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Vertex Pharmaceuticals Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: November 3, 2011 05:26PM

Vertex Pharmaceuticals Inc. (VRTX) filed Quarterly Report for the period ended 2011-09-30. Vertex Pharmaceuticals Inc. has a market cap of $7.68 billion; its shares were traded at around $36.9 with and P/S ratio of 53.6. Vertex Pharmaceuticals Inc. had an annual average earning growth of 13.3% over the past 10 years.



Highlight of Business Operations:

In the third quarter of 2011, we had net income attributable to Vertex of $221.1 million. Our increased revenues were the result $419.6 million of INCIVEK net product revenues and $200.0 million in milestone revenues from Janssen recognized in the third quarter 2011, for which there were no comparable revenues in third quarter of 2010. Our increased revenues were partially offset by increased operating costs and expenses in the third quarter of 2011 as compared to the third quarter of 2010. A significant portion of the increase in operating costs and expenses was due to a $105.8 million impairment charge that we incurred in the third quarter of 2011 related to VX-759, a back-up HCV polymerase inhibitor that we determined was impaired based on, among other factors, the advancement of our lead HCV polymerase inhibitor VX-222. The remaining $114.3 million increase in operating costs and expenses in the third quarter of 2011 as compared to the third quarter of 2010 was principally attributable to a $61.8 million increase in sales, general and administrative expenses and a $35.3 million increase in costs of product revenues. Our operating costs and expenses in the third quarter of 2011 and 2010 included $29.4 million and $23.8 million, respectively, of stock-based compensation expense.

In each of the three and nine months ended September 30, 2011 and 2010, we recognized $9.6 million and $28.7 million of deferred revenues from Mitsubishi Tanabe Pharma Corporation related to a one-time payment of $105.0 million that we received in 2009. We expect to continue recognizing $9.6 million of deferred revenues each quarter from the one-time payment of $105.0 million through the first quarter of 2012. In the second quarter of 2011, we began recognizing collaborative revenues pursuant to the April 2011 amendment to our collaboration agreement with the Cystic Fibrosis Therapeutics Incorporated.

Sales, general and administrative expenses increased substantially in the three and nine months ended September 30, 2011 as compared to the comparable periods in 2010, primarily as a result of substantial increases in expenses incurred by our commercial organization, which are classified as sales expenses. The sales expenses increased from $18.7 million in the third quarter of 2010 to $68.9 million in the third quarter of 2011, and from $43.5 million in the nine months ended September 30, 2010 to $172.3 million in the nine months ended September 30, 2011. These sales expenses include salary and benefits for our sales force and managed market organization, the majority of whom were hired in the second half of 2010, and market research and other third-party expenses incurred prior to and increasing through the commercial launch of INCIVEK in the United States. We expect that these sales

In the third quarter of 2011, we recorded a benefit from income taxes of $32.7 million related to the impairment of VX-759 and a provision of $4.9 million for income taxes payable by Alios on revenues from us. In the nine months ended September 30, 2011, we recorded a benefit from income taxes of $32.7 million related to the impairment of VX-759 and a provision of $29.3 million for income taxes payable by Alios on revenues from us.

Our cash, cash equivalents and marketable securities, excluding Alios' cash and cash equivalents, decreased by $372.7 million during the nine months ended September 30, 2011, primarily because of our significant net cash expenditures in the nine months ended September 30, 2011, including in the first half of 2011 prior to our receipt of significant cash receipts from sales of INCIVEK. These cash expenditures were related to, among other things, research and development expenses, sales, general and administrative expenses, the $60.0 million up-front payment we made to Alios and capital expenditures for property and equipment of $25.3 million. Our cash expenditures in the nine months ended September 30, 2011 were partially offset by $108.7 million in cash received from issuances of common stock from employee benefit plans, and the cash we have received from sales of INCIVEK.

Read the The complete Report



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