# Vertex Pharmaceuticals Inc / Ma: Form 10-Q for the period ended Mar 31, 2009

- Company: [Vertex Pharmaceuticals Inc / Ma](/companies/vrtx.md) (CIK 875320)
- Form: 10-Q
- Filed: 2009-05-11
- Accepted by EDGAR: May 11, 2009, 20:31 ET
- Period: 2009-03-31
- Accession: 0001047469-09-005373
- Inline XBRL: no
- Main document: https://www.sec.gov/Archives/edgar/data/875320/000104746909005373/a2192154z10-q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/875320/000104746909005373/

## Management's discussion and analysis

As filed, 54,071 characters.

### Overview

We are in the business of discovering, developing and commercializing small molecule drugs for the treatment of serious diseases. Telaprevir, our lead drug candidate, is an oral hepatitis C protease inhibitor and one of the most advanced of a new class of antiviral treatments in clinical development that targets hepatitis C virus, or HCV, infection. Telaprevir is being evaluated in a fully-enrolled registration program focused on treatment-naïve and treatment-failure patients with genotype 1 HCV. We currently intend to file a new drug application, or NDA, for telaprevir in the United States in the second half of 2010, assuming the successful completion of the registration program. We also are developing, among other compounds, VX-770, a drug candidate for the treatment of patients with cystic fibrosis, or CF. We expect that, in the second quarter of 2009, we will begin a registration program for VX-770 that focuses on CF patients with the G551D mutation in the gene responsible for CF. We intend to continue investing in our research programs with the goal of adding to our pipeline drug candidates designed to address significant unmet medical needs and provide substantial benefits to patients.

#### Business Focus

Over the next several years, we expect to focus a substantial portion of our resources on the development and commercialization of telaprevir. Our clinical development program is designed to support registration by us of telaprevir in North America for treatment-naïve and treatment-failure patients with genotype 1 HCV, and by our collaborators, Janssen Pharmaceutica, N.V., a Johnson & Johnson company, and Mitsubishi Tanabe Pharma Corp., in international markets.

In the second quarter of 2009, we expect to initiate a registration program for VX-770 focused on patients with CF who have the G551D mutation. We also expect to continue the development of VX-809, an investigational corrector compound that is being evaluated in a Phase 2 clinical trial in patients with CF. As a result, we expect that over the next several years we will need to substantially increase resources focused on the development of our CF drug candidates. We plan to leverage the infrastructure that we are building in preparation for the launch of telaprevir to support the potential launch of VX-770.

In addition to the registration programs for telaprevir and VX-770, we plan to continue investing in our research programs and to develop drug candidates, alone or with third-party collaborators, that have emerged from our research programs. Using our drug discovery capability, which integrates biology, pharmacology, biophysics, chemistry, automation and information technologies in a coordinated manner, we have identified, among other drug candidates: telaprevir; VX-813 and VX-985, two additional HCV protease inhibitors; VX-770 and VX-809; and VX-509 and VX-467, novel Janus Kinase 3, or JAK3, inhibitors that target immune-mediated inflammatory diseases.

Our acquisition of ViroChem Pharma Inc., or ViroChem, in March 2009, for $100.0 million in cash plus 10.7 million shares of our common stock, represents a significant investment in order to acquire drug candidates that are in Phase 1 clinical development and could potentially be used to treat HCV infection in combination with telaprevir. In order to realize benefits from this acquisition, we will need to invest significant resources in the development of these potential combination therapies.

#### Drug Discovery and Clinical Development

Discovery and development of a new pharmaceutical product is a lengthy and resource-intensive process, which may take 10 to 15 years or more. Throughout this entire process, potential drug candidates are subjected to rigorous evaluation, driven in part by stringent regulatory considerations, designed to generate information concerning efficacy, side-effects, proper dosage levels and a variety of other physical and chemical characteristics that are important in determining whether a drug candidate should be approved for marketing as a pharmaceutical product. The toxicity characteristics and profile of drug candidates at varying dose levels administered for varying periods of time also are monitored and evaluated during the nonclinical and clinical development process. Most chemical compounds that are investigated as potential drug candidates never progress into formal development, and most drug candidates that do advance into formal development never become commercial products. A drug candidate's failure to progress or advance may be the result of any one or more of a wide range of adverse experimental outcomes including, for example, the lack of sufficient efficacy against the disease target, the lack of acceptable absorption characteristics or other physical properties, difficulties in developing a cost-effective manufacturing or formulation method or the discovery of toxicities or side-effects that are unacceptable for the disease indication being treated or that adversely affect the competitive commercial profile of the drug candidate.

Designing and coordinating large-scale clinical trials to determine the efficacy and safety of drug candidates and to support the submission of an NDA requires significant financial resources, along with extensive technical and regulatory expertise and infrastructure. Prior to commencing a late-stage clinical trial of any drug candidate, we must work collaboratively with regulatory authorities, including the United States Food and Drug Administration, or FDA, in order to identify the specific scientific issues that need to be addressed by the clinical trials in order to support continued development and approval of the drug candidate. These discussions typically occur over a period of months and can result in significant changes to planned clinical trial designs or timelines. In addition, even after agreement with respect to a clinical trial design has been reached, regulatory authorities may request additional clinical trials or changes to existing clinical trial protocols. If the data from our ongoing clinical trials or nonclinical studies regarding the safety or efficacy of our drug candidates are not favorable, we may be forced to delay or terminate the clinical development program, which, particularly in the case of telaprevir, would materially harm our business. Further, even if we obtain marketing approvals from the FDA and comparable foreign regulatory authorities in a timely manner, we cannot be sure that the drug will be commercially successful.

Our investments are subject to the considerable risk that one or more of our drug candidates will not progress to product registration due to a wide range of adverse experimental outcomes. We monitor the results of our clinical trials, discovery research and our nonclinical studies and frequently evaluate our portfolio investments in light of new data and scientific, business and commercial insights with the objective of balancing risk and potential. This process can result in relatively abrupt changes in focus and priority as new information becomes available and is analyzed and we gain additional insights into ongoing programs and potential new programs. Although we believe that our development activities and the clinical trial data we have obtained to date have reduced the risks associated with obtaining marketing approval for telaprevir, we cannot be sure that our development of telaprevir will lead successfully to regulatory approval on a timely basis, or at all, or that obtaining regulatory approval will lead to commercial success. With respect to our other drug candidates, we have more limited data from clinical trials and nonclinical studies and as a result it is difficult to predict which, if any, of these drug candidates will result in pharmaceuticals products.

