# Vertex Pharmaceuticals Inc / Ma: Form 10-Q for the period ended Mar 31, 2012

- Company: [Vertex Pharmaceuticals Inc / Ma](/companies/vrtx.md) (CIK 875320)
- Form: 10-Q
- Filed: 2012-05-10
- Accepted by EDGAR: May 10, 2012, 20:17 ET
- Period: 2012-03-31
- Accession: 0001047469-12-005755
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/875320/000104746912005755/a2209148z10-q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/875320/000104746912005755/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2012-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2012-01-01 to 2012-03-31 | $438.7m | us-gaap:Revenues |
| Cost of revenue | 3 months, 2012-01-01 to 2012-03-31 | $25.9m | us-gaap:CostOfGoodsSold |
| Research and development | 3 months, 2012-01-01 to 2012-03-31 | $196.4m | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months, 2012-01-01 to 2012-03-31 | $111.1m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2012-01-01 to 2012-03-31 | $91.6m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2012-01-01 to 2012-03-31 | $4.1m | us-gaap:InterestExpense |
| Income tax | 3 months, 2012-01-01 to 2012-03-31 | $32.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2012-01-01 to 2012-03-31 | $91.6m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2012-01-01 to 2012-03-31 | $0.43 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2012-01-01 to 2012-03-31 | $0.44 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2012-01-01 to 2012-03-31 | 219,264,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Capital expenditure | 3 months, 2012-01-01 to 2012-03-31 | $6.2m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2012-03-31 | $267.9m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2012-03-31 | $1.44bn | us-gaap:AssetsCurrent |
| Total assets | at 2012-03-31 | $2.35bn | us-gaap:Assets |
| Current liabilities | at 2012-03-31 | $356.8m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2012-03-31 | $1.24bn | us-gaap:Liabilities |
| Shareholders' equity | at 2012-03-31 | $930.5m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 45,947 characters.

### Overview

We are in the business of discovering, developing, manufacturing and commercializing small molecule drugs for the treatment of serious diseases. Our two products are INCIVEK™ (telaprevir), which is approved in the United States and Canada for the treatment of adults with genotype 1 hepatitis C virus, or HCV, infection, and KALYDECO™ (ivacaftor), which is approved in the United States for the treatment of patients six years of age or older with cystic fibrosis, or CF, who have a specific genetic mutation that is referred to as the G551D mutation. We began marketing INCIVEK in the United States in May 2011. Our collaborator, Janssen Pharmaceutica, N.V., or Janssen, began marketing telaprevir in its territories under the brand name INCIVO™ in the third quarter of 2011, and our collaborator, Mitsubishi Tanabe Pharma Corporation, or Mitsubishi Tanabe, began marketing telaprevir in Japan under the brand name TELAVIC™ in the fourth quarter of 2011. We began marketing KALYDECO in the United States in January 2012, and we expect to obtain approval to market ivacaftor in the European Union in the third quarter of 2012.

We began generating earnings as a cashflow positive company in the second half of 2011 after experiencing significant losses in preceding periods. In the first quarter of 2012, we had net income attributable to us of $91.6 million and recognized net product revenues on sales of INCIVEK and KALYDECO of $356.9 million and $18.4 million, respectively. In addition, we recognized royalty revenues of $32.9 million on sales of INCIVO by Janssen in the first quarter of 2012. In order to maintain profitability and continue our strategic investment in research and development activities, we will need to continue to generate significant revenues in future periods.

We have ongoing clinical programs involving drug candidates intended for the treatment of HCV infection, CF, rheumatoid arthritis, epilepsy and influenza. Our HCV clinical programs are focused on developing all-oral, interferon-free combinations of HCV drugs and drug candidates that have the potential to further improve treatment options available to patients with HCV infection. In our CF program, we are investigating the use of ivacaftor as a monotherapy in additional populations of patients with CF and combinations of ivacaftor and our other CF drug candidates, with the goal of expanding the group of patients with CF who can benefit from our medicines. We believe that our longer-term success will depend on our ability to continue to generate and develop innovative compounds for the treatment of serious diseases. As a result, we expect to continue investing in research programs directed toward the identification of new drug candidates and to develop and commercialize selected drug candidates that emerge from those programs, alone or with third-party collaborators.

#### Commercialization and Competition

We believe that by focusing on serious diseases and innovative drugs that have the potential to provide significant advantages over existing therapies, we can increase the likelihood that our drug candidates, if approved, will be commercially successful. Our marketing efforts in the United States have focused on establishing an effective sales force and managed markets organization to promote our products to health care providers and payors; implementing appropriate marketing, distribution and pricing strategies; and maintaining appropriate and sustained levels of inventory.

We believe that initial sales of INCIVEK have confirmed its commercially competitive profile, and to date a significant group of patients with genotype 1 HCV infection have sought treatment with an INCIVEK-based treatment regimen. We and Janssen are competing with Merck & Co., Inc.'s VICTRELIS™ (boceprevir), another HCV protease inhibitor that was approved for sale in the United States and Europe in 2011. We believe that sales of INCIVEK are subject to some seasonal fluctuations as, for example, we believe that fewer patients started treatment with INCIVEK in December 2011 than during the preceding and following periods. Sales of drugs that obtain initial market acceptance may decline for a variety of reasons, including increased competition from currently approved competitive drugs, the introduction of new competitive drugs, adverse information regarding the safety characteristics or efficacy of the drug, significant new information regarding potential future treatment regimens that are being evaluated in clinical trials or enrollment by patients with genotype 1 HCV infection in clinical trials being conducted by us or our competitors.

