|
|
|
$
|
(769
|
)
|
|
$
|
—
|
|
Other liabilities, excluding current portion:
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward contracts
|
(132
|
)
|
|
—
|
|
|
(132
|
)
|
|
—
|
|
||||
Total financial liabilities
|
$
|
(901
|
)
|
|
$
|
—
|
|
|
$
|
(901
|
)
|
|
$
|
—
|
|
E.
|
Marketable Securities
|
|
Amortized Cost
|
|
Gross
Unrealized Gains |
|
Gross
Unrealized Losses |
|
Fair Value
|
||||||||
|
(in thousands)
|
||||||||||||||
December 31, 2016
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Cash and money market funds
|
$
|
1,183,945
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,183,945
|
|
Total cash and cash equivalents
|
$
|
1,183,945
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,183,945
|
|
Marketable securities:
|
|
|
|
|
|
|
|
||||||||
Government-sponsored enterprise securities (matures within 1 year)
|
$
|
15,506
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
15,508
|
|
Corporate equity securities (matures within 1 year)
|
43,213
|
|
|
21,347
|
|
|
—
|
|
|
64,560
|
|
||||
Commercial paper (matures within 1 year)
|
59,331
|
|
|
73
|
|
|
—
|
|
|
59,404
|
|
||||
Corporate debt securities (matures within 1 year)
|
111,225
|
|
|
—
|
|
|
(85
|
)
|
|
111,140
|
|
||||
Total marketable securities
|
229,275
|
|
|
21,422
|
|
|
(85
|
)
|
|
250,612
|
|
||||
Total cash, cash equivalents and marketable securities
|
$
|
1,413,220
|
|
|
$
|
21,422
|
|
|
$
|
(85
|
)
|
|
$
|
1,434,557
|
|
|
|
|
|
|
|
|
|
||||||||
December 31, 2015
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Cash and money market funds
|
$
|
582,352
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
582,352
|
|
Government-sponsored enterprise securities
|
85,994
|
|
|
—
|
|
|
—
|
|
|
85,994
|
|
||||
Commercial paper
|
34,889
|
|
|
—
|
|
|
—
|
|
|
34,889
|
|
||||
Corporate debt securities
|
11,533
|
|
|
—
|
|
|
—
|
|
|
11,533
|
|
||||
Total cash and cash equivalents
|
$
|
714,768
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
714,768
|
|
Marketable securities:
|
|
|
|
|
|
|
|
||||||||
Government-sponsored enterprise securities (matures within 1 year)
|
$
|
87,176
|
|
|
$
|
—
|
|
|
$
|
(14
|
)
|
|
$
|
87,162
|
|
Commercial paper (matures within 1 year)
|
98,877
|
|
|
246
|
|
|
—
|
|
|
99,123
|
|
||||
Corporate debt securities (matures within 1 year)
|
141,515
|
|
|
—
|
|
|
(106
|
)
|
|
141,409
|
|
||||
Total marketable securities
|
327,568
|
|
|
246
|
|
|
(120
|
)
|
|
327,694
|
|
||||
Total cash, cash equivalents and marketable securities
|
1,042,336
|
|
|
246
|
|
|
(120
|
)
|
|
1,042,462
|
|
F.
|
Accumulated Other Comprehensive Income
|
|
Foreign currency translation adjustment
|
|
Unrealized holding gains (losses) on marketable securities, net of tax
|
|
Unrealized (losses) gains on foreign currency forward contracts, net of tax
|
|
Total
|
||||||||
|
(in thousands)
|
||||||||||||||
Balance at December 31, 2013
|
$
|
(325
|
)
|
|
$
|
42
|
|
|
$
|
(23
|
)
|
|
$
|
(306
|
)
|
Other comprehensive (loss) income before reclassifications
|
(646
|
)
|
|
(165
|
)
|
|
3,591
|
|
|
2,780
|
|
||||
Amounts reclassified from accumulated other comprehensive loss
|
—
|
|
|
—
|
|
|
(1,557
|
)
|
|
(1,557
|
)
|
||||
Net current period other comprehensive (loss) income
|
(646
|
)
|
|
(165
|
)
|
|
2,034
|
|
|
1,223
|
|
||||
Balance at December 31, 2014
|
$
|
(971
|
)
|
|
$
|
(123
|
)
|
|
$
|
2,011
|
|
|
$
|
917
|
|
Other comprehensive (loss) income before reclassifications
|
(1,109
|
)
|
|
249
|
|
|
6,493
|
|
|
5,633
|
|
||||
Amounts reclassified from accumulated other comprehensive loss
|
—
|
|
|
—
|
|
|
(4,726
|
)
|
|
(4,726
|
)
|
||||
Net current period other comprehensive (loss) income
|
(1,109
|
)
|
|
249
|
|
|
1,767
|
|
|
907
|
|
||||
Balance at December 31, 2015
|
$
|
(2,080
|
)
|
|
$
|
126
|
|
|
$
|
3,778
|
|
|
$
|
1,824
|
|
Other comprehensive (loss) income before reclassifications
|
(5,782
|
)
|
|
17,395
|
|
|
17,383
|
|
|
28,996
|
|
||||
Amounts reclassified from accumulated other comprehensive loss
|
—
|
|
|
—
|
|
|
(9,647
|
)
|
|
(9,647
|
)
|
||||
Net current period other comprehensive (loss) income
|
(5,782
|
)
|
|
17,395
|
|
|
7,736
|
|
|
19,349
|
|
||||
Balance at December 31, 2016
|
$
|
(7,862
|
)
|
|
$
|
17,521
|
|
|
$
|
11,514
|
|
|
$
|
21,173
|
|
G.