#### Drug Candidates

### Telaprevir

Telaprevir is being investigated in a registration program focused on patients with genotype 1 HCV that includes ADVANCE and ILLUMINATE, which are Phase 3 clinical trials in treatment-naïve patients, and REALIZE, a Phase 3 clinical trial in treatment-failure patients. Enrollment in ADVANCE, ILLUMINATE and REALIZE was completed in October 2008, December 2008 and February 2009, respectively. Telaprevir dosing is complete in the ADVANCE and ILLUMINATE clinical trials and will be completed in the REALIZE clinical trial by the middle of June 2009. We currently intend to file an NDA for telaprevir in the second half of 2010, assuming the successful completion of our ongoing registration program. In addition to the clinical trials in our registration program, our collaborators and we are conducting several additional clinical trials evaluating twice-daily dosing of telaprevir and the use of telaprevir for treatment of patients with other HCV genotypes.

We have completed three Phase 2b clinical trials of telaprevir-based combination therapy in patients with genotype 1 HCV, which enrolled an aggregate of approximately 580 treatment-naïve patients and 440 patients who did not achieve a sustained viral response, or SVR, with a previous treatment with pegylated-interferon, or peg-IFN, and ribavirin, or RBV. The SVR rates on an intent-to-treat basis of the patients in the 24-week telaprevir-based treatment arms and the control arms of PROVE 1 and PROVE 2, the two Phase 2b clinical trials that evaluated treatment-naïve patients, are set forth in the table below:

| 24-week telaprevir-based treatment arm: | PROVE 1 | PROVE 2 |
| --- | ---: | ---: |
| telaprevir in combination with peg-IFN and RBV for 12 weeks, followed by peg-IFN and RBV alone for 12 weeks | 61% | 69% |
| **48-week control arm:** |  |  |
| 48 weeks of therapy with peg-IFN and RBV | 41% | 46% |

The SVR rates on an intent-to-treat basis of the patients in the 24-week telaprevir-based treatment arm, the 48-week telaprevir-based treatment arm and the control arm of PROVE 3, the Phase 2b clinical trial that evaluated treatment-failure patients, are set forth in the table below:

|  | Non-responders | Relapsers | Breakthroughs | Total |
| --- | --- | --- | --- | --- |
| **24-week telaprevir-based treatment arm:** |  |  |  |  |
| telaprevir in combination with peg-IFN and RBV for 12 weeks, followed by peg-IFN and RBV alone for 12 weeks | 39% (n=66) | 69% (n=42) | 57% (n=7) | 51% (n=115) |
| **48-week telaprevir-based treatment arm:** |  |  |  |  |
| telaprevir in combination with peg-IFN and RBV for 24 weeks, followed by peg-IFN and RBV alone for 24 weeks | 38% (n=64) | 76% (n=41) | 50% (n=8) | 52% (n=113) |
| **48-week control arm:** |  |  |  |  |
| 48 weeks of therapy with peg-IFN and RBV | 9% (n=68) | 20% (n=41) | 40% (n=5) | 14% (n=114) |

The adverse event profile of telaprevir generally has been consistent across our Phase 2 clinical trials, which have principally involved clinical trial sites in the United States and Europe. Safety data from our Phase 2 clinical trials indicated that the most common adverse events, regardless of treatment assignment, were fatigue, rash, headache and nausea. The most common adverse events reported more frequently in patients receiving telaprevir were gastrointestinal events, skin events—rash and pruritus—and anemia. There have been reports of severe rashes in clinical trials involving telaprevir-based treatments, including several reports from the clinical trials being conducted by Mitsubishi Tanabe in Japan, where telaprevir has advanced into Phase 3 clinical trials in combination with peg-IFN and RBV. Rash resulted in treatment discontinuations in the telaprevir-based treatment arms in approximately 7% of patients in PROVE 1 and PROVE 2 and 5% of patients in PROVE 3. Other adverse events reported in our Phase 2 clinical trials generally were similar in type and frequency to those seen with peg-IFN and RBV treatment.

The successful development and commercialization of telaprevir is critical to the success of our business as currently conducted. While we are devoting significant resources, time and attention to the development, potential regulatory approval and a successful commercial launch of telaprevir, all of these efforts involve significant scientific and execution risk and can be adversely affected by events, such as competitive activities, adverse trial results and regulatory actions, outside our direct control.

### HCV Polymerase Inhibitors

VCH-222 and VCH-759 are HCV polymerase inhibitors being developed by ViroChem. HCV polymerase inhibitors are direct-acting antivirals that inhibit the ability of the hepatitis C virus to replicate through a mechanism that is distinct from HCV protease inhibitors such as telaprevir. We are currently conducting a Phase 1 clinical trial of VCH-222 in patients with genotype 1 HCV infection, and we plan to begin clinical evaluation of novel combination regimens of telaprevir with VCH-222 and/or VCH-759 by the end of 2009.

VCH-222 and VCH-759 were evaluated by ViroChem in Phase 1 clinical trials. In a Phase 1 viral kinetic clinical trial involving five treatment-naïve patients with genotype 1 HCV, VCH-222 dosed at 750 mg twice daily resulted in a median 3.7 log10 decrease in HCV RNA—equivalent to a 5,000-fold reduction in virus in the blood—at the end of three days of dosing. The results were consistent from patient to patient, and across HCV genotype 1 subtypes. In clinical evaluations of VCH-222 to date, no serious adverse events have been observed. VCH-222 has completed 28-day non-clinical toxicology studies in two species. In the second quarter of 2009, we are initiating a multi-dose viral kinetic clinical trial to evaluate the antiviral activity, safety, tolerability and pharmacokinetics of VCH-222 in patients with chronic genotype 1 HCV infection. This clinical trial will evaluate the antiviral activity of VCH-222 dosed as monotherapy for three days in approximately 32 treatment-naïve patients.

### Cystic Fibrosis

In October 2008, we completed a Phase 2a clinical trial of VX-770 in 39 patients with CF with the G551D mutation. The G551D mutation, which is present in approximately 4% of the CF population in the United States, results in a gating defect where the defective cystic fibrosis transmembrane regulator, or CFTR, protein reaches the cell surface but does not efficiently transport chloride ions across the cell membrane. Patients in the Phase 2a clinical trial received VX-770 over 14-day and 28-day dosing periods. The primary endpoint for this clinical trial was safety, and no serious adverse events attributable to VX-770 were observed. Based on the promising lung function data from this Phase 2a clinical trial, as measured by improvements in FEV1, the lung function test most commonly used to monitor CF disease progression, and based also on observed changes in biomarkers that seek to measure the activity of the CFTR protein, we expect to begin a registration program for VX-770 that focuses on CF patients with the G551D mutation in the gene responsible for CF in the second quarter of 2009.

