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Vertex Reports Third-Quarter 2019 Financial Results

BOSTON--(BUSINESS WIRE)--

- Product revenues of $950 million, a 21% increase compared to Q3 2018 -

- Continued progression of pipeline of investigational medicines in multiple diseases -

Vertex Pharmaceuticals Incorporated (VRTX) today reported consolidated financial results for the third quarter ended September 30, 2019 and reiterated its full-year 2019 total product revenue guidance.

"2019 has been a year of significant progress for Vertex across all parts of our business. With the historic approval of TRIKAFTA, we are now one step closer to providing treatment for up to 90% of all people with CF. We've also had tremendous success bringing our CF medicines to more patients globally with reimbursement agreements recently reached in England, Spain, Australia, and Scotland, and through label expansions to younger patients," said Jeffrey Leiden, M.D., Ph.D., Chairman, President and Chief Executive Officer of Vertex. "The company also continues to successfully execute on our strategy of creating transformative medicines for serious diseases through serial innovation. The rapid progress of our pipeline is expected to yield proof-of-concept data in multiple diseases in 2020, which will position Vertex for continued growth in the years ahead."

Third-Quarter 2019 Financial Highlights

 

Three Months Ended September 30,

 

%

 

2019

 

2018

 

Change

 

(in millions, except per share amounts)

Total product revenues, net

$

950

 

 

 

$

783

 

 

 

21%

KALYDECO

$

249

 

 

 

$

246

 

 

 

 

ORKAMBI

$

297

 

 

 

$

282

 

 

 

 

SYMDEKO/SYMKEVI

$

404

 

 

 

$

255

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Operating income

$

99

 

 

 

$

206

 

 

 

(52)%

Non-GAAP Operating income

$

403

 

 

 

$

295

 

 

 

37%

 

 

 

 

 

 

 

 

 

 

GAAP Net income

$

58

 

 

 

$

129

 

 

 

(55)%

Non-GAAP Net income

$

322

 

 

 

$

282

 

 

 

14%

 

 

 

 

 

 

 

 

 

 

GAAP Net income per share - diluted

$

0.22

 

 

 

$

0.50

 

 

 

(56)%

Non-GAAP Net income per share - diluted

$

1.23

 

 

 

$

1.09

 

 

 

13%

 

Total product revenues increased 21% compared to the third quarter of 2018, primarily driven by the global uptake of SYMDEKO and SYMKEVI in patients ages 12 and older.

GAAP net income decreased compared to the third quarter of 2018, primarily driven by a $175 million upfront payment as part of Vertex's recently expanded collaboration with CRISPR Therapeutics, and was partially offset by the strong growth in total product revenues.

Non-GAAP net income increased compared to the third quarter of 2018, driven by the strong growth in total product revenues, and was partially offset by increased operating expenses and income taxes.

Cash, cash equivalents and marketable securities as of September 30, 2019 were $4.0 billion, an increase of approximately $800 million compared to $3.2 billion as of December 31, 2018.

Third-Quarter 2019 Expenses

 

Three Months Ended September 30,

 

2019

 

2018

 

(in millions)

Combined GAAP R&D and SG&A expenses

$

716

 

 

 

$

468

 

 

Combined Non-GAAP R&D and SG&A expenses

$

416

 

 

 

$

379

 

 

 

 

 

 

 

 

 

 

GAAP R&D expense

$

556

 

 

 

$

331

 

 

Non-GAAP R&D expense

$

290

 

 

 

$

274

 

 

 

 

 

 

 

 

 

 

GAAP SG&A expense

$

160

 

 

 

$

137

 

 

Non-GAAP SG&A expense

$

127

 

 

 

$

105

 

 

 

 

 

 

 

 

 

 

GAAP income taxes

$

13

 

 

 

$

8

 

 

Non-GAAP income taxes

$

84

 

 

 

$

5

 

 

Combined GAAP R&D and SG&A expenses increased compared to the third quarter of 2018, primarily due to the $175 million upfront payment to CRISPR Therapeutics.