|
Hedging
|
|
As of December 31, 2016
|
|
As of December 31, 2015
|
||||
Foreign Currency
|
(in thousands)
|
||||||
Euro
|
$
|
164,368
|
|
|
$
|
103,362
|
|
British pound sterling
|
65,237
|
|
|
78,756
|
|
||
Australian dollar
|
23,776
|
|
|
27,167
|
|
||
Total foreign currency forward contracts
|
$
|
253,381
|
|
|
$
|
209,285
|
|
As of December 31, 2016
|
||||||||||
Assets
|
|
Liabilities
|
||||||||
Classification
|
|
Fair Value
|
|
Classification
|
|
Fair Value
|
||||
(in thousands)
|
||||||||||
Prepaid and other current assets
|
|
$
|
14,407
|
|
|
Other liabilities, current portion
|
|
$
|
(144
|
)
|
Other assets
|
|
1,186
|
|
|
Other liabilities, excluding current portion
|
|
—
|
|
||
Total assets
|
|
$
|
15,593
|
|
|
Total liabilities
|
|
$
|
(144
|
)
|
As of December 31, 2015
|
||||||||||
Assets
|
|
Liabilities
|
||||||||
Classification
|
|
Fair Value
|
|
Classification
|
|
Fair Value
|
||||
(in thousands)
|
||||||||||
Prepaid and other current assets
|
|
$
|
5,161
|
|
|
Other liabilities, current portion
|
|
$
|
(769
|
)
|
Other assets
|
|
605
|
|
|
Other liabilities, excluding current portion
|
|
(132
|
)
|
||
Total assets
|
|
$
|
5,766
|
|
|
Total liabilities
|
|
$
|
(901
|
)
|
|
As of December 31, 2016
|
||||||||||||||||||
|
Gross Amounts Recognized
|
|
Gross Amounts Offset
|
|
Gross Amount Presented
|
|
Gross Amount Not Offset
|
|
Legal Offset
|
||||||||||
Foreign currency forward contracts
|
(in thousands)
|
||||||||||||||||||
Total assets
|
$
|
15,593
|
|
|
$
|
—
|
|
|
$
|
15,593
|
|
|
$
|
(144
|
)
|
|
$
|
15,449
|
|
Total liabilities
|
$
|
(144
|
)
|
|
$
|
—
|
|
|
$
|
(144
|
)
|
|
$
|
144
|
|
|
$
|
—
|
|
|
As of December 31, 2015
|
||||||||||||||||||
|
Gross Amounts Recognized
|
|
Gross Amounts Offset
|
|
Gross Amount Presented
|
|
Gross Amount Not Offset
|
|
Legal Offset
|
||||||||||
Foreign currency forward contracts
|
(in thousands)
|
||||||||||||||||||
Total assets
|
$
|
5,766
|
|
|
$
|
—
|
|
|
$
|
5,766
|
|
|
$
|
(901
|
)
|
|
$
|
4,865
|
|
Total liabilities
|
(901
|
)
|
|
—
|
|
|
(901
|
)
|
|
901
|
|
|
—
|
|
H.
|
Inventories
|
|
As of December 31,
|
||||||
|
2016
|
|
2015
|
||||
|
(in thousands)
|
||||||
Raw materials
|
$
|
6,348
|
|
|
$
|
8,696
|
|
Work-in-process
|
56,672
|
|
|
40,695
|
|
||
Finished goods
|
14,584
|
|
|
7,816
|
|
||
Total
|
$
|
77,604
|
|
|
$
|
57,207
|
|
I.
|
Property and Equipment
|
|
As of December 31,
|
||||||
|
2016
|
|
2015
|
||||
|
(in thousands)
|
||||||
Buildings
|
$
|
548,232
|
|
|
$
|
531,627
|
|
Furniture and equipment
|
236,634
|
|
|
218,623
|
|
||
Software
|
134,321
|
|
|
124,469
|
|
||
Leasehold improvements
|
108,702
|
|
|
106,768
|
|
||
Computers
|
58,271
|
|
|
52,295
|
|
||
Total property and equipment, gross
|
1,086,160
|
|
|
1,033,782
|
|
||
Less: accumulated depreciation
|
(387,798
|
)
|
|
(336,067
|
)
|
||
Total property and equipment, net
|
$
|
698,362
|
|
|
$
|
697,715
|
|
J.
|
Intangible Assets and Goodwill
|
K.
