x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Fiscal Year Ended December 31, 2016 | |
or | |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to |
Massachusetts | 04-3039129 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
50 Northern Avenue, Boston, Massachusetts | 02210 |
(Address of principal executive offices) | (Zip Code) |
Title of Each Class | Name of Each Exchange on Which Registered | |||
Common Stock, $0.01 Par Value Per Share | The NASDAQ Global Select Market |
Large accelerated filer x | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o |
(Do not check if a smaller reporting company) |
ITEM 1. | BUSINESS |
• | Tezacaftor (VX-661) is a corrector compound that we are evaluating in a Phase 3 development program in combination with ivacaftor in multiple CF patient populations who have at least one copy of the F508del mutation in their CFTR gene. We expect data from this Phase 3 development program in the first half of 2017. If supported by data from the Phase 3 development program, we plan to submit a New Drug Application, or NDA, to the United States Food and Drug Administration, or FDA for tezacaftor in combination with ivacaftor in the second half of 2017. |
• | VX-152, VX-440, VX-659 and VX-445 are next-generation CFTR corrector compounds that we are evaluating as part of combination treatment regimens. We have initiated Phase 2 clinical trials of VX-152 and VX-440 and expect data from these clinical trials in the second half of 2017. We have initiated Phase 1 clinical trials of VX-659 and VX-445. |
• | VX-371 is an investigational epithelial sodium channel, or ENaC, inhibitor that is being evaluated in a Phase 2 development program and which we exclusively licensed from Parion Sciences, Inc., or Parion, in 2015. |
• | Two copies of the F508del in their CFTR gene: We have completed enrollment in this clinical trial and expect data from this clinical trial to be available in the first half of 2017; |
• | One copy of the F508del mutation in their CFTR gene and a second mutation in their CFTR gene that results in residual CFTR function: We have completed enrollment in this clinical trial and expect data from this clinical trial to be available in the first half of 2017; and |
• | One copy of the F508del mutation in their CFTR gene and a second mutation in their CFTR gene that results in a gating defect in the CFTR protein: We plan to complete enrollment in this clinical trial in the first half of 2017. Data from this clinical trial are not expected to be included in the initial regulatory applications for tezacaftor in combination with ivacaftor. |
• | VX-440 to evaluate the safety and efficacy of four-week dosing of VX-440 in combination with tezacaftor and ivacaftor in approximately 40 patients with CF who have one copy of the F508del mutation in their CFTR gene and a second mutation that results in minimal CFTR function and approximately 25 patients with CF who have two copies of the F508del mutation in their CFTR gene; and |
• | VX-152 to evaluate the safety and efficacy of two-week dosing of VX-152 in combination with tezacaftor and ivacaftor in approximately 35 patients with CF who have one copy of the F508del mutation in their CFTR gene and a second mutation that results in minimal CFTR function and approximately 25 patients with CF who have two copies of the F508del mutation in their CFTR gene. |
Drug/Drug Candidate | Status of United States Patent (Anticipated Expiration, Subject to Potential Extensions) | Status of European Union Patent (Anticipated Expiration, Subject to Potential Extensions) |
Ivacaftor | Granted (2027) | Granted (2025) |
Lumacaftor | Granted (2030) | Granted (2026) |
Tezacaftor | Granted (2027) | Granted (2028) |
• | U.S. and foreign patent applications covering CF potentiators, correctors and ENaC inhibitors, including ivacaftor, lumacaftor, tezacaftor, VX-371, VX-152, VX-440, VX-659 and VX-445 and many other related compounds, and the use of those potentiators, correctors and ENaC inhibitors to treat CF. |
• | U.S. and foreign patents and patent applications covering VX-150 and VX-241 and the use of VX-150 and VX-241 to treat pain indications. |
• | U.S. and foreign patents and patent applications covering VX-210 and the use of VX-210 to treat neurology indications. |
• | U.S. and foreign patents and patent applications covering the manufacture, pharmaceutical compositions, related solid forms, formulations, dosing regimens and methods of use of these compounds, including ivacaftor and lumacaftor. |
• | refusal to approve or delay in review of pending applications; |
• | withdrawal of an approval or the implementation of limitations on a previously approved indication for use; |
• | imposition of a clinical hold, a risk mitigation and evaluation strategy or other safety-related limitations; |
• | warning letters or “untitled letters”; |
• | product seizures; |
• | total or partial suspension of production or distribution; or |
• | injunctions, fines, disgorgement, refusals of government contracts, or civil or criminal penalties. |
• | completion of preclinical laboratory tests, animal studies and formulation studies conducted according to Good Laboratory Practices, or GLP, and other applicable regulations; |
• | submission to the FDA of an investigational new drug, or IND, application, which must become effective before clinical trials in the United States may begin; |
• | performance of adequate and well-controlled clinical trials according to Good Clinical Practices, or GCP, to establish the safety and efficacy of the proposed drug for its intended use; |
• | submission to the FDA of an NDA; |
• | satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product will be produced to assess compliance with cGMP to assure that the facilities, methods and controls are adequate to preserve the product’s identity, strength, quality and purity; and |
• | FDA review and approval of the NDA. |
• | Phase 1. The drug initially is introduced into healthy human subjects and tested for safety, dosage tolerance, absorption, metabolism, distribution and elimination. In the case of some drug candidates for severe or life-threatening diseases, such as cancer, especially when the drug candidate may be inherently too toxic to ethically administer to healthy volunteers, the initial human testing is often conducted in patients. |
• | Phase 2. Clinical trials are initiated in a limited patient population intended to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the drug candidate for specific targeted diseases and to determine dosage tolerance and optimal dosage. |
• | Phase 3. Clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population at geographically dispersed clinical trial sites. These clinical trials are intended to establish the overall risk-benefit ratio of the drug candidate and provide an adequate basis for regulatory approval and product labeling. |
Phase | Estimated Duration | |
Discovery | 2 to 4 years | |
Preclinical | 1 to 2 years | |
Phase 1 | 1 to 2 years | |
Phase 2 | 2 to 4 years | |
Phase 3 | 2 to 4 years | |
FDA approval | 8 months to 2 years |
• | record-keeping requirements; |
• | reporting of adverse experiences with the product; |
• | providing the FDA with updated safety and efficacy information; |
• | drug sampling and distribution requirements; |
• | notifying the FDA and gaining its approval of specified manufacturing or labeling changes; |
• | complying with certain electronic records and signature requirements; and |
• | complying with FDA promotion and advertising requirements. |
Name | Age | Position | |
Jeffrey M. Leiden, M.D., Ph.D. | 61 | Chairman of the Board, Chief Executive Officer and President | |
David Altshuler, M.D., Ph.D. | 52 | Executive Vice President, Global Research and Chief Scientific Officer | |
Stuart A. Arbuckle | 51 | Executive Vice President and Chief Commercial Officer | |
Jeffrey A. Chodakewitz, M.D. | 61 | Executive Vice President, Global Medicines Development and Medical Affairs, and Chief Medical Officer | |
Michael Parini, J.D. | 42 | Executive Vice President and Chief Legal and Administrative Officer | |
Amit K. Sachdev, J.D. | 49 | Executive Vice President, Chief Regulatory Officer and Chief of Staff to the CEO | |
Ian F. Smith | 51 | Executive Vice President, Chief Operating Officer and Chief Financial Officer | |
Paul M. Silva | 51 | Senior Vice President and Corporate Controller | |
Sangeeta M. Bhatia, M.D., Ph.D. | 48 | Director | |
Joshua S. Boger, Ph.D. | 65 | Director | |
Terrence C. Kearney | 62 | Director | |
Yuchun Lee | 51 | Director | |
Margaret G. McGlynn | 57 | Director | |
Bruce I. Sachs | 57 | Director | |
Elaine S. Ullian | 69 | Director | |
William Young | 72 | Director |
• | our ability to obtain, and the timing and terms of obtaining, reimbursement for ORKAMBI in ex-U.S. markets; |
• | the number of additional patients who begin treatment with ORKAMBI, including patients six to eleven years of age in the United States; |
• | the rate at which additional patients initiate treatment; |
• | the proportion of initiated patients who remain on treatment; and |
• | the compliance rate for patients who remain on treatment. |
• | prevalence and severity of adverse side-effects; |
• | lack of reimbursement availability from third-party payors; |
• | lower demonstrated efficacy, safety and/or tolerability compared to alternative treatment methods; |
• | lack of cost-effectiveness; |
• | a decision to wait for the approval of other therapies in development that have significant perceived advantages over our drug; |
• | convenience and ease of administration; |
• | other potential advantages of alternative treatment methods; and |
• | ineffective sales, marketing and/or distribution support. |
• | offer therapeutic or other improvement over existing competitive therapies; |
• | be proven safe and effective in clinical trials; |
• | meet applicable regulatory standards; |
• | be capable of being produced in commercial quantities at acceptable costs; or |
• | if approved for commercial sale, be successfully marketed as pharmaceutical products. |
• | ongoing discussions with the FDA or comparable foreign authorities regarding the scope or design of our clinical trials and the number of clinical trials we must conduct; |
• | delays in enrolling volunteers or patients into clinical trials, including as a result of low numbers of patients that meet the eligibility criteria for the trial; |
• | a lower than anticipated retention rate of volunteers or patients in clinical trials; |
• | the need to repeat clinical trials as a result of inconclusive results, unforeseen complications in testing or clinical investigator error; |
• | inadequate supply or deficient quality of drug candidate materials or other materials necessary for the conduct of our clinical trials; |
• | unfavorable FDA or foreign regulatory authority inspection and review of a manufacturing facility that supplied clinical trial materials or its relevant manufacturing records or a clinical trial site or records of any clinical or preclinical investigation; |
• | unfavorable scientific results from clinical trials; |
• | serious and unexpected drug-related side-effects experienced by participants in our clinical trials or by participants in clinical trials being conducted by our competitors to evaluate drug candidates with similar mechanisms of action or structures to drug candidates that we are developing; |
• | favorable results in testing of our competitors’ drug candidates, or FDA or foreign regulatory authority approval of our competitors’ drug candidates; or |
• | action by the FDA or a foreign regulatory authority to place a clinical hold or partial clinical hold on a trial or compound or deeming the clinical trial conduct as problematic. |
• | failure to successfully further develop the acquired or licensed drugs or technology or to achieve strategic objectives, including successfully developing and commercializing the drugs, drug candidates or technologies that we acquire or license; |
• | inadequate or unfavorable data from clinical trials evaluating the acquired or licensed drug or drug candidates; |
• | entry into markets in which we have no or limited direct prior experience or where competitors in such markets have stronger market positions; |
• | disruption of our ongoing business and distraction of our management and employees from other opportunities and challenges; |
• | potential failure of the due diligence processes to identify significant problems, liabilities or other shortcomings or challenges of an acquired company, or acquired or licensed product or technology, including but not limited to, problems, liabilities or other shortcomings or challenges with respect to intellectual property, product quality, safety, accounting practices, employee, customer or third party relations and other known and unknown liabilities; |
• | liability for activities of the acquired company or licensor before the acquisition or license, including intellectual property infringement claims, violations of laws, commercial disputes, tax liabilities, and other known and unknown liabilities; |
• | exposure to litigation or other claims in connection with, or inheritance of claims or litigation risk as a result of an acquisition or license, including but not limited to, claims from terminated employees, customers, former equity holders or other third-parties; |
• | difficulty in integrating the drugs, drug candidates, technologies, business operations and personnel of an acquired company; and |
• | difficulties in the integration of the acquired company’s departments, systems, including accounting, human resource and other administrative systems, technologies, books and records, and procedures, as well as in maintaining uniform standards, controls, including internal control over financial reporting required by the Sarbanes-Oxley Act of 2002 and related procedures and policies. |
• | Our collaborators may change the focus of their development and commercialization efforts or may have insufficient resources to effectively develop our drug candidates. The ability of some of our products and drug candidates to reach their potential could be limited if collaborators decrease or fail to increase development or commercialization efforts related to those products or drug candidates. Our collaboration agreements provide our collaborators with a level of discretion in determining the amount and timing of efforts and resources that they will apply to these collaborations. |
• | Any future collaboration agreements may have the effect of limiting the areas of research and development that we may pursue, either alone or in collaboration with third parties. |
• | Collaborators may develop and commercialize, either alone or with others, drugs that are similar to or competitive with the drugs or drug candidates that are the subject of their collaborations with us. |
• | Disagreements with collaborators, including disagreements over proprietary rights, contract interpretation or the preferred course of development, might cause delays or termination of the research, development or commercialization of drug candidates, might lead to additional responsibilities for us with respect to drug candidates, or might result in litigation or arbitration. Any such disagreements would divert management attention and resources and be time-consuming and expensive. |
• | Collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential litigation. |
• | Collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability. |
• | Investigations and/or compliance or enforcement actions against a collaborator, which may expose us to indirect liability as a result of our partnership with such collaborator. |
• | Our collaboration agreements are subject to termination under various circumstances. |
• | differing regulatory requirements for drug approvals and regulation of approved drugs in foreign countries; |
• | varying reimbursement regimes and difficulties or the inability to obtain reimbursement for our products in a timely manner; |
• | differing patient treatment infrastructures, particularly since our business is focused on the treatment of rare diseases that are typically prescribed by specialist physicians; |
• | collectibility of accounts receivable; |
• | changes in tariffs, trade barriers and regulatory requirements, the risks of which appear to have increased in the current political environment; |
• | economic weakness, including recession and inflation, or political instability in particular foreign economies and markets; |
• | differing levels of enforcement and/or recognition of contractual and intellectual property rights; |
• | complying with local laws and regulations, which are interpreted and enforced differently across jurisdictions and which can change significantly over time; |
• | foreign taxes, including withholding of payroll taxes; |
• | foreign currency fluctuations, which could result in reduced revenues or increased operating expenses, and other obligations incident to doing business or operating in another country; |
• | workforce uncertainty in countries where labor unrest is more common than in the United States; |
• | import and export licensing requirements, tariffs, and other trade and travel restrictions; |
• | production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and |
• | business interruptions resulting from geo-political actions, including war and terrorism. |
• | implement and clearly communicate our corporate-wide strategies; |
• | enhance our operational and financial infrastructure, including our controls over records and information; |
• | enhance our operational, financial and management processes, including our cross-functional decision-making processes and our budget prioritization systems; |
• | train and manage our global employee base; |
• | transition from a U.S.-centric company into an organization capable of developing and commercializing multiple drug candidates in international markets; and |
• | enhance our compliance and legal resources. |
• | the information contained in our quarterly earnings releases, including our net product revenues and operating expenses for completed periods and guidance regarding future periods; |
• | announcements of FDA actions with respect to our drugs or our competitors’ drugs, or regulatory filings for our drug candidates or those of our competitors, or announcements of interim or final results of clinical trials or nonclinical studies relating to our drugs, drug candidates or those of our competitors; |
• | prescription data and other information disclosed by third parties regarding our business or products; |
• | technological innovations or the introduction of new drugs by our competitors; |
• | government regulatory action; |
• | public concern as to the safety of drugs developed by us or our competitors; |
• | developments in patent or other intellectual property rights or announcements relating to these matters; |
• | developments in domestic and international governmental policy or regulation, for example, relating to intellectual property rights; |
• | developments relating specifically to other companies and market conditions for pharmaceutical and biotechnology stocks or stocks in general; |
• | business development, capital structuring or financing activities; and |
• | general worldwide or national economic, political and capital market conditions. |
• | our expectations regarding the amount of, timing of and trends with respect to our revenues, costs and expenses and other gains and losses, including those related to net product revenues from KALYDECO and ORKAMBI; |
• | our expectations regarding clinical trials, development timelines and regulatory authority filings and submissions for ivacaftor, lumacaftor, tezacaftor, VX-371, VX-440, VX-152, VX-659, VX-445, VX-150 and VX-210, as well as the MAA for ORKAMBI for patients with CF six to eleven years of age who are homozygous for the F508del mutation in their CFTR gene and the NDA for tezacaftor in combination with ivacaftor; |
• | our ability to obtain reimbursement for ORKAMBI in ex-U.S. markets and our ability to otherwise successfully market ORKAMBI and KALYDECO or any of our other drug candidates for which we obtain regulatory approval; |
• | our expectations regarding the timing and structure of clinical trials of our drugs and drug candidates, including ivacaftor, lumacaftor, tezacaftor, VX-371, VX-440, VX-152, VX-659, VX-445, VX-150 and VX-210, and the expected timing of our receipt of data from our ongoing and planned clinical trials; |
• | the data that will be generated by ongoing and planned clinical trials and the ability to use that data to advance compounds, continue development or support regulatory filings; |
• | our beliefs regarding the support provided by clinical trials and preclinical and nonclinical studies of our drug candidates for further investigation, clinical trials or potential use as a treatment; |
• | our plan to continue investing in our research and development programs and our strategy to develop our drug candidates, alone or with third party-collaborators; |
• | the establishment, development and maintenance of collaborative relationships; |
• | potential business development activities; |
• | potential fluctuations in foreign currency exchange rates; |
• | our ability to use our research programs to identify and develop new drug candidates to address serious diseases and significant unmet medical needs; and |
• | our liquidity and our expectations regarding the possibility of raising additional capital. |
ITEM 1B. | UNRESOLVED STAFF COMMENTS |
ITEM 2. | PROPERTIES |
ITEM 3. | LEGAL PROCEEDINGS |
ITEM 4. | MINE SAFETY DISCLOSURES |
ITEM 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
Year Ended December 31, 2016: | High | Low | ||||||
First quarter | $ | 124.96 | $ | 75.90 | ||||
Second quarter | 96.49 | 75.92 | ||||||
Third quarter | 103.73 | 83.50 | ||||||
Fourth quarter | 97.93 | 71.46 |
Year Ended December 31, 2015: | High | Low | ||||||
First quarter | $ | 136.33 | $ | 103.75 | ||||
Second quarter | 137.50 | 113.68 | ||||||
Third quarter | 143.45 | 97.45 | ||||||
Fourth quarter | 134.71 | 101.49 |
Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs | ||||
Oct. 1, 2016 to Oct. 31, 2016 | 23,701 | $ | 0.01 | — | — | |||
Nov. 1, 2016 to Nov. 30, 2016 | 16,880 | $ | 0.01 | — | — | |||
Dec. 1, 2016 to Dec. 31, 2016 | 10,946 | $ | 0.01 | — | — |
ITEM 6. | SELECTED FINANCIAL DATA |
Year Ended December 31, | |||||||||||||||||||
2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||
(in thousands, except per share amounts) | |||||||||||||||||||
Consolidated Statements of Operations Data: | |||||||||||||||||||
Product revenues, net | |||||||||||||||||||
KALYDECO product revenues, net | $ | 703,432 | $ | 631,674 | $ | 463,750 | $ | 371,285 | $ | 171,645 | |||||||||
ORKAMBI product revenues, net | 979,590 | 350,663 | — | — | — | ||||||||||||||
INCIVEK product revenues, net | 610 | 17,987 | 24,071 | 466,360 | 1,161,813 | ||||||||||||||
Total product revenues, net | 1,683,632 | 1,000,324 | 487,821 | 837,645 | 1,333,458 | ||||||||||||||
Royalty revenues | 16,600 | 23,959 | 40,919 | 156,592 | 141,498 | ||||||||||||||
Collaborative revenues (1) | 1,945 | 8,053 | 51,675 | 217,738 | 52,086 | ||||||||||||||
Total revenues | 1,702,177 | 1,032,336 | 580,415 | 1,211,975 | 1,527,042 | ||||||||||||||
Total costs and expenses (2) | 1,692,241 | 1,499,215 | 1,272,827 | 1,821,983 | 1,480,315 | ||||||||||||||
(Loss) income from continuing operations attributable to Vertex | (112,052 | ) | (556,334 | ) | (737,643 | ) | (503,622 | ) | 32,271 | ||||||||||
(Loss) income from discontinued operations attributable to Vertex (3) | — | — | (912 | ) | 58,594 | (139,303 | ) | ||||||||||||
Net (loss) income attributable to Vertex | $ | (112,052 | ) | $ | (556,334 | ) | $ | (738,555 | ) | $ | (445,028 | ) | $ | (107,032 | ) | ||||
Diluted (loss) income from continuing operations attributable to Vertex per common share | $ | (0.46 | ) | $ | (2.31 | ) | $ | (3.14 | ) | $ | (2.24 | ) | $ | 0.15 | |||||
Shares used in per diluted share calculations | 244,685 | 241,312 | 235,307 | 224,906 | 215,262 | ||||||||||||||
As of December 31, | |||||||||||||||||||
2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||
(in thousands) | |||||||||||||||||||
Consolidated Balance Sheet Data: | |||||||||||||||||||
Cash, cash equivalents and marketable securities | $ | 1,434,557 | $ | 1,042,462 | $ | 1,387,106 | $ | 1,465,076 | $ | 1,321,215 | |||||||||
Total assets | 2,896,787 | 2,498,587 | 2,334,679 | 2,319,041 | 2,759,288 | ||||||||||||||
Total current liabilities (4) | 792,537 | 506,167 | 368,254 | 397,829 | 432,624 | ||||||||||||||
Long-term debt obligations, excluding current portion (5) | — | 223,863 | 280,569 | — | 400,000 | ||||||||||||||
Construction financing lease obligation, excluding current portion (6) | 486,359 | 472,611 | 473,073 | 440,937 | 268,031 | ||||||||||||||
Other long-term obligations | 279,700 | 202,318 | 116,600 | 123,870 | 424,251 |
(1) | In 2013, we recorded $203.4 million of collaborative revenues from Janssen NV, which were primarily attributable to a 2013 amendment to our collaboration agreement with Janssen NV. See Note B, “Collaborative Arrangements.” |
(2) | Total costs and expenses included (i) in 2013 and 2012, an aggregate of $10.4 million and $133.2 million, respectively, of write-offs for excess and obsolete inventories, (ii) in 2013 and 2012, total costs and expenses included intangible asset impairment charges of $412.9 million and $105.8 million, respectively and (iii) in 2016, 2015, 2014 and 2013, $1.3 million, $2.2 million, $50.9 million and $40.5 million, respectively, of restructuring charges. See Note H, “Inventories,” Note J, “Intangible Assets and Goodwill” and Note Q, “Restructuring Expenses.” |
(3) | (Loss) income from discontinued operations attributable to Vertex relates to our collaboration with Alios BioPharma, Inc., in 2012 through 2013, which we deconsolidated as of December 31, 2013. See Note B, “Collaborative Arrangements.” |
(4) | In 2016, we borrowed $300.0 million pursuant to a revolving credit facility that matures in October 2021. In February 2017, we repaid the $300.0 million that was outstanding under our revolving credit facility. See Note L, “Long Term Obligations.” |
(5) | In 2013, our convertible senior subordinated notes (due 2015) with an aggregate principal amount of $400.0 million were converted into common stock or redeemed. During 2016, we terminated and repaid all outstanding obligations under our term loan. See Note L, “Long Term Obligations.” |
(6) | In 2011, we entered into two leases for our corporate headquarters, which we occupied in December 2013. We are deemed for accounting purposes to be the owner of the buildings. See Note L, “Long Term Obligations.” |
ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
• | Tezacaftor (VX-661) is a corrector compound that we are evaluating in a Phase 3 development program in combination with ivacaftor in multiple CF patient populations who have at least one copy of the F508del mutation in their CFTR gene. We expect data from this Phase 3 development program in the first half of 2017. If supported by data from the Phase 3 development program, we plan to submit a New Drug Application, or NDA, to the United States Food and Drug Administration, or FDA for tezacaftor in combination with ivacaftor in the second half of 2017. |
• | VX-152, VX-440, VX-659 and VX-445 are next-generation CFTR corrector compounds that we are evaluating as part of combination treatment regimens. We have initiated Phase 2 clinical trials of VX-152 and VX-440 and expect data from these clinical trials in the second half of 2017. We have initiated Phase 1 clinical trials of VX-659 and VX-445. |
• | VX-371, an investigational epithelial sodium channel, or ENaC, inhibitor, is being evaluated in a Phase 2 development program and which we exclusively licensed from Parion Sciences, Inc., or Parion, in 2015. |
• | CRISPR Therapeutics AG, or CRISPR, pursuant to which we are collaborating on the discovery and development of potential new treatments aimed at the underlying genetic causes of human diseases using CRISPR-Cas9 gene editing technology; |
• | Parion Sciences, Inc., or Parion, pursuant to which we are developing epithelial sodium channel, or ENaC, inhibitors for the treatment of pulmonary diseases; |
• | Moderna Therapeutics, Inc., or Moderna, pursuant to which we are seeking to identify and develop mRNA therapeutics for the treatment of CF; and |
• | BioAxone Biosciences, Inc., or BioAxone, pursuant to which we are evaluating VX-210 as a potential treatment for patients who have spinal cord injuries. |
• | Merck KGaA, pursuant to which Merck KGaA will, subject to regulatory approval, obtain rights to four oncology research and development programs; and |
• | Janssen Pharmaceuticals, Inc. which is developing JNJ-3872 (formerly VX-787) for the treatment of influenza. |
2016/2015 Comparison | 2015/2014 Comparison | ||||||||||||||||||||||||
Increase/(Decrease) | Increase/(Decrease) | ||||||||||||||||||||||||
2016 | 2015 | 2014 | $ | % | $ | % | |||||||||||||||||||
(in thousands) | (in thousands, except percentages) | ||||||||||||||||||||||||
Revenues | $ | 1,702,177 | $ | 1,032,336 | $ | 580,415 | $ | 669,841 | 65 | % | $ | 451,921 | 78 | % | |||||||||||
Operating costs and expenses | 1,692,241 | 1,499,215 | 1,272,827 | 193,026 | 13 | % | 226,388 | 18 | % | ||||||||||||||||
Other items, net | (121,988 | ) | (89,455 | ) | (45,231 | ) | $ | 32,533 | 36 | % | 44,224 | 98 | % | ||||||||||||
Loss from continuing operations attributable to Vertex | (112,052 | ) | (556,334 | ) | (737,643 | ) | (444,282 | ) | (80 | )% | (181,309 | ) | (25 | )% | |||||||||||
Loss from discontinued operations attributable to Vertex | — | — | (912 | ) | n/a | n/a | n/a | n/a | |||||||||||||||||
Net loss attributable to Vertex | $ | (112,052 | ) | $ | (556,334 | ) | $ | (738,555 | ) | $ | (444,282 | ) | (80 | )% | $ | (182,221 | ) | (25 | )% |
2016/2015 Comparison | 2015/2014 Comparison | ||||||||||||||||||||||||
Increase/(Decrease) | Increase/(Decrease) | ||||||||||||||||||||||||
2016 | 2015 | 2014 | $ | % | $ | % | |||||||||||||||||||
(in thousands) | (in thousands, except percentages) | ||||||||||||||||||||||||
Product revenues, net | $ | 1,683,632 | $ | 1,000,324 | $ | 487,821 | $ | 683,308 | 68 | % | $ | 512,503 | 105 | % | |||||||||||
Royalty revenues | 16,600 | 23,959 | 40,919 | (7,359 | ) | (31 | )% | (16,960 | ) | (41 | )% | ||||||||||||||
Collaborative revenues | 1,945 | 8,053 | 51,675 | (6,108 | ) | (76 | )% | (43,622 | ) | (84 | )% | ||||||||||||||
Total revenues | $ | 1,702,177 | $ | 1,032,336 | $ | 580,415 | $ | 669,841 | 65 | % | $ | 451,921 | 78 | % |
2016 | 2015 | 2014 | |||||||||
(in thousands) | |||||||||||
ORKAMBI | $ | 979,590 | $ | 350,663 | $ | — | |||||
KALYDECO | $ | 703,432 | $ | 631,674 | $ | 463,750 | |||||
INCIVEK | 610 | 17,987 | 24,071 | ||||||||
Total product revenues, net | $ | 1,683,632 | $ | 1,000,324 | $ | 487,821 |
2016/2015 Comparison | 2015/2014 Comparison | ||||||||||||||||||||||||
Increase/(Decrease) | Increase/(Decrease) | ||||||||||||||||||||||||
2016 | 2015 | 2014 | $ | % | $ | % | |||||||||||||||||||
(in thousands) | (in thousands, except percentages) | ||||||||||||||||||||||||
Cost of product revenues | $ | 206,811 | $ | 117,151 | $ | 39,725 | $ | 89,660 | 77 | % | $ | 77,426 | 195 | % | |||||||||||
Royalty expenses | 3,649 | 7,361 | 21,262 | (3,712 | ) | (50 | )% | (13,901 | ) | (65 | )% | ||||||||||||||
Research and development expenses | 1,047,690 | 995,922 | 855,506 | 51,768 | 5 | % | 140,416 | 16 | % | ||||||||||||||||
Sales, general and administrative expenses | 432,829 | 376,575 | 305,409 | 56,254 | 15 | % | 71,166 | 23 | % | ||||||||||||||||
Restructuring expenses | 1,262 | 2,206 | 50,925 | (944 | ) | (43 | )% | (48,719 | ) | (96 | )% | ||||||||||||||
Total costs and expenses | $ | 1,692,241 | $ | 1,499,215 | $ | 1,272,827 | $ | 193,026 | 13 | % | $ | 226,388 | 18 | % |
2016/2015 Comparison | 2015/2014 Comparison | ||||||||||||||||||||||||
Increase/(Decrease) | Increase/(Decrease) | ||||||||||||||||||||||||
2016 | 2015 | 2014 | $ | % | $ | % | |||||||||||||||||||
(in thousands) | (in thousands, except percentages) | ||||||||||||||||||||||||
Research expenses | $ | 314,602 | $ | 337,797 | $ | 257,483 | $ | (23,195 | ) | (7 | )% | $ | 80,314 | 31 | % | ||||||||||
Development expenses | 733,088 | 658,125 | 598,023 | 74,963 | 11 | % | 60,102 | 10 | % | ||||||||||||||||
Total research and development expenses | $ | 1,047,690 | $ | 995,922 | $ | 855,506 | $ | 51,768 | 5 | % | $ | 140,416 | 16 | % |
2016/2015 Comparison | 2015/2014 Comparison | ||||||||||||||||||||||||
Increase/(Decrease) | Increase/(Decrease) | ||||||||||||||||||||||||
2016 | 2015 | 2014 | $ | % | $ | % | |||||||||||||||||||
(in thousands) | (in thousands, except percentages) | ||||||||||||||||||||||||
Research Expenses: | |||||||||||||||||||||||||
Salary and benefits | $ | 80,845 | $ | 81,752 | $ | 82,975 | $ | (907 | ) | (1 | )% | $ | (1,223 | ) | (1 | )% | |||||||||
Stock-based compensation expense | 51,034 | 49,744 | 40,531 | 1,290 | 3 | % | 9,213 | 23 | % | ||||||||||||||||
Laboratory supplies and other direct expenses | 43,151 | 37,058 | 38,082 | 6,093 | 16 | % | (1,024 | ) | (3 | )% | |||||||||||||||
Outsourced services | 33,682 | 24,210 | 17,401 | 9,472 | 39 | % | 6,809 | 39 | % | ||||||||||||||||
Collaboration payments | 33,000 | 75,000 | — | (42,000 | ) | (56 | )% | n/a | n/a | ||||||||||||||||
Infrastructure costs | 72,890 | 70,033 | 78,494 | 2,857 | 4 | % | (8,461 | ) | (11 | )% | |||||||||||||||
Total research expenses | $ | 314,602 | $ | 337,797 | $ | 257,483 | $ | (23,195 | ) | (7 | )% | $ | 5,314 | 2 | % |
2016/2015 Comparison | 2015/2014 Comparison | ||||||||||||||||||||||||
Increase/(Decrease) | Increase/(Decrease) | ||||||||||||||||||||||||
2016 | 2015 | 2014 | $ | % | $ | % | |||||||||||||||||||
(in thousands) | (in thousands, except percentages) | ||||||||||||||||||||||||
Development Expenses: | |||||||||||||||||||||||||
Salary and benefits | $ | 177,399 | $ | 164,466 | $ | 161,718 | $ | 12,933 | 8 | % | $ | 2,748 | 2 | % | |||||||||||
Stock-based compensation expense | 102,417 | 103,211 | 76,467 | (794 | ) | (1 | )% | 26,744 | 35 | % | |||||||||||||||
Laboratory supplies and other direct expenses | 42,861 | 30,611 | 34,689 | 12,250 | 40 | % | (4,078 | ) | (12 | )% | |||||||||||||||
Outsourced services | 282,137 | 248,506 | 197,743 | 33,631 | 14 | % | 50,763 | 26 | % | ||||||||||||||||
Drug supply costs | 12,510 | 9,799 | 10,026 | 2,711 | 28 | % | (227 | ) | (2 | )% | |||||||||||||||
Infrastructure costs | 115,764 | 101,532 | 117,380 | 14,232 | 14 | % | (15,848 | ) | (14 | )% | |||||||||||||||
Total development expenses | $ | 733,088 | $ | 658,125 | $ | 598,023 | $ | 74,963 | 11 | % | $ | 60,102 | 10 | % |
2016/2015 Comparison | 2015/2014 Comparison | ||||||||||||||||||||||||
Increase/(Decrease) | Increase/(Decrease) | ||||||||||||||||||||||||
2016 | 2015 | 2014 | $ | % | $ | % | |||||||||||||||||||
(in thousands) | (in thousands, except percentages) | ||||||||||||||||||||||||
Sales, general and administrative expenses | $ | 432,829 | $ | 376,575 | $ | 305,409 | $ | 56,254 | 15 | % | $ | 71,166 | 23 | % |
2016 | 2015 | 2014 | |||||||||
(in thousands) | |||||||||||
Loss attributable to noncontrolling interest before provision for income taxes | $ | 10,086 | $ | 6,646 | $ | 764 | |||||
Provision for income taxes | 16,743 | 29,731 | 3,876 | ||||||||
Increase in fair value of contingent payments | (54,850 | ) | (4,530 | ) | (450 | ) | |||||
Net (income) loss attributable to noncontrolling interest | $ | (28,021 | ) | $ | 31,847 | $ | 4,190 |
Payments Due by Period | |||||||||||||||||||
2017 | 2018-2019 | 2020-2021 | 2022 and later | Total | |||||||||||||||
(in thousands) | |||||||||||||||||||
Fan Pier Leases | $ | 67,206 | $ | 139,795 | $ | 145,178 | $ | 535,032 | $ | 887,211 | |||||||||
Facility leases, excluding Fan Pier Leases | 36,391 | 41,568 | 39,816 | 200,626 | 318,401 | ||||||||||||||
Capital lease obligations | 21,995 | 30,171 | 5,793 | 543 | 58,502 | ||||||||||||||
Revolving credit facility | 300,000 | — | — | — | 300,000 | ||||||||||||||
Research, development and drug supply costs | 24,061 | — | — | — | 24,061 | ||||||||||||||
Other | 3,119 | 3,004 | 226 | 6,108 | 12,457 | ||||||||||||||
Total contractual commitments and obligations | $ | 452,772 | $ | 214,538 | $ | 191,013 | $ | 742,309 | $ | 1,600,632 |
• | CFFT: CFFT has the right to tiered royalties ranging from single digits to sub-teens on any approved drugs first synthesized and/or tested during a research term on or before February 28, 2014, including KALYDECO, ORKAMBI, lumacaftor and tezacaftor and royalties ranging from low single digits to mid-single digits on potential sales of certain compounds first synthesized and/or tested between March 1, 2014 and August 31, 2016. |
• | Parion: Parion has the potential to receive milestone and royalty payments, including up to $490.0 million in development and regulatory milestone payments for the development of VX-371 and/or VX-551 to treat CF. |
• | CRISPR: CRISPR has the potential to receive milestone and royalty payments, including up to $420.0 million in development, regulatory and commercial milestone payments for each of up to six targets pursuant to the collaboration. |
• | Moderna: Moderna has the potential to receive milestone and royalty payments, including up to $275.0 million in development and regulatory milestones. |
• | BioAxone: BioAxone has the potential to receive milestone and royalty payments, including up to $90.0 million in development and regulatory milestone payments (including a license continuation fee). |
• | revenue recognition; |
• | intangible assets; |
• | collaborations and variable interest entities; |
• | research and development accruals; |
• | commercial supplies and inventories; |
• | income taxes; |
• | leases; |
• | restructuring expenses; and |
• | stock-based compensation expense. |
• | there is persuasive evidence that an arrangement exists between us and our customer; |
• | collectability is reasonably assured; and |
• | the price is fixed or determinable. |
• | In each period, we record net income (loss) attributable to our VIEs noncontrolling interest. This net income (loss) reflects our VIEs net income (loss) for the period as adjusted for gains and losses in the fair value of the contingent payments, which consist of milestone, royalty and option payments, payable by us to our VIEs. Determining the fair value of the contingent payments payable by us to our VIEs requires us to make significant estimates regarding the probability and potential timing of achieving each of the milestones pursuant to the agreement, future potential net sales of licensed products and appropriate discount rates. We expect that the net income (loss) attributed to noncontrolling interest will continue to be affected by changes in the fair value of the contingent payments. In 2016, 2015 and 2014, the fair value of contingent payments payable by us increased by $54.9 million, $4.5 million and $0.5 million, respectively. The increase in fair value of the contingent payments in 2016 primarily related to a Phase 2 clinical trial of VX-371, a compound in-licensed from Parion, achieving its primary safety endpoint in the second quarter of 2016. The increases in the fair value of contingent payments increased our net loss attributable to Vertex on a dollar-for-dollar basis. |
• | We recorded $255.3 million and $29.0 million, respectively, of intangible assets on our consolidated balance sheet based on our estimate of the fair value of Parion’s and BioAxone’s in-process research and development assets as of the transaction date and made significant estimates regarding: the probability of obtaining regulatory approval of licensed products; the timing and expected costs of clinical trials and other development activities; future potential cash flows from sales of drugs and the appropriate discount rates. If we are successful in developing a drug candidate, we will amortize the carrying value of the relevant intangible asset as part of cost of product revenues. We test these in-process research and development assets for impairment on an annual basis as of October 1, and more frequently if indicators are present or changes in circumstances suggest that impairment may exist. If the fair value of a licensed program becomes impaired as the result of safety or efficacy data from any ongoing or future clinical trial conducted by us or our competitors or because of any other information regarding the prospects of successfully developing or commercializing the licensed drug candidate, we could incur significant charges in the period in which the impairment occurs. We determined the fair value of these in-process research and development assets using probability-weighted present-value models. |
• | The revenues and expenses of our VIEs that are unrelated to the programs that we in-license from our VIEs and that are consolidated into our financial statements are set forth in the table below and represent less than 1% of our revenues and expenses in each period: |
2016 | 2015 | 2014 | |||||||||
(in thousands) | |||||||||||
Revenues | $ | 944 | $ | 2,888 | $ | — | |||||
Research and development expenses | (6,762 | ) | (3,642 | ) | (286 | ) | |||||
Sales, general and administrative expenses | (4,160 | ) | (5,836 | ) | (491 | ) | |||||
Other (expenses) income, net | (108 | ) | (56 | ) | 13 | ||||||
Loss attributable to noncontrolling interest before provision for income taxes | $ | (10,086 | ) | $ | (6,646 | ) | $ | (764 | ) |
• | We reflect all of our VIEs' cash and cash equivalents under the heading “restricted cash and cash equivalents (VIE)” on our consolidated balance sheets. We do not have any rights to our VIEs cash or cash equivalents, these resources are not available to fund research and development programs pursuant to the collaborations and these amounts do not provide us with any additional liquidity. Our VIEs have control over the restricted cash and cash equivalents (VIE), including the ability to distribute the restricted cash and cash equivalents to their equity holders, and as a result, these assets, although carried on our consolidated balance sheets, are not included in the discussion of our liquidity and should be disregarded when evaluating our financial condition. |
ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
ITEM 9A. | CONTROLS AND PROCEDURES |
• | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; |
• | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and |
• | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. |
ITEM 9B. | OTHER INFORMATION |
ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
ITEM 11. | EXECUTIVE COMPENSATION |
ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES |
Page Number in this Form 10-K | |
Report of Independent Registered Public Accounting Firm | |
Consolidated Statements of Operations for the years ended December 31, 2016, 2015 and 2014 | |
Consolidated Statements of Comprehensive Loss for the years ended December 31, 2016, 2015 and 2014 | |
Consolidated Balance Sheets as of December 31, 2016 and 2015 | |
Consolidated Statements of Shareholders’ Equity and Noncontrolling Interest for the years ended December 31, 2016, 2015 and 2014 | |
Consolidated Statements of Cash Flows for the years ended December 31, 2016, 2015 and 2014 | |
Notes to Consolidated Financial Statements |
Exhibit Number | Exhibit Description | Filed with this report | Incorporated by Reference herein from—Form or Schedule | Filing Date/ Period Covered | SEC File/ Reg. Number |
3.1 | Restated Articles of Organization of Vertex Pharmaceuticals Incorporated, as amended. | 10-Q (Exhibit 3.1) | August 4, 2015 | 000-19319 | |
3.2 | Amended and Restated By-Laws of Vertex Pharmaceuticals Incorporated, as subsequently amended on April 26, 2016. | 10-Q (Exhibit 3.1) | May 3, 2016 | 000-19319 | |
4.1 | Specimen stock certificate. | S-1 (Exhibit 4.1) | July 18, 1991 | 33-40966 | |
Collaboration Agreements | |||||
10.1 | Research, Development and Commercialization Agreement, dated as of May 24, 2004, between Vertex Pharmaceuticals Incorporated and Cystic Fibrosis Foundation Therapeutics Incorporated.† | 10-Q/A (Exhibit 10.2) | August 19, 2011 | 000-19319 | |