Combined Non-GAAP R&D and SG&A expenses increased compared to the third quarter of 2018, primarily due to the incremental investment to support the global use of Vertex's medicines and the expansion of Vertex's pipeline in CF and other new disease areas.

GAAP and Non-GAAP income taxes increased significantly compared to the third quarter of 2018 due to Vertex's release of its valuation allowance on the majority of its deferred tax assets in the fourth quarter of 2018. GAAP and non-GAAP income taxes in the third quarter of 2019 include a provision for income taxes on Vertex's pre-tax income using an estimated effective tax rate approximating statutory rates. This provision for income taxes includes a significant non-cash charge due to Vertex's ability to offset its pre-tax income against previously benefited net operating losses. Refer to "Supplemental Income Tax Information" for discussion of the cash versus non-cash components of Vertex's provision for income taxes.

Full-Year 2019 Financial Guidance

Vertex today reiterated its 2019 revenue guidance that was updated on October 21, 2019. A summary of the company's current financial expectations is below:

 

 

Current FY 2019

 

Previous FY 2019

 

 

 

 

 

 

 

 

 

TOTAL product revenues

 

Unchanged

 

 

$

3.70 to 3.75 billion

 

 

 

 

 

 

 

 

 

Combined GAAP R&D and SG&A expenses

$

2.35 to 2.45 billion

 

 

$

2.25 to 2.40 billion

 

Combined Non-GAAP R&D and SG&A expenses

 

Unchanged

 

 

$

1.65 to 1.70 billion

 

Non-GAAP effective tax rate

 

Unchanged

 

 

 

21% to 22%

 

Clinical Development

Cystic Fibrosis (CF):

  • On October 21, 2019, the company announced that the U.S. Food and Drug Administration (FDA) approved TRIKAFTA (elexacaftor/tezacaftor/ivacaftor and ivacaftor) for the treatment of CF in people ages 12 years and older who have at least one F508del mutation. TRIKAFTA is Vertex's fourth breakthrough medicine approved to treat the underlying cause of CF.
  • Enrollment is ongoing in a Phase 3 study evaluating the elexacaftor/tezacaftor/ivacaftor combination regimen in children with CF ages 6 to 11 years who have two F508del mutations and in children who have one F508del mutation and one minimal function mutation.
  • Vertex continues to make progress toward gaining approval and reimbursement for its CF medicines globally. Recent highlights include:
    • Reimbursement for ORKAMBI and SYMDEKO for eligible patients in England, Spain, Australia, and Scotland.
    • CHMP positive opinion for KALYDECO in the European Union (EU) for infants as early as 6 months old.
    • A Marketing Authorization Application (MAA) submitted to the European Medicines Agency (EMA) for the elexacaftor/tezacaftor/ivacaftor combination regimen to treat people with CF ages 12 years and older.

Alpha-1 Antitrypsin (AAT) Program:

  • VX-814: In the fourth quarter of 2019, Vertex plans to initiate a Phase 2 proof-of-concept study of its first oral small molecule corrector, VX-814, for the treatment of alpha-1 antitrypsin (AAT) deficiency. This study is expected to enroll approximately 50 patients with AAT deficiency who have two Z mutations. The study will evaluate multiple doses of VX-814 administered for 28 days compared to placebo. The primary endpoints will be the change in the level of functional AAT protein in the blood as well as safety and tolerability. Pending enrollment, Vertex expects to obtain data from this study in 2020.
  • VX-864: A Phase 1 study is ongoing in healthy volunteers evaluating VX-864, the company's second investigational small molecule corrector for the treatment of AAT deficiency.

Sickle Cell Disease and Beta Thalassemia:

  • Enrollment is ongoing in the Phase 1/2 studies evaluating the novel gene-editing therapy CTX001 for the treatment of severe sickle cell disease and beta thalassemia. Vertex and its partner CRISPR Therapeutics plan to provide the first clinical data from these studies in the fourth quarter of 2019. These data will include measurements of safety and efficacy for patients with beta thalassemia and sickle cell disease treated with CTX001.

