- VX-950 Global Phase 2b Clinical Development Plan On Track -
- Collaboration with Janssen Pharmaceutica, a Johnson & Johnson Company,
Adds Important Strengths and Development Capabilities for VX-950 -
CAMBRIDGE, Mass., July 26 /CNW/ -- Vertex Pharmaceuticals
Incorporated (Nasdaq: VRTX) today reported consolidated financial results for
the quarter ended June 30, 2006.
"In the second quarter, Vertex made significant advances across its
business, particularly with VX-950, our investigational hepatitis C virus
protease inhibitor," said Joshua Boger, Ph.D., President and CEO of Vertex
Pharmaceuticals. "We reported additional data on the safety and antiviral
activity of VX-950 at two major medical conferences and initiated a global
Phase 2b clinical development program for VX-950."
"In June, we entered into a major collaboration with Janssen
Pharmaceutica, a Johnson & Johnson company, for the development and
commercialization of VX-950 in Europe and other regions. Through this
agreement, Janssen demonstrated their support for the clinical and commercial
potential of VX-950, and we have added important strengths and capabilities
that enhance the commercial potential of VX-950," continued Dr. Boger.
Second Quarter Results
The non-GAAP loss, before charges for stock-based compensation and
restructuring, for the quarter ended June 30, 2006 was $65.6 million, or $0.60
per share, compared to a non-GAAP loss, before charges, of $41.6 million, or
$0.51 per share for the quarter ended June 30, 2005. The increase in the
Company's second quarter 2006 non-GAAP loss resulted from increased
development investment as the Company continued to advance its proprietary
drug candidates.
For the quarter ended June 30, 2006, the Company's net loss on a GAAP
basis was $77.7 million, or $0.72 per share. This included stock-based
compensation expense of approximately $11.6 million and restructuring expense
of approximately $0.4 million. The net loss on a GAAP basis for the quarter
ended June 30, 2005 was $41.0 million, or $0.50 per share. The 2005 GAAP net
loss includes stock-based compensation expense of approximately $1.1 million,
and a credit to restructuring expense of approximately $1.7 million.
Total revenues for the quarter ended June 30, 2006 were $29.7 million
compared to $32.3 million for the second quarter of 2005. Revenues continue
to be comprised of HIV product royalties and R&D collaborations.
Research and development expenses for the quarter ended June 30, 2006 were
$91.3 million, including $9.8 million of stock-based compensation, compared to
$59.4 million, including $0.9 million of stock-based compensation, for the
second quarter of 2005. The increase primarily relates to development
investment to support the global Phase 2b development program for VX-950 for
HCV, and increased charges for stock-based compensation compared to the prior
year as a result of the adoption of FAS 123R on January 1, 2006.
Sales, general and administrative (SG&A) expenses for the quarter ended
June 30, 2006 were $14.4 million, including $1.9 million of stock-based
compensation, compared to $10.8 million, including $0.2 million of stock-based
compensation, for the second quarter of 2005.
Other income, net, for the quarter ended June 30, 2006 was $1.6 million,
compared to other expense, net, of $2.4 million for the second quarter in
2005. This increase resulted from the Company's reduction of outstanding debt
in 2005 and higher investment returns.
At June 30, 2006, Vertex had approximately $315.9 million in cash, cash
equivalents and available for sale securities. This amount does not include
the up-front payment of $165 million received from Janssen Pharmaceutica in
July. Vertex ended the second quarter with $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.
Second Quarter Achievements and 2006 Objectives
Continue to advance proprietary Vertex compounds:
VX-950 (telaprevir)
In June, Vertex and Janssen Pharmaceutica, a Johnson & Johnson
company, entered into an agreement to develop and commercialize
VX-950 in Europe, South America, the Middle East, Africa and
Australia. Under terms of the agreement, Vertex could receive as
much as $545 million in upfront license and milestone payments. Key
financial terms include:
Upfront and milestones: In July, Vertex received an upfront
payment of $165 million following the signing of the contract, and
could receive a further $380 million in additional milestone
payments, based on the successful development and approval of
VX-950, and launch in Janssen Pharmaceutica's territory.
Royalties: a tiered royalty averaging a mid-20 percent range of
net sales in Janssen's territory. In addition, Janssen will be
responsible for certain third party royalties in its territory.
Drug development costs: reimbursement of 50 percent of drug
development costs incurred by Vertex.