10.2 | Amendment No. 1 to Research, Development and Commercialization Agreement, dated as of January 6, 2006, between Vertex Pharmaceuticals Incorporated and Cystic Fibrosis Foundation Therapeutics Incorporated.† | 10-K (Exhibit 10.9) | March 16, 2006 | 000-19319 | |
10.3 | Amendment No. 2 to Research, Development and Commercialization Agreement, dated as of March 17, 2006, between Vertex Pharmaceuticals Incorporated and Cystic Fibrosis Foundation Therapeutics Incorporated. | 10-Q/A (Exhibit 10.6) | August 19, 2011 | 000-19319 | |
10.4 | Amendment No. 5 to Research, Development and Commercialization Agreement, effective as of April 1, 2011, between Vertex Pharmaceuticals Incorporated and Cystic Fibrosis Foundation Therapeutics Incorporated.† | 10-Q (Exhibit 10.3) | August 9, 2011 | 000-19319 | |
10.5 | Amendment No. 7 to Research, Development and Commercialization Agreement, dated October 13, 2016, between Vertex Pharmaceuticals Incorporated and Cystic Fibrosis Foundation Therapeutics Incorporated. † | X | |||
10.6 | Strategic Collaboration and License Agreement, dated as of June 4, 2015, by and among Parion Sciences, Inc., Vertex Pharmaceuticals Incorporated and Vertex Pharmaceuticals (Europe) Limited.† | 10-Q (Exhibit 10.2) | August 4, 2015 | 000-19319 |
Exhibit Number | Exhibit Description | Filed with this report | Incorporated by Reference herein from—Form or Schedule | Filing Date/ Period Covered | SEC File/ Reg. Number |
10.7 | Strategic Collaboration, Option and License Agreement, dated October 26, 2015, by and among CRISPR Therapeutics AG, CRISPR Therapeutics Limited, CRISPR Therapeutics, Inc., Tracr Hematology Ltd., Vertex Pharmaceuticals Incorporated and Vertex Pharmaceuticals (Europe) Limited.† | 10-K (Exhibit 10.6) | February 16, 2016 | 000-19319 | |
Leases | |||||
10.8 | Lease, dated May 5, 2011, between Fifty Northern Avenue LLC and Vertex Pharmaceuticals Incorporated.† | 10-Q (Exhibit 10.4) | August 9, 2011 | 000-19319 | |
10.9 | Lease, dated May 5, 2011, between Eleven Fan Pier Boulevard LLC and Vertex Pharmaceuticals Incorporated.† | 10-Q (Exhibit 10.5) | August 9, 2011 | 000-19319 | |
10.10 | Lease, dated as of January 18, 2001, between Kendall Square, LLC and Vertex Pharmaceuticals Incorporated.† | 10-K (Exhibit 10.16) | March 26, 2001 | 000-19319 | |
10.11 | Lease, dated December 2, 2015, between ARE-SD Region No. 23, LLC and Vertex Pharmaceuticals Incorporated. | 10-K (Exhibit 10.10) | February 16, 2016 | 000-19319 | |
Financing Agreements | |||||
10.12 | Credit Agreement, dated as of October 13, 2016, among Vertex Pharmaceuticals Incorporated, Bank of America, N.A. and the other lenders party thereto. | X | |||
10.13 | First Amendment to Credit Agreement, dated as of February 9, 2017, among Vertex Pharmaceuticals Incorporated, Bank of America, N.A. and the other lenders party thereto. | X | |||
Equity Plans | |||||
10.14 | 1996 Stock and Option Plan, as amended and restated as of March 14, 2005.* | 10-K (Exhibit 10.3) | March 16, 2005 | 000-19319 | |
10.15 | Form of Stock Option Grant under 1996 Stock and Option Plan.* | 8-K (Exhibit 10.1) | February 9, 2005 | 000-19319 | |
10.16 | Amended and Restated 2006 Stock and Option Plan.* | 10-Q (Exhibit 10.3) | August 8, 2012 | 000-19319 | |
10.17 | Form of Stock Option Agreement under Amended and Restated 2006 Stock and Option Plan (granted prior to July 30, 2013).* | 8-K (Exhibit 10.2) | May 15, 2006 | 000-19319 | |
10.18 | Form of Restricted Stock Agreement under Amended and Restated 2006 Stock and Option Plan (granted prior to July 30, 2013).* | 8-K (Exhibit 10.3) | May 15, 2006 | 000-19319 | |
10.19 | Form of Restricted Stock Agreement (Performance Accelerated Restricted Stock) under Amended and Restated 2006 Stock and Option Plan (granted prior to July 30, 2013).* | 8-K (Exhibit 10.4) | May 15, 2006 | 000-19319 | |
10.20 | Form of Stock Option Agreement under Amended and Restated 2006 Stock and Option Plan (granted on or after July 30, 2013).* | 10-K (Exhibit 10.20) | February 13, 2015 | 000-19319 | |
10.21 | Form of Restricted Stock Agreement under Amended and Restated 2006 Stock and Option Plan (granted on or after July 30, 2013).* | 10-K (Exhibit 10.21) | February 13, 2015 | 000-19319 | |
10.22 | Form of Restricted Stock Unit Agreement under Amended and Restated 2006 Stock and Option Plan (granted on or after July 30, 2013).* | 10-K (Exhibit 10.22) | February 13, 2015 | 000-19319 | |
10.23 | Amended and Restated 2013 Stock and Option Plan.* | DEF 14A (Appendix A) | April 30, 2015 | 000-19319 | |
10.24 | Form of Non-Qualified Stock Option Agreement under 2013 Stock and Option Plan.* | 10-K (Exhibit 10.17) | February 13, 2015 | 000-19319 | |
10.25 | Form of Restricted Stock Agreement under 2013 Stock and Option Plan.* | 10-K (Exhibit 10.18) | February 13, 2015 | 000-19319 | |
10.26 | Form of Restricted Stock Unit Agreement under 2013 Stock and Option Plan (U.S.).* | 10-K (Exhibit 10.25) | February 16, 2016 | 000-19319 | |
10.27 | Form of Restricted Stock Unit Agreement under 2013 Stock and Option Plan (International).* | 10-K (Exhibit 10.19) | February 13, 2015 | 000-19319 | |
10.28 | Non-Employee Director Deferred Compensation Plan.* | 10-K (Exhibit 10.27) | February 16, 2016 | 000-19319 | |
10.29 | Vertex Pharmaceuticals Incorporated Employee Stock Purchase Plan, as amended and restated as of July 12, 2016.* | 10-Q (Exhibit 10.1) | August 1, 2016 | 000-19319 | |
Agreements with Executive Officers and Directors | |||||
10.30 | Amended and Restated Employment Agreement, dated November 30, 2016, by and between Vertex Pharmaceuticals Incorporated and Jeffrey M. Leiden, M.D., Ph.D* | 8-K (Exhibit 10.1) | November 29, 2016 | 000-19319 |
Exhibit Number | Exhibit Description | Filed with this report | Incorporated by Reference herein from—Form or Schedule | Filing Date/ Period Covered | SEC File/ Reg. Number |
10.31 | Employee Non-disclosure, Non-competition and Inventions Agreement between Jeffrey M. Leiden and Vertex, dated December 14, 2011.* | 10-K (Exhibit 10.35) | February 22, 2012 | 000-19319 | |
10.32 | Employment Agreement, dated as of August 27, 2012, between Vertex Pharmaceuticals Incorporated and Stuart Arbuckle.* | 10-Q (Exhibit 10.1) | November 6, 2012 | 000-19319 | |
10.33 | Change of Control Agreement, dated as of August 27, 2012, between Vertex Pharmaceuticals Incorporated and Stuart Arbuckle.* | 10-Q (Exhibit 10.2) | November 6, 2012 | 000-19319 | |
10.34 | Employment Agreement, dated as of December 12, 2014, between Vertex Pharmaceuticals Incorporated and David Altshuler.* | 10-K (Exhibit 10.34) | February 16, 2016 | 000-19319 | |
10.35 | Change of Control Agreement, dated as of December 12, 2014, between Vertex Pharmaceuticals Incorporated and David Altshuler.* | 10-K (Exhibit 10.35) | February 16, 2016 | 000-19319 | |
10.36 | Amended and Restated Employment Agreement, dated as of November 8, 2004, between Vertex Pharmaceuticals Incorporated and Ian F. Smith.* | 10-Q (Exhibit 10.13) | November 9, 2004 | 000-19319 | |
10.37 | Amendment No. 1 to Amended and Restated Employment Agreement between Ian F. Smith and Vertex Pharmaceuticals Incorporated, dated December 29, 2008.* | 10-K (Exhibit 10.66) | February 17, 2009 | 000-19319 | |
10.38 | Employment Agreement, dated as of December 2, 2013, between Vertex Pharmaceuticals Incorporated and Jeffrey Chodakewicz.* | 10-Q (Exhibit 10.1) | March 31, 2015 | 000-19319 | |
10.39 | Change of Control Agreement, dated as of December 2, 2013, between Vertex Pharmaceuticals Incorporated and Jeffrey Chodakewicz.* | 10-Q (Exhibit 10.2) | March 31, 2015 | 000-19319 | |
10.40 | Employment Agreement, dated as of November 14, 2015, between Vertex Pharmaceuticals Incorporated and Michael Parini.* | X | |||
10.41 | Change of Control Agreement, dated as of November 9, 2015, between Vertex Pharmaceuticals Incorporated and Michael Parini.* | X | |||
10.42 | Third Amended and Restated Employment Agreement, dated as of February 26, 2013, between Vertex Pharmaceuticals Incorporated and Amit Sachdev.* | X | |||
10.43 | Third Amended and Restated Change of Control Agreement, dated as of February 26, 2013, between Vertex Pharmaceuticals Incorporated and Amit Sachdev.* | X | |||
10.44 | Form of Employee Non-Disclosure and Inventions Agreement.* | S-1 (Exhibit 10.4) | May 30, 1991 | 33-40966 | |
10.45 | Vertex Employee Compensation Plan.* | 10-K (Exhibit 10.41) | February 16, 2016 | 000-19319 | |
10.46 | Vertex Pharmaceuticals Non-Employee Board Compensation.* | 10-K (Exhibit 10.42) | February 16, 2016 | 000-19319 | |
Subsidiaries | |||||
21.1 | Subsidiaries of Vertex Pharmaceuticals Incorporated. | X | |||
Consent | |||||
23.1 | Consent of Independent Registered Public Accounting Firm, Ernst & Young LLP. | X | |||
Certifications | |||||
31.1 | Certification of the Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002. | X | |||
31.2 | Certification of the Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002. | X | |||
32.1 | Certification of the Chief Executive Officer and the Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002. | X | |||
101.INS | XBRL Instance | X | |||
101.SCH | XBRL Taxonomy Extension Schema | X | |||
101.CAL | XBRL Taxonomy Extension Calculation | X | |||
101.LAB | XBRL Taxonomy Extension Labels | X | |||
101.PRE | XBRL Taxonomy Extension Presentation | X | |||
101.DEF | XBRL Taxonomy Extension Definition | X |
† | Confidential portions of this document have been filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment. |
Vertex Pharmaceuticals Incorporated | ||
February 23, 2017 | By: | /s/ Jeffrey M. Leiden |
Jeffrey M. Leiden Chief Executive Officer |
Name | Title | Date | |||||||||||
/s/ Jeffrey M. Leiden | Chair of the Board, President and Chief Executive Officer (Principal Executive Officer) | ||||||||||||
Jeffrey M. Leiden | February 23, 2017 | ||||||||||||
/s/ Ian F. Smith | Executive Vice President, Chief Operating Officer and Chief Financial Officer (Principal Financial Officer) | ||||||||||||
Ian F. Smith | February 23, 2017 | ||||||||||||
/s/ Paul M. Silva | Senior Vice President and Corporate Controller (Principal Accounting Officer) | ||||||||||||
Paul M. Silva | February 23, 2017 | ||||||||||||
/s/ Sangeeta N. Bhatia | Director | ||||||||||||
Sangeeta N. Bhatia | February 23, 2017 | ||||||||||||
/s/ Joshua S. Boger | Director | ||||||||||||
Joshua S. Boger | February 23, 2017 | ||||||||||||
/s/ Terrence C. Kearney | Director | ||||||||||||
Terrence C. Kearney | February 23, 2017 | ||||||||||||
/s/ Yuchun Lee | Director | ||||||||||||
Yuchun Lee | February 23, 2017 | ||||||||||||
/s/ Margaret G. McGlynn | Director | ||||||||||||
Margaret G. McGlynn | February 23, 2017 | ||||||||||||
/s/ Bruce I. Sachs | Director | ||||||||||||
Bruce I. Sachs | February 23, 2017 | ||||||||||||
/s/ Elaine S. Ullian | Director | ||||||||||||
Elaine S. Ullian | February 23, 2017 | ||||||||||||
/s/ William D. Young | Director | ||||||||||||
William D. Young | February 23, 2017 |
/s/ Ernst & Young LLP |
VERTEX PHARMACEUTICALS INCORPORATED Consolidated Statements of Operations (in thousands, except per share amounts) | |||||||||||
Year Ended December 31, | |||||||||||
2016 | 2015 | 2014 | |||||||||
Revenues: | |||||||||||
Product revenues, net | $ | 1,683,632 | $ | 1,000,324 | $ | 487,821 | |||||
Royalty revenues | 16,600 | 23,959 | 40,919 | ||||||||
Collaborative revenues | 1,945 | 8,053 | 51,675 | ||||||||
Total revenues | 1,702,177 | 1,032,336 | 580,415 | ||||||||
Costs and expenses: | |||||||||||
Cost of product revenues | 206,811 | 117,151 | 39,725 | ||||||||
Royalty expenses | 3,649 | 7,361 | 21,262 | ||||||||
Research and development expenses | 1,047,690 | 995,922 | 855,506 | ||||||||
Sales, general and administrative expenses | 432,829 | 376,575 | 305,409 | ||||||||
Restructuring expenses | 1,262 | 2,206 | 50,925 | ||||||||
Total costs and expenses | 1,692,241 | 1,499,215 | 1,272,827 | ||||||||
Income (loss) from operations | 9,936 | (466,879 | ) | (692,412 | ) | ||||||
Interest expense, net | (81,432 | ) | (84,206 | ) | (72,863 | ) | |||||
Other income (expense), net | 4,130 | (6,715 | ) | 30,400 | |||||||
Loss from continuing operations before provision for income taxes | (67,366 | ) | (557,800 | ) | (734,875 | ) | |||||
Provision for income taxes | 16,665 | 30,381 | 6,958 | ||||||||
Loss from continuing operations | (84,031 | ) | (588,181 | ) | (741,833 | ) | |||||
Loss from discontinued operations, net of tax benefit of $0, $0 and $0, respectively | — | — | (912 | ) | |||||||
Net loss | (84,031 | ) | (588,181 | ) | (742,745 | ) | |||||
(Income) loss attributable to noncontrolling interest | (28,021 | ) | 31,847 | 4,190 | |||||||
Net loss attributable to Vertex | $ | (112,052 | ) | $ | (556,334 | ) | $ | (738,555 | ) | ||
Amounts attributable to Vertex: | |||||||||||
Loss from continuing operations | $ | (112,052 | ) | $ | (556,334 | ) | $ | (737,643 | ) | ||
Loss from discontinued operations | — | — | (912 | ) | |||||||
Net loss attributable to Vertex | $ | (112,052 | ) | $ | (556,334 | ) | $ | (738,555 | ) | ||
Amounts per share attributable to Vertex common shareholders: | |||||||||||
Net loss from continuing operations: | |||||||||||
Basic | $ | (0.46 | ) | $ | (2.31 | ) | $ | (3.14 | ) | ||
Diluted | $ | (0.46 | ) | $ | (2.31 | ) | $ | (3.14 | ) | ||
Net loss from discontinued operations: | |||||||||||
Basic | $ | — | $ | — | $ | — | |||||
Diluted | $ | — | $ | — | $ | — | |||||
Net loss: | |||||||||||
Basic | $ | (0.46 | ) | $ | (2.31 | ) | $ | (3.14 | ) | ||
Diluted | $ | (0.46 | ) | $ | (2.31 | ) | $ | (3.14 | ) | ||
Shares used in per share calculations: | |||||||||||
Basic | 244,685 | 241,312 | 235,307 | ||||||||
Diluted | 244,685 | 241,312 | 235,307 |
VERTEX PHARMACEUTICALS INCORPORATED Consolidated Statements of Comprehensive Loss (in thousands) | |||||||||||
Year ended December 31, | |||||||||||
2016 | 2015 | 2014 | |||||||||
Net loss | $ | (84,031 | ) | $ | (588,181 | ) | $ | (742,745 | ) | ||
Changes in other comprehensive income (loss): | |||||||||||
Unrealized holding gains (losses) on marketable securities, net of tax | 17,395 | 249 | (165 | ) | |||||||
Unrealized gains on foreign currency forward contracts, net of tax | 7,736 | 1,767 | 2,034 | ||||||||
Foreign currency translation adjustment | (5,782 | ) | (1,109 | ) | (646 | ) | |||||
Total changes in other comprehensive income (loss) | 19,349 | 907 | 1,223 | ||||||||
Comprehensive loss | (64,682 | ) | (587,274 | ) | (741,522 | ) | |||||
Comprehensive (income) loss attributable to noncontrolling interest | (28,021 | ) | 31,847 | 4,190 | |||||||
Comprehensive loss attributable to Vertex | $ | (92,703 | ) | $ | (555,427 | ) | $ | (737,332 | ) |
VERTEX PHARMACEUTICALS INCORPORATED Consolidated Balance Sheets (in thousands, except share and per share amounts) | |||||||
December 31, | |||||||
2016 | 2015 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 1,183,945 | $ | 714,768 | |||
Marketable securities, available-for-sale | 250,612 | 327,694 | |||||
Restricted cash and cash equivalents (VIE) | 47,762 | 78,910 | |||||
Accounts receivable, net | 201,083 | 173,838 | |||||
Inventories | 77,604 | 57,207 | |||||
Prepaid expenses and other current assets | 70,534 | 54,736 | |||||
Total current assets | 1,831,540 | 1,407,153 | |||||
Property and equipment, net | 698,362 | 697,715 | |||||
Intangible assets | 284,340 | 284,340 | |||||
Goodwill | 50,384 | 50,384 | |||||
Cost method investments | 20,276 | — | |||||
Note receivable | — | 30,000 | |||||
Restricted cash | 52 | 22,083 | |||||
Other assets | 11,833 | 6,912 | |||||
Total assets | $ | 2,896,787 | $ | 2,498,587 | |||
Liabilities and Shareholders’ Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 61,451 | $ | 74,942 | |||
Accrued expenses | 315,249 | 305,820 | |||||
Deferred revenues, current portion | 6,005 | 16,296 | |||||
Accrued restructuring expense, current portion | 6,047 | 7,894 | |||||
Capital lease obligations, current portion | 19,426 | 15,545 | |||||
Senior secured term loan, current portion | — | 71,296 | |||||
Customer deposits | 73,416 | — | |||||
Credit facility | 300,000 | — | |||||
Other liabilities, current portion | 10,943 | 14,374 | |||||
Total current liabilities | 792,537 | 506,167 | |||||
Deferred revenues, excluding current portion | 6,632 | 9,714 | |||||
Accrued restructuring expense, excluding current portion | 1,907 | 7,464 | |||||
Capital lease obligations, excluding current portion | 34,976 | 42,923 | |||||
Deferred tax liability | 134,063 | 110,439 | |||||
Construction financing lease obligation, excluding current portion | 486,359 | 472,611 | |||||
Senior secured term loan, excluding current portion | — | 223,863 | |||||
Other liabilities, excluding current portion | 102,122 | 31,778 | |||||
Total liabilities | 1,558,596 | 1,404,959 | |||||
Commitments and contingencies | |||||||
Shareholders’ equity: | |||||||
Preferred stock, $0.01 par value; 1,000,000 shares authorized; none issued and outstanding at December 31, 2015 and 2014 | — | — | |||||
Common stock, $0.01 par value; 500,000,000 shares authorized at December 31, 2016 and 2015; 248,300,517 and 246,306,818 shares issued and outstanding at December 31, 2016 and 2015, respectively | 2,450 | 2,427 | |||||
Additional paid-in capital | 6,506,795 | 6,197,500 | |||||
Accumulated other comprehensive income | 21,173 | 1,824 | |||||
Accumulated deficit | (5,373,836 | ) | (5,261,784 | ) | |||
Total Vertex shareholders’ equity | 1,156,582 | 939,967 | |||||
Noncontrolling interest | 181,609 | 153,661 | |||||
Total shareholders’ equity | 1,338,191 | 1,093,628 | |||||
Total liabilities and shareholders’ equity | $ | 2,896,787 | $ | 2,498,587 |
VERTEX PHARMACEUTICALS INCORPORATED Consolidated Statements of Shareholders’ Equity and Noncontrolling Interest (in thousands) | ||||||||||||||||||||||||||||||
Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Loss | Accumulated Deficit | Total Vertex Shareholders’ Equity | Noncontrolling Interest | Total Shareholders’ Equity | ||||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||||||||
Balance, December 31, 2013 | 233,789 | $ | 2,320 | $ | 5,321,286 | $ | (306 | ) | $ | (3,966,895 | ) | $ | 1,356,405 | $ | — | $ | 1,356,405 | |||||||||||||
Other comprehensive income, net of tax | 1,223 | 1,223 | 1,223 | |||||||||||||||||||||||||||
Net (loss) income | (738,555 | ) | (738,555 | ) | (4,190 | ) | (742,745 | ) | ||||||||||||||||||||||
Issuance of common stock under benefit plans | 7,975 | 65 | 274,743 | 274,808 | 274,808 | |||||||||||||||||||||||||
Stock-based compensation expense | 178,965 | 178,965 | 178,965 | |||||||||||||||||||||||||||
Tax benefit from equity compensation | 2,160 | 2,160 | 2,160 | |||||||||||||||||||||||||||
Noncontrolling interest upon consolidation | — | 25,367 | 25,367 | |||||||||||||||||||||||||||
Balance, December 31, 2014 | 241,764 | $ | 2,385 | $ | 5,777,154 | $ | 917 | $ | (4,705,450 | ) | $ | 1,075,006 | $ | 21,177 | $ | 1,096,183 | ||||||||||||||
Other comprehensive income, net of tax | 907 | 907 | 907 | |||||||||||||||||||||||||||
Net loss | (556,334 | ) | (556,334 | ) | (31,847 | ) | (588,181 | ) | ||||||||||||||||||||||
Issuance of common stock under benefit plans | 4,543 | 42 | 185,234 | 185,276 | 14 | 185,290 | ||||||||||||||||||||||||
Stock-based compensation expense | 235,112 | 235,112 | 235,112 | |||||||||||||||||||||||||||
Tax benefit from equity compensation | — | — | — | |||||||||||||||||||||||||||
Noncontrolling interest upon consolidation | — | 164,317 | 164,317 | |||||||||||||||||||||||||||
Balance, December 31, 2015 | 246,307 | $ | 2,427 | $ | 6,197,500 | $ | 1,824 | $ | (5,261,784 | ) | $ | 939,967 | $ | 153,661 | $ | 1,093,628 | ||||||||||||||
Other comprehensive income, net of tax | 19,349 | 19,349 | 19,349 | |||||||||||||||||||||||||||
Net loss | (112,052 | ) | (112,052 | ) | 28,021 | (84,031 | ) | |||||||||||||||||||||||
Issuance of common stock under benefit plans | 1,994 | 23 | 67,983 | 68,006 | — | 68,006 | ||||||||||||||||||||||||
Stock-based compensation expense | 241,312 | 241,312 | (73 | ) | 241,239 | |||||||||||||||||||||||||
Balance, December 31, 2016 | 248,301 | $ | 2,450 | $ | 6,506,795 | $ | 21,173 | $ | (5,373,836 | ) | $ | 1,156,582 | $ | 181,609 | $ | 1,338,191 |
VERTEX PHARMACEUTICALS INCORPORATED Consolidated Statements of Cash Flows (in thousands) | |||||||||||
Year Ended December 31, | |||||||||||
2016 | 2015 | 2014 | |||||||||
Cash flows from operating activities: | |||||||||||
Net loss | $ | (84,031 | ) | $ | (588,181 | ) | $ | (742,745 | ) | ||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | |||||||||||
Stock-based compensation expense | 237,705 | 231,025 | 177,542 | ||||||||
Depreciation and amortization expense | 61,398 | 62,343 | 63,257 | ||||||||
Deferred income taxes | 16,961 | 3,283 | 281 | ||||||||
Impairment of property and equipment | — | 2,516 | 1,689 | ||||||||
Excess tax benefit from share-based payment arrangements | — | — | (2,160 | ) | |||||||
Other non-cash items, net | 6,140 | 9,532 | — | ||||||||
Changes in operating assets and liabilities, excluding the effects of the acquisition and deconsolidation of variable interest entities: | |||||||||||
Accounts receivable, net | (33,027 | ) | (104,847 | ) | 7,428 | ||||||
Inventories | (16,450 | ) | (23,146 | ) | (16,469 | ) | |||||
Prepaid expenses and other assets | (8,699 | ) | (9,260 | ) | (15,771 | ) | |||||
Accounts payable | (11,745 | ) | (1,709 | ) | 25,048 | ||||||
Accrued expenses and other liabilities | 88,649 | 102,746 | (63,183 | ) | |||||||
Accrued restructuring expense | (7,426 | ) | (30,492 | ) | 17,502 | ||||||
Deferred revenues | (13,372 | ) | (19,242 | ) | (25,531 | ) | |||||
Net cash provided by provided by (used in) operating activities | 236,103 | (365,432 | ) | (573,112 | ) | ||||||
Cash flows from investing activities: | |||||||||||
Maturities of marketable securities | 757,562 | 1,067,443 | 1,557,938 | ||||||||
Purchases of marketable securities | (616,625 | ) | (633,041 | ) | (1,424,172 | ) | |||||
Payment for acquisition of variable interest entity | — | (80,000 | ) | (10,000 | ) | ||||||
Expenditures for property and equipment | (56,563 | ) | (45,302 | ) | (51,201 | ) | |||||
Investment in note receivable | (20,000 | ) | (30,000 | ) | — | ||||||
Investment in CRISPR | (13,075 | ) | — | — | |||||||
(Decrease) increase in restricted cash and cash equivalents | 22,029 | (21,981 | ) | — | |||||||
Decrease in restricted cash and cash equivalents (VIE) | 31,148 | 11,685 | 1,638 | ||||||||
Increase (decrease) in other assets | (7 | ) | 52 | (244 | ) | ||||||
Payments returned related to construction financing lease obligation | — | — | 8,050 | ||||||||
Net cash provided by investing activities | 104,469 | 268,856 | 82,009 | ||||||||
Cash flows from financing activities: | |||||||||||
Issuances of common stock under benefit plans | 68,230 | 185,592 | 274,615 | ||||||||
Payments on construction financing lease obligation | (432 | ) | (381 | ) | (336 | ) | |||||
Proceeds from lease financing | 11,208 | 23,662 | — | ||||||||
Payments on capital lease financing | (17,597 | ) | (19,954 | ) | (21,443 | ) | |||||
Proceeds from senior secured term loan | — | — | 294,243 | ||||||||
Payments on senior secured term loan | (75,000 | ) | — | — | |||||||
Proceeds from revolving credit facility | 74,965 | — | — | ||||||||
Payments of debt issuance costs | (3,103 | ) | — | — | |||||||
Advance from CFFT | 75,000 | — | — | ||||||||
Excess tax benefit from share-based payment arrangements | — | — | 2,160 | ||||||||
Net cash provided by financing activities | 133,271 | 188,919 | 549,239 | ||||||||
Effect of changes in exchange rates on cash | (4,666 | ) | (2,834 | ) | (2,176 | ) | |||||
Net increase in cash and cash equivalents | 469,177 | 89,509 | 55,960 | ||||||||
Cash and cash equivalents—beginning of period | 714,768 | 625,259 | 569,299 | ||||||||
Cash and cash equivalents—end of period | $ | 1,183,945 | $ | 714,768 | $ | 625,259 | |||||
Supplemental disclosure of cash flow information: | |||||||||||
Cash paid for interest | $ | 83,656 | $ | 85,613 | $ | 68,963 | |||||
Cash (received from) paid for income taxes | $ | (2,579 | ) | $ | 1,806 | $ | 1,210 | ||||
Non-cash investing and financing activities: | |||||||||||
Capitalization of costs related to construction financing lease obligation | $ | 14,238 | $ | — | $ | 25,564 | |||||
Assets acquired under capital lease obligations | $ | — | $ | — | $ | 9,188 | |||||
Issuances of common stock exercises from employee benefit plans receivable | $ | 68 | $ | 361 | $ | 637 | |||||
Proceeds from revolving credit facility directly paid to settle all outstanding obligations under the term loan | $ | 225,000 | $ | — | $ | — |
A. | Nature of Business and Accounting Policies |
Trade Allowances | Rebates, Chargebacks and Discounts | Product Returns | Other Incentives | Total | |||||||||||||||
(in thousands) | |||||||||||||||||||
2016 | |||||||||||||||||||
Beginning Balance | $ | 2,089 | $ | 44,669 | $ | 1,228 | $ | 1,310 | $ | 49,296 | |||||||||
Provision related to current period sales | 20,075 | 134,198 | 3,047 | 6,602 | 163,922 | ||||||||||||||
Adjustments related to prior period sales | (90 | ) | 154 | (17 | ) | (151 | ) | (104 | ) | ||||||||||
Credits/payments made | (19,506 | ) | (97,094 | ) | (766 | ) | (6,547 | ) | (123,913 | ) | |||||||||
Ending Balance | $ | 2,568 | $ | 81,927 | $ | 3,492 | $ | 1,214 | $ | 89,201 | |||||||||
2015 | |||||||||||||||||||
Beginning Balance | $ | 1,463 | $ | 29,102 | $ | 4,713 | $ | 745 | $ | 36,023 | |||||||||
Provision related to current period sales | 10,890 | 65,781 | 779 | 3,755 | 81,205 | ||||||||||||||
Adjustments related to prior period sales | (214 | ) | (19,410 | ) | (993 | ) | (235 | ) | (20,852 | ) | |||||||||
Credits/payments made | (10,050 | ) | (30,804 | ) | (3,271 | ) | (2,955 | ) | (47,080 | ) | |||||||||
Ending Balance | $ | 2,089 | $ | 44,669 | $ | 1,228 | $ | 1,310 | $ | 49,296 | |||||||||
2014 | |||||||||||||||||||
Beginning Balance | $ | 1,535 | $ | 68,244 | $ | 15,799 | $ | 1,555 | $ | 87,133 | |||||||||
Provision related to current period sales | 8,468 | 35,713 | 2,478 | 1,347 | 48,006 | ||||||||||||||
Adjustments related to prior period sales | (43 | ) | 329 | 3,056 | (72 | ) | 3,270 | ||||||||||||
Credits/payments made | (8,497 | ) | (75,184 | ) | (16,620 | ) | (2,085 | ) | (102,386 | ) | |||||||||
Ending Balance | $ | 1,463 | $ | 29,102 | $ | 4,713 | $ | 745 | $ | 36,023 |
B. | Collaborative Arrangements |
June 4, 2015 | |||
(in thousands) | |||
Up-front payment | $ | 80,000 | |
Fair value of contingent payments | 175,340 | ||
Total | $ | 255,340 |
June 4, 2015 | |||
(in thousands) | |||
Consideration transferred | $ | — | |
Noncontrolling interest | 164,317 | ||
Intangible assets | (255,340 | ) | |
Net other liabilities | 10,468 | ||
Deferred tax liability | 91,023 | ||
Goodwill | $ | 10,468 |
2016 | 2015 | 2014 | |||||||||
(in thousands) | |||||||||||
Loss attributable to noncontrolling interest before provision for income taxes | $ | 10,086 | $ | 6,646 | $ | 764 | |||||
Provision for income taxes | 16,743 | 29,731 | 3,876 | ||||||||
Increase in fair value of contingent payments | (54,850 | ) | (4,530 | ) | (450 | ) | |||||
Net (income) loss attributable to noncontrolling interest | $ | (28,021 | ) | $ | 31,847 | $ | 4,190 |
December 31, 2016 | December 31, 2015 | ||||||
(in thousands) | |||||||
Restricted cash and cash equivalents (VIE) | $ | 47,762 | $ | 78,910 | |||
Prepaid expenses and other current assets | 6,812 | 3,138 | |||||
Intangible assets | 284,340 | 284,340 | |||||
Goodwill | 19,391 | 19,391 | |||||
Other assets | 399 | 455 | |||||
Accounts payable | 415 | 676 | |||||
Taxes payable | 1,330 | 24,554 | |||||
Other current liabilities | 2,137 | 7,100 | |||||
Deferred tax liability, net | 131,446 | 110,438 | |||||
Other liabilities | 300 | 300 | |||||
Noncontrolling interest | 181,609 | 153,661 |
2016 | 2015 | 2014 | |||||||||
(in thousands) | |||||||||||
Royalty revenues | $ | 71 | $ | 1,518 | $ | 13,481 | |||||
Collaborative revenues | $ | (155 | ) | $ | 1,946 | $ | 7,104 | ||||
Total revenues attributable to the Janssen HCV collaboration | $ | (84 | ) | $ | 3,464 | $ | 20,585 |
C. | Earnings Per Share |
2016 | 2015 | 2014 | ||||||
(in thousands) | ||||||||
Stock options | 12,642 | 11,145 | 12,003 | |||||
Unvested restricted stock and restricted stock units | 3,546 | 3,024 | 3,091 |
D. | Fair Value Measurements |
Level 1: | Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. |
Level 2: | Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active. |
Level 3: | Unobservable inputs based on the Company’s assessment of the assumptions that market participants would use in pricing the asset or liability. |
Fair Value Measurements as of December 31, 2016 | |||||||||||||||
Fair Value Hierarchy | |||||||||||||||
Total | Level 1 | Level 2 | Level 3 | ||||||||||||
(in thousands) | |||||||||||||||
Financial instruments carried at fair value (asset position): | |||||||||||||||
Cash equivalents: | |||||||||||||||
Money market funds | $ | 280,560 | $ | 280,560 | $ | — | $ | — | |||||||
Marketable securities: | |||||||||||||||
Government-sponsored enterprise securities | 15,508 | 15,508 | — | — | |||||||||||
Corporate equity securities | 64,560 | 64,560 | — | — | |||||||||||
Commercial paper | 59,404 | — | 59,404 | — | |||||||||||
Corporate debt securities | 111,140 | — | 111,140 | — | |||||||||||
Prepaid and other current assets: | |||||||||||||||
Foreign currency forward contracts | 14,407 | — | 14,407 | — | |||||||||||
Other assets: | |||||||||||||||
Foreign currency forward contracts | 1,186 | $ | — | 1,186 | $ | — | |||||||||
Total financial assets | $ | 546,765 | $ | 360,628 | $ | 186,137 | $ | — | |||||||
Financial instruments carried at fair value (liability position): | |||||||||||||||
Other liabilities, current portion: | |||||||||||||||
Foreign currency forward contracts | $ | (144 | ) | $ | — | $ | (144 | ) | $ | — | |||||
Total financial liabilities | $ | (144 | ) | $ | — | $ | (144 | ) | $ | — |
Fair Value Measurements as of December 31, 2015 | |||||||||||||||
Fair Value Hierarchy | |||||||||||||||
Total | Level 1 | Level 2 | Level 3 | ||||||||||||
(in thousands) | |||||||||||||||
Financial instruments carried at fair value (asset position): | |||||||||||||||
Cash equivalents: | |||||||||||||||
Money market funds | $ | 199,507 | $ | 199,507 | $ | — | $ | — | |||||||
Government-sponsored enterprise securities | 85,994 | 85,994 | — | — | |||||||||||
Commercial paper | 34,889 | — | 34,889 | — | |||||||||||
Corporate debt securities | 11,533 | — | 11,533 | — | |||||||||||
Marketable securities: | |||||||||||||||
Government-sponsored enterprise securities | 87,162 | 87,162 | — | — | |||||||||||
Commercial paper | 99,123 | — | 99,123 | — | |||||||||||
Corporate debt securities | 141,409 | — | 141,409 | — | |||||||||||
Prepaid and other current assets: | |||||||||||||||
Foreign currency forward contracts | 5,161 | — | 5,161 | — | |||||||||||
Other assets: | |||||||||||||||
Foreign currency forward contracts | 605 | $ | — | 605 | $ | — | |||||||||
Total financial assets | $ | 665,383 | $ | 372,663 | $ | 292,720 | $ | — | |||||||
Financial instruments carried at fair value (liability position): | |||||||||||||||
Other liabilities, current portion: | |||||||||||||||
Foreign currency forward contracts | $ | (769 | ) | $ | — | $ | (769 | ) | $ | — | |||||
Other liabilities, excluding current portion: | |||||||||||||||
Foreign currency forward contracts | (132 | ) | — | (132 | ) | — | |||||||||
Total financial liabilities | $ | (901 | ) | $ | — | $ | (901 | ) | $ | — |
E. | Marketable Securities |
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||
(in thousands) | |||||||||||||||
December 31, 2016 | |||||||||||||||
Cash and cash equivalents: | |||||||||||||||
Cash and money market funds | $ | 1,183,945 | $ | — | $ | — | $ | 1,183,945 | |||||||
Total cash and cash equivalents | $ | 1,183,945 | $ | — | $ | — | $ | 1,183,945 | |||||||
Marketable securities: | |||||||||||||||
Government-sponsored enterprise securities (matures within 1 year) | $ | 15,506 | $ | 2 | $ | — | $ | 15,508 | |||||||
Corporate equity securities (matures within 1 year) | 43,213 | 21,347 | — | 64,560 | |||||||||||
Commercial paper (matures within 1 year) | 59,331 | 73 | — | 59,404 | |||||||||||
Corporate debt securities (matures within 1 year) | 111,225 | — | (85 | ) | 111,140 | ||||||||||
Total marketable securities | 229,275 | 21,422 | (85 | ) | 250,612 | ||||||||||
Total cash, cash equivalents and marketable securities | $ | 1,413,220 | $ | 21,422 | $ | (85 | ) | $ | 1,434,557 | ||||||
December 31, 2015 | |||||||||||||||
Cash and cash equivalents: | |||||||||||||||
Cash and money market funds | $ | 582,352 | $ | — | $ | — | $ | 582,352 | |||||||
Government-sponsored enterprise securities | 85,994 | — | — | 85,994 | |||||||||||
Commercial paper | 34,889 | — | — | 34,889 | |||||||||||
Corporate debt securities | 11,533 | — | — | 11,533 | |||||||||||
Total cash and cash equivalents | $ | 714,768 | $ | — | $ | — | $ | 714,768 | |||||||
Marketable securities: | |||||||||||||||
Government-sponsored enterprise securities (matures within 1 year) | $ | 87,176 | $ | — | $ | (14 | ) | $ | 87,162 | ||||||
Commercial paper (matures within 1 year) | 98,877 | 246 | — | 99,123 | |||||||||||
Corporate debt securities (matures within 1 year) | 141,515 | — | (106 | ) | 141,409 | ||||||||||
Total marketable securities | 327,568 | 246 | (120 | ) | 327,694 | ||||||||||
Total cash, cash equivalents and marketable securities | 1,042,336 | 246 | (120 | ) | 1,042,462 |
F. | Accumulated Other Comprehensive Income |
Foreign currency translation adjustment | Unrealized holding gains (losses) on marketable securities, net of tax | Unrealized (losses) gains on foreign currency forward contracts, net of tax | Total | ||||||||||||
(in thousands) | |||||||||||||||
Balance at December 31, 2013 | $ | (325 | ) | $ | 42 | $ | (23 | ) | $ | (306 | ) | ||||
Other comprehensive (loss) income before reclassifications | (646 | ) | (165 | ) | 3,591 | 2,780 | |||||||||
Amounts reclassified from accumulated other comprehensive loss | — | — | (1,557 | ) | (1,557 | ) | |||||||||
Net current period other comprehensive (loss) income | (646 | ) | (165 | ) | 2,034 | 1,223 | |||||||||
Balance at December 31, 2014 | $ | (971 | ) | $ | (123 | ) | $ | 2,011 | $ | 917 | |||||
Other comprehensive (loss) income before reclassifications | (1,109 | ) | 249 | 6,493 | 5,633 | ||||||||||
Amounts reclassified from accumulated other comprehensive loss | — | — | (4,726 | ) | (4,726 | ) | |||||||||
Net current period other comprehensive (loss) income | (1,109 | ) | 249 | 1,767 | 907 | ||||||||||
Balance at December 31, 2015 | $ | (2,080 | ) | $ | 126 | $ | 3,778 | $ | 1,824 | ||||||
Other comprehensive (loss) income before reclassifications | (5,782 | ) | 17,395 | 17,383 | 28,996 | ||||||||||
Amounts reclassified from accumulated other comprehensive loss | — | — | (9,647 | ) | (9,647 | ) | |||||||||
Net current period other comprehensive (loss) income | (5,782 | ) | 17,395 | 7,736 | 19,349 | ||||||||||
Balance at December 31, 2016 | $ | (7,862 | ) | $ | 17,521 | $ | 11,514 | $ | 21,173 |
G. | Hedging |
As of December 31, 2016 | As of December 31, 2015 | ||||||
Foreign Currency | (in thousands) | ||||||
Euro | $ | 164,368 | $ | 103,362 | |||
British pound sterling | 65,237 | 78,756 | |||||
Australian dollar | 23,776 | 27,167 | |||||
Total foreign currency forward contracts | $ | 253,381 | $ | 209,285 |
As of December 31, 2016 | ||||||||||
Assets | Liabilities | |||||||||
Classification | Fair Value | Classification | Fair Value | |||||||
(in thousands) | ||||||||||
Prepaid and other current assets | $ | 14,407 | Other liabilities, current portion | $ | (144 | ) | ||||
Other assets | 1,186 | Other liabilities, excluding current portion | — | |||||||
Total assets | $ | 15,593 | Total liabilities | $ | (144 | ) |
As of December 31, 2015 | ||||||||||
Assets | Liabilities | |||||||||
Classification | Fair Value | Classification | Fair Value | |||||||
(in thousands) | ||||||||||
Prepaid and other current assets | $ | 5,161 | Other liabilities, current portion | $ | (769 | ) | ||||
Other assets | 605 | Other liabilities, excluding current portion | (132 | ) | ||||||
Total assets | $ | 5,766 | Total liabilities | $ | (901 | ) |
As of December 31, 2016 | |||||||||||||||||||
Gross Amounts Recognized | Gross Amounts Offset | Gross Amount Presented | Gross Amount Not Offset | Legal Offset | |||||||||||||||
Foreign currency forward contracts | (in thousands) | ||||||||||||||||||
Total assets | $ | 15,593 | $ | — | $ | 15,593 | $ | (144 | ) | $ | 15,449 | ||||||||
Total liabilities | $ | (144 | ) | $ | — | $ | (144 | ) | $ | 144 | $ | — |
As of December 31, 2015 | |||||||||||||||||||
Gross Amounts Recognized | Gross Amounts Offset | Gross Amount Presented | Gross Amount Not Offset | Legal Offset | |||||||||||||||
Foreign currency forward contracts | (in thousands) | ||||||||||||||||||
Total assets | $ | 5,766 | $ | — | $ | 5,766 | $ | (901 | ) | $ | 4,865 | ||||||||
Total liabilities | (901 | ) | — | (901 | ) | 901 | — |
H. | Inventories |
As of December 31, | |||||||
2016 | 2015 | ||||||
(in thousands) | |||||||
Raw materials | $ | 6,348 | $ | 8,696 | |||
Work-in-process | 56,672 | 40,695 | |||||
Finished goods | 14,584 | 7,816 | |||||
Total | $ | 77,604 | $ | 57,207 |
I. | Property and Equipment |
As of December 31, | |||||||
2016 | 2015 | ||||||
(in thousands) | |||||||
Buildings | $ | 548,232 | $ | 531,627 | |||
Furniture and equipment | 236,634 | 218,623 | |||||
Software | 134,321 | 124,469 | |||||
Leasehold improvements | 108,702 | 106,768 | |||||
Computers | 58,271 | 52,295 | |||||
Total property and equipment, gross | 1,086,160 | 1,033,782 | |||||
Less: accumulated depreciation | (387,798 | ) | (336,067 | ) | |||
Total property and equipment, net | $ | 698,362 | $ | 697,715 |
J. | Intangible Assets and Goodwill |
K. | Additional Balance Sheet Detail |
As of December 31, | |||||||
2016 | 2015 | ||||||
(in thousands) | |||||||
Prepaid expenses | $ | 36,134 | $ | 22,058 | |||
Fair value foreign currency forward contracts | 14,407 | 5,161 | |||||
Taxes receivable | 3,213 | 14,682 | |||||
Other | 16,780 | 12,835 | |||||
Total | $ | 70,534 | $ | 54,736 |
As of December 31, | |||||||
2016 | 2015 | ||||||
(in thousands) | |||||||
Payroll and benefits | $ | 86,387 | $ | 87,873 | |||
Research, development and commercial contract costs | 62,756 | 55,677 | |||||
Product revenue allowances | 86,533 | 47,209 | |||||
Royalty payable | 52,845 | 60,191 | |||||
Taxes payable and reserves (including VIE taxes payable) | 6,883 | 30,953 | |||||
Professional fees | 6,512 | 7,455 | |||||
Interest | 1,390 | 4,642 | |||||
Other | 11,943 | 11,820 | |||||
Total | $ | 315,249 | $ | 305,820 |
As of December 31, | |||||||
2016 | 2015 | ||||||
(in thousands) | |||||||
Advance from CFFT | $ | 73,423 | $ | — | |||
Deferred rent | 19,551 | 22,235 | |||||
Other | 9,148 | 9,543 | |||||
Total | $ | 102,122 | $ | 31,778 |
L. | Long Term Obligations |
M. | Common Stock, Preferred Stock and Equity Plans |
As of December 31, 2016 | ||||||||||
Title of Plan | Group Eligible | Type of Award Granted | Awards Outstanding | Additional Awards Authorized for Grant | ||||||
2013 Stock and Option Plan | Employees, Non-employee Directors and Consultants | NSO, RS and RSU | 9,832,269 | 9,180,002 | ||||||
2006 Stock and Option Plan | Employees, Non-employee Directors and Consultants | NSO, RS and RSU | 6,355,357 | — | ||||||
Total | 16,187,626 | 9,180,002 |
Stock Options | Weighted-average Exercise Price | Weighted-average Remaining Contractual Life | Aggregate Intrinsic Value | |||||||||
(in thousands) | (per share) | (in years) | (in thousands) | |||||||||
Outstanding at December 31, 2015 | 11,145 | $ | 75.99 | |||||||||
Granted | 3,183 | $ | 91.36 | |||||||||
Exercised | (1,064 | ) | $ | 45.61 | ||||||||
Forfeited | (544 | ) | $ | 94.62 | ||||||||
Expired | (78 | ) | $ | 107.51 | ||||||||
Outstanding at December 31, 2016 | 12,642 | $ | 81.41 | 7.06 | $ | 124,939 | ||||||
Exercisable at December 31, 2016 | 7,323 | $ | 68.92 | 6.00 | $ | 121,671 | ||||||
Exercisable and Expected to Vest at December 31, 2016 | 12,200 | $ | 80.76 | 7.00 | $ | 124,892 |
Options Outstanding | Options Exercisable | |||||||||||||||
Range of Exercise Prices | Number Outstanding | Weighted-average Remaining Contractual Life | Weighted-average Exercise Price | Number Exercisable | Weighted-average Exercise Price | |||||||||||
(in thousands) | (in years) | (per share) | (in thousands) | (per share) | ||||||||||||
$18.93–$20.00 | 137 | 1.10 | $ | 18.93 | 137 | $ | 18.93 | |||||||||
$20.01–$40.00 | 1,696 | 3.19 | $ | 33.94 | 1,696 | $ | 33.94 | |||||||||
$40.01–$60.00 | 1,867 | 5.59 | $ | 48.26 | 1,762 | $ | 48.44 | |||||||||
$60.01–$80.00 | 1,345 | 7.11 | $ | 75.90 | 891 | $ | 75.60 | |||||||||
$80.01–$100.00 | 4,529 | 8.45 | $ | 90.60 | 1,548 | $ | 89.61 | |||||||||
$100.01–$120.00 | 1,604 | 8.05 | $ | 109.33 | 702 | $ | 109.29 | |||||||||
$120.01–$134.69 | 1,464 | 8.53 | $ | 130.58 | 587 | $ | 130.17 | |||||||||
Total | 12,642 | 7.06 | $ | 81.41 | 7,323 | $ | 68.92 |
Restricted Stock | Restricted Stock Units | ||||||||||||
Number of Units | Weighted-average Grant-date Fair Value | Number of Shares | Weighted-average Grant-date Fair Value | ||||||||||
(in thousands) | (per share) | (in thousands) | (per share) | ||||||||||
Unvested at December 31, 2015 | 2,831 | $ | 98.80 | 193 | $ | 98.36 | |||||||
Granted | 857 | $ | 91.49 | 847 | $ | 90.46 | |||||||
Vested | (817 | ) | $ | 79.28 | (59 | ) | $ | 83.13 | |||||
Cancelled | (258 | ) | $ | 98.56 | (48 | ) | $ | 94.54 | |||||
Unvested at December 31, 2016 | 2,613 | $ | 102.54 | 933 | $ | 92.35 |
Year Ended December 31, 2016 | |||
(in thousands, except per share amount) | |||
Number of shares | 272 | ||
Average price paid per share | $ | 70.70 |
N. | Stock-based Compensation Expense |
2016 | 2015 | 2014 | |||||||||
(in thousands) | |||||||||||
Stock-based compensation expense by line item: | |||||||||||
Research and development expenses | $ | 153,451 | $ | 152,955 | $ | 116,998 | |||||
Sales, general and administrative expenses | 84,254 | 78,070 | 60,544 | ||||||||
Total stock-based compensation expense included in costs and expenses | $ | 237,705 | $ | 231,025 | $ | 177,542 |
2016 | 2015 | 2014 | |||||||||
(in thousands) | |||||||||||
Stock-based compensation expense by type of award: | |||||||||||
Stock options | $ | 114,768 | $ | 129,276 | $ | 99,961 | |||||
Restricted stock and restricted stock units | 118,709 | 98,811 | 70,678 | ||||||||
ESPP share issuances | 7,835 | 7,025 | 8,326 | ||||||||
Less: stock-based compensation expense capitalized to inventories | (3,607 | ) | (4,087 | ) | (1,423 | ) | |||||
Total stock-based compensation expense included in costs and expenses | $ | 237,705 | $ | 231,025 | $ | 177,542 |
As of December 31, 2016 | |||||
Unrecognized Expense Net of Estimated Forfeitures | Weighted-average Recognition Period | ||||
(in thousands) | (in years) | ||||
Type of award: | |||||
Stock options | $ | 157,819 | 2.50 | ||
Restricted stock and restricted stock units | $ | 176,972 | 2.39 | ||
ESPP share issuances | $ | 4,080 | 0.58 |
2016 | 2015 | 2014 | ||||||
Expected stock price volatility | 46.77 | % | 47.29 | % | 50.86 | % | ||
Risk-free interest rate | 1.32 | % | 1.61 | % | 1.77 | % | ||
Expected term of options (in years) | 4.91 | 5.28 | 5.47 | |||||
Expected annual dividends | — | — | — |
• | Expected stock price volatility: Expected stock price volatility is calculated using the trailing one month average of daily implied volatilities prior to grant date. Implied volatility is based on options to purchase the Company’s stock with remaining terms of greater than one year that are regularly traded in the market. |
• | Risk-free interest rate: The Company bases the risk-free interest rate on the interest rate payable on U.S. Treasury securities in effect at the time of grant for a period that is commensurate with the assumed expected option term. |
• | Expected term of options: The expected term of options represents the period of time options are expected to be outstanding. The Company uses historical data to estimate employee exercise and post-vest termination behavior. The Company believes that all groups of employees exhibit similar exercise and post-vest termination behavior and therefore does not stratify employees into multiple groups in determining the expected term of options. |
• | Expected annual dividends: The estimate for annual dividends is $0.00 because the Company has not historically paid, and does not intend for the foreseeable future to pay, a dividend. |
2016 | 2015 | 2014 | ||||||
Expected stock price volatility | 48.22 | % | 47.20 | % | 60.32 | % | ||
