-Hepatitis C: Regulatory agencies in U.S., Europe and Canada to provide accelerated reviews of telaprevir applications-
-Cystic Fibrosis: First Phase 3 registration data for VX-770 expected in first quarter 2011; potential regulatory submissions in the U.S. and E.U. in second half of 2011-
-Financial: Vertex enters 2011 with more than $1 billion in cash, cash equivalents and marketable securities-

CAMBRIDGE, Mass.--(BUSINESS WIRE)-- Vertex Pharmaceuticals Incorporated (Nasdaq: VRTX) today provided an update on recent progress in its late-stage development programs in hepatitis C virus (HCV) infection and cystic fibrosis (CF) and reported consolidated financial results for the year ended December 31, 2010.

"Vertex enters 2011 in a strong financial position as we prepare for the planned launch of telaprevir," said Matthew Emmens, Chairman, President and Chief Executive Officer of Vertex Pharmaceuticals. "Our primary focus remains on making telaprevir available to people with hepatitis C as quickly as possible, and we are encouraged that regulatory agencies in the U.S., Europe and Canada will each provide an accelerated review of telaprevir, with the first approval decision currently expected in the U.S. in May of this year.

"We will also soon receive the first Phase 3 registration data for VX-770 in cystic fibrosis, which if positive will form the basis for planned regulatory submissions for approval in the U.S. and E.U. in the second half of the year.

"Additionally, we believe that our financial position will support our key business objectives through 2012, at which time we expect to begin generating earnings as a cashflow positive company," concluded Mr. Emmens.

Recent Clinical Development Progress

In a press release issued on January 9, 2011, Vertex provided a comprehensive business update, including planned clinical development milestones for 2011. Vertex today provided the following additional updates, reflecting recent progress in its development programs:

Accelerated Reviews of Telaprevir Application from U.S., E.U. and Canadian Regulatory Authorities
In January, the U.S. FDA accepted for filing Vertex's New Drug Application (NDA) for telaprevir and granted the company's request for six-month Priority Review. A target review date of May 23, 2011 was set under the Prescription Drug User Fee Act (PDUFA) for the FDA's approval decision. Also in January, Vertex completed a New Drug Submission (NDS) to the Therapeutic Product Directorate (TPD) of Health Canada seeking approval for telaprevir in Canada. Telaprevir was also granted Priority Review in Canada.
Vertex today announced that the European Medicines Agency (EMA) has notified our collaborator Janssen that its telaprevir Marketing Authorisation Application (MAA) was valid and acceptable for review. The EMA previously accepted the telaprevir MAA for accelerated assessment, which is granted to new medicines of major public health interest.
Continued Progress in Phase 2 Study of Telaprevir and VX-222
Vertex is conducting a Phase 2 clinical trial evaluating multiple 12-week and 24-week, response-guided regimens of telaprevir, Vertex's lead medicine in development for hepatitis C, dosed in combination with its hepatitis C virus polymerase inhibitor VX-222. The study currently includes three treatment arms. Two of the treatment arms are fully enrolled and are evaluating four-drug combinations of telaprevir (1,125 mg; BID), VX-222 (400 mg or 100 mg; BID), Pegasys® (pegylated-interferon alfa-2a) and Copegus® (ribavirin). All of the people in the four-drug treatment arms will have reached the 12-week timepoint in the study by the end of February.
On-treatment data from the study are expected in the first quarter of 2011 from both of the four-drug treatment arms.
In addition, enrollment is expected to begin in the first quarter of 2011 for a three-drug treatment arm of this study designed to evaluate the potential of an all-oral, interferon-free regimen of telaprevir (1,125 mg), VX-222 (400 mg) and ribavirin dosed twice daily.
Full Year 2010 Financial Results

For the year ended December 31, 2010, the company's GAAP net loss was $754.6 million, or $3.77 per share, including certain charges totaling $148.9 million. The GAAP net loss for the year ended December 31, 2009 was $642.2 million, or $3.71 per share, including certain charges totaling $134.7 million.

