Vertex Pharmaceuticals Inc 10-Q for FY2021 Q1

Vertex Pharmaceuticals Inc (VRTX)

10-Q 2021-04-30 For: 2021-03-31

Added on April 02, 2026

About this 10-Q

Vertex Pharmaceuticals Inc filed this 10-Q on April 30, 2021, covering the quarter ended March 31, 2021 (FY2021 Q1).

Headline figures

Quarter ended March 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $1.72B; up 13.8% from $1.52B a year earlier
Net income: $653.14M; up 8.4% from net income of $602.75M a year earlier
Diluted EPS: $2.49; up 8.7% from $2.29 a year earlier

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		Page
Part I. Financial Information
Item 1.	Financial Statements	2
	Condensed Consolidated Financial Statements (unaudited)	2
	Condensed Consolidated Statements of Operations - Three Months Ended March 31, 2021 and 2020	2
	Condensed Consolidated Statements of Comprehensive Income - Three Months Ended March 31, 2021 and 2020	3
	Condensed Consolidated Balance Sheets - March 31, 2021 and December 31, 2020	4
	Condensed Consolidated Statements of Shareholders' Equity - Three Months Ended March 31, 2021 and 2020	5
	Condensed Consolidated Statements of Cash Flows - Three Months Ended March 31, 2021 and 2020	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	33
Part II. Other Information
Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 5.	Other Information	35
Item 6.	Exhibits	36
Signatures		37


	Three Months Ended March 31,
		2021		2020
Revenues:
Product revenues, net		$	1,723,305	$	1,515,107
Other revenues		1,000		—
Total revenues		1,724,305		1,515,107
Costs and expenses:
Cost of sales		192,329		162,497
Research and development expenses		455,973		448,528
Sales, general and administrative expenses		192,077		182,258
Change in fair value of contingent consideration		(3,900)		1,600
Total costs and expenses		836,479		794,883
Income from operations		887,826		720,224
Interest income		1,465		12,576
Interest expense		(15,678)		(14,136)
Other expense, net		(52,653)		(61,130)
Income before provision for income taxes		820,960		657,534
Provision for income taxes		167,822		54,781
Net income		$	653,138	$	602,753

Net income per common share:
Basic		$	2.52	$	2.32
Diluted		$	2.49	$	2.29
Shares used in per share calculations:
Basic		259,369		259,815
Diluted		261,916		263,515


	Three Months Ended March 31,
		2021		2020
Net income		$	653,138	$	602,753
Other comprehensive income:
Unrealized holding losses on marketable securities, net		(218)		(764)
Unrealized gains on foreign currency forward contracts, net of tax of $(9.3) million and $(5.0) million, respectively		33,966		18,782
Foreign currency translation adjustment		1,430		(2,662)
Total other comprehensive income		35,178		15,356
Comprehensive income		$	688,316	$	618,109


	March 31,		December 31,
	2021		2020
Assets
Current assets:
Cash and cash equivalents	$	6,304,330	$	5,988,187
Marketable securities	619,638		670,710
Accounts receivable, net	977,551		885,352
Inventories	298,863		280,777
Prepaid expenses and other current assets	338,925		308,353
Total current assets	8,539,307		8,133,379
Property and equipment, net	986,123		958,534
Goodwill	1,002,158		1,002,158
Intangible assets	400,000		400,000
Deferred tax assets	815,890		882,779
Operating lease assets	322,319		325,564
Other assets	49,262		49,394
Total assets	$	12,115,059	$	11,751,808
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	127,839	$	155,139
Accrued expenses	1,532,037		1,404,971
Other current liabilities	284,174		317,423
Total current liabilities	1,944,050		1,877,533
Long-term finance lease liabilities	530,330		539,042
Long-term operating lease liabilities	368,467		350,463
Long-term contingent consideration	185,700		189,600
Other long-term liabilities	106,258		108,355
Total liabilities	3,134,805		3,064,993
Commitments and contingencies	—		—
Shareholders’ equity:
Preferred stock, $0.01 par value; 1,000 shares authorized; none issued and outstanding	—		—
Common stock, $0.01 par value; 500,000 shares authorized, 258,829 and 259,890 shares issued and outstanding, respectively	2,588		2,599
Additional paid-in capital	7,499,161		7,894,027
Accumulated other comprehensive loss	(33,302)		(68,480)
Retained earnings	1,511,807		858,669
Total shareholders’ equity	8,980,254		8,686,815
Total liabilities and shareholders’ equity	$	12,115,059	$	11,751,808