We have conducted Phase 1 clinical trials of VX-809 in healthy volunteers and an escalating single-dose pharmacokinetics and safety clinical trial of VX-809 in patients with CF who carry the F508del mutation on at least one of the patient's two *CFTR* genes, or alleles. In the first quarter of 2009, we initiated a Phase 2a clinical trial primarily designed to evaluate the safety and tolerability of multiple doses of VX-809 in patients with CF. In addition to assessing safety, the trial will evaluate the effect of VX-809 on measures of CFTR function. The trial is expected to enroll approximately 90 patients homozygous for the F508del mutation in the CFTR gene, the most common mutation in CF patients.

### Immune-mediated Inflammatory Disease

VX-509 is a novel oral JAK3 inhibitor that we believe has the potential to be used in multiple immune-mediated inflammatory disease, or IMID, indications. We have completed Phase 1 single and multiple, 14-day, dose-ranging clinical trials of VX-509. In both Phase 1 clinical trials and prior *in vitro* studies, VX-509 has shown selective inhibition of biomarkers of JAK3 activity, with limited inhibition of

JAK2 activity at targeted exposures. In addition to VX-509, Vertex has selected VX-467 as an additional drug candidate targeting JAK3 for further development. We may seek to license VX-509 and/or VX-467 to a corporate collaborator in order to fund and support other research and development investments.

#### Corporate Collaborations

Corporate collaborations have been and will continue to be an important component of our business strategy. Under our agreement with Janssen, we have retained exclusive commercial rights to telaprevir in North America, and we are leading the global clinical development program. Janssen agreed to be responsible for 50% of the drug development costs under the development program for telaprevir in North America and the Janssen territories, to pay us contingent milestone payments based on successful development, approval and launch of telaprevir, to be responsible for the commercialization of telaprevir outside of North America and the Far East and to pay us royalties on any sales of telaprevir in its territories. We also have a collaboration with Mitsubishi Tanabe with respect to the development of telaprevir in Japan and other countries in the Far East. Mitsubishi Tanabe has initiated registration trials of telaprevir in Japan focused on evaluation of 24-week telaprevir-based treatment regimens, including peg-IFN and RBV, in approximately 300 patients with genotype 1 HCV.

Our drug candidate pipeline also includes Aurora kinase inhibitors that are being investigated by Merck & Co., Inc. for oncology indications. In the second quarter of 2008, Merck initiated a Phase 1 clinical trial of MK-5108 (VX-689) alone and in combination with docetaxel in patients with advanced and/or refractory tumors. In the third quarter of 2008, Merck selected additional Aurora kinase inhibitors for potential development.

We will not have the resources for some time to develop and commercialize all drug candidates for which we have rights, and therefore we will need to rely on corporate collaborations for the development and commercialization of some or all of our new drug candidates. Historically, we have been successful in initiating and concluding productive collaborations, but we will need to continue to do so in the future, even though economic and competitive conditions may be different than in the past.

#### Acquisition of ViroChem Pharma Inc.

In March 2009, we acquired ViroChem, a privately-held Canadian biotechnology company, for $100.0 million in cash plus 10.7 million shares of our common stock. ViroChem was in the business of discovering and developing drug candidates for the treatment of HCV and HIV infection. VCH-222 and VCH-759, two HCV polymerase inhibitors, were ViroChem's two lead drug candidates, and we are planning on pursuing potential combination therapies for the treatment of HCV infection involving these drug candidates.

After acquiring ViroChem, we restructured its operations in order to focus ViroChem's research and development activities on drug candidates for the treatment of HCV infection. ViroChem currently has approximately 38 employees and leases a research facility in Laval, Canada. The expenses associated with continuing the research and development activities at our new research site in Canada are not expected to be significant in comparison to the costs and expenses related to our other ongoing research and development activities. We currently are evaluating ViroChem's non-HCV programs and may seek to license rights to ViroChem's other assets to a third-party collaborator.

#### Financing Strategy

At March 31, 2009, we had $869.2 million of cash, cash equivalents and marketable securities, which was an increase of $37.1 million from $832.1 million at December 31, 2008. This increase was the result of net proceeds of $313.3 million from the sale in February 2009 of 10,000,000 shares of our common stock. This cash inflow was partially offset by cash used to fund our operations during the first quarter of 2009 and the $100.0 million of cash used in our acquisition of ViroChem in March 2009.

We have incurred losses from our inception and expect to continue to incur losses at least until we obtain approval for and successfully commercialize a product, if we ever do. Therefore, we are dependent in large part on our continued ability to raise significant funding to finance our research and development operations, to create a commercial infrastructure, and to meet our overhead costs and long-term contractual commitments and obligations. To date, we have secured funds principally through capital market transactions, strategic collaborative agreements, proceeds from the disposition of assets, investment income and the issuance of common stock under our employee benefit plans.

We expect that we will need additional capital in order to complete the development and any commercialization of telaprevir while at the same time continuing the development of our other drug candidates, including VX-770. We may raise additional capital from public offerings or private placements of our securities or other methods of financing. We cannot be sure that any such financing opportunities will be available on acceptable terms, if at all. If adequate funds are not available on acceptable terms, or at all, we may be required to curtail significantly or discontinue one or more of our research, drug discovery or development programs, including clinical trials, incur significant cash exit costs, or attempt to obtain funds through arrangements with collaborators or others that may require that we relinquish rights to certain of our technologies or drug candidates.

As part of our strategy for managing our capital structure, we have from time to time adjusted the amount and maturity of our debt obligations through new issues, privately negotiated transactions and market purchases, depending on market conditions and our perceived needs at the time. We expect to continue pursuing a general financial strategy that may lead us to undertake one or more additional transactions with respect to our outstanding debt obligations, and the amounts involved in any such transactions, individually or in the aggregate, may be material. Any such transactions may or may not be similar to transactions in which we have engaged in the past.

### Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations is based upon our condensed consolidated financial statements prepared in accordance with generally accepted accounting principles in the United States. The preparation of these financial statements requires us to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reported periods. These items are monitored and analyzed by management for changes in facts and circumstances, and material changes in these estimates could occur in the future. Changes in estimates are reflected in reported results for the period in which they become known. We base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from our estimates if past experience or other assumptions do not turn out to be substantially accurate. There were no material changes during the three months ended March 31, 2009 to our critical accounting policies as reported in our Annual Report on Form 10-K for the year ended December 31, 2008, except:

#### Business Combinations

In March 2009, we acquired ViroChem Pharma Inc. for $100.0 million in cash and common stock with a fair market value of $290.6 million. Under Financial Accounting Standards Board ("FASB") Statement No. 141 (Revised 2007), "Business Combinations" ("SFAS 141(R)"), which became effective on January 1, 2009, we assign the value of the consideration transferred to acquire a business to the tangible assets and identifiable intangible assets acquired and liabilities assumed on the basis of their fair values at the date of acquisition. We assess the fair value of assets, including intangible assets such as in-process research and development, using a variety of methods including present-value models. The method used to estimate the fair value of in-process research and development projects requires the use of significant estimates and assumptions, including assumptions regarding the probability of completing in-process research and development projects, which would require obtaining regulatory approval for marketing of the associated drug candidate; estimates regarding the timing of and expected costs to complete in-process research and development projects; estimating future cash flows from potential product sales; and assumptions regarding appropriate discount rates. The difference between the purchase price and the fair value of assets acquired and liabilities assumed is allocated to goodwill.

For the purposes of the condensed consolidated balance sheets, we have made preliminary allocations of the purchase price for ViroChem to the net tangible assets and intangible assets, goodwill and the deferred tax liability. However, we are in the process of completing our valuations of certain intangible assets. The preliminary allocations recorded on our condensed consolidated balance sheets were $525.9 million of intangible assets and a $162.5 million deferred tax liability. The final allocations of the purchase price to intangible assets, goodwill and the deferred tax liability may differ materially from the information presented in these unaudited condensed consolidated financial statements.

The intangible assets are in-process research and development assets relating to the drug candidates that ViroChem was developing and in particular to ViroChem's HCV polymerase inhibitors VCH-222 and VCH-759, each of which is in Phase 1 clinical development. Initially, these assets are recorded at fair value and accounted for as indefinite-lived intangible assets in accordance with FASB Statement No. 142, "Goodwill and Other Intangible Assets," as amended by SFAS 141(R). These assets will be maintained on our condensed consolidated balance sheets until either the research and development project underlying them is completed or the assets become impaired. If a project is completed, the carrying value of the related intangible asset would be amortized over the remaining estimated life of the asset. If a project becomes impaired or is abandoned, the carrying value of the related intangible asset would be written down to its fair value and an impairment charge would be taken in the period in which the impairment occurs. In order to complete an acquired research and development project, the related drug candidate will need to be evaluated in later-stage clinical trials, which are subject to all of the risks and uncertainties associated with the development of pharmaceutical products. If the fair value of any of these drug candidates, and in particular VCH-222, becomes impaired as the result of unfavorable safety or efficacy data from any ongoing or future clinical trial or because of any other information regarding the prospects of successfully developing or commercializing the drug candidate, we could incur significant charges in the period in which the impairment occurs.

These intangible assets will be tested for impairment on an annual basis, or earlier if impairment indicators are present.

Post-acquisition research and development expenses related to the in-process research and development projects will be expensed as incurred.

### Results of Operations—Three Months Ended March 31, 2009 Compared with Three Months Ended March 31, 2008

*(in thousands)*

|  | Three Months Ended March 31, Increase/ (Decrease) $ 2009 | Increase/ (Decrease) % 2008 |  |  |
| --- | ---: | ---: | ---: | ---: |
| Revenues | $23,979 | $41,675 | $(17,696) | (42)% |
| Costs and expenses | 185,872 | 140,411 | 45,461 | 32% |
| Net interest income (expense) | (779) | 2,582 | (3,361) | (130)% |
| Net loss | $162,672 | $96,154 | $66,518 | 69% |

#### Net Loss

In the first quarter of 2009 as compared to the first quarter of 2008, our net loss increased by $66.5 million, or 69%. The increased net loss in the first quarter of 2009 as compared to the first quarter of 2008 was primarily the result of significantly higher expenses combined with lower revenues. The increased expenses included increased operating expenses related to the increased size of our workforce and to our late-stage clinical programs and increased expenses related to stock-based compensation expense, restructuring expense and acquisition-related expenses.

#### Net Loss per Share

Our net loss for the three months ended March 31, 2009 was $1.04 per basic and diluted common share compared to $0.72 per basic and diluted common share for the three months ended March 31, 2008. This increase in net loss per common share for the first quarter of 2009 compared to the first quarter of 2008 was the result of the increased net loss for the period in 2009 partially offset by an increase in the basic and diluted weighted-average number of common shares outstanding from 134.5 million to 155.9 million, due primarily to equity offerings in 2008 and February 2009.

#### Stock-based Compensation Expense, Restructuring Expense and Acquisition-related Expenses

The comparison of our costs and expenses in first quarter of 2009 and 2008 is affected by increases in our stock-based compensation expense and our restructuring expense as well as expenses related to specific events that occurred in the first quarter of 2009, including our acquisition of ViroChem in March 2009 and the CEO transition that began in February 2009. Our cost and expenses in the first quarter of 2009 and 2008 included the following stock-based compensation expense, restructuring expense and acquisition-related expenses:

*(in thousands)*

|  | Three Months Ended March 31, 2009 | 2008 |
| --- | ---: | ---: |
| Stock-based compensation expense | $22,277 | $13,072 |
| Restructuring expense | $2,402 | $630 |
| Acquisition-related expenses | $7,793 | $— |

33

### Revenues

*(in thousands)*

|  | Three Months Ended March 31, Increase/ (Decrease) $ 2009 | Increase/ (Decrease) % 2008 |  |  |
| --- | ---: | ---: | ---: | ---: |
| Royalty revenues | $6,140 | $10,851 | $(4,711) | (43)% |
| Collaborative and other research and development revenues | 17,839 | 30,824 | (12,985) | (42)% |
| Total revenues | $23,979 | $41,675 | $(17,696) | (42)% |

Our total revenues in recent periods have consisted primarily of collaborative and other research and development revenues. On a quarterly basis our collaborative and other research and development revenues have fluctuated significantly based on the timing of recognition of significant milestone payments and the level of reimbursement we have received for our development programs.

### Collaborative and Other Research and Development Revenues

The table presented below is a summary of revenues from collaborative arrangements for the three months ended March 31, 2009 and 2008:

*(in thousands)*

|  | Three Months Ended March 31, 2009 | 2008 |
| --- | ---: | ---: |
| Janssen | $17,135 | $25,528 |
| Other | 704 | 5,296 |
| Total collaborative and other research and development revenues | $17,839 | $30,824 |

Our revenues from the Janssen collaboration in each period consist of:

development milestone payments, if any, recognized in the period;

net reimbursements from Janssen for development costs of telaprevir; and

an amortized portion of the $165.0 million up-front payment.

