Vertex Pharmaceuticals Inc / Ma
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VERTEX PHARMACEUTICALS INC / MA FORM 10-K (Annual Report) Filed 02/15/18 for the Period Ending 12/31/17 Address 50 NORTHERN AVENUE BOSTON, MA, 02210 Telephone 6173416393 CIK 0000875320 Symbol VRTX SIC Code 2834 - Pharmaceutical Preparations Industry Biotechnology & Medical Research Sector Healthcare Fiscal Year 12/31 http://www.edgar-online.com © Copyright 2018, EDGAR Online, a division of Donnelley Financial Solutions. All Rights Reserved. Distribution and use of this document restricted under EDGAR Online, a division of Donnelley Financial Solutions, Terms of Use. UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ________________________________________________________ FORM 10-K x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 2017 or o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 000-19319 ____________________________________________ Vertex Pharmaceuticals Incorporated (Exact name of registrant as specified in its charter) Massachusetts 04-3039129 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 50 Northern Avenue, Boston, Massachusetts 02210 (Address of principal executive offices) (Zip Code) Registrant’s telephone number, including area code (617) 341-6100 ____________________________________________ Securities registered pursuant to Section 12(b) of the Exchange Act: Title of Each Class Name of Each Exchange on Which Registered Common Stock, $0.01 Par Value Per Share The NASDAQ Global Select Market Securities registered pursuant to Section 12(g) of the Exchange Act: None ______________________________________________ Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No o Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes o No x Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10 K. x Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act (Check one): Large accelerated filer x Accelerated filer o Non-accelerated filer o Smaller reporting company o Emerging growth company o (Do not check if a smaller reporting company) If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant (without admitting that any person whose shares are not included in such calculation is an affiliate) based on the last reported sale price of the common stock on June 30, 2017 (the last trading day of the registrant’s second fiscal quarter of 2017 ) was $31.8 billion . As of January 31, 2018 , the registrant had 253,891,984 shares of common stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of the definitive Proxy Statement for the 2018 Annual Meeting of Shareholders to be held on May 17, 2018 are incorporated by reference into Part III of this Annual Report on Form 10-K. VERTEX PHARMACEUTICALS INCORPORATED ANNUAL REPORT ON FORM 10-K TABLE OF CONTENTS PART I Item 1. Business 1 Directors and Executive Officers of the Registrant 19 Item 1A. Risk Factors 23 Item 1B. Unresolved Staff Comments 44 Item 2. Properties 44 Item 3. Legal Proceedings 44 Item 4. Mine Safety Disclosures 44 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 45 Item 6. Selected Financial Data 47 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 48 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 67 Item 8. Financial Statements and Supplementary Data 68 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 68 Item 9A. Controls and Procedures 68 Item 9B. Other Information 71 PART III Item 10. Directors, Executive Officers and Corporate Governance 72 Item 11. Executive Compensation 72 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 72 Item 13. Certain Relationships and Related Transactions, and Director Independence 72 Item 14. Principal Accountant Fees and Services 72 PART IV Item 15. Exhibits and Financial Statement Schedules 73 Signatures 77 “We,” “us,” “Vertex” and the “Company” as used in this Annual Report on Form 10-K refer to Vertex Pharmaceuticals Incorporated, a Massachusetts corporation, and its subsidiaries. “Vertex,” “KALYDECO ® , ” “ORKAMBI ® ” and “SYMDEKO TM ” are registered trademarks of Vertex. Other brands, names and trademarks contained in this Annual Report on Form 10-K are the property of their respective owners. PART I ITEM 1. BUSINESS OVERVIEW We invest in scientific innovation to create transformative medicines for serious diseases. Our business is focused on developing and commercializing therapies for the treatment of cystic fibrosis, or CF, and advancing our research and development programs in other diseases. Our marketed products are ORKAMBI (lumacaftor in combination with ivacaftor), KALYDECO (ivacaftor) and SYMDEKO (tezacaftor in combination with ivacaftor). Cystic Fibrosis Our goal is to develop treatment regimens that will provide benefits to all patients with CF and will enhance the benefits that currently are being provided to patients taking our medicines. Current Medicines ORKAMBI, KALYDECO and SYMDEKO are collectively approved to treat approximately 45% of the 75,000 CF patients in North America, Europe and Australia. ORKAMBI is approved as a treatment for approximately 28,000 patients who have two copies of the F508del mutation, who we refer to as F508del homozygous patients, in their cystic fibrosis transmembrane conductance regulator, or CFTR , gene. KALYDECO is approved for the treatment of approximately 6,000 CF patients who have the G551D mutation or other specified mutations in their CFTR gene. SYMDEKO was approved by the United States Food and Drug Administration, or FDA, in February 2018 for the treatment of patients with CF twelve years of age and older who are F508del homozygous or who have at least one mutation that is responsive to tezacaftor/ivacaftor, and provides an additional treatment option to CF patients who were already eligible for either ORKAMBI or KALYDECO. We are currently seeking approval from the European Medicines Agency, or EMA, for tezacaftor in combination with ivacaftor. Next-generation CFTR Corrector Triple Combination Regimens In the first quarter of 2018, we selected two next-generation corrector compounds, VX-659 and VX-445, to advance into Phase 3 clinical development as part of separate triple combination regimens. Each of VX-659 and VX-445 have the potential to be combined with both (i) tezacaftor and ivacaftor and (ii) tezacaftor and VX-561, a deuterated version of ivacaftor. We expect to initiate the Phase 3 development program for VX-659 in combination with tezacaftor and ivacaftor in the first half of 2018. In mid-2018, we expect to initiate the Phase 3 development of a once-daily combination of VX-445, tezacaftor and VX-561. Our decision to advance VX-659 and VX-445 was based on available clinical and nonclinical data, including data from an ongoing Phase 2 clinical program, and regulatory discussions are ongoing to finalize the design of the Phase 3 development programs for VX-659 and VX-445. We believe the triple combination regimens we are evaluating could potentially provide benefits to all CF patients who have at least one F508del mutation in their CFTR gene (approximately 90% of all CF patients). This would include (i) the first treatment option that treats the underlying cause of CF for patients who have one copy of the F508del mutation in their CFTR gene and a second mutation in their CFTR gene that results in minimal CFTR function, who we refer to as F508del/Min patients, and (ii) an additional treatment option for patients with CF who are eligible for ORKAMBI, KALYDECO and/or SYMDEKO. Research and Development Programs We have a number of ongoing research and development programs in other diseases that we are conducting independently or in collaboration with third parties. We are developing VX-150 and VX-128 as treatments for pain, co-developing CTX001, an investigational gene editing treatment, for the treatment of beta-thalassemia and sickle cell disease, with CRISPR Therapeutics AG, or CRISPR, and developing VX-210 as a treatment for acute spinal cord injury.