Risk-free interest rate | 0.56 | % | 0.40 | % | 0.09 | % | ||
Expected term (in years) | 0.75 | 0.72 | 0.75 | |||||
Expected annual dividends | — | — | — |
O. | Other Arrangements |
P. | Income Taxes |
2016 | 2015 | 2014 | |||||||||
(in thousands) | |||||||||||
United States | $ | (147,860 | ) | $ | (272,326 | ) | $ | (645,465 | ) | ||
Foreign | 80,494 | (285,474 | ) | (89,410 | ) | ||||||
Loss from continuing operations before provision for income taxes | $ | (67,366 | ) | $ | (557,800 | ) | $ | (734,875 | ) |
2016 | 2015 | 2014 | |||||||||
(in thousands) | |||||||||||
Current taxes: | |||||||||||
United States | $ | (3,821 | ) | $ | 25,623 | $ | 2,853 | ||||
Foreign | 1,794 | 831 | 2,457 | ||||||||
State | 1,836 | 3,629 | 1,366 | ||||||||
Total current taxes | $ | (191 | ) | $ | 30,083 | $ | 6,676 | ||||
Deferred taxes: | |||||||||||
United States | $ | 18,659 | $ | 497 | $ | 244 | |||||
Foreign | (3,359 | ) | (355 | ) | — | ||||||
State | 1,556 | 156 | 38 | ||||||||
Total deferred taxes | $ | 16,856 | $ | 298 | $ | 282 | |||||
Provision for income taxes | $ | 16,665 | $ | 30,381 | $ | 6,958 |
2016 | 2015 | 2014 | |||||||||
(in thousands) | |||||||||||
Loss from continuing operations before provision for income taxes | $ | (67,366 | ) | $ | (557,800 | ) | $ | (734,875 | ) | ||
Expected tax provision (benefit) | (23,578 | ) | (195,230 | ) | (257,206 | ) | |||||
State taxes, net of federal benefit | 3,621 | 3,800 | 1,124 | ||||||||
Foreign rate differential | 21,346 | 47,402 | 39,335 | ||||||||
Tax credits | (47,773 | ) | (55,696 | ) | (33,788 | ) | |||||
Unbenefitted operating losses (gains) | 14,837 | 226,169 | 241,037 | ||||||||
Non-deductible expenses | 24,749 | 5,817 | 18,756 | ||||||||
Rate change | 12,836 | (1,224 | ) | (1,826 | ) | ||||||
Tax attribute expiration | 9,947 | — | — | ||||||||
Other | 680 | (657 | ) | (474 | ) | ||||||
Provision for income taxes | $ | 16,665 | $ | 30,381 | $ | 6,958 |
As of December 31, | |||||||
2016 | 2015 | ||||||
(in thousands) | |||||||
Deferred tax assets: | |||||||
Net operating loss | $ | 1,232,399 | $ | 1,250,642 | |||
Tax credit carryforwards | 367,402 | 315,535 | |||||
Property and equipment | 22 | — | |||||
Intangible assets | 34,938 | 14,673 | |||||
Deferred revenues | 31,205 | 9,341 | |||||
Stock-based compensation | 110,446 | 93,404 | |||||
Inventories | 4,705 | 5,913 | |||||
Accrued expenses | 23,078 | 27,236 | |||||
Currency translation adjustment | — | 222 | |||||
Unrealized loss | 5 | — | |||||
Construction financing lease obligation | 177,735 | 176,250 | |||||
Gross deferred tax assets | 1,981,935 | 1,893,216 | |||||
Valuation allowance | (1,731,186 | ) | (1,716,349 | ) | |||
Total deferred tax assets | 250,749 | 176,867 | |||||
Deferred tax liabilities: | |||||||
Property and equipment | (169,089 | ) | (175,424 | ) | |||
Acquired intangibles | (134,063 | ) | (110,439 | ) | |||
Deferred revenue | $ | (73,357 | ) | $ | — | ||
Unrealized gain | $ | (7,967 | ) | $ | (1,088 | ) | |
Net deferred tax liabilities | $ | (133,727 | ) | $ | (110,084 | ) |
2016 | 2015 | ||||||
(in thousands) | |||||||
Unrecognized tax benefits beginning of year | $ | 425 | $ | 880 | |||
Decrease due to statute of limitations expiring | (425 | ) | — | ||||
Decrease due to settlements and payments | — | (455 | ) | ||||
Unrecognized tax benefits end of year | $ | — | $ | 425 |
Q. | Restructuring Expenses |
Restructuring Expense | Cash Payments | Non-cash Expense | Liability as of December 31, 2003 | ||||||||||||
(in thousands) | |||||||||||||||
Lease restructuring and other operating lease expense | $ | 84,726 | $ | (15,200 | ) | $ | — | $ | 69,526 | ||||||
Employee severance, benefits and related costs | 2,616 | (2,616 | ) | — | — | ||||||||||
Leasehold improvements and asset impairments | 4,482 | — | (4,482 | ) | — | ||||||||||
Total | $ | 91,824 | $ | (17,816 | ) | $ | (4,482 | ) | $ | 69,526 |
2016 | 2015 | 2014 | 2004-2016 | ||||||||||||
(in thousands) | |||||||||||||||
Liability, beginning of the period | $ | 7,944 | $ | 11,596 | $ | 19,115 | $ | 69,526 | |||||||
Cash payments | (15,841 | ) | (14,625 | ) | (17,494 | ) | (226,912 | ) | |||||||
Cash received from subleases | 11,892 | 11,089 | 12,912 | 111,601 | |||||||||||
Credit for portion of facility Vertex decided to occupy in 2005 | — | — | — | (10,018 | ) | ||||||||||
Restructuring expense | 333 | (116 | ) | (2,937 | ) | 60,131 | |||||||||
Liability, end of the period | $ | 4,328 | $ | 7,944 | $ | 11,596 | $ | 4,328 |
2016 | 2015 | 2014 | |||||||||
(in thousands) | |||||||||||
Liability, beginning of the period | $ | 5,964 | $ | 33,390 | $ | 797 | |||||
Cash payments | (12,674 | ) | (30,022 | ) | (18,271 | ) | |||||
Cash received from subleases | 9,751 | 4,229 | — | ||||||||
Restructuring expense | 585 | (1,633 | ) | 50,864 | |||||||
Liability, end of the period | $ | 3,626 | $ | 5,964 | $ | 33,390 |
2016 | 2015 | 2014 | |||||||||
(in thousands) | |||||||||||
Liability, beginning of the period | $ | 1,450 | $ | 869 | $ | 8,441 | |||||
Cash payments | (1,794 | ) | (3,374 | ) | (10,570 | ) | |||||
Restructuring expense | 344 | 3,955 | 2,998 | ||||||||
Liability, end of the period | $ | — | $ | 1,450 | $ | 869 |
R. | Employee Benefits |
S. | Commitments and Contingencies |
Year | Fan Pier Leases | San Diego Leases | Kendall Square Lease | Kendall Sublease Income | Other Leases | Total Lease Commitments (Net of Sublease Income) | ||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
2017 | $ | 67,206 | $ | 3,147 | $ | 20,088 | $ | (15,687 | ) | $ | 13,156 | $ | 87,910 | |||||||||||
2018 | 67,206 | 3,245 | 6,696 | (5,236 | ) | 12,975 | 84,886 | |||||||||||||||||
2019 | 72,589 | 6,906 | — | — | 11,746 | 91,241 | ||||||||||||||||||
2020 | 72,589 | 9,208 | — | — | 11,100 | 92,897 | ||||||||||||||||||
2021 | 72,589 | 9,208 | — | — | 10,300 | 92,097 | ||||||||||||||||||
Thereafter | 535,032 | 138,217 | — | — | 62,409 | 735,658 | ||||||||||||||||||
Total minimum lease payments | $ | 887,211 | $ | 169,931 | $ | 26,784 | $ | (20,923 | ) | $ | 121,686 | $ | 1,184,689 |
Year | (in thousands) | |||
2017 | $ | 21,995 | ||
2018 | 21,393 | |||
2019 | 8,778 | |||
2020 | 3,336 | |||
2021 | 2,457 | |||
Thereafter | 543 | |||
Total payments | 58,502 | |||
Less: amount representing interest | (4,100 | ) | ||
Present value of payments | $ | 54,402 |
T. | Segment Information |
2016 | 2015 | 2014 | |||||||||
(in thousands) | |||||||||||
KALYDECO | $ | 703,432 | $ | 631,674 | $ | 463,750 | |||||
ORKAMBI | 979,590 | 350,663 | — | ||||||||
INCIVEK | 610 | 17,987 | 24,071 | ||||||||
Total product revenues, net | $ | 1,683,632 | $ | 1,000,324 | $ | 487,821 |
2016 | 2015 | 2014 | |||||||||
(in thousands) | |||||||||||
United States | $ | 1,321,807 | $ | 763,316 | $ | 361,074 | |||||
Outside of the United States | |||||||||||
Europe | 320,456 | 219,596 | 197,611 | ||||||||
Other | 59,914 | 49,424 | 21,730 | ||||||||
Total revenues outside of the United States | 380,370 | 269,020 | 219,341 | ||||||||
Total revenues | $ | 1,702,177 | $ | 1,032,336 | $ | 580,415 |
Percent of Total Gross Revenues | Percent of Gross Accounts Receivable | |||||||||||||
Year Ended December 31, | As of December 31, | |||||||||||||
2016 | 2015 | 2014 | 2016 | 2015 | ||||||||||
Walgreen Co. | 19 | % | 20 | % | 12 | % | 15 | % | 15 | % | ||||
CVS/Caremark | 19 | % | 17 | % | <10 | % | 17 | % | 17 | % | ||||
Accredo/Curascript | 15 | % | 15 | % | <10 | % | 10 | % | 16 | % |
As of December 31, | |||||||
2016 | 2015 | ||||||
(in thousands) | |||||||
United States | $ | 665,552 | $ | 661,421 | |||
Outside of the United States | |||||||
United Kingdom | 26,921 | 32,793 | |||||
Other | 5,889 | 3,501 | |||||
Total property and equipment, net outside of the United States | 32,810 | 36,294 | |||||
Total property and equipment, net | $ | 698,362 | $ | 697,715 |
U. | Quarterly Financial Data (unaudited) |
Three Months Ended | |||||||||||||||
March 31, 2016 | June 30, 2016 | September 30, 2016 | December 31, 2016 | ||||||||||||
(in thousands, except per share amounts) | |||||||||||||||
Revenues: | |||||||||||||||
Product revenues, net | $ | 394,410 | $ | 425,651 | $ | 409,689 | $ | 453,882 | |||||||
Royalty revenues | 3,596 | 5,282 | 3,835 | 3,887 | |||||||||||
Collaborative revenues | 74 | 675 | 259 | 937 | |||||||||||
Total revenues | 398,080 | 431,608 | 413,783 | 458,706 | |||||||||||
Costs and expenses: | |||||||||||||||
Cost of product revenues | 49,789 | 44,154 | 53,222 | 59,646 | |||||||||||
Royalty expenses | 860 | 1,098 | 855 | 836 | |||||||||||
Research and development expenses (1) | 255,860 | 271,008 | 272,370 | 248,452 | |||||||||||
Sales, general and administrative expenses | 105,214 | 111,652 | 106,055 | 109,908 | |||||||||||
Restructuring expenses | 687 | 343 | 8 | 224 | |||||||||||
Total costs and expenses | 412,410 | 428,255 | 432,510 | 419,066 | |||||||||||
(Loss) income from operations | (14,330 | ) | 3,353 | (18,727 | ) | 39,640 | |||||||||
Interest expense, net | (20,698 | ) | (20,155 | ) | (20,140 | ) | (20,439 | ) | |||||||
Other income (expense), net | 4,411 | (1,219 | ) | (167 | ) | 1,105 | |||||||||
(Loss) income before provision for income taxes | (30,617 | ) | (18,021 | ) | (39,034 | ) | 20,306 | ||||||||
Provision for (benefit from) income taxes | 5,485 | 18,130 | 503 | (7,453 | ) | ||||||||||
Net (loss) income | (36,102 | ) | (36,151 | ) | (39,537 | ) | 27,759 | ||||||||
(Income) loss attributable to noncontrolling interest | (5,529 | ) | (28,374 | ) | 696 | 5,186 | |||||||||
Net (loss) income attributable to Vertex | $ | (41,631 | ) | $ | (64,525 | ) | $ | (38,841 | ) | $ | 32,945 | ||||
Amounts per share attributable to Vertex common shareholders: | |||||||||||||||
Net (loss) income: | |||||||||||||||
Basic | $ | (0.17 | ) | $ | (0.26 | ) | $ | (0.16 | ) | $ | 0.13 | ||||
Diluted | $ | (0.17 | ) | $ | (0.26 | ) | $ | (0.16 | ) | $ | 0.13 | ||||
Shares used in per share calculations: | |||||||||||||||
Basic | 243,831 | 244,482 | 244,920 | 245,454 | |||||||||||
Diluted | 243,831 | 244,482 | 244,920 | 247,757 |
Three Months Ended | |||||||||||||||
March 31, 2015 | June 30, 2015 | September 30, 2015 | December 31, 2015 | ||||||||||||
(in thousands, except per share amounts) | |||||||||||||||
Revenues: | |||||||||||||||
Product revenues, net | $ | 130,875 | $ | 160,388 | $ | 302,511 | $ | 406,550 | |||||||
Royalty revenues | 6,792 | 5,077 | 5,759 | 6,331 | |||||||||||
Collaborative revenues | 842 | 611 | 1,546 | 5,054 | |||||||||||
Total revenues | 138,509 | 166,076 | 309,816 | 417,935 | |||||||||||
Costs and expenses: | |||||||||||||||
Cost of product revenues | 9,381 | 15,409 | 30,269 | 62,092 | |||||||||||
Royalty expenses | 2,926 | 1,451 | 1,691 | 1,293 | |||||||||||
Research and development expenses (2) | 215,599 | 223,858 | 246,284 | 310,181 | |||||||||||
Sales, general and administrative expenses | 85,860 | 94,394 | 99,772 | 96,549 | |||||||||||
Restructuring (income) expenses | (3,272 | ) | 2,128 | 1,826 | 1,524 | ||||||||||
Total costs and expenses | 310,494 | 337,240 | 379,842 | 471,639 | |||||||||||
Loss from operations | (171,985 | ) | (171,164 | ) | (70,026 | ) | (53,704 | ) | |||||||
Interest expense, net | (21,307 | ) | (21,111 | ) | (21,134 | ) | (20,654 | ) | |||||||
Other (expense) income, net | (5,113 | ) | 1,414 | (1,326 | ) | (1,690 | ) | ||||||||
Loss before provision for (benefit from) income taxes | (198,405 | ) | (190,861 | ) | (92,486 | ) | (76,048 | ) | |||||||
Provision for (benefit from) income taxes | 299 | 30,131 | 1,330 | (1,379 | ) | ||||||||||
Net loss | (198,704 | ) | (220,992 | ) | (93,816 | ) | (74,669 | ) | |||||||
Loss (income) attributable to noncontrolling interest | 98 | 32,144 | (1,333 | ) | 938 | ||||||||||
Net loss attributable to Vertex | $ | (198,606 | ) | $ | (188,848 | ) | $ | (95,149 | ) | $ | (73,731 | ) | |||
Amounts per share attributable to Vertex common shareholders: | |||||||||||||||
Net loss: | |||||||||||||||
Basic and diluted | $ | (0.83 | ) | $ | (0.78 | ) | $ | (0.39 | ) | $ | (0.30 | ) | |||
Shares used in per share calculations: | |||||||||||||||
Basic and diluted | 239,493 | 240,757 | 241,969 | 242,987 |
1. | In the second quarter of 2016, the Company incurred research and development expenses of approximately $10.0 million to acquire certain early-stage research assets. In the third quarter of 2016, the Company incurred research and development expenses related to a $20.0 million upfront payment to Moderna Therapeutics, Inc. See Note B, “Collaborative Arrangements,” for further information. |
2. | In the fourth quarter of 2015, the Company made a $75.0 million upfront payment to CRISPR Therapeutics in connection with the collaboration, which was recorded as a research and development expense. See Note B, “Collaborative Arrangements,” for further information. |
V. | Subsequent Events |
(i) | [***]Net Sales of Original Drug Products in the Field that are [***]; |
(ii) | [***]Net Sales of Original Drug Products in the Field [***]. |
i. | For Additional Products containing Additional Compounds first synthesized and/or tested by or under the direction of Vertex during the period commencing on [***]and ending on and including [***]: [***] of annual Net Sales of such Additional Product in the Field; |
ii. | For Additional Products containing Additional Compounds first synthesized and/or tested by or under the direction of Vertex during the period commencing on [***] and ending on and including [***]: [***] of annual Net Sales of such Additional Products in the Field; and |
iii. | For Additional Products containing Additional Compounds first synthesized and/or tested by or under the direction of Vertex during the period commencing on [***]and ending on and including [***]: [***] of annual Net Sales of such Additional Products in the Field. |
CYSTIC FIBROSIS FOUNDATION THERAPEUTICS INCORPORATED | VERTEX PHARMACEUTICALS INCORPORATED | ||
By: | /s/ Preston Campbell | By: | /s/ Ian Smith |
Name: | Preston Campbell | Name: | Ian Smith |
Title: | President & CEO | Title: | EVP& CFO |
By: | Wilmington Trust Company, not in its individual capacity but solely in its capacity as owner trustee |
RPI FINANCE TRUST | |
By: | Wilmington Trust Company, not in its individual capacity but solely in its capacity as owner trustee |
By: | s/ Eric A Kardash |
Name: | Eric A Kardash |
Title: | Assistant Vice President |
[***] | $[***] |
[***] | $[***] |
[***] | $[***] |
[***] [***] | $[***] $[***] |
Royalty Paid on Original Drug Products: | |
[***] | $[***] |
[***] | $[***] |
Total Royalty: | $[***] |
[***] | $[***] |
[***] | $[***] |
[***] | $[***] |
[***] | $[***] |
[***]: | |
[***] | $[***] |
[***] | $[***] |
Royalty Paid on Additional Product under Section 5.3.1(d)(i): | |
Total Annual Net Sales [***] | $[***] |
Royalty Paid on Additional Product under Section 5.3.1(d)(ii): | |
Total Annual Net Sales [***] | $[***] |
Total Royalty: | $[***] |
Page | ||
ARTICLE I | DEFINITIONS AND ACCOUNTING TERMS | 1 |
1.01 | Defined Terms | 1 |
1.02 | Other Interpretive Provisions | 43 |
1.03 | Accounting Terms | 44 |
1.04 | Rounding | 45 |
1.05 | Times of Day | 45 |
1.06 | Letter of Credit Amounts | 45 |
1.07 | UCC Terms | 46 |
1.08 | Rates; Currency Equivalents | 46 |
1.09 | Additional Alternative Currencies | 47 |
1.10 | Change of Currency | 47 |
ARTICLE II | COMMITMENTS AND CREDIT EXTENSIONS | 48 |
2.01 | Revolving Loans | 48 |
2.02 | Borrowings, Conversions and Continuations of Loans | 48 |
2.03 | Letters of Credit | 50 |
2.04 | Swingline Loans | 61 |
2.05 | Prepayments | 65 |
2.06 | Termination or Reduction of Commitments | 67 |
2.07 | Repayment of Loans | 67 |
2.08 | Interest and Default Rate | 68 |
2.09 | Fees | 68 |
2.10 | Computation of Interest and Fees; Retroactive Adjustments of Applicable Rate | 69 |
2.11 | Evidence of Debt | 70 |
2.12 | Payments Generally; Administrative Agent's Clawback | 71 |
2.13 | Sharing of Payments by Lenders | 73 |
2.14 | Cash Collateral | 74 |
2.15 | Defaulting Lenders | 76 |
2.16 | Increase in Revolving Commitments | 78 |
ARTICLE III | TAXES, YIELD PROTECTION AND ILLEGALITY | 81 |
3.01 | Taxes | 81 |
3.02 | Illegality | 86 |
3.03 | Inability to Determine Rates | 87 |
3.04 | Increased Costs; Reserves on Eurodollar Rate Loans | 88 |
3.05 | Compensation for Losses | 90 |
3.06 | Mitigation Obligations; Replacement of Lenders | 91 |
3.07 | Survival | 91 |
ARTICLE IV | CONDITIONS PRECEDENT TO CREDIT EXTENSIONS | 91 |
4.01 | Conditions of Initial Credit Extension | 91 |
4.02 | Conditions to all Credit Extensions | 94 |
ARTICLE V | REPRESENTATIONS AND WARRANTIES | 95 |
5.01 | Existence, Qualification and Power | 95 |
5.02 | Authorization; No Contravention | 95 |
5.03 | Governmental Authorization; Other Consents | 95 |
5.04 | Binding Effect | 96 |
5.05 | Financial Statements; No Material Adverse Effect | 96 |
5.06 | Litigation | 97 |
5.07 | No Default | 97 |
5.08 | Ownership of Property | 97 |
5.09 | Environmental Compliance | 97 |
5.10 | Insurance | 98 |
5.11 | Taxes | 98 |
5.12 | ERISA Compliance | 98 |
5.13 | Margin Regulations; Investment Company Act | 99 |
5.14 | Disclosure | 100 |
5.15 | Compliance with Laws | 100 |
5.16 | Solvency | 101 |
5.17 | Sanctions Concerns and Anti-Corruption Laws | 101 |
5.18 | Responsible Officers | 101 |
5.19 | Subsidiaries; Equity Interests; Loan Parties | 101 |
5.20 | Collateral Representations | 102 |
5.21 | [Reserved] | 103 |
5.22 | Intellectual Property; Licenses, Etc. | 103 |
5.23 | EEA Financial Institutions | 104 |
ARTICLE VI | AFFIRMATIVE COVENANTS | 104 |
6.01 | Financial Statements | 104 |
6.02 | Certificates; Other Information | 105 |
6.03 | Notices | 107 |
6.04 | Payment of Obligations | 108 |
6.05 | Preservation of Existence, Etc | 108 |
6.06 | Maintenance of Properties; Intellectual Property | 109 |
6.07 | Maintenance of Insurance | 109 |
6.08 | Compliance with Laws | 109 |
6.09 | Books and Records | 109 |
6.10 | Inspection Rights | 110 |
6.11 | Use of Proceeds | 110 |
6.12 | [Reserved] | 110 |
6.13 | Covenant to Guarantee Obligations | 110 |
6.14 | Covenant to Give Security | 111 |
6.15 | Further Assurances | 112 |
6.16 | Compliance with Environmental Laws | 113 |
6.17 | Approvals and Authorizations | 113 |
6.18 | Anti-Corruption Laws | 114 |
6.19 | Post-Closing Covenant | 114 |
ARTICLE VII | NEGATIVE COVENANTS | 114 |
7.01 | Liens | 114 |
7.02 | Indebtedness | 117 |
7.03 | Investments | 120 |
7.04 | Fundamental Changes | 123 |
7.05 | Dispositions | 125 |
7.06 | Restricted Payments | 127 |
7.07 | Change in Nature of Business | 128 |
7.08 | Transactions with Affiliates | 128 |
7.09 | Burdensome Agreements | 129 |
7.10 | Use of Proceeds | 130 |
7.11 | Financial Covenants | 130 |
7.12 | Amendments of Organization Documents; Fiscal Year; Legal Name, State of Formation; Form of Entity and Accounting Changes | 130 |
7.13 | Sale and Leaseback Transactions | 131 |
7.14 | Prepayments, Etc. of Indebtedness | 131 |
7.15 | Amendment, Etc. of Indebtedness | 132 |
7.16 | Sanctions | 132 |
7.17 | Anti-Corruption Laws | 132 |
7.18 | Massachusetts Security Corporation | 132 |
7.19 | Unrestricted Subsidiaries | 132 |
ARTICLE VIII | EVENTS OF DEFAULT AND REMEDIES | 132 |
8.01 | Events of Default | 132 |
8.02 | Remedies upon Event of Default | 135 |
8.03 | Application of Funds | 136 |
ARTICLE IX | ADMINISTRATIVE AGENT | 137 |
9.01 | Appointment and Authority | 137 |
9.02 | Rights as a Lender | 138 |
9.03 | Exculpatory Provisions | 138 |
9.04 | Reliance by Administrative Agent | 140 |
9.05 | Delegation of Duties | 140 |
9.06 | Resignation of Administrative Agent | 141 |
9.07 | Non-Reliance on Administrative Agent and Other Lenders | 142 |
9.08 | No Other Duties, Etc. | 143 |
9.09 | Administrative Agent May File Proofs of Claim; Credit Bidding | 143 |
9.10 | Collateral and Guaranty Matters | 144 |
9.11 | Secured Cash Management and Agreements and Secured Hedge Agreements | 145 |
ARTICLE X | CONTINUING GUARANTY | 146 |
10.01 | Guaranty | 146 |
10.02 | Rights of Lenders | 147 |
10.03 | Certain Waivers | 147 |
10.04 | Obligations Independent | 147 |
10.05 | Subrogation | 148 |
10.06 | Termination; Reinstatement | 148 |
10.07 | Stay of Acceleration | 148 |
10.08 | Condition of Borrower | 148 |
10.09 | Appointment of Borrower | 148 |
10.10 | Right of Contribution | 149 |
10.11 | Keepwell | 149 |
ARTICLE XI | MISCELLANEOUS | 149 |
11.01 | Amendments, Etc. | 149 |
11.02 | Notices; Effectiveness; Electronic Communications | 152 |
11.03 | No Waiver; Cumulative Remedies; Enforcement | 154 |
11.04 | Expenses; Indemnity; Damage Waiver | 155 |
11.05 | Payments Set Aside | 158 |
11.06 | Successors and Assigns | 158 |
11.07 | Treatment of Certain Information; Confidentiality | 165 |
11.08 | Right of Setoff | 166 |
11.09 | Interest Rate Limitation | 167 |
11.10 | Counterparts; Integration; Effectiveness | 167 |
11.11 | Survival of Representations and Warranties | 168 |
11.12 | Severability | 168 |
11.13 | Replacement of Lenders | 168 |
11.14 | Governing Law; Jurisdictional Etc | 169 |
11.15 | Waiver of Jury Trial | 170 |
11.16 | Subordination | 171 |
11.17 | No Advisory or Fiduciary Responsibility | 171 |
11.18 | Electronic Execution | 172 |
11.19 | USA PATRIOT Act Notice | 172 |
11.20 | Acknowledgement and Consent to Bail-In of EEA Financial Institutions | 173 |
11.21 | Judgment Currency | 173 |
11.22 | ENTIRE AGREEMENT | 174 |
Schedule 1.01(c) | Responsible Officers |
Schedule 1.01(d) | Existing Letters of Credit |
Schedule 5.19(a) | Subsidiaries, Joint Ventures, Partnerships and Equity Investments |
Schedule 5.19(b) | Loan Parties |
Schedule 5.20(b) | Documents, Instrument, and Tangible Chattel Paper |
Schedule 5.20(c)(i) | Deposit Accounts & Securities Accounts |
Schedule 5.20(c)(ii) | Electronic Chattel Paper & Letter-of-Credit Rights |
Schedule 5.20(d) | Commercial Tort Claims |
Schedule 5.20(e) | Pledged Equity Interests |
Schedule 5.20(f) | Other Properties |
Schedule 6.19 | Post-Closing Items |
Schedule 7.01 | Existing Liens |
Schedule 7.02 | Existing Indebtedness |
Schedule 7.03 | Existing Investments |
Schedule 7.09 | Burdensome Agreements |
Schedule 11.06 | DQ List |
Schedule 1.01(a) | Certain Addresses for Notices |
Schedule 1.01(b) | Commitments and Applicable Percentages |
Exhibit A | Form of Administrative Questionnaire |
Exhibit B | Form of Assignment and Assumption |
Exhibit C | Form of Compliance Certificate |
Exhibit D | Form of Joinder Agreement |
Exhibit E | Form of Loan Notice |
Exhibit F | Form of Permitted Acquisition Certificate |
Exhibit G | Form of Revolving Note |
Exhibit H | Form of Secured Party Designation Notice |
Exhibit I | Form of Solvency Certificate |
Exhibit J | Form of Swingline Loan Notice |
Exhibit K | Forms of U.S. Tax Compliance Certificates |
Exhibit L | Form of Funding Indemnity Letter |
Exhibit M | Form of Landlord Waiver |
Exhibit N | [Reserved] |
Exhibit O | Form of Notice of Loan Prepayment |
Exhibit P | Form of Letter of Credit Report |
Exhibit Q | Form of Notice of Additional L/C Issuer |
1.01 | Defined Terms. |
Applicable Rate | ||||
Level | Consolidated Leverage Ratio | Eurodollar Rate Loans & Letter of Credit Fee | Base Rate Loans | Commitment Fee |
1 | ≥ 2.50 to 1.00 | 2.50% | 1.50% | 0.35% |
2 | ≥ 1.50 to 1.00 but < 2.50 to 1.00 | 2.25% | 1.25% | 0.30% |
3 | ≥ 0.75 to 1.00 but < 1.50 to 1.00 | 2.00% | 1.00% | 0.25% |
4 | < 0.75 to 1.00 | 1.75% | 0.75% | 0.20% |
1.02 | Other Interpretive Provisions. |
1.03 | Accounting Terms. |
1.04 | Rounding. |
1.05 | Times of Day. |
1.06 | Letter of Credit Amounts. |
1.07 | UCC Terms. |
1.08 | Rates; Currency Equivalents. |
1.09 | Additional Alternative Currencies. |
1.10 | Change of Currency. |
2.01 | Revolving Loans. Subject to the terms and conditions set forth herein, each Revolving Lender severally agrees to make loans (each such loan, a “Revolving Loan”) to the Borrower, in Dollars from time to time, on any Business Day during the Availability Period, in an aggregate amount not to exceed at any time outstanding the amount of such Lender’s Revolving Commitment; provided, however, that after giving effect to any Revolving Borrowing, (i) the Total Revolving Outstandings shall not exceed the Aggregate Revolving Commitments, and (ii) the Revolving Exposure of any Lender shall not exceed such Revolving Lender’s Revolving Commitment. Within the limits of each Revolving Lender’s Revolving Commitment, and subject to the other terms and conditions hereof, the Borrower may borrow Revolving Loans, prepay under Section 2.05, and reborrow under this Section 2.01. Revolving Loans may be Base Rate Loans or Eurodollar Rate Loans, as further provided herein; provided, however, any Revolving Borrowings made on the Closing Date shall be made as Base Rate Loans unless the Borrower delivers a Funding Indemnity Letter not less than three (3) Business Days prior to the date of such Revolving Borrowing. |
2.02 | Borrowings, Conversions and Continuations of Loans. |
2.03 | Letters of Credit. |
2.04 | Swingline Loans. |
2.05 | Prepayments. |
2.06 | Termination or Reduction of Commitments. |
2.07 | Repayment of Loans. |
2.08 | Interest and Default Rate. |
2.09 | Fees. |
2.10 | Computation of Interest and Fees; Retroactive Adjustments of Applicable Rate. |
2.11 | Evidence of Debt. |
2.12 | Payments Generally; Administrative Agent’s Clawback. |
2.13 | Sharing of Payments by Lenders. |
2.14 | Cash Collateral. |
2.15 | Defaulting Lenders. |
2.16 | Increase in Revolving Commitments. |
3.01 | Taxes. |
3.02 | Illegality. |
3.03 | Inability to Determine Rates. |
3.04 | Increased Costs; Reserves on Eurodollar Rate Loans. |
3.05 | Compensation for Losses. |
3.06 | Mitigation Obligations; Replacement of Lenders. |
3.07 | Survival. |
4.01 | Conditions of Initial Credit Extension. |
4.02 | Conditions to all Credit Extensions. |
5.01 | Existence, Qualification and Power. |
5.02 | Authorization; No Contravention. |
5.03 | Governmental Authorization; Other Consents. |
5.04 | Binding Effect. |
5.05 | Financial Statements; No Material Adverse Effect. |
5.06 | Litigation. |
5.07 | No Default. |
5.08 | Ownership of Property. |
5.09 | Environmental Compliance. |
5.10 | Insurance. |
5.11 | Taxes. |
5.12 | ERISA Compliance. |
5.13 | Margin Regulations; Investment Company Act. |
5.14 | Disclosure. |
5.15 | Compliance with Laws. |
5.16 | Solvency. |
5.17 | Sanctions Concerns and Anti-Corruption Laws. |
5.18 | Responsible Officers. |
5.19 | Subsidiaries; Equity Interests; Loan Parties. |
5.20 | Collateral Representations. |
5.21 | [Reserved]. |
5.22 | Intellectual Property; Licenses, Etc. |
5.23 | EEA Financial Institutions. |
6.01 | Financial Statements. |
6.02 | Certificates; Other Information. |
6.03 | Notices. |
6.04 | Payment of Obligations. |
6.05 | Preservation of Existence, Etc. |
6.06 | Maintenance of Properties; Intellectual Property. |
6.07 | Maintenance of Insurance. |
6.08 | Compliance with Laws. |
6.09 | Books and Records. |
6.10 | Inspection Rights. |
6.11 | Use of Proceeds. |
6.12 | [Reserved]. |
6.13 | Covenant to Guarantee Obligations. |
6.14 | Covenant to Give Security. |
6.15 | Further Assurances. |
6.16 | Compliance with Environmental Laws. |
6.17 | Approvals and Authorizations. |
6.18 | Anti-Corruption Laws. |
6.19 | Post-Closing Covenant. |
7.01 | Liens. |
7.02 | Indebtedness. |
7.03 | Investments. |
7.04 | Fundamental Changes. |
7.05 | Dispositions. |
7.06 | Restricted Payments. |
7.07 | Change in Nature of Business. |
7.08 | Transactions with Affiliates. |
7.09 | Burdensome Agreements. |
7.10 | Use of Proceeds. |
7.11 | Financial Covenants. |
7.12 | Amendments of Organization Documents; Fiscal Year; Legal Name, State of Formation; Form of Entity and Accounting Changes. |
7.13 | Sale and Leaseback Transactions. |
7.14 | Prepayments, Etc. of Indebtedness. |
7.15 | Amendment, Etc. of Indebtedness. |
7.16 | Sanctions. |
7.17 | Anti-Corruption Laws. |
7.18 | Massachusetts Security Corporation. |
7.19 | Unrestricted Subsidiaries. |
8.01 | Events of Default. |
8.02 | Remedies upon Event of Default. |
8.03 | Application of Funds. |
9.01 | Appointment and Authority. |
9.02 | Rights as a Lender. |
9.03 | Exculpatory Provisions. |
9.04 | Reliance by Administrative Agent. |
9.05 | Delegation of Duties. |
9.06 | Resignation of Administrative Agent. |
9.07 | Non-Reliance on Administrative Agent and Other Lenders. |
9.08 | No Other Duties, Etc. |
9.09 | Administrative Agent May File Proofs of Claim; Credit Bidding. |
9.10 | Collateral and Guaranty Matters. |
9.11 | Secured Cash Management Agreements and Secured Hedge Agreements. |
10.01 | Guaranty. |
10.02 | Rights of Lenders. |
10.03 | Certain Waivers. |
10.04 | Obligations Independent. |
10.05 | Subrogation. |
10.06 | Termination; Reinstatement. |
10.07 | Stay of Acceleration. |
10.08 | Condition of Borrower. |
10.09 | Appointment of Borrower. |
10.10 | Right of Contribution. |
10.11 | Keepwell. |
11.01 | Amendments, Etc. |
11.02 | Notices; Effectiveness; Electronic Communications. |
11.03 | No Waiver; Cumulative Remedies; Enforcement. |
11.04 | Expenses; Indemnity; Damage Waiver. |
11.05 | Payments Set Aside. |
11.06 | Successors and Assigns. |
11.07 | Treatment of Certain Information; Confidentiality. |
11.08 | Right of Setoff. |
11.09 | Interest Rate Limitation. |
11.10 | Counterparts; Integration; Effectiveness. |
11.11 | Survival of Representations and Warranties. |
11.12 | Severability. |
11.13 | Replacement of Lenders. |
11.14 | Governing Law; Jurisdiction; Etc. |
11.15 | Waiver of Jury Trial. |
11.16 | Subordination. |
11.17 | No Advisory or Fiduciary Responsibility. |
11.18 | Electronic Execution. |
11.19 | USA PATRIOT Act Notice. |
11.20 | Acknowledgement and Consent to Bail-In of EEA Financial Institutions. |
11.21 | Judgment Currency. |
11.22 | ENTIRE AGREEMENT. |
VERTEX PHARMACEUTICALS INCORPORATED | ||
By: | /s/ | Jeffrey Leiden |
Name: | Jeffrey Leiden | |
Title: | Chief Executive Officer and President |
By: | /s/ | Ian Smith |
Name: | Ian Smith | |
Title: | Executive Vice President, Chief Financial Officer and Treasurer |
VERTEX PHARMACEUTICALS (SAN DIEGO) LLC | ||
By: | /s/ | Ian Smith |
Name: | Ian Smith | |
Title: | Treasurer |
VERTEX HOLDINGS, INC. | ||
By: | /s/ | Ian Smith |
Name: | Ian Smith | |
Title: | Treasurer |
VERTEX PHARMACEUTICALS (DISTRIBUTION) INCORPORATED | ||
By: | /s/ | Ian Smith |
Name: | Ian Smith | |
Title: | Treasurer |
VERTEX PHARMACEUTICALS (DELAWARE) LLC | ||
By: | /s/ | Ian Smith |
Name: | Ian Smith | |
Title: | Treasurer |
VERTEX PHARMACEUTICALS (PUERTO RICO) LLC | ||
By: | /s/ | Ian Smith |
Name: | Ian Smith | |
Title: | Treasurer |
BANK OF AMERICA, N.A., as Administrative Agent | ||
By: | /s/ | Angela M. Larkin |
Name: | Angela M. Larkin | |
Title: | Assistant Vice President |
BANK OF AMERICA, N.A., as a Lender, a L/C Issuer and Swingline Lender | ||
By: | /s/ | Linda E. Alto |
Name: | Linda E. Alto | |
Title: | Senior Vice President |
SUNTRUST BANK, as a Lender | ||
By: | /s/ | Ben Cumming |
Name: | Ben Cumming | |
Title: | Director |
CITIZENS BANK N.A., as a Lender | ||
By: | /s/ | R. Scott Haskell |
Name: | R. Scott Haskell | |
Title: | Managing Director |
THE BANK OF TOKYO - MITSUBISHI UFJ LTD., as a Lender | ||
By: | /s/ | Teuta Ghilaga |
Name: | Teuta Ghilaga | |
Title: | Director |
CITIBANK, N.A., as a Lender | |
/s/ | Laura Fogarty |
Laura Fogarty | |
Vice President |
KEYBANK NATIONAL ASSOCIATION, as a Lender | ||
By: | /s/ | Raymond T. Kelley |
Name: | Raymond T. Kelley | |
Title: | Senior Vice President |
HSBC BANK USA NATIONAL ASSOCIATION, as a Lender | ||
By: | /s/ | Zhiyan Zeng |
Name: | Zhiyan Zeng | |
Title: | Vice President |
Section 1. | Amendments to Credit Agreement. |
By: | /s/ Ian Smith |
Name: | Ian Smith |
Title: | Executive Vice President, COO & CFO |
By: | /s/ Ian Smith |
Name: | Ian Smith |
Title: | Director |
By: | /s/ Ian Smith |
Name: | Ian Smith |
Title: | Director |
By: | /s/ Ian Smith |
Name: | Ian Smith |
Title: | Director |
By: | /s/ Ian Smith |
Name: | Ian Smith |
Title: | Director |
By: | /s/ Ian Smith |
Name: | Ian Smith |
Title: | Treasurer |
By: | /s/ Angela Larkin |
Name: | Angela Larkin |
Title: | Assistant Vice President |
By: | /s/ Linda Alto |
Name: | Linda Alto |
Title: | Senior Vice President |
By: | /s/ Katherine Bass |
Name: | Katherine Bass |
Title: | Director |
By: | /s/ Evan Moriarty |
Name: | Evan Moriarty |
Title: | Assistant Vice President |
By: | /s/ Prasanna Manyem |
Name: | Prasanna Manyem |
Title: | Vice President |
By: | /s/ Teuta Ghilaga |
Name: | Teuta Ghilaga |
Title: | Director |
By: | /s/ Laura Fogarty |
Name: | Laura Fogarty |
Title: | Vice President |
By: | /s/ Neil Buitening |
Name: | Neil Buitening |
Title: | Senior Vice President |
By: | /s/ Elise M. Russo |
Name: | Elise M. Russo |
Title: | Senior Vice President |
(i) | the Executive’s duties are materially diminished to an extent that results in either (A) the Executive no longer being an “officer,” as such term is defined in Rule 16a-1(f) promulgated under the Securities Exchange Act of 1934; or (B) the Executive ceases to be a member of the executive management team of the Company; or |
(ii) | the Executive’s Base Salary is decreased unless such reduction is part of an across-the-board proportionate reduction in the salaries of the Company’s senior management team; or |
(iii) | the office to which the Executive is assigned is relocated to a place 35 or more miles away and such relocation is not at the Executive’s request or with the Executive’s prior agreement (and other than, for Executives assigned to the Company’s principal executive offices, in connection with a change in location of the Company’s principal executive offices); |
(i) | Base Salary earned by Executive but not paid through the date of termination of Executive’s employment under this Section 9(b); and |
(ii) | any amounts earned, accrued or owing to the Executive but not yet paid under Sections 5, 6, or 7 above. |
(i) | Base Salary earned by Executive but not paid through the date of termination of Executive’s employment under this Section 9(c); |
(ii) | all incentive compensation awards earned by Executive but not paid prior to the date of termination of Executive’s employment under this Section 9(c); |
(iii) | a cash payment to the Executive in an amount equal to the Severance Payment, payable within ten days after the execution of a general release and expiration, without revocation, of any applicable revocation periods under the general release provided that if the 60-day period during which the release is required to become effective and irrevocable begins in one calendar year and ends in another calendar year, the Severance Payment shall not be made before the first day of the second calendar year; |
(iv) | any amounts earned, accrued or owing to the Executive but not yet paid under Sections 5, 6 or 7 above; |
(v) | if COBRA coverage is elected by the Executive, the Company shall pay the cost of insurance continuation premiums on the Executive’s behalf (whether or not covered by COBRA) to continue standard medical, dental and life insurance |
(A) | the date 12 months after the date the Executive’s employment is terminated; or |
(B) | the date, or dates, on which the Executive receives equivalent coverage and benefits under the plans, programs and/or arrangements of a subsequent employer (such coverage and benefits to be determined on a coverage-by-coverage or benefit-by-benefit basis). |
/s/ Jeffrey M. Leiden |
Jeffrey M. Leiden, M.D., Ph.D. |
Chairman, President & Chief Executive Officer |
/s/ Michael Parini |
Michael Parini |
I. | Definitions. For the purposes of this Amended and Restated Change of Control Agreement (this “Agreement”), capitalized terms shall have the following meanings: |
1. | “Cause” shall mean: |
(a) | your conviction of a crime involving moral turpitude; |
(b) | your willful refusal or failure to follow a lawful directive or instruction of the Company’s Board of Directors or the individual(s) to whom you report, provided that you receive prior written notice of the directive(s) or instruction(s) that you failed to follow, and provided further that the Company, in good faith, gives you 30 days to correct such failure and further provided that if you correct the failure(s), any termination of your employment on account of such failure shall not be treated for purposes of this Agreement as a termination of employment for “Cause”; |
(c) | in carrying out your duties you commit (i) willful gross negligence, or (ii) willful gross misconduct, resulting in either case in material harm to the Company, unless such act, or failure to act, was believed by you, in good faith, to be in the best interests of the Company; or |
(d) | your violation of the Company’s policies made known to you regarding confidentiality, securities trading or inside information. |
2. | “Change of Control” shall mean that: |
(a) | any “person” or “group” as such terms are used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934 (the “Act”), becomes a beneficial owner, as such term is used in Rule 13d-3 promulgated under the Act, of securities of the Company |
(b) | all or substantially all the business or assets of the Company are sold or disposed of, or the Company or a subsidiary of the Company combines with another company pursuant to a merger, consolidation, or other similar transaction, other than (i) a transaction solely for the purpose of reincorporating the Company or one of its subsidiaries in a different jurisdiction or recapitalizing or reclassifying the Company’s stock; or (ii) a merger or consolidation in which the shareholders of the Company immediately prior to such merger or consolidation continue to own at least a majority of the outstanding voting securities of the Company or the surviving entity immediately after the merger or consolidation. |
3. | “Code” shall mean the Internal Revenue Code of 1986, as amended. |
4. | “Disability” shall mean a disability as determined under the Company's long-term disability plan or program in effect at the time the disability first occurs, or if no such plan or program exists at the time of disability, then a “disability” as defined Section 22(e)(3) of the Code. |
5. | “Good Reason” shall mean one of the following events has occurred without your consent: |
(a) | You suffer a material reduction in the authorities, duties or job title and responsibilities associated with your position as Executive Vice President, Chief Legal Officer for the Company as of the date hereof; |
(b) | your annual base salary is decreased; |
(c) | the office to which you are assigned is relocated to a place 35 or more miles away; or |
(d) | following a Change of Control, the Company’s successor fails to assume the Company’s rights and obligations under this Agreement; |
6. | “Termination Date” shall mean the last day of your employment with the Company. |
II. | Severance Benefits upon Change of Control. If: |
(A) | your employment is terminated by the Company (except for termination for Cause or due to a Disability) and the Termination Date is within 90 days prior to a Change of Control or within 12 months after a Change of Control; or |
(B) | you, of your own initiative, (i) terminate your employment for Good Reason (in accordance with the notice and cure provisions set forth in Section I.5 above) and (ii) the event giving rise to Good Reason occurs within 90 days prior to a Change of Control or within 12 months after a Change of Control; |
1. | Severance Payment. In exchange for your execution within 60 days of the Termination Date of a general release, in a form satisfactory to the Company, of all claims against the Company, its subsidiaries, and its and their officers, directors and representatives, that becomes enforceable and irrevocable within such 60-day period, the Company shall make a cash payment (the “Severance Payment”) to you in an amount equal to: |
(a) | (i) your annual base salary (provided, however, that if you terminate your employment for Good Reason based on a reduction in your annual base salary, then the annual base salary to be used in calculating the Severance Payment shall be your annual base salary in effect immediately prior to such reduction in annual base salary) plus your target bonus under any bonus program applicable to you for the year in which the Termination Date occurs; plus |
(b) | a prorata portion of your target bonus for the portion of the year in which the Termination Date occurs under any bonus program applicable to you; plus |
(c) | all cash incentive compensation awards earned by you but not paid prior to the Termination Date; provided that, if a fiscal year has been completed and the incentive award for such fiscal year has not been determined, the incentive compensation for such completed fiscal year shall equal the target bonus for such fiscal year. |
2. | Accelerated Vesting. |
(a) | On the Termination Date, stock options for the purchase of the Company’s securities held by you as of the Termination Date and not then exercisable shall immediately become exercisable in full. The options to which this accelerated vesting applies shall remain exercisable until the earlier of (a) the end of the 90-day period immediately following the later of (i) the Termination Date or (ii) the date of the Change of Control and (b) the date the stock option(s) would otherwise expire; and |
(b) | On the Termination Date, the Company’s lapsing repurchase right with respect to shares of restricted stock held by you shall lapse in full (subject to your making satisfactory arrangements with the Company providing for the payment to the Company of all required withholding taxes). |
3. | Continued Insurance Coverage. If COBRA coverage is elected by you, the Company shall pay the cost of insurance continuation premiums on your behalf (whether or not covered by COBRA) to continue standard medical, dental and life insurance coverage for you (or the cash equivalent of same if you are ineligible for continued coverage) until the earlier of (i) |
4. | No Mitigation. You shall not be required to mitigate the amount of the Severance Payment or any other benefit provided under this Agreement by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this Agreement be reduced (except as provided in Article II Section 3(ii)) by any compensation earned by you as the result of other employment, by retirement benefits, or be offset against any amount claimed to be owed by you to the Company or otherwise (except for any required withholding taxes); provided, that if the Company makes any other severance payments to you under any other program or agreement, such amounts shall be offset against the payments the Company is obligated to make pursuant to this Agreement. |
III. | Miscellaneous. |
1. | Employee’s Obligations. Upon the termination of employment, you shall promptly deliver to the Company all property of the Company and all material documents, statistics, account records, programs and other similar tangible items which may by in your possession or under your control and which relate in a material way to the business or affairs of the Company or its subsidiaries, and no copies of any such documents or any part thereof shall be retained by you. |
2. | Entire Agreement. This Agreement and the “Employee Non-Disclosure, Non-Competition & Inventions Agreement” previously executed by you covers the entire understanding of the parties as to the subject matter hereof, superseding all prior understandings and agreements related hereto, including the previous Change of Control Agreement between you and the Company. No modification or amendment of the terms and conditions of this Agreement shall be effective unless in writing and signed by the parties or their respective duly authorized agents, provided, however, that the Company may, without your consent, unilaterally adopt amendments that may be required so that this Agreement continues to comply with applicable law or regulation, including without limitation Section 409A of the Code, provided such amendments do not adversely affect the benefits to be provided to you under Section II of this Agreement. |
3. | Governing Law. This Agreement shall be governed by the laws of The Commonwealth of Massachusetts, as applied to contracts entered into and performed entirely in Massachusetts by Massachusetts residents. |
4. | Successors and Assigns. This Agreement may be assigned by the Company upon a sale, transfer or reorganization of the Company. Upon a Change of Control, the Company shall require the successor to assume the Company’s rights and obligations under this Agreement. The Company’s failure to do so shall constitute a material breach of this Agreement. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their successors, permitted assigns, legal representatives and heirs. |
