Incivek sales drive Vertex 3rd quarter profit...

$420 million in net product revenues for Incivek in the third quarter helped Vertex record a record net income or $221 million sending shares up almost 2% today, this despite a recent rumored stall in the sales trajectory for Incivek. The company also gives an update to it's HIV/HCV co-infection trial (an exceptionally under-served part of the population), potential BID dosing, a 12 week study of TVR + P/R in patients with the 'CC' variation near the IL28B gene and it's quad therapy trial looking at it's VX-222 polymerase inhibitor + P/R

CAMBRIDGE, Mass., Oct 27, 2011 (BUSINESS WIRE) -- ---Continued strength in launch of INCIVEK for hepatitis C; submissions of KALYDECO(TM) (VX-770, ivacaftor) approval applications complete-

Vertex Pharmaceuticals Incorporated /quotes/zigman/79675/quotes/nls/vrtx VRTX +1.81% today reported consolidated financial results for the quarter ended September 30, 2011 and provided an update on the launch of INCIVEK(TM)(telaprevir) tablets and its development programs evaluating potential new medicines.

The company reported total revenues of approximately $659 million, including approximately $420 million in net product revenues for INCIVEK in the third quarter. Vertex recorded net income of approximately $221 million, or $1.02 per diluted share, on a GAAP basis and approximately $151 million, or $0.70 per diluted share, on a non-GAAP basis for the quarter. Vertex ended the quarter with a cash position of approximately $659 million.

Vertex also today provided an update on ongoing and planned clinical trials for its broad pipeline of potential new treatments for hepatitis C, cystic fibrosis, rheumatoid arthritis, epilepsy and influenza. In addition to INCIVEK, Vertex has seven other potential medicines in clinical development.

"Our continued progress with the launch of INCIVEK together with our global approval applications for KALYDECO highlight Vertex's strengths in moving innovative science from the lab to people with serious diseases," said Matthew Emmens, Chairman, President and Chief Executive Officer of Vertex. "As we enter 2012, we expect to have more than a dozen ongoing clinical trials across our broad and diverse pipeline, which we believe may lead to additional new medicines to support our future growth."

"More than 17,000 people with hepatitis C have started treatment with INCIVEK since its approval in May, underscoring the strength of the launch," said Nancy Wysenski, RN, Executive Vice President and Chief Commercial Officer. "We are focused on further broadening the number of doctors using INCIVEK and are continuing to work with the hepatitis C community to increase awareness and screening and to help ensure patients are able to get the support they need."

Recent Progress and Upcoming Milestones

Hepatitis C

INCIVEK Now Available in Multiple Countries

-- In the third quarter, Vertex announced the availability of INCIVEK for people in Canada who have chronic genotype 1 hepatitis C. INCIVEK is the first medicine marketed in Canada by Vertex.

-- Vertex's collaborator, Janssen, announced in September that the European Commission approved telaprevir in Europe, where it is being marketed by Janssen as INCIVO(R). INCIVO is now available in the U.K., Germany, France and Sweden. Also in the third quarter, Vertex's collaborator Mitsubishi Tanabe Pharma announced the approval of telaprevir in Japan, where it will be marketed by Mitsubishi as TELAVIC(R).

Phase 3b Study of INCIVEK Dosed Twice Daily

-- Vertex is currently conducting a Phase 3b clinical trial to evaluate twice-daily dosing of INCIVEK (1,125 mg; BID) compared to three-times-daily dosing of INCIVEK (750 mg; q8h) in combination with Pegasys(R) (pegylated-interferon alfa-2a) and Copegus(R) (ribavirin) for people with chronic genotype 1 hepatitis C. Sustained viral response (SVR, or viral cure) data from OPTIMIZE are expected as early as the second half of 2012, which could support the submission of a supplemental New Drug Application (NDA) for twice-daily dosing of INCIVEK by the end of 2012.