APOL1-Mediated Kidney Diseases:

  • A Phase 1 study in healthy volunteers evaluating VX-147 is expected to be complete in the fourth quarter of 2019. VX-147 is the company's first investigational oral small molecule medicine for the treatment of APOL1-mediated focal segmental glomerulosclerosis (FSGS) and other serious kidney diseases. Pending the results of the Phase 1 study, Vertex plans to initiate a Phase 2 proof-of-concept study in 2020 to evaluate the ability of VX-147 to reduce protein levels in the urine. Vertex is also advancing multiple other APOL1 inhibitors through preclinical development.

Pain:

  • A Phase 1 study is ongoing in healthy volunteers evaluating the investigational NaV1.8 inhibitor VX-961 for the treatment of pain. VX-961 has been granted Fast Track Designation by the FDA.

Investments in External Innovation

Type 1 Diabetes:

  • On October 10, 2019, Vertex completed its previously announced acquisition of Semma Therapeutics, a privately held biotechnology company pioneering the use of stem cell-derived human islets as a potentially curative treatment for type 1 diabetes.

     

Non-GAAP Financial Measures

In this press release, Vertex's financial results and financial guidance are provided in accordance with accounting principles generally accepted in the United States (GAAP) and using certain non-GAAP financial measures. In particular, non-GAAP financial results and guidance exclude from Vertex's pre-tax income (i) stock-based compensation expense, (ii) revenues and expenses related to business development transactions including collaboration agreements, asset acquisitions and consolidated variable interest entities, (iii) gains or losses related to the fair value of the company's strategic investments, (iv) acquisition-related costs and (v) other adjustments. The company's non-GAAP financial results also exclude from its provision for or benefit from income taxes the estimated tax impact related to its non-GAAP adjustments to pre-tax income described above. These results are provided as a complement to results provided in accordance with GAAP because management believes these non-GAAP financial measures help indicate underlying trends in the company's business, are important in comparing current results with prior period results and provide additional information regarding the company's financial position. Management also uses these non-GAAP financial measures to establish budgets and operational goals that are communicated internally and externally and to manage the company's business and to evaluate its performance. The company adjusts, where appropriate, for both revenues and expenses in order to reflect the company's operations. The company provides guidance regarding product revenues in accordance with GAAP and provides guidance regarding combined research and development and sales, general, and administrative expenses on both a GAAP and non-GAAP basis. The company also provides guidance regarding its anticipated income taxes as a percentage of pre-tax income on a non-GAAP basis. The guidance regarding GAAP research and development expenses and sales, general and administrative expenses does not include estimates associated with any potential future business development activities. A reconciliation of the GAAP financial results to non-GAAP financial results is included in the attached financial information.

 

Vertex Pharmaceuticals Incorporated
Third-Quarter Results
Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

2019

 

2018

 

2019

 

2018

Revenues:

 

 

 

 

 

 

 

Product revenues, net...................................................................................................

$

949,828

 

 

$

782,511

 

 

$

2,747,461

 

 

$

2,170,152

 

Collaboration and royalty revenues...................................................................................................

 

 

2,024

 

 

2,095

 

 

7,339

 

Total revenues................................................................................................

949,828

 

 

784,535

 

 

2,749,556

 

 

2,177,491

 

Costs and expenses:

 

 

 

 

 

 

 

Cost of sales...................................................................................................

131,914

 

 

111,255

 

 

362,746

 

 

287,250

 

Research and development expenses...................................................................................................

555,948

 

 

330,510

 

 

1,274,529

 

 

978,595

 

Sales, general and administrative expenses...................................................................................................

159,674

 

 

137,295

 

 

463,221

 

 

404,406

 

Change in fair value of contingent consideration...................................................................................................

2,959

 

 

 

 

2,959

 

 

 

Restructuring income...................................................................................................

 

 

(174

)

 

 

 

(188

)

Total costs and expenses................................................................................................

850,495

 

 

578,886

 

 

2,103,455

 

 

1,670,063

 

Income from operations.....................................................................................................

99,333

 

 

205,649

 

 

646,101

 

 

507,428

 

Interest income...................................................................................................

17,628

 

 

10,543

 

 

51,319

 

 

24,381

 

Interest expense...................................................................................................

