Quarter Highlighted by Progress in the Company's Clinical Programs
CAMBRIDGE, Mass., July 27 /CNW/ -- Vertex Pharmaceuticals
Incorporated (Nasdaq: VRTX) today reported consolidated financial results for
the three months ended June 30, 2005.
"Vertex's progress in the second quarter of 2005 was characterized by
significant clinical achievements and enhanced financial strength," said
Joshua Boger, Ph.D., Chairman, President and CEO of Vertex Pharmaceuticals.
"The clinical progress with our hepatitis C virus (HCV) protease inhibitor,
VX-950, as well as other compounds across our pipeline, together with the
completion of a $175.7 million stock offering, position Vertex to advance its
business and further create value."
For the quarter ended June 30, 2005, the Company's net loss on a GAAP
basis was $41.0 million, or $0.50 per share, compared to a net loss of $44.3
million, or $0.56 per share for the quarter ended June 30, 2004.
Excluding restructuring credits, the loss for the quarter ended June 30,
2005 was $42.7 million or $0.52 per share, compared to a loss of $42.4
million, or $0.54 per share, excluding restructuring charges, for the quarter
ended June 30, 2004. The Company's 2005 second quarter loss was comparable to
the prior year, but was characterized by continued revenue growth, which
offset increased development investment as the Company continues to advance
its proprietary drug candidates.
Total revenues for the quarter ended June 30, 2005 increased to $32.3
million from $18.5 million for the same period in 2004, primarily due to the
contribution of R&D revenue from collaborative agreements signed in 2004 and
early 2005, and an increase in HIV product royalties. Research and
development expenses for the quarter ended June 30, 2005 were $59.4 million,
compared to $47.5 million for the second quarter of 2004.
Sales, general and administrative expenses for the quarter ended June 30,
2005 were $10.8 million, compared to $10.2 million for the quarter ended June
30, 2004.
Other interest expense, net, for the quarter ended June 30, 2005 was $2.4
million, compared to other interest expense, net, of $2.0 million for the
second quarter of 2004.
At June 30, 2005, Vertex had approximately $446.6 million in cash, cash
equivalents and available for sale securities, $82.6 million in principal
amount of convertible debt due September 2007 and $232.4 million in principal
amount of convertible debt due February 2011. The Company raised $175.7
million in gross proceeds in a common stock offering in the second quarter of
2005.
Second Quarter 2005 Highlights
Vertex presented preliminary results of a Phase Ib clinical trial with
its oral HCV protease inhibitor, VX-950, at the Digestive Disease Week
conference in Chicago, Illinois. In the study, patients treated with
750 mg of VX-950 every eight hours achieved a median reduction of HCV-
RNA of 4.4 log10, equivalent to a 25,000-fold reduction in viral levels,
at the end of 14 days of treatment. At the end of 14 days of treatment,
4 of 8 patients in the 750 mg dose group tested HCV-RNA negative in the
quantitative Roche COBAS TaqMan(R) assay (<30 IU/mL).
Vertex completed enrollment in the Phase IIb METRO study of merimepodib
(MMPD) in HCV patients who did not respond to previous combination
therapy.
Vertex initiated dosing in a 300-patient Phase II clinical study in
rheumatoid arthritis (RA) with VX-702, an investigational oral p38 MAP
kinase inhibitor.
Vertex's collaborator Merck began a Phase I clinical study with VX-680,
a small molecule inhibitor of Aurora kinases, in patients with
hematologic cancers. Merck now has three clinical studies in cancer
underway with VX-680.
In a common stock offering completed in the second quarter, Vertex sold
13,512,500 shares of common stock at the price of $13.00 per share,
resulting in gross proceeds, before commissions and expenses, of $175.7
million.
Outlook
"In the second half of 2005, we anticipate making clinical advances across
our pipeline and signing new collaborations to support our R&D investment,"
stated Dr. Boger. "We are committed to building on our leadership position in
the development of novel, oral HCV therapies. With our HCV protease
inhibitor, VX-950, we plan to complete all of the preparatory work necessary
to support the initiation of Phase II clinical development in the fourth
quarter. We also expect to meet with regulatory authorities to define the
path forward for MMPD by the end of the year."
