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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 | |
---|---|---|---|---|---|---|---|---|---|---|
13.57 | 3.45% | 406.38 | 402.14 | 408.70 | 406.95 | 392.47 | 393.00 | 1,259,896 | 01:00:00 |
- First-quarter 2019 product revenues of $857 million, a 34% increase compared to $638 million in 2018-
- First-quarter 2019 GAAP operating income increased 115% to $277 million; non-GAAP operating income increased 81% to $377 million -
- On track to choose best triple combination regimen in Q2 2019; NDA submission planned for Q3 2019 -
Vertex Pharmaceuticals Incorporated (Nasdaq: VRTX) today reported consolidated financial results for the first quarter ended March 31, 2019 and reiterated full-year 2019 financial guidance.
"Our goal is to develop transformative medicines for all people with CF and other serious diseases and to ensure all eligible patients have access to these medicines as quickly as possible," said Jeffrey Leiden, M.D., Ph.D., Chairman, President and Chief Executive Officer of Vertex. "We have made significant progress toward achieving this goal by rapidly advancing our triple combination regimens through late-stage development, and we remain on track to submit a New Drug Application for one of these medicines in the third quarter of 2019. We also continue to advance our earlier-stage programs targeting AAT, pain, FSGS and sickle cell disease. In the first quarter, we again delivered strong revenue and earnings growth, which further enhances our ability to make significant investments in internal and external innovation."
First-Quarter 2019 Financial Highlights
Three Months Ended March 31, % 2019 2018 Change (in millions, except per share amounts) Total product revenues, net $ 857 $ 638 34% KALYDECO $ 244 $ 250 ORKAMBI $ 293 $ 354 SYMDEKO/SYMKEVI $ 320 $ 34 GAAP Operating income $ 277 $ 129 115% Non-GAAP Operating income $ 377 $ 208 81% GAAP Net income $ 269 $ 210 28% Non-GAAP Net income $ 296 $ 196 51% GAAP Net income per share - diluted $ 1.03 $ 0.81 27% Non-GAAP Net income per share - diluted $ 1.14 $ 0.76 50%Total product revenues increased 34% compared to the first quarter of 2018, primarily driven by the uptake of SYMDEKO in the U.S. since launch.
GAAP and Non-GAAP net income increased compared to the first quarter of 2018, largely driven by the strong growth in total product revenues, and was partially offset by increases in operating expenses and income taxes.
Cash, cash equivalents and marketable securities as of March 31, 2019 were $3.5 billion, an increase of approximately $300 million compared to $3.2 billion as of December 31, 2018.
First-Quarter 2019 Expenses
Three Months Ended March 31, 2019 2018 (in millions) Combined GAAP R&D and SG&A expenses $ 487 $ 440 Combined Non-GAAP R&D and SG&A expenses $ 388 $ 360 GAAP R&D expense $ 339 $ 311 Non-GAAP R&D expense $ 273 $ 260 GAAP SG&A expense $ 147 $ 130 Non-GAAP SG&A expense $ 114 $ 100 GAAP income taxes $ 52 $ (13 ) Non-GAAP income taxes $ 81 $ 3Combined GAAP and non-GAAP R&D and SG&A expenses increased compared to the first quarter of 2018 primarily due to the incremental investment to support the global use of Vertex's medicines and the expansion of Vertex's pipeline in CF and other new disease areas.
GAAP and Non-GAAP income taxes increased significantly compared to the first quarter of 2018 due to Vertex's release of its valuation allowance on the majority of its deferred tax assets in the fourth quarter of 2018. GAAP and non-GAAP income taxes in the first quarter of 2019 include a provision for income taxes on Vertex's pre-tax income using an estimated effective tax rate approximating statutory rates. This provision for income taxes includes a significant non-cash charge due to Vertex's ability to offset its pre-tax income against previously benefited net operating losses. Vertex expects its cash paid for income taxes to increase significantly once all of its net operating losses have been utilized to offset its pre-tax income. Refer to "Supplemental Income Tax Information" for discussion of the cash versus non-cash components of Vertex's provision for income taxes.
Full-Year 2019 Financial Guidance
Vertex today reiterated its full-year 2019 guidance as follows:
FY 2019 TOTAL product revenues $ 3.45 to 3.55 billion Combined GAAP R&D and SG&A expenses $ 2.00 to 2.15 billion Combined Non-GAAP R&D and SG&A expenses $ 1.65 to 1.70 billion Non-GAAP effective tax rate 21% - 22%The company's total product revenue growth in 2019 is expected to be driven primarily by the full-year impact of the SYMDEKO launch, reimbursement agreements reached in 2018 and label expansions for the company's CF medicines. The company's full-year 2019 revenue guidance reflects only markets where its CF medicines are currently reimbursed.