By: /s/ Jeffrey M. Leiden |
Jeffrey M. Leiden, M.D., Ph.D. |
Chairman, President & Chief Executive Officer |
/s/ Michael J. Parini |
Michael J. Parini |
(i) | the Executive is assigned to any duties or responsibilities that are inconsistent, in any significant respect, with the scope of duties and responsibilities customarily associated with the position and office of Senior Vice President, Global Government Strategy, Market Access and Value, or other position at the level of at least Senior Vice President and Member of the Executive Team, provided that such reassignment of duties or responsibilities is not due to the Executive’s Disability or performance, nor is at the Executive’s request; or |
(ii) | the Executive suffers a reduction in the authorities, duties, and responsibilities associated with the Executive’s position as Senior Vice President, Global Government Strategy, Market Access and Value, provided that any modification to the Executive's authorities, duties and responsibilities that do not result in the Executive ceasing to be a member of the executive management team of the Company at a level at least equivalent to Senior Vice President shall not for purposes of this Agreement be a reduction in the authorities duties and responsibilities associated with Executive's position as Senior Vice President Global Government Strategy, Market Access and Value, and further provided that such reassignment of duties or responsibilities is not due to the Executive’s Disability or the Executive’s performance, and is not at the Executive’s request or with the Executive’s prior agreement; or |
(iii) | the Executive’s Base Salary is decreased below Base Salary, other than a reduction that is part of an across-the-board proportionate reduction in the salaries of the senior management team; or |
(iv) | the Executive’s office is relocated thirty-five (35) or more miles from Washington, D.C. (other than in connection with relocation of the Company’s offices); |
(i) | Base Salary earned by Executive but not paid through the date of termination of Executive’s employment under this Section 9(b); and |
(ii) | any amounts earned, accrued or owing to the Executive but not yet paid under Sections 5, 6, or 7 above. |
(i) | Base Salary earned by Executive but not paid through the date of termination of Executive’s employment under this Section 9(c); |
(ii) | all incentive compensation awards earned by Executive but not paid prior to the date of termination of Executive’s employment under this Section 9(c); |
(iii) | a cash payment to the Executive in an amount equal to the Severance Payment, payable within ten days after the execution of a general release and expiration, without revocation, |
(iv) | any amounts earned, accrued or owing to the Executive but not yet paid under Sections 5, 6 or 7 above; |
(v) | if COBRA coverage is elected by the Executive, the Company shall pay the cost of insurance continuation premiums on the Executive’s behalf (whether or not covered by COBRA) to continue standard medical, dental and life insurance coverage for the Executive (or the cash equivalent of same in the event the Executive is ineligible for continued coverage) until the earlier of: |
(A) | the date 12 months after the date the Executive’s employment is terminated; or |
(B) | the date, or dates, on which the Executive receives equivalent coverage and benefits under the plans, programs and/or arrangements of a subsequent employer (such coverage and benefits to be determined on a coverage-by-coverage or benefit-by-benefit basis). |
(vi) | all stock options held by the Executive as of the date of the termination under this Section 9(c) that are not exercisable as of that date shall be deemed to have been held by the Executive for an additional 18 months, for purposes of vesting and exercise rights, and any options that become exercisable shall remain exercisable until the earlier of (1) the end of the 90-day period following the date of termination of employment or (2) the date the stock option would otherwise expire; and |
(vii) | the Company’s lapsing repurchase right shall lapse with respect to the Pro-Rata Share of Restricted Stock. |
I. | Definitions. For the purposes of this Agreement, capitalized terms shall have the following meaning: |
1. | “Cause” shall mean: |
(a) | your conviction of a crime of moral turpitude; |
(b) | your willful refusal or failure to follow a lawful directive or instruction of the Company’s Board of Directors or the individual(s) to whom you report, provided that you receive prior written notice of the directive(s) or instruction(s) that you failed to follow, and provided further that the Company, in good faith, gives you 30 days to correct such failure and further provided if you correct the failure(s), any termination of your employment on account of such failure shall not be treated for purposes of this Agreement as a termination of employment for “Cause;” |
(c) | in carrying out your duties you commit (i) willful gross negligence, or (ii) willful gross misconduct, resulting in either case in material harm to the Company, unless such act, or failure to act, was believed by you, in good faith, to be in the best interests of the Company; or |
(d) | your violation of the Company’s policies made known to you regarding confidentiality, securities trading or inside information. |
2. | “Change of Control” shall mean that: |
(a) | any “person” or “group” as such terms are used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934 (the “Act”), becomes a beneficial owner, as such term is used in Rule 13d-3 promulgated under the Act, of securities of the Company representing more than 50% of the combined voting power of the outstanding securities of the Company having the right to vote in the election of directors; or |
(b) | all or substantially all the business or assets of the Company are sold or disposed of, or the Company or a subsidiary of the Company combines with another company pursuant to a merger, consolidation, or other similar transaction, other than (i) a transaction solely for the purpose of reincorporating the Company or one of its subsidiaries in a different jurisdiction or recapitalizing or reclassifying the Company’s stock; or (ii) a merger or consolidation in which the shareholders of the Company immediately prior to such merger or consolidation continue to own at least a majority of the outstanding voting securities of the Company or the surviving entity immediately after the merger or consolidation. |
3. | “Code” shall mean the Internal Revenue Code of 1986, as amended. |
4. | “Disability” shall mean a disability as determined under the Company's long-term disability plan or program in effect at the time the disability first occurs, or if no such plan or program exists at the time of disability, then a “disability” as defined Section 22(e)(3) of the Code. |
5. | “Good Reason” shall mean one of the following events has occurred without your consent: |
(a) | you are assigned to any duties or responsibilities that are inconsistent, in any significant respect, with the scope of duties and responsibilities customarily associated with the position and office of Senior Vice President, Global Government Strategy, Market Access and Value, provided that such reassignment of duties or responsibilities is not due to your Disability or performance, nor is at your request; |
(b) | you suffer a reduction in the authorities, duties, and responsibilities customarily associated with your position as Senior Vice President, Global Government Strategy, Market Access and Value, provided that such reassignment of authorities, duties and responsibilities is not due to your Disability or your performance, and is not at your request or with your prior agreement; |
(c) | your annual base salary is decreased; |
(d) | the office to which you are assigned (currently Washington, D.C.) is relocated to a place 35 or more miles away; or |
(e) | following a Change of Control, the Company’s successor fails to assume the Company’s rights and obligations under both this Agreement and the Employment Agreement, as it may be amended from time to time; |
6. | “Termination Date” shall mean the last day of your employment with the Company. |
II. | Severance Benefits upon Change of Control. If: |
(A) | your employment is terminated by the Company (except for termination for Cause or due to a Disability) and the Termination Date is within 90 days prior to a Change of Control or within 12 months after a Change of Control; or |
(B) | you, of your own initiative, (i) terminate your employment for Good Reason (in accordance with the notice and cure provisions set forth in Section I.5 above) and (ii) the event giving rise to Good Reason occurs within 90 days prior to a Change of Control or within 12 months after a Change of Control; |
1. | Severance Payment. In exchange for your execution within 60 days of the Termination Date of a general release, in a form satisfactory to the Company, of all claims against the Company, its subsidiaries, and its and their officers, directors and representatives, that becomes enforceable and irrevocable within such 60-day period, the Company shall make a cash payment (the “Severance Payment”) to you in an amount equal to |
(a) | your annual base salary (provided, however, that if you terminate your employment for Good Reason based on a reduction in your annual base salary, then the annual base salary to be used in calculating the Severance Payment shall be your annual base salary in effect immediately prior to such reduction in annual base salary) plus your target bonus under any bonus program applicable to you for the year in which the Termination Date occurs; plus |
(b) | a pro rata portion of your target bonus for the year in which the Termination Date occurs under any bonus program applicable to you; plus |
(c) | all cash incentive compensation awards earned by you but not paid prior to the Termination Date; provided that, if a fiscal year has been completed and the incentive award for such fiscal year has not been determined, the incentive compensation for such completed fiscal year shall equal the target bonus for such fiscal year. |
2. | Accelerated Vesting. |
(a) | On the Termination Date, stock options for the purchase of the Company’s securities held by you as of the Termination Date and not then exercisable shall immediately become exercisable in full. The options to which this accelerated vesting applies shall remain exercisable until the earlier of (a) the end of the 90-day period immediately following the later of (i) the Termination Date or (ii) the date of the Change of Control or (b) the date the stock option(s) would otherwise expire; and |
(b) | On the Termination Date, the Company’s lapsing repurchase right with respect to shares of restricted stock held by you shall lapse in full (subject to your making satisfactory arrangements with the Company providing for the payment to the Company of all required withholding taxes). |
3. | Continued Insurance Coverage. If COBRA coverage is elected by you, the Company shall pay the cost of insurance continuation premiums on your behalf (whether or not covered by COBRA) to continue standard medical, dental and life insurance coverage for you (or the cash equivalent of same if you are ineligible for continued coverage) for a maximum of 12 months after the Termination Date. |
4. | No Mitigation. You shall not be required to mitigate the amount of the Severance Payment or any other benefit provided under this Agreement by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this Agreement be reduced by any compensation earned by you as the result of other employment, by retirement benefits, or be offset against any amount claimed to be owed by you to the Company or otherwise (except for any required withholding taxes); provided, that if the Company makes any other severance payments to you under any other program or agreement, including any payments under the Employment Agreement, such amounts shall be offset against the payments the Company is obligated to make pursuant to this Agreement. |
III. | Miscellaneous. |
1. | Employee’s Obligations. Upon the termination of employment, you shall promptly deliver to the Company all property of the Company and all material documents, statistics, account records, programs and other similar tangible items which may by in your possession or under your control and which relate in a material way to the business or affairs of the Company or its subsidiaries, and no copies of any such documents or any part thereof shall be retained by you. |
2. | Entire Agreement. This Agreement, the Employment Agreement, and the “Employee Non-Disclosure, Non-Competition & Inventions Agreement” previously executed by you covers the entire understanding of the parties as to the subject matter hereof, superseding all prior understandings and agreements related hereto. No modification or amendment of the terms and conditions of this Agreement shall be effective unless in writing and signed by the parties or their respective duly authorized agents. |
3. | Governing Law. This Agreement shall be governed by the laws of The Commonwealth of Massachusetts, as applied to contracts entered into and performed entirely in Massachusetts by Massachusetts residents. |
4. | Successors and Assigns. This Agreement may be assigned by the Company upon a sale, transfer or reorganization of the Company. Upon a Change of Control, the Company shall require the successor to assume the Company’s rights and obligations under this Agreement. The Company’s failure to do so shall constitute a material breach of this Agreement. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their successors, permitted assigns, legal representatives and heirs. |
Vertex Pharmaceuticals Incorporated | |
By: | /s/ Matthew W. Emmens |
Name: | Matthew W. Emmens |
Title: | President, Chairman and Chief Executive Officer |
/s/ Amit Sachdev |
Amit Sachdev |
(1) | Registration Statement (Form S-3 No. 333-211096) of Vertex Pharmaceuticals Incorporated, |
(2) | Registration Statement (Form S-8 No. 333-104362) pertaining to the Vertex Pharmaceuticals Incorporated 1996 Stock and Option Plan, as amended, |
(3) | Registration Statement (Form S-8 Nos. 333-134482, 333-150946, 333-160442, 333-166803 and 333-184787) pertaining to the Vertex Pharmaceuticals Incorporated Amended and Restated 2006 Stock and Option Plan (formerly known as the Vertex Pharmaceuticals Incorporated 2006 Stock and Option Plan), |
(4) | Registration Statement (Form S-8 No. 333-184784) pertaining to the Vertex Pharmaceuticals Incorporated Employee Stock Purchase Plan, and |
(5) | Registration Statement (Form S-8 Nos. 333-188737, 333-197466 and 333-206075) pertaining to the Amended and Restated Vertex Pharmaceuticals Incorporated 2013 Stock and Option Plan (formerly known as the Vertex Pharmaceuticals Incorporated 2013 Stock and Option Plan); |
1. | I have reviewed this Annual Report on Form 10-K of Vertex Pharmaceuticals Incorporated; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | February 23, 2017 | /s/ Jeffrey M. Leiden |
Jeffrey M. Leiden | ||
Chief Executive Officer and President |
1. | I have reviewed this Annual Report on Form 10-K of Vertex Pharmaceuticals Incorporated; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | February 23, 2017 | /s/ Ian F. Smith |
Ian F. Smith | ||
Executive Vice President, Chief Operating Officer and Chief Financial Officer |
Date: | February 23, 2017 | |
/s/ Jeffrey M. Leiden | ||
Jeffrey M. Leiden | ||
Chief Executive Officer and President | ||
Date: | February 23, 2017 | |
/s/ Ian F. Smith | ||
Ian F. Smith | ||
Executive Vice President, Chief Operating Officer and Chief Financial Officer |
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Document and Entity Information - USD ($) $ in Billions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Feb. 10, 2017 |
Jun. 30, 2016 |
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Document and Entity Information [Abstract] | |||
Entity Registrant Name | VERTEX PHARMACEUTICALS INC / MA | ||
Entity Central Index Key | 0000875320 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Filer Category | Large Accelerated Filer | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2016 | ||
Document Fiscal Year Focus | 2016 | ||
Document Fiscal Period Focus | FY | ||
Amendment Flag | false | ||
Entity Public Float | $ 21.1 | ||
Entity Common Stock, Shares Outstanding | 248,438,127 | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes |
Consolidated Statements of Operations (Parenthetical) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Income Statement [Abstract] | |||
Loss from discontinued operations, tax (benefit) provision | $ 0 | $ 0 | $ 0 |
Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Comprehensive Income (Loss), Net of Tax, Including Portion Attributable to Noncontrolling Interest [Abstract] | |||
Net loss | $ (84,031) | $ (588,181) | $ (742,745) |
Changes in other comprehensive income (loss): | |||
Unrealized holding gains (losses) on marketable securities, net of tax | 17,395 | 249 | (165) |
Unrealized gains on foreign currency forward contracts, net of tax | 7,736 | 1,767 | 2,034 |
Foreign currency translation adjustment | (5,782) | (1,109) | (646) |
Total changes in other comprehensive income (loss) | 19,349 | 907 | 1,223 |
Comprehensive loss | (64,682) | (587,274) | (741,522) |
Comprehensive (income) loss attributable to noncontrolling interest | (28,021) | 31,847 | 4,190 |
Comprehensive loss attributable to Vertex | $ (92,703) | $ (555,427) | $ (737,332) |
Consolidated Balance Sheets (Parenthetical) - $ / shares |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Preferred stock, par value (usd per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized (shares) | 1,000,000 | 1,000,000 |
Preferred stock, shares issued (shares) | 0 | 0 |
Preferred stock, shares outstanding (shares) | 0 | 0 |
Common stock, par value (usd per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (shares) | 500,000,000 | 500,000,000 |
Common stock, shares issued (shares) | 248,300,517 | 246,306,818 |
Common stock, shares outstanding (shares) | 248,300,517 | 246,306,818 |
Nature of Business and Accounting Policies |
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Dec. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Nature of Business and Accounting Policies | Nature of Business and Accounting Policies Business Vertex Pharmaceuticals Incorporated (“Vertex” or the “Company”) is in the business of discovering, developing, manufacturing and commercializing medicines for serious diseases. The Company uses precision medicine approaches with the goal of creating transformative medicines for patients in specialty markets. The Company is focused on developing and commercializing therapies for the treatment of cystic fibrosis (“CF”) and advancing its research and development programs. The Company’s two marketed medicines are ORKAMBI and KALYDECO, which are approved to treat patients with CF who have specific mutations in their cystic fibrosis transmembrane conductance regulator (“CFTR”) gene. The Company’s net loss attributable to Vertex for 2016 was $112.1 million, or $0.46 per share. As of December 31, 2016, the Company had cash, cash equivalents and marketable securities of $1.43 billion. The Company expects that cash flows from the sales of its products, together with the Company’s cash, cash equivalents and marketable securities, will be sufficient to fund its operations for at least the next twelve months. Vertex is subject to risks common to companies in its industry including, but not limited to, the dependence on revenues from ORKAMBI and KALYDECO, competition, uncertainty about clinical trial outcomes and regulatory approvals, uncertainties relating to pharmaceutical pricing and reimbursement, uncertainty related to international expansion, uncertain protection of proprietary technology, the need to comply with government regulations, share price volatility, dependence on collaborative relationships and potential product liability. Basis of Presentation The consolidated financial statements reflect the operations of (i) the Company, (ii) its wholly-owned subsidiaries and (iii) consolidated variable interest entities (VIEs). In addition, the consolidated financial statements for 2014 reflect the operations of Alios BioPharma, Inc. (“Alios”), a former collaborator, as well as direct expenses Vertex incurred as a result of the Company’s agreement with Alios, as discontinued operations. All material intercompany balances and transactions have been eliminated. The Company operates in one segment, pharmaceuticals. Please refer to Note T, “Segment Information,” for enterprise-wide disclosures regarding the Company’s revenues, major customers and long-lived assets by geographic area. The Company has reclassified certain amounts in the consolidated balance sheets for the period ended December 31, 2015 between Accounts receivable, net and Prepaid expenses and other current assets to conform to the current year presentation. Use of Estimates The preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the amounts of revenues and expenses during the reported periods. Significant estimates in these consolidated financial statements have been made in connection with the calculation of revenues, inventories, research and development expenses, stock-based compensation expense, restructuring expense, the fair value of intangible assets, goodwill, contingent consideration, noncontrolling interest, the consolidation of VIEs, leases, the fair value of cash flow hedges and the provision for or benefit from income taxes. The Company bases its estimates on historical experience and various other assumptions, including in certain circumstances future projections, that management believes to be reasonable under the circumstances. Actual results could differ from those estimates. Changes in estimates are reflected in reported results in the period in which they become known. Revenue Recognition Product Revenues, Net The Company sells its products principally to a limited number of specialty pharmacy providers and selected regional wholesalers in North America as well as government-owned and supported customers in international markets (collectively, its “Customers”). The Company’s Customers in North America subsequently resell the products to patients and health care providers. The Company recognizes net revenues from product sales upon delivery as long as (i) there is persuasive evidence that an arrangement exists between the Company and the Customer, (ii) collectibility is reasonably assured and (iii) the price is fixed or determinable. In order to conclude that the price is fixed or determinable, the Company must be able to (i) calculate its gross product revenues from sales to Customers and (ii) reasonably estimate its net product revenues upon delivery to its Customer’s locations. The Company calculates gross product revenues based on the price that the Company charges its Customers. The Company estimates its net product revenues by deducting from its gross product revenues (a) trade allowances, such as invoice discounts for prompt payment and Customer fees, (b) estimated government and private payor rebates, chargebacks and discounts, (c) estimated reserves for expected product returns and (d) estimated costs of co-pay assistance programs for patients, as well as other incentives for certain indirect customers. Trade Allowances: The Company generally provides invoice discounts on product sales to its Customers for prompt payment and pays fees for distribution services, such as fees for certain data that Customers provide to the Company. The payment terms for sales to Customers in the United States generally include a discount for payment within 30 days. The Company expects that, based on its experience, its Customers will earn these discounts and fees, and deducts the full amount of these discounts and fees from its gross product revenues and accounts receivable at the time such revenues are recognized. Rebates, Chargebacks and Discounts: The Company contracts with government agencies and various private organizations (collectively, its “Third-party Payors”) so that products will be eligible for purchase by, or partial or full reimbursement from, such Third-party Payors. The Company estimates the rebates, chargebacks and discounts it will provide to Third-party Payors and deducts these estimated amounts from its gross product revenues at the time the revenues are recognized. For each product, the Company estimates the aggregate rebates, chargebacks and discounts that it will provide to Third-party Payors based upon (i) the Company’s contracts with these Third-party Payors, (ii) the government-mandated discounts applicable to government-funded programs, (iii) information obtained from the Company’s Customers and other third-party data regarding the payor mix for such product and (iv) historical experience. Product Returns: The Company estimates the amount of each product that will be returned and deducts these estimated amounts from its gross revenues at the time the revenues are recognized. The Company’s Customers have the right to return unopened unprescribed packages, subject to contractual limitations. To date product returns have been minimal and, based on inventory levels held by its Customers and its distribution model, the Company believes that returns of its products will continue to be minimal. Other Incentives: Other incentives that the Company offers include co-pay mitigation rebates provided by the Company to commercially insured patients who have coverage and who reside in states that permit co-pay mitigation programs. The Company’s co-pay mitigation programs are intended to reduce each participating patient’s portion of the financial responsibility for a product’s purchase price to a specified dollar amount. Based upon the terms of the Company’s co-pay mitigation programs, the Company estimates average co-pay mitigation amounts for each of its products in order to establish its accruals for co-pay mitigation rebates and deducts these estimated amounts from its gross product revenues at the later of the date (i) the revenues are recognized or (ii) the incentive is offered. The Company’s co-pay mitigation rebates are subject to expiration. The Company makes significant estimates and judgments that materially affect the Company’s recognition of net product revenues. In certain instances, the Company may be unable to reasonably conclude that the price is fixed or determinable at the time of delivery, in which case it defers the recognition of revenues. Once the Company is able to determine that the price is fixed or determinable, it recognizes the revenues associated with the units in which revenue recognition was deferred. ORKAMBI net product revenues do not include any revenues from product sales in France. The Company began distributing ORKAMBI through early access programs in the fourth quarter of 2015. The Company’s consolidated balance sheet includes $73.4 million collected as of December 31, 2016 in France related to ORKAMBI that is classified as customer deposits. The Company expects that revenues from these early access programs will be recognized in the period that a formal reimbursement agreement in France is reached based on the terms of such agreement. The following table summarizes activity in each of the product revenue allowance and reserve categories for the three years ended December 31, 2016:
The Company adjusts its estimated rebates, chargebacks and discounts based on new information, including information regarding actual rebates, chargebacks and discounts for its products, as it becomes available. Claims by third-party payors for rebates, chargebacks and discounts frequently are submitted to the Company significantly after the related sales, potentially resulting in adjustments in the period in which the new information becomes known. In each of the periods presented, the Company’s adjustments relating to prior period sales principally related to the Company’s estimates for INCIVEK. During the fourth quarter of 2014, the Company withdrew INCIVEK from the market in the United States. Royalty Revenues The Company’s royalty revenues on commercial sales of INCIVO (telaprevir) by Janssen NV were based on net sales of licensed products in licensed territories as provided by Janssen NV. The Company recognized royalty revenues in the period the sales occured. The Company has sold its rights to receive certain royalties on sales of an HIV protease inhibitor (fosamprenavir) and recognizes the revenues related to this sale as royalty revenues. In the circumstance where the Company has sold its rights to future royalties under a license agreement and also maintains continuing involvement in the royalty arrangement (but not significant continuing involvement in the generation of the cash flows payable to the purchaser of the future royalty rights), the Company defers recognition of the proceeds it receives for the royalty stream and recognizes these deferred revenues over the life of the license agreement pursuant to the units-of-revenue method. The Company’s estimates regarding the estimated remaining royalty payments due to the purchaser have changed in the past and may change in the future. Collaborative Revenues The Company recognizes revenues generated through collaborative research, development and/or commercialization agreements. The terms of these agreements typically include payment to the Company of one or more of the following: nonrefundable, up-front license fees; development and commercial milestone payments; funding of research and/or development activities; payments for services the Company provides through its third-party manufacturing network; and royalties on net sales of licensed products. Each of these types of payments results in collaborative revenues, except for revenues from royalties on net sales of licensed products, which are classified as royalty revenues. For each collaborative research, development and/or commercialization agreement that result in revenues, the Company determines (i) whether multiple deliverables exist, (ii) whether the undelivered elements have value to the customer on a stand-alone basis, (iii) how the deliverables should be separated and (iv) how the consideration should be allocated to the deliverables. For arrangements entered into or materially modified after January 1, 2011, the Company allocates consideration in an arrangement using the relative selling price method based on management’s best estimate of selling price of deliverables if it does not have vendor-specific objective evidence or third-party evidence. As part of the accounting for these agreements, the Company must develop assumptions that require judgment to determine the best estimate of selling price. Key assumptions utilized by the Company to determine the best estimate of selling price may include forecasted revenues, patient enrollment requirements from regulatory authorities, development timelines, reimbursement rates for personnel costs, discount rates, and estimated third-party development costs. The Company evaluates amendments to its existing arrangements to determine whether they have been materially modified. In making its determination that an arrangement has been materially modified, the Company considers whether there have been significant changes to the consideration under the arrangement, the deliverables under the arrangement, the timing of deliverables and the period of the arrangement. If the arrangement is determined to have been materially modified, the Company allocates fixed consideration under the arrangement using its best estimate of selling price to the remaining undelivered elements at the date of material modification. Any consideration remaining after the allocation is recognized as revenue. Up-front License Fees: If the license to the Company’s intellectual property was determined to have stand-alone value from the other deliverables identified in the arrangement, the Company recognized revenues from nonrefundable, up-front license fees upon delivery. If these licenses did not have stand-alone value, the Company recognized revenues from nonrefundable, up-front license fees on a straight-line basis over the contracted or estimated period of performance. The Company evaluates the period of performance each reporting period and adjusts the period of performance on a prospective basis if there are changes to be made. Milestone Payments: At the inception of each agreement that included research and development milestone payments, the Company evaluated whether each milestone was substantive. The Company recognized revenues related to substantive milestones in full in the period in which the substantive milestone is achieved if payment is reasonably assured. If a milestone is not considered substantive, the Company recognized the applicable milestone payment over the period of performance. Research and Development Activities/Manufacturing Services: If the Company was entitled to reimbursement from its collaborators for specified research and development expenses and/or was entitled to payments for specified manufacturing services that the Company provided through its third-party manufacturing network, the Company determines whether the research and development funding would result in collaborative revenues or an offset to research and development expenses in accordance with the provisions of gross or net revenue presentation. Concentration of Credit Risk Financial instruments that potentially subject the Company to concentration of credit risk consist principally of money market funds and marketable securities. The Company places these investments with highly rated financial institutions, and, by policy, limits the amounts of credit exposure to any one financial institution. These amounts at times may exceed federally insured limits. The Company also maintains a foreign currency hedging program that includes foreign currency forward contracts with several counterparties. The Company has not experienced any credit losses related to these financial instruments and does not believe it is exposed to any significant credit risk related to these instruments. The Company also is subject to credit risk from its accounts receivable related to its product sales and collaborators. The Company evaluates the creditworthiness of each of its customers and has determined that all of its material customers are creditworthy. To date, the Company has not experienced significant losses with respect to the collection of its accounts receivable. The Company’s receivables from Greece, Italy, Portugal and Spain were not material at December 31, 2016. The Company believes that its allowance for doubtful accounts was adequate at December 31, 2016. Please refer to Note T, “Segment Information,” for further information. Cash and Cash Equivalents The Company considers all highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents. Marketable Securities The Company’s marketable securities consist of investments in government-sponsored enterprise securities, corporate debt securities, corporate equity securities and commercial paper that are classified as available-for-sale. The Company classifies marketable securities available to fund current operations as current assets on its consolidated balance sheets. Marketable securities are classified as long-term assets on the consolidated balance sheets if (i) they have been in an unrealized loss position for longer than one year and (ii) the Company has the ability and intent to hold them (a) until the carrying value is recovered and (b) such holding period may be longer than one year. The Company’s marketable securities are stated at fair value with their unrealized gains and losses included as a component of accumulated other comprehensive income (loss), which is a separate component of shareholders’ equity, until such gains and losses are realized. The fair value of these securities is based on quoted prices for identical or similar assets. The Company reviews investments in marketable securities for other-than-temporary impairment whenever the fair value of an investment is less than the amortized cost and evidence indicates that an investment’s carrying amount is not recoverable within a reasonable period of time. To determine whether an impairment is other-than-temporary, the Company considers whether it has an intent to sell, or whether it is more likely than not that the Company will be required to sell, the investment before recovery of the investment’s amortized cost basis. Evidence considered in this assessment includes reasons for the impairment, compliance with the Company’s investment policy, the severity and the duration of the impairment and changes in value subsequent to year-end. If a decline in the fair value is considered other-than-temporary, based on available evidence, the unrealized loss is transferred from other comprehensive income (loss) to the consolidated statements of operations. Realized gains and losses are determined using the specific identification method and are included in other income (expense), net in the consolidated statements of operations. Accounts Receivable The Company deducts trade allowances for prompt payment and fees for distribution services from its accounts receivable based on its experience that the Company’s Customers will earn these discounts and fees. The Company’s estimates for its allowance for doubtful accounts, which have not been significant to date, are determined based on existing contractual payment terms and historical payment patterns. Stock-based Compensation Expense The Company expenses the fair value of employee stock options and other forms of stock-based employee compensation over the associated employee service period on a straight-line basis. Stock-based compensation expense is determined based on the fair value of the award at the grant date, net of estimated forfeitures, and is adjusted each period to reflect actual forfeitures and the outcomes of certain performance conditions. For awards with performance conditions that accelerate vesting of the award, the Company estimates the likelihood of satisfaction of the performance conditions, which affects the period over which the expense is recognized, and recognizes the expense using the accelerated attribution model. For awards with performance conditions in which the award does not vest unless the performance condition is met, the Company recognizes expense if, and to the extent that, the Company estimates that achievement of the performance condition is probable. If the Company concludes that vesting is probable, it recognizes expense from the date it reaches this conclusion through the estimated vesting date. Effective for equity awards granted on or after February 5, 2014, the Company provides to employees who have rendered a certain number of years’ to the Company and meet certain age requirements, partial or full acceleration of vesting of these equity awards, subject to certain conditions including a notification period, upon a termination of employment other than for cause. Approximately 5% of the Company’s employees were eligible for partial or full acceleration of any of their equity awards as of December 31, 2016. The Company recognizes stock-based compensation expense related to these awards over a service period reflecting qualified employees eligibility for partial or full acceleration of vesting. Research and Development Expenses The Company expenses as incurred all research and development expenses, including amounts funded by research and development collaborations. The Company capitalizes nonrefundable advance payments made by the Company for research and development activities and expenses the payments as the related goods are delivered or the related services are performed. Research and development expenses are comprised of costs incurred by the Company in performing research and development activities, including salary and benefits; stock-based compensation expense; laboratory supplies and other direct expenses; outsourced services, including clinical trial and pharmaceutical development costs; expenses associated with drug supplies that are not being capitalized; and infrastructure costs, including facilities costs and depreciation expense. Advertising Expenses The Company expenses the costs of advertising, including promotional expenses, as incurred. Advertising expenses, recorded in sales, general and administrative expenses, were $31.4 million, $24.5 million and $16.2 million in 2016, 2015 and 2014, respectively. Inventories The Company values its inventories at the lower-of-cost or market. The Company determines the cost of its inventories, which includes amounts related to materials and manufacturing overhead, on a first-in, first-out basis. The Company performs an assessment of the recoverability of capitalized inventory during each reporting period, and writes down any excess and obsolete inventories to their realizable value in the period in which the impairment is first identified. Shipping and handling costs incurred for inventory purchases are capitalized and recorded upon sale in cost of product revenues in the consolidated statements of operations. Shipping and handling costs incurred for product shipments are recorded as incurred in cost of product revenues in the consolidated statements of operations. The Company capitalizes inventories produced in preparation for initiating sales of a drug candidate when the related drug candidate is considered to have a high likelihood of regulatory approval and the related costs are expected to be recoverable through sales of the inventories. In determining whether or not to capitalize such inventories, the Company evaluates, among other factors, information regarding the drug candidate’s safety and efficacy, the status of regulatory submissions and communications with regulatory authorities and the outlook for commercial sales, including the existence of current or anticipated competitive drugs and the availability of reimbursement. In addition, the Company evaluates risks associated with manufacturing the drug candidate and the remaining shelf-life of the inventories. Property and Equipment Property and equipment are recorded at cost. Depreciation expense is recorded using the straight-line method over the estimated useful life of the related asset, generally seven to ten years for furniture and equipment, three to five years for computers and software, 40 years for buildings and for leasehold improvements, the shorter of the useful life of the improvements or the estimated remaining life of the associated lease. Amortization expense of assets acquired under capital leases is included in depreciation expense. Maintenance and repairs to an asset that do not improve or extend its life are charged to operations. When assets are retired or otherwise disposed of, the assets and related accumulated depreciation are eliminated from the accounts and any resulting gain or loss is reflected in the Company’s consolidated statements of operations. The Company performs an assessment of the fair value of the assets if indicators of impairment are identified during a reporting period and records the assets at the lower of the net book value or the fair value of the assets. The Company capitalizes internal costs incurred to develop software for internal use during the application development stage. The Company expenses costs related to the planning and post-implementation phases of development of software for internal use as these costs are incurred. Maintenance and enhancement costs (including costs in the post-implementation stages) are expensed as incurred, unless such costs relate to substantial upgrades and enhancements to the software resulting in added functionality, in which case the costs are capitalized. Amortization of capitalized internally developed software costs is recorded in depreciation expense over the useful life of the related asset. The Company records certain construction costs incurred by a landlord as an asset and a corresponding financing obligation on the Company’s consolidated balance sheets when the Company is determined to be the owner of the buildings during construction for accounting purposes. Upon completion of the project, the Company performs a