|
Additional Balance Sheet Detail
|
|
As of December 31,
|
||||||
|
2016
|
|
2015
|
||||
|
(in thousands)
|
||||||
Prepaid expenses
|
$
|
36,134
|
|
|
$
|
22,058
|
|
Fair value foreign currency forward contracts
|
14,407
|
|
|
5,161
|
|
||
Taxes receivable
|
3,213
|
|
|
14,682
|
|
||
Other
|
16,780
|
|
|
12,835
|
|
||
Total
|
$
|
70,534
|
|
|
$
|
54,736
|
|
|
As of December 31,
|
||||||
|
2016
|
|
2015
|
||||
|
(in thousands)
|
||||||
Payroll and benefits
|
$
|
86,387
|
|
|
$
|
87,873
|
|
Research, development and commercial contract costs
|
62,756
|
|
|
55,677
|
|
||
Product revenue allowances
|
86,533
|
|
|
47,209
|
|
||
Royalty payable
|
52,845
|
|
|
60,191
|
|
||
Taxes payable and reserves (including VIE taxes payable)
|
6,883
|
|
|
30,953
|
|
||
Professional fees
|
6,512
|
|
|
7,455
|
|
||
Interest
|
1,390
|
|
|
4,642
|
|
||
Other
|
11,943
|
|
|
11,820
|
|
||
Total
|
$
|
315,249
|
|
|
$
|
305,820
|
|
L.
|
Long Term Obligations
|
M.
|
Common Stock, Preferred Stock and Equity Plans
|
|
|
|
|
|
|
As of December 31, 2016
|
||||
Title of Plan
|
|
Group Eligible
|
|
Type of Award
Granted |
|
Awards
Outstanding |
|
Additional Awards
Authorized for Grant |
||
2013 Stock and Option Plan
|
|
Employees, Non-employee Directors and Consultants
|
|
NSO,
RS and RSU |
|
9,832,269
|
|
|
9,180,002
|
|
2006 Stock and Option Plan
|
|
Employees, Non-employee Directors and Consultants
|
|
NSO,
RS and RSU |
|
6,355,357
|
|
|
—
|
|
|
|
|
|
Total
|
|
16,187,626
|
|
|
9,180,002
|
|
|
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, 2015
|
11,145
|
|
|
$
|
75.99
|
|
|
|
|
|
||
Granted
|
3,183
|
|
|
$
|
91.36
|
|
|
|
|
|
||
Exercised
|
(1,064
|
)
|
|
$
|
45.61
|
|
|
|
|
|
||
Forfeited
|
(544
|
)
|
|
$
|
94.62
|
|
|
|
|
|
||
Expired
|
(78
|
)
|
|
$
|
107.51
|
|
|
|
|
|
||
Outstanding at December 31, 2016
|
12,642
|
|
|
$
|
81.41
|
|
|
7.06
|
|
$
|
124,939
|
|
Exercisable at December 31, 2016
|
7,323
|
|
|
$
|
68.92
|
|
|
6.00
|
|
$
|
121,671
|
|
Exercisable and Expected to Vest at December 31, 2016
|
12,200
|
|
|
$
|
80.76
|
|
|
7.00
|
|
$
|
124,892
|
|
|
|
Options Outstanding
|
|
Options Exercisable
|
||||||||||||
Range of Exercise Prices
|
|
Number
Outstanding |
|
Weighted-average
Remaining Contractual Life |
|
Weighted-average
Exercise Price |
|
Number
Exercisable |
|
Weighted-average
Exercise Price |
||||||
|
|
(in thousands)
|
|
(in years)
|
|
(per share)
|
|
(in thousands)
|
|
(per share)
|
||||||
$18.93–$20.00
|
|
137
|
|
|
1.10
|
|
$
|
18.93
|
|
|
137
|
|
|
$
|
18.93
|
|
$20.01–$40.00
|
|
1,696
|
|
|
3.19
|
|
$
|
33.94
|
|
|
1,696
|
|
|
$
|
33.94
|
|
$40.01–$60.00
|
|
1,867
|
|
|
5.59
|
|
$
|
48.26
|
|
|
1,762
|
|
|
$
|
48.44
|
|
$60.01–$80.00
|
|
1,345
|
|
|
7.11
|
|
$
|
75.90
|
|
|
891
|
|
|
$
|
75.60
|
|
$80.01–$100.00
|
|
4,529
|
|
|
8.45
|
|
$
|
90.60
|
|
|
1,548
|
|
|
$
|
89.61
|
|
$100.01–$120.00
|
|
1,604
|
|
|
8.05
|
|
$
|
109.33
|
|
|
702
|
|
|
$
|
109.29
|
|
$120.01–$134.69
|
|
1,464
|
|
|
8.53
|
|
$
|
130.58
|
|
|
587
|
|
|
$
|
130.17
|
|
Total
|
|
12,642
|
|
|
7.06
|
|
$
|
81.41
|
|
|
7,323
|
|
|
$
|
68.92
|
|
|
Restricted Stock
|
|
Restricted Stock Units
|
||||||||||
|
Number of Units
|
|
Weighted-average
Grant-date Fair Value |
|
Number of Shares
|
|
Weighted-average
Grant-date Fair Value |
||||||
|
(in thousands)
|
|
(per share)
|
|
(in thousands)
|
|
(per share)
|
||||||
Unvested at December 31, 2015
|
2,831
|
|
|
$
|
98.80
|
|
|
193
|
|
|
$
|
98.36
|
|
Granted
|
857
|
|
|
$
|
91.49
|
|
|
847
|
|
|
$
|
90.46
|
|
Vested
|
(817
|
)
|
|
$
|
79.28
|
|
|
(59
|
)
|
|
$
|
83.13
|
|
Cancelled
|
(258
|
)
|
|
$
|
98.56
|
|
|
(48
|
)
|
|
$
|
94.54
|
|
Unvested at December 31, 2016
|
2,613
|
|
|
$
|
102.54
|
|
|
933
|
|
|
$
|
92.35
|
|
|
Year Ended December 31, 2016
|
||
|
(in thousands,
except per share amount) |
||
Number of shares
|
272
|
|
|
Average price paid per share
|
$
|
70.70
|
|
N.