The company's combined GAAP and non-GAAP R&D and SG&A expense guidance reflects CF development efforts, incremental investment to support the potential launch of a triple combination regimen and investment to support the expansion of Vertex's pipeline into new disease areas.
In addition, based on the release of the company's valuation allowance in the fourth quarter of 2018, Vertex has also begun to record a tax provision in 2019 and expects its full-year non-GAAP tax rate to be between 21% and 22%. The vast majority of this tax provision will be a non-cash expense until the company fully utilizes its net operating losses.
Business Highlights
INVESTIGATIONAL CF MEDICINES
Bringing CF medicines to more people as quickly as possible:
APPROVED CF MEDICINES
Securing access for Vertex CF medicines:
- Positive recommendation for SYMDEKO in Australia for ages 12+ from the Pharmaceutical Benefits Advisory Committee (PBAC).
- Reimbursement for ORKAMBI in Sweden for ages 2 to 5.
- Expanded pricing agreement for ORKAMBI in Germany to include children ages 6 through 11.
Treating patients at younger ages with CFTR modulators:
- Approval for KALYDECO in the U.S. for infants ages 6 to <12 months.
- Approval for KALYDECO in Canada for children ages 12 to <24 months.
- Approval for ORKAMBI in the EU for children ages 2 to 5 years old.
- Supplemental New Drug Application (sNDA) submitted in the U.S. for tezacaftor/ivacaftor in children ages 6 to 11 years old.
LATE-STAGE RESEARCH & CLINICAL DEVELOPMENT
Alpha-1 Antitrypsin (AAT) Program:
Sickle Cell Disease & Beta-Thalassemia:
Non-GAAP Financial Measures
In this press release, Vertex's financial results and financial guidance are provided in accordance with accounting principles generally accepted in the United States (GAAP) and using certain non-GAAP financial measures. In particular, non-GAAP financial results and guidance exclude from Vertex's pre-tax income (i) stock-based compensation expense, (ii) revenues and expenses related to business development transactions including collaboration agreements, asset acquisitions and consolidated variable interest entities and (iii) other adjustments, including gains or losses related to the fair value of the company's strategic investments. The company's non-GAAP financial results also exclude from its provision for or benefit from income taxes the estimated tax impact related to its non-GAAP adjustments to pre-tax income described above. These results are provided as a complement to results provided in accordance with GAAP because management believes these non-GAAP financial measures help indicate underlying trends in the company's business, are important in comparing current results with prior period results and provide additional information regarding the company's financial position. Management also uses these non-GAAP financial measures to establish budgets and operational goals that are communicated internally and externally and to manage the company's business and to evaluate its performance. The company adjusts, where appropriate, for both revenues and expenses in order to reflect the company's operations. The company provides guidance regarding product revenues in accordance with GAAP and provides guidance regarding combined research and development and sales, general, and administrative expenses on both a GAAP and non-GAAP basis. The company also provides guidance regarding its anticipated income taxes as a percentage of pre-tax income on a non-GAAP basis. The guidance regarding GAAP research and development expenses and sales, general and administrative expenses does not include estimates associated with any potential future business development activities. A reconciliation of the GAAP financial results to non-GAAP financial results is included in the attached financial information.
Vertex Pharmaceuticals IncorporatedFirst-Quarter ResultsConsolidated Statements of Operations(in thousands, except per share amounts)(unaudited)
Three Months Ended March 31, 2019 2018 Revenues: Product revenues, net $ 857,253 $ 637,729 Collaboration and royalty revenues 1,182 3,070 Total revenues 858,435 640,799 Costs and expenses: Cost of sales 95,092 71,613 Research and development expenses 339,490 310,553 Sales, general and administrative expenses 147,045 129,808 Restructuring income — (76 ) Total costs and expenses 581,627 511,898 Income from operations 276,808 128,901 Interest income 15,615 5,789 Interest expense (14,868 ) (16,886 ) Other income, net (1) 42,610 96,838 Income from operations before provision for (benefit from) income taxes 320,165 214,642 Provision for (benefit from) income taxes (2) 51,534 (12,659 ) Net income 268,631 227,301 Income attributable to noncontrolling interest (3) — (17,038 ) Net income attributable to Vertex $ 268,631 $ 210,263 Amounts per share attributable to Vertex common shareholders: Net income: Basic $ 1.05 $ 0.83 Diluted $ 1.03 $ 0.81 Shares used in per share calculations: Basic 255,695 253,231 Diluted 260,175 258,526Reconciliation of GAAP to Non-GAAP Net IncomeFirst-Quarter Results(in thousands, except per share amounts)(unaudited)