	Three Months Ended
	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings (Accumulated Deficit)		Total Shareholders’ Equity
	Shares	Amount
Balance at December 31, 2019	258,993	$	2,589	$	7,937,606	$	(1,973)	$	(1,852,978)	$	6,085,244
Other comprehensive income, net of tax	—	—		—		15,356		—		15,356
Net income	—	—		—		—		602,753		602,753
Repurchase of common stock	(1,404)	(14)		(300,012)		—		—		(300,026)
Common stock withheld for employee tax obligations	(575)	(6)		(136,161)		—		—		(136,167)
Issuance of common stock under benefit plans	2,065	22		77,572		—		—		77,594
Stock-based compensation expense	—	—		116,900		—		—		116,900
Balance at March 31, 2020	259,079	$	2,591	$	7,695,905	$	13,383	$	(1,250,225)	$	6,461,654

Balance at December 31, 2020	259,890	$	2,599	$	7,894,027	$	(68,480)	$	858,669	$	8,686,815
Other comprehensive income, net of tax	—	—		—		35,178		—		35,178
Net income	—	—		—		—		653,138		653,138
Repurchase of common stock	(1,989)	(20)		(424,932)		—		—		(424,952)
Common stock withheld for employee tax obligations	(472)	(5)		(102,135)		—		—		(102,140)
Issuance of common stock under benefit plans	1,400	14		15,164		—		—		15,178
Stock-based compensation expense	—	—		117,037		—		—		117,037
Balance at March 31, 2021	258,829	$	2,588	$	7,499,161	$	(33,302)	$	1,511,807	$	8,980,254


Common Stock, par value $0.01 per share			258,865,671			Outstanding at April 22, 2021


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.


	As of March 31, 2021								As of December 31, 2020
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
	(in thousands)
Financial instruments carried at fair value (asset positions):
Cash equivalents:
Money market funds	$	3,890,303	$	3,890,303	$	—	$	—	$	3,141,053	$	3,141,053	$	—	$	—
Marketable securities:
Corporate equity securities	143,486		143,486		—		—		195,781		15,650		180,131		—
Government-sponsored enterprise securities	62,362		62,362		—		—		80,063		80,063		—		—
Corporate debt securities	155,716		—		155,716		—		231,598		—		231,598		—
Commercial paper	258,074		—		258,074		—		163,268		—		163,268		—
Prepaid expenses and other current assets:
Foreign currency forward contracts	7,039		—		7,039		—		—		—		—		—
Other assets:
Foreign currency forward contracts	1,944		—		1,944		—		—		—		—		—
Total financial assets	$	4,518,924	$	4,096,151	$	422,773	$	—	$	3,811,763	$	3,236,766	$	574,997	$	—

Financial instruments carried at fair value (liability positions):
Other current liabilities:
Foreign currency forward contracts	$	(28,743)	$	—	$	(28,743)	$	—	$	(59,184)	$	—	$	(59,184)	$	—
Long-term contingent consideration	(185,700)		—		—		(185,700)		(189,600)		—		—		(189,600)
Other long-term liabilities:
Foreign currency forward contracts	(433)		—		(433)		—		(4,283)		—		(4,283)		—
Total financial liabilities	$	(214,876)	$	—	$	(29,176)	$	(185,700)	$	(253,067)	$	—	$	(63,467)	$	(189,600)


	Three Months Ended March 31, 2021
	(in thousands)
Balance at December 31, 2020	$	189,600
Decrease in fair value of contingent payments	(3,900)
Balance at March 31, 2021	$	185,700


	As of March 31, 2021								As of December 31, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(in thousands)
Cash equivalents:
Money market funds	$	3,890,303	$	—	$	—	$	3,890,303	$	3,141,053	$	—	$	—	$	3,141,053
Total cash equivalents	$	3,890,303	$	—	$	—	$	3,890,303	$	3,141,053	$	—	$	—	$	3,141,053
Marketable securities:
Government-sponsored enterprise securities	$	62,332	$	30	$	—	$	62,362	$	80,046	$	17	$	—	$	80,063
Corporate debt securities	155,636		126		(46)		155,716		231,263		377		(42)		231,598
Commercial paper	258,068		27		(21)		258,074		163,286		19		(37)		163,268
Total marketable debt securities	476,036		183		(67)		476,152		474,595		413		(79)		474,929
Corporate equity securities	51,427		92,059		—		143,486		51,427		144,354		—		195,781
Total marketable securities	$	527,463	$	92,242	$	(67)	$	619,638	$	526,022	$	144,767	$	(79)	$	670,710


	Foreign Currency Translation Adjustment		Unrealized Holding Gains (Losses), Net of Tax				Total
			On Available-For-Sale Debt Securities		On Foreign Currency Forward Contracts
	(in thousands)
Balance at December 31, 2020	$	(15,678)	$	334	$	(53,136)	$	(68,480)
Other comprehensive income (loss) before reclassifications	1,430		(218)		21,019		22,231
Amounts reclassified from accumulated other comprehensive income (loss)	—		—		12,947		12,947
Net current period other comprehensive income (loss)	1,430		(218)		33,966		35,178
Balance at March 31, 2021	$	(14,248)	$	116	$	(19,170)	$	(33,302)