|
Stock-based Compensation Expense
|
|
2016
|
|
2015
|
|
2014
|
||||||
|
(in thousands)
|
||||||||||
Stock-based compensation expense by line item:
|
|
|
|
|
|
||||||
Research and development expenses
|
$
|
153,451
|
|
|
$
|
152,955
|
|
|
$
|
116,998
|
|
Sales, general and administrative expenses
|
84,254
|
|
|
78,070
|
|
|
60,544
|
|
|||
Total stock-based compensation expense included in costs and expenses
|
$
|
237,705
|
|
|
$
|
231,025
|
|
|
$
|
177,542
|
|
|
2016
|
|
2015
|
|
2014
|
||||||
|
(in thousands)
|
||||||||||
Stock-based compensation expense by type of award:
|
|
|
|
|
|
||||||
Stock options
|
$
|
114,768
|
|
|
$
|
129,276
|
|
|
$
|
99,961
|
|
Restricted stock and restricted stock units
|
118,709
|
|
|
98,811
|
|
|
70,678
|
|
|||
ESPP share issuances
|
7,835
|
|
|
7,025
|
|
|
8,326
|
|
|||
Less: stock-based compensation expense capitalized to inventories
|
(3,607
|
)
|
|
(4,087
|
)
|
|
(1,423
|
)
|
|||
Total stock-based compensation expense included in costs and expenses
|
$
|
237,705
|
|
|
$
|
231,025
|
|
|
$
|
177,542
|
|
|
As of December 31, 2016
|
||||
|
Unrecognized Expense
Net of Estimated Forfeitures |
|
Weighted-average
Recognition Period |
||
|
(in thousands)
|
|
(in years)
|
||
Type of award:
|
|
|
|
||
Stock options
|
$
|
157,819
|
|
|
2.50
|
Restricted stock and restricted stock units
|
$
|
176,972
|
|
|
2.39
|
ESPP share issuances
|
$
|
4,080
|
|
|
0.58
|
|
2016
|
|
2015
|
|
2014
|
|||
Expected stock price volatility
|
46.77
|
%
|
|
47.29
|
%
|
|
50.86
|
%
|
Risk-free interest rate
|
1.32
|
%
|
|
1.61
|
%
|
|
1.77
|
%
|
Expected term of options (in years)
|
4.91
|
|
|
5.28
|
|
|
5.47
|
|
Expected annual dividends
|
—
|
|
|
—
|
|
|
—
|
|
•
|
Expected stock price volatility:
Expected stock price volatility is calculated using the trailing one month average of daily implied volatilities prior to grant date. Implied volatility is based on options to purchase the Company’s stock with remaining terms of greater than one year that are regularly traded in the market.
|
•
|
Risk-free interest rate:
The Company bases the risk-free interest rate on the interest rate payable on U.S. Treasury securities in effect at the time of grant for a period that is commensurate with the assumed expected option term.
|
•
|
Expected term of options:
The expected term of options represents the period of time options are expected to be outstanding. The Company uses historical data to estimate employee exercise and post-vest termination behavior. The Company believes that all groups of employees exhibit similar exercise and post-vest termination behavior and therefore does not stratify employees into multiple groups in determining the expected term of options.
|
•
|
Expected annual dividends:
The estimate for annual dividends is
$0.00
because the Company has not historically paid, and does not intend for the foreseeable future to pay, a dividend.
|
O.
|
Other Arrangements
|
P.