Three Months Ended March 31, 2019 2018 GAAP net income attributable to Vertex $ 268,631 $ 210,263 Stock-based compensation expense 93,791 78,136 Increase in fair value of contingent consideration payable to VIE (3) — 24,000 Increase in fair value of strategic investments (1) and other adjustments (4) (37,200 ) (94,616 ) Total non-GAAP adjustments to pre-tax income 56,591 7,520 Estimated income taxes related to non-GAAP adjustments to pre-tax income (5) (29,392 ) (21,859 ) Non-GAAP net income attributable to Vertex $ 295,830 $ 195,924 Amounts per diluted share attributable to Vertex common shareholders: Net income: GAAP $ 1.03 $ 0.81 Non-GAAP $ 1.14 $ 0.76 Shares used in diluted per share calculations: GAAP and Non-GAAP 260,175 258,526Reconciliation of GAAP to Non-GAAP Revenues and ExpensesFirst-Quarter Results(in thousands)(unaudited)
Three Months Ended March 31, 2019 2018 GAAP total revenues $ 858,435 $ 640,799 Other adjustments (4) (141 ) (1,919 ) Non-GAAP total revenues $ 858,294 $ 638,880 Three Months Ended March 31, 2019 2018 GAAP cost of sales $ 95,092 $ 71,613 Stock-based compensation expense (1,338 ) (813 ) Non-GAAP cost of sales $ 93,754 $ 70,800 GAAP research and development expenses $ 339,490 $ 310,553 Stock-based compensation expense (59,715 ) (48,488 ) Other adjustments (4) (6,492 ) (2,073 ) Non-GAAP research and development expenses $ 273,283 $ 259,992 GAAP sales, general and administrative expenses $ 147,045 $ 129,808 Stock-based compensation expense (32,738 ) (28,835 ) Other adjustments (4) — (1,329 ) Non-GAAP sales, general and administrative expenses $ 114,307 $ 99,644 Combined non-GAAP R&D and SG&A expenses $ 387,590 $ 359,636 Three Months Ended March 31, 2019 2018 GAAP other income, net $ 42,610 $ 96,838 Increase in fair value of strategic investments (1) (43,551 ) (95,458 ) Non-GAAP other (expense) income, net $ (941 ) $ 1,380 GAAP provision for (benefit from) income taxes $ 51,534 $ (12,659 ) Estimated income taxes related to non-GAAP adjustments to pre-tax income (5) 29,392 15,454 Non-GAAP provision for income taxes (2) $ 80,926 $ 2,795Condensed Consolidated Balance Sheets(in thousands)(unaudited)
March 31, 2019 December 31, 2018 Assets Cash, cash equivalents and marketable securities $ 3,478,035 $ 3,168,242 Accounts receivable, net 438,297 409,688 Inventories 136,698 124,360 Property and equipment, net 742,559 812,005 Goodwill 50,384 50,384 Deferred tax assets 1,467,518 1,499,672 Other assets 229,623 181,547 Total assets $ 6,543,114 $ 6,245,898 Liabilities and Shareholders' Equity Accounts payable and accruals $ 615,007 $ 715,482 Finance lease liabilities 596,106 596,639 Other liabilities 608,688 498,574 Shareholders' equity 4,723,313 4,435,203 Total liabilities and shareholders' equity $ 6,543,114 $ 6,245,898 Common shares outstanding 256,351 255,172Supplemental Income Tax Information(in thousands, except percentages)(unaudited)
Three Months Ended March 31, 2019 2018 Components of provision for (benefit from) income taxes related to: Cash taxes paid or accrued for state and foreign income taxes $ 4,778 $ 2,795 VIE provision for income taxes (5) — 6,405 Provision for income taxes offset by net operating losses 46,756 (21,859 ) GAAP provision for (benefit from) income taxes (2) $ 51,534 $ (12,659 ) Cash taxes paid or accrued for state and foreign income taxes $ 4,778 $ 2,795 Estimated income taxes attributable to Vertex related to non-GAAP adjustments to pre-tax income (5) 29,392 21,859 Provision for income taxes offset by net operating losses 46,756 (21,859 ) Non-GAAP provision for income taxes (2) $ 80,926 $ 2,795 Effective tax rate reconciliation: GAAP effective tax rate 16 % (6 )% Impact of GAAP to Non-GAAP adjustments 5 % 7 % Non-GAAP effective tax rate 21 % 1 %Notes and Explanations
1: The company recorded gains of $43.6 million and $95.5 million in the three months ended March 31, 2019 and 2018, respectively, to "Other income, net," related to changes in the fair value of its strategic investments.
