-- Clinical, Research and Financial Objectives Achieved --
CAMBRIDGE, Mass., Feb. 7 /PRNewswire-FirstCall/ -- Vertex Pharmaceuticals
Incorporated (Nasdaq: VRTX) today reported consolidated financial results for
the quarter and year ended December 31, 2005. The Company also provided its
full year 2006 financial guidance and outlook.
"Vertex achieved all of its clinical, research and financial objectives in
2005," said Joshua Boger, Ph.D., Chairman, President and CEO of Vertex
Pharmaceuticals. "In particular, we increased our financial strength as we
advanced potentially transformational compounds targeting hepatitis C virus
(HCV), rheumatoid arthritis and cystic fibrosis. Our performance last year
has positioned us to build momentum in 2006."
Full Year Results
For the year ended December 31, 2005, the Company's net loss on a GAAP
basis was $203.4 million, or $2.28 per share. This included $8.1 million of
restructuring expense as well as charges of approximately $48.2 million as a
result of the private exchange of convertible debt for common stock. The net
loss on a GAAP basis for the year ended December 31, 2004 was $166.2 million,
or $2.12 per share.
The non-GAAP loss, before charges, for the year ended December 31, 2005
was $147.1 million, or $1.65 per share, compared to a non-GAAP loss, before
charges, of $145.2 million, or $1.85 per share for the year ended December 31,
2004. The Company's 2005 non-GAAP loss before charges 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 year ended December 31, 2005 increased to $160.9
million from $102.7 million for 2004, reflecting an increase in revenue from
collaborative research and development agreements and an increase in HIV
product royalties. Research and development expenses for the year ended
December 31, 2005 were $248.5 million, compared to $192.2 million for 2004,
reflecting increased investment in the development of the Company's
proprietary drug candidates and investment in its research pipeline.
Sales, general and administrative expenses for the year ended December 31,
2005 were $44.0 million, compared to $42.1 million for 2004.
Other interest expense, net, for the year ended December 31, 2005 was $5.3
million, compared to $8.0 million for 2004. This decrease in expense is
attributed to the reduction of outstanding debt as a result of the convertible
note exchanges that took place in the third and fourth quarters of 2005 as
well as the Company earning higher returns on invested funds as compared with
the same periods in 2004.
At December 31, 2005, Vertex had approximately $407.5 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.
Outlook
"2006 can be a further transformational year for Vertex. As we look
toward the end of 2006, we expect that VX-950 will be on track for a 2008 new
drug application (NDA) submission, that our pipeline will continue to advance
and that our business model will enable us to capture the full value of all of
our assets," stated Dr. Boger. "Specifically, we expect to have generated
data with VX-950 that supports the start of Phase III development in 2007.
Also in 2006, we expect to obtain clinical results from a major study of VX-
702 in rheumatoid arthritis and begin clinical studies of a small molecule
drug for cystic fibrosis. We also expect to report progress on our drugs in
development with collaborators, including our HIV protease inhibitor
brecanavir, our Aurora kinase inhibitor VX-680 targeting cancer, and VX-409,
our novel, subtype selective sodium channel modulator for the treatment of
pain. All of these clinical advances have the potential to drive significant
value for shareholders."
2006 Clinical and Corporate Objectives
Clinical Objectives
* Continue to advance proprietary Vertex compounds:
-- VX-950: Today in a separate press release, Vertex announced
preliminary results from a 12-patient, 28-day Phase II study of VX-
950 in combination with pegylated interferon and ribavirin. In the
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. In the study, there were no treatment
discontinuations and no serious adverse events reported. A detailed
safety analysis is ongoing.
-- In addition, Vertex announced today that it has completed three-month
non-clinical toxicology studies with VX-950 that will support
clinical studies of VX-950 of up to three months duration. The data
from the toxicology studies and the Phase II clinical study will be
submitted to the FDA for review. Subject to FDA agreement, Vertex
plans to initiate in the second quarter a three-month, Phase II
study of VX-950 in more than 200 HCV patients. This study will
include a comparison to the current standard of care in HCV
treatment. Vertex is conducting a broad Phase II development
program designed to establish the safety and antiviral activity of
VX-950 in patients with HCV. The Company plans to initiate
additional clinical studies of VX-950 throughout 2006, including a
Phase II study in patients who have failed prior therapy.