|
Income Taxes
|
|
2016
|
|
2015
|
|
2014
|
||||||
|
(in thousands)
|
||||||||||
United States
|
$
|
(147,860
|
)
|
|
$
|
(272,326
|
)
|
|
$
|
(645,465
|
)
|
Foreign
|
80,494
|
|
|
(285,474
|
)
|
|
(89,410
|
)
|
|||
Loss from continuing operations before provision for income taxes
|
$
|
(67,366
|
)
|
|
$
|
(557,800
|
)
|
|
$
|
(734,875
|
)
|
|
2016
|
|
2015
|
|
2014
|
||||||
|
(in thousands)
|
||||||||||
Current taxes:
|
|
|
|
|
|
||||||
United States
|
$
|
(3,821
|
)
|
|
$
|
25,623
|
|
|
$
|
2,853
|
|
Foreign
|
1,794
|
|
|
831
|
|
|
2,457
|
|
|||
State
|
1,836
|
|
|
3,629
|
|
|
1,366
|
|
|||
Total current taxes
|
$
|
(191
|
)
|
|
$
|
30,083
|
|
|
$
|
6,676
|
|
Deferred taxes:
|
|
|
|
|
|
||||||
United States
|
$
|
18,659
|
|
|
$
|
497
|
|
|
$
|
244
|
|
Foreign
|
(3,359
|
)
|
|
(355
|
)
|
|
—
|
|
|||
State
|
1,556
|
|
|
156
|
|
|
38
|
|
|||
Total deferred taxes
|
$
|
16,856
|
|
|
$
|
298
|
|
|
$
|
282
|
|
Provision for income taxes
|
$
|
16,665
|
|
|
$
|
30,381
|
|
|
$
|
6,958
|
|
|
2016
|
|
2015
|
|
2014
|
||||||
|
(in thousands)
|
||||||||||
Loss from continuing operations before provision for income taxes
|
$
|
(67,366
|
)
|
|
$
|
(557,800
|
)
|
|
$
|
(734,875
|
)
|
Expected tax provision (benefit)
|
(23,578
|
)
|
|
(195,230
|
)
|
|
(257,206
|
)
|
|||
State taxes, net of federal benefit
|
3,621
|
|
|
3,800
|
|
|
1,124
|
|
|||
Foreign rate differential
|
21,346
|
|
|
47,402
|
|
|
39,335
|
|
|||
Tax credits
|
(47,773
|
)
|
|
(55,696
|
)
|
|
(33,788
|
)
|
|||
Unbenefitted operating losses (gains)
|
14,837
|
|
|
226,169
|
|
|
241,037
|
|
|||
Non-deductible expenses
|
24,749
|
|
|
5,817
|
|
|
18,756
|
|
|||
Rate change
|
12,836
|
|
|
(1,224
|
)
|
|
(1,826
|
)
|
|||
Tax attribute expiration
|
9,947
|
|
|
—
|
|
|
—
|
|
|||
Other
|
680
|
|
|
(657
|
)
|
|
(474
|
)
|
|||
Provision for income taxes
|
$
|
16,665
|
|
|
$
|
30,381
|
|
|
$
|
6,958
|
|
|
As of December 31,
|
||||||
|
2016
|
|
2015
|
||||
|
(in thousands)
|
||||||
Deferred tax assets:
|
|
|
|
||||
Net operating loss
|
$
|
1,232,399
|
|
|
$
|
1,250,642
|
|
Tax credit carryforwards
|
367,402
|
|
|
315,535
|
|
||
Property and equipment
|
22
|
|
|
—
|
|
||
Intangible assets
|
34,938
|
|
|
14,673
|
|
||
Deferred revenues
|
31,205
|
|
|
9,341
|
|
||
Stock-based compensation
|
110,446
|
|
|
93,404
|
|
||
Inventories
|
4,705
|
|
|
5,913
|
|
||
Accrued expenses
|
23,078
|
|
|
27,236
|
|
||
Currency translation adjustment
|
—
|
|
|
222
|
|
||
Unrealized loss
|
5
|
|
|
—
|
|
||
Construction financing lease obligation
|
177,735
|
|
|
176,250
|
|
||
Gross deferred tax assets
|
1,981,935
|
|
|
1,893,216
|
|
||
Valuation allowance
|
(1,731,186
|
)
|
|
(1,716,349
|
)
|
||
Total deferred tax assets
|
250,749
|
|
|
176,867
|
|
||
Deferred tax liabilities:
|
|
|
|
||||
Property and equipment
|
(169,089
|
)
|
|
(175,424
|
)
|
||
Acquired intangibles
|
(134,063
|
)
|
|
(110,439
|
)
|
||
Deferred revenue
|
$
|
(73,357
|
)
|
|
$
|
—
|
|
Unrealized gain
|
$
|
(7,967
|
)
|
|
$
|
(1,088
|
)
|
Net deferred tax liabilities
|
$
|
(133,727
|
)
|
|
$
|
(110,084
|
)
|
|
2016
|
|
2015
|
||||
|
(in thousands)
|
||||||
Unrecognized tax benefits beginning of year
|
$
|
425
|
|
|
$
|
880
|
|
Decrease due to statute of limitations expiring
|
(425
|
)
|
|
—
|
|
||
Decrease due to settlements and payments
|
—
|
|
|
(455
|
)
|
||
Unrecognized tax benefits end of year
|
$
|
—
|
|
|
$
|
425
|
|
Q.
