-- Company on Track to Achieve Clinical, Research and Corporate Objectives --
CAMBRIDGE, Mass., April 25 /CNW/ -- Vertex
Pharmaceuticals Incorporated (Nasdaq: VRTX) today reported consolidated
financial results for the quarter ended March 31, 2006.
"Vertex is achieving key clinical objectives that have the potential to
build significant value for shareholders," said Joshua Boger, Ph.D., Chairman,
President and CEO of Vertex Pharmaceuticals. "We continue to be on track to
gain important clinical data in 2006 on key product candidates that we are
evaluating for the treatment of hepatitis C virus (HCV), rheumatoid arthritis
(RA) and cystic fibrosis (CF). With VX-950, we are expanding our global Phase
II program in HCV patients. We expect that this program will position us to
understand whether a sustained viral response (SVR) can be achieved with
shorter treatment duration than the current standard of care. Based on the
results from the Phase II VeRA study with VX-702, we expect to begin in the
second half of 2006 a major Phase II study of VX-702 on a background of
methotrexate in patients with RA. We also are on track to begin, in the
second quarter, the first Phase I clinical study of VX-770, our novel
potentiator compound for CF, with the goal of initiating our first study in
patients with CF in the second half of the year."
First Quarter Results
The non-GAAP loss, before charges for stock-based compensation,
restructuring, and a cumulative benefit of adopting FAS 123(R), for the
quarter ended March 31, 2006 was $42.2 million, or $0.39 per share, compared
to a non-GAAP loss, before charges, of $41.8 million, or $0.53 per share for
the quarter ended March 31, 2005. The Company's first quarter 2006 non-GAAP
loss reflected continued revenue growth, which offset increased development
investment as the Company continued to advance its proprietary drug
candidates.
For the quarter ended March 31, 2006, the Company's net loss on a GAAP
basis was $50.1 million, or $0.47 per share. This included stock-based
compensation expense of approximately $8.1 million, a cumulative benefit
related to the adoption of FAS 123(R) of $1.0 million, and restructuring
expense of approximately $0.8 million. The net loss on a GAAP basis for the
quarter ended March 31, 2005 was $44.7 million, or $0.56 per share. The 2005
GAAP net loss includes stock-based compensation expense of approximately $1.0
million, and restructuring expense of approximately $1.9 million.
Total revenues for the quarter ended March 31, 2006 increased to $39.1
million from $28.6 million for the first quarter of 2005, reflecting an
increase in revenue from collaborative research and development agreements,
including approximately $8.8 million of milestone revenue from Merck & Co. for
the initiation of Phase II development of VX-680.
Research and development expenses for the quarter ended March 31, 2006
were $75.2 million, including $6.4 million of stock-based compensation,
compared to $57.4 million, including $0.8 million of stock-based compensation,
for the first quarter of 2005. Our development investment increased to
prepare for and conduct later stage clinical trials of product candidates in
hepatitis C, rheumatoid arthritis and the first clinical trials with VX-770 in
CF, as well as an increase in the charge for stock-based compensation.
Sales, general and administrative (SG&A) expenses for the quarter ended
March 31, 2006 were $12.9 million, including $1.7 million of stock-based
compensation, compared to $9.6 million, including $0.2 million of stock-based
compensation, for the first quarter of 2005.
Other income, net, for the quarter ended March 31, 2006 was $1.6 million,
compared to other expense, net, of $2.3 million for the first quarter in 2005.
This improvement primarily resulted from the Company's reduction of
outstanding debt in 2005.
At March 31, 2006, Vertex had approximately $378.8 million in cash, cash
equivalents and available for sale securities, $42.1 million in principal
amount of convertible debt due September 2007 and $118.0 million in principal
amount of convertible debt due February 2011.
First Quarter Achievements and 2006 Objectives
Clinical Objectives
Continue to advance proprietary Vertex compounds:
VX-950
-- In January, Vertex announced preliminary results from a small Phase
Ib clinical study of VX-950 dosed in combination with pegylated
interferon. In this study, patients receiving a combination of VX-
950 dosed with peg-IFN achieved a median 5.5-log10 reduction in HCV
RNA at 14 days.
-- In February, Vertex announced preliminary results from a 12-patient,
28-day Phase II study of VX-950 in combination with pegylated
interferon and ribavirin. In this study, 12 of 12 patients had
plasma HCV RNA levels below the limits of detection of a highly
sensitive assay (10 IU/mL; Roche TaqMan(R)) at 28 days of dosing.