-- VX-702: Vertex announced today that all dosing in the 315-patient
Phase II rheumatoid arthritis (RA) clinical study of VX-702 has been
completed with approximately 275 patients completing three months of
dosing within all dosing arms of the study. Vertex expects to
report top-line data from the study early in the second quarter. In
the second half of 2006, Vertex plans to initiate a three-month,
Phase II study of VX-702 in RA, in combination with methotrexate.
In addition, the Company announced that its collaborator Kissei
Pharmaceuticals initiated Phase I clinical trials in Japan with VX-
702 in the fourth quarter of 2005.
-- Cystic Fibrosis (CF): The Company announced today that in the first
quarter of 2006 it expects to file an investigational new drug (IND)
application with the U.S. Food and Drug Administration (FDA) and
initiate clinical development of VX-770, a novel oral compound for
the treatment of CF in the second quarter. VX-770 is a small
molecule compound that is designed to potentiate the gating activity
of the Cystic Fibrosis Transmembrane Regulator (CFTR), a chloride
channel on the cell surface that is functionally defective in
patients with CF.
* Continue to advance collaborator-driven compounds:
-- Brecanavir (VX-385): Vertex expects GlaxoSmithKline (GSK) to
initiate Phase III clinical development of the HIV protease
inhibitor brecanavir in 2006. Vertex also expects GSK to report
data from a Phase IIb study of brecanavir at a medical conference
this year.
-- VX-680: Vertex expects Merck to present Phase I clinical data for
the Aurora kinase inhibitor VX-680 at one or more scientific
conferences in 2006 and also to initiate Phase II clinical
development.
-- VX-409: Vertex expects GSK to conduct preclinical development in
preparation for Phase I development in early 2007.
Corporate and Financial 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.
"Last year, we took several steps to improve the financial profile of the
Company, and we now enter 2006 with a stronger financial position and the
operating leverage that supports investment into later-stage clinical
programs," stated Ian Smith, Executive Vice President and Chief Financial
Officer of Vertex. "Specifically, our financial strength enables us to invest
comprehensively in VX-950 and develop this product candidate to its full
clinical and commercial potential. We are committed to maintaining the
trajectory toward a 2008 NDA filing for VX-950."
* Loss: Vertex anticipates a non-GAAP loss for 2006, excluding
restructuring charges and stock-based compensation expense, in the range
of $165 to $185 million. Vertex 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. The Company anticipates a non-GAAP loss,
excluding restructuring charges and stock-based compensation expense,
for the first quarter of 2006 in the range of $48 to $53 million.
Vertex anticipates a first quarter GAAP loss in the range of $58 to $63
million.
* Revenues: Vertex expects that full year 2006 total revenue will be in
the range of $210 to $235 million. This includes:
-- HIV product royalties of approximately $40 million.
-- Approximately $110 million of revenues from collaborative R&D funding
and milestones from existing collaborations.
-- The remainder of the revenue guidance is comprised of anticipated
revenues from new collaborations, which Vertex anticipates will be
focused on later-stage development and other assets.
* Research and Development (R&D) Expense: The Company expects that R&D
expense will be in the range of $350 to $370 million for 2006, inclusive
of approximately $28 million of stock-based compensation expense. The
forecasted increase, exclusive of stock-based compensation expense, as
compared to 2005 is driven by increased clinical development investment
as Vertex advances its core programs, most notably VX-950. Vertex
believes that VX-950 requires comprehensive investment to realize the
full medical and commercial value of the compound. The Company expects
to continue to evaluate and prioritize investment in its clinical
programs based on the emergence of new clinical and non-clinical data in
each program.
* Sales, General and Administrative (SG&A) Expense: Vertex expects SG&A
expense to be in the range of $55 to $60 million in 2006, inclusive of
approximately $6 million of stock-based compensation expense.