We, along with a number of competitors, are pursuing development programs involving all-oral combinations of HCV drugs and drug candidates with the goal of developing improved treatment regimens for HCV infection that could render the current treatments, which include the administration of pegylated-interferon, or peg-IFN, by injection, noncompetive. In particular, each of Abbott Laboratories, Bristol-Myers Squibb Company and Gilead Sciences, Inc. is actively pursuing development of all-oral combination treatment regimens to treat HCV infection. To date, potential all-oral treatment regimens have been evaluated in Phase 2 clinical trials involving relatively small numbers of patients. However, we expect that one or more companies may begin registration programs evaluating potential all-oral combination regimens for the treatment of genotype 1 HCV infection in 2012. While the development and regulatory timelines for these drug candidates are highly subjective and subject to change, we believe that substantial additional clinical data regarding these drug candidates and potential all-oral treatment regimens will become available in 2012 and 2013 and that one or more all-oral treatment regimens could enter the market as early as 2014 or 2015.

KALYDECO (ivacaftor) is a treatment for patients with CF six years of age or older who have a specific genetic mutation that is referred to as the G551D mutation. As with other marketed therapies for orphan diseases such as CF, we believe that we will be able to obtain adequate reimbursement for KALYDECO in the United States. In addition, we are focused on obtaining approval and adequate reimbursement for ivacaftor in Europe and plan to seek approval for ivacaftor in a number of other countries, including Canada and Australia. As of April 2012, we believe that approximately 600 patients have started treatment with KALYDECO. We are planning to conduct three clinical trials to evaluate KALYDECO as a monotherapy in additional patient populations, including patients with other mutations in the cystic fibrosis transmembrane conductance regulator, or *CFTR,* gene and patients younger than six years of age. These clinical trials are subject to many of the same risks and uncertainties as the clinical trials for our drug candidates. Even if these clinical trials are successful, we do not expect we would obtain approval for the use of KALYDECO in additional populations until 2013 or later.

In addition to the factors described above, approved drugs continue to be subject to, among other things, numerous regulatory risks, post-approval safety monitoring and risks related to supply chain disruptions. As a result, it is difficult to predict future revenues that will be generated from sales by us of INCIVEK and KALYDECO and by Janssen of INCIVO.

#### Drug Development

Discovery and development of a new pharmaceutical product is a difficult and lengthy process that requires significant financial resources along with extensive technical and regulatory expertise and can take 10 to 15 years or more. Potential drug candidates are subjected to rigorous evaluations, 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. Most chemical compounds that are investigated as potential drug candidates never progress into development, and most drug candidates that do advance into development never receive marketing approval. We cannot predict whether or not we will encounter problems with any of our completed, ongoing or planned clinical trials that could cause us or regulatory authorities to delay or suspend the clinical trial. Because our investments in drug candidates are subject to considerable risks, we closely monitor the results of our discovery research, clinical trials and nonclinical studies, and frequently evaluate our drug development programs 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 we gain additional understanding of our ongoing programs and potential new programs as well as those of our competitors.

If we believe the data from a completed registration program support approval of a drug candidate, we submit a New Drug Application, or NDA, to the United States Food and Drug Administration, or FDA, requesting approval to market the drug candidate in the United States. We also may seek analogous approvals from comparable regulatory authorities in foreign jurisdictions, such as a Marketing Authorization Application in the European Union. To obtain approval, we must, among other things, demonstrate with evidence gathered in nonclinical studies and well-controlled clinical trials that the drug candidate is safe and effective for the disease it is intended to treat and that the manufacturing facilities, processes and controls for the manufacture of the drug candidate are adequate. The FDA and foreign regulatory authorities have substantial discretion in deciding whether or not a drug candidate should be granted approval based on the benefits and risks of the drug candidate in the treatment of a particular disease, and could delay, limit or deny regulatory approval. If regulatory delays are significant or regulatory approval is limited or denied altogether, our financial results and the commercial prospects for the drug candidate involved will be harmed.

#### Drug Supply

We require a supply of INCIVEK and KALYDECO for sale in North America and will require a supply of ivacaftor for international sales if we are successful in obtaining marketing approval outside the United States. We rely on an international network of third parties to manufacture and distribute our products and for supplies of compounds for clinical trials, and we expect that we will continue to rely on third parties to provide these manufacturing services for the foreseeable future. Third-party contract manufacturers, including some in China, supply us with raw materials, and contract manufacturers in the European Union and the United States convert these raw materials into drug substance and convert the drug substance into final dosage form. Establishing and managing this global supply chain requires a significant financial commitment and the creation and maintenance of numerous third-party relationships. Although we believe we effectively manage the business relationships with companies in our supply chain, we do not have complete control over their activities. Also, while we believe we can effectively forecast demand for INCIVEK, we have limited flexibility to adjust our supply in response to changes in demand, due to the significant lead times required to manufacture INCIVEK.

#### Regulatory Compliance

Our marketing of pharmaceutical products, which began in May 2011, is subject to extensive and complex laws and regulations. We have a corporate compliance program designed to promote a culture of compliance and to actively identify, prevent and mitigate risk. Among other laws, regulations and standards, we are subject to various U.S. federal and state laws and comparable foreign laws pertaining to health care fraud and abuse, including anti-kickback and false claims statutes, and laws prohibiting the promotion of drugs for unapproved, or off-label, uses. Anti-kickback laws make it illegal for a prescription drug manufacturer to solicit, offer, receive or pay any remuneration in exchange for, or to induce, the referral of business, including the purchase or prescription of a particular drug. False claims laws prohibit anyone from presenting for payment to third-party payors, including Medicare and Medicaid, claims for reimbursed drugs or services that are false or fraudulent, claims for items or services not provided as claimed or claims for medically unnecessary items or services. We expect to continue to devote substantial resources to maintain, administer and expand these compliance programs globally.