|
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
|
|
|
2016
|
|
2015
|
|
2014
|
|
2004-2016
|
||||||||
|
(in thousands)
|
||||||||||||||
Liability, beginning of the period
|
$
|
7,944
|
|
|
$
|
11,596
|
|
|
$
|
19,115
|
|
|
$
|
69,526
|
|
Cash payments
|
(15,841
|
)
|
|
(14,625
|
)
|
|
(17,494
|
)
|
|
(226,912
|
)
|
||||
Cash received from subleases
|
11,892
|
|
|
11,089
|
|
|
12,912
|
|
|
111,601
|
|
||||
Credit for portion of facility Vertex decided to occupy in 2005
|
—
|
|
|
—
|
|
|
—
|
|
|
(10,018
|
)
|
||||
Restructuring expense
|
333
|
|
|
(116
|
)
|
|
(2,937
|
)
|
|
60,131
|
|
||||
Liability, end of the period
|
$
|
4,328
|
|
|
$
|
7,944
|
|
|
$
|
11,596
|
|
|
$
|
4,328
|
|
|
2016
|
|
2015
|
|
2014
|
||||||
|
(in thousands)
|
||||||||||
Liability, beginning of the period
|
$
|
5,964
|
|
|
$
|
33,390
|
|
|
$
|
797
|
|
Cash payments
|
(12,674
|
)
|
|
(30,022
|
)
|
|
(18,271
|
)
|
|||
Cash received from subleases
|
9,751
|
|
|
4,229
|
|
|
—
|
|
|||
Restructuring expense
|
585
|
|
|
(1,633
|
)
|
|
50,864
|
|
|||
Liability, end of the period
|
$
|
3,626
|
|
|
$
|
5,964
|
|
|
$
|
33,390
|
|
|
2016
|
|
2015
|
|
2014
|
||||||
|
(in thousands)
|
||||||||||
Liability, beginning of the period
|
$
|
1,450
|
|
|
$
|
869
|
|
|
$
|
8,441
|
|
Cash payments
|
(1,794
|
)
|
|
(3,374
|
)
|
|
(10,570
|
)
|
|||
Restructuring expense
|
344
|
|
|
3,955
|
|
|
2,998
|
|
|||
Liability, end of the period
|
$
|
—
|
|
|
$
|
1,450
|
|
|
$
|
869
|
|
R.
|
Employee Benefits
|
S.
|
Commitments and Contingencies
|
Year
|
|
Fan Pier
Leases |
|
San Diego
Leases
|
|
Kendall Square
Lease |
|
Kendall Sublease
Income |
|
Other
Leases |
|
Total Lease
Commitments
(Net of Sublease Income)
|
||||||||||||
|
|
(in thousands)
|
||||||||||||||||||||||
2017
|
|
$
|
67,206
|
|
|
$
|
3,147
|
|
|
$
|
20,088
|
|
|
$
|
(15,687
|
)
|
|
$
|
13,156
|
|
|
$
|
87,910
|
|
2018
|
|
67,206
|
|
|
3,245
|
|
|
6,696
|
|
|
(5,236
|
)
|
|
12,975
|
|
|
84,886
|
|
||||||
2019
|
|
72,589
|
|
|
6,906
|
|
|
—
|
|
|
—
|
|
|
11,746
|
|
|
91,241
|
|
||||||
2020
|
|
72,589
|
|
|
9,208
|
|
|
—
|
|
|
—
|
|
|
11,100
|
|
|
92,897
|
|
||||||
2021
|
|
72,589
|
|
|
9,208
|
|
|
—
|
|
|
—
|
|
|
10,300
|
|
|
92,097
|
|
||||||
Thereafter
|
|
535,032
|
|
|
138,217
|
|
|
—
|
|
|
—
|
|
|
62,409
|
|
|
735,658
|
|
||||||
Total minimum lease payments
|
|
$
|
887,211
|
|
|
$
|
169,931
|
|
|
$
|
26,784
|
|
|
$
|
(20,923
|
)
|
|
$
|
121,686
|
|
|
$
|
1,184,689
|
|
Year
|
|
(in thousands)
|
||
2017
|
|
$
|
21,995
|
|
2018
|
|
21,393
|
|
|
2019
|
|
8,778
|
|
|
2020
|
|
3,336
|
|
|
2021
|
|
2,457
|
|
|
Thereafter
|
|
543
|
|
|
Total payments
|
|
58,502
|
|
|
Less: amount representing interest
|
|
(4,100
|
)
|
|
Present value of payments
|
|
$
|
54,402
|
|
T.