-- Vertex is on track to move forward with its global Phase II clinical
program for VX-950. Key objectives of the program will be to
evaluate the optimal SVR rate that can be achieved with VX-950
therapy in combination with the standard of care, to evaluate the
optimal treatment duration for VX-950, and to evaluate the role of
ribavirin in VX-950-based therapy. Beginning in the second quarter,
Vertex plans to conduct Phase II studies in the U.S. and Europe that
will dose more than 500 genotype 1 HCV patients with VX-950. In
these studies, Vertex expects to evaluate 12-week combination
regimens of VX-950 in treatment-naive patients, including regimens
involving various durations of pegylated interferon and ribavirin
follow-on therapy as well as regimens involving no additional
therapy. As part of this broad Phase II program, Vertex plans to
conduct a major study in HCV patients who have failed prior
interferon-based treatment.
-- Vertex researchers are presenting data on VX-950 at two major medical
conferences. Three abstracts have been accepted for presentation at
the 41st Annual Meeting of the European Association for the Study of
the Liver (EASL) being held this week. One abstract has been
accepted as a late-breaker presentation at the Digestive Disease Week
(DDW(R)) conference being held in May.
VX-702
-- In March, Vertex announced that VX-702 met its primary objectives in
the 12-week Phase II VeRA clinical study involving 315 patients. A
preliminary analysis indicated that VX-702 was well-tolerated through
12 weeks of dosing, and demonstrated statistically significant
effects on signs and symptoms of rheumatoid arthritis.
-- Vertex expects to initiate in the second half of 2006 a three or six-
month Phase II clinical study of VX-702 on a background of
methotrexate in patients with rheumatoid arthritis.
VX-770
-- Vertex is on track to begin clinical development of VX-770 in the
U.S. in the second quarter under an open investigational new drug
(IND) filing. In March, Vertex and Cystic Fibrosis Foundation
Therapeutics, Inc. (CFFT) announced that they entered into a new
collaboration to accelerate development of VX-770. As part of the
agreement, CFFT is scheduled to pay Vertex approximately $13.3
million in developmental support through 2007.
Continue to advance collaborator-led compounds:
VX-680
-- In April, Vertex and Merck & Co. announced the initiation of a Phase
II clinical development program for VX-680. Merck is now enrolling
patients with advanced colorectal cancer in a Phase II extension of a
previous Phase I clinical study. Vertex expects Merck to begin a
Phase II clinical study of VX-680 in patients with advanced lung
cancer in 2006. VX-680 is an investigational drug candidate
targeting Aurora kinase.
-- In April, Vertex researchers presented a poster at the 97th Annual
Meeting for the American Association for Cancer Research (AACR) in
Washington, DC, supporting the clinical investigation of VX-680 in
patients with treatment-resistant forms of chronic myelogenous
leukemia (CML). In addition, clinical researchers plan to present
the first clinical data for VX-680 in patients with solid tumors in
an oral presentation at the 2006 American Society of Clinical
Oncology (ASCO) Annual Meeting in June in Atlanta.
Brecanavir (VX-385)
-- Brecanavir is a novel HIV protease inhibitor currently being
evaluated in a Phase IIb study as part of a collaboration with
GlaxoSmithKline (GSK). Vertex expects data from the Phase IIb study
of brecanavir to become available this year, and also expects GSK to
initiate Phase III clinical development of brecanavir in 2006.
VX-409
-- VX-409 is a novel, subtype-selective ion channel modulator being
developed for the treatment of pain in collaboration with GSK.
Vertex expects GSK to conduct preclinical development of VX-409 in
preparation for Phase I development in early 2007.
Corporate Objectives
Maintain strong revenue and capital structure to support investment in
proprietary products
Sign new collaborations, focused on later-stage development assets
Continue to generate strong HIV product royalties, and achieve
milestones from existing collaborations
Full Year 2006 Financial Guidance
This section contains forward-looking guidance about the financial outlook
for Vertex Pharmaceuticals. Vertex today reiterated its financial guidance
for the full year of 2006. The Company expects a non-GAAP loss, excluding
restructuring charges and stock-based compensation expense, in the range of
$165 to $185 million. The Company expects that the full year 2006 GAAP loss
will be in the range of $205 to $225 million. The 2006 GAAP loss includes an
estimate of stock-based compensation expense of approximately $34 million, and
restructuring expense of approximately $6 million as a result of imputed
interest charges relating to the restructuring accrual.