The $8.4 million, or 33%, decrease in our revenues from Janssen in the first quarter of 2009 compared to the first quarter of 2008 was primarily the result of a decrease in milestone payments from our Janssen collaboration partially offset by an increase in net reimbursements from Janssen. In 2008, we recognized a $10.0 million milestone payment in the first quarter for which there was no corresponding milestone payment in 2009. The principal remaining milestones under our agreement with Janssen relate to filing for marketing authorization for telaprevir with the European Medicines Evaluation Agency and the launch of telaprevir in the European Union, and as a result we do not expect any milestone payments from Janssen during the remainder of 2009. The increased net reimbursements in the first quarter of 2009 compared to the first quarter of 2008 were the result of our higher reimbursable expenses related to the telaprevir registration program, partially offset by higher reimbursable expenses incurred by Janssen. During the remaining three quarters of 2009, we expect to continue to recognize revenue from net reimbursements from Janssen for telaprevir development costs and an amortized portion of the $165.0 million up-front payment.

Our revenues from our other collaborative arrangements significantly decreased in the three months ended March 31, 2009 compared to the three months ended March 31, 2008. Our ability to generate significant collaborative and research and development revenues from collaborators other than

Janssen in 2009 will be dependent on our ability to establish new collaborative relationships and/or expand existing collaborative relationships.

### Royalty Revenues

Our royalty revenues relate to sales of the HIV protease inhibitors Lexiva/Telzir and Agenerase by GlaxoSmithKline. Until May 30, 2008, these royalty revenues were based on actual and estimated worldwide net sales of Lexiva/Telzir and Agenerase. On May 30, 2008, we sold our right to receive future royalties from GlaxoSmithKline with respect to these HIV protease inhibitors, excluding the portion allocated to pay a subroyalty on these net sales to a third party, in return for a one-time cash payment of $160.0 million. We deferred the recognition of $155.1 million of revenues from this sale. We are recognizing these deferred revenues over the term of our agreement with GlaxoSmithKline under the units-of-revenue method. We will continue to recognize royalty revenues equal to the amount of the third-party subroyalty and an offsetting royalty expense for the third-party subroyalty payment.

The $4.7 million, or 43%, decrease in royalty revenues in the first quarter of 2009 compared to the first quarter of 2008 resulted from this sale of our future HIV royalties in the second quarter of 2008. In 2009, we expect that we will recognize as royalty revenues a portion of the remaining deferred revenues from the sale of our HIV royalty stream plus the full amount of the third-party subroyalty.

### Costs and Expenses

*(in thousands)*

|  | Three Months Ended March 31, Increase/ (Decrease) $ 2009 | Increase/ (Decrease) % 2008 |  |  |
| --- | ---: | ---: | ---: | ---: |
| Royalty expenses | $3,576 | $3,576 | $0 | 0% |
| Research and development expenses | 143,581 | 116,273 | 27,308 | 23% |
| Sales, general and administrative expenses | 28,520 | 19,932 | 8,588 | 43% |
| Restructuring expense | 2,402 | 630 | 1,772 | 281% |
| Acquisition-related expenses | 7,793 | — | 7,793 | n/a |
| Total costs and expenses | $185,872 | $140,411 | $45,461 | 32% |

Our costs and expenses primarily relate to our research and development expenses and our sales, general and administrative expenses. As we have increased our employee base, particularly in our development and commercialization organizations, these expenses have generally increased during recent periods. Our research and development expenses fluctuate on a quarterly basis due to the timing of expenses relating to our clinical trials, and in particular our clinical trials of telaprevir. In addition, in the first quarter of 2009, we experienced significant increases in our stock-based compensation expense and our restructuring expense and incurred $7.8 million in expenses relating to our acquisition of ViroChem. All of these factors combined to cause the significant increase in our total costs and expenses in the first quarter of 2009 as compared to the first quarter of 2008.

### Research and Development Expenses

*(in thousands)*

|  | Three Months Ended March 31, Increase/ (Decrease) $ 2009 | Increase/ (Decrease) % 2008 |  |  |
| --- | ---: | ---: | ---: | ---: |
| Research expenses | $41,903 | $39,853 | $2,050 | 5% |
| Development expenses | 101,678 | 76,420 | 25,258 | 33% |
| Total research and development expenses | $143,581 | $116,273 | $27,308 | 23% |

35

The significant increase in our total research and development expenses in the three months ended March 31, 2009 compared to the three months ended March 31, 2008 was primarily the result of increased development expenses to support telaprevir's registration program and potential commercialization.

#### Research Expenses

*(in thousands)*

| Research Expenses: | Three Months Ended March 31, Increase/ (Decrease) $ 2009 | Increase/ (Decrease) % 2008 |  |  |
| --- | ---: | ---: | ---: | ---: |
| Salary and benefits | $14,543 | $13,249 | $1,294 | 10% |
| Stock-based compensation expense | 6,353 | 4,586 | 1,767 | 39% |
| Laboratory supplies and other direct expenses | 6,643 | 6,279 | 364 | 6% |
| Contractual services | 974 | 2,132 | (1,158) | (54)% |
| Infrastructure costs | 13,390 | 13,607 | (217) | (2)% |
| Total research expenses | $41,903 | $39,853 | $2,050 | 5% |

The $2.1 million increase in total research expenses in the three months ended March 31, 2009 compared to the same period in 2008 was primarily related to increased expenses relating to our workforce partially offset by decreased contractual services expenses.

#### Development Expenses

*(in thousands)*

| Development Expenses: | Three Months Ended March 31, Increase/ (Decrease) $ 2009 | Increase/ (Decrease) % 2008 |  |  |
| --- | ---: | ---: | ---: | ---: |
| Salary and benefits | $22,676 | $17,271 | $5,405 | 31% |
| Stock-based compensation expense | 10,999 | 6,124 | 4,875 | 80% |
| Laboratory supplies and other direct expenses | 6,935 | 7,692 | (757) | (10)% |
| Contractual services | 34,685 | 24,810 | 9,875 | 40% |
| Commercial supply investment in telaprevir | 6,663 | 4,311 | 2,352 | 55% |
| Infrastructure costs | 19,720 | 16,212 | 3,508 | 22% |
| Total development expenses | $101,678 | $76,420 | $25,258 | 33% |

Our development expenses increased by $25.3 million, or 33%, in the first quarter of 2009 as compared to the first quarter of 2008. This increase in our development expenses was primarily the result of increased expenses related to our workforce and increased contractual services expenses. The increased contractual services expenses were attributable to increased clinical development activities related to the Phase 3 clinical trials of telaprevir. The number of employees in our development group increased by approximately 22% from the first quarter of 2008 to the first quarter of 2009.