Commercial supply responsibilities: Vertex and Janssen will be
responsible for drug supply in their respective territories.
Under the agreement, Vertex retains exclusive commercial rights to
VX-950 in North America and will continue to lead the global
development plan for VX-950.
Vertex initiated a Phase 2b global development program for VX-950. The
260-patient PROVE 1 clinical trial was initiated in the U.S. in May.
Vertex expects to complete enrollment of 260 patients in the PROVE 1
clinical trial in the third quarter. The 320-patient PROVE 2 clinical
trial has been initiated in Europe. In the second half of the year,
Vertex expects to begin a 400-patient clinical trial of VX-950 in
treatment-experienced patients with HCV. By the end of the first
quarter of 2007, the Company expects to have enrolled approximately
1000 patients in VX-950 clinical trials.
During the second quarter, clinical investigators presented data at two
major medical meetings, EASL and DDW, that indicated that VX-950
produced dramatic antiviral results in clinical studies of 14 days and
28 days in combination with currently used treatments for hepatitis C
with no serious adverse events noted. Vertex expects that additional
VX-950 clinical data will be presented at medical meetings in the
second half of 2006.
Vertex announced today that Mitsubishi Pharma Corporation has begun the
first Phase 1 clinical trial of VX-950 in the Far East.
Vertex also announced today that the generic name for VX-950 is
telaprevir.
VX-702
To manage resources and focus on VX-950 development and
commercialization, Vertex is revising its development plans for VX-702.
Vertex now plans to start a large Phase 2 clinical trial of VX-702 on
a background of methotrexate in patients with rheumatoid arthritis (RA)
in 2007. Vertex continues to expect to file an investigational new
drug (IND) application for VX-702 with the U.S. FDA in the second half
of 2006. The first study under the IND will be the required QTc study.
Vertex successfully completed dosing of VX-702 and methotrexate in a
drug-drug interaction study in patients with RA in the second quarter.
VX-770
Vertex has completed dosing in the first two cohorts of healthy
volunteers in the single-dose Phase 1 clinical trial for VX-770, a
novel, oral drug candidate that specifically targets a key mechanism
underlying the progression of cystic fibrosis (CF). Vertex will
evaluate multiple doses of VX-770 in healthy volunteers and assess
single doses of VX-770 in patients with CF as part of this study in the
second half of 2006.
Continue to advance collaborator-led compounds:
VX-680
Vertex announced that its collaborator Merck has begun patient
enrollment in a Phase 2 clinical study of VX-680 (MK-0457), an
investigational drug candidate targeting Aurora kinase, in patients
with advanced lung cancer. Earlier this year, Merck also began a
Phase 2 clinical trial of VX-680 in patients with advanced colorectal
cancer. A Phase 2 clinical trial of VX-680 in patients with
hematologic cancers is ongoing.
brecanavir (VX-385)
Brecanavir is a novel HIV protease inhibitor currently being
evaluated in a Phase 2b study as part of a collaboration with
GlaxoSmithKline (GSK). We expect GSK to initiate Phase 3 development
of brecanavir in 2007.
Full Year 2006 Financial Guidance
This section contains forward-looking guidance about the financial outlook
for Vertex Pharmaceuticals. Vertex today updated certain aspects of its 2006
financial guidance, which was initially provided in its February 7, 2006 press
release and reiterated in its Form 10-Q filed with the Securities and Exchange
Commission (SEC) on May 10, 2006.
"As a result of significant progress made in the VX-950 development
program throughout the first half of 2006, we are expanding and increasing our
investment into VX-950 to support the global Phase 2b clinical development
program," stated Ian Smith, Executive Vice President and Chief Financial
Officer of Vertex. "Additionally, we signed a significant collaboration with
Janssen Pharmaceutica, which enhances Vertex's financial strength and adds
important capabilities and resources to the development of VX-950."
Vertex is revising upward its guidance for 2006 year end cash and cash
equivalents and available for sale securities from $300 million to $400
million, primarily as a result of the $165 million upfront payment that the
Company received as part of the VX-950 collaboration with Janssen.
Additionally, Vertex has expanded its VX-950 global Phase 2b program based
on continued positive data from early clinical trials, and the Company now
expects that its R&D expense for the full year 2006, inclusive of $31 million
of stock-based compensation expense, will increase by $25 million from a range
of $350 to $370 million to a range of $375 to $395 million.