Phase 3b CONCISE Study Underway Evaluating 12-week Regimens of INCIVEK Combination Treatment

-- Earlier this week, Vertex announced the start of a Phase 3b trial to evaluate the potential for treatment with INCIVEK(TM) combination therapy to be shortened to 12 weeks in people with genotype 1 chronic hepatitis C who have the 'CC' variation near the IL28B gene. Approximately one-third of people with hepatitis C have the 'CC' genotype, which has been associated with higher sustained viral response (SVR, or viral cure) rates and faster response to interferon-based treatment. The trial is expected to include approximately 350 people with genotype 1 chronic hepatitis C who have not previously been treated and people who have relapsed after at least one prior course of treatment with pegylated-interferon and ribavirin alone.

Enrollment Complete in All-Oral Arms of Phase 2 ZENITH Study of INCIVEK and VX-222

-- Vertex completed enrollment in the third quarter in the two, all-oral three-drug treatment arms of the ongoing Phase 2 ZENITH clinical trial evaluating response-guided regimens of Vertex's lead investigational hepatitis C virus polymerase inhibitor, VX-222, dosed in combination with INCIVEK and ribavirin. The all-oral, three-drug treatment arms are evaluating a twice-daily, interferon-free regimen of INCIVEK (1,125 mg), VX-222 (400 mg) and ribavirin in people with genotype 1a or 1b chronic hepatitis C. Vertex expects to obtain end-of-treatment data from the all-oral arms of the study in early 2012.

-- Two four-drug (quad) arms of the study are also fully enrolled and are evaluating response-guided four-drug combinations of VX-222 (400 mg or 100 mg; BID), INCIVEK (1,125 mg; BID), pegylated-interferon and ribavirin.

-- Earlier this year Vertex announced interim data from ZENITH and expects to provide additional data from the four-drug arms at the upcoming Liver Meeting in November.

Multiple INCIVEK and VX-222 Presentations at the Liver Meeting in November

-- At the 2011 Liver Meeting, being held in San Francisco, November 4-8, Vertex expects to present clinical data from multiple studies of INCIVEK and VX-222. New data, including sustained viral response (SVR, or viral cure) results from the ZENITH study, will be presented for the first time. Additionally, new data from a Phase 2 study evaluating INCIVEK combination treatment in people co-infected with genotype 1 chronic hepatitis C virus (HCV) and human immunodeficiency virus (HIV), will be presented at the meeting.

Phase 3b HCV-HIV Co-infection Trial to Begin This Year

-- Based on data from a Phase 2 trial of INCIVEK combination treatment in people co-infected with HCV and HIV, Vertex plans to initiate a Phase 3b trial of INCIVEK in people co-infected with HCV and HIV by the end of 2011. The trial is expected to enroll approximately 150 people and will be designed to provide safety and efficacy data to support registration of INCIVEK for the treatment of HCV-HIV co-infection as early as 2013. All patients in this trial will receive INCIVEK combination treatment. Vertex's collaborator Tibotec also plans to conduct a similar trial in Europe, which will provide additional safety and efficacy data in people co-infected with HCV and HIV. Tibotec expects to begin enrollment in this study in early 2012.

First Phase 2b Study of INCIVEK in People with Hepatitis C Following a Liver Transplant

-- By the end of 2011, Vertex expects to initiate the first Phase 2b clinical study of INCIVEK combination treatment in people who have recurrent hepatitis C following a liver transplant. The 2-part trial will evaluate approximately 80 people.

Phase 1 Trials to Begin for ALS-2200 and ALS-2158

-- Vertex and Alios plan to advance ALS-2200 and ALS-2158 into clinical development beginning later this year. The first Phase 1 study is expected to begin by year-end for ALS-2200, followed by a study of ALS-2158 in early 2012. The studies will evaluate healthy volunteers followed by people with hepatitis C. The goal of these studies is to generate safety, pharmacokinetic and viral kinetic data to support the potential evaluation of either or both compounds in all-oral treatment regimens for hepatitis C.

Additional information on INCIVEK, including important safety information, appears at the end of this release.

Cystic Fibrosis (CF)

U.S. and E.U. Applications for Approval of KALYDECO (VX-770, ivacaftor) Complete

-- Last week, Vertex submitted an NDA to the U.S. Food and Drug Administration (FDA) and a Marketing Authorization Application (MAA) to the European Medicines Agency (EMA) for KALYDECO, Vertex's cystic fibrosis transmembrane conductance regulator protein (CFTR) potentiator. Vertex requested Priority Review from the FDA and has received agreement from the EMA for accelerated assessment of KALYDECO in Europe.