#### Recent Developments

### CF

#### Interim data from Phase 2 clinical trial of VX-809 in combination with KALYDECO

In May 2012, we disclosed information about an interim analysis of data from Part 2 of an ongoing Phase 2 clinical trial of VX-809 and KALYDECO. This part of the clinical trial enrolled 108 people with CF ages 18 and older with one (heterozygous) or two (homozygous) copies of the F508del mutation in the *CFTR* gene, who were divided into five treatment groups of approximately 20 patients each. Three groups of homozygous patients were randomized to receive VX-809 alone (200mg, 400mg or 600mg) for 28 days and then in combination with KALYDECO (250mg) for an additional 28 days. One group of heterozygous patients is receiving VX-809 alone (600mg) for 28 days and then in combination with KALYDECO (250mg) for an additional 28 days. The placebo group includes both homozygous and heterozygous patients. Nearly half of people with CF are estimated to have two copies of the F508del mutation in the *CFTR* gene.

We conducted the planned interim analysis after approximately half of the patients in Part 2 of this clinical trial had completed all 56 days of treatment. Pooled data from the 37 patients with CF who have two copies (homozygous) of the F508del mutation and who had completed all 56 days of treatment demonstrated a statistically significant improvement in lung function (absolute change in percent predicted FEV1) across the combined homozygous treatment groups relative to baseline compared to the 11 patients with one or two copies of the F508del mutation who received placebo (p=0.002). Of those who received VX-809 and KALYDECO, approximately 46 percent (17/37) experienced an absolute improvement from baseline to Day 56 in lung function of 5 percentage points or more, and approximately 30 percent (11/37) experienced an absolute improvement from baseline to Day 56 of 10 percentage points or more. Evaluation of the 21 patients with one copy (heterozygous) of the F508del mutation in the *CFTR* gene is ongoing, but at the time of the announced interim analysis, not enough heterozygous patients had completed the clinical trial to draw conclusions. None of the patients treated with placebo (0/11) achieved a 5-percentage point or more improvement from baseline to Day 56 in lung function. Most adverse events across all clinical trial arms were mild or moderate in severity and comparable between treatment and placebo groups.

Elevated sweat chloride levels are a diagnostic hallmark in CF and are the result of CFTR protein dysfunction. Although not a clinically validated endpoint, a reduction in sweat chloride is considered to be a biomarker of improved CFTR function in the skin. One of the two primary endpoints in Part 2 of this clinical trial is change in sweat chloride levels from Day 28 to Day 56. In the interim analysis, we observed reductions in sweat chloride levels between Day 28 and Day 56 in homozygous patients treated with VX-809 and KALYDECO. At the time of the interim analysis, these reductions were not statistically significant. A statistically significant reduction in sweat chloride levels was observed in patients treated with VX-809 alone (baseline to Day 28).

A co-primary endpoint in this clinical trial is safety. Safety results reported in connection with the interim analysis include data from all patients who had started treatment prior to the interim analysis. VX-809 generally was well-tolerated alone and in combination with KALYDECO. The most common adverse events were pulmonary in nature. Most adverse events were mild or moderate in severity and comparable between treatment and placebo groups. The rate of serious adverse events was similar between treatment and placebo groups.

This clinical trial is ongoing and we expect that complete data, including statistical analyses for all patient groups, will be available in mid-2012. We plan to start a pivotal clinical trial of VX-809 and KALYDECO in people with two copies of the F508del mutation, subject to the final results from this Phase 2 clinical trial and discussions with regulatory agencies. The complete data will be included in the final clinical trial analysis and will be used to determine next steps for the development of VX-809 and KALYDECO in heterozygous F508del patients as well as homozygous patients.

A clinical trial of VX-661, also a corrector compound, dosed in combination with KALYDECO, is ongoing, and we expect data from this clinical trial in the second half of 2012.

#### KALYDECO

In mid-2012, we plan to initiate pivotal clinical trials of KALYDECO in patients with CF who have at least one copy of the R117H mutation in the *CFTR* gene and in patients who have other gating mutations. The R117H mutation is present in approximately three percent of patients with CF in the United States and the other gating mutations are present in approximately one percent of patients with CF in the United States. Subject to final feedback from regulatory agencies, we also plan to initiate a pivotal clinical trial of KALYDECO in patients with CF as young as two years of age who have gating mutations.

### HCV

In February 2012, we announced interim data from two treatment arms of a Phase 2 clinical trial evaluating VX-222 in combination with INCIVEK and ribavirin in treatment-naïve patients with genotype 1 HCV infection. The interim data showed that HCV RNA levels were undetectable for 83 percent of patients in these treatment arms at week 12, and that 9 of the 11 patients who were eligible to stop all treatment at 12 weeks had undetectable HCV RNA levels four weeks after the end of all treatment. The three-drug treatment regimen was generally well-tolerated, with the majority of adverse events reported as mild.

We plan to initiate a Phase 2b clinical trial to evaluate combination regimens of INCIVEK, VX-222 and ribavirin in the second quarter of 2012. This clinical trial will enroll approximately 100 patients and will evaluate total treatment durations as short as 12 weeks in patients with genotype 1 HCV infection.

