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Vertex Pharmaceuticals Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: May 10, 2012 04:49PM

Vertex Pharmaceuticals Inc. (VRTX) filed Quarterly Report for the period ended 2012-03-31. Vertex Pharm has a market cap of $7.89 billion; its shares were traded at around $60.19 with a P/E ratio of 41.2 and P/S ratio of 5.6.



Highlight of Business Operations:

We began generating earnings as a cashflow positive company in the second half of 2011 after experiencing significant losses in preceding periods. In the first quarter of 2012, we had net income attributable to us of $91.6 million and recognized net product revenues on sales of INCIVEK and KALYDECO of $356.9 million and $18.4 million, respectively. In addition, we recognized royalty revenues of $32.9 million on sales of INCIVO by Janssen in the first quarter of 2012. In order to maintain profitability and continue our strategic investment in research and development activities, we will need to continue to generate significant revenues in future periods.

In the first quarter of 2012, we had net income attributable to Vertex of $91.6 million. Our increased revenues in the first quarter of 2012 as compared to 2011 were the result of $375.4 million of net product revenues and $32.9 million of royalty revenues on sales of INCIVO by Janssen for which there were no comparable revenues in the first quarter of 2011. The $113.5 million increase in operating costs and expenses in the first quarter of 2012 as compared to the first quarter of 2011 was attributable to a $37.8 million increase in research and development expenses and a $39.6 million increase in sales, general and administrative expenses, as well as a $25.9 million increase in cost of product revenues for which there were no comparable costs in the first quarter of 2011 and a $10.6 million increase in royalty expenses primarily related to the launch of INCIVO by Janssen. Our operating costs and expenses in the first quarters of 2012 and 2011 included $27.7 million and $27.9 million, respectively, of stock-based compensation expense.

We began recognizing net product revenues from sales of INCIVEK in the second quarter of 2011 and net product revenues from sales of KALYDECO in the first quarter of 2012. Our net revenues from sales of INCIVEK decreased by 22% in the first quarter of 2012 compared to the fourth quarter of 2011. The lower INCIVEK net revenues in the first quarter of 2012 compared to the fourth quarter of 2011 were affected by lower sales volumes, a reduction of approximately $22 million in wholesaler inventory during the first quarter of 2012 and an increase on a percentage basis in the discounts provided to third parties on sales of INCIVEK in the first quarter of 2012 as compared to the fourth quarter of 2011. On April 1, 2012, we increased the wholesale acquisition price of INCIVEK in the United States by seven percent.

Our royalty revenues increased in the first quarter of 2012 as compared to the first quarter of 2011 due to $32.9 million of royalty revenues recognized in the first quarter of 2012 from sales of INCIVO by Janssen for which there were no comparable revenues in the first quarter of 2011. Mitsubishi Tanabe has a fully-paid license to market telaprevir in Japan.

In each of the three months ended March 31, 2012 and 2011, we recognized $9.6 million of deferred revenues from Mitsubishi Tanabe related to a one-time payment of $105.0 million that we received in 2009. The final $3.2 million of deferred revenues related to this one-time payment will be recognized in the second quarter of 2012.

Read the The complete Report



Stocks Discussed: VRTX,
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