Dr. Boger continued, "We are also now conducting clinical studies that we
believe will further establish the clinical and commercial potential for VX-
702, our p38 MAP kinase inhibitor for the treatment of rheumatoid arthritis,
and VX-765, our ICE inhibitor for the treatment of psoriasis. These drug
candidates demonstrate Vertex's leadership in the development of novel oral
anti-cytokine therapies and represent exciting new potential treatment
options."
"We also are looking forward to continued progress with our product
candidates directed at HIV infection and cancer," stated Dr. Boger. "We
announced last week that the investigational HIV protease inhibitor, VX-385,
being developed with GlaxoSmithKline, has been designated as a fast-track
compound by the U.S. FDA. Additionally, Merck is conducting a broad Phase I
development program for our Aurora kinase inhibitor, VX-680, with three
clinical trials in cancer patients now underway."
Dr. Boger continued, "Furthermore, we expect our ongoing drug discovery
and new small molecule drug candidates to provide additional business and
financial strength in the second half of 2005."
2005 Product Candidate Objectives
Vertex's objectives for its current product candidates for the remainder
of 2005 are:
HCV
Initiate a Phase Ib combination study with VX-950 and pegylated
interferon
Initiate dialogue with the FDA on the Phase II clinical program for VX-
950 and file an Investigational New Drug (IND) application to support
Phase II development in the U.S.
Complete a 28-day clinical virology study of oral compounds MMPD and
ribavirin in HCV patients
Determine the registration path for MMPD
Inflammation
Complete enrollment in a three-month, 300 patient Phase II study of VX-
702 in rheumatoid arthritis
Complete a four-week, Phase IIa safety and pharmacokinetic study of VX-
765 in psoriasis
Cancer
Support broad Phase I clinical development program in cancer with VX-
680, being conducted by Merck
Support preclinical program for the novel Flt-3/c-kit inhibitor VX-322,
being conducted by Novartis
HIV
Present Phase IIa antiviral data for VX-385 at a medical conference
Support Phase IIb clinical trial for VX-385, to be conducted by
GlaxoSmithKline
Drug Discovery
Advance two or more new drug candidates from drug discovery into
preclinical development
Corporate
Establish a new collaboration or collaborations that would support
Vertex's discovery organization and help to advance development and
commercialization of proprietary compounds
Full Year 2005 Financial Guidance
This section contains forward-looking guidance about the financial outlook
for Vertex Pharmaceuticals.
"Following the positive results from the Phase Ib clinical study of VX-950
in May 2005, we have accelerated our investment in manufacturing and
formulation development and expanded our clinical development program for this
compound. This resulted in a revision of our R&D expense and loss estimates
for the year," said Ian Smith, Senior Vice President and Chief Financial
Officer of Vertex. "We believe this increased investment in 2005 will reduce
operational risk in later stages of development and commercialization of VX-
950."
Vertex today updated certain aspects of its 2005 financial guidance, which
was previously provided in its February 9, 2005 press release and in its Form
10-Q filed with the Securities and Exchange Commission (SEC) on May 9, 2005.
As a result of accelerated investment in the development of Vertex's oral HCV
protease inhibitor, VX-950, the Company now expects that its R&D expense for
full year 2005 will increase from $225-$240 million to $235-$245 million.
With this increased investment, Vertex now anticipates that its 2005 loss,
before charges and gains, will increase from $125-$135 million to $140-$150
million. Based on royalty growth for the Company's HIV products, achievement
of milestones in existing collaborative research and development programs, and
the potential to sign new collaborations, the Company continues to anticipate
that full year 2005 revenues will be in the range of $150-$160 million. The
Company continues to expect that SG&A expense will be in the range of $42-$46
million. Vertex anticipates having more than $380 million in cash, cash
equivalents and marketable securities at year-end. Vertex anticipates a loss,
before charges and gains, for the third quarter of 2005 in the range of $45
million to $48 million.