Phase 2 Combination Trial of KALYDECO and VX-809 Enrolling Patients in Part 2

-- Vertex today announced the start of the second part of a Phase 2 clinical trial to evaluate combination regimens of KALYDECO and VX-809, a CFTR corrector, in people with the most common mutation in CF, known as F508del. Part Two of this trial will evaluate dosing of VX-809 alone for four weeks followed by dosing of KALYDECO and VX-809 in combination for four weeks. The study is expected to evaluate multiple dose levels of VX-809, including doses higher than those studied in the first part of the trial. The study is expected to enroll approximately 100 people with CF who have one copy or two copies of the F508del mutation. Similar to Part One, the primary goals of the second part of the trial are to evaluate safety and tolerability and the effect of the combination of KALYDECO and VX-809 on CFTR function as measured by sweat chloride. Lung function will be measured as a secondary endpoint. Patient screening for this study is underway.

KALYDECO and VX-809 Presentations at the North American Cystic Fibrosis Conference

-- Nine abstracts were accepted for presentation at the 2011 North American Cystic Fibrosis Conference (NACFC), being held in Anaheim, CA, November 3-5. Complete 48-week data from the Phase 3 ENVISION study of KALYDECO in children ages 6 to 11 years will be presented for the first time, as will data from a subset of patients in the open-label PERSIST extension study who had completed 48 weeks of treatment (placebo or KALYDECO) in one of the KALYDECO Phase 3 trials (STRIVE or ENVISION). Data from the first 12 weeks of the rollover study in patients who completed the STRIVE study and entered PERSIST will be presented at the meeting. In addition, complete data from the first part of the Phase 2 study combining KALYDECO and VX-809 will be presented for the first time.

Additional Studies of KALYDECO Planned for 2012

-- Pediatric Study: Vertex remains on track to initiate a Phase 2 study of KALYDECO dosed as monotherapy in children ages 2 through 5 in 2012. This will be the first study to evaluate a pediatric formulation of KALYDECO in children with the G551D mutation as young as two years of age.

-- Other CFTR Mutations: Also in 2012, Vertex plans to begin evaluation of KALYDECO monotherapy in people with certain other gating mutations (not G551D) and in mutations that result in some residual function of the defective CFTR protein on the cell surface. Vertex is in discussions with global regulatory agencies regarding the design of these studies and intends to provide additional information upon the initiation of the first study in these additional mutations.

First Study of VX-661 Planned for First Quarter of 2012

-- In addition to the ongoing Phase 2 study of KALYDECO and VX-809, Vertex also plans to begin Phase 2 development of VX-661, another CFTR corrector, in the first quarter of 2012. VX-661 is expected to be evaluated as monotherapy followed by dosing of VX-661 in combination with KALYDECO in people with two copies of the F508del mutation.

Rheumatoid Arthritis

350-patient Phase 2b Study of VX-509 To Begin by Early 2012 for Rheumatoid Arthritis

-- In September, Vertex announced data from a Phase 2 proof-of-concept clinical trial of the oral JAK3 inhibitor VX-509 in people with moderate to severe rheumatoid arthritis (RA). Based on these data, Vertex plans to begin a six-month Phase 2b study of VX-509 in RA by early 2012. This study will evaluate once-daily (QD) and twice-daily (BID) doses of VX-509 in combination with methotrexate, a commonly prescribed disease-modifying antirheumatic drug (DMARD) for RA that is frequently used in combination with other RA medicines. The study is expected to enroll approximately 350 people with moderate to severe RA.

Epilepsy

400-patient Phase 2b Study of VX-765 To Begin by Year-end for Epilepsy

-- Earlier this year, Vertex announced results from a Phase 2 study of VX-765 in people with treatment-resistant epilepsy. Based on these results, Vertex plans to initiate an additional Phase 2 study to evaluate longer dosing of VX-765 in approximately 400 people with treatment-resistant epilepsy. The trial is expected to begin by the end of this year.