* Cash, Cash Equivalents and Available for Sale Securities: Vertex
expects cash, cash equivalents and available for sale securities to be
in excess of $300 million at the end of 2006. In 2006, Vertex expects
to continue to seek to manage its convertible debt obligations.
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 fourth quarter and full year 2005 loss, and guidance for a full
year 2006 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, 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 that (i) its performance last year has
positioned the Company to build momentum in 2006; (ii) by the end of 2006, VX-
950 will be on track for a 2008 new drug application (NDA) submission, that
its pipeline will continue to advance, that its business model will enable the
Company to capture the full value of all of its assets and that 2006 can be a
further transformational year for the Company; (iii) it will have generated
data that supports the start of Phase III development of VX-950 in 2007; (iv)
it will obtain clinical results from a major study of VX-702 in rheumatoid
arthritis and begin development of a small molecule drug for cystic fibrosis;
(v) it will report progress on its drugs in development with collaborators,
including brecanavir, an HIV protease inhibitor, VX-680, an Aurora kinase
inhibitor targeting cancer, and VX-409, a novel, subtype selective sodium
channel modulator for the treatment of pain; (vi) the three month non-clinical
toxicology results for VX-950 support three-month dosing in patients; (vii)
the Company plans to initiate in the second quarter a three-month, Phase II
study of VX-950 in more than 200 HCV patients; (viii) it will initiate
additional clinical studies of VX-950 throughout 2006, including a Phase II
study in patients who have failed prior therapy; (ix) it will report top-line
data from a 315-patient, Phase II study of VX-702 in rheumatoid arthritis
early in the second quarter of 2006 and initiate a three-month Phase II study
of VX-702 in combination with methotrexate in the second half of 2006; (x) it
will file an IND in the first quarter of 2006 covering initial studies of VX-
770 in CF, and will initiate clinical development of VX-770 in the second
quarter of 2006; (xi) GSK will initiate Phase III development of brecanavir in
2006, (xii) Merck will initiate Phase II clinical development of VX-680 in
2006 and will present Phase I data at scientific conferences during that
period; (xiii) GSK will conduct preclinical development of VX-409 in
preparation for Phase I clinical trials in early 2007; (xiv) the Company's
projected 2006 annual loss, revenue, R&D expense, SG&A expense and cash
position, and its quarterly loss for the first quarter of 2006, 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;
and (xv) the Company's financial strength will enable it to invest
comprehensively in VX-950 during 2006, and develop this product candidate to
its full clinical and commercial potential. 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, including its proposed Phase II, three-month study
of VX-950, will not proceed as planned for technical, scientific or commercial
reasons, or due to FDA disagreement with study design, 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
equity-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, 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, 2005. 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
2005 Fourth Quarter and Twelve Month Results
Consolidated Statement of Operations Data
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
2005 2004 2005 2004
Revenues:
Royalties $9,743 $6,326 $32,829 $17,322
Collaborative and
other R&D revenues 54,013 33,509 128,061 85,395
Total revenues $63,756 $39,835 $160,890 $102,717
Costs and expenses:
Royalty payments 2,783 2,009 10,098 5,649
Research and
development 68,158 54,247 248,540 192,162
Sales, general &
administrative 12,811 11,657 43,990 42,139
Total costs and
expenses 83,752 67,913 302,628 239,950
Other interest expense
(income), net (152) 2,333 5,332 7,994
Loss excluding charges
for exchanges of 2007
and 2011 convertible
notes, retirement of
2007 convertible notes,
and restructuring $(19,844) $(30,411) $(147,070) $(145,227)
Basic and diluted loss
per common share
excluding charges for
exchanges of 2007 and
2011 convertible notes,
retirement of 2007
convertible notes, and
restructuring $(0.20) $(0.38) $(1.65) $(1.85)
Charge for exchange of
2011 convertible notes
(Note 1) (11,889) --- (11,889) ---
Charge for exchange of
2007 convertible notes
(Note 1) --- --- (36,324) ---
Charge for retirement of
2007 convertible notes
(Note 2) --- --- --- (3,446)
Restructuring expense
(Note 3) (6,398) (12,358) (8,134) (17,574)
Net loss $(38,131) $(42,769) $(203,417) $(166,247)
Basic and diluted net
loss per common share $(0.38) $(0.54) $(2.28) $(2.12)
Basic and diluted
weighted average
number of common
shares outstanding 100,535 79,073 89,241 78,571
Note 1: In the fourth quarter 2005, holders of the Company's 5.75%
Convertible Subordinated Notes due 2011 exchanged $114.5 million in aggregate
principal amount of notes, plus interest, for approximately 8.1 million shares
of common stock. As a result of the exchange, a non-cash charge of
approximately $11.9 million was incurred. This charge is related to the
incremental shares issued in the transaction over the number that would have
been issued upon conversion of the notes under their original terms.