Balance at December 31, 2019	$	(895)	$	503	$	(1,581)	$	(1,973)
Other comprehensive (loss) income before reclassifications	(2,662)		(764)		25,772		22,346
Amounts reclassified from accumulated other comprehensive income (loss)	—		—		(6,990)		(6,990)
Net current period other comprehensive (loss) income	(2,662)		(764)		18,782		15,356
Balance at March 31, 2020	$	(3,557)	$	(261)	$	17,201	$	13,383


	As of March 31, 2021		As of December 31, 2020
Foreign Currency	(in thousands)
Euro	$	892,995	$	745,099
British pound sterling	250,528		160,427
Australian dollar	100,733		99,922
Canadian dollar	80,122		86,468
Total foreign currency forward contracts	$	1,324,378	$	1,091,916


As of March 31, 2021
Assets			Liabilities
Classification	Fair Value		Classification	Fair Value
(in thousands)
Prepaid expenses and other current assets	$	7,039	Other current liabilities	$	(28,743)
Other assets	1,944		Other long-term liabilities	(433)
Total assets	$	8,983	Total liabilities	$	(29,176)


	As of March 31, 2021
	Gross Amounts Recognized		Gross Amounts Offset		Gross Amounts Presented		Gross Amounts Not Offset		Legal Offset
Foreign currency forward contracts	(in thousands)
Total assets	$	8,983	$	—	$	8,983	$	(8,983)	$	—
Total liabilities	(29,176)		—		(29,176)		8,983		(20,193)


	Three Months Ended March 31,			Increase/(Decrease)
				2021		2020		$		%
				(in thousands, except percentages and per share amounts)
Revenues				$	1,724,305	$	1,515,107	$	209,198	14	%
Operating costs and expenses				836,479		794,883		41,596		5	%
Income from operations				887,826		720,224		167,602		23	%
Other non-operating expense, net				(66,866)		(62,690)		(4,176)		7	%
Provision for income taxes				167,822		54,781		113,041		206	%
Net income				$	653,138	$	602,753	$	50,385	8	%

Net income per diluted common share		$	2.49	$	2.29
Diluted shares used in per share calculations				261,916		263,515


	Three Months Ended March 31,
		2021		2020
		(in thousands)
United States		$	1,253,433	$	1,187,588
Outside of the United States
Europe		404,969		257,391
Other		64,903		70,128
Total product revenues outside of the United States		469,872		327,519
Total product revenues, net		$	1,723,305	$	1,515,107


	As of March 31, 2021		As of December 31, 2020
	(in thousands)
Matures within one year	$	4,358,433	$	3,526,185
Matures after one year through five years	8,022		89,797
Total	$	4,366,455	$	3,615,982


	As of March 31, 2021		As of December 31, 2020
	(in thousands)
Raw materials	$	44,921	$	46,232
Work-in-process	170,721		161,324
Finished goods	83,221		73,221
Total	$	298,863	$	280,777


	Three Months Ended March 31,	Increase/(Decrease)
		2021		2020		$		%
		(in thousands, except percentages)
TRIKAFTA/KAFTRIO		$	1,193,217	$	895,233	$	297,984	33	%
SYMDEKO/SYMKEVI		125,049		173,159		(48,110)		(28)	%
ORKAMBI		218,697		234,138		(15,441)		(7)	%
KALYDECO		186,342		212,577		(26,235)		(12)	%
Total product revenues, net		$	1,723,305	$	1,515,107	$	208,198	14	%


Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (1)
January 1, 2021 to January 31, 2021	—	$	—	—	$	424,912,410
February 1, 2021 to February 28, 2021	1,988,941	$	213.64	1,988,941	$	—
March 1, 2021 to March 31, 2021	—	$	—	—	$	—
Total	1,988,941	$	213.64	1,988,941	$	—


Exhibit Number			Exhibit Description
31.1			Certification of the Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
31.2			Certification of the Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
32.1			Certification of the Chief Executive Officer and the Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS			XBRL Instance - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH			XBRL Taxonomy Extension Schema
101.CAL			XBRL Taxonomy Extension Calculation
101.LAB			XBRL Taxonomy Extension Labels
101.PRE			XBRL Taxonomy Extension Presentation
101.DEF			XBRL Taxonomy Extension Definition
104			Cover Page Interactive Data File––the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.


	Vertex Pharmaceuticals Incorporated

April 30, 2021	By:	/s/ Charles F. Wagner, Jr.
		Charles F. Wagner, Jr.
		Executive Vice President, Chief Financial Officer (principal financial officer and duly authorized officer)


Date:	April 30, 2021	/s/ Reshma Kewalramani

		Reshma Kewalramani
		Chief Executive Officer and President