(14,548

)

 

(18,686

)

 

(44,253

)

 

(53,727

)

Other (expense) income, net (1)

(31,747

)

 

(60,995

)

 

64,802

 

 

89,662

 

Income from operations before provision for income taxes.................................................................................................

70,666

 

 

136,511

 

 

717,969

 

 

567,744

 

Provision for income taxes (2)...................................................................................................

13,148

 

 

8,055

 

 

124,393

 

 

5,737

 

Net income.....................................................................................................

57,518

 

 

128,456

 

 

593,576

 

 

562,007

 

Loss (income) attributable to noncontrolling interest (3)...............................................................................................

 

 

290

 

 

 

 

(15,638

)

Net income attributable to Vertex.....................................................................................................

$

57,518

 

 

$

128,746

 

 

$

593,576

 

 

$

546,369

 

 

 

 

 

 

 

 

 

Amounts per share attributable to Vertex common shareholders:

 

 

 

 

 

 

 

Net income:

 

 

 

 

 

 

 

Basic...................................................................................................

$

0.22

 

 

$

0.51

 

 

$

2.32

 

 

$

2.15

 

Diluted...................................................................................................

$

0.22

 

 

$

0.50

 

 

$

2.28

 

 

$

2.11

 

Shares used in per share calculations:

 

 

 

 

 

 

 

Basic...................................................................................................

256,946

 

 

254,905

 

 

256,289

 

 

254,096

 

Diluted...................................................................................................

260,473

 

 

259,788

 

 

260,182

 

 

258,972

 

 

Reconciliation of GAAP to Non-GAAP Net Income
Third-Quarter Results
(in thousands, except per share amounts)
(unaudited)

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

2019

 

2018

 

2019

 

2018

GAAP net income attributable to Vertex.....................................................................................................

$

57,518

 

 

$

128,746

 

 

$

593,576

 

 

$

546,369

 

Stock-based compensation expense................................................................................................

85,420

 

 

85,532

 

 

268,898

 

 

246,104

 

Decrease (increase) in fair value of strategic investments (1)............................................................................................

31,216

 

 

61,159

 

 

(68,862

)

 

(88,217

)

Increase in fair value of contingent consideration (3)............................................................................................

2,959

 

 

200

 

 

2,959

 

 

23,100

 

Collaborative revenues and expenses (4)............................................................................................

203,777

 

 

1,779

 

 

262,286

 

 

4,777

 

Acquisition-related costs (5) and other adjustments............................................................................................

11,459

 

 

1,398

 

 

12,690

 

 

3,520

 

Total non-GAAP adjustments to pre-tax income........................................................................................

334,831

 

 

150,068

 

 

477,971

 

 

189,284

 

Estimated income taxes related to non-GAAP adjustments to pre-tax income (6)............................................................................................

(70,849

)

 

3,114

 

 

(126,951

)

 

(13,715

)

Non-GAAP net income attributable to Vertex.......................................................................................

$

321,500

 

 

$

281,928

 

 

$

944,596

 

 

$

721,938

 

 

 

 

 

 

 

 

 

Amounts per diluted share attributable to Vertex common shareholders:

 

 

 

 

 

 

 

Net income:

 

 

 

 

 

 

 

GAAP................................................................................................

$

0.22

 

 

$

0.50

 

 

$

2.28

 

 

$

2.11

 

Non-GAAP................................................................................................

$

1.23

 

 

$

1.09

 

 

$

3.63

 

 

$

2.79

 

Shares used in diluted per share calculations:

 

 

 

 

 

 

 

GAAP and Non-GAAP................................................................................................

260,473

 

 

259,788

 

 

260,182

 

 

258,972

 

Reconciliation of GAAP to Non-GAAP Revenues and Expenses
Third-Quarter Results
(in thousands)
(unaudited)

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

2019

 

2018

 

2019

 

2018

GAAP total revenues.....................................................................................................

$

949,828

 

 

$

784,535

 

 

$

2,749,556

 

 

$

2,177,491

 

Collaborative revenues (4)................................................................................................