In March 2012, we announced interim data from a Phase 2 clinical trial evaluating the safety and tolerability of INCIVEK in combination with peg-IFN and ribavirin in patients co-infected with genotype 1 HCV infection and human immunodeficiency virus, or HIV. The interim data showed that 74 percent of patients who were treated with INCIVEK combination therapy had undetectable HCV RNA levels 12 weeks after the end of all treatment compared to 45 percent of patients who were treated with peg-IFN and ribavirin alone. We are enrolling patients co-infected with HCV and HIV in a Phase 3 clinical trial and expect that data from this Phase 3 clinical trial will be included in a submission for a supplemental approval of INCIVEK for use in this population.

In the second quarter of 2012, we expect to receive the first data from clinical trials evaluating seven-day viral kinetics of ALS-2158 and ALS-2200, the HCV nucleotide analogues we license from Alios BioPharma, Inc., or Alios. Depending on the results of these clinical trials, we plan to initiate Phase 2 clinical trials in the second half of 2012 to evaluate regimens of ALS-2158 or ALS-2200 with INCIVEK or VX-222 and with or without ribavirin, as well as other potential interferon-free combination regimens.

### Rheumatoid Arthritis

In May 2012, we plan to initiate a Phase 2b clinical trial evaluating once-daily and twice-daily doses of VX-509 over a six-month dosing period in patients with moderate to severe rheumatoid arthritis. We expect to enroll approximately 350 patients in this clinical trial. VX-509 will be evaluated in combination with methotrexate, a commonly prescribed disease-modifying antirheumatic drug that is frequently used in combination with other rheumatoid arthritis drugs.

### Influenza

We recently initiated a Phase 2 clinical trial of VX-787 that is expected to enroll approximately 140 healthy volunteers who will be infected with live influenza virus as part of this clinical trial. The primary efficacy endpoint is viral shedding. We expect to obtain data from this clinical trial in the second half of 2012.

### Results of Operations—Three Months Ended March 31, 2012 Compared with Three Months Ended March 31, 2011

*(in thousands)*

|  | Three Months Ended March 31, 2012 | 2011 | Increase/ (Decrease) $% | Increase/ (Decrease) |
| --- | ---: | ---: | ---: | ---: |
| Revenues | $438,737 | $73,662 | $365,075 | 496% |
| Operating costs and expenses | 347,088 | 233,561 | 113,527 | 49% |
| Other loss, net | 59 | 16,197 | (16,138) | (100)% |
| Net income (loss) attributable to Vertex | $91,590 | $(176,096) | n/a | n/a |

### Net Income (Loss) Attributable to Vertex

In the first quarter of 2012, we had net income attributable to Vertex of $91.6 million. Our increased revenues in the first quarter of 2012 as compared to 2011 were the result of $375.4 million of net product revenues and $32.9 million of royalty revenues on sales of INCIVO by Janssen for which there were no comparable revenues in the first quarter of 2011. The $113.5 million increase in operating costs and expenses in the first quarter of 2012 as compared to the first quarter of 2011 was attributable to a $37.8 million increase in research and development expenses and a $39.6 million increase in sales, general and administrative expenses, as well as a $25.9 million increase in cost of product revenues for which there were no comparable costs in the first quarter of 2011 and a $10.6 million increase in royalty expenses primarily related to the launch of INCIVO by Janssen. Our operating costs and expenses in the first quarters of 2012 and 2011 included $27.7 million and $27.9 million, respectively, of stock-based compensation expense.

### Net Income (Loss) Attributable to Vertex per Diluted Share

Our net income attributable to Vertex was $0.43 per diluted share in the first quarter of 2012 as compared to a net loss attributable to Vertex of $(0.87) per diluted share in the first quarter of 2011.

### Revenues

*(in thousands)*

|  | Three Months Ended March 31, 2012 | 2011 | Increase/ (Decrease) $% | Increase/ (Decrease) |
| --- | ---: | ---: | ---: | ---: |
| Product revenues, net | $375,375 | $— | $375,375 | n/a |
| Royalty revenues | 38,981 | 6,061 | 32,920 | 543% |
| Collaborative revenues | 24,381 | 67,601 | (43,220) | (64)% |
| Total revenues | $438,737 | $73,662 | $365,075 | 496% |

### Product Revenues, Net

*(in thousands)*

| Product revenues, net | Three Months Ended March 31, 2012 | 2011 |
| --- | ---: | ---: |
| INCIVEK | $356,927 | $— |
| KALYDECO | 18,448 | — |
| Total product revenues, net | $375,375 | $— |

36

We began recognizing net product revenues from sales of INCIVEK in the second quarter of 2011 and net product revenues from sales of KALYDECO in the first quarter of 2012. Our net revenues from sales of INCIVEK decreased by 22% in the first quarter of 2012 compared to the fourth quarter of 2011. The lower INCIVEK net revenues in the first quarter of 2012 compared to the fourth quarter of 2011 were affected by lower sales volumes, a reduction of approximately $22 million in wholesaler inventory during the first quarter of 2012 and an increase on a percentage basis in the discounts provided to third parties on sales of INCIVEK in the first quarter of 2012 as compared to the fourth quarter of 2011. On April 1, 2012, we increased the wholesale acquisition price of INCIVEK in the United States by seven percent.

KALYDECO net product revenues in the first quarter of 2012 represent sales during February 2012 and March 2012 following approval of KALYDECO by the FDA on January 31, 2012. We expect that KALYDECO net product revenues will increase in the second quarter of 2012 as compared to the first quarter of 2012.