sale-leaseback analysis to determine if the Company can remove the assets from its consolidated balance sheet. Capital Leases The assets and liabilities associated with capital lease agreements are recorded at the present value of the minimum lease payments at the inception of the lease agreement. The assets are depreciated using the straight-line method over the shorter of the useful life of the related asset or the remaining life of the associated lease. Amortization of assets that the Company leases pursuant to a capital lease is included in depreciation expense. The Company performs an assessment of the fair value of the assets if indicators of impairment are identified during a reporting period and records the assets at the lower of the net book value or the fair value of the assets. Assets recorded under capital leases are recorded within “Property and equipment, net” and liabilities related to those assets are recorded within “Capital lease obligations, current portion” and “Capital lease obligations, excluding current portion” on the Company’s consolidated balance sheets. Income Taxes Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial statement carrying amounts and the income tax bases of assets and liabilities. A valuation allowance is applied against any net deferred tax asset if, based on the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company records liabilities related to uncertain tax positions by prescribing a minimum recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Company does not believe any such uncertain tax positions currently pending will have a material adverse effect on its consolidated financial statements. Variable Interest Entities The Company reviews each collaboration agreement pursuant to which the Company licenses assets owned by a collaborator in order to determine whether or not the Company has a variable interest via the license agreement with the collaborator and if the variable interest is a variable interest in the collaborator as a whole. In assessing whether the Company has a variable interest in the collaborator as a whole, the Company considers and makes judgments regarding the purpose and design of the entity, the value of the licensed assets to the collaborator and the significant activities of the collaborator. If the Company has a variable interest in the collaborator as a whole, the Company assesses whether or not the Company is the primary beneficiary of that VIE based on a number of factors, including (i) which party has the power to direct the activities that most significantly affect the VIE’s economic performance, (ii) the parties’ contractual rights and responsibilities pursuant to the collaboration agreement and (iii) which party has the obligation to absorb losses of or the right to receive benefits from the VIE that could be significant to the VIE. If the Company determines it is the primary beneficiary of a VIE at the onset of the collaboration agreement, the collaboration is treated as a business combination and the Company consolidates the financial statements of the VIE into the Company’s consolidated financial statements. The Company evaluates whether it continues to be the primary beneficiary of any consolidated VIEs on a quarterly basis. If the Company determines that it is no longer the primary beneficiary of a consolidated VIE, or no longer has a variable interest in the VIE, it deconsolidates the VIE in the period that the determination is made. Assets recorded as a result of consolidating VIEs’ financial results into the Company’s consolidated balance sheet do not represent additional assets that could be used to satisfy claims against the Company’s general assets. With respect to the Company’s VIEs, the VIEs’ assets are not significant, except for the VIEs’ cash and cash equivalents. The Company records the cash and cash equivalents of consolidated VIEs as restricted cash because the Company does not have control over the VIEs’ cash and cash equivalents. The Company also has recorded the liabilities of its consolidated VIEs for which creditors do not have recourse to the Company’s general assets outside of the VIE. Fair Value of In-process Research and Development Assets and Contingent Payments The present-value models used to estimate the fair values of research and development assets and contingent payments pursuant to collaborations incorporate significant assumptions, including: assumptions regarding the probability of obtaining marketing approval and/or achieving relevant development milestones for a drug candidate; estimates regarding the timing of and the expected costs to develop a drug candidate; estimates of future cash flows from potential product sales and/or the potential to achieve certain commercial milestones with respect to a drug candidate; and the appropriate discount and tax rates. In-process Research and Development Assets The Company records the fair value of in-process research and development assets as of the transaction date of a business combination. Each of these assets is accounted for as an indefinite-lived intangible asset and is maintained on the Company’s consolidated balance sheet until either the project underlying it is completed or the asset becomes impaired. If the asset becomes impaired or is abandoned, the carrying value of the related intangible asset is written down to its fair value, and an impairment charge is recorded in the period in which the impairment occurs. If a project is completed, the carrying value of the related intangible asset is amortized as a part of cost of product revenues over the remaining estimated life of the asset beginning in the period in which the project is completed. In-process research and development assets are tested for impairment on an annual basis as of October 1, and more frequently if indicators are present or changes in circumstances suggest that impairment may exist. Goodwill The difference between the purchase price and the fair value of assets acquired and liabilities assumed in a business combination is allocated to goodwill. Goodwill is evaluated for impairment on an annual basis as of October 1, and more frequently if indicators are present or changes in circumstances suggest that impairment may exist. Noncontrolling Interest The Company records noncontrolling interest, which has historically related to consolidated VIEs, on its consolidated balance sheets. The Company records net loss (income) attributable to noncontrolling interest on its consolidated statements of operations, reflecting the VIEs’ net loss (income) for the reporting period, adjusted for changes in the noncontrolling interest holders’ claim to net assets, including contingent milestone, royalty and option payments, is evaluated each reporting period. Deconsolidation and Discontinued Operations Upon the occurrence of certain events and on a regular basis, the Company evaluates whether it no longer has a controlling interest in its subsidiaries, including consolidated VIEs. If the Company determines it no longer has a controlling interest, the subsidiary is deconsolidated. The Company records a gain or loss on deconsolidation based on the difference on the deconsolidation date between (i) the aggregate of (a) the fair value of any consideration received, (b) the fair value of any retained noncontrolling investment in the former subsidiary and (c) the carrying amount of any noncontrolling interest in the subsidiary being deconsolidated, less (ii) the carrying amount of the former subsidiary’s assets and liabilities. The Company assesses whether a deconsolidation is required to be presented as discontinued operations in its consolidated financial statements on the deconsolidation date. This assessment is based on whether or not the deconsolidation represents a strategic shift that has or will have a major effect on the Company’s operations or financial results. If the Company determines that a deconsolidation requires presentation as a discontinued operation on the deconsolidation date, or at any point during the one year period following such date, it will present the former subsidiary as a discontinued operation in current and comparative period financial statements. Derivative Instruments, Embedded Derivatives and Hedging Activities The Company has entered into financial transactions involving free-standing derivative instruments and embedded derivatives in the past. Embedded derivatives are required to be bifurcated from the host instruments if the derivatives are not clearly and closely related to the host instruments. The Company determines the fair value of each derivative instrument or embedded derivative that is identified on the date of issuance and at the end of each quarterly period. The estimates of the fair value of the derivatives include significant assumptions regarding the estimates market participants would make in order to evaluate these derivatives. The Company recognizes the fair value of hedging instruments that are designated and qualify as hedging instruments pursuant to GAAP, primarily foreign currency forward contracts, as either assets or liabilities on the consolidated balance sheets. Changes in the fair value of hedging instruments are recorded each period in accumulated other comprehensive income (loss) as unrealized gains and losses until the forecasted underlying transaction occurs. Unrealized gains and losses on these foreign currency forward contracts are included in (i) “Prepaid expenses and other current assets,” (ii) Other assets,” (iii) “Other liabilities, current portion” and (iv) “Other liabilities, excluding current portion,” respectively, on the Company’s consolidated balance sheets. Realized gains and losses for the effective portion of such contracts are recognized in “Product revenues, net” in the consolidated statement of operations when the contract is settled with the counterparty. The Company classifies the cash flows from hedging instruments in the same category as the cash flows from the hedged items. Certain of the Company’s hedging instruments are subject to master netting arrangements to reduce the risk arising from such transactions with its counterparties. The Company presents unrealized gains and losses on its foreign currency forward contracts on a gross basis within its consolidated balance sheets. The Company assesses, both at inception and on an ongoing basis, whether the foreign currency forward contracts used in hedging transactions are highly effective in offsetting the changes in cash flows of the hedged items. The Company also assesses hedge ineffectiveness quarterly and, if determined to be ineffective, records the gain or loss related to the ineffective portion to earnings in “Other income (expense), net” in its consolidated statements of operations. Restructuring Expenses The Company records costs and liabilities associated with exit and disposal activities based on estimates of fair value in the period the liabilities are incurred. In periods subsequent to the initial measurement, the Company measures changes to the liability using the credit-adjusted risk-free discount rate applied in the initial period. The Company evaluates and adjusts these liabilities as appropriate for changes in circumstances at least on a quarterly basis. Comprehensive Income (Loss) Comprehensive income (loss) consists of net income (loss) and other comprehensive income (loss), which includes foreign currency translation adjustments and unrealized gains and losses on foreign currency forward contracts and certain marketable securities. For purposes of comprehensive income (loss) disclosures, the Company records tax provisions or benefits related to the unrealized gains and losses on foreign currency forward contracts and certain marketable securities. The Company does not record tax provisions or benefits related to the cumulative translation adjustment, as the Company intends to permanently reinvest undistributed earnings in its foreign subsidiaries. Foreign Currency Translation and Transactions The Company primarily operates with entities that have the U.S. dollar denominated as their functional currency. Non-U.S. dollar denominated functional currency subsidiaries have assets and liabilities translated into U.S. dollars at rates of exchange in effect at the end of the year. Revenue and expense amounts are translated using the average exchange rates for the period. Net unrealized gains and losses resulting from foreign currency translation are included in accumulated other comprehensive income (loss), which is a separate component of shareholders’ equity. Included in accumulated other comprehensive income (loss) are net unrealized losses related to foreign currency translation of $7.9 million, $2.1 million and $1.0 million at December 31, 2016, 2015 and 2014, respectively. Net foreign currency exchange transaction gains or losses are included in “net loss” on the Company’s consolidated statement of operations. Net transaction gains were $4.0 million for 2016 and net transaction losses were $6.8 million and $6.4 million for 2015 and 2014, respectively. Net Loss Per Share Attributable to Vertex Common Shareholders Basic and diluted net loss per share attributable to Vertex common shareholders are presented in conformity with the two-class method required for participating securities. Under the two-class method, earnings are allocated to (i) Vertex common shares, excluding unvested restricted stock, and (ii) participating securities, based on their respective weighted-average shares outstanding for the period. Shares of unvested restricted stock granted under the Company’s Amended and Restated 2006 Stock and Option Plan have the non-forfeitable right to receive dividends on an equal basis with other outstanding common stock. As a result, these unvested shares of restricted stock are considered participating securities under the two-class method. Potentially dilutive shares result from the assumed exercise of outstanding stock options (the proceeds of which are then assumed to have been used to repurchase outstanding stock using the treasury stock method). Basic net loss per share attributable to Vertex common shareholders is based upon the weighted-average number of common shares outstanding during the period, excluding restricted stock that has been issued but is not yet vested. Diluted net loss per share attributable to Vertex common shareholders is based upon the weighted-average number of common shares outstanding during the period plus additional weighted-average common equivalent shares outstanding during the period when the effect is dilutive. The Company utilizes income (loss) from continuing operations attributable to Vertex to determine whether potentially outstanding stock options and the assumed conversion of convertible notes are dilutive. Recent Accounting Pronouncements In 2014, the Financial Accounting Standards Board (“FASB”) issued amended guidance applicable to revenue recognition that will be effective for the year ending December 31, 2018. Early adoption is permitted for the year-ending December 31, 2017. The new guidance applies a more principles based approach to recognizing revenue. Under the new guidance, revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration that an entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The new guidance must be adopted using either a modified retrospective approach or a full retrospective approach for all periods presented. Under the modified retrospective method, the cumulative effect of applying the standard would be recognized at the date of initial application within retained earnings. Under the full retrospective approach, the standard would be applied to each prior reporting period presented. The Company expects to adopt the new guidance using the modified retrospective method. The Company is in the process of evaluating the new guidance and determining whether the expected effect is material to its consolidated financial statements. The process includes identifying and analyzing the impact of the standard by reviewing the Company’s current accounting policies and practices to identify potential differences that would result from applying the requirements of the new standard to each revenue contract associated with all of the Company’s revenue streams. The new guidance could impact the Company’s accounting for product shipments to countries through early access programs, for example the French early access programs, whereby the associated product has received regulatory approval but the reimbursement rate has not been finalized. In 2016, the FASB issued amended guidance applicable to leases that will be effective for the year ending December 31, 2019. Early adoption is permitted. This update requires an entity to recognize assets and liabilities for leases with lease terms of more than 12 months on the balance sheet. The Company is in the process of evaluating the new guidance and determining the expected effect on its consolidated financial statements. In 2016, the FASB issued amended guidance applicable to share-based compensation to employees that will be effective for the year ending December 31, 2017 with early adoption permitted. This guidance simplifies the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The Company plans to change how it accounts for forfeitures upon adoption and is currently quantifying the adjustment to be recorded to retained earnings related to this change in policy. In addition, the Company will include certain net operating losses and tax credits, offset with a full valuation allowance, as a component of deferred taxes upon adoption of this guidance that were previously not included in deferred taxes. The Company will also record a corresponding valuation allowance against these increased net operating loss carryforwards upon adoption of this new guidance. In 2016, the FASB issued amended guidance for the classification of certain cash receipts and cash payments on the statement of cash flows to reduce existing diversity in practice. The new accounting guidance is effective for the year ending December 31, 2017. Early adoption is permitted. The Company does not expect a significant effect on its consolidated financial statements upon adoption of this new guidance. In January 2017, the FASB issued amended guidance related to business combinations. The new guidance clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The new accounting guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. Early adoption is permitted. The Company plans to apply this new guidance to future acquisitions. In 2014, the FASB issued new guidance on management’s responsibility in evaluating whether or not there is substantial doubt about a company’s ability to continue as a going concern within one year from the date the financial statements are issued each reporting period. This new accounting guidance became effective for the Company for the year ended December 31, 2016. The adoption of the new guidance did not have a material effect on the Company’s consolidated financial statements. |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Collaborative Arrangements | Collaborative Arrangements Cystic Fibrosis Foundation Therapeutics Incorporated The Company has a research, development and commercialization agreement with Cystic Fibrosis Foundation Therapeutics Incorporated (“CFFT”) that was originally entered into in May 2004, and was most recently amended on October 13, 2016 (the “2016 Amendment”). Pursuant to the agreement, as amended, the Company has agreed to pay royalties ranging from low single digits to mid-single digits on potential sales of certain compounds first synthesized and/or tested between March 1, 2014 and August 31, 2016 and tiered royalties ranging from single digits to sub-teens on any approved drugs first synthesized and/or tested during a research term on or before February 28, 2014, including KALYDECO (ivacaftor), ORKAMBI (lumacaftor in combination with ivacaftor), lumacaftor and tezacaftor. For combination products, such as ORKAMBI, sales will be allocated equally to each of the active pharmaceutical ingredients in the combination product. In each of the fourth quarter of 2015 and first quarter of 2016, CFFT earned a commercial milestone payment of $13.9 million from the Company upon achievement of certain sales levels of lumacaftor. There are no additional commercial milestone payments payable by the Company to CFFT pursuant to the agreement. Pursuant to the 2016 Amendment, the CFFT provided the Company an upfront payment of $75.0 million and agreed to provide development funding to the Company of up to $6.0 million annually. The upfront payment plus any future development funding represent a form of financing pursuant to Accounting Standards Codification (ASC) 730, Research and Development, and thus the amounts are recorded as a liability on the consolidated balance sheet, primarily reflected in Other liabilities, excluding current portion. The liability is reduced over the estimated royalty term of the agreement. Reductions in the liability are reflected as an offset to cost of product revenues and as interest expense. The Company began marketing KALYDECO in the United States and certain countries in the European Union in 2012 and began marketing ORKAMBI in the United States in 2015. The Company received approval for ORKAMBI In the European Union in 2015 and in Canada and Australia in 2016. The Company has royalty obligations to CFFT for ivacaftor, lumacaftor and tezacaftor until the expiration of patents covering those compounds. The Company has patents in the United States and European Union covering the composition-of-matter of ivacaftor that expire in 2027 and 2025, respectively, subject to potential patent extensions. The Company has patents in the United States and European Union covering the composition-of-matter of lumacaftor that expire in 2030 and 2026, respectively, subject to potential extension. The Company has patents in the United States and European Union covering the composition-of-matter of tezacaftor that expire in 2027 and 2028, respectively, subject to potential extension. CRISPR Therapeutics AG On October 26, 2015, the Company entered into a strategic collaboration, option and license agreement (the “CRISPR Agreement”) with CRISPR Therapeutics AG and its affiliates (“CRISPR”) to collaborate on the discovery and development of potential new treatments aimed at the underlying genetic causes of human diseases using CRISPR-Cas9 gene editing technology. The Company has the exclusive right to license up to six CRISPR-Cas9-based targets. In connection with the CRISPR Agreement, the Company made an upfront payment to CRISPR of $75.0 million and a $30.0 million investment in CRISPR pursuant to a convertible loan agreement that converted into preferred stock in January 2016. The Company expensed $75.0 million to research and development, and the $30.0 million investment was recorded at cost and was classified as a long-term asset on the Company’s consolidated balance sheet in 2015. In the second quarter of 2016, the Company made an additional preferred stock investment in CRISPR of approximately $3.1 million. In connection with CRISPR's initial public offering in October 2016, the Company purchased $10.0 million of common shares at the public offering price and the Company's preferred stock investments in CRISPR converted into common shares. Pursuant to the terms of a lockup agreement between the Company and the underwriters of CRISPR’s initial public offering, the Company agreed not to sell or otherwise dispose of its shares in CRISPR through April 17, 2017. As of December 31, 2016, the Company recorded the CRISPR common shares it holds at fair value and included the fair value of the common shares in its marketable securities and the unrecognized gain related to these common shares in accumulated other comprehensive income (loss) on the consolidated balance sheet. The Company will fund all of the discovery activities conducted pursuant to the CRISPR Agreement. For potential hemoglobinapathy treatments, including treatments for sickle cell disease, the Company and CRISPR will share equally all research and development costs and worldwide revenues. For other targets that the Company elects to license, the Company would lead all development and global commercialization activities. For each of up to six targets that the Company elects to license, other than hemoglobinapathy targets, CRISPR has the potential to receive up to $420.0 million in development, regulatory and commercial milestones and royalties on net product sales. The Company may terminate the CRISPR Agreement upon 90 days’ notice to CRISPR prior to any product receiving marketing approval or upon 270 days’ notice after a product has received marketing approval. The CRISPR Agreement also may be terminated by either party for a material breach by the other, subject to notice and cure provisions. Unless earlier terminated, the CRISPR Agreement will continue in effect until the expiration of the Company’s payment obligations under the CRISPR Agreement. Variable Interest Entities (VIE) The Company has entered into several agreements pursuant to which it has licensed rights to certain drug candidates from third-party collaborators, which has resulted in the consolidation of the third parties' financial statements into the Company's consolidated financial statements as VIEs. In order to account for the fair value of the contingent payments, which consist of milestone, royalty and option payments, related to these collaborations under GAAP, the Company uses present-value models based on assumptions regarding the probability of achieving the relevant milestones, estimates regarding the timing of achieving the milestones, estimates of future product sales and the appropriate discount rates. The Company bases its estimate of the probability of achieving the relevant milestones on industry data for similar assets and its own experience. The discount rates used in the valuation model represent a measure of credit risk and market risk associated with settling the liabilities. Significant judgment is used in determining the appropriateness of these assumptions at each reporting period. Changes in these assumptions could have a material effect on the fair value of the contingent payments. The following collaborations are reflected in the Company's financial statements as consolidated VIEs: Parion Sciences, Inc. License and Collaboration Agreement In June 2015, the Company entered into a strategic collaboration and license agreement (the “Parion Agreement”) with Parion Sciences, Inc. (“Parion”). Pursuant to the agreement, the Company is collaborating with Parion to develop investigational epithelial sodium channel (“ENaC”) inhibitors, including VX-371 (formerly P-1037) and VX-551 (formerly P-1055), for the potential treatment of CF and all other pulmonary diseases. The Company is leading development activities for VX-371 and VX-551 and is responsible for all costs, subject to certain exceptions, related to development and commercialization of the compounds. Pursuant to the Parion Agreement, the Company has worldwide development and commercial rights to Parion’s lead investigational ENaC inhibitors, VX-371 and VX-551, for the potential treatment of CF and all other pulmonary diseases and has the option to select additional compounds discovered in Parion’s research program. Parion received an $80.0 million up-front payment and has the potential to receive up to an additional (i) $490.0 million in development and regulatory milestone payments for development of ENaC inhibitors in CF, including $360.0 million related to global filing and approval milestones, (ii) $370.0 million in development and regulatory milestones for VX-371 and VX-551 in non-CF pulmonary indications and (iii) $230.0 million in development and regulatory milestones should the Company elect to develop an additional ENaC inhibitor from Parion’s research program. The Company has agreed to pay Parion tiered royalties that range from the low double digits to mid-teens as a percentage of potential sales of licensed products. In the second quarter of 2016, Parion earned a milestone payment of $5.0 million based upon the achievement of a specified milestone under the Parion Agreement. The Company may terminate the Parion Agreement upon 90 days’ notice to Parion prior to any licensed product receiving marketing approval or upon 180 days’ notice after a licensed product has received marketing approval. If the Company experiences a change of control prior to the initiation of the first Phase 3 clinical trial for a licensed product, Parion may terminate the Parion Agreement upon 30 days’ notice, subject to the Company’s right to receive specified royalties on any subsequent commercialization of licensed products. The Parion Agreement also may be terminated by either party for a material breach by the other, subject to notice and cure provisions. Unless earlier terminated, the Parion Agreement will continue in effect until the expiration of the Company’s royalty obligations, which expire on a country-by-country basis on the later of (i) the date the last-to-expire patent covering a licensed product expires or (ii) ten years after the first commercial sale in the country. The Company determined that it has a variable interest in Parion via the Parion Agreement, and that the variable interest represents a variable interest in Parion as a whole since the fair value of the ENaC inhibitors represents more than half of the total fair value of Parion’s assets. The Company also concluded that it is the primary beneficiary as it has the power to direct the activities that most significantly affect the economic performance of Parion and it has the obligation to absorb losses and right to receive benefits that potentially could be significant to Parion. Accordingly, the Company consolidated Parion's financial statements beginning on June 4, 2015. However, the Company's interests in Parion are limited to those accorded to the Company in the Parion Agreement. Consideration for the Parion Agreement The Company determined that the fair value of the consideration to be transferred from the Company to Parion was $255.3 million as of June 4, 2015, which consisted of (i) an $80.0 million up-front payment, (ii) the estimated fair value of the contingent research and development milestones and (iii) the estimated fair value of potential royalty payments. The Company valued the contingent payments using (a) discount rates ranging from 4.1% to 5.9% for the development milestones and (b) a discount rate of 6.6% for royalties. The up-front payment made and the fair value of the contingent payments payable by the Company pursuant to the Parion Agreement are set forth in the table below:
Allocation of Assets and Liabilities The Company recorded the fair value of the assets and liabilities of Parion on the effective date of the agreement as follows:
While there was a transfer of $80.0 million to Parion, the cash remained within the Company’s consolidated financial statements since Parion is part of the consolidated entity. The cash is classified as restricted cash and cash equivalents (VIE) within the consolidated balance sheet as it is attributed to the noncontrolling interest holders of Parion. When determining the valuation of goodwill, the fair value of consideration for the license is zero since there was no consideration transferred outside the consolidated financial statements. The Company recorded $255.3 million of intangible assets on the Company's consolidated balance sheets for Parion's in-process research and development assets. These in-process research and development assets relate to Parion's pulmonary ENaC platform, including the intellectual property related to VX-371 and VX-551, that are licensed by Parion to the Company. The Company also recorded the fair value of the net assets attributable to noncontrolling interest and deferred tax liability resulting from a basis difference in the intangible assets and certain other net liabilities held by Parion. The difference between the fair values of the consideration and noncontrolling interest and the fair value of Parion’s net assets was recorded as goodwill. BioAxone Biosciences, Inc. In October 2014, the Company entered into a license and collaboration agreement (the “BioAxone Agreement”) with BioAxone Biosciences, Inc. (“BioAxone”), which resulted in the consolidation of BioAxone as a VIE beginning on October 1, 2014. The Company determined that BioAxone is a VIE based on, among other factors, the significance to BioAxone of VX-210, which was licensed to the Company pursuant to the BioAxone Agreement, and on the Company’s power to direct the activities that most significantly affect the economic performance of BioAxone. Accordingly, the Company consolidated BioAxone’s financial statements beginning in October 2014. The Company paid BioAxone initial payments of $10.0 million in the fourth quarter of 2014. BioAxone has the potential to receive up to $90.0 million in milestones and fees, including development, regulatory and milestone payments and a license continuation fee. In addition, BioAxone would receive royalties and commercial milestones on future net product sales of VX-210, if any. The Company recorded an in-process research and development intangible asset of $29.0 million for VX-210 and a corresponding deferred tax liability of $11.3 million attributable to BioAxone. The Company holds an option to purchase BioAxone at a predetermined price. The option expires on the earliest of (a) the day the FDA accepts the Biologics License Application submission for VX-210, (b) the day the Company elects to continue the license instead of exercising the option to purchase BioAxone and (c) March 15, 2018, subject to the Company’s option to extend this date by one year. Alios BioPharma, Inc. In 2011, the Company entered into a license and collaboration agreement (the “Alios Agreement”) with Alios, which terminated in the fourth quarter of 2014. Pursuant to the Alios Agreement, which resulted in the consolidation of Alios as a VIE through December 31, 2013, the Company and Alios collaborated on the research, development and commercialization of HCV nucleotide analogues discovered by Alios. As of September 30, 2014, the Company concluded that it no longer had significant continuing involvement with Alios due to its intent and ability to terminate the Alios Agreement, among other factors, and the operations of Alios are presented as discontinued operations in these consolidated financial statements for 2014. Aggregate VIE Financial Information An aggregate summary of net loss attributable to noncontrolling interest related to the Company’s VIEs for the three years ended December 31, 2016 was as follows:
During the years ended December 31, 2016 and 2015, the noncontrolling interest holders’ claim to net assets with respect to the contingent payments related to the Parion Agreement, increased by $64.8 million and $3.6 million, respectively. The increase in the fair value of the contingent payments related to the Parion Agreement in 2016 was primarily due to a Phase 2 clinical trial of VX-371 achieving its primary safety endpoint in the second quarter of 2016 offset by a payment of $5.0 million related to the achievement of a specified milestone under the Parion Agreement. The changes in the fair value of the contingent payments were also due to the changes in market interest rates and the time value of money. As of December 31, 2016 and 2015, the fair value of the contingent payments related to the Parion Agreement was $238.8 million and $179.0 million, respectively. During the year ended December 31, 2016, the noncontrolling interest holders’ claim to net assets with respect to the contingent payments related to the BioAxone Agreement decreased by $10.0 million. The decrease in the fair value of the contingent payments was due to changes in certain assumptions used in establishing the fair value including revenue assumptions and the development timeline. During the year ended December 31, 2015 and 2014, the fair value of the contingent payments related to the BioAxone Agreement increased by $0.9 million and $0.5 million, respectively. As of December 31, 2016 and 2015, the fair value of the contingent payments related to the BioAxone Agreement was $18.0 million and $28.0 million, respectively. The following table summarizes items related to the Company’s VIEs included in the Company’s consolidated balance sheets as of the dates set forth in the table:
The Company has recorded the VIEs’ cash and cash equivalents as restricted cash and cash equivalents (VIE) because (i) the Company does not have any interest in or control over the VIEs’ cash and cash equivalents and (ii) the Company’s agreements with each VIE do not provide for the VIEs’ cash and cash equivalents to be used for the development of the assets that the Company licensed from the applicable VIE. Assets recorded as a result of consolidating the Company’s VIEs’ financial condition into the Company’s balance sheets do not represent additional assets that could be used to satisfy claims against the Company’s general assets. Other Collaborations The Company has entered into various agreements pursuant to which it collaborates with third parties, including inlicensing and outlicensing arrangements. Although the Company does not consider any of these arrangements to be material, the most notable of these arrangements are described below. Moderna Therapeutics, Inc. In July 2016, the Company entered into a strategic collaboration and licensing agreement (the "Moderna Agreement") with Moderna Therapeutics, Inc. ("Moderna") pursuant to which the parties are seeking to identify and develop messenger Ribonucleic Acid ("mRNA") Therapeutics for the treatment of CF. In connection with the Moderna Agreement in the third quarter of 2016, the Company made an upfront payment to Moderna of $20.0 million and a $20.0 million cost-method investment in Moderna pursuant to a convertible promissory note that converted into preferred stock in August 2016. Moderna has the potential to receive future development and regulatory milestones of up to $275.0 million, including $220.0 million in approval and reimbursement milestones, as well as tiered royalty payments on future sales. Under the terms of the Moderna Agreement, Moderna will lead discovery efforts and the Company will lead all preclinical, development and commercialization activities associated with the advancement of mRNA Therapeutics that result from this collaboration and will fund all expenses related to the collaboration. The Company may terminate the Moderna Agreement by providing advanced notice to Moderna, with the required length of notice dependent on whether any product developed under the Moderna Agreement has received marketing approval. The Moderna Agreement also may be terminated by either party for a material breach by the other, subject to notice and cure provisions. Unless earlier terminated, the Moderna Agreement will continue in effect until the expiration of the Company's payment obligations under the Moderna Agreement. Janssen Pharmaceuticals, Inc. In June 2014, the Company entered into an agreement (the “Janssen Influenza Agreement”) with Janssen Pharmaceuticals, Inc. (“Janssen Inc.”), which was amended in October 2014 to clarify certain roles and responsibilities of the parties. Pursuant to the Janssen Influenza Agreement, Janssen Inc. has an exclusive worldwide license to develop and commercialize certain drug candidates for the treatment of influenza, including JNJ-3872 (formerly VX-787). The Company received non-refundable payments of $35.0 million from Janssen Inc. in 2014, which were recorded as collaborative revenues. The Company has the potential to receive development, regulatory and commercial milestone payments as well as royalties on future product sales, if any. Janssen Inc. is responsible for costs related to the development and commercialization of the compounds. The Company recorded reimbursement for these development activities of $14.7 million, $22.8 million and $9.1 million in 2016, 2015 and 2014, respectively. The reimbursements are recorded as a reduction to development expense in the Company’s consolidated statements of operations primarily due to the fact that Janssen Inc. directs the activities and selects the suppliers associated with these activities. Janssen Inc. may terminate the Janssen Influenza Agreement, subject to certain exceptions, upon six months’ notice. Janssen Pharmaceutica NV The Company has a collaboration agreement (the “Janssen HCV Agreement”) with Janssen Pharmaceutica NV (“Janssen NV”) for the development, manufacture and commercialization of telaprevir, which Janssen NV began marketing under the brand name INCIVO in certain of its territories in September 2011. Pursuant to the Janssen HCV Agreement, as amended, Janssen NV has a fully-paid license to manufacture and commercialize INCIVO in its territories including Europe, South America, the Middle East, Africa and Australia, subject to the payment of third-party royalties on net sales of INCIVO. In addition to the collaborative revenues, the Company recorded royalty revenues and corresponding royalty expenses related to third-party royalties that Janssen NV remains responsible for based on INCIVO net sales. During the three years ended December 31, 2016, the Company recognized the following revenues attributable to the Janssen HCV collaboration:
Subsequent Event Merck KGaA On January 10, 2017, the Company entered into a Strategic Collaboration and License Agreement (the “Merck KGaA Agreement”) with Merck KGaA, Darmstadt, Germany (“Merck KGaA”). Pursuant to the Merck KGaA Agreement, the Company granted Merck KGaA an exclusive worldwide license to research, develop and commercialize four oncology research and development programs. Under the Merck KGaA Agreement, the Company granted Merck KGaA exclusive, worldwide rights to our two clinical-stage programs targeting DNA damage repair: its ataxia telangiectasia and Rad3-related protein inhibitor program, including VX-970 and VX-803, and its DNA-dependent protein kinase inhibitor program, including VX-984. In addition, the Company granted Merck KGaA exclusive, worldwide rights to two pre-clinical programs. Under the Merck KGaA Agreement, the Company will receive an up-front payment of $230.0 million. In addition, it will receive tiered royalties on potential sales of licensed products, calculated as a percentage of net sales, that range from (i) mid-single digits to mid-twenties for clinical-stage programs and (ii) mid-single digits to high single digits for the pre-clinical research programs. Merck KGaA will assume full responsibility for development and commercialization costs for all programs. The licenses granted pursuant to the Merck KGaA Agreement and the up-front payment are subject to the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act. Merck KGaA may terminate the Merck KGaA Agreement or any individual program by providing 90 days’ notice, or, in the case of termination of a program with a product that has received marketing approval, 180 days’ notice. The Merck KGaA Agreement may also be terminated by either party for a material breach by the other party, subject to notice and cure provisions. Unless earlier terminated, the Merck KGaA Agreement will continue in effect until the date on which the royalty term and all payment obligations with respect to all products in all countries have expired. |
Earnings Per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share | Earnings Per Share Basic net loss per share attributable to Vertex common shareholders is based upon the weighted-average number of common shares outstanding during the period, excluding restricted stock and restricted stock units that have been issued but are not yet vested. Diluted net loss per share attributable to Vertex common shareholders is based upon the weighted-average number of common shares outstanding during the period plus additional weighted-average common equivalent shares outstanding during the period when the effect is dilutive. The Company did not include the securities in the following table in the computation of the net loss from continuing operations per share attributable to Vertex common shareholders calculations because the effect would have been anti-dilutive during each period.