|
Segment Information
|
|
2016
|
|
2015
|
|
2014
|
||||||
|
(in thousands)
|
||||||||||
KALYDECO
|
$
|
703,432
|
|
|
$
|
631,674
|
|
|
$
|
463,750
|
|
ORKAMBI
|
979,590
|
|
|
350,663
|
|
|
—
|
|
|||
INCIVEK
|
610
|
|
|
17,987
|
|
|
24,071
|
|
|||
Total product revenues, net
|
$
|
1,683,632
|
|
|
$
|
1,000,324
|
|
|
$
|
487,821
|
|
|
2016
|
|
2015
|
|
2014
|
||||||
|
(in thousands)
|
||||||||||
United States
|
$
|
1,321,807
|
|
|
$
|
763,316
|
|
|
$
|
361,074
|
|
Outside of the United States
|
|
|
|
|
|
||||||
Europe
|
320,456
|
|
|
219,596
|
|
|
197,611
|
|
|||
Other
|
59,914
|
|
|
49,424
|
|
|
21,730
|
|
|||
Total revenues outside of the United States
|
380,370
|
|
|
269,020
|
|
|
219,341
|
|
|||
Total revenues
|
$
|
1,702,177
|
|
|
$
|
1,032,336
|
|
|
$
|
580,415
|
|
|
Percent of Total Gross Revenues
|
|
Percent of Gross Accounts Receivable
|
|||||||||||
|
Year Ended December 31,
|
|
As of December 31,
|
|||||||||||
|
2016
|
|
2015
|
|
2014
|
|
2016
|
|
2015
|
|||||
Walgreen Co.
|
19
|
%
|
|
20
|
%
|
|
12
|
%
|
|
15
|
%
|
|
15
|
%
|
CVS/Caremark
|
19
|
%
|
|
17
|
%
|
|
<10
|
%
|
|
17
|
%
|
|
17
|
%
|
Accredo/Curascript
|
15
|
%
|
|
15
|
%
|
|
<10
|
%
|
|
10
|
%
|
|
16
|
%
|
|
As of December 31,
|
||||||
|
2016
|
|
2015
|
||||
|
(in thousands)
|
||||||
United States
|
$
|
665,552
|
|
|
$
|
661,421
|
|
Outside of the United States
|
|
|
|
||||
United Kingdom
|
26,921
|
|
|
32,793
|
|
||
Other
|
5,889
|
|
|
3,501
|
|
||
Total property and equipment, net outside of the United States
|
32,810
|
|
|
36,294
|
|
||
Total property and equipment, net
|
$
|
698,362
|
|
|
$
|
697,715
|
|
U.
|
Quarterly Financial Data (unaudited)
|
|
Three Months Ended
|
||||||||||||||
|
March 31,
2016 |
|
June 30,
2016 |
|
September 30,
2016 |
|
December 31,
2016 |
||||||||
|
(in thousands, except per share amounts)
|
||||||||||||||
Revenues:
|
|
|
|
|
|
|
|
||||||||
Product revenues, net
|
$
|
394,410
|
|
|
$
|
425,651
|
|
|
$
|
409,689
|
|
|
$
|
453,882
|
|
Royalty revenues
|
3,596
|
|
|
5,282
|
|
|
3,835
|
|
|
3,887
|
|
||||
Collaborative revenues
|
74
|
|
|
675
|
|
|
259
|
|
|
937
|
|
||||
Total revenues
|
398,080
|
|
|
431,608
|
|
|
413,783
|
|
|
458,706
|
|
||||
Costs and expenses:
|
|
|
|
|
|
|
|
||||||||
Cost of product revenues
|
49,789
|
|
|
44,154
|
|
|
53,222
|
|
|
59,646
|
|
||||
Royalty expenses
|
860
|
|
|
1,098
|
|
|
855
|
|
|
836
|
|
||||
Research and development expenses (1)
|
255,860
|
|
|
271,008
|
|
|
272,370
|
|
|
248,452
|
|
||||
Sales, general and administrative expenses
|
105,214
|
|
|
111,652
|
|
|
106,055
|
|
|
109,908
|
|
||||
Restructuring expenses
|
687
|
|
|
343
|
|
|
8
|
|
|
224
|
|
||||
Total costs and expenses
|
412,410
|
|
|
428,255
|
|
|
432,510
|
|
|
419,066
|
|
||||
(Loss) income from operations
|
(14,330
|
)
|
|
3,353
|
|
|
(18,727
|
)
|
|
39,640
|
|
||||
Interest expense, net
|
(20,698
|
)
|
|
(20,155
|
)
|
|
(20,140
|
)
|
|
(20,439
|
)
|
||||
Other income (expense), net
|
4,411
|
|
|
(1,219
|
)
|
|
(167
|
)
|
|
1,105
|
|
||||
(Loss) income before provision for income taxes
|
(30,617
|
)
|
|
(18,021
|
)
|
|
(39,034
|
)
|
|
20,306
|
|
||||
Provision for (benefit from) income taxes
|
5,485
|
|
|
18,130
|
|
|
503
|
|
|
(7,453
|
)
|
||||
Net (loss) income
|
(36,102
|
)
|
|
(36,151
|
)
|
|
(39,537
|
)
|
|
27,759
|
|
||||
(Income) loss attributable to noncontrolling interest
|
(5,529
|
)
|
|
(28,374
|
)
|
|
696
|
|
|
5,186
|
|
||||
Net (loss) income attributable to Vertex
|
$
|
(41,631
|
)
|
|
$
|
(64,525
|
)
|
|
$
|
(38,841
|
)
|
|
$
|
32,945
|
|
|
|
|
|
|
|
|
|
||||||||