### Royalty Revenues

Our royalty revenues increased in the first quarter of 2012 as compared to the first quarter of 2011 due to $32.9 million of royalty revenues recognized in the first quarter of 2012 from sales of INCIVO by Janssen for which there were no comparable revenues in the first quarter of 2011. Mitsubishi Tanabe has a fully-paid license to market telaprevir in Japan.

We recognized royalty revenues related to sales by GlaxoSmithKline plc of an HIV protease inhibitor that was discovered and developed pursuant to our collaboration with GlaxoSmithKline of $6.1 million in both the first quarter of 2012 and the first quarter of 2011. We sold our rights to these HIV royalties in 2008 for a one-time cash payment of $160.0 million.

### Collaborative Revenues

Our collaborative revenues have fluctuated significantly on an annual and quarterly basis. This variability has been due to, among other things: the achievement of significant milestone revenues in 2011; the April 2011 amendment to our collaboration agreement with the Cystic Fibrosis Foundation Therapeutics Incorporated, or CFFT, which began providing us additional research and development support in April 2011; and variable revenues we have received from services we provide to Janssen and Mitsubishi Tanabe through our third-party manufacturing network.

The table presented below is a summary of collaborative revenues for the three months ended March 31, 2012 and 2011:

*(in thousands)*

| Collaborative revenues: | Three Months Ended March 31, 2012 | 2011 |
| --- | ---: | ---: |
| Janssen | $6,417 | $56,116 |
| Mitsubishi Tanabe | 14,034 | 11,485 |
| CFFT | 3,930 | — |
| Total collaborative revenues | $24,381 | $67,601 |

Our collaborative revenues from Janssen decreased significantly in the first quarter of 2012 as compared to the first quarter of 2011 because we recognized $50.0 million in milestone revenues under our collaboration agreement with Janssen in the first quarter of 2011 for which there were no comparable milestone revenues in the first quarter of 2012. There are no future milestone payments that we expect to earn from Janssen pursuant to our collaboration agreement.

In each of the three months ended March 31, 2012 and 2011, we recognized $9.6 million of deferred revenues from Mitsubishi Tanabe related to a one-time payment of $105.0 million that we received in 2009. The final $3.2 million of deferred revenues related to this one-time payment will be recognized in the second quarter of 2012.

### Operating Costs and Expenses

*(in thousands)*

|  | Three Months Ended March 31, 2012 | 2011 | Increase/ (Decrease) $% | Increase/ (Decrease) |
| --- | ---: | ---: | ---: | ---: |
| Cost of product revenues | $25,918 | $— | $25,918 | n/a |
| Royalty expenses | 13,293 | 2,666 | 10,627 | 399% |
| Research and development expenses | 196,371 | 158,612 | 37,759 | 24% |
| Sales, general and administrative expenses | 111,146 | 71,523 | 39,623 | 55% |
| Restructuring expense | 360 | 760 | (400) | (53)% |
| Total costs and expenses | $347,088 | $233,561 | $113,527 | 49% |

### Cost of Product Revenues

Our cost of product revenues consists of the cost of producing inventories that corresponds to product revenues for the reporting period, plus the third-party royalties payable on our net sales of INCIVEK and KALYDECO. We expensed most of the manufacturing costs of INCIVEK and KALYDECO sold in the first quarter of 2012 as research and development expenses in prior periods. We expect our cost of product revenues to increase as a percentage of net sales in future periods.

### Royalty Expenses

Royalty expenses include third-party royalties payable upon net sales of telaprevir by our collaborators and royalty expenses related to a subroyalty payable to a third party on net sales of an HIV protease inhibitor sold by GlaxoSmithKline. Royalty expenses in the first quarter of 2012 increased compared to the first quarter of 2011 because of the third-party royalties payable on net sales of INCIVO by Janssen.

### Research and Development Expenses

*(in thousands)*

|  | Three Months Ended March 31, 2012 | 2011 | Increase $% | Increase |
| --- | ---: | ---: | ---: | ---: |
| Research expenses | $60,993 | $51,371 | $9,622 | 19% |
| Development expenses | 135,378 | 107,241 | 28,137 | 26% |
| Total research and development expenses | $196,371 | $158,612 | $37,759 | 24% |

Our research and development expenses include internal and external costs incurred for research and development of our drugs and drug candidates. We do not assign our internal costs, such as salary and benefits, stock-based compensation expense, laboratory supplies and infrastructure costs, to individual drugs or drug candidates, because the employees within our research and development groups typically are deployed across multiple research and development programs. These internal costs are significantly greater than our external costs, such as the costs of services provided to us by clinical research organizations and other outsourced research, which we do allocate by individual program. All research and development costs for our drugs and drug candidates are expensed as incurred.

To date, we have incurred in excess of $4.9 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 and the disease indication being targeted. 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 activities. 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.

In recent periods, costs related to telaprevir have represented the largest portion of our development costs. We expect to continue to incur development costs related to the conduct of additional clinical trials to support potential supplemental applications for telaprevir and ivacaftor. If our clinical trials of VX-222 are successful, we could submit an NDA for an all-oral regimen for the treatment of genotype 1 HCV infection as early as the end of 2014. Our other drug candidates are still in early and mid-stage clinical development and, as a result, any estimates regarding development and regulatory timelines for these drug candidates are highly subjective and subject to change. We cannot make a meaningful estimate when, if ever, these drug candidates, including those we in-licensed from Alios, will generate revenues and cash flows.