To date, we have incurred in excess of $2.9 billion in research and development expenses associated with drug discovery and development. The successful development of our drug candidates is highly uncertain and subject to a number of risks. In addition, the duration of clinical trials may vary substantially according to the type, complexity and novelty of the drug candidate. The FDA and comparable agencies in foreign countries impose substantial requirements on the introduction of therapeutic pharmaceutical products, typically requiring lengthy and detailed laboratory and clinical testing procedures, sampling activities and other costly and time-consuming procedures. Data obtained from nonclinical and clinical activities at any step in the testing process may be adverse and lead to discontinuation or redirection of development activity. Data obtained from these activities also are susceptible to varying interpretations, which could delay, limit or prevent regulatory approval. The duration and cost of discovery, nonclinical studies and clinical trials may vary significantly over the life of a project and are difficult to predict. Therefore, accurate and meaningful estimates of the ultimate costs to bring our drug candidates to market are not available. The most significant costs associated with drug discovery and development are those costs associated with Phase 2 and Phase 3 clinical trials. Given the uncertainties related to development, we currently are unable to reliably estimate when, if ever, our drug candidates will generate revenues and net cash inflows.

### Sales, General and Administrative Expenses

*(in thousands)*

|  | Three Months Ended March 31, Increase/ (Decrease) $ 2009 | Increase/ (Decrease) % 2008 |  |  |
| --- | ---: | ---: | ---: | ---: |
| Sales, general and administrative expenses | $28,520 | $19,932 | $8,588 | 43% |

The increase in sales, general and administrative expenses in the three months ended March 31, 2009 compared to the same period in 2008 is the result of increased headcount as we advance our drug candidates, particularly telaprevir, into late-stage development. In the first quarter of 2009 and 2008, our sales, general and administrative expenses included $4.9 million and $2.4 million, respectively, of stock-based compensation expense.

### Royalty Expenses

Royalty expenses remained consistent in the first quarter of 2009 as compared to the first quarter of 2008. Royalty expenses primarily relate to a subroyalty payable to a third party on net sales of Lexiva/Telzir and Agenerase. The subroyalty results in both a royalty expense and corresponding royalty revenues. We expect to continue to recognize this subroyalty as an expense in future periods.

### Restructuring Expense

We recorded restructuring expense of $2.4 million for the three months ended March 31, 2009 compared to $0.6 million for the three months ended March 31, 2008. The restructuring expense in all periods included imputed interest cost related to the restructuring liability associated with our Kendall Square lease. The increase in restructuring expense for the three months ended March 31, 2009 compared to the three months ended March 31, 2008 was primarily the result of a revision, in the first quarter of 2009, of certain key estimates and assumptions about facility operating costs for the remaining period of the lease commitment, for which there was no corresponding revision in the three months ended March 31, 2008. The lease restructuring liability was $34.8 million as of March 31, 2009.

We review our estimates and assumptions with respect to the Kendall Square lease at least on a quarterly basis, and will make whatever modifications we believe are necessary to reflect any changed circumstances, based on our best judgment, until the termination of the lease. Our estimates have changed in the past, and may change in the future, resulting in additional adjustments to the estimate of the liability, and the effect of any such adjustments could be material.

### Acquisition-related Expenses

We incurred $7.8 million of expenses in the first quarter of 2009 in connection with our acquisition of ViroChem, including $5.7 million in transaction expenses and $2.1 million related to a restructuring of ViroChem's operations that we undertook in March 2009 in order to focus ViroChem's activities on its HCV assets. We did not have corresponding acquisition-related expenses in the first quarter of 2008.

### Non-operating Items

Interest income decreased by $1.9 million, or 42%, to $2.6 million for the three months ended March 31, 2009 from $4.5 million for the three months ended March 31, 2008. The decrease was a result of lower portfolio yields during the 2009 period as compared to the 2008 period. Our cash, cash equivalents and marketable securities yielded approximately 1% on an annual basis in the first quarter of 2009 compared to approximately 4% on an annual basis in the first quarter of 2008.

Interest expense increased by $1.5 million, or 76%, to $3.4 million for the three months ended March 31, 2009 from $1.9 million for the three months ended March 31, 2008. This increase was a result of the issuance of $287.5 million in aggregate principal amount of our convertible senior subordinated notes due February 2013, or 2013 Notes, in February 2008.

### Liquidity and Capital Resources

We have incurred operating losses since our inception and have financed our operations principally through public and private offerings of our equity and debt securities, strategic collaborative agreements that include research and/or development funding, development milestones and royalties on the sales of products, strategic sales of assets or businesses, investment income and proceeds from the issuance of common stock under our employee benefit plans. We expect that we will require additional capital in order to commercialize telaprevir and continue our planned activities in other areas.

At March 31, 2009, we had cash, cash equivalents and marketable securities of $869.2 million, which was an increase of $37.1 million from $832.1 million at December 31, 2008. The increase was primarily a result of the $313.3 million of net proceeds from the offering of common stock that we completed in February 2009. In addition, we received payments from our collaborators and $5.4 million from the issuance of common stock under our employee benefits plans. These cash inflows were largely offset by cash expenditures we made in the first quarter of 2009 related to, among other things, $100.0 million in cash that we paid for ViroChem, research and development expenses and sales, general and administrative expenses and the timing of payments to our vendors. Capital expenditures for property and equipment during the first quarter of 2009 were $6.6 million.

At March 31, 2009, we had outstanding $287.5 million in aggregate principal amount of our 2013 Notes. The 2013 Notes bear interest at the rate of 4.75% per annum, and we are required to make semi-annual interest payments on the outstanding principal balance of the 2013 Notes on February 15 and August 15 of each year. The 2013 Notes will mature on February 15, 2013. The 2013 Notes are convertible, at the option of the holder, into our common stock at a price equal to approximately $23.14 per share, subject to adjustment. On or after February 15, 2010, we may redeem the 2013 Notes at our option, in whole or in part, at the redemption prices stated in the indenture related to the 2013 Notes, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

Our accrued restructuring expense of $34.8 million at March 31, 2009 relates to the portion of the facility that we lease in Kendall Square that we do not intend to occupy and includes other related lease obligations, recorded at net present value. In the first quarter 2009, we made cash payments of $3.8 million against the accrued expense and received $2.1 million in sublease rental payments. During the remaining three quarters of 2009, we expect to make additional cash payments of $11.4 million against the accrued expense and receive $6.4 million in sublease rental payments.