Influenza:

Phase 1 Development Underway for VX-787

-- In September, Vertex began clinical development of VX-787 in a Phase 1 study in healthy volunteers. VX-787 is an investigational medicine that is designed to treat influenza A, including recent H1 (pandemic) and H5 (avian) influenza strains. VX-787 is the first of a new class of molecules that aims to treat influenza in a way that is distinct from neuraminidase inhibitors, the current standard of care for the treatment of influenza, and from other previous approaches to the treatment of influenza.

-- Phase 1 development in healthy volunteers is ongoing, and Vertex plans to begin evaluation of VX-787 in influenza infection as part of a Phase 2a proof-of-concept trial in mid-2012.

Third Quarter Financial Results

"Our financial performance in the third quarter was driven by the successful launch of INCIVEK, enabling Vertex to be profitable and cashflow positive in the first full quarter after INCIVEK was available," said Ian Smith, Executive Vice President and Chief Financial Officer. "We remain committed to reinvesting in our broad pipeline and to the creation of significant earnings, which we believe will deliver the greatest value for patients, the company and shareholders."

Total Revenues: Total revenues for the quarter ended September 30, 2011 were $659.2 million, compared with $23.8 million in total revenues for the third quarter of 2010. The increase in total revenues is primarily a result of INCIVEK net revenues of $419.6 million and $200.0 million in milestone revenues earned from Vertex's collaborator Janssen in the third quarter.

INCIVEK Revenues: For the quarter ended September 30, 2011, Vertex reported $419.6 million in net revenues of INCIVEK, which were recorded on an ex-factory basis and reflect the first full quarter of INCIVEK sales following approval on May 23, 2011. Net revenues of INCIVEK for the second quarter of 2011 were $74.5 million.

Cost of Product Revenues: Cost of product revenues for the quarter ended September 30, 2011 was $35.3 million, which principally reflects royalty expenses owed to third parties on the sale of INCIVEK.

Research and Development (R&D) Expenses: R&D expenses for the quarter ended September 30, 2011 were $189.1 million, including $18.7 million in stock-based compensation expense, compared to $170.4 million, including $17.0 million in stock-based compensation expense, for the third quarter of 2010. These expenses reflect the company's continued investment in its research and development pipeline, including preparation for the initiation of multiple clinical trials planned to begin by early 2012.

Sales, General and Administrative (SG&A) Expenses: SG&A expenses for the quarter ended September 30, 2011 were $110.7 million, including $10.8 million in stock-based compensation expense, compared to $48.9 million, including $6.8 million in stock-based compensation expense, for the third quarter of 2010. This increase reflects the expansion of the company's commercial organization to support both INCIVEK and KALYDECO and costs related to the commercial launch of INCIVEK.

GAAP and Non-GAAP Net Income (Loss) Attributable to Vertex: For the quarter ended September 30, 2011, the company's GAAP net income attributable to Vertex was $221.1 million, or $1.02 per diluted share, compared to a GAAP net loss attributable to Vertex for the quarter ended September 30, 2010 of $209.0 million, or $1.04 per diluted share.

The non-GAAP net income attributable to Vertex for the quarter ended September 30, 2011 was $151.2 million, or $0.70 per diluted share, compared to a non-GAAP net loss of $174.6 million, or $0.87 per diluted share, for the quarter ended September 30, 2010. The non-GAAP net income for the third quarter of 2011 and the third quarter non-GAAP net loss for the third quarter of 2010 excludes stock-based compensation expense, restructuring expense (credit), any revenues and expenses related to certain September 2009 financial transactions, any intangible asset impairment charge, net of tax, and items related to Vertex's collaboration with Alios. The increase in the third quarter 2011 non-GAAP net income attributable to Vertex resulted principally from increased revenues related to the sale of INCIVEK.

Cash Position: At September 30, 2011, Vertex had $658.7 million in cash, cash equivalents and marketable securities, compared to cash, cash equivalents and marketable securities at June 30, 2011 of $593.5 million.

This section contains forward-looking guidance about the financial outlook for Vertex Pharmaceuticals.

Vertex is today reiterating its guidance for 2011 total operating expenses, excluding cost of revenues, stock-based compensation expense and intangible asset impairment charge, of $960 to $980 million, as provided on July 28, 2011.

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