#### Research Expenses

*(in thousands)*

| Research Expenses: | Three Months Ended March 31, 2012 | 2011 | Increase/ (Decrease) $% | Increase/ (Decrease) |
| --- | ---: | ---: | ---: | ---: |
| Salary and benefits | $19,815 | $17,952 | $1,863 | 10% |
| Stock-based compensation expense | 6,236 | 6,255 | (19) | (0)% |
| Laboratory supplies and other direct expenses | 11,913 | 7,789 | 4,124 | 53% |
| Contractual services | 5,560 | 3,014 | 2,546 | 84% |
| Infrastructure costs | 17,469 | 16,361 | 1,108 | 7% |
| Total research expenses | $60,993 | $51,371 | $9,622 | 19% |

We have maintained a substantial investment in research activities with changes in various categories of expense resulting in a 19% increase in research expenses in the first quarter of 2012 as compared to the first quarter of 2011. Our research expenses increased in the first quarter of 2012 as compared to the first quarter of 2011 principally because of increased costs of laboratory supplies and other direct expenses and increased contractual services costs. We expect to continue to invest in our research programs in an effort to identify additional drug candidates.

#### Development Expenses

*(in thousands)*

| Development Expenses: | Three Months Ended March 31, 2012 | 2011 | Increase/ (Decrease) $% | Increase/ (Decrease) |
| --- | ---: | ---: | ---: | ---: |
| Salary and benefits | $34,105 | $29,784 | $4,321 | 15% |
| Stock-based compensation expense | 10,968 | 12,294 | (1,326) | (11)% |
| Laboratory supplies and other direct expenses | 9,561 | 7,349 | 2,212 | 30% |
| Contractual services | 47,089 | 28,491 | 18,598 | 65% |
| Drug supply costs | 8,022 | 5,714 | 2,308 | 40% |
| Infrastructure costs | 25,633 | 23,609 | 2,024 | 9% |
| Total development expenses | $135,378 | $107,241 | $28,137 | 26% |

Our development expenses increased by $28.1 million, or 26%, in the first quarter of 2012 as compared to the first quarter of 2011 primarily as a result of increased contractual services expenses related to our ongoing and planned clinical trials.

### Sales, General and Administrative Expenses

*(in thousands)*

|  | Three Months Ended March 31, 2012 | 2011 | Increase $% | Increase |
| --- | ---: | ---: | ---: | ---: |
| Sales, general and administrative expenses | $111,146 | $71,523 | $39,623 | 55% |

Sales, general and administrative expenses increased substantially in the first quarter of 2012 as compared to the first quarter of 2011, primarily as a result of increases in workforce and commercial expenses associated with marketing INCIVEK and KALYDECO.

### Restructuring Expense

As of March 31, 2012, our lease restructuring liability was $25.5 million. In the first quarters of 2012 and 2011, we recorded restructuring expense of $0.4 million and $0.8 million, respectively. In the first quarters of 2012 and 2011, we made cash payments of $3.7 million in each period against the accrued expense and received $2.5 million and $2.2 million, respectively, in sublease rental payments. During the remainder of 2012, we expect to make additional cash payments of $11.1 million against the accrued expense and to receive $7.5 million in sublease rental payments.

### Non-operating Items

### Interest Income

Interest income decreased by $1.0 million to $0.4 million for the first quarter of 2012 from $1.4 million for the first quarter of 2011. Our cash, cash equivalents and marketable securities yielded less than 0.5% on an annual basis in the first quarter of 2012.

### Interest Expense

Interest expense decreased by $7.9 million, or 66%, to $4.1 million in the first quarter of 2012 from $12.0 million in the first quarter of 2011. The decrease was the result of decreased interest expense related to our secured notes due 2012, which were redeemed in 2011. During the remainder of

2012, we expect that we will incur approximately $10 million in interest expense related to our convertible senior subordinated notes due 2015, or 2015 Notes.

### Change in Fair Value of Derivative Instruments

In the first quarter of 2011, we recorded charges of $5.6 million in connection with the embedded and free-standing derivatives associated with our September 2009 financial transactions. In 2011, the contingent milestone payments that were the subject of the September 2009 financial transactions were earned in full. We did not incur any charges related to the September 2009 financial transactions in the first quarter of 2012 and will not incur any charges related to these financial transactions in future periods.

### Provision for Income Taxes

In the first quarter of 2012, we recorded a provision for income taxes attributable to Vertex of $2.3 million, which was offset by a benefit from income taxes attributable to noncontrolling interest (Alios) of $2.3 million. The provision for income taxes attributable to Vertex was due to state income taxes in the first quarter of 2012. There was no comparable provision or benefit from income taxes recorded in the first quarter of 2011.

### Noncontrolling Interest (Alios)

The net loss attributable to noncontrolling interest (Alios) recorded on our consolidated statements of operations reflects Alios' net loss for the reporting period, as adjusted for changes during the reporting period in the fair value of the contingent milestone and royalty payments payable by us to Alios.

A summary of net loss attributable to noncontrolling interest (Alios) in the first quarters of 2012 and 2011 is as follows:

*(in thousands)*

|  | Three Months Ended March 31, 2012 | 2011 |
| --- | ---: | ---: |
| Loss before provision for income taxes | $(5,024) | $— |
| Benefit from income taxes | 2,280 | — |
| Change in fair value of contingent milestone and royalty payments | (970) | — |
| Net loss attributable to noncontrolling interest (Alios) | $(3,714) | $— |

In the three months ended March 31, 2012, the fair value of contingent milestone and royalty payments decreased by $1.0 million based on a rise in interest rates used in the calculation, which increased net income attributable to Vertex. If we are able to successfully advance ALS-2158 or ALS-2200 into mid-stage and late-stage clinical development, we believe the fair value of the contingent milestone and royalty payments will increase, which may significantly reduce net income attributable to Vertex.

