10-QPeriod: Q1 FY2008

VERTEX PHARMACEUTICALS INC / MA Quarterly Report for Q1 Ended Mar 31, 2008

Filed May 12, 2008For Securities:VRTX

Summary

Vertex Pharmaceuticals Inc. (VRTX) reported its first quarter 2008 financial results, highlighting a net loss of $96.2 million, or $0.72 per share, a slight increase from the $80.7 million net loss in the same period last year. This widening loss was primarily driven by a significant decrease in collaborative and research and development revenues, partially offset by lower overall costs and expenses. The company's cash position strengthened considerably, ending the quarter at $749.6 million, boosted by a substantial $390.1 million net proceeds from a February 2008 equity offering and $287.5 million from convertible senior subordinated notes. Vertex continues to heavily invest in its lead drug candidate, telaprevir, for Hepatitis C, initiating a Phase 3 clinical trial. While progress is being made, the company acknowledges significant future capital needs to fund telaprevir's development and commercialization, as well as other pipeline candidates. Management expects to incur substantial operating losses for the foreseeable future.

Key Highlights

  • 1Net loss for Q1 2008 was $96.2 million ($0.72/share), compared to $80.7 million ($0.64/share) in Q1 2007.
  • 2Total revenues decreased to $41.7 million in Q1 2008 from $68.8 million in Q1 2007, mainly due to a $28.2 million drop in collaborative and R&D revenues.
  • 3Research and development expenses decreased by $18.0 million to $114.6 million, largely driven by a reduction in commercial supply investment for telaprevir.
  • 4Cash, cash equivalents, and marketable securities significantly increased to $749.6 million as of March 31, 2008, up from $467.8 million at December 31, 2007, due to successful equity and debt offerings.
  • 5The company raised approximately $390.1 million in net proceeds from a February 2008 equity offering and $287.5 million in aggregate principal amount from 4.75% convertible senior subordinated notes due 2013.
  • 6Vertex initiated a Phase 3 clinical trial for telaprevir in March 2008 for Hepatitis C.
  • 7Despite a strong cash position, the company anticipates substantial future operating losses and the need for significant additional capital to fund telaprevir's development and commercialization.

Frequently Asked Questions

Vertex's primary focus is on the discovery, development, and commercialization of small molecule drugs, with a significant emphasis on telaprevir, an investigational oral protease inhibitor for Hepatitis C (HCV). In March 2008, the company initiated the ADVANCE Phase 3 clinical trial for telaprevir, targeting treatment-naïve patients with genotype 1 HCV. Data presented from earlier trials (PROVE 1 and PROVE 2) showed promising Sustained Viral Response (SVR) rates, although gastrointestinal issues and rash were more frequent in telaprevir arms.

Vertex reported an increased net loss of $96.2 million ($0.72/share) for the first quarter of 2008, compared to $80.7 million ($0.64/share) in the first quarter of 2007. This was mainly due to a significant decrease in collaborative and R&D revenues, which fell by $28.2 million. While total costs and expenses also decreased by $17.0 million, the revenue decline led to the wider net loss. However, the company's cash position improved dramatically due to recent financing activities.

In February 2008, Vertex completed concurrent offerings of common stock and convertible senior subordinated notes. These offerings provided net proceeds of approximately $390.1 million from the equity sale and $287.5 million from the notes. This significantly boosted the company's cash reserves to $749.6 million at the end of the quarter, providing a stronger liquidity position. Management expects this cash, along with expected collaborator payments, to be sufficient for at least the next twelve months.

Vertex acknowledges significant risks associated with drug development, particularly the high failure rate and lengthy timelines. The company expects to incur substantial operating losses for the foreseeable future and anticipates needing significant additional capital to fund the completion of telaprevir's development and commercialization, as well as the advancement of its other drug candidates. Failure to secure adequate financing on acceptable terms could force Vertex to curtail or discontinue its research and development programs.