We expect to continue to make significant investments in our development pipeline, particularly in clinical trials of telaprevir, in our effort to prepare for potential registration, regulatory approval and commercial launch of telaprevir, and in clinical trials for our other drug candidates, including VX-770. We also expect to maintain our substantial investment in research. As a result, we expect to incur future losses on a quarterly and annual basis. The adequacy of our available funds to meet our future operating and capital requirements will depend on many factors, including the number, breadth and prospects of our discovery and development programs, the costs and timing of obtaining regulatory approvals for any of our drug candidates and our decisions regarding manufacturing and commercial investments.

We believe that our current cash, cash equivalents and marketable securities, in addition to amounts we expect to receive from our collaborators under existing contractual obligations, will be sufficient to fund our operations for at least the next twelve months. We expect that we will need additional capital in order to complete the development and commercialization of telaprevir and to continue the development of our other drug candidates, including VX-770. We may raise additional capital through public offerings or private placements of our securities, securing new collaborative agreements, or other methods of financing. Any such capital transactions may or may not be similar to transactions in which we have engaged in the past. We also will continue to manage our capital structure and consider all financing opportunities, whenever they may occur, that could strengthen our long-term liquidity profile. There can be no assurance that any such financing opportunities will be available on acceptable terms, if at all. If adequate funds are not available, we may be required to curtail significantly or discontinue one or more of our research, drug discovery or development programs or attempt to obtain funds through arrangements that may require us to relinquish rights to certain of our technologies or drug candidates.

### Contractual Commitments and Obligations

Our commitments and obligations were reported in our Annual Report on Form 10-K for the year ended December 31, 2008, which was filed with the Securities and Exchange Commission, or SEC, on February 17, 2009. There have been no material changes from the contractual commitments and obligations previously disclosed in that Annual Report on Form 10-K.

### Recent Accounting Pronouncements

In April 2009, the FASB issued three FASB Staff Positions ("FSP"s) that are intended to provide additional application guidance and enhance disclosures about fair value measurements and impairments of securities. FSP No. FAS 157-4, "Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly," clarifies the objective and method of fair value measurement even when there has been a significant decrease in market activity for the asset being measured. FSP No. FAS 115-2 and FAS 124-2, "Recognition and Presentation of Other-Than-Temporary Impairments," establishes a new model for measuring other-than-temporary impairments for debt securities, including establishing criteria for when to recognize a write-down through earnings instead of other comprehensive income. FSP No. FAS 107-1 and APB 28-1, "Interim Disclosures about Fair Value of Financial Instruments," expands the fair value disclosures required for all financial instruments within the scope of FASB Statement No. 107, "Disclosures about Fair Value of Financial Instruments," to interim periods. All of these FSPs are effective for us beginning on April 1, 2009. We are evaluating the effect of FSP No. FAS 157-4 and FSP No. FAS 115-2 and FAS 124-2 on our condensed consolidated financial statements. FSP No. FAS 107-1 and APB 28-1 is expected to result in increased disclosures in future interim periods.

In April 2009, the FASB issued FSP No. FAS 141(R)-1, "Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies," which amends SFAS No. 141(R) by establishing a model to account for certain pre-acquisition contingencies. In November 2008, the FASB ratified Emerging Issues Task Force ("EITF") Issue No. 08-7, "Accounting for Defensive Intangible Assets" ("EITF 08-7"). EITF 08-7 applies to defensive intangible assets, which are acquired intangible assets that the acquirer does not intend to actively use but intends to hold to prevent its competitors from obtaining access to them. FSP No. FAS 141(R)-1 and EITF 08-7 became effective on January 1, 2009. The implementation of FSP No. FAS 141 (R)-1 and EITF 08-7 did not have an effect on our condensed consolidated financial statements.

In June 2008, the FASB ratified the consensus reached on EITF Issue No. 07-5, "Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity's Own Stock" ("EITF 07-5"). EITF 07-5 clarifies the determination of whether an instrument (or an embedded feature) is indexed to an entity's own stock, which would qualify as an exception under FASB Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities." EITF 07-5 became effective for us on January 1, 2009. The implementation of EITF 07-5 did not have an effect on our condensed consolidated financial statements.

In December 2007, the FASB ratified the consensus reached by the EITF on EITF Issue No. 07-1, "Accounting for Collaborative Arrangements" ("EITF 07-1"). EITF 07-1 requires collaborators to present the results of activities for which they act as the principal on a gross basis and report any payments received from (made to) other collaborators based on other applicable GAAP or, in the absence of other applicable GAAP, based on analogy to authoritative accounting literature or a reasonable, rational, and consistently applied accounting policy election. Further, EITF 07-1 clarified the determination of whether transactions within a collaborative arrangement are part of a vendor customer (or analogous) relationship subject to EITF Issue No. 01-9, "Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor's Products)." EITF 07-1 became effective for us on January 1, 2009. The implementation of EITF 07-1 did not have a material effect on our condensed consolidated financial statements.

## Market risk

As filed, 1,209 characters.

As part of our investment portfolio, we own financial instruments that are sensitive to market risks. The investment portfolio is used to preserve our capital until it is required to fund operations, including our research and development activities. None of these market risk-sensitive instruments are held for trading purposes. We do not have derivative financial instruments in our investment portfolio.

### Interest Rate Risk

We invest our cash in a variety of financial instruments, principally securities issued by the United States government and its agencies, investment grade corporate bonds and notes and money market instruments. These investments are denominated in United States dollars. All of our interest-bearing securities are subject to interest rate risk, and could decline in value if interest rates fluctuate. Substantially all of our investment portfolio consists of marketable securities with active secondary or resale markets to help ensure portfolio liquidity, and we have implemented guidelines limiting the term-to-maturity of our investment instruments. Due to the conservative nature of these instruments, we do not believe that we have a material exposure to interest rate risk.

## Controls and procedures

As filed, 2,303 characters.