### LIQUIDITY AND CAPITAL RESOURCES

We began operating as a cashflow positive company in the second half of 2011. As of March 31, 2012, we had cash, cash equivalents and marketable securities, excluding Alios' cash and cash equivalents, of $980.9 million, which was an increase of approximately $12 million from $968.9 million as of December 31, 2011. This increase principally was due to cash receipts from INCIVEK sales largely offset by cash expenditures we made in the first quarter of 2012 related to, among other things, research and development expenses, sales, general and administrative expenses and milestone payments to Alios. In order to operate as a cashflow positive company while continuing our strategic investment in research and development activities, we will need to continue to generate significant revenues in future periods.

#### Sources of Liquidity

We intend to rely on cash flows from product sales as our primary source of liquidity and cash flows from royalties as a secondary source of liquidity. We also generate proceeds from the issuance of common stock under our employee benefit plans. Other possible sources of liquidity include commercial debt, 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 and financial transactions.

We may seek to borrow funds to finance our working capital needs if such financing is available to us. Our existing $100.0 million credit facility, which terminates on July 6, 2012, is initially unsecured, but is subject to a number of affirmative and negative covenants, including a liquidity covenant that requires us to maintain cash, cash equivalents and marketable securities of more than $400.0 million in domestic accounts. If we breach any of these covenants and it results in an event of default, upon the event of default the lender would obtain a security interest in cash, cash equivalents and marketable securities having a margined value of $100.0 million, which would be transferred to an account controlled by the lender. To date, we have not utilized any funds available to us pursuant to this credit facility.

#### Future Capital Requirements

We are incurring substantial expenses to commercialize INCIVEK and KALYDECO, while at the same time continuing diversified research and development efforts for our drugs and drug candidates. We may in the future require capital to repay the $400.0 million in aggregate principal amount of 2015 Notes. The 2015 Notes bear interest at the rate of 3.35% per annum, and we are required to make semi-annual interest payments on the outstanding principal balance of the 2015 Notes on April 1 and October 1 of each year. The 2015 Notes will mature on October 1, 2015 and are convertible, at the option of the holder, into our common stock at a price equal to approximately $48.83 per share, subject to adjustment. In addition, we have substantial lease obligations that will continue through 2028.

Since the third quarter of 2011, our cash flows from sales of INCIVEK have exceeded our operating expenses, and we expect our cash flows from INCIVEK/INCIVO and KALYDECO together with our current cash, cash equivalents and marketable securities will be sufficient to fund our operations for at least the next twelve months. The adequacy of our available funds to meet our future operating and capital requirements will depend on many factors, including the amounts of future revenues generated by INCIVEK/INCIVO and KALYDECO, and the number, breadth, cost and prospects of our discovery and development programs.

#### Financing Strategy

Although we do not have any plans to do so in the near term, we may raise additional capital through public offerings or private placements of our securities, securing new collaborative agreements or other methods of financing. 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. We will continue to manage our capital structure and to consider all financing opportunities, whenever they may occur, that could strengthen our long-term liquidity profile. Any capital transaction related to our outstanding debt obligations may or may not be similar to transactions in which we have engaged in the past. There can be no assurance that any such financing opportunities will be available on acceptable terms, if at all.

### Contractual Commitments and Obligations

Our commitments and obligations were reported in our Annual Report on Form 10-K for the year ended December 31, 2011, which was filed with the Securities and Exchange Commission, or SEC, on February 22, 2012. There have been no material changes from the contractual commitments and obligations previously disclosed in that Annual Report on Form 10-K.

### 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 condensed 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 the change occurs. 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. During the three months ended March 31, 2012, there were no material changes to our critical accounting policies as reported in our Annual Report on Form 10-K for the year ended December 31, 2011, which was filed with the SEC on February 22, 2012.

### Recent Accounting Pronouncements

Refer to Note A, "Basis of Presentation and Accounting Policies—Recent Accounting Pronouncements," in the accompanying notes to the condensed consolidated financial statements. In the first quarter of 2012, we retrospectively adopted amended guidance issued in June 2011 by the Financial Accounting Standards Board that resulted in two separate, but consecutive, statements of operations and comprehensive income (loss) that affected the presentation of our condensed consolidated financial statements. There were no new accounting pronouncements adopted during the three months ended March 31, 2012 that had a material effect on our financial statements.

## Market risk

As filed, 2,134 characters.

As part of our investment portfolio, we own financial instruments that are sensitive to market risk. 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 U.S. government and its agencies, investment grade corporate bonds and commercial paper, and money market funds. These investments are denominated in U.S. 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.

### Foreign Exchange Market Risk

As a result of our foreign operations, we face exposure to movements in foreign currency exchange rates, primarily the Euro, Swiss Franc, British Pound and Canadian Dollar against the U.S. dollar. The current exposures arise primarily from cash, accounts receivable, intercompany receivables and payables, and calculations of royalties receivable from net sales denominated in foreign currencies. Both positive and negative impacts to our international product sales from movements in foreign currency exchange rates are partially mitigated by the natural, opposite impact that foreign currency exchange rates have on our international operating expenses.

We are considering a foreign currency management program with the objective of reducing the volatility of exchange rate fluctuations on our operating results and to increase the predictability of the foreign exchange impact on forecasted revenues.

## Controls and procedures

As filed, 1,467 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, 2012 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

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 2012 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 9,079 characters.