2: In the fourth quarter of 2018, the company recorded a non-cash benefit from income taxes of approximately $1.5 billion related to the release of its valuation allowance on the majority of its net operating losses and other deferred tax assets. As a result, the company recorded deferred tax assets of $1.5 billion on its consolidated balance sheet as of December 31, 2018, which were previously subject to its valuation allowance. Starting in the first quarter of 2019, the company began recording a provision for income taxes on its pre-tax income using an estimated effective tax rate that approximates statutory rates. The provision includes a significant non-cash charge due to the company's ability to offset its pre-tax income against previously benefited net operating losses. The company expects the majority of its tax provision to represent a non-cash expense until its net operating losses have been fully utilized. As of December 31, 2018, the company's federal net operating losses and credits that were available to offset future pre-tax income were approximately $4.5 billion.
3: During the three months ended March 31, 2018, the company consolidated the financial statements of a variable interest entity, or VIE, because Vertex had licensed the rights to develop the VIE's most significant intellectual property asset. During the three months ended March 31, 2018, the fair value of the contingent payments payable by Vertex to the VIE increased by $24.0 million. This increase was attributable to noncontrolling interest and resulted in a decrease in net income attributable to Vertex on a dollar-for-dollar basis. The company deconsolidated the VIE as of December 31, 2018; therefore, there were no comparable amounts during the three months ended March 31, 2019.
4: "Other adjustments" in the three months ended March 31, 2019 primarily related to collaborative milestone payments. "Other adjustments" in the three months ended March 31, 2018 primarily related to revenues and expenses attributable to our VIE's operations and collaboration revenues and payments including those related to the company's oncology collaboration with Merck KGaA, Darmstadt, Germany.
5: In the three months ended March 31, 2019, "Estimated income taxes related to non-GAAP adjustments to pre-tax income" primarily related to (i) stock-based compensation (including an adjustment for excess tax benefits related to stock-based compensation) and (ii) the increase in the fair value of the company's strategic investments. In the three months ended March 31, 2018, "Estimated income taxes related to non-GAAP adjustments to pre-tax income" were related to a provision for income taxes attributable to the company's VIE and excess tax benefits related to stock-based compensation.
About VertexVertex is a global biotechnology company that invests in scientific innovation to create transformative medicines for people with serious and life-threatening diseases. In addition to clinical development programs in CF, Vertex has more than a dozen ongoing research programs focused on the underlying mechanisms of other serious diseases.
Founded in 1989 in Cambridge, Mass., Vertex's headquarters is now located in Boston's Innovation District. Today, the company has research and development sites and commercial offices in the United States, Europe, Canada, Australia and Latin America. Vertex is consistently recognized as one of the industry's top places to work, including being named to Science magazine's Top Employers in the life sciences ranking for nine years in a row. For additional information and the latest updates from the company, please visit www.vrtx.com.
Special Note Regarding Forward-Looking StatementsThis press release contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, including, without limitation, Dr. Leiden's statements in this press release, the information provided regarding future financial performance, including in the section captioned "Full Year 2019 Financial Guidance" and statements regarding (i) the timing and expected outcome of regulatory applications, including NDAs and MAAs, (ii) the timing of receipt of final Phase 3 24 week data from the triple combination program and (iii) the development plan and timelines for our product development candidates, including our next-generation triple combination regimens, VX-561, VX-121, CTX001, VX-150 and the company's AAT correctors. While Vertex believes the forward-looking statements contained in this press release are accurate, these forward-looking statements represent the company's beliefs only as of the date of this press release and there are a number of factors that could cause actual events or results to differ materially from those indicated by such forward-looking statements. Those risks and uncertainties include, among other things, that the company's expectations regarding its 2019 CF net product revenues, expenses and effective tax rates may be incorrect (including because one or more of the company's assumptions underlying its expectations may not be realized), that data from the company's development programs may not support registration or further development of its compounds due to safety, efficacy or other reasons, and other risks listed under Risk Factors in Vertex's annual report and quarterly reports filed with the Securities and Exchange Commission and available through the company's website at www.vrtx.com. Vertex disclaims any obligation to update the information contained in this press release as new information becomes available.
Conference Call and WebcastThe company will host a conference call and webcast today at 4:30 p.m. ET. To access the call, please dial (866) 501-1537 (U.S.) or +1 (720) 545-0001 (International). The conference call will be webcast live and a link to the webcast can be accessed through Vertex's website at www.vrtx.com in the "Investors" section under "Events and Presentations." To ensure a timely connection, it is recommended that users register at least 15 minutes prior to the scheduled webcast. An archived webcast will be available on the company's website.
(VRTX-E)
View source version on businesswire.com: https://www.businesswire.com/news/home/20190430006065/en/
Vertex Contacts:Investors:Michael Partridge, 617-341-6108orEric Rojas, 617-961-7205orZach Barber, 617-341-6470
Media:617-341-6992mediainfo@vrtx.com
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