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 first quarter 2006 loss, and guidance for a full year 2006 loss,
excluding certain charges and gains and stock-based compensation expense, 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 are important in comparing current results with
prior period results. 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.
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, with GlaxoSmithKline.
Lexiva is a registered trademark of the GlaxoSmithKline group of
companies.
This press release contains forward-looking statements, including
statements that Vertex (i) is on track to gain important clinical data in 2006
on proprietary product candidates being evaluated for the treatment of
hepatitis C virus (HCV), rheumatoid arthritis (RA), and cystic fibrosis (CF);
(ii) plans to expand its global Phase II program for VX-950, beginning in the
second quarter, as set forth above, and during the initial phase of the
program it expects to dose more than 500 treatment-naive, genotype 1 HCV
patients; (iii) as part of its expanded phase II program, expects to begin in
the second half of 2006 a major Phase II study of VX-950 in patients who have
failed prior therapies; (iv) expects to begin in the second half of 2006 a
major Phase II study of VX-702 on a background of methotrexate in patients
with rheumatoid arthritis; (v) is on track to begin a Phase I clinical study
in the second quarter of VX-770, a novel potentiator for CF, and will initiate
a first study in patients in the second half of the year; (vi) expects that
Merck will initiate a Phase II clinical study of VX-680 in patients with
advanced lung cancer in 2006; (vii) expects that data from the Phase IIb study
of brecanavir will become available this year, and that GSK will initiate
Phase III clinical development of brecanavir in 2006; (viii) expects that GSK
will conduct preclinical development of VX-409 in preparation for Phase I
development in early 2007; (ix) expects to sign new collaborations, focused on
later-stage development assets; (x) expects to achieve its financial guidance
for 2006 as 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 drug development programs,
including its proposed Phase II studies of VX-950 and VX-702, and its proposed
Phase I study of VX-770, or its development programs with collaborators, will
not proceed as planned for technical, scientific or commercial reasons, or due
to FDA disagreement study designs (including the proposed design of VX-950,
VX-702 and VX-770 studies), patient enrollment issues or judgments based on
new information from non-clinical or clinical studies or from other sources,
that one or more of the Company's assumptions underlying its revenue
expectations -- including clinical and scientific progress that could lead to
milestone payments under existing collaboration agreements or other payments
under new collaborations -- or its expense expectations -- including estimates
of the variables that go into determining stock-based compensation costs --
will not be realized, that Vertex will be unable to realize one or more of its
financial objectives for 2006 due to unexpected and costly program delays
(including delays due to regulatory action or lack of action) or any number of
other financial, technical or collaboration considerations, that unexpected
costs associated with one or more 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 and other areas, that due to scientific, medical or
technical developments, the Company's drug discovery efforts will not
ultimately result in commercial products or assets that can generate
collaboration revenue, 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, 2006. We disclaim any intention or obligation to
update or revise any forward-looking statements, whether as a result of new
information, future events, or otherwise, unless required by law.
Vertex Pharmaceuticals Incorporated
2006 First Quarter Results
Consolidated Statement of Operations Data
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended
March 31,
2006 2005
Revenues:
Royalties $9,179 $6,153
Collaborative and other R&D revenues 29,908 22,453
Total revenues $39,087 $28,606
Costs and expenses:
Royalty payments $2,995 $2,030
Research and development (includes stock-based
compensation expense under FAS 123(R):
2006-$6,406, 2005- $837) 75,202 57,435
Sales, general & administrative
(includes stock-based compensation expense
under FAS 123(R): 2006-$1,719, 2005- $194) 12,879 9,627
Restructuring expense 767 1,914
Total costs and expenses $91,843 $71,006
Loss from operations $(52,756) $(42,400)
Other income (expense), net 1,623 (2,320)
Loss from continuing operations before
cumulative effect of change in
accounting principle $(51,133) $(44,720)
Cumulative effect of a change in accounting
principle - FAS 123(R) $1,046 ----
Net loss $(50,087) $(44,720)
Basic and diluted loss per common share
before cumulative effect of change
in accounting principle $(0.48) $(0.56)
Cumulative effect of change in
accounting principle - basic and diluted $0.01 ----
Basic and diluted net loss per common share $(0.47) $(0.56)
Basic and diluted weighted average number of
common shares outstanding 107,440 79,428
Non-GAAP Loss Reconciliation (1)
Three Months Ended
March 31,
2006 2005
GAAP Net Loss $(50,087) $(44,720)
Pro Forma Adjustments:
Stock-based compensation expense
included in R&D (Note 2): $6,406 $837
Stock-based compensation expense
included in SG&A (Note 2): 1,719 194
Total stock-based compensation expense $8,125 $1,031
Restructuring expense (Note 4) $767 $1,914
Cumulative effect of change in
accounting principle - FAS 123(R) (Note 3) $(1,046) ----
Non-GAAP Loss $(42,241) $(41,775)
Basic and diluted Non-GAAP loss per share $(0.39) $(0.53)
Note 1: Financial results are provided both in accordance with generally
accepted accounting principles (GAAP) in the United States and
using certain non-GAAP financial measures. These results are
provided as a complement to the results in accordance with GAAP
because management believes these non-GAAP 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.