Non-GAAP Financial Measures
In this press release, Vertex's financial results are provided both in
accordance with generally accepted accounting principles (GAAP) in the United
States and using certain non-GAAP financial measures. In particular, Vertex
provides its second quarter 2005 net loss, and guidance for a third quarter
and full year 2005 net loss, excluding charges and gains, all of which are
non-GAAP financial measures. 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, and uses these non-GAAP financial measures to establish budgets and
operational goals that are communicated internally and externally, to manage
the Company's business and to evaluate its performance.
About Vertex
Vertex Pharmaceuticals Incorporated is a global biotechnology company
committed to the discovery and development of breakthrough small molecule
drugs for serious diseases. The Company's strategy is to commercialize its
products both independently and in collaboration with major pharmaceutical
companies. Vertex's product pipeline is principally focused on viral
diseases, inflammation, autoimmune diseases and cancer. Vertex co-promotes
the HIV protease inhibitor, Lexiva(R), with GlaxoSmithKline.
Lexiva(R) is a registered trademark of the GlaxoSmithKline group of
companies.
This press release contains forward-looking statements, including
statements that Vertex expects (i) that clinical development progress with VX-
950 and completion of a common stock offering have positioned Vertex to
advance its business and create value; (ii) to make significant clinical
advances across its pipeline in the second half of 2005; (iii) to complete in
the second half of the year the preparatory work necessary to support Phase II
clinical development of VX-950 and to sign new collaborations to support its
research and development investment; (iv) to meet with regulatory authorities
in the coming months to help Vertex to define the path forward for
merimepodib; (v) that clinical studies now underway will further establish the
clinical and commercial potential for VX-702 and VX-765; (vi) to see continued
progress with products directed at HIV and cancer; (vii) that the Company's
objectives, stated above, for its current product candidates will be achieved
during the second half of 2005; and (viii) that the Company's projected third
quarter loss and 2005 annual loss, revenue, R&D expense, SG&A expense and cash
position will be within the ranges set forth above. While management makes its
best efforts to be accurate in making forward-looking statements, those
statements are subject to risks and uncertainties that could cause Vertex's
actual results to vary materially. Those risks and uncertainties include,
among other things, the risk that any one or more of Vertex's internal and
external drug development programs will not proceed as planned for technical,
scientific or commercial reasons or due to patient enrollment issues or based
on new information from nonclinical or clinical studies or from other sources,
that Vertex will be unable to realize one or more of its financial objectives
for 2005 as set forth above, due to any number of financial, technical or
collaboration considerations, that unexpected costs associated with one of the
Company's programs will necessitate a reduction in its investment in other
programs or a change in the Company's financial projections, that future
competitive or other market factors may adversely impact the commercial
potential for the Company's product candidates in HCV and inflammation, that
the Company's drug discovery efforts will not ultimately result in commercial
products due to scientific, medical or technical developments, that Vertex
will be unable to enter into new collaborative relationships to support its
research and development programs on acceptable terms, or at all, that the key
estimates and assumptions underlying the Company's forward-looking statements
will turn out to be incorrect or not reflective of changing scientific
knowledge or business conditions in the future, and other risks listed under
Risk Factors in Vertex's Annual Report on Form 10-K filed with the Securities
and Exchange Commission on March 16, 2005.
Vertex Pharmaceuticals Incorporated
2005 Second Quarter and Six Month Results
Consolidated Statements of Operations Data
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2005 2004 2005 2004
Revenues:
Royalties $7,467 $4,011 $13,620 $6,593
Collaborative and
other R&D revenues 24,854 14,530 47,307 29,461
Total revenues $32,321 $18,541 $60,927 $36,054
Costs and expenses:
Royalty payments 2,489 1,328 4,519 2,174
Research and development 59,357 47,450 116,792 89,125
Sales, general &
administrative 10,814 10,160 20,441 19,882
Total costs and expenses 72,660 58,938 141,752 111,181
Other interest expense,
net 2,392 2,035 4,712 3,472
Loss excluding charge
for retirement of 2007
convertible notes and
restructuring $(42,731) $(42,432) $(85,537) $(78,599)
Basic and diluted
loss per common share
excluding charge for
retirement of 2007
convertible notes
and restructuring $(0.52) $(0.54) $(1.06) $(1.00)
Charge for retirement
of 2007 convertible
notes (Note 1) - - - (2,453)
Restructuring (expense)
/credit (Note 2) 1,743 (1,837) (171) (3,655)
Net loss $(40,988) $(44,269) $(85,708) $(84,707)
Basic and diluted net
loss per share $(0.50) $(0.56) $(1.06) $(1.08)
Basic weighted average
number of common
shares outstanding 82,274 78,807 80,859 78,356
Note 1: In February 2004, the Company exchanged approximately $153.1
million in aggregate principal amount of 5% Convertible Subordinated Notes due
2007 for approximately $153.1 million in aggregate principal amount of newly
issued 5.75% Convertible Senior Subordinated Notes due 2011. This transaction
resulted in a charge of approximately $2.5 million relating to the write-off
of the remaining unamortized issuance charges for the $153.1 million of 2007
5% convertible notes, which were retired.