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Fair Value Measurements |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | Fair Value Measurements The fair value of the Company’s financial assets and liabilities reflects the Company’s estimate of amounts that it would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from sources independent from the Company) and to minimize the use of unobservable inputs (the Company’s assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
The Company’s investment strategy is focused on capital preservation. The Company invests in instruments that meet the credit quality standards outlined in the Company’s investment policy. This policy also limits the amount of credit exposure to any one issue or type of instrument. As of December 31, 2016, the Company’s investments were in money market funds, government-sponsored enterprise securities, corporate equity securities, corporate debt securities and commercial paper. As of December 31, 2016, all of the Company’s financial assets that were subject to fair value measurements were valued using observable inputs. The Company’s financial assets valued based on Level 1 inputs consisted of a money market funds, corporate equity securities and government-sponsored enterprise securities. The Company’s financial assets valued based on Level 2 inputs consisted of corporate debt securities and commercial paper, which consisted of investments in highly-rated investment-grade corporations. The fair value of the Company’s foreign currency forward contracts was based on Level 2 inputs using third party pricing services. During 2016, 2015 and 2014, the Company did not record an other-than-temporary impairment charge related to its financial assets. The following table sets forth the Company’s financial assets (excluding VIE cash and cash equivalents) subject to fair value measurements:
VIEs had cash equivalents of $46.1 million as of December 31, 2016 that consisted of money market funds, which are valued based on Level 1 inputs. These cash equivalents are not included in the table above. The Company’s noncontrolling interest related to VIEs includes the fair value of the contingent payments, which are valued based on Level 3 inputs. Please refer to Note B, “Collaborative Arrangements,” for further information. The Company’s Credit Facility carries a variable interest rate set at current market rates, and as such, the carrying value approximates fair values. As of December 31, 2016, the fair value and carrying value of the Company’s Credit Facility was $300.0 million. |
Marketable Securities |
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Cash and Cash Equivalents [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Marketable Securities | Marketable Securities A summary of the Company’s cash, cash equivalents and marketable securities is shown below:
The Company has a limited number of marketable securities in insignificant loss positions as of December 31, 2016, which the Company does not intend to sell and has concluded it will not be required to sell before recovery of the amortized costs for the investment at maturity. There were no charges recorded for other-than-temporary declines in fair value of marketable securities nor gross realized gains or losses recognized in 2016, 2015 or 2014. |
Accumulated Other Comprehensive Income |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Income | Accumulated Other Comprehensive Income The following table summarizes the changes in accumulated other comprehensive income by component:
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Hedging |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Hedging | Hedging The Company maintains a hedging program intended to mitigate the effect of changes in foreign exchange rates for a portion of the Company’s forecasted product revenues denominated in certain foreign currencies. The program includes foreign currency forward contracts that are designated as cash flow hedges under GAAP having contractual durations from one to eighteen months. The Company formally documents the relationship between foreign currency forward contracts (hedging instruments) and forecasted product revenues (hedged items), as well as the Company’s risk management objective and strategy for undertaking various hedging activities, which includes matching all foreign currency forward contracts that are designated as cash flow hedges to forecasted transactions. The Company also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the foreign currency forward contracts are highly effective in offsetting changes in cash flows of hedged items on a prospective and retrospective basis. If the Company determines that a (i) foreign currency forward contract is not highly effective as a cash flow hedge, (ii) foreign currency forward contract has ceased to be a highly effective hedge or (iii) forecasted transaction is no longer probable of occurring, the Company would discontinue hedge accounting treatment prospectively. The Company measures effectiveness based on the change in fair value of the forward contracts and the fair value of the hypothetical foreign currency forward contracts with terms that match the critical terms of the risk being hedged. As of December 31, 2016, all hedges were determined to be highly effective and the Company had not recorded any ineffectiveness related to the hedging program. The following table summarizes the notional amount of the Company’s outstanding foreign currency forward contracts designated as cash flow hedges:
The following table summarizes the fair value of the Company’s outstanding foreign currency forward contracts designated as cash flow hedges under GAAP included on the Company’s consolidated balance sheets:
The following table summarizes the potential effect of offsetting derivatives by type of financial instrument on the Company’s consolidated balance sheets:
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Inventories |
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Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories | Inventories Inventories consisted of the following:
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Property and Equipment |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property and Equipment | Property and Equipment Property and equipment, net consisted of the following:
Total property and equipment, gross, as of December 31, 2016 and 2015, included $101.3 million and $106.8 million, respectively, for property and equipment recorded under capital leases. Accumulated depreciation, as of December 31, 2016 and 2015, included $37.9 million and $30.4 million, respectively, for property and equipment recorded under capital leases. As of December 31, 2016, included in property and equipment, net were $17.8 million and $9.2 million in capitalized internally developed software costs and related amortization, respectively. As of December 31, 2015, included in property and equipment, net were $15.4 million and $4.1 million in capitalized internally developed software costs and related amortization, respectively. The Company recorded depreciation expense of $60.8 million, $60.0 million and $62.3 million in 2016, 2015 and 2014, respectively. |
Intangible Assets and Goodwill |
12 Months Ended |
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Dec. 31, 2016 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets and Goodwill | Intangible Assets and Goodwill Intangible Assets As of each of December 31, 2016 and December 31, 2015, in-process research and development intangible assets of $284.3 million were recorded on the Company’s consolidated balance sheets. In June 2015, in connection with entering into the Parion Agreement, the Company recorded an in-process research and development intangible asset of $255.3 million based on the Company’s estimate of the fair value of Parion’s lead investigational ENaC inhibitors, including VX-371 and VX-551, that were licensed by the Company from Parion. The Company aggregated the fair value of the ENaC inhibitors into a single intangible asset because the phase, nature and risks of development as well as the amount and timing of benefits associated with the assets were similar. The Company used a discount rate of 7.1% in the present-value models to estimate the fair values of the ENaC inhibitors intangible assets. The Company also conducted an evaluation of Parion’s other programs at the effective date of the Parion Agreement and determined that market participants would not have ascribed value to those programs because of the stage of development of the assets in each program and uncertainties related to the potential development and commercialization of the programs. Goodwill As of each of December 31, 2016 and December 31, 2015, goodwill of $50.4 million was recorded on the Company’s consolidated balance sheet. |
Additional Balance Sheet Detail |
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Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Additional Balance Sheet Detail | Additional Balance Sheet Detail Prepaid and other current assets consisted of the following:
Accrued expenses consisted of the following:
Other liabilities, excluding current portion consisted of the following:
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Long Term Obligations |
12 Months Ended |
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Dec. 31, 2016 | |
Debt Disclosure [Abstract] | |
Long Term Obligations | Long Term Obligations Fan Pier Leases In 2011, the Company entered into two lease agreements, pursuant to which the Company leases approximately 1.1 million square feet of office and laboratory space in two buildings (the “Buildings”) at Fan Pier in Boston, Massachusetts (the “Fan Pier Leases”). The Company commenced lease payments in December 2013, and will make lease payments pursuant to the Fan Pier Leases through December 2028. The Company has an option to extend the term of the Fan Pier Leases for an additional 10 years. Because the Company was involved in the construction project, the Company was deemed for accounting purposes to be the owner of the Buildings during the construction period and recorded project construction costs incurred by the landlord. Upon completion of the Buildings, the Company evaluated the Fan Pier Leases and determined that the Fan Pier Leases did not meet the criteria for “sale-leaseback” treatment. Accordingly, the Company began depreciating the asset and incurring interest expense related to the financing obligation in 2013. The Company bifurcates its lease payments pursuant to the Fan Pier Leases into (i) a portion that is allocated to the Buildings and (ii) a portion that is allocated to the land on which the Buildings were constructed. The portion of the lease obligations allocated to the land is treated as an operating lease that commenced in 2011. The Company recorded interest expense of $60.2 million in each of 2016, 2015 and 2014. The Company recorded depreciation expense of $13.3 million in each of 2016, 2015 and $13.4 million in 2014, respectively. In each of 2016, 2015 and 2014, the Company recorded rent expense of $6.5 million. Property and equipment, net, included $489.0 million and $502.3 million as of December 31, 2016 and 2015, respectively, related to construction costs for the Buildings. The carrying value of the construction financing lease obligation related to the Buildings, which excludes interest that will be imputed over the course of the Company’s lease agreement for the Buildings, was $472.6 million and $473.0 million, as of December 31, 2016 and 2015, respectively. San Diego Lease On December 2, 2015, the Company entered into a lease agreement for 3215 Merryfield Row, San Diego, California with ARE-SD Region No. 23, LLC. Pursuant to this agreement, the Company agreed to lease approximately 170,000 square feet of office and laboratory space in a building under construction in San Diego, California (“San Diego Lease”). Lease payments pursuant to the San Diego Lease will commence upon completion of the building, scheduled for the first half of 2018, and will extend for 16 years from the commencement date. Pursuant to the San Diego Lease, during the initial 16-year term, the Company will pay an average of approximately $10.2 million per year in aggregate rent, exclusive of operating expenses. The Company has the option to extend the lease term for up to two additional five-year terms. Because the Company is involved in the construction project, the Company is deemed for accounting purposes to be the owner of the San Diego building during the construction period and recorded project construction costs incurred by the landlord. The Company bifurcates its lease payments pursuant to the San Diego Lease into (i) a portion that is allocated to the San Diego building and (ii) a portion that is allocated to the land on which the San Diego building was constructed. Although the Company will not begin making lease payments pursuant to the San Diego Lease until the commencement date, the portion of the lease obligation allocated to the land is treated for accounting purposes as an operating lease that commenced in the fourth quarter of 2016. Upon completion of the San Diego building, the Company will evaluate the San Diego Lease and determine if the San Diego Lease meets the criteria for “sale-leaseback” treatment. If the San Diego Lease meets the “sale-leaseback” criteria, the Company will remove the asset and the related liability from its consolidated balance sheet and treat the San Diego Lease as either an operating or a capital lease based on the Company’s assessment of the accounting guidance. The Company expects that upon completion of construction of the San Diego building the San Diego Lease will not meet the “sale-leaseback” criteria. If the San Diego Lease does not meet “sale-leaseback” criteria, the Company will treat the San Diego Lease as a financing obligation and will depreciate the asset over its estimated useful life. Revolving Credit Facility In October 2016, the Company entered into a Credit Agreement (the “Credit Agreement”) with Bank of America, N.A., as administrative agent and the lenders referred to therein. The Credit Agreement provides for a $500.0 million revolving facility, $300.0 million of which was drawn at closing (the “Loans”). The Credit Agreement also provides that, subject to satisfaction of certain conditions, the Company may request that the borrowing capacity under the Credit Agreement be increased by an additional $300.0 million. The Credit Agreement matures on October 13, 2021. The proceeds of the borrowing under the Credit Agreement were used primarily to repay the Company's existing indebtedness under the Macquarie Loan. The Loans will bear interest, at the Company's option, at either a base rate or a Eurodollar rate, in each case plus an applicable margin. Under the Credit Agreement, the applicable margins on base rate loans range from 0.75% to 1.50% and the applicable margins on Eurodollar loans range from 1.75% to 2.50%, in each case based on the Company's consolidated leverage ratio (the ratio of the Company's total consolidated debt to the Company's trailing twelve-month EBITDA). The Loans are guaranteed by certain of the Company's domestic subsidiaries and secured by substantially all of the Company's assets and the assets of the Company's domestic subsidiaries (excluding intellectual property, owned and leased real property and certain other excluded property) and by the equity interests of the Company's subsidiaries, subject to certain exceptions. Under the terms of the Credit Agreement, the Company must maintain, subject to certain limited exceptions, a consolidated leverage ratio of 3.00 to 1.00 and consolidated EBITDA of at least $200.0 million, in each case to be measured on a quarterly basis. The Credit Agreement contains customary representations and warranties and usual and customary affirmative and negative covenants. The Credit Agreement also contains customary events of default. In the case of a continuing event of default, the administrative agent would be entitled to exercise various remedies, including the acceleration of amounts due under outstanding loans. Term Loan On July 9, 2014, the Company entered into a credit agreement with the lenders party thereto, and Macquarie US Trading LLC (“Macquarie”), as administrative agent. The credit agreement provided for a $300.0 million senior secured term loan (“Macquarie Loan”). On October 13, 2016, the Company terminated and repaid all outstanding obligations under the Macquarie Loan. The Company incurred a charge of $2.2 million in the fourth quarter of 2016 related to a loss on extinguishment attributable to the Macquarie Loan that was recorded as Interest Expense in the Company’s consolidated statements of operations. The Macquarie Loan initially bore interest at a rate of 7.2% per annum, which was reduced to 6.2% per annum based on the FDA’s approval of ORKAMBI. The Macquarie Loan bore interest at a rate of LIBOR plus 5.0% per annum during the third year of the term. If the Company had not terminated and repaid all outstanding obligations, the maturity date of all loans under the facilities would have been July 9, 2017. Based on the Company's evaluation of the Macquarie Loan, the Company determined that the Macquarie Loan contained several embedded derivatives. These embedded derivatives were clearly and closely related to the host instrument because they related to the Company's credit risk; therefore, they did not require bifurcation from the host instrument, the Macquarie Loan. The Company incurred $5.3 million in fees paid to Macquarie that were recorded as a discount on the Term Loan and that were recorded as additional interest expense using the effective interest method over the term of the loan in the Company’s consolidated statements of operations. As of December 31, 2016 and 2015, the unamortized discount associated with the Term Loan that was included in the senior secured term loan caption on the Company’s consolidated balance sheets was zero and $4.6 million, respectively. Subsequent Event In February 2017, the Company repaid all $300.0 million outstanding under the Credit Agreement. The Company may reborrow and repay amounts under the revolving credit agreement without penalty. |
Common Stock, Preferred Stock and Equity Plans |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common Stock, Preferred Stock and Equity Plans | Common Stock, Preferred Stock and Equity Plans The Company is authorized to issue 500,000,000 shares of common stock. Holders of common stock are entitled to one vote per share. Holders of common stock are entitled to receive dividends, if and when declared by the Company’s Board of Directors, and to share ratably in the Company’s assets legally available for distribution to the Company’s shareholders in the event of liquidation. Holders of common stock have no preemptive, subscription, redemption or conversion rights. The holders of common stock do not have cumulative voting rights. The Company is authorized to issue 1,000,000 shares of preferred stock in one or more series and to fix the powers, designations, preferences and relative participating, option or other rights thereof, including dividend rights, conversion rights, voting rights, redemption terms, liquidation preferences and the number of shares constituting any series, without any further vote or action by the Company’s shareholders. As of December 31, 2016 and 2015, the Company had no shares of preferred stock issued or outstanding. Stock and Option Plans The purpose of each of the Company’s stock and option plans is to attract, retain and motivate its employees, consultants and directors. Awards granted under these plans can be incentive stock options (“ISOs”), nonstatutory stock options (“NSOs”), restricted stock (“RSs”), restricted stock units (“RSUs”) or other equity-based awards, as specified in the individual plans. Shares issued under all of the Company’s plans are funded through the issuance of new shares. The following table contains information about the Company’s equity plans:
All options granted under the Company’s 2013 Stock and Option Plan (“2013 Plan”) and 2006 Stock and Option Plan (“2006 Plan”) were granted with an exercise price equal to the fair value of the underlying common stock on the date of grant. As of December 31, 2016, the stock and option plan under which the Company makes new equity awards is the Company’s 2013 Plan. Under the 2013 Plan, no stock options can be awarded with an exercise price less than the fair market value on the date of grant. The Company’s shareholders (i) approved an increase in the number of shares authorized for issuance pursuant to the 2013 Plan of 7,800,000 shares, plus the number of shares that remained available for issuance under the Company’s 2006 Stock and Option Plan, which rolled-over into the 2013 Stock and Option Plan in 2015 and (ii) approved an increase in the number of shares authorized for issuance pursuant to the 2013 Plan of 9,500,000 shares in 2014. During the three years ended December 31, 2016, grants to current employees and directors primarily had a grant date that was the same as the date the award was approved by the Company’s Board of Directors. During the three years ended December 31, 2016, for grants to new employees and directors, the date of grant for awards was the employee’s first day of employment or the date the director was elected to the Company’s Board of Directors. All options awarded under the Company’s stock and option plans expire not more than 10 years from the grant date. Historically, all shares of restricted stock and restricted stock units have been granted at a price equal to $0.01, the par value of the Company’s common stock. Beginning with awards approved by the Company’s Board of Directors in July 2016, the Company stopped granting restricted stock units at par value and instead grants the awards at a purchase price equal to $0.00. Vesting of options, restricted stock and restricted stock units generally is ratable over specified periods and is determined by the Company’s Board of Directors. The following table summarizes information related to the outstanding and exercisable options during the year ended December 31, 2016:
The aggregate intrinsic value in the table above represents the total pre-tax amount, net of exercise price, that would have been received by option holders if all option holders had exercised all options with an exercise price lower than the market price on December 30, 2016, which was $74.11 based on the average of the high and low price of the Company’s common stock on that date. The total intrinsic value (the amount by which the fair market value exceeded the exercise price) of stock options exercised during 2016, 2015 and 2014 was $48.6 million, $252.9 million and $316.5 million, respectively. The total cash received by the Company as a result of employee stock option exercises during 2016, 2015 and 2014 was $48.5 million, $165.6 million and $255.5 million, respectively. The following table summarizes information about stock options outstanding and exercisable at December 31, 2016:
The following table summarizes the restricted stock and restricted stock unit activity of the Company during the year ended December 31, 2016:
The total fair value of restricted stock that vested during 2016, 2015 and 2014 (measured on the date of vesting) was $74.1 million, $124.0 million and $54.5 million, respectively. The total fair value of restricted stock units that vested during 2016, 2015 and 2014 (measured on the date of vesting) was $5.3 million, $8.0 million and $2.9 million, respectively. Employee Stock Purchase Plan The Company has an employee stock purchase plan (the “ESPP”). The ESPP permits eligible employees to enroll in a twelve-month offering period comprising two six-month purchase periods. Participants may purchase shares of the Company’s common stock, through payroll deductions, at a price equal to 85% of the fair market value of the common stock on the first day of the applicable twelve-month offering period, or the last day of the applicable six-month purchase period, whichever is lower. Purchase dates under the ESPP occur on or about May 14 and November 14 of each year. As of December 31, 2016, there were 891,353 shares of common stock authorized for issuance pursuant to the ESPP. In 2016, the following shares were issued to employees under the ESPP:
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Stock-based Compensation Expense |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based Compensation Expense | Stock-based Compensation Expense The Company recognizes share-based payments to employees as compensation expense using the fair value method. The fair value of stock options and shares purchased pursuant to the ESPP is calculated using the Black-Scholes option pricing model. The fair value of restricted stock and restricted stock units is based on the intrinsic value on the date of grant. Stock-based compensation, measured at the grant date based on the fair value of the award, is typically recognized as expense ratably over the requisite service period. The expense recognized over the requisite service period includes an estimate of awards that will be forfeited. The effect of stock-based compensation expense during the three years ended December 31, 2016 was as follows:
The stock-based compensation expense by type of award during the three years ended December 31, 2016 was as follows:
The Company capitalizes stock-based compensation expense to inventories, all of which is attributable to employees who support the Company’s manufacturing operations for the Company’s products. The following table sets forth the Company’s unrecognized stock-based compensation expense, net of estimated forfeitures, as of December 31, 2016, by type of award and the weighted-average period over which that expense is expected to be recognized:
Stock Options The Company issues stock options with service conditions, which are generally the vesting periods of the awards. The Company uses the Black-Scholes option pricing model to estimate the fair value of stock options at the grant date. The Black-Scholes option pricing model uses the option exercise price as well as estimates and assumptions related to the expected price volatility of the Company’s stock, the rate of return on risk-free investments, the expected period during which the options will be outstanding, and the expected dividend yield for the Company’s stock to estimate the fair value of a stock option on the grant date. The options granted during 2016, 2015 and 2014 had a weighted-average grant-date fair value per share of $37.93, $52.16 and $39.95, respectively. The fair value of each option granted during 2016, 2015 and 2014 was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions:
The weighted-average valuation assumptions were determined as follows:
Restricted Stock and Restricted Stock Units The Company awards restricted stock and restricted stock units with service conditions, which are generally the vesting periods of the awards. Until 2017, the Company also awarded, to certain members of senior management, on an annual basis restricted stock and restricted stock units that vest upon the earlier of the satisfaction of (i) a performance condition or (ii) a service condition. In February 2016, the Company began granting performance-based restricted stock units (“PSUs”) to certain members of senior management. Threshold, target and maximum parameters were established for the financial and half on non-financial goals, and will be used to calculate the number of shares that will be issuable when the award vests, which may range from zero to 200% of the target amount. The financial-based PSUs vest in three equal installments over a three-year period and are expensed ratably over that same period based upon an assessment of the likelihood of achievement. The non-financial based PSUs cliff vest at the end of the three-year performance period and are expensed on a straight-line basis over that same period based upon an assessment of the likelihood of achievement. In addition, in 2015 and 2014, the Company issued, pursuant to a retention program, restricted stock awards to certain members of senior management that will vest upon the satisfaction of both (i) a performance condition and (ii) a service condition. Employee Stock Purchase Plan The weighted-average fair value of each purchase right granted during 2016, 2015 and 2014 was $26.86, $37.84 and $29.59, respectively. The following table reflects the weighted-average assumptions used in the Black-Scholes option pricing model for 2016, 2015 and 2014:
The expected stock price volatility for ESPP offerings is based on implied volatility. The Company bases the risk-free interest rate on the interest rate payable on U.S. Treasury securities in effect at the time of grant for a period that is commensurate with the assumed expected term. The expected term represents purchases and purchase periods that take place within the offering period. The expected annual dividends estimate is $0.00 because the Company has not historically paid, and does not for the foreseeable future intend to pay, a dividend. |
Other Arrangements |
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Dec. 31, 2016 | |
Other Income and Expenses [Abstract] | |
Other Arrangements | Other Arrangements Sale of HIV Protease Inhibitor Royalty Stream In 2008, the Company sold to a third party its rights to receive royalty payments from GlaxoSmithKline plc, net of royalty amounts to be earned by and due to a third party, for a one-time cash payment of $160.0 million. These royalty payments relate to net sales of HIV protease inhibitors, which had been developed pursuant to a collaboration agreement between the Company and GlaxoSmithKline plc. As of December 31, 2016, the Company had $12.6 million in deferred revenues related to the one-time cash payment, which it is recognizing over the life of the collaboration agreement with GlaxoSmithKline plc based on the units-of-revenue method. In addition, the Company continues to recognize royalty revenues equal to the amount of the third-party subroyalty and an offsetting royalty expense for the third-party subroyalty payment. Other income (expense), net In April 2014, the Company received a one-time cash payment of $36.7 million from its landlord pursuant to the Fan Pier Leases. This payment related to bonds issued pursuant to an Infrastructure Development Assistance Agreement between The Commonwealth of Massachusetts and the Company’s landlord. The bonds were issued in connection with the landlord’s contribution to infrastructure improvements and also were dependent upon employment levels at the Company through the bond issuance date. The Company accounted for the cash payment as a government grant as it was provided in part related to the Company’s employment level in Massachusetts. Such grants are recognized in income in the period in which the conditions of the grant are met and there is reasonable assurance that the grant will be received, provided it is not subject to refund. In the second quarter of 2014, the Company recorded $36.7 million as a credit to other income (expense), net in its consolidated statements of operations because the Company’s employment obligations related to these funds were satisfied as of the date of issuance of the bonds and the payment received is not subject to refund. |
Income Taxes |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | Income Taxes The components of loss from continuing operations before provision for income taxes during the three years ended December 31, 2016 consisted of the following:
The components of the provision for income taxes from continuing operations during the three years ended December 31, 2016 consisted of the following:
The difference between the Company’s “expected” tax provision (benefit), as computed by applying the U.S. federal corporate tax rate of 35% to loss from continuing operations before provision for income taxes, and actual tax is reconciled as follows:
The foreign rate differential in the tax rate reconciliation table reflects the effect of operations in jurisdictions with tax rates that are different from the United States. As set forth in the components of loss before provision for income taxes, the Company had income in 2016 and losses in 2015 and 2014 in foreign jurisdictions in each year presented. Due to lower foreign tax rates, particularly in the United Kingdom, the Company’s tax expense (benefit) in foreign jurisdictions is less than the “expected” tax expense (benefit) that would have resulted from income (losses) in these jurisdictions at corporate tax rates in the United States. The difference between the tax expense (benefit) at foreign corporate tax rates and the “expected” expense (benefit) based on corporate tax rates in the United States is reflected in the tax reconciliation table under the caption “foreign rate differential.” The unbenefitted operating losses in the tax rate reconciliation table primarily reflect a change in the valuation allowance on deferred tax assets related to the United States, United Kingdom and Switzerland. In 2016, the valuation allowance increased primarily due to an increase in tax credits in the United States and an increase in the net operating loss in the United Kingdom, both due to the uncertainty in the Company’s ability to use them in future periods. In 2015 and 2014, the valuation allowance increased primarily related to an increase in net operating losses that have been incurred with no corresponding benefit due to the uncertainty in the Company’s ability to use them in future periods. In 2016, the effect of non-deductible expenses is related to equity compensation, Orphan Drug Credits, foreign amortization and partial disallowance of expenses related to dissolution of a foreign subsidiary. Deferred tax assets and liabilities are determined based on the difference between financial statement and tax bases using enacted tax rates in effect for the year in which the differences are expected to reverse. The components of the deferred taxes were as follows:
The Company presents its deferred tax assets and deferred tax liabilities gross on its consolidated balance sheets. As of December 31, 2016, $134.0 million of the deferred tax liabilities are attributable to the Company’s collaborations with BioAxone and Parion. As of December 31, 2015, $110.4 million of the deferred tax liabilities are attributable to the Company’s collaborations with BioAxone and Parion. For federal income tax purposes, as of December 31, 2016, the Company has net operating loss carryforwards of approximately $4.1 billion and tax credits of $262.9 million, which may be used to offset future federal income and tax liability, respectively. In addition, the Company will record an increase of approximately $1.2 billion of the federal net operating loss carryforward with a corresponding valuation allowance upon adoption of the new stock compensation guidance in the first quarter 2017. For state income tax purposes, the Company has net operating loss carryforwards of approximately $975.8 million and tax credits of $103.8 million, which may be used to offset future state income and tax liability, respectively. In addition, the Company will record an increase of approximately $190.0 million of the state net operating loss carryforward with a corresponding valuation allowance upon adoption of the new stock compensation guidance in the first quarter 2017. These federal and state operating loss carryforwards and tax credits expire at various dates through 2036. After consideration of all the evidence, both positive and negative, the Company continues to maintain a valuation allowance for the majority of the 2016 deferred tax asset because it is more likely than not that the deferred tax asset will not be realized. In future periods, if management determines that it is more likely than not that the deferred tax asset will be realized, (i) the valuation allowance would be decreased, (ii) the deferred tax asset would be reflected on the Company’s consolidated balance sheet and (iii) the Company would record non-cash benefits in its consolidated statements of operations related to the reflection of the deferred tax asset on its consolidated balance sheets. The valuation allowance increased by $14.8 million from December 31, 2015 to December 31, 2016 primarily due to an increase in research tax credit carry forwards in the United States and other timing items. Unrecognized tax benefits during the two years ended December 31, 2016 consisted of the following:
The Company had gross unrecognized tax benefits of zero and $0.4 million, respectively, as of December 31, 2016 and 2015. The Company recognizes interest and penalties related to income taxes as a component of income tax expense. As of December 31, 2016, no interest and penalties have been accrued. The Company files United States federal income tax returns and income tax returns in various state, local and foreign jurisdictions. The Company is no longer subject to any tax assessment from an income tax examination in the United States or any other major taxing jurisdiction for years before 2011, except where the Company has net operating losses or tax credit carryforwards that originate before 2011. The Company currently is under examination by Canada Revenue Agency for the years ending December 31, 2011 through December 31, 2013. No adjustments have been reported. The Company is not under examination by any other jurisdictions for any tax year. The Company concluded audits with Internal Revenue Service, Delaware, Pennsylvania, Texas and Revenue Quebec during 2016, and Massachusetts and New York during 2015, with no material adjustments. At December 31, 2016, foreign earnings, which were not significant, have been retained indefinitely by foreign subsidiary companies for reinvestment; therefore, no provision has been made for income taxes that would be payable upon the distribution of such earnings and it would not be practicable to determine the amount of the related unrecognized deferred income tax liability. Upon repatriation of those earnings, in the form of dividends or otherwise, the Company would be subject to U.S. federal income taxes (subject to an adjustment for foreign tax credits) and withholding taxes payable to the various foreign countries. |
Restructuring Expenses |
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring Expenses |
Facility Lease Obligations The Company has adopted several plans to restructure its facility operations for which it has incurred restructuring expenses in the three years ended December 31, 2016. The Company’s initial estimate of its liabilities for net ongoing costs associated with these facility obligations are recorded at fair value on the cease use date. In estimating the expenses and liabilities related to these facilities, the Company utilizes the probability-weighted discounted cash-flows of the Company’s ongoing lease obligations. In estimating the expense and liability under its lease obligations, the Company estimated (i) the costs to be incurred to satisfy rental and build-out commitments under the lease (including operating costs), (ii) the lead-time necessary to sublease the space, (iii) the projected sublease rental rates and (iv) the anticipated durations of subleases. The Company uses a credit-adjusted risk-free rate to discount the estimated cash flows. The Company reviews its estimates and assumptions on at least a quarterly basis, intends to continue such reviews until the termination of these facility lease obligations, and will make whatever modifications the Company believes necessary, based on the Company’s best judgment, to reflect any changed circumstances. The Company’s estimates have changed in the past, and may change in the future, resulting in additional adjustments to the estimate of these liabilities. Changes to the Company’s estimate of these liabilities are recorded as additional restructuring expenses (credits). In addition, because the Company’s estimate of these liabilities includes the application of a discount rate to reflect the time-value of money, the Company records imputed interest costs related to these liabilities each quarter. These costs are included in restructuring expenses on the Company’s consolidated statements of operations. 2003 Kendall Restructuring In 2003, the Company adopted a plan to restructure its operations (the “2003 Kendall Restructuring”) to coincide with its increasing internal emphasis on advancing drug candidates through clinical development to commercialization. The restructuring was designed to re-balance the Company’s relative investments in research and development to better support the Company’s long-term strategy. At that time, the restructuring plan included a workforce reduction, write-offs of certain assets and a decision not to occupy approximately 290,000 square feet of specialized laboratory and office space in Cambridge, Massachusetts under lease to Vertex (the “Kendall Square Lease”). The Kendall Square Lease commenced in January 2003 and has a 15-year term. In 2005, the Company revised its assessment of its real estate requirements and decided to use approximately 120,000 square feet of the facility subject to the Kendall Square Lease (the “Kendall Square Facility”) for its operations, beginning in 2006. The rentable square footage of the Kendall Square Facility related to the 2003 Kendall Restructuring currently is subleased to third parties. The restructuring expense incurred from the second quarter of 2003 through the end of the first quarter of 2005 (i.e., immediately prior to the Company’s decision to use a portion of the Kendall Square Facility for its operations) related to the estimated incremental net ongoing lease obligations associated with the entire Kendall Square Facility, together with imputed interest costs relating to the restructuring liability. The restructuring expense incurred in the period beginning in the second quarter of 2005 relates only to the portion of the Kendall Square Facility that the Company was not occupying and did not intend to occupy for its operations. The Company uses a discount rate of 10% related to this restructuring activity. The remaining lease obligations, which are associated with the 120,000 square foot portion of the Kendall Square Facility that the Company occupied and used for its operations, were recorded as rental expense in the period incurred until the Company incurred a cease use charge related to this portion of the Kendall Square Facility in the third quarter of 2014 in connection with transitioning its Massachusetts operations to Fan Pier in Boston, Massachusetts (the “Fan Pier Move Restructuring”). The activity related to restructuring and other liability for 2003 was as follows:
In 2003, the lease restructuring and other operating lease expense included $78.7 million of lease restructuring expense and $6.0 million of lease operating expense incurred prior to the decision not to occupy the Kendall Square Facility. The restructuring accrual as of December 31, 2003 related only to the lease restructuring expense. The activities related to 2003 restructuring liability for 2004 through 2016 were as follows:
Fan Pier Move Restructuring In connection with the relocation of its Massachusetts operations to Fan Pier in Boston, Massachusetts, which commenced in 2013, the Company is incurring restructuring charges related to its remaining lease obligations at its facilities in Cambridge, Massachusetts. The majority of these restructuring charges were recorded in the third quarter of 2014 upon decommissioning three facilities in Cambridge. The Company discounted the estimated cash flows related to the facilities at a discount rate of 9%. The Company will continue to incur charges through April 2018 related to the difference between the Company’s estimated future cash flows related to its lease obligations, which include an estimate for sublease income to be received if applicable, and its actual cash flows. The Fan Pier Move Restructuring included lease obligations related to the 120,000 square feet of the Kendall Square Facility that the Company continued to use for its operations following its 2013 Kendall Restructuring. The remaining rentable square footage of the Kendall Square Facility related to the Fan Pier Move Restructuring was subleased to a third party in February 2015. The activities related to the Fan Pier relocation restructuring liability for the three years ended December 31, 2016 were as follows:
Other Restructuring Activities The Company has engaged in several other restructuring activities that are unrelated to its 2003 Kendall Restructuring and the Fan Pier Move Restructuring. The most significant activity commenced in October 2013 when the Company adopted a restructuring plan that included (i) a workforce reduction primarily related to the commercial support of INCIVEK following the continued and rapid decline in the number of patients being treated with INCIVEK as new medicines for the treatment of HCV infection neared approval and (ii) the write-off of certain assets. This action resulted from the Company’s decision to focus its investment on future opportunities in CF and other research and development programs. The activities related to the Company’s other restructuring liabilities for the three years ended December 31, 2016 were as follows:
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Employee Benefits |
12 Months Ended |
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Dec. 31, 2016 | |
Compensation and Retirement Disclosure [Abstract] | |
Employee Benefits | Employee Benefits The Company has a 401(k) retirement plan (the “Vertex 401(k) Plan”) in which substantially all of its permanent U.S. employees are eligible to participate. Participants may contribute up to 60% of their annual compensation to the Vertex 401(k) Plan, subject to statutory limitations. The Company may declare discretionary matching contributions to the Vertex 401(k) Plan. Beginning in mid-2013, the Company began paying matching contributions in the form of cash. For the years ended December 31, 2016, 2015 and 2014, the Company contributed approximately $11.8 million, $12.8 million and $12.0 million to the plan, respectively. As of December 31, 2016, 755,000 shares of common stock remained available for grant under the Vertex 401(k) Plan. |
Commitments and Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies | Commitments and Contingencies Lease Obligations The Company moved into its corporate headquarters to Boston, Massachusetts in January 2014. In December 2015, the Company entered into a lease agreement for 3215 Merryfield Row, San Diego, California. Please refer to Note L, “Long Term Obligations,” for additional information regarding both of these commitments. The Kendall Square Lease began in January 2003 and will expire in April 2018. The Company occupied and used for its operations approximately 120,000 square feet of the Kendall Square Facility until 2014 when it moved its operations to Fan Pier. The Company has sublease arrangements in place for the remaining rentable square footage of the Kendall Square Facility, with terms that expire concurrently with the Kendall Square Lease. Please refer to Note Q, “Restructuring Expenses,” for further information. As of December 31, 2016, future minimum commitments under the facility leases with terms of more than one year and contractual sublease income under the Company’s subleases for the Kendall Square Facility were as follows:
During 2016, 2015 and 2014, rental expense was $19.1 million, $18.1 million and $38.9 million, respectively. The majority of the Company’s lease payments related to the Fan Pier Leases are recorded as interest expense because the Company is deemed for accounting purposes to be the owner of the Buildings. Please refer to Note L, “Long Term Obligations,” for further information. The Company has outstanding leases, which are accounted for as capital leases, for equipment, leasehold improvements and software licenses. The capital leases bear interest at rates ranging from less than 1% to 9% per year. The following table sets forth the Company’s future minimum payments due under capital leases as of December 31, 2016:
In addition, the Company has committed to make potential future milestone and royalty payments pursuant to certain collaboration agreements. Payments generally become due and payable upon the achievement of certain developmental, regulatory and/or commercial milestones. Please refer to Note B, “Collaborative Arrangements,” for further information. Litigation On May 28, 2014, a purported shareholder class action Local No. 8 IBEW Retirement Plan & Trust v. Vertex Pharmaceuticals Incorporated, et al. was filed in the United States District Court for the District of Massachusetts, naming the Company and certain of the Company’s current and former officers and directors as defendants. The lawsuit alleged that the Company made material misrepresentations and/or omissions of material fact in the Company’s disclosures during the period from May 7, 2012 through May 29, 2012, all in violation of Section 10(b) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder. The purported class consists of all persons (excluding defendants) who purchased the Company’s common stock between May 7, 2012 and May 29, 2012. The plaintiffs sought unspecified monetary damages, costs and attorneys’ fees as well as disgorgement of the proceeds from certain individual defendants’ sales of the Company’s stock. On October 8, 2014, the Court approved Local No. 8 IBEW Retirement Fund as lead plaintiff, and Scott and Scott LLP as lead counsel for the plaintiff and the putative class. On September 30, 2015, the court granted the Company’s motion to dismiss. On October 15, 2015, the plaintiff filed a notice of appeal. In 2016, the parties filed briefs with, and presented oral arguments to, the First Circuit Court of Appeals. On October 3, 2016, the First Circuit Court of Appeals affirmed the district court’s dismissal of the plaintiff’s complaint. The times for petitioning the U.S. Court of Appeals for the First Circuit for an en banc rehearing as well as filing a petition for certiorari to the U.S. Supreme Court both have passed. As of December 31, 2016, the Company has not recorded any reserves for this purported class action. Guaranties and Indemnifications As permitted under Massachusetts law, the Company’s Articles of Organization and By-laws provide that the Company will indemnify certain of its officers and directors for certain claims asserted against them in connection with their service as an officer or director. The maximum potential amount of future payments that the Company could be required to make under these indemnification provisions is unlimited. However, the Company has purchased directors’ and officers’ liability insurance policies that could reduce its monetary exposure and enable it to recover a portion of any future amounts paid. No indemnification claims currently are outstanding, and the Company believes the estimated fair value of these indemnification arrangements is minimal. The Company customarily agrees in the ordinary course of its business to indemnification provisions in agreements with clinical trial investigators and sites in its drug development programs, sponsored research agreements with academic and not-for-profit institutions, various comparable agreements involving parties performing services for the Company, and its real estate leases. The Company also customarily agrees to certain indemnification provisions in its drug discovery, development and commercialization collaboration agreements. With respect to the Company’s clinical trials and sponsored research agreements, these indemnification provisions typically apply to any claim asserted against the investigator or the investigator’s institution relating to personal injury or property damage, violations of law or certain breaches of the Company’s contractual obligations arising out of the research or clinical testing of the Company’s compounds or drug candidates. With respect to lease agreements, the indemnification provisions typically apply to claims asserted against the landlord relating to personal injury or property damage caused by the Company, to violations of law by the Company or to certain breaches of the Company’s contractual obligations. The indemnification provisions appearing in the Company’s collaboration agreements are similar to those for the other agreements discussed above, but in addition provide some limited indemnification for its collaborator in the event of third-party claims alleging infringement of intellectual property rights. In each of the cases above, the indemnification obligation generally survives the termination of the agreement for some extended period, although the Company believes the obligation typically has the most relevance during the contract term and for a short period of time thereafter. The maximum potential amount of future payments that the Company could be required to make under these provisions is generally unlimited. The Company has purchased insurance policies covering personal injury, property damage and general liability that reduce its exposure for indemnification and would enable it in many cases to recover all or a portion of any future amounts paid. The Company has never paid any material amounts to defend lawsuits or settle claims related to these indemnification provisions. Accordingly, the Company believes the estimated fair value of these indemnification arrangements is minimal. Other Contingencies The Company has certain contingent liabilities that arise in the ordinary course of its business activities. The Company accrues a reserve for contingent liabilities when it is probable that future expenditures will be made and such expenditures can be reasonably estimated. There were no material contingent liabilities accrued as of December 31, 2016 or 2015. |
Segment Information |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information | Segment Information Segment reporting is prepared on the same basis that the Company’s chief executive officer, who is the Company’s chief operating decision maker, manages the business, makes operating decisions and assesses performance. The Company operates in one segment, pharmaceuticals. Enterprise-wide disclosures about revenues, significant customers, and property and equipment, net by location are presented below. Revenues by Product Product revenues, net consisted of the following:
Revenues by Geographic Location Total revenues from external customers and collaborators by geographic region consisted of the following. Product revenues are attributed to countries based on the location of the customer. Collaborative revenues are attributed to the operations of the Company in the United States. Royalty revenues are attributed to countries based on the location of the collaborator.