Note 2: For the three months ended March 31, 2006, the Company incurred
$8.1 million in stock compensation expense of which $6.4 million
is included in research and development expenses and $1.7 million
is included in sales, general and administrative expenses. Stock
compensation expense includes costs associated with restricted
stock, stock option awards and employee stock purchase shares,
which were recorded in connection with provisions of FAS 123(R),
"Accounting for Stock-Based Compensation". FAS 123(R) requires
companies to record stock-based payments in the financial
statements using a fair value method. The Company adopted FAS
123(R) on a modified prospective basis beginning January 1, 2006.
For the three months ended March 31, 2005 the Company recorded
$1.0 million of stock compensation expense relating to restricted
stock awards.
Note 3: FAS 123(R) requires companies to recognize expense only for shares
the Company expects to vest, this results in the Company
estimating forfeitures on grant date. For the three months ended
March 31, 2006 the Company recorded a $1.0 million benefit for
the cumulative effect of the change in recording forfeitures as
they occur to estimating forfeitures on grant date.
Note 4: For the three months ended March 31, 2006 and 2005, the Company
incurred restructuring expense charges. The charge for the three
months ending March 31, 2006 and 2005 was $0.8 million and $1.9
million, respectively, and is primarily the result of the imputed
interest charge related to the restructuring liability. This
expense and related liability has been estimated in accordance
with FASB 146 "Accounting for Costs Associated with Exit or
Disposal Activities" and is reviewed quarterly for changes in
circumstances.
Vertex Pharmaceuticals Incorporated
2006 First Quarter Results
Condensed Consolidated Balance Sheet Data
(In thousands)
(Unaudited)
March 31, December 31,
2006 2005
Assets
Cash, cash equivalents and available
for sale securities $378,773 $407,510
Other current assets 30,589 23,898
Property, plant and equipment, net 55,869 54,533
Restricted cash 41,482 41,482
Other noncurrent assets 17,945 21,575
Total assets $524,658 $548,998
Liabilities and Equity
Other current liabilities $45,479 $54,443
Accrued restructuring expense 41,719 42,982
Deferred revenue 24,451 32,300
Collaborator development loan (due 2008) 19,997 19,997
Convertible notes (due 2007) 42,102 42,102
Convertible notes (due 2011) 117,998 117,998
Stockholders' Equity 232,912 239,176
Total liabilities and equity $524,658 $548,998
Common shares outstanding 109,873 108,153
Conference Call and Webcast: First Quarter 2006 Financial Results:
Vertex Pharmaceuticals will host a conference call today, April 25, 2006
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). Alternatively,
Vertex is providing a podcast MP3 file available for download on the Vertex
website, http://www.vrtx.com.
The call will be available for replay via telephone commencing April 25,
2006 at 8:00 p.m. EDT running through 5:00 p.m. EDT on May 2, 2006. 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
7661044. Following the live webcast, an archived version will be available on
Vertex's website until 5:00 p.m. ET on May 9, 2006.
Vertex's press releases are available at http://www.vrtx.com.
Vertex Contacts:
Lynne H. Brum, Vice President, Strategic Communications, (617) 444-6614
Michael Partridge, Director, Corporate Communications, (617) 444-6108
Lora Pike, Manager, Investor Relations, (617) 444-6755