In the third quarter of 2005, holders of the Company's 5% Convertible
Subordinated Notes due 2007 exchanged $40.5 million in aggregate principal
amount of notes, plus interest, for approximately 2.5 million shares of common
stock. As a result of the exchange, a non-cash charge of approximately $36.3
million was incurred. This charge is related to the incremental shares issued
in the transaction over the number that would have been issued upon conversion
of the notes under their original terms.
Note 2: During 2004, the Company exchanged approximately $232.4 million
in aggregate principal amount of 5% Convertible Subordinated Notes due 2007
for approximately $232.4 million in aggregate principal amount of newly issued
5.75% Convertible Senior Subordinated Notes due 2011. The total exchange of
$232.4 million was a result of two separate transactions, a February 2004
issuance of approximately $153.1 million notes, and a September 2004 issuance
of $79.3 million.
For the twelve months ended December 31, 2004, the total charges related
to the write-off of the remaining unamortized issuance costs for the February
and September exchanges was approximately $3.4 million.
Note 3: For the three and twelve months ended December 31, 2005 and 2004,
the Company incurred restructuring charges. The charge for the three months
ended December 31, 2005 was $6.4 million, which includes estimated incremental
net ongoing lease obligations as well as an imputed interest cost relating to
the restructuring accrual. For the twelve months ended December 31, 2005, the
Company recorded $8.1 million of net restructuring expense which includes a
credit for reversing a portion of the restructuring accrual related to the
space that Vertex expects to occupy in the future. For the three and twelve
months ended December 31, 2004, the Company recorded restructuring expense of
$12.4 million and $17.6 million, respectively. This expense 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
2005 Fourth Quarter Results
Condensed Consolidated Balance Sheet Data
(In thousands)
(Unaudited)
December 31, December 31,
2005 2004
Assets
Cash, cash equivalents and
available for sale securities $407,510 $392,320
Other current assets 23,898 14,392
Property, plant and equipment, net 54,533 64,225
Restricted cash 41,482 49,847
Other noncurrent assets 21,575 24,669
Total assets $548,998 $545,453
Liabilities and Equity
Other current liabilities $54,443 $50,161
Accrued restructuring expense 42,982 55,843
Deferred revenue 32,300 66,086
Collaborator development loan (due 2008) 19,997 19,997
Other long term obligations ---- 2,925
Convertible notes (due 2007) 42,102 82,552
Convertible notes (due 2011) 117,998 232,448
Other Stockholders' equity 1,228,760 821,608
Accumulated Deficit (989,584) (786,167)
Total liabilities and equity $548,998 $545,453
Common stock outstanding 108,153 80,765
Conference Call and Webcast: Fourth Quarter and Full Year 2005 Financial
Results:
Vertex Pharmaceuticals will host a conference call today, February 7, 2006
at 4:30 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 February 7,
2006 at 7:30 p.m. EST running through 5:00 p.m. EST on February 14, 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
4445790. Following the live webcast, an archived version will be available on
Vertex's website until 5:00 p.m. ET on February 21, 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
SOURCE Vertex Pharmaceuticals Inc.
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Related links:
http://www.vrtx.com
Company News On-Call:
http://www.prnewswire.com/comp/938395.html
CONTACT:
Lynne H. Brum, Vice President, Strategic
Communications, +1-617-444-6614, or Michael Partridge, Director,
Corporate Communications, +1-617-444-6108, or Lora Pike, Manager,
Investor Relations, +1-617-444-6755, all of Vertex
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