Information regarding risk factors appears in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2011, which was filed with the SEC on February 22, 2012. There have been no material changes from the risk factors previously disclosed in that Annual Report on Form 10-K, except:

***We are planning to accelerate our development program for VX-809 in combination with KALYDECO, based primarily on interim data from a portion of the patients enrolled in Part 2 of a Phase 2 clinical trial in which patients received VX-809 and KALYDECO over a short duration. If final data from Part 2 of this clinical trial are less favorable than the interim data, or if we are unable to successfully develop VX-809 in combination with KALYDECO or experience delays in doing so, our business could be materially harmed and the trading price of our common stock could decline.***

In May 2012, we disclosed information about an interim analysis of data from Part 2 of an ongoing Phase 2 clinical trial of VX-809 and KALYDECO. We conducted the planned interim analysis after approximately half of the 108 patients enrolled in Part 2 of this clinical trial had completed all 56 days of treatment. Pooled data from the 37 patients with CF who have two copies (homozygous) of the F508del mutation in the *CFTR* gene and who had completed all 56 days of treatment demonstrated a statistically significant improvement in lung function (absolute change in percent predicted FEV1) across the combined homozygous treatment groups relative to baseline compared to the 11 patients with one or two copies of the F508del mutation who received placebo. Of those who received VX-809 and KALYDECO, approximately 46 percent (17/37) experienced an absolute improvement from baseline to Day 56 in lung function of 5 percentage points or more, and approximately 30 percent (11/37) experienced an absolute improvement from baseline to Day 56 of 10 percentage points or more. Evaluation of the 21 patients with one copy (heterozygous) of the F508del mutation in the *CFTR* gene is ongoing, but at the time of the announced interim analysis, not enough heterozygous patients had completed the clinical trial to draw conclusions. One of the two primary endpoints in Part 2 of this clinical trial is change in sweat chloride levels from Day 28 to Day 56. In the interim analysis, we observed reductions in sweat chloride levels between Day 28 and Day 56 in homozygous patients treated with VX-809 and KALYDECO. At the time of the interim analysis, these reductions were not statistically significant.

This clinical trial is ongoing and we expect that complete data, including statistical analyses for all patient groups, will be available in mid-2012. We plan to start a pivotal clinical trial of VX-809 and KALYDECO in people with two copies of the F508del mutation, subject to the final results from this Phase 2 clinical trial and discussions with regulatory agencies. The complete data will be included in the final clinical trial analysis and will be used to determine next steps for the development of VX-809 and KALYDECO in heterozygous F508del patients as well as homozygous F508del patients.

Our development program for the combination of VX-809 and KALYDECO is subject to numerous risks and uncertainties, including the risks that:

final outcomes of the ongoing Phase 2 clinical trial or future clinical trials of the combination of VX-809 and KALYDECO may be less favorable than the interim analysis that we reported in May 2012 or may not be favorable at all;

the data we expect from this clinical trial in mid-2012 evaluating the combination of VX-809 and KALYDECO as a potential treatment for heterozygous F508del patients may not be favorable or may be less favorable than data from homozygous F508del patients; and

the final data and/or discussions with regulatory agencies regarding the scope and design of future clinical trials may result in additional clinical trials needing to be conducted before we can initiate pivotal clinical trials to evaluate VX-809 in combination with KALYDECO in homozygous F508del patients.

Even if final data from Part 2 of this Phase 2 clinical trial and discussions with regulatory agencies permit us to promptly initiate the planned pivotal clinical trial in homozygous F508del patients, we will need to show that the combination of VX-809 and KALYDECO is safe and effective in a significantly larger number of patients than are involved in the ongoing Phase 2 clinical trial, over significantly longer dosing periods. If we are unable to show the safety and efficacy of the combination of VX-809 and KALYDECO, or experience delays in doing so, our business could be materially harmed.

### 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:

expectations regarding the amount of, timing of and trends with respect to our revenues, costs and expenses and other gains and losses, including those related to product revenues from sales of INCIVEK and KALYDECO and royalty revenues from sales of INCIVO and to the intangible assets associated with the ViroChem acquisition and the Alios collaboration;

our expectations regarding development timelines and regulatory authority filings and submissions for VX-222, ALS-2158, ALS-2200, VX-809, VX-661, VX-509 and VX-787;

our plan to initiate a pivotal clinical trial of VX-809 in combination with KALYDECO;

our ability to successfully market INCIVEK and/or KALYDECO or any of our drug candidates if we obtain regulatory approval;

our expectations regarding the timing and structure of clinical trials of our drugs and drug candidates, including INCIVEK, KALYDECO, VX-222, ALS-2158, ALS-2200, VX-809, VX-661, VX-509 and VX-787, and the expected timing of our receipt of data from our and our collaborators' ongoing and planned clinical trials;

the data that will be generated by ongoing and planned clinical trials and the ability to use that data to support regulatory filings, as well as the expected timing of such regulatory filings and resulting potential approvals;

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;

the focus of our drug development efforts and our financial and management resources and our plan to continue investing in our diversified research and development programs and to develop and commercialize selected drug candidates that emerge from those programs, alone or with third-party collaborators;

the establishment, development and maintenance of collaborative relationships;

potential business development activities;

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 the possibility of raising 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, 2011, which was filed with the SEC on February 22, 2012, 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 10, 2012.
Source: SEC EDGAR, the filing index for accession 0001047469-12-005755. Last ingested by Listed: Nov 6, 2026, 12:56 ET. No prices; not investment advice.