In 2016, 2015 and 2014, revenues attributable to the United Kingdom were the largest contributor to the Company’s European revenues. Significant Customers Gross revenues and accounts receivable from each of the Company’s customers who individually accounted for 10% or more of total gross revenues and/or 10% or more of total gross accounts receivable consisted of the following:
Property and Equipment, Net by Location Property and equipment, net by location consisted of the following:
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Quarterly Financial Data (unaudited) |
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Quarterly Financial Information Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Quarterly Financial Data (unaudited) | Quarterly Financial Data (unaudited) The following table sets forth the Company’s quarterly financial data for the two years ended December 31, 2016.
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Subsequent Events |
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Dec. 31, 2016 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events In February 2017, the Company decided to consolidate its research activities into its Boston, Milton Park and San Diego locations. As a result, the Company plans to close its Laval, Canada site. In connection with this decision, approximately 70 positions were affected and the Company estimates that it will incur aggregate restructuring expenses of approximately $10 million in the first quarter of 2017. In January 2017, the Company entered into the Merck KGaA Agreement. A description of the Merck KGaA Agreement is set forth in Note B, “Collaborative Arrangements.” In February 2017, the Company repaid all outstanding borrowings under the Credit Agreement. Further information on the Credit Agreement, including the February 2017 repayment, is set forth in Note L, “Long Term Obligations.” |
Nature of Business and Accounting Policies (Policies) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Presentation | Basis of Presentation The consolidated financial statements reflect the operations of (i) the Company, (ii) its wholly-owned subsidiaries and (iii) consolidated variable interest entities (VIEs). In addition, the consolidated financial statements for 2014 reflect the operations of Alios BioPharma, Inc. (“Alios”), a former collaborator, as well as direct expenses Vertex incurred as a result of the Company’s agreement with Alios, as discontinued operations. All material intercompany balances and transactions have been eliminated. The Company operates in one segment, pharmaceuticals. Please refer to Note T, “Segment Information,” for enterprise-wide disclosures regarding the Company’s revenues, major customers and long-lived assets by geographic area. |
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Use of Estimates | Use of Estimates The preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the amounts of revenues and expenses during the reported periods. Significant estimates in these consolidated financial statements have been made in connection with the calculation of revenues, inventories, research and development expenses, stock-based compensation expense, restructuring expense, the fair value of intangible assets, goodwill, contingent consideration, noncontrolling interest, the consolidation of VIEs, leases, the fair value of cash flow hedges and the provision for or benefit from income taxes. The Company bases its estimates on historical experience and various other assumptions, including in certain circumstances future projections, that management believes to be reasonable under the circumstances. Actual results could differ from those estimates. Changes in estimates are reflected in reported results in the period in which they become known. |
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Revenue Recognition | Revenue Recognition Product Revenues, Net The Company sells its products principally to a limited number of specialty pharmacy providers and selected regional wholesalers in North America as well as government-owned and supported customers in international markets (collectively, its “Customers”). The Company’s Customers in North America subsequently resell the products to patients and health care providers. The Company recognizes net revenues from product sales upon delivery as long as (i) there is persuasive evidence that an arrangement exists between the Company and the Customer, (ii) collectibility is reasonably assured and (iii) the price is fixed or determinable. In order to conclude that the price is fixed or determinable, the Company must be able to (i) calculate its gross product revenues from sales to Customers and (ii) reasonably estimate its net product revenues upon delivery to its Customer’s locations. The Company calculates gross product revenues based on the price that the Company charges its Customers. The Company estimates its net product revenues by deducting from its gross product revenues (a) trade allowances, such as invoice discounts for prompt payment and Customer fees, (b) estimated government and private payor rebates, chargebacks and discounts, (c) estimated reserves for expected product returns and (d) estimated costs of co-pay assistance programs for patients, as well as other incentives for certain indirect customers. Trade Allowances: The Company generally provides invoice discounts on product sales to its Customers for prompt payment and pays fees for distribution services, such as fees for certain data that Customers provide to the Company. The payment terms for sales to Customers in the United States generally include a discount for payment within 30 days. The Company expects that, based on its experience, its Customers will earn these discounts and fees, and deducts the full amount of these discounts and fees from its gross product revenues and accounts receivable at the time such revenues are recognized. Rebates, Chargebacks and Discounts: The Company contracts with government agencies and various private organizations (collectively, its “Third-party Payors”) so that products will be eligible for purchase by, or partial or full reimbursement from, such Third-party Payors. The Company estimates the rebates, chargebacks and discounts it will provide to Third-party Payors and deducts these estimated amounts from its gross product revenues at the time the revenues are recognized. For each product, the Company estimates the aggregate rebates, chargebacks and discounts that it will provide to Third-party Payors based upon (i) the Company’s contracts with these Third-party Payors, (ii) the government-mandated discounts applicable to government-funded programs, (iii) information obtained from the Company’s Customers and other third-party data regarding the payor mix for such product and (iv) historical experience. Product Returns: The Company estimates the amount of each product that will be returned and deducts these estimated amounts from its gross revenues at the time the revenues are recognized. The Company’s Customers have the right to return unopened unprescribed packages, subject to contractual limitations. To date product returns have been minimal and, based on inventory levels held by its Customers and its distribution model, the Company believes that returns of its products will continue to be minimal. Other Incentives: Other incentives that the Company offers include co-pay mitigation rebates provided by the Company to commercially insured patients who have coverage and who reside in states that permit co-pay mitigation programs. The Company’s co-pay mitigation programs are intended to reduce each participating patient’s portion of the financial responsibility for a product’s purchase price to a specified dollar amount. Based upon the terms of the Company’s co-pay mitigation programs, the Company estimates average co-pay mitigation amounts for each of its products in order to establish its accruals for co-pay mitigation rebates and deducts these estimated amounts from its gross product revenues at the later of the date (i) the revenues are recognized or (ii) the incentive is offered. The Company’s co-pay mitigation rebates are subject to expiration. The Company makes significant estimates and judgments that materially affect the Company’s recognition of net product revenues. In certain instances, the Company may be unable to reasonably conclude that the price is fixed or determinable at the time of delivery, in which case it defers the recognition of revenues. Once the Company is able to determine that the price is fixed or determinable, it recognizes the revenues associated with the units in which revenue recognition was deferred. ORKAMBI net product revenues do not include any revenues from product sales in France. The Company began distributing ORKAMBI through early access programs in the fourth quarter of 2015. The Company’s consolidated balance sheet includes $73.4 million collected as of December 31, 2016 in France related to ORKAMBI that is classified as customer deposits. The Company expects that revenues from these early access programs will be recognized in the period that a formal reimbursement agreement in France is reached based on the terms of such agreement. The following table summarizes activity in each of the product revenue allowance and reserve categories for the three years ended December 31, 2016:
The Company adjusts its estimated rebates, chargebacks and discounts based on new information, including information regarding actual rebates, chargebacks and discounts for its products, as it becomes available. Claims by third-party payors for rebates, chargebacks and discounts frequently are submitted to the Company significantly after the related sales, potentially resulting in adjustments in the period in which the new information becomes known. In each of the periods presented, the Company’s adjustments relating to prior period sales principally related to the Company’s estimates for INCIVEK. During the fourth quarter of 2014, the Company withdrew INCIVEK from the market in the United States. Royalty Revenues The Company’s royalty revenues on commercial sales of INCIVO (telaprevir) by Janssen NV were based on net sales of licensed products in licensed territories as provided by Janssen NV. The Company recognized royalty revenues in the period the sales occured. The Company has sold its rights to receive certain royalties on sales of an HIV protease inhibitor (fosamprenavir) and recognizes the revenues related to this sale as royalty revenues. In the circumstance where the Company has sold its rights to future royalties under a license agreement and also maintains continuing involvement in the royalty arrangement (but not significant continuing involvement in the generation of the cash flows payable to the purchaser of the future royalty rights), the Company defers recognition of the proceeds it receives for the royalty stream and recognizes these deferred revenues over the life of the license agreement pursuant to the units-of-revenue method. The Company’s estimates regarding the estimated remaining royalty payments due to the purchaser have changed in the past and may change in the future. Collaborative Revenues The Company recognizes revenues generated through collaborative research, development and/or commercialization agreements. The terms of these agreements typically include payment to the Company of one or more of the following: nonrefundable, up-front license fees; development and commercial milestone payments; funding of research and/or development activities; payments for services the Company provides through its third-party manufacturing network; and royalties on net sales of licensed products. Each of these types of payments results in collaborative revenues, except for revenues from royalties on net sales of licensed products, which are classified as royalty revenues. For each collaborative research, development and/or commercialization agreement that result in revenues, the Company determines (i) whether multiple deliverables exist, (ii) whether the undelivered elements have value to the customer on a stand-alone basis, (iii) how the deliverables should be separated and (iv) how the consideration should be allocated to the deliverables. For arrangements entered into or materially modified after January 1, 2011, the Company allocates consideration in an arrangement using the relative selling price method based on management’s best estimate of selling price of deliverables if it does not have vendor-specific objective evidence or third-party evidence. As part of the accounting for these agreements, the Company must develop assumptions that require judgment to determine the best estimate of selling price. Key assumptions utilized by the Company to determine the best estimate of selling price may include forecasted revenues, patient enrollment requirements from regulatory authorities, development timelines, reimbursement rates for personnel costs, discount rates, and estimated third-party development costs. The Company evaluates amendments to its existing arrangements to determine whether they have been materially modified. In making its determination that an arrangement has been materially modified, the Company considers whether there have been significant changes to the consideration under the arrangement, the deliverables under the arrangement, the timing of deliverables and the period of the arrangement. If the arrangement is determined to have been materially modified, the Company allocates fixed consideration under the arrangement using its best estimate of selling price to the remaining undelivered elements at the date of material modification. Any consideration remaining after the allocation is recognized as revenue. Up-front License Fees: If the license to the Company’s intellectual property was determined to have stand-alone value from the other deliverables identified in the arrangement, the Company recognized revenues from nonrefundable, up-front license fees upon delivery. If these licenses did not have stand-alone value, the Company recognized revenues from nonrefundable, up-front license fees on a straight-line basis over the contracted or estimated period of performance. The Company evaluates the period of performance each reporting period and adjusts the period of performance on a prospective basis if there are changes to be made. Milestone Payments: At the inception of each agreement that included research and development milestone payments, the Company evaluated whether each milestone was substantive. The Company recognized revenues related to substantive milestones in full in the period in which the substantive milestone is achieved if payment is reasonably assured. If a milestone is not considered substantive, the Company recognized the applicable milestone payment over the period of performance. Research and Development Activities/Manufacturing Services: If the Company was entitled to reimbursement from its collaborators for specified research and development expenses and/or was entitled to payments for specified manufacturing services that the Company provided through its third-party manufacturing network, the Company determines whether the research and development funding would result in collaborative revenues or an offset to research and development expenses in accordance with the provisions of gross or net revenue presentation. |
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Concentration of Credit Risk | Concentration of Credit Risk Financial instruments that potentially subject the Company to concentration of credit risk consist principally of money market funds and marketable securities. The Company places these investments with highly rated financial institutions, and, by policy, limits the amounts of credit exposure to any one financial institution. These amounts at times may exceed federally insured limits. The Company also maintains a foreign currency hedging program that includes foreign currency forward contracts with several counterparties. The Company has not experienced any credit losses related to these financial instruments and does not believe it is exposed to any significant credit risk related to these instruments. The Company also is subject to credit risk from its accounts receivable related to its product sales and collaborators. The Company evaluates the creditworthiness of each of its customers and has determined that all of its material customers are creditworthy. |
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Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents. |
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Marketable Securities | Marketable Securities The Company’s marketable securities consist of investments in government-sponsored enterprise securities, corporate debt securities, corporate equity securities and commercial paper that are classified as available-for-sale. The Company classifies marketable securities available to fund current operations as current assets on its consolidated balance sheets. Marketable securities are classified as long-term assets on the consolidated balance sheets if (i) they have been in an unrealized loss position for longer than one year and (ii) the Company has the ability and intent to hold them (a) until the carrying value is recovered and (b) such holding period may be longer than one year. The Company’s marketable securities are stated at fair value with their unrealized gains and losses included as a component of accumulated other comprehensive income (loss), which is a separate component of shareholders’ equity, until such gains and losses are realized. The fair value of these securities is based on quoted prices for identical or similar assets. The Company reviews investments in marketable securities for other-than-temporary impairment whenever the fair value of an investment is less than the amortized cost and evidence indicates that an investment’s carrying amount is not recoverable within a reasonable period of time. To determine whether an impairment is other-than-temporary, the Company considers whether it has an intent to sell, or whether it is more likely than not that the Company will be required to sell, the investment before recovery of the investment’s amortized cost basis. Evidence considered in this assessment includes reasons for the impairment, compliance with the Company’s investment policy, the severity and the duration of the impairment and changes in value subsequent to year-end. If a decline in the fair value is considered other-than-temporary, based on available evidence, the unrealized loss is transferred from other comprehensive income (loss) to the consolidated statements of operations. Realized gains and losses are determined using the specific identification method and are included in other income (expense), net in the consolidated statements of operations |
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Accounts Receivable | Accounts Receivable The Company deducts trade allowances for prompt payment and fees for distribution services from its accounts receivable based on its experience that the Company’s Customers will earn these discounts and fees. The Company’s estimates for its allowance for doubtful accounts, which have not been significant to date, are determined based on existing contractual payment terms and historical payment patterns. |
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Stock-based Compensation Expense | Stock-based Compensation Expense The Company expenses the fair value of employee stock options and other forms of stock-based employee compensation over the associated employee service period on a straight-line basis. Stock-based compensation expense is determined based on the fair value of the award at the grant date, net of estimated forfeitures, and is adjusted each period to reflect actual forfeitures and the outcomes of certain performance conditions. For awards with performance conditions that accelerate vesting of the award, the Company estimates the likelihood of satisfaction of the performance conditions, which affects the period over which the expense is recognized, and recognizes the expense using the accelerated attribution model. For awards with performance conditions in which the award does not vest unless the performance condition is met, the Company recognizes expense if, and to the extent that, the Company estimates that achievement of the performance condition is probable. If the Company concludes that vesting is probable, it recognizes expense from the date it reaches this conclusion through the estimated vesting date. Effective for equity awards granted on or after February 5, 2014, the Company provides to employees who have rendered a certain number of years’ to the Company and meet certain age requirements, partial or full acceleration of vesting of these equity awards, subject to certain conditions including a notification period, upon a termination of employment other than for cause. Approximately 5% of the Company’s employees were eligible for partial or full acceleration of any of their equity awards as of December 31, 2016. The Company recognizes stock-based compensation expense related to these awards over a service period reflecting qualified employees eligibility for partial or full acceleration of vesting |
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Research and Development Expenses | Research and Development Expenses The Company expenses as incurred all research and development expenses, including amounts funded by research and development collaborations. The Company capitalizes nonrefundable advance payments made by the Company for research and development activities and expenses the payments as the related goods are delivered or the related services are performed. Research and development expenses are comprised of costs incurred by the Company in performing research and development activities, including salary and benefits; stock-based compensation expense; laboratory supplies and other direct expenses; outsourced services, including clinical trial and pharmaceutical development costs; expenses associated with drug supplies that are not being capitalized; and infrastructure costs, including facilities costs and depreciation expense |
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Advertising Expenses | Advertising Expenses The Company expenses the costs of advertising, including promotional expenses, as incurred |
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Inventories | Inventories The Company values its inventories at the lower-of-cost or market. The Company determines the cost of its inventories, which includes amounts related to materials and manufacturing overhead, on a first-in, first-out basis. The Company performs an assessment of the recoverability of capitalized inventory during each reporting period, and writes down any excess and obsolete inventories to their realizable value in the period in which the impairment is first identified. Shipping and handling costs incurred for inventory purchases are capitalized and recorded upon sale in cost of product revenues in the consolidated statements of operations. Shipping and handling costs incurred for product shipments are recorded as incurred in cost of product revenues in the consolidated statements of operations. The Company capitalizes inventories produced in preparation for initiating sales of a drug candidate when the related drug candidate is considered to have a high likelihood of regulatory approval and the related costs are expected to be recoverable through sales of the inventories. In determining whether or not to capitalize such inventories, the Company evaluates, among other factors, information regarding the drug candidate’s safety and efficacy, the status of regulatory submissions and communications with regulatory authorities and the outlook for commercial sales, including the existence of current or anticipated competitive drugs and the availability of reimbursement. In addition, the Company evaluates risks associated with manufacturing the drug candidate and the remaining shelf-life of the inventories |
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Property and Equipment | Property and Equipment Property and equipment are recorded at cost. Depreciation expense is recorded using the straight-line method over the estimated useful life of the related asset, generally seven to ten years for furniture and equipment, three to five years for computers and software, 40 years for buildings and for leasehold improvements, the shorter of the useful life of the improvements or the estimated remaining life of the associated lease. Amortization expense of assets acquired under capital leases is included in depreciation expense. Maintenance and repairs to an asset that do not improve or extend its life are charged to operations. When assets are retired or otherwise disposed of, the assets and related accumulated depreciation are eliminated from the accounts and any resulting gain or loss is reflected in the Company’s consolidated statements of operations. The Company performs an assessment of the fair value of the assets if indicators of impairment are identified during a reporting period and records the assets at the lower of the net book value or the fair value of the assets. The Company capitalizes internal costs incurred to develop software for internal use during the application development stage. The Company expenses costs related to the planning and post-implementation phases of development of software for internal use as these costs are incurred. Maintenance and enhancement costs (including costs in the post-implementation stages) are expensed as incurred, unless such costs relate to substantial upgrades and enhancements to the software resulting in added functionality, in which case the costs are capitalized. Amortization of capitalized internally developed software costs is recorded in depreciation expense over the useful life of the related asset. The Company records certain construction costs incurred by a landlord as an asset and a corresponding financing obligation on the Company’s consolidated balance sheets when the Company is determined to be the owner of the buildings during construction for accounting purposes. Upon completion of the project, the Company performs a sale-leaseback analysis to determine if the Company can remove the assets from its consolidated balance sheet |
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Capital Leases | Capital Leases The assets and liabilities associated with capital lease agreements are recorded at the present value of the minimum lease payments at the inception of the lease agreement. The assets are depreciated using the straight-line method over the shorter of the useful life of the related asset or the remaining life of the associated lease. Amortization of assets that the Company leases pursuant to a capital lease is included in depreciation expense. The Company performs an assessment of the fair value of the assets if indicators of impairment are identified during a reporting period and records the assets at the lower of the net book value or the fair value of the assets. Assets recorded under capital leases are recorded within “Property and equipment, net” and liabilities related to those assets are recorded within “Capital lease obligations, current portion” and “Capital lease obligations, excluding current portion” on the Company’s consolidated balance sheets. |
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Income Taxes | Income Taxes Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial statement carrying amounts and the income tax bases of assets and liabilities. A valuation allowance is applied against any net deferred tax asset if, based on the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company records liabilities related to uncertain tax positions by prescribing a minimum recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Company does not believe any such uncertain tax positions currently pending will have a material adverse effect on its consolidated financial statements |
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Variable Interest Entities | Variable Interest Entities The Company reviews each collaboration agreement pursuant to which the Company licenses assets owned by a collaborator in order to determine whether or not the Company has a variable interest via the license agreement with the collaborator and if the variable interest is a variable interest in the collaborator as a whole. In assessing whether the Company has a variable interest in the collaborator as a whole, the Company considers and makes judgments regarding the purpose and design of the entity, the value of the licensed assets to the collaborator and the significant activities of the collaborator. If the Company has a variable interest in the collaborator as a whole, the Company assesses whether or not the Company is the primary beneficiary of that VIE based on a number of factors, including (i) which party has the power to direct the activities that most significantly affect the VIE’s economic performance, (ii) the parties’ contractual rights and responsibilities pursuant to the collaboration agreement and (iii) which party has the obligation to absorb losses of or the right to receive benefits from the VIE that could be significant to the VIE. If the Company determines it is the primary beneficiary of a VIE at the onset of the collaboration agreement, the collaboration is treated as a business combination and the Company consolidates the financial statements of the VIE into the Company’s consolidated financial statements. The Company evaluates whether it continues to be the primary beneficiary of any consolidated VIEs on a quarterly basis. If the Company determines that it is no longer the primary beneficiary of a consolidated VIE, or no longer has a variable interest in the VIE, it deconsolidates the VIE in the period that the determination is made. Assets recorded as a result of consolidating VIEs’ financial results into the Company’s consolidated balance sheet do not represent additional assets that could be used to satisfy claims against the Company’s general assets. With respect to the Company’s VIEs, the VIEs’ assets are not significant, except for the VIEs’ cash and cash equivalents. The Company records the cash and cash equivalents of consolidated VIEs as restricted cash because the Company does not have control over the VIEs’ cash and cash equivalents. The Company also has recorded the liabilities of its consolidated VIEs for which creditors do not have recourse to the Company’s general assets outside of the VIE |
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Fair Value of In-process Research and Development Assets and Contingent Payments | Fair Value of In-process Research and Development Assets and Contingent Payments The present-value models used to estimate the fair values of research and development assets and contingent payments pursuant to collaborations incorporate significant assumptions, including: assumptions regarding the probability of obtaining marketing approval and/or achieving relevant development milestones for a drug candidate; estimates regarding the timing of and the expected costs to develop a drug candidate; estimates of future cash flows from potential product sales and/or the potential to achieve certain commercial milestones with respect to a drug candidate; and the appropriate discount and tax rates. |
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In-process Research and Development Assets | In-process Research and Development Assets The Company records the fair value of in-process research and development assets as of the transaction date of a business combination. Each of these assets is accounted for as an indefinite-lived intangible asset and is maintained on the Company’s consolidated balance sheet until either the project underlying it is completed or the asset becomes impaired. If the asset becomes impaired or is abandoned, the carrying value of the related intangible asset is written down to its fair value, and an impairment charge is recorded in the period in which the impairment occurs. If a project is completed, the carrying value of the related intangible asset is amortized as a part of cost of product revenues over the remaining estimated life of the asset beginning in the period in which the project is completed. In-process research and development assets are tested for impairment on an annual basis as of October 1, and more frequently if indicators are present or changes in circumstances suggest that impairment may exist |
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Goodwill | Goodwill The difference between the purchase price and the fair value of assets acquired and liabilities assumed in a business combination is allocated to goodwill. Goodwill is evaluated for impairment on an annual basis as of October 1, and more frequently if indicators are present or changes in circumstances suggest that impairment may exist |
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Noncontrolling Interest | Noncontrolling Interest The Company records noncontrolling interest, which has historically related to consolidated VIEs, on its consolidated balance sheets. The Company records net loss (income) attributable to noncontrolling interest on its consolidated statements of operations, reflecting the VIEs’ net loss (income) for the reporting period, adjusted for changes in the noncontrolling interest holders’ claim to net assets, including contingent milestone, royalty and option payments, is evaluated each reporting period |
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Deconsolidation and Discounted Operations | Deconsolidation and Discontinued Operations Upon the occurrence of certain events and on a regular basis, the Company evaluates whether it no longer has a controlling interest in its subsidiaries, including consolidated VIEs. If the Company determines it no longer has a controlling interest, the subsidiary is deconsolidated. The Company records a gain or loss on deconsolidation based on the difference on the deconsolidation date between (i) the aggregate of (a) the fair value of any consideration received, (b) the fair value of any retained noncontrolling investment in the former subsidiary and (c) the carrying amount of any noncontrolling interest in the subsidiary being deconsolidated, less (ii) the carrying amount of the former subsidiary’s assets and liabilities. The Company assesses whether a deconsolidation is required to be presented as discontinued operations in its consolidated financial statements on the deconsolidation date. This assessment is based on whether or not the deconsolidation represents a strategic shift that has or will have a major effect on the Company’s operations or financial results. If the Company determines that a deconsolidation requires presentation as a discontinued operation on the deconsolidation date, or at any point during the one year period following such date, it will present the former subsidiary as a discontinued operation in current and comparative period financial statements |
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Derivative Instruments, Embedded Derivatives and Hedging Activities | Derivative Instruments, Embedded Derivatives and Hedging Activities The Company has entered into financial transactions involving free-standing derivative instruments and embedded derivatives in the past. Embedded derivatives are required to be bifurcated from the host instruments if the derivatives are not clearly and closely related to the host instruments. The Company determines the fair value of each derivative instrument or embedded derivative that is identified on the date of issuance and at the end of each quarterly period. The estimates of the fair value of the derivatives include significant assumptions regarding the estimates market participants would make in order to evaluate these derivatives. The Company recognizes the fair value of hedging instruments that are designated and qualify as hedging instruments pursuant to GAAP, primarily foreign currency forward contracts, as either assets or liabilities on the consolidated balance sheets. Changes in the fair value of hedging instruments are recorded each period in accumulated other comprehensive income (loss) as unrealized gains and losses until the forecasted underlying transaction occurs. Unrealized gains and losses on these foreign currency forward contracts are included in (i) “Prepaid expenses and other current assets,” (ii) Other assets,” (iii) “Other liabilities, current portion” and (iv) “Other liabilities, excluding current portion,” respectively, on the Company’s consolidated balance sheets. Realized gains and losses for the effective portion of such contracts are recognized in “Product revenues, net” in the consolidated statement of operations when the contract is settled with the counterparty. The Company classifies the cash flows from hedging instruments in the same category as the cash flows from the hedged items. Certain of the Company’s hedging instruments are subject to master netting arrangements to reduce the risk arising from such transactions with its counterparties. The Company presents unrealized gains and losses on its foreign currency forward contracts on a gross basis within its consolidated balance sheets. The Company assesses, both at inception and on an ongoing basis, whether the foreign currency forward contracts used in hedging transactions are highly effective in offsetting the changes in cash flows of the hedged items. The Company also assesses hedge ineffectiveness quarterly and, if determined to be ineffective, records the gain or loss related to the ineffective portion to earnings in “Other income (expense), net” in its consolidated statements of operations |
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Restructuring Expenses | Restructuring Expenses The Company records costs and liabilities associated with exit and disposal activities based on estimates of fair value in the period the liabilities are incurred. In periods subsequent to the initial measurement, the Company measures changes to the liability using the credit-adjusted risk-free discount rate applied in the initial period. The Company evaluates and adjusts these liabilities as appropriate for changes in circumstances at least on a quarterly basis. |
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Comprehensive Income (Loss) | Comprehensive Income (Loss) Comprehensive income (loss) consists of net income (loss) and other comprehensive income (loss), which includes foreign currency translation adjustments and unrealized gains and losses on foreign currency forward contracts and certain marketable securities. For purposes of comprehensive income (loss) disclosures, the Company records tax provisions or benefits related to the unrealized gains and losses on foreign currency forward contracts and certain marketable securities. The Company does not record tax provisions or benefits related to the cumulative translation adjustment, as the Company intends to permanently reinvest undistributed earnings in its foreign subsidiaries |
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Foreign Currency Translation and Transactions | Foreign Currency Translation and Transactions The Company primarily operates with entities that have the U.S. dollar denominated as their functional currency. Non-U.S. dollar denominated functional currency subsidiaries have assets and liabilities translated into U.S. dollars at rates of exchange in effect at the end of the year. Revenue and expense amounts are translated using the average exchange rates for the period. Net unrealized gains and losses resulting from foreign currency translation are included in accumulated other comprehensive income (loss), which is a separate component of shareholders’ equity |
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Net Loss Per Share Attributable to Vertex Common Stockholders | Net Loss Per Share Attributable to Vertex Common Shareholders Basic and diluted net loss per share attributable to Vertex common shareholders are presented in conformity with the two-class method required for participating securities. Under the two-class method, earnings are allocated to (i) Vertex common shares, excluding unvested restricted stock, and (ii) participating securities, based on their respective weighted-average shares outstanding for the period. Shares of unvested restricted stock granted under the Company’s Amended and Restated 2006 Stock and Option Plan have the non-forfeitable right to receive dividends on an equal basis with other outstanding common stock. As a result, these unvested shares of restricted stock are considered participating securities under the two-class method. Potentially dilutive shares result from the assumed exercise of outstanding stock options (the proceeds of which are then assumed to have been used to repurchase outstanding stock using the treasury stock method). Basic net loss per share attributable to Vertex common shareholders is based upon the weighted-average number of common shares outstanding during the period, excluding restricted stock that has been issued but is not yet vested. Diluted net loss per share attributable to Vertex common shareholders is based upon the weighted-average number of common shares outstanding during the period plus additional weighted-average common equivalent shares outstanding during the period when the effect is dilutive. The Company utilizes income (loss) from continuing operations attributable to Vertex to determine whether potentially outstanding stock options and the assumed conversion of convertible notes are dilutive |
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Recent Accounting Pronouncements | Recent Accounting Pronouncements In 2014, the Financial Accounting Standards Board (“FASB”) issued amended guidance applicable to revenue recognition that will be effective for the year ending December 31, 2018. Early adoption is permitted for the year-ending December 31, 2017. The new guidance applies a more principles based approach to recognizing revenue. Under the new guidance, revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration that an entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The new guidance must be adopted using either a modified retrospective approach or a full retrospective approach for all periods presented. Under the modified retrospective method, the cumulative effect of applying the standard would be recognized at the date of initial application within retained earnings. Under the full retrospective approach, the standard would be applied to each prior reporting period presented. The Company expects to adopt the new guidance using the modified retrospective method. The Company is in the process of evaluating the new guidance and determining whether the expected effect is material to its consolidated financial statements. The process includes identifying and analyzing the impact of the standard by reviewing the Company’s current accounting policies and practices to identify potential differences that would result from applying the requirements of the new standard to each revenue contract associated with all of the Company’s revenue streams. The new guidance could impact the Company’s accounting for product shipments to countries through early access programs, for example the French early access programs, whereby the associated product has received regulatory approval but the reimbursement rate has not been finalized. In 2016, the FASB issued amended guidance applicable to leases that will be effective for the year ending December 31, 2019. Early adoption is permitted. This update requires an entity to recognize assets and liabilities for leases with lease terms of more than 12 months on the balance sheet. The Company is in the process of evaluating the new guidance and determining the expected effect on its consolidated financial statements. In 2016, the FASB issued amended guidance applicable to share-based compensation to employees that will be effective for the year ending December 31, 2017 with early adoption permitted. This guidance simplifies the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The Company plans to change how it accounts for forfeitures upon adoption and is currently quantifying the adjustment to be recorded to retained earnings related to this change in policy. In addition, the Company will include certain net operating losses and tax credits, offset with a full valuation allowance, as a component of deferred taxes upon adoption of this guidance that were previously not included in deferred taxes. The Company will also record a corresponding valuation allowance against these increased net operating loss carryforwards upon adoption of this new guidance. In 2016, the FASB issued amended guidance for the classification of certain cash receipts and cash payments on the statement of cash flows to reduce existing diversity in practice. The new accounting guidance is effective for the year ending December 31, 2017. Early adoption is permitted. The Company does not expect a significant effect on its consolidated financial statements upon adoption of this new guidance. In January 2017, the FASB issued amended guidance related to business combinations. The new guidance clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The new accounting guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. Early adoption is permitted. The Company plans to apply this new guidance to future acquisitions. In 2014, the FASB issued new guidance on management’s responsibility in evaluating whether or not there is substantial doubt about a company’s ability to continue as a going concern within one year from the date the financial statements are issued each reporting period. This new accounting guidance became effective for the Company for the year ended December 31, 2016. The adoption of the new guidance did not have a material effect on the Company’s consolidated financial statements |
Nature of Business and Accounting Policies (Tables) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of product revenues allowances and reserve categories | The following table summarizes activity in each of the product revenue allowance and reserve categories for the three years ended December 31, 2016:
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Collaborative Arrangements (Tables) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value of Consideration Transferred | The up-front payment made and the fair value of the contingent payments payable by the Company pursuant to the Parion Agreement are set forth in the table below:
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Schedule of Collaborative Arrangement Summary of Final Fair Values of the Assets and Liabilities Recorded on the Effective Date of the Agreement | :
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Schedule of Collaborative Arrangement Activity Net Loss Attributable to Noncontrolling Interest | An aggregate summary of net loss attributable to noncontrolling interest related to the Company’s VIEs for the three years ended December 31, 2016 was as follows:
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Schedule of Collaborative Arrangement Summary Of Items Related To Variable Interest Entities | The following table summarizes items related to the Company’s VIEs included in the Company’s consolidated balance sheets as of the dates set forth in the table:
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Schedule of Collaborative Arrangements and Non-collaborative Arrangement Transactions - Royalty and Collaborative Revenues | During the three years ended December 31, 2016, the Company recognized the following revenues attributable to the Janssen HCV collaboration:
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Earnings Per Share (Tables) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Potential gross common equivalent shares | The Company did not include the securities in the following table in the computation of the net loss from continuing operations per share attributable to Vertex common shareholders calculations because the effect would have been anti-dilutive during each period.