With the increased R&D investment, the Company now expects that its
non-GAAP loss for the full 2006 year, excluding restructuring charges and
stock-based compensation expense, will increase from a range of $165 to $185
million to a range of $180 to $195 million. The Company now expects that the
full year 2006 GAAP loss will increase from $205 to $225 million to $222 to
$237 million. The 2006 GAAP loss includes an estimate of stock-based
compensation expense of approximately $38 million, and restructuring expense
of approximately $4 million as a result of imputed interest charges relating
to the restructuring accrual.
Vertex's guidance for 2006 total revenues and SG&A expense remains
unchanged.
Non-GAAP Financial Measures
In this press release, Vertex's financial results are provided both in
accordance with accounting principles generally accepted in the United States
(GAAP) and using certain non-GAAP financial measures. In particular, Vertex
provides its second quarter 2006 and 2005 loss, and guidance for a full year
2006 loss, in each case, excluding restructuring charges and stock-based
compensation expense, each of which is a non-GAAP financial measure. 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-discovered
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 expects (i) that the Janssen collaboration terms add
important strengths and capabilities that enhance the commercial potential of
VX-950; (ii) to receive a total of $545 million in payments from the
Janssen/Johnson & Johnson collaboration, including $380 million in milestone
payments based on successful development and approval of VX-950, and launch in
countries in the Janssen territory; (iii) that tiered royalties payable under
the Janssen collaboration for the successful launch and commercialization of
VX-950 could be in the mid-20 percent range; (iv) that the enrollment of 260
patients in the PROVE 1 study will be completed in the third quarter of 2006;
(v) to begin a 400-patient clinical trial of VX-950 in treatment-experienced
patients with HCV infection in the second half of 2006; (vi) to have enrolled
approximately 1000 patients in VX-950 clinical trials by the end of the first
quarter of 2007; (vii) to file an IND application for VX-702 with the FDA in
the second half of 2006; (viii) to conduct a required QTc clinical trial with
VX-702 and; (ix) to start a Phase 2 clinical trial in rheumatoid arthritis
with VX-702 on a background of methotrexate in 2007; (x) to evaluate multiple
doses of VX-770 in healthy volunteers and assess single doses of VX-770 in
patients with CF in the second half of the year; (xi) that GSK will initiate
Phase 3 development of brecanavir in 2007; and (xii) the Company's projected
and revised guidance for both GAAP and non-GAAP 2006 loss, revenue, R&D
expense, SG&A expense and cash position will be within the ranges stated above
in the Company's financial guidance, and the Company's estimates of its stock-
based compensation expenses will be as stated 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 or ongoing Phase 2 studies of
VX-950 and VX-702, and its ongoing Phase 1 study of VX-770, or its development
programs with collaborators, including the VX-950 collaboration with Janssen,
will not proceed as planned for technical, scientific or commercial reasons,
or due to FDA disagreement with study designs, patient enrollment issues or
judgments based on new information from non-clinical studies or clinical
trials 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 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 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,
2006 2005 2006 2005
Revenues:
Royalties $9,005 $7,467 $18,184 $13,620
Collaborative and other
R&D revenues 20,721 24,854 50,629 47,307
Total revenues $29,726 $32,321 $68,813 $60,927
Costs and expenses:
Royalty payments 2,885 2,489 5,880 4,519
Research and development 91,250 59,357 166,452 116,792
Sales, general &
administrative 14,370 10,814 27,249 20,441
Restructuring
expense/(credit) 443 (1,743) 1,210 171
Total costs and expenses 108,948 70,917 200,791 141,923
Loss from operations (79,222) (38,596) (131,978) (80,996)
Other income (expense), net 1,564 (2,392) 3,187 (4,712)
Loss from continuing
operations before cumulative
effect of a change in
accounting principle $(77,658) $(40,988) $(128,791) $(85,708)
Cumulative effect of a change
in accounting principle -
FAS 123R --- --- 1,046 ---
Net loss $(77,658) $(40,988) $(127,745) $(85,708)
Basic and diluted loss per
common share before
cumulative effect of a
change in accounting
principle $(0.72) $(0.50) $(1.19) $(1.06)
Cumulative effect of a change