The non-GAAP loss, before certain charges, for the year ended December 31, 2010 was $605.7 million, or $3.02 per share, compared to $507.5 million, or $2.93 per share, for the year ended December 31, 2009. The increase in the company's 2010 non-GAAP loss was principally attributable to increased costs related to launch preparation activities for telaprevir, including the significant expansion of our commercial organization and increased commercial supply investment.

Total revenues for the year ended December 31, 2010 were $143.4 million, compared to $101.9 million for the year ended December 31, 2009. The increase is primarily due to an increase in revenues from Mitsubishi Tanabe for commercial supply of telaprevir.

Research and development (R&D) expenses for the year ended December 31, 2010 were $637.4 million, including $65.2 million in stock-based compensation expense, compared to $550.3 million, which included $67.4 million in stock-based compensation and executive transition expenses, for the year ended December 31, 2009. The increase in Vertex's R&D investment is principally due to continued investment in the development programs for telaprevir, VX-770 and earlier-stage programs, and increased commercial supply investment for telaprevir. Vertex and Tibotec share certain costs of development activities for telaprevir.

Sales, general and administrative (SG&A) expenses for the year ended December 31, 2010 were $187.8 million, which included $25.9 million in stock-based compensation expense, compared to $130.2 million, which included $24.8 million in stock-based compensation and executive transition expenses, for the year ended December 31, 2009. This increase primarily reflects expenses related to the significant expansion of our commercial organization for telaprevir and VX-770, including the hiring of the commercial management team and more than 100 field-based employees to support the potential future sale of telaprevir.

Other expense, net, for the year ended December 31, 2010 was $58.5 million, compared to other expense, net, of $28.2 million for the year ended December 31, 2009. This increase in other expense resulted primarily from non-cash expenses in 2010 related to the company's September 2009 financial transactions, which were partially offset by losses incurred in 2009 on the exchanges of convertible senior subordinated notes.

At December 31, 2010, Vertex had approximately $1.03 billion in cash, cash equivalents and marketable securities.

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

Operating Expenses: Vertex expects operating expenses, consisting of Research and Development (R&D) expense and Sales, General and Administrative (SG&A) expense, to be in the range of $890 to $930 million in 2011, excluding costs of revenues and approximately $105 million in stock-based compensation expense, as compared to $734 million in 2010, excluding $91 million in stock-based compensation expense. The components of this 2011 operating expense are:

R&D Expense: The company expects that R&D expense levels for 2011 will be similar to R&D expense levels for 2010. The principal development investment will continue to be focused on hepatitis C and cystic fibrosis, with the investment in research activities generally comparable with prior years.
SG&A Expense: The company expects that SG&A expense will increase in 2011 to fund the continued expansion of the company's commercial function for telaprevir and VX-770 and investment in activities and employees to support the potential launch and future sale of telaprevir.
Non-GAAP Financial Measures

In this press release, Vertex's financial results and financial guidance are provided both in accordance with accounting principles generally accepted in the United States (GAAP) and using certain non-GAAP financial measures. In particular, Vertex provides its fourth quarter and full-year 2010 and 2009 loss, excluding stock-based compensation and executive transition expenses, restructuring expense, acquisition-related expenses, loss on exchanges of convertible subordinated notes, intangible asset impairment charges, net of tax, and expenses related to certain September 2009 financial transactions. These results are provided as a complement to results provided in accordance with GAAP because management believes these non-GAAP financial measures help indicate underlying trends in the company's business, are important in comparing current results with prior period results and provide additional information regarding its financial position. Management also uses these non-GAAP financial measures to establish budgets and operational goals that are communicated internally and externally, and to manage the company's business and to evaluate its performance. A reconciliation of the other non-GAAP financial results to GAAP financial results is included in the attached financial statements.

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