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Vertex Pharmaceuticals Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: August 8, 2012 04:35PM

Vertex Pharmaceuticals Inc. (VRTX) filed Quarterly Report for the period ended 2012-06-30. Vertex Pharmaceuticals Incorporated has a market cap of $10.41 billion; its shares were traded at around $50.67 with a P/E ratio of 24 and P/S ratio of 7.4.



Highlight of Business Operations:

As of June 30, 2012, we had cash, cash equivalents and marketable securities, excluding Alios' cash and cash equivalents, of $1.2 billion. In the first and second quarters of 2012, we had net product revenues of $375.4 million and $373.3 million, respectively. Our net product revenues from INCIVEK and KALYDECO were $327.7 million and $45.5 million, respectively, in the second quarter of 2012. The slight decrease in total net product revenues in the second quarter of 2012 as compared to the first quarter of 2012 was the result of a decrease in INCIVEK net product revenues offset by an increase in KALYDECO net product revenues. We expect these trends to continue with KALYDECO revenues increasing as a result of its recent approval in the European Union and INCIVEK revenues decreasing in future periods. Although our net product revenues in the second quarter of 2012 were similar to our net product revenues in the first quarter of 2012, we incurred a net loss attributable to us in the second quarter of 2012 of $(64.9) million as compared to net income attributable to us in the first quarter of 2012 of $91.6 million because we incurred two significant charges in the second quarter of 2012. These charges were $78.0 million related to excess and obsolete INCIVEK inventories, and $56.2 million related to an increase in the fair market value of our liabilities pursuant to our Alios collaboration due to positive clinical data we received from a Phase 1 clinical trial evaluating ALS-2200.

In the second quarter of 2012, we had a net loss attributable to Vertex of $(64.9) million as compared to a net loss attributable to Vertex of $(174.1) million in the second quarter of 2011. Our total revenues increased significantly in the second quarter of 2012 compared to the second quarter of 2011 due to a $298.7 million increase in our net product revenues and a $23.5 million increase in our royalty revenues, partially offset by an $18.3 million decrease in our collaborative revenues. Our operating costs and expenses increased from $280.3 million, including $31.9 million of stock-based compensation expense, in the second quarter of 2011 to $429.1 million, including $31.4 million of stock-based compensation expense, in the second quarter of 2012. The increase in operating expenses was primarily due to a $99.1 million increase in cost of product revenues, a $22.9 million increase in research and development expenses and a $20.9 million increase in sales, general and administrative expenses. The cost of product revenues increased in the second quarter of 2012 as compared to the same period in 2011 because of the increase in net product revenues of $298.7 million and because we recorded a $78.0 million charge in the second quarter of 2012 for excess and obsolete INCIVEK inventories. In addition, the $56.2 million increase in the fair value of the contingent milestone payments and royalties payable by us to Alios increased the net loss attributable to Vertex in the second quarter of 2012 dollar-for-dollar. The fair value of these contingent milestone and royalty payments increased because the positive data from a Phase 1 clinical trial of ALS-2200 made it more likely that these payments will become due from us to Alios.

In the six months ended June 30, 2012, we had net income attributable to Vertex of $26.7 million as compared to a net loss attributable to Vertex of $(350.2) million in the six months ended June 30, 2011. Our total revenues increased significantly in the first half of 2012 compared to the first half of 2011 due to a $674.1 million increase in our net product revenues and a $56.4 million increase in our royalty revenues, partially offset by a $61.5 million decrease in our collaborative revenues. Our operating costs and expenses increased from $513.9 million, including $59.8 million of stock-based compensation expense, in the first half of 2011 to $776.2 million, including $59.1 million of stock-based compensation expense, in the first half of 2012. The increase in operating expenses was primarily due to a $125.1 million increase in cost of product revenues, which included the $78.0 million charge in the second quarter of 2012 for excess and obsolete INCIVEK inventories, as well as a $60.7 million increase in research and development expenses and a $60.5 million increase in sales, general and administrative expenses. In addition, a $55.2 million increase in the fair value of the contingent

The increases in our royalty revenues in the second quarter and first half of 2012 as compared to the comparable periods in 2011 were due to royalty revenues recognized from sales of INCIVO by Janssen. INCIVO was approved in the European Union in September 2011, and we recognized $28.0 million and $60.9 million, respectively, of royalty revenues from Janssen in the second quarter and first half of 2012. Royalty revenues from Janssen decreased by $4.9 million from $32.9 million in the first quarter of 2012 to $28.0 million in the second quarter of 2012. Mitsubishi Tanabe's license to market telaprevir in Japan is fully paid.

We recognized royalty revenues related to sales by GlaxoSmithKline plc of Lexiva/Telzir, an HIV protease inhibitor that was discovered and developed pursuant to our collaboration with GlaxoSmithKline, of $5.5 million and $7.5 million, respectively, in the second quarter of 2012 and 2011, and $11.6 million and $13.5 million, respectively, in the first half of 2012 and 2011. We sold our rights to these HIV royalties in 2008 for a one-time cash payment of $160.0 million.

Read the The complete Report



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