Amounts per share attributable to Vertex common shareholders:
|
|
|
|
|
|
|
|
||||||||
Net (loss) income:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
(0.17
|
)
|
|
$
|
(0.26
|
)
|
|
$
|
(0.16
|
)
|
|
$
|
0.13
|
|
Diluted
|
$
|
(0.17
|
)
|
|
$
|
(0.26
|
)
|
|
$
|
(0.16
|
)
|
|
$
|
0.13
|
|
Shares used in per share calculations:
|
|
|
|
|
|
|
|
||||||||
Basic
|
243,831
|
|
|
244,482
|
|
|
244,920
|
|
|
245,454
|
|
||||
Diluted
|
243,831
|
|
|
244,482
|
|
|
244,920
|
|
|
247,757
|
|
|
Three Months Ended
|
||||||||||||||
|
March 31,
2015 |
|
June 30,
2015 |
|
September 30,
2015 |
|
December 31,
2015 |
||||||||
|
(in thousands, except per share amounts)
|
||||||||||||||
Revenues:
|
|
|
|
|
|
|
|
||||||||
Product revenues, net
|
$
|
130,875
|
|
|
$
|
160,388
|
|
|
$
|
302,511
|
|
|
$
|
406,550
|
|
Royalty revenues
|
6,792
|
|
|
5,077
|
|
|
5,759
|
|
|
6,331
|
|
||||
Collaborative revenues
|
842
|
|
|
611
|
|
|
1,546
|
|
|
5,054
|
|
||||
Total revenues
|
138,509
|
|
|
166,076
|
|
|
309,816
|
|
|
417,935
|
|
||||
Costs and expenses:
|
|
|
|
|
|
|
|
||||||||
Cost of product revenues
|
9,381
|
|
|
15,409
|
|
|
30,269
|
|
|
62,092
|
|
||||
Royalty expenses
|
2,926
|
|
|
1,451
|
|
|
1,691
|
|
|
1,293
|
|
||||
Research and development expenses (2)
|
215,599
|
|
|
223,858
|
|
|
246,284
|
|
|
310,181
|
|
||||
Sales, general and administrative expenses
|
85,860
|
|
|
94,394
|
|
|
99,772
|
|
|
96,549
|
|
||||
Restructuring (income) expenses
|
(3,272
|
)
|
|
2,128
|
|
|
1,826
|
|
|
1,524
|
|
||||
Total costs and expenses
|
310,494
|
|
|
337,240
|
|
|
379,842
|
|
|
471,639
|
|
||||
Loss from operations
|
(171,985
|
)
|
|
(171,164
|
)
|
|
(70,026
|
)
|
|
(53,704
|
)
|
||||
Interest expense, net
|
(21,307
|
)
|
|
(21,111
|
)
|
|
(21,134
|
)
|
|
(20,654
|
)
|
||||
Other (expense) income, net
|
(5,113
|
)
|
|
1,414
|
|
|
(1,326
|
)
|
|
(1,690
|
)
|
||||
Loss before provision for (benefit from) income taxes
|
(198,405
|
)
|
|
(190,861
|
)
|
|
(92,486
|
)
|
|
(76,048
|
)
|
||||
Provision for (benefit from) income taxes
|
299
|
|
|
30,131
|
|
|
1,330
|
|
|
(1,379
|
)
|
||||
Net loss
|
(198,704
|
)
|
|
(220,992
|
)
|
|
(93,816
|
)
|
|
(74,669
|
)
|
||||
Loss (income) attributable to noncontrolling interest
|
98
|
|
|
32,144
|
|
|
(1,333
|
)
|
|
938
|
|
||||
Net loss attributable to Vertex
|
$
|
(198,606
|
)
|
|
$
|
(188,848
|
)
|
|
$
|
(95,149
|
)
|
|
$
|
(73,731
|
)
|
|
|
|
|
|
|
|
|
||||||||
Amounts per share attributable to Vertex common shareholders:
|
|
|
|
|
|
|
|
||||||||
Net loss:
|
|
|
|
|
|
|
|
||||||||
Basic and diluted
|
$
|
(0.83
|
)
|
|
$
|
(0.78
|
)
|
|
$
|
(0.39
|
)
|
|
$
|
(0.30
|
)
|
Shares used in per share calculations:
|
|
|
|
|
|
|
|
||||||||
Basic and diluted
|
239,493
|
|
|
240,757
|
|
|
241,969
|
|
|
242,987
|
|
1.
|
In the second quarter of 2016, the Company incurred research and development expenses of approximately
$10.0 million
to acquire certain early-stage research assets. In the third quarter of 2016, the Company incurred research and development expenses related to a
$20.0 million
upfront payment to Moderna Therapeutics, Inc. See
Note B, “Collaborative Arrangements,”
for further information.
|
2.
|
In the fourth quarter of 2015, the Company made a
$75.0 million
upfront payment to CRISPR Therapeutics in connection with the collaboration, which was recorded as a research and development expense. See
Note B, “Collaborative Arrangements,”
for further information.
|
V.
|
Subsequent Events
|
1 Year Vertex Pharmaceuticals Chart |
1 Month Vertex Pharmaceuticals Chart |
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