 

 

(680

)

 

(158

)

 

(3,540

)

Non-GAAP total revenues...........................................................................................

$

949,828

 

 

$

783,855

 

 

$

2,749,398

 

 

$

2,173,951

 

 

 

 

 

 

 

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

2019

 

2018

 

2019

 

2018

GAAP cost of sales.............................................................................................

$

131,914

 

 

$

111,255

 

 

$

362,746

 

 

$

287,250

 

Stock-based compensation expense................................................................................................

(1,337

)

 

(1,259

)

 

(4,178

)

 

(3,263

)

Non-GAAP cost of sales.......................................................................................

$

130,577

 

 

$

109,996

 

 

$

358,568

 

 

$

283,987

 

 

 

 

 

 

 

 

 

GAAP research and development expenses.....................................................................................................

$

555,948

 

 

$

330,510

 

 

$

1,274,529

 

 

$

978,595

 

Stock-based compensation expense................................................................................................

(52,504

)

 

(52,918

)

 

(167,851

)

 

(153,018

)

Collaborative expenses (4)............................................................................................

(203,777

)

 

(2,619

)

 

(262,444

)

 

(8,079

)

Acquisition-related costs (5) and other adjustments............................................................................................

(10,122

)

 

(1,388

)

 

(10,122

)

 

(3,128

)

Non-GAAP research and development expenses.......................................................................................

$

289,545

 

 

$

273,585

 

 

$

834,112

 

 

$

814,370

 

 

 

 

 

 

 

 

 

GAAP sales, general and administrative expenses.................................................................................................

$

159,674

 

 

$

137,295

 

 

$

463,221

 

 

$

404,406

 

Stock-based compensation expense................................................................................................

(31,579

)

 

(31,355

)

 

(96,869

)

 

(89,823

)

Collaborative expenses (4)............................................................................................

 

 

(289

)

 

 

 

(1,704

)

Acquisition-related costs (5) and other adjustments............................................................................................

(1,337

)

 

(184

)

 

(2,568

)

 

(580

)

Non-GAAP sales, general and administrative expenses.......................................................................................

$

126,758

 

 

$

105,467

 

 

$

363,784

 

 

$

312,299

 

 

 

 

 

 

 

 

 

Combined non-GAAP R&D and SG&A expenses.......................................................................................

$

416,303

 

 

$

379,052

 

 

$

1,197,896

 

 

$

1,126,669

 

 

 

 

 

 

 

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

2019

 

2018

 

2019

 

2018

GAAP other (expense) income, net.................................................................................................

$

(31,747

)

 

$

(60,995

)

 

$

64,802

 

 

$

89,662

 

Decrease (increase) in fair value of strategic investments (1)............................................................................................

31,216

 

 

61,159

 

 

(68,862

)

 

(88,217

)

Non-GAAP other (expense) income, net.......................................................................................

$

(531

)

 

$

164

 

 

$

(4,060

)

 

$

1,445

 

 

 

 

 

 

 

 

 

GAAP provision for income taxes.................................................................................................

$

13,148

 

 

$

8,055

 

 

$

124,393

 

 

$

5,737

 

Estimated income taxes related to non-GAAP adjustments to pre-tax income (6)............................................................................................

70,849

 

 

(3,193

)

 

126,951

 

 

7,647

 

Non-GAAP provision for income taxes (2).......................................................................................

$

83,997

 

 

$

4,862

 

 

$

251,344

 

 

$

13,384

 

 

 

Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)

 

 

September 30, 2019

 

December 31, 2018

Assets

 

 

 

Cash, cash equivalents and marketable securities..................................................................................................................................

$

3,996,331

 

 

$

3,168,242

 

Accounts receivable, net..................................................................................................................................

443,315

 

 

409,688

 

Inventories..................................................................................................................................

162,306

 

 

124,360

 

Property and equipment, net..................................................................................................................................

733,509

 

 

812,005

 

Goodwill..................................................................................................................................

447,525

 

 

50,384

 

Deferred tax assets..................................................................................................................................

1,415,511

 

 

1,499,672

 

Other assets..................................................................................................................................

