10-QPeriod: Q1 FY2015

VERTEX PHARMACEUTICALS INC / MA Quarterly Report for Q1 Ended Mar 31, 2015

Filed May 4, 2015For Securities:VRTX

Summary

Vertex Pharmaceuticals Inc. reported a net loss of $198.6 million for the first quarter of 2015, an improvement from the $232.5 million net loss in the same period last year. This reduction in loss was driven by a 17% increase in total revenues, primarily due to a 26% surge in product revenues, largely from KALYDECO (ivacaftor). While R&D expenses decreased year-over-year, Sales, General & Administrative (SG&A) expenses saw an increase, reflecting preparations for the potential launch of ORKAMBI (lumacaftor in combination with ivacaftor). The company's cash position remains strong, with $1.18 billion in cash, cash equivalents, and marketable securities as of March 31, 2015. The key focus for investors remains the anticipated approval and commercialization of ORKAMBI, with a PDUFA date of July 5, 2015, for the U.S. market. The company expects ORKAMBI to be a significant driver of future revenue growth. Management believes existing liquidity is sufficient for the next twelve months, but future capital needs will depend on the success of KALYDECO, ORKAMBI, and other pipeline developments.

Financial Highlights

49 data points
Beta

Revenue

$138.51M

93.2% Gross Margin

Net Income

-$198.61M

-143.4% Net Margin

EPS (Diluted)

$-0.83

Total Assets

$2.17B

Cash & Equivalents

$664.88M

Free Cash Flow

-$232.79M

Financial Statements
Beta
Revenue$138.51M
Cost of Revenue$9.38M
Gross Profit$129.13M
R&D Expenses$215.60M
SG&A Expenses$85.86M
Operating Expenses$310.49M
Operating Income-$171.99M
Net Income-$198.61M
EPS (Basic)$-0.83
EPS (Diluted)$-0.83
Shares Outstanding (Basic)239.49M
Shares Outstanding (Diluted)239.49M

Key Highlights

  • 1Total revenues increased by 17% to $138.5 million in Q1 2015 compared to Q1 2014.
  • 2Product revenues, driven by KALYDECO, grew by 26% to $130.9 million in Q1 2015.
  • 3Net loss attributable to Vertex narrowed to $198.6 million from $232.5 million year-over-year.
  • 4Research and Development (R&D) expenses decreased by 10% to $215.6 million, while Sales, General & Administrative (SG&A) expenses increased by 16% to $85.9 million.
  • 5The company expects a U.S. regulatory decision for ORKAMBI (lumacaftor/ivacaftor) by July 5, 2015, with potential U.S. launch in mid-2015.
  • 6Cash, cash equivalents, and marketable securities stood at $1.18 billion as of March 31, 2015.
  • 7The company's significant ongoing investment in R&D continues, with a focus on cystic fibrosis and other specialty markets.

Frequently Asked Questions

The primary driver of revenue growth is KALYDECO (ivacaftor), which saw a 31% increase in net product revenues year-over-year, reaching $130.2 million. This growth is attributed to expanded patient access through label expansions and successful reimbursement discussions in international markets.

Vertex has submitted New Drug Applications (NDAs) in the U.S. and Marketing Authorization Applications (MAAs) in Europe for ORKAMBI. The U.S. FDA has a target decision date of July 5, 2015, with a potential U.S. launch in mid-2015. ORKAMBI is expected to be a significant contributor to future revenue, targeting patients with the F508del mutation in cystic fibrosis.

R&D expenses decreased by 10% to $215.6 million. This decrease was primarily due to reduced outsourced services, such as clinical trial expenses following the completion of the TRAFFIC and TRANSPORT trials, and lower infrastructure costs. However, the company plans for development expenses to increase later in 2015 due to new clinical trial initiations.

Vertex maintains a strong liquidity position with $1.18 billion in cash, cash equivalents, and marketable securities as of March 31, 2015. While the company continues to incur net losses, management believes its current resources are sufficient to fund operations for at least the next twelve months.