Note 2: For the three months ended June 30, 2005, the Company incurred a
credit to restructuring expense of $1.7 million. Based on recent developments
in our clinical pipeline, the Company has updated an assessment of its real
estate requirements and related plans, resulting in an expectation that the
Company will occupy a portion of the Kendall Square facility. The Company has
commitments, subject to final approvals, to enter into sublease arrangements
for a significant portion of the remainder of the building.
The $1.7 million net credit is a result of reversing a portion of the
restructuring accrual related to the space that Vertex expects to occupy in
the future, offset by estimated incremental net ongoing lease obligations for
the remainder of the space and imputed interest costs on the restructuring
accrual.
The restructuring expense incurred in the periods prior to the three-month
period ended June 30, 2005 relates to the estimated incremental net ongoing
lease obligations associated with the Kendall Square facility as well as the
imputed interest costs relating to the restructuring accrual.
The expense associated with the portion of the building that the Company
still does not intend to occupy will continue to be estimated in accordance
with FASB 146 "Accounting for Costs Associated with Exit or Disposal
Activities" and reviewed quarterly for changes in circumstances.
Vertex Pharmaceuticals Incorporated
2005 Second Quarter Results
Condensed Consolidated Balance Sheets Data
(In thousands)
(Unaudited)
June 30, December 31,
2005 2004
Assets
Cash, cash equivalents
and available for
sale securities $446,606 $392,320
Other current assets 18,704 14,392
Property, plant and equipment, net 58,496 64,225
Restricted cash 49,007 49,847
Other noncurrent assets 24,090 24,669
Total assets $596,903 $545,453
Liabilities and Equity
Other current liabilities $49,690 $50,161
Accrued restructuring expense 43,813 55,843
Deferred revenue 45,445 66,086
Collaborator development loan (due 2008) 19,997 19,997
Other long term obligations ------- 2,925
Convertible notes (due 2007) 82,552 82,552
Convertible notes (due 2011) 232,448 232,448
Other Stockholders' Equity 994,833 821,608
Accumulated Deficit (871,875) (786,167)
Total liabilities and equity $596,903 $545,453
Conference Call and Webcast: Second Quarter 2005 Financial Results:
Vertex Pharmaceuticals will host a conference call today, July 27, 2005 at
5:00 p.m. EDT to review financial results and recent developments. This call
will be broadcast via the Internet at http://www.vrtx.com in the investor
center. Alternatively, to listen to the call on the telephone, dial (800)
374-0296 (U.S. and Canada) or (706) 634-2224 (International).
The call will be available for replay via telephone commencing July 27,
2005 at 8:00 p.m. EDT running through 5:00 p.m. EDT on August 3, 2005. The
replay phone number for the U.S. and Canada is (800) 642-1687. The
international replay number is (706) 645-9291 and the conference ID number is
7845101. Following the live webcast, an archived version will be available on
Vertex's website until 5:00 p.m. EDT on August 10, 2005.
Vertex's press releases are available at http://www.vrtx.com.
Vertex Contacts:
Lynne H. Brum, Vice President, Corporate Communications and Financial
Planning, (617) 444-6614
Michael Partridge, Director, Corporate Communications, (617) 444-6108
Lora Pike, Manager, Investor Relations, (617) 444-6755
/Company News On-Call: http://www.prnewswire.com/comp/938395.html/
/Web site: http://www.vrtx.com/
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