316,056

 

 

181,547

 

Total assets..................................................................................................................................

$

7,514,553

 

 

$

6,245,898

 

 

 

 

 

Liabilities and Shareholders' Equity

 

 

 

Accounts payable and accrued expenses..................................................................................................................................

$

1,266,311

 

 

$

1,069,886

 

Finance lease liabilities..................................................................................................................................

578,624

 

 

596,638

 

Contingent consideration..................................................................................................................................

175,000

 

 

 

Other liabilities..................................................................................................................................

241,224

 

 

144,171

 

Shareholders' equity..................................................................................................................................

5,253,394

 

 

4,435,203

 

Total liabilities and shareholders' equity..................................................................................................................................

$

7,514,553

 

 

$

6,245,898

 

 

 

 

 

Common shares outstanding..................................................................................................................................

257,265

 

 

255,172

 

 
 

Supplemental Income Tax Information
(in thousands, except percentages)
(unaudited)

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

2019

 

2018

 

2019

 

2018

Components of provision for income taxes related to:

 

 

 

 

 

 

 

 

 

 

 

 

Cash taxes paid or accrued for state and foreign income taxes...........................................................................................

$

12,961

 

 

$

4,862

 

 

$

22,953

 

 

$

13,384

 

VIE income taxes (6)...........................................................................................

 

 

79

 

 

 

 

6,068

 

Provision for income taxes offset by net operating losses...........................................................................................

187

 

 

3,114

 

 

101,440

 

 

(13,715

)

GAAP provision for income taxes (2)......................................................................................

$

13,148

 

 

$

8,055

 

 

$

124,393

 

 

$

5,737

 

 

 

 

 

 

 

 

 

Cash taxes paid or accrued for state and foreign income taxes...........................................................................................

$

12,961

 

 

$

4,862

 

 

$

22,953

 

 

$

13,384

 

Estimated income taxes attributable to Vertex related to non-GAAP adjustments to pre-tax income (5)...........................................................................................

70,849

 

 

(3,114

)

 

126,951

 

 

13,715

 

Provision for income taxes offset by net operating losses...........................................................................................

187

 

 

3,114

 

 

101,440

 

 

(13,715

)

Non-GAAP provision for income taxes (2)......................................................................................

$

83,997

 

 

$

4,862

 

 

$

251,344

 

 

$

13,384

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effective tax rate reconciliation:

 

 

 

 

 

 

 

GAAP effective tax rate...............................................................................................

19

%

 

6

%

 

17

%

 

1

%

Impact of GAAP to Non-GAAP adjustments...............................................................................................

2

%

 

(4

)%

 

4

%

 

1

%

Non-GAAP effective tax rate..........................................................................................

21

%

 

2

%

 

21

%

 

2

%

Notes and Explanations

1: The company records gains and losses related to changes in the fair value of its strategic investments to "Other income, net."

2: In the fourth quarter of 2018, the company recorded a non-cash benefit from income taxes of approximately $1.5 billion related to the release of its valuation allowance on the majority of its net operating losses and other deferred tax assets. As a result, the company recorded deferred tax assets of $1.5 billion on its consolidated balance sheet as of December 31, 2018, which were previously subject to its valuation allowance. Starting in the first quarter of 2019, the company began recording a provision for income taxes on its pre-tax income using an estimated effective tax rate that approximates statutory rates. The provision includes a significant non-cash charge due to the company's ability to offset its pre-tax income against previously benefited net operating losses. The company expects the majority of its tax provision to represent a non-cash expense until its net operating losses have been fully utilized. As of December 31, 2018, the company's federal net operating losses and credits that were available to offset future pre-tax income were approximately $4.5 billion.

3: During the three and nine months ended September 30, 2018, the company consolidated the financial statements of a variable interest entity, or VIE, because Vertex had licensed the rights to develop the VIE's most significant intellectual property asset. During the nine months ended September 30, 2018, the fair value of the contingent payments payable by Vertex to the VIE increased by $23.1 million. This increase was attributable to noncontrolling interest and resulted in a decrease in net income attributable to Vertex on a dollar-for-dollar basis. The company deconsolidated the VIE as of December 31, 2018; therefore, there were no comparable amounts during the three and nine months ended September 30, 2019.