in accounting principle -
basic and diluted --- --- $0.01 ---
Basic and diluted net loss per
share $(0.72) $(0.50) $(1.18) $(1.06)
Basic and diluted weighted
average number of common
shares outstanding 108,523 82,274 107,985 80,859
Non-GAAP Loss Reconciliation (Note 1)
Three Months Ended Six Months Ended
June 30, June 30,
2006 2005 2006 2005
GAAP Net Loss $(77,658) $(40,988) $(127,745) $(85,708)
Pro Forma
Adjustments:
Stock-based
compensation
expense
included in R&D
(Note 2): $9,755 $927 $16,161 $1,764
Stock-based
compensation
expense
included in SG&A
(Note 2): 1,892 202 3,611 396
Total stock-based
compensation
expense $11,647 $1,129 $19,772 $2,160
Restructuring
expense/(credit)
(Note 4) $443 $(1,743) $1,210 $171
Cumulative effect
of a change in
accounting
principle -
FAS 123R (Note 3) --- --- $(1,046) ---
Non-GAAP loss $(65,568) $(41,602) $(107,809) $(83,377)
Basic and diluted
non-GAAP loss
per share $(0.60) $(0.51) $(1.00) $(1.03)
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 and six months ended June 30, 2006, the Company
incurred $11.6 million and $19.8 million, respectively, in stock-based
compensation expense of which $9.8 million and $16.2 million, respectively, is
included in research and development expenses and $1.9 million and $3.6
million, respectively, is included in sales, general and administrative
expenses. Stock-based 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 123R, "Share Based
Payment." FAS 123R requires companies to record stock-based payments in the
financial statements using a fair value method. The Company adopted FAS 123R
on a modified prospective basis beginning January 1, 2006. For the three and
six months ended June 30, 2005, the Company recorded $1.1 million and $2.2
million, respectively, of stock-based compensation expense relating to
restricted stock awards.
Note 3: FAS 123R requires companies to recognize expense only for shares
the Company expects to vest, which results in the Company estimating
forfeitures on grant date. During the first half of 2006 the Company recorded
a $1.0 million benefit for the cumulative effect of the change in recording
forfeitures for restricted stock awards as they occur to estimating
forfeitures on the grant date.
Note 4: For the three and six months ended June 30, 2006, the Company
incurred restructuring expense charges of $0.4 million and $1.2 million,
respectively. These charges are primarily a result of the imputed interest
charge related to the restructuring liability.
For the three months ended June 30, 2005, the Company incurred a credit to
restructuring expense of $1.7 million. This credit is a result of reversing a
portion of the restructuring accrual related to the space that Vertex expects
to occupy, offset by estimated incremental net ongoing lease obligations for
the remainder of the space and imputed interest costs on the restructuring
accrual.
The expense and the related liability have been estimated in accordance
with FASB 146 "Accounting for Costs Associated with Exit or Disposal
Activities" and are reviewed quarterly for changes in circumstances.
Vertex Pharmaceuticals Incorporated
2006 Second Quarter Results
Condensed Consolidated Balance Sheets Data
(In thousands)
(Unaudited)
June 30, December 31,
2006 2005
Assets
Cash, cash equivalents and
available for sale securities $315,864 $407,510
Receivable from Janssen Pharmaceutica(1) 165,000 ---
Other current assets 25,248 23,898
Property and equipment, net 59,971 54,533
Restricted cash 41,482 41,482
Other noncurrent assets 17,913 21,575
Total assets $625,478 $548,998
Liabilities and Equity
Other current liabilities $57,942 $54,443
Accrued restructuring expense 36,278 42,982
Deferred revenue 176,170 32,300
Collaborator development loan (due 2008) 19,997 19,997
Convertible notes (due 2007) 42,102 42,102
Convertible notes (due 2011) 117,993 117,998
Stockholders' Equity 174,996 239,176
Total liabilities and equity $625,478 $548,998
Common shares outstanding 110,600 108,153
(1) The $165 million was
received from Janssen
Pharmaceutica in early July,
2006
Conference Call and Webcast: Second Quarter 2006 Financial Results:
Vertex Pharmaceuticals will host a conference call today, July 26, 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). Vertex is
also 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 July 26,
2006 at 8:00 p.m. EDT running through 5:00 p.m. EDT on August 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
2716674. Following the live webcast, an archived version will be available on
Vertex's website until 5:00 p.m. ET on August 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
