Macro Tsimmis

intelligently hedged investment

Vertex (VRTX) update #7

Posted by intelledgement on Mon, 11 Feb 08

Our biotech company, Vertex (VRTX), reported today that [a] they spent a lot of money in 2007—even more than in 2006—on the development of our their anti-hepatitis C candidate drug, telaprevir, [b] they expect to spend even more in 2008 as a huge Phase 3 trial for telaprevir ramps up, and [c] they need to raise more cash to finance all this activity.

In FY07, VRTX lost $391MM ($3.03 per share) compared to losses of $207MM ($1.83 per share) for 2006. “The increase in the Company’s 2007…loss was principally driven by an increase in development investment to support the progression of telaprevir towards a Phase 3 pivotal registration program and commercialization,” according to the press release. And the red ink keeps flowing. Management expect to spend $500MM in R&D in 2008, mostly on telaprevir, and anticipate losses in the vicinity of $400MM again.

As they ended 2007 with $460MM in cash, they need a fresh supply to avoid getting onto too thin ice, financially speaking. Accordingly, management also announced today that they plan to sell 6MM shares of common stock utilizing a shelf registration filed with the SEC. No price was announced, but at today’s close of $18.21, the sale should raise more than $100MM.  Management are also exploring a deal to monetize VRTX’s HIV royalty stream and thus provide additional cash in 2008.


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