4: "Collaborative revenues and expenses" in the three and nine months ended September 30, 2019 and 2018 primarily related to collaborative upfront and milestone payments. "Collaborative revenues and expenses" in the three and nine months ended September 30, 2018 also included revenues and expenses attributable to our VIE's operations.

5: "Acquisition-related costs" in the three and nine months ended September 30, 2019 primarily related to costs associated with the company's acquisition of Exonics. There were no comparable amounts during the three and nine months ended September 30, 2018.

6: In the three and nine months ended September 30, 2019, "Estimated income taxes related to non-GAAP adjustments to pre-tax income" primarily related to (i) stock-based compensation (including an adjustment for excess tax benefits related to stock-based compensation), (ii) increases or decreases in the fair value of the company's strategic investments and (iii) collaborative upfront payments. In the three and nine months ended September 30, 2018, "Estimated income taxes related to non-GAAP adjustments to pre-tax income" were related to a provision for income taxes attributable to the company's VIE and excess tax benefits related to stock-based compensation.

About Vertex
Vertex is a global biotechnology company that invests in scientific innovation to create transformative medicines for people with serious diseases. The company has four approved medicines that treat the underlying cause of cystic fibrosis (CF) - a rare, life-threatening genetic disease - and has several ongoing clinical and research programs in CF. Beyond CF, Vertex has a robust pipeline of investigational medicines in other serious diseases where it has deep insight into causal human biology, such as sickle cell disease, beta thalassemia, pain, alpha-1 antitrypsin deficiency, Duchenne muscular dystrophy and APOL1-mediated kidney diseases.

Founded in 1989 in Cambridge, Mass., Vertex's global headquarters is now located in Boston's Innovation District and its international headquarters is in London, UK. Additionally, the company has research and development sites and commercial offices in North America, Europe, Australia and Latin America. Vertex is consistently recognized as one of the industry's top places to work, including 10 consecutive years on Science magazine's Top Employers list and top five on the 2019 Best Employers for Diversity list by Forbes. For company updates and to learn more about Vertex's history of innovation, visit www.vrtx.com or follow us on Facebook, Twitter, LinkedIn, YouTube and Instagram.

Special Note Regarding Forward-Looking Statements
This press release contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, including, without limitation, Dr. Leiden's statements in this press release, the information provided regarding future financial performance, including in the section captioned "Full Year 2019 Financial Guidance" and statements regarding (i) the timing and expected outcome of regulatory applications and reimbursement for CF medicines globally and (ii) the development plan and timelines for our product development candidates, including our next-generation triple combination regimen, CTX001, VX-814, VX-864, VX-147 and VX-961. While Vertex believes the forward-looking statements contained in this press release are accurate, these forward-looking statements represent the company's beliefs only as of the date of this press release and there are a number of risks and uncertainties that could cause actual events or results to differ materially from those expressed or implied by such forward-looking statements. Those risks and uncertainties include, among other things, that the company's expectations regarding its 2019 CF net product revenues, expenses and effective tax rates may be incorrect (including because one or more of the company's assumptions underlying its expectations may not be realized), that data from the company's development programs may not support registration or further development of its compounds due to safety, efficacy or other reasons, and other risks listed under Risk Factors in Vertex's annual report and subsequent quarterly reports filed with the Securities and Exchange Commission and available through the company's website at www.vrtx.com. Vertex disclaims any obligation to update the information contained in this press release as new information becomes available.

Conference Call and Webcast
The company will host a conference call and webcast today at 5:00 p.m. ET. To access the call, please dial (866) 501-1537 (U.S.) or +1 (720) 545-0001 (International). The conference call will be webcast live and a link to the webcast can be accessed through Vertex's website at www.vrtx.com in the "Investors" section under "Events and Presentations." To ensure a timely connection, it is recommended that users register at least 15 minutes prior to the scheduled webcast. An archived webcast will be available on the company's website.

(VRTX-E)

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