### Evaluation of Disclosure Controls and Procedures

Our chief executive officer and chief financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Quarterly Report on Form 10-Q, have concluded that, based on such evaluation, as of March 31, 2009 our disclosure controls and procedures were effective and designed to provide reasonable assurance that the information required to be disclosed is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. In designing and evaluating our disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

### Changes in Internal Controls Over Financial Reporting

We completed the acquisition of ViroChem on March 12, 2009 at which time ViroChem became a subsidiary of Vertex. The accounting for the acquisition of ViroChem is material to our financial position as of March 31, 2009, and we believe that the internal controls and procedures related to the accounting for the acquisition of ViroChem have a material effect on our internal control over financial reporting. See Note 9, "Acquisition of ViroChem Pharma Inc.," to our unaudited condensed consolidated financial statements contained in this Quarterly Report for further details on the transaction.

We have expanded our Section 404 compliance program under the Sarbanes-Oxley Act of 2002 and the applicable rules and regulations under this act to include accounting for the acquisition of ViroChem. Except for the acquisition of ViroChem, no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended) occurred during the first quarter of 2009 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 7,789 characters.

Information regarding risk factors appears in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2008, which was filed with the SEC on February 17, 2009. There have been no material changes from the risk factors previously disclosed in that Annual Report on Form 10-K, except:

**WE MAY NOT BE SUCCESSFUL IN DEVELOPING ANY OF THE DRUG CANDIDATES WE RECENTLY ACQUIRED IN THE VIROCHEM TRANSACTION AND, AS A RESULT, WE MAY NOT REALIZE ANY BENEFITS FROM THIS ACQUISITION AND COULD BE SUBJECT TO SIGNIFICANT IMPAIRMENT CHARGES IN FUTURE PERIODS.**

In March 2009, we acquired ViroChem for $100.0 million in cash and 10.7 million shares of our common stock. We acquired ViroChem primarily in order to acquire rights to two HCV polymerase inhibitors, VCH-222 and VCH-759, as part of our strategy to pursue drug candidates that could potentially be developed in combination with telaprevir or our earlier-stage protease inhibitors. VCH-222 and VCH-759 are still in Phase 1 clinical development and have only been evaluated in preclinical studies and in a limited number of patients with HCV. While we believe the data from the clinical trials to date, together with studies in animal models and *in vitro* data, support the development of combination therapies, there are numerous reasons why we may not be able to successfully develop a combination involving either VCH-222 or VCH-759, including:

data from trials involving drug candidates separately may not be predictive of results involving drug candidates dosed in combination, including as a result of unforeseen drug interactions; and

positive results in small clinical trials and preclinical studies may not be predictive of results in clinical trials involving large numbers of patients.

There can be no assurance that we will be able to successfully develop either VCH-222 or VCH-759 in combination with telaprevir or our other HCV protease inhibitors, or at all, and if we are not successful in developing VCH-222 or VCH-759, we may not realize any benefits from our recently completed acquisition.

We allocated $525.9 million to intangible assets related to the in-process research and development associated with the ViroChem drug candidates. If the value of these drug candidates becomes impaired, we may incur significant impairment charges, including potentially the entire amount of the intangible assets reflected on our condensed consolidated balance sheets associated with the drug candidate, in the period in which the impairment becomes known. An impairment could result from, among other things, unfavorable safety or efficacy results from clinical trials or non-clinical studies or competitive factors affecting the potential market for the drug candidate. If we incur a significant impairment charge in a future period related to the intangible assets acquired in the ViroChem transaction, the value of our common stock could decrease.

### SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q and, in particular, our Management's Discussion and Analysis of Financial Condition and Results of Operations set forth in Part I—Item 2, contain or incorporate a number of forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding:

our expectations regarding clinical trials, development timelines and regulatory authority filings for telaprevir, VX-770, VX-809, VCH-222 and other drug candidates under development by us and our collaborators including our intention to file an NDA for telaprevir in the United States in the second half of 2010;

our expectations regarding the number of patients that will be evaluated, the trial design that will be utilized, and the expected date by which SVR data, interim data and/or final data will be available and/or publicly announced for our ADVANCE, REALIZE and ILLUMINATE trials, the other ongoing or planned clinical trials of telaprevir, the registration program for VX-770, the Phase 2a clinical trials of VX-809, the Phase 1 clinical trial of VCH-222, and the clinical trials being conducted by our collaborators of drug candidates for the treatment of cancer;

expectations regarding the amount of, timing of and trends with respect to our revenues and costs and expenses;

the data that will be generated by ongoing and planned clinical trials, and the ability to use that data for the design and initiation of further clinical trials and to support regulatory filings, including potentially applications for marketing approval for telaprevir and VX-770;

our ability to potentially register telaprevir for marketing across a range of genotypes and patient populations;

our intention to begin the registration program for VX-770 in the second quarter of 2009;

our plan to begin clinical evaluation of novel combination regimens of telaprevir with VCH-222 and/or VCH-759 by the end of 2009;

our expectations regarding the future market demand and medical need for telaprevir and our other drug candidates;

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 of those drug candidates;

our ability to successfully market telaprevir and VX-770 if we are able to obtain regulatory approval;

the focus of our drug development efforts and our financial and management resources and our plan to invest significant resources in telaprevir and our other drug candidates;

the establishment, development and maintenance of collaborative relationships;

potential business development activities, including with respect to our JAK3 program;

our ability to use our research programs to identify and develop new drug candidates to address serious diseases and significant unmet medical needs;

our estimates regarding obligations associated with a lease of a facility in Kendall Square, Cambridge, Massachusetts; and

our liquidity and our expectations regarding our needs for and ability to raise additional capital.

Without limiting the foregoing, the words "believes," "anticipates," "plans," "intends," "expects" and similar expressions are intended to identify forward-looking statements. Any or all of our forward-looking statements in this Quarterly Report on Form 10-Q may turn out to be wrong. They can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties. Many factors mentioned in our discussion in this Quarterly Report on Form 10-Q will be important in determining future results. Consequently, no forward- looking statement can be guaranteed. Actual future results may vary materially from expected results. We also provide a cautionary discussion of risks and uncertainties under "Risk Factors" in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2008, which was filed with the SEC on February 17, 2009, and updated and supplemented by "Part II—Item 1A—Risk Factors" of this Quarterly Report on Form 10-Q. These are factors that we think could cause our actual results to differ materially from expected results. Other factors besides those listed could also adversely affect us. In addition, the forward-looking statements contained herein represent our estimate only as of the date of this filing and should not be relied upon as representing our estimate as of any subsequent date. While we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so to reflect actual results, changes in assumptions or changes in other factors affecting such forward-looking statements.

Filed May 11, 2009.
Source: SEC EDGAR, the filing index for accession 0001047469-09-005373. Last ingested by Listed: Nov 6, 2026, 12:56 ET. No prices; not investment advice.