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Fair Value Measurements (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial assets subject to fair value measurements (excluding restricted cash and cash equivalents (VIE)) | The following table sets forth the Company’s financial assets (excluding VIE cash and cash equivalents) subject to fair value measurements:
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Marketable Securities (Tables) |
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Cash and Cash Equivalents [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of cash, cash equivalents and marketable securities | A summary of the Company’s cash, cash equivalents and marketable securities is shown below:
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Accumulated Other Comprehensive Income (Tables) |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reclassifications out of Accumulated Other Comprehensive Income | The following table summarizes the changes in accumulated other comprehensive income by component:
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Hedging (Tables) |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Cash Flow Hedging Instruments | The following table summarizes the notional amount of the Company’s outstanding foreign currency forward contracts designated as cash flow hedges:
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Schedule of Foreign Exchange Contracts | The following table summarizes the fair value of the Company’s outstanding foreign currency forward contracts designated as cash flow hedges under GAAP included on the Company’s consolidated balance sheets:
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Derivatives Offsetting | The following table summarizes the potential effect of offsetting derivatives by type of financial instrument on the Company’s consolidated balance sheets:
|
Inventories (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Inventories by Type | Inventories consisted of the following:
|
Property and Equipment (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Property and equipment | Property and equipment, net consisted of the following:
|
Additional Balance Sheet Detail (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Prepaid and other current assets | Prepaid and other current assets consisted of the following:
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Accrued expenses and other current liabilities | Accrued expenses consisted of the following:
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Other liabilities, excluding current portion | Other liabilities, excluding current portion consisted of the following:
|
Common Stock, Preferred Stock and Equity Plans (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of stock and stock equity plans | The following table contains information about the Company’s equity plans:
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Outstanding and vested options | The following table summarizes information related to the outstanding and exercisable options during the year ended December 31, 2016:
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Stock options outstanding and exercisable | The following table summarizes information about stock options outstanding and exercisable at December 31, 2016:
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Restricted stock and restricted stock units activity | The following table summarizes the restricted stock and restricted stock unit activity of the Company during the year ended December 31, 2016:
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Shares issued under Employee Stock Purchase Plan | In 2016, the following shares were issued to employees under the ESPP:
|
Stock-based Compensation Expense (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation expense by line item | The effect of stock-based compensation expense during the three years ended December 31, 2016 was as follows:
|
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Stock-based compensation expense by type of award | The stock-based compensation expense by type of award during the three years ended December 31, 2016 was as follows:
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Unrecognized stock-based compensation expense, net of estimated forfeitures | The following table sets forth the Company’s unrecognized stock-based compensation expense, net of estimated forfeitures, as of December 31, 2016, by type of award and the weighted-average period over which that expense is expected to be recognized:
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Schedule of assumptions used to estimate the grant date fair value of options | The fair value of each option granted during 2016, 2015 and 2014 was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions:
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Schedule of assumptions used to estimate the grant date fair value employee stock purchase plan | The following table reflects the weighted-average assumptions used in the Black-Scholes option pricing model for 2016, 2015 and 2014:
|
Income Taxes (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of components of income (loss) before provision for (benefit from) income taxes | The components of loss from continuing operations before provision for income taxes during the three years ended December 31, 2016 consisted of the following:
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Schedule of components of provision for (benefit from) income taxes | The components of the provision for income taxes from continuing operations during the three years ended December 31, 2016 consisted of the following:
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Reconciliation of the provision for (benefit from) income taxes | The difference between the Company’s “expected” tax provision (benefit), as computed by applying the U.S. federal corporate tax rate of 35% to loss from continuing operations before provision for income taxes, and actual tax is reconciled as follows:
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Schedule of deferred tax assets and liabilities | The components of the deferred taxes were as follows:
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Schedule of unrecognized tax benefits | Unrecognized tax benefits during the two years ended December 31, 2016 consisted of the following:
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Restructuring Expenses (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2003 Restructuring | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring Cost and Reserve [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and other liabilities | The activity related to restructuring and other liability for 2003 was as follows:
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Activity related to the restructuring liability | The activities related to 2003 restructuring liability for 2004 through 2016 were as follows:
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Fan Pier Move Restructuring | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring Cost and Reserve [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and related liability | The activities related to the Fan Pier relocation restructuring liability for the three years ended December 31, 2016 were as follows:
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Other Restructuring | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring Cost and Reserve [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and related liability | The activities related to the Company’s other restructuring liabilities for the three years ended December 31, 2016 were as follows:
|
Commitments and Contingencies (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Future minimum commitments under Fan Pier Leases and facility operating leases with terms of more than one year, net of estimated sublease income | As of December 31, 2016, future minimum commitments under the facility leases with terms of more than one year and contractual sublease income under the Company’s subleases for the Kendall Square Facility were as follows:
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Schedule of future minimum lease payments for capital leases | The following table sets forth the Company’s future minimum payments due under capital leases as of December 31, 2016:
|
Segment Information (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenues by Product | Product revenues, net consisted of the following:
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Revenues and Property and Equipment by Location | Property and equipment, net by location consisted of the following:
Total revenues from external customers and collaborators by geographic region consisted of the following. Product revenues are attributed to countries based on the location of the customer. Collaborative revenues are attributed to the operations of the Company in the United States. Royalty revenues are attributed to countries based on the location of the collaborator.
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Significant Customers | Gross revenues and accounts receivable from each of the Company’s customers who individually accounted for 10% or more of total gross revenues and/or 10% or more of total gross accounts receivable consisted of the following:
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Quarterly Financial Data (unaudited) (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Quarterly Financial Information Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of quarterly financial data | The following table sets forth the Company’s quarterly financial data for the two years ended December 31, 2016.
|
Nature of Business and Accounting Policies - Business (Details) $ / shares in Units, $ in Thousands |
3 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2016
USD ($)
marketed_medecine
$ / shares
|
Sep. 30, 2016
USD ($)
$ / shares
|
Jun. 30, 2016
USD ($)
$ / shares
|
Mar. 31, 2016
USD ($)
$ / shares
|
Dec. 31, 2015
USD ($)
|
Sep. 30, 2015
USD ($)
|
Jun. 30, 2015
USD ($)
|
Mar. 31, 2015
USD ($)
|
Dec. 31, 2016
USD ($)
segment
marketed_medecine
$ / shares
|
Dec. 31, 2015
USD ($)
$ / shares
|
Dec. 31, 2014
USD ($)
$ / shares
|
|
Valuation and Qualifying Accounts Disclosure [Line Items] | |||||||||||
Customer deposits | $ 73,416 | $ 0 | $ 73,416 | $ 0 | |||||||
Number of marketed medicines | marketed_medecine | 2 | 2 | |||||||||
Accounts receivable, net | $ 201,083 | 173,838 | $ 201,083 | 173,838 | |||||||
Net loss | $ 27,759 | $ (39,537) | $ (36,151) | $ (36,102) | $ (74,669) | $ (93,816) | $ (220,992) | $ (198,704) | $ (84,031) | $ (588,181) | $ (742,745) |
Basic EPS (usd per share) | $ / shares | $ 0.13 | $ (0.16) | $ (0.26) | $ (0.17) | $ (0.46) | $ (2.31) | $ (3.14) | ||||
Cash, cash equivalents and marketable securities | $ 1,430,000 | $ 1,430,000 | |||||||||
Number of operating segments | segment | 1 | ||||||||||
Advertising expense | $ 31,400 | $ 24,500 | $ 16,200 | ||||||||
Accumulated Deficit | |||||||||||
Valuation and Qualifying Accounts Disclosure [Line Items] | |||||||||||
Net loss | (112,052) | $ (556,334) | $ (738,555) | ||||||||
Greece, Italy, Portugal and Spain | |||||||||||
Valuation and Qualifying Accounts Disclosure [Line Items] | |||||||||||
Accounts receivable, net | $ 0 | $ 0 |
Nature of Business and Accounting Policies - Share-Based Compensation and Advertising Expense (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Share-based Compensation Arrangement by Share-based Payment Award | ||
Accounts receivable, net | $ 201,083 | $ 173,838 |
Percentage of employees eligible for acceleration of equity awards (less than) (percent) | 5.00% | |
Tranche one | ||
Share-based Compensation Arrangement by Share-based Payment Award | ||
Vesting rights percentage | 33.33% | |
Tranche two | ||
Share-based Compensation Arrangement by Share-based Payment Award | ||
Vesting rights percentage | 33.33% | |
Tranche three | ||
Share-based Compensation Arrangement by Share-based Payment Award | ||
Vesting rights percentage | 33.33% |
Nature of Business and Accounting Policies - Property and Equipment (Details) |
12 Months Ended |
---|---|
Dec. 31, 2016 | |
Furniture and equipment | Maximum | |
Property, Plant and Equipment [Line Items] | |
Property and equipment useful life | 10 years |
Furniture and equipment | Minimum | |
Property, Plant and Equipment [Line Items] | |
Property and equipment useful life | 7 years |
Computers and software | Maximum | |
Property, Plant and Equipment [Line Items] | |
Property and equipment useful life | 5 years |
Computers and software | Minimum | |
Property, Plant and Equipment [Line Items] | |
Property and equipment useful life | 3 years |
Buildings and leasehold improvements | |
Property, Plant and Equipment [Line Items] | |
Property and equipment useful life | 40 years |
Nature of Business and Accounting Policies - Foreign Currency Gain (Loss) (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Foreign Currency Translation | |||
Net unrealized losses related to foreign currency translation | $ (7.9) | $ (2.1) | $ (1.0) |
Net foreign currency transaction gain (loss) | $ 4.0 | $ (6.8) | $ (6.4) |
Collaborative Arrangements - Cystic Fibrosis Foundation Therapeutics Incorporated (Details) - USD ($) |
3 Months Ended | 12 Months Ended | ||
---|---|---|---|---|
Oct. 13, 2016 |
Mar. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2016 |
|
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | ||||
Additional milestone payments | $ 0 | |||
Cystic Fibrosis Foundation Therapeutics Incorporated | ||||
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | ||||
Milestone payments | $ 13,900,000 | $ 13,900,000 | ||
Collaborative funding | $ 75,000,000.0 | |||
Additional collaborative funding | $ 6,000,000.0 |
Collaborative Arrangements - CRISPR Therapeutics AG (Details) - CRISPR Therapeutics |
1 Months Ended | 3 Months Ended | ||
---|---|---|---|---|
Oct. 26, 2015
USD ($)
target
|
Oct. 31, 2016
USD ($)
|
Jun. 30, 2016
USD ($)
|
Dec. 31, 2015
USD ($)
|
|
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | ||||
Collaborative funding | $ 75,000,000 | $ 75,000,000.0 | ||
Investment in collaborative partner, pursuant to convertible loan agreement | $ 30,000,000 | $ 10,000,000 | $ 3,100,000 | |
Right to license, number of targets (up to) | target | 6 | |||
Collaborative arrangement development and regulatory potential milestone payments maximum | $ 420,000,000 | |||
Prior to marketing approval, time period of notice required to terminate (in days) | 90 days | |||
Subsequent to marketing approval, time period of notice required to terminate (in days) | 270 days |
Collaborative Arrangements - BioAxone Biosciences, Inc. (Details) - BioAxone Biosciences, Inc - USD ($) |
1 Months Ended | 3 Months Ended | 12 Months Ended | ||
---|---|---|---|---|---|
Oct. 31, 2014 |
Dec. 31, 2014 |
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | |||||
Decrease (increase) in fair value of contingent payments | $ 10,000,000 | $ (900,000) | $ (500,000) | ||
Up-front payment | $ 10,000,000 | ||||
Maximum license fees and milestone payments | $ 90,000,000.0 | ||||
In-process research and development intangible assets | 29,000,000 | ||||
Deferred tax liability attributable to BioAxone | $ 11,300,000 | ||||
Purchase option, term of extension of expiration date | 1 year | ||||
Contingent consideration liability | $ 18,000,000 | $ 28,000,000 |
Collaborative Arrangements - Janssen Pharmaceuticals, Inc. (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2016 |
Sep. 30, 2016 |
Jun. 30, 2016 |
Mar. 31, 2016 |
Dec. 31, 2015 |
Sep. 30, 2015 |
Jun. 30, 2015 |
Mar. 31, 2015 |
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | |||||||||||
Royalty revenues | $ 3,887 | $ 3,835 | $ 5,282 | $ 3,596 | $ 6,331 | $ 5,759 | $ 5,077 | $ 6,792 | $ 16,600 | $ 23,959 | $ 40,919 |
Collaborative revenues | 937 | 259 | 675 | 74 | 5,054 | 1,546 | 611 | 842 | 1,945 | 8,053 | 51,675 |
Revenues | $ 458,706 | $ 413,783 | $ 431,608 | $ 398,080 | $ 417,935 | $ 309,816 | $ 166,076 | $ 138,509 | 1,702,177 | 1,032,336 | 580,415 |
Janssen | |||||||||||
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | |||||||||||
Royalty revenues | 71 | 1,518 | 13,481 | ||||||||
Up-front payment | 35,000 | ||||||||||
Reimbursement for research and development activities | $ 14,700 | 22,800 | 9,100 | ||||||||
Time period of notice required to terminate | 6 months | ||||||||||
Collaborative revenues | $ (155) | 1,946 | 7,104 | ||||||||
Revenue, Net | $ (84) | $ 3,464 | $ 20,585 |
Collaborative Arrangements - Moderna Therapeutics, Inc. (Details) - Moderna Therapeutics, Inc. - USD ($) |
1 Months Ended | 3 Months Ended |
---|---|---|
Jul. 31, 2016 |
Sep. 30, 2016 |
|
Schedule of Collaborative Arrangement Agreements [Line Items] | ||
Up-front payment | $ 20,000,000.0 | |
Investment in collaborative partner, pursuant to convertible loan agreement | $ 20,000,000 | |
Collaborative arrangement development and regulatory potential milestone payments maximum | $ 275,000,000.0 | |
Collaborative arrangement approval and reimbursement milestones | $ 220,000,000.0 |
Collaborative Arrangements - Merck KGaA (Details) - Subsequent Event - Merck KGaA |
Jan. 10, 2017
USD ($)
pre-clinical_stage_program
clinical-stage_program
development_program
|
---|---|
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | |
Right to license, number of development programs | development_program | 4 |
Right to license, number of clinical stage programs | clinical-stage_program | 2 |
Number of pre-clinical stage programs | pre-clinical_stage_program | 2 |
Up-front payment | $ | $ 230,000,000.0 |
Time period of notice required to terminate | 90 days |
Time period of notice required to terminate after product has received marketing approval | 180 days |
Earnings Per Share (Details) - shares shares in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Stock options | |||
Antidilutive Securities Excluded from Computation of Earnings Per Share | |||
Antidilutive securities excluded from computation of earnings per share (in shares) | 12,642 | 11,145 | 12,003 |
Unvested restricted stock and restricted stock units | |||
Antidilutive Securities Excluded from Computation of Earnings Per Share | |||
Antidilutive securities excluded from computation of earnings per share (in shares) | 3,546 | 3,024 | 3,091 |
Hedging - Notional Amount (Details) - Cash Flow Hedging - Foreign currency forward contracts - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Designated as Hedging Instrument | ||
Derivative [Line Items] | ||
Notional amount of foreign currency forward contract | $ 253,381 | $ 209,285 |
Designated as Hedging Instrument | Euro | ||
Derivative [Line Items] | ||
Notional amount of foreign currency forward contract | 164,368 | 103,362 |
Designated as Hedging Instrument | British pound sterling | ||
Derivative [Line Items] | ||
Notional amount of foreign currency forward contract | 65,237 | 78,756 |
Designated as Hedging Instrument | Australian dollar | ||
Derivative [Line Items] | ||
Notional amount of foreign currency forward contract | $ 23,776 | $ 27,167 |
Minimum | ||
Derivative [Line Items] | ||
Derivative term | 1 month | |
Maximum | ||
Derivative [Line Items] | ||
Derivative term | 18 months |
Hedging - Derivative Fair Value (Details) - USD ($) $ in Thousands |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Foreign Currency Cash Flow Hedge Derivative at Fair Value [Abstract] | ||
Total assets | $ 5,766 | |
Total liabilities | (901) | |
Foreign currency forward contracts | ||
Foreign Currency Cash Flow Hedge Derivative at Fair Value [Abstract] | ||
Total assets | $ 15,593 | 5,766 |
Total liabilities | (144) | (901) |
Prepaid and other current assets | ||
Foreign Currency Cash Flow Hedge Derivative at Fair Value [Abstract] | ||
Fair value - assets | 14,407 | 5,161 |
Other liabilities, current portion | ||
Foreign Currency Cash Flow Hedge Derivative at Fair Value [Abstract] | ||
Fair value - liabilities | (144) | (769) |
Other assets | ||
Foreign Currency Cash Flow Hedge Derivative at Fair Value [Abstract] | ||
Fair value - assets | 1,186 | 605 |
Other liabilities, excluding current portion | ||
Foreign Currency Cash Flow Hedge Derivative at Fair Value [Abstract] | ||
Fair value - liabilities | $ 0 | $ (132) |
Hedging - Offsetting Derivatives (Details) - USD ($) $ in Thousands |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Offsetting Derivative Assets [Abstract] | ||
Gross Amounts Recognized | $ 5,766 | |
Offsetting Derivative Liabilities [Abstract] | ||
Gross Amounts Recognized | (901) | |
Foreign currency forward contracts | ||
Offsetting Derivative Assets [Abstract] | ||
Gross Amounts Recognized | $ 15,593 | 5,766 |
Gross Amounts Offset | 0 | 0 |
Gross Amount Presented | 15,593 | 5,766 |
Gross Amount Not Offset | (144) | (901) |
Legal Offset | 15,449 | 4,865 |
Offsetting Derivative Liabilities [Abstract] | ||
Gross Amounts Recognized | (144) | (901) |
Gross Amounts Offset | 0 | 0 |
Gross Amount Presented | (144) | (901) |
Gross Amount Not Offset | 144 | 901 |
Legal Offset | $ 0 | $ 0 |
Inventories (Details) - USD ($) $ in Thousands |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Inventory Disclosure [Abstract] | ||
Raw materials | $ 6,348 | $ 8,696 |
Work-in-process | 56,672 | 40,695 |
Finished goods | 14,584 | 7,816 |
Total | $ 77,604 | $ 57,207 |
Additional Balance Sheet Detail (Details) - USD ($) $ in Thousands |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Prepaid and other current assets | ||
Prepaid expenses | $ 36,134 | $ 22,058 |
Fair value foreign currency forward contracts | 14,407 | 5,161 |
Taxes receivable | 3,213 | 14,682 |
Other | 16,780 | 12,835 |
Total | 70,534 | 54,736 |
Accrued expenses | ||
Payroll and benefits | 86,387 | 87,873 |
Research, development and commercial contract costs | 62,756 | 55,677 |
Product revenue allowances | 86,533 | 47,209 |
Royalty payable | 52,845 | 60,191 |
Taxes payable and reserves (including VIE taxes payable) | 6,883 | 30,953 |
Professional fees | 6,512 | 7,455 |
Interest | 1,390 | 4,642 |
Other | 11,943 | 11,820 |
Total | 315,249 | 305,820 |
Other liabilities, current portion | ||
Advance from CFFT | 73,423 | 0 |
Deferred rent | 19,551 | 22,235 |
Other Sundry Liabilities, Noncurrent | 9,148 | 9,543 |
Total non-current liabilities | $ 102,122 | $ 31,778 |
Long Term Obligations (Fan Pier Leases) (Details) $ in Thousands, ft² in Millions |
12 Months Ended | |||
---|---|---|---|---|
Dec. 31, 2016
USD ($)
|
Dec. 31, 2015
USD ($)
|
Dec. 31, 2014
USD ($)
|
Dec. 31, 2011
ft²
lease
building
|
|
Depreciation expense | $ 60,800 | $ 60,000 | $ 62,300 | |
Rental expense | 19,100 | 18,100 | 38,900 | |
Property and equipment, net | 698,362 | 697,715 | ||
Construction financing lease obligation, current and noncurrent | 472,600 | 473,000 | ||
Fan Pier Leases | ||||
Number of leases | lease | 2 | |||
Area of real estate property (in square feet) | ft² | 1.1 | |||
Lease agreements number of buildings | building | 2 | |||
Optional term of lease agreement (in years) | 10 years | |||
Buildings | Fan Pier Leases | ||||
Interest expense | 60,200 | 60,200 | 60,200 | |
Depreciation expense | 13,300 | 13,300 | 13,400 | |
Rental expense | 6,500 | 6,500 | $ 6,500 | |
Construction-in-process | ||||
Property and equipment, net | $ 489,000 | $ 502,300 |
Long Term Obligations (San Diego Lease) (Details) - San Diego Lease ft² in Thousands, $ in Millions |
Dec. 02, 2015
USD ($)
ft²
term
|
---|---|
Area of real estate property (in square feet) | ft² | 170 |
Length of lease | 16 years |
Average yearly aggregate rent | $ | $ 10.2 |
Amount of optional renewal terms | term | 2 |
Optional renewal term length | 5 years |
Long Term Obligations (Term Loan) (Details) - USD ($) |
3 Months Ended | 12 Months Ended | |||
---|---|---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2016 |
Oct. 31, 2016 |
Dec. 31, 2015 |
Jul. 09, 2014 |
|
Senior Secured Term Loan | |||||
Debt Instrument [Line Items] | |||||
Face amount of term loan | $ 300,000,000 | ||||
Gains (losses) on extinguishment of debt | $ 2,200,000 | ||||
Interest rate (percent) | 6.20% | 6.20% | 7.20% | ||
Unamortized discount on term loan | $ 0 | $ 0 | $ 4,600,000 | $ 5,300,000 | |
Minimum | Senior Secured Term Loan | LIBOR | |||||
Debt Instrument [Line Items] | |||||
Basis spread on variable rate (percent) | 5.00% | ||||
Line of Credit | Minimum | Base Rate | |||||
Debt Instrument [Line Items] | |||||
Interest rate (percent) | 0.75% | ||||
Line of Credit | Minimum | Eurodollar | |||||
Debt Instrument [Line Items] | |||||
Interest rate (percent) | 1.75% | ||||
Line of Credit | Maximum | Base Rate | |||||
Debt Instrument [Line Items] | |||||
Interest rate (percent) | 1.50% | ||||
Line of Credit | Maximum | Eurodollar | |||||
Debt Instrument [Line Items] | |||||
Interest rate (percent) | 2.50% |
Long Term Obligations (Convertible Senior Subordinated Notes) (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Convertible Senior Subordinated Notes | |||
Depreciation expense | $ 60.8 | $ 60.0 | $ 62.3 |
Rental expense | 19.1 | 18.1 | 38.9 |
Buildings | Fan Pier Leases | |||
Convertible Senior Subordinated Notes | |||
Interest expense | 60.2 | 60.2 | 60.2 |
Depreciation expense | 13.3 | 13.3 | 13.4 |
Rental expense | $ 6.5 | $ 6.5 | $ 6.5 |
Other Arrangements (Details) - USD ($) $ in Millions |
1 Months Ended | 3 Months Ended | 12 Months Ended | |
---|---|---|---|---|
Apr. 30, 2014 |
Jun. 30, 2014 |
Dec. 31, 2008 |
Dec. 31, 2016 |
|
Sale of HIV Protease Inhibitor Royalty Stream | ||||
Gross proceeds from sale of royalty rights receivable from GlaxoSmithKline | $ 160.0 | |||
Royalty purchase agreement deferred revenue | $ 12.6 | |||
Other nonoperating Income | $ 36.7 | $ 36.7 |
Income Taxes- Components of Income and Provision for (Benefit from) Income Taxes (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2016 |
Sep. 30, 2016 |
Jun. 30, 2016 |
Mar. 31, 2016 |
Dec. 31, 2015 |
Sep. 30, 2015 |
Jun. 30, 2015 |
Mar. 31, 2015 |
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Components of income (loss) before provision for (benefit from) income taxes | |||||||||||
United States | $ (147,860) | $ (272,326) | $ (645,465) | ||||||||
Foreign | 80,494 | (285,474) | (89,410) | ||||||||
Loss from continuing operations before provision for income taxes | $ 20,306 | $ (39,034) | $ (18,021) | $ (30,617) | $ (76,048) | $ (92,486) | $ (190,861) | $ (198,405) | (67,366) | (557,800) | (734,875) |
Current taxes: | |||||||||||
United States | (3,821) | 25,623 | 2,853 | ||||||||
Foreign | 1,794 | 831 | 2,457 | ||||||||
State | 1,836 | 3,629 | 1,366 | ||||||||
Total current taxes | (191) | 30,083 | 6,676 | ||||||||
Deferred taxes: | |||||||||||
United States | 18,659 | 497 | 244 | ||||||||
Foreign | (3,359) | (355) | 0 | ||||||||
State | 1,556 | 156 | 38 | ||||||||
Total deferred taxes | 16,856 | 298 | 282 | ||||||||
Provision for income taxes | $ (7,453) | $ 503 | $ 18,130 | $ 5,485 | $ (1,379) | $ 1,330 | $ 30,131 | $ 299 | $ 16,665 | $ 30,381 | $ 6,958 |
Income Taxes - Effective Income Tax Reconciliation (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2016 |
Sep. 30, 2016 |
Jun. 30, 2016 |
Mar. 31, 2016 |
Dec. 31, 2015 |
Sep. 30, 2015 |
Jun. 30, 2015 |
Mar. 31, 2015 |
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Reconciliation of Income Tax Expense: | |||||||||||
Loss from continuing operations before provision for income taxes | $ 20,306 | $ (39,034) | $ (18,021) | $ (30,617) | $ (76,048) | $ (92,486) | $ (190,861) | $ (198,405) | $ (67,366) | $ (557,800) | $ (734,875) |
Expected tax provision (benefit) | (23,578) | (195,230) | (257,206) | ||||||||
State taxes, net of federal benefit | 3,621 | 3,800 | 1,124 | ||||||||
Foreign rate differential | 21,346 | 47,402 | 39,335 | ||||||||
Tax credits | (47,773) | (55,696) | (33,788) | ||||||||
Unbenefitted operating losses (gains) | 14,837 | 226,169 | 241,037 | ||||||||
Non-deductible expenses | 24,749 | 5,817 | 18,756 | ||||||||
Rate change | 12,836 | (1,224) | (1,826) | ||||||||
Tax attribute expiration | 9,947 | 0 | 0 | ||||||||
Other | 680 | (657) | (474) | ||||||||
Provision for income taxes | $ (7,453) | $ 503 | $ 18,130 | $ 5,485 | $ (1,379) | $ 1,330 | $ 30,131 | $ 299 | $ 16,665 | $ 30,381 | $ 6,958 |
Income Taxes - Deferred Tax Assets and Liabilities (Details) - USD ($) $ in Thousands |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Deferred tax assets: | ||
Net operating loss | $ 1,232,399 | $ 1,250,642 |
Tax credit carryforwards | 367,402 | 315,535 |
Property and equipment | 22 | 0 |
Intangible assets | 34,938 | 14,673 |
Deferred revenues | 31,205 | 9,341 |
Stock-based compensation | 110,446 | 93,404 |
Inventories | 4,705 | 5,913 |
Accrued expenses | 23,078 | 27,236 |
Currency translation adjustment | 0 | 222 |
Unrealized loss | 5 | 0 |
Construction financing lease obligation | 177,735 | 176,250 |
Gross deferred tax assets | 1,981,935 | 1,893,216 |
Valuation allowance | (1,731,186) | (1,716,349) |
Total deferred tax assets | 250,749 | 176,867 |
Deferred tax liabilities: | ||
Property and equipment | (169,089) | (175,424) |
Acquired intangibles | (134,063) | (110,439) |
Deferred revenue | (73,357) | 0 |
Unrealized gain | (7,967) | (1,088) |
Net deferred tax liabilities | $ (133,727) | $ (110,084) |
Income Taxes - Unrecognized Tax Benefits (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Reconciliation of unrecognized tax benefits | ||
Unrecognized Tax Benefits | $ 425 | $ 880 |
Decrease due to statute of limitations expiring | (425) | 0 |
Decrease due to settlements and payments | 0 | (455) |
Unrecognized Tax Benefits | $ 0 | $ 425 |
Restructuring Expenses - 2003 Kendall Restructuring (Details) - 2003 Restructuring ft² in Thousands, $ in Millions |
1 Months Ended | 12 Months Ended | |
---|---|---|---|
Jan. 31, 2003 |
Dec. 31, 2003
USD ($)
ft²
|
Jan. 01, 2006
ft²
|
|
Restructuring and Related Activities [Line Items] | |||
Discount rate, lease restructuring liability (percent) | 10.00% | ||
Lease restructuring expense | $ | $ 78.7 | ||
Lease operating expense | $ | $ 6.0 | ||
Facility Closing | |||
Restructuring and Related Activities [Line Items] | |||
Leased area (in square feet) | ft² | 290 | ||
Lease term (in years) | 15 years | ||
Area of real estate property (in square feet) | ft² | 120 |
Restructuring Expenses - 2003 Restructuring Liability (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | 36 Months Ended | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2016 |
Sep. 30, 2016 |
Jun. 30, 2016 |
Mar. 31, 2016 |
Dec. 31, 2015 |
Sep. 30, 2015 |
Jun. 30, 2015 |
Mar. 31, 2015 |
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2003 |
Dec. 31, 2016 |
|
Restructuring activities | |||||||||||||
Restructuring expenses | $ 224 | $ 8 | $ 343 | $ 687 | $ 1,524 | $ 1,826 | $ 2,128 | $ (3,272) | $ 1,262 | $ 2,206 | $ 50,925 | ||
2003 Restructuring | |||||||||||||
Restructuring activities | |||||||||||||
Liability, beginning of the period | $ 7,944 | $ 11,596 | 7,944 | 11,596 | 19,115 | $ 19,115 | |||||||
Cash payments | (15,841) | (14,625) | (17,494) | $ (17,816) | (226,912) | ||||||||
Cash received from subleases | 11,892 | 11,089 | 12,912 | 111,601 | |||||||||
Credit for portion of facility Vertex decided to occupy in 2005 | 0 | 0 | 0 | (10,018) | |||||||||
Restructuring expenses | 333 | (116) | (2,937) | 91,824 | 60,131 | ||||||||
Liability, end of the period | $ 4,328 | $ 7,944 | $ 4,328 | $ 7,944 | $ 11,596 | $ 69,526 | $ 4,328 |
Restructuring Expenses - Fan Pier Restructuring Liability (Details) ft² in Thousands, $ in Thousands |
3 Months Ended | 12 Months Ended | 36 Months Ended | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2016
USD ($)
|
Sep. 30, 2016
USD ($)
|
Jun. 30, 2016
USD ($)
|
Mar. 31, 2016
USD ($)
|
Dec. 31, 2015
USD ($)
|
Sep. 30, 2015
USD ($)
|
Jun. 30, 2015
USD ($)
|
Mar. 31, 2015
USD ($)
|
Dec. 31, 2016
USD ($)
|
Dec. 31, 2015
USD ($)
|
Dec. 31, 2014
USD ($)
ft²
|
Dec. 31, 2016
USD ($)
|
Sep. 30, 2014 |
|
Restructuring activities | |||||||||||||
Restructuring expenses | $ 224 | $ 8 | $ 343 | $ 687 | $ 1,524 | $ 1,826 | $ 2,128 | $ (3,272) | $ 1,262 | $ 2,206 | $ 50,925 | ||
Fan Pier Move Restructuring | |||||||||||||
Restructuring Cost and Reserve [Line Items] | |||||||||||||
Discount rate, lease restructuring liability (percent) | 9.00% | ||||||||||||
Area of real estate property (in square feet) | ft² | 120 | ||||||||||||
Restructuring activities | |||||||||||||
Liability, beginning of the period | $ 5,964 | $ 33,390 | 5,964 | 33,390 | $ 797 | $ 797 | |||||||
Cash payments | (12,674) | (30,022) | (18,271) | ||||||||||
Cash received from subleases | 9,751 | 4,229 | 0 | ||||||||||
Restructuring expenses | 585 | (1,633) | 50,864 | ||||||||||
Liability, end of the period | $ 3,626 | $ 5,964 | $ 3,626 | $ 5,964 | $ 33,390 | $ 3,626 |
Restructuring Expenses - Other Restructuring Liabilities (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | 36 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2016 |
Sep. 30, 2016 |
Jun. 30, 2016 |
Mar. 31, 2016 |
Dec. 31, 2015 |
Sep. 30, 2015 |
Jun. 30, 2015 |
Mar. 31, 2015 |
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2016 |
|
Restructuring activities | ||||||||||||
Restructuring expenses | $ 224 | $ 8 | $ 343 | $ 687 | $ 1,524 | $ 1,826 | $ 2,128 | $ (3,272) | $ 1,262 | $ 2,206 | $ 50,925 | |
Other Restructuring | ||||||||||||
Restructuring activities | ||||||||||||
Liability, beginning of the period | $ 1,450 | $ 869 | 1,450 | 869 | 8,441 | $ 8,441 | ||||||
Cash payments | (1,794) | (3,374) | (10,570) | |||||||||
Restructuring expenses | 344 | 3,955 | 2,998 | |||||||||
Liability, end of the period | $ 0 | $ 1,450 | $ 0 | $ 1,450 | $ 869 | $ 0 |
Employee Benefits (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Compensation and Retirement Disclosure [Abstract] | |||
Maximum percentage of annual compensation contributed by the participant (percent) | 60.00% | ||
Company contribution | $ 11.8 | $ 12.8 | $ 12.0 |
Common stock shares remained available for grant (shares) | 755,000 |
Commitments and Contingencies - Capital Lease Financing Obligations (Details) $ in Thousands |
Dec. 31, 2016
USD ($)
|
---|---|
Capital Leases, Future Minimum Payments Due [Abstract] | |
2017 | $ 21,995 |
2018 | 21,393 |
2019 | 8,778 |
2020 | 3,336 |
2021 | 2,457 |
Thereafter | 543 |
Total payments | 58,502 |
Less: amount representing interest | (4,100) |
Present value of payments | $ 54,402 |
Minimum | |
Capital Leased Assets | |
Effective interest rate (less than) (percentage) | 1.00% |
Maximum | |
Capital Leased Assets | |
Effective interest rate (less than) (percentage) | 9.00% |
Commitments and Contingencies - Contingencies (Details) |
Dec. 31, 2016
USD ($)
|
---|---|
Loss Contingencies [Line Items] | |
Indemnification claims | $ 0 |
Contingent liabilities | 0 |
IBEW | |
Loss Contingencies [Line Items] | |
Legal reserves | $ 0 |
Segment Information - Revenues by Product (Details) $ in Thousands |
3 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2016
USD ($)
|
Sep. 30, 2016
USD ($)
|
Jun. 30, 2016
USD ($)
|
Mar. 31, 2016
USD ($)
|
Dec. 31, 2015
USD ($)
|
Sep. 30, 2015
USD ($)
|
Jun. 30, 2015
USD ($)
|
Mar. 31, 2015
USD ($)
|
Dec. 31, 2016
USD ($)
segment
|
Dec. 31, 2015
USD ($)
|
Dec. 31, 2014
USD ($)
|
|
Segment Reporting [Abstract] | |||||||||||
Number of operating segments | segment | 1 | ||||||||||
Revenue from External Customer [Line Items] | |||||||||||
Total product revenues, net | $ 453,882 | $ 409,689 | $ 425,651 | $ 394,410 | $ 406,550 | $ 302,511 | $ 160,388 | $ 130,875 | $ 1,683,632 | $ 1,000,324 | $ 487,821 |
KALYDECO | |||||||||||
Revenue from External Customer [Line Items] | |||||||||||
Total product revenues, net | 703,432 | 631,674 | 463,750 | ||||||||
ORKAMBI | |||||||||||
Revenue from External Customer [Line Items] | |||||||||||
Total product revenues, net | 979,590 | 350,663 | 0 | ||||||||
INCIVEK | |||||||||||
Revenue from External Customer [Line Items] | |||||||||||
Total product revenues, net | $ 610 | $ 17,987 | $ 24,071 |
Segment Information - Revenue by Geographic Location (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2016 |
Sep. 30, 2016 |
Jun. 30, 2016 |
Mar. 31, 2016 |
Dec. 31, 2015 |
Sep. 30, 2015 |
Jun. 30, 2015 |
Mar. 31, 2015 |
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Revenues from External Customers and Long-Lived Assets [Line Items] | |||||||||||
Revenues | $ 458,706 | $ 413,783 | $ 431,608 | $ 398,080 | $ 417,935 | $ 309,816 | $ 166,076 | $ 138,509 | $ 1,702,177 | $ 1,032,336 | $ 580,415 |
United States | |||||||||||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||||||||||
Revenues | 1,321,807 | 763,316 | 361,074 | ||||||||
Europe | |||||||||||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||||||||||
Revenues | 320,456 | 219,596 | 197,611 | ||||||||
Other | |||||||||||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||||||||||
Revenues | 59,914 | 49,424 | 21,730 | ||||||||
Total revenues outside of the United States | |||||||||||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||||||||||
Revenues | $ 380,370 | $ 269,020 | $ 219,341 |
Segment Information - Property and Equipment, Net by Location (Details) - USD ($) $ in Thousands |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Total property and equipment, net | $ 698,362 | $ 697,715 |
United States | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Total property and equipment, net | 665,552 | 661,421 |
United Kingdom | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Total property and equipment, net | 26,921 | 32,793 |
Other | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Total property and equipment, net | 5,889 | 3,501 |
Total revenues outside of the United States | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Total property and equipment, net | $ 32,810 | $ 36,294 |
Quarterly Financial Data (unaudited) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2016 |
Sep. 30, 2016 |
Jun. 30, 2016 |
Mar. 31, 2016 |
Dec. 31, 2015 |
Sep. 30, 2015 |
Jun. 30, 2015 |
Mar. 31, 2015 |
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Revenues: | |||||||||||
Product revenues, net | $ 453,882 | $ 409,689 | $ 425,651 | $ 394,410 | $ 406,550 | $ 302,511 | $ 160,388 | $ 130,875 | $ 1,683,632 | $ 1,000,324 | $ 487,821 |
Royalty revenues | 3,887 | 3,835 | 5,282 | 3,596 | 6,331 | 5,759 | 5,077 | 6,792 | 16,600 | 23,959 | 40,919 |
Collaborative revenues | 937 | 259 | 675 | 74 | 5,054 | 1,546 | 611 | 842 | 1,945 | 8,053 | 51,675 |
Total revenues | 458,706 | 413,783 | 431,608 | 398,080 | 417,935 | 309,816 | 166,076 | 138,509 | 1,702,177 | 1,032,336 | 580,415 |
Costs and expenses: | |||||||||||
Cost of product revenues | 59,646 | 53,222 | 44,154 | 49,789 | 62,092 | 30,269 | 15,409 | 9,381 | 206,811 | 117,151 | 39,725 |
Royalty expenses | 836 | 855 | 1,098 | 860 | 1,293 | 1,691 | 1,451 | 2,926 | 3,649 | 7,361 | 21,262 |
Research and development expenses | 248,452 | 272,370 | 271,008 | 255,860 | 310,181 | 246,284 | 223,858 | 215,599 | 1,047,690 | 995,922 | 855,506 |
Sales, general and administrative expenses | 109,908 | 106,055 | 111,652 | 105,214 | 96,549 | 99,772 | 94,394 | 85,860 | 432,829 | 376,575 | 305,409 |
Restructuring expenses | 224 | 8 | 343 | 687 | 1,524 | 1,826 | 2,128 | (3,272) | 1,262 | 2,206 | 50,925 |
Total costs and expenses | 419,066 | 432,510 | 428,255 | 412,410 | 471,639 | 379,842 | 337,240 | 310,494 | 1,692,241 | 1,499,215 | 1,272,827 |
Income (loss) from operations | 39,640 | (18,727) | 3,353 | (14,330) | (53,704) | (70,026) | (171,164) | (171,985) | 9,936 | (466,879) | (692,412) |
Interest expense, net | (20,439) | (20,140) | (20,155) | (20,698) | (20,654) | (21,134) | (21,111) | (21,307) | (81,432) | (84,206) | (72,863) |
Other income (expense), net | 1,105 | (167) | (1,219) | 4,411 | (1,690) | (1,326) | 1,414 | (5,113) | 4,130 | (6,715) | 30,400 |
Loss from continuing operations before provision for income taxes | 20,306 | (39,034) | (18,021) | (30,617) | (76,048) | (92,486) | (190,861) | (198,405) | (67,366) | (557,800) | (734,875) |
Provision for (benefit from) income taxes | (7,453) | 503 | 18,130 | 5,485 | (1,379) | 1,330 | 30,131 | 299 | 16,665 | 30,381 | 6,958 |
Net loss | 27,759 | (39,537) | (36,151) | (36,102) | (74,669) | (93,816) | (220,992) | (198,704) | (84,031) | (588,181) | (742,745) |
Loss (income) attributable to noncontrolling interest | 938 | (1,333) | 32,144 | 98 | |||||||
(Income) loss attributable to noncontrolling interest | 5,186 | 696 | (28,374) | (5,529) | |||||||
Net loss attributable to Vertex | $ 32,945 | $ (38,841) | $ (64,525) | $ (41,631) | $ (73,731) | $ (95,149) | $ (188,848) | $ (198,606) | $ (112,052) | $ (556,334) | $ (738,555) |
Net (loss) income: | |||||||||||
Basic (usd per share) | $ 0.13 | $ (0.16) | $ (0.26) | $ (0.17) | $ (0.46) | $ (2.31) | $ (3.14) | ||||
Diluted (usd per share) | $ 0.13 | $ (0.16) | $ (0.26) | $ (0.17) | $ (0.46) | $ (2.31) | $ (3.14) | ||||
Basic and diluted (usd per share) | $ (0.30) | $ (0.39) | $ (0.78) | $ (0.83) | |||||||
Shares used in per share calculations: | |||||||||||
Basic (in shares) | 245,454 | 244,920 | 244,482 | 243,831 | 244,685 | 241,312 | 235,307 | ||||
Diluted (in shares) | 247,757 | 244,920 | 244,482 | 243,831 | 244,685 | 241,312 | 235,307 | ||||
Basic and diluted (in shares) | 242,987 | 241,969 | 240,757 | 239,493 |
Quarterly Financial Data (unaudited) (footnotes) (Details) - USD ($) |
3 Months Ended | |||
---|---|---|---|---|
Oct. 26, 2015 |
Sep. 30, 2016 |
Jun. 30, 2016 |
Dec. 31, 2015 |
|
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | ||||
Research and development expenses, early-stage research assets | $ 10,000,000 | |||
Moderna Therapeutics, Inc. | ||||
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | ||||
Up-front payment | $ 20,000,000.0 | |||
CRISPR Therapeutics | ||||
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items] | ||||
Collaborative funding with CRISPR | $ 75,000,000 | $ 75,000,000.0 |
Subsequent Events (Details) - Facility Closing - Subsequent Event $ in Millions |
1 Months Ended |
---|---|
Feb. 23, 2017
USD ($)
position
| |
Restructuring Cost and Reserve [Line Items] | |
Number of positions eliminated | position | 70 |
Restructuring and related costs, expected total costs | $ | $ 10.0 |
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