SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------- FORM 10-Q [x] Quarterly report pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934 For the quarterly period ended June 30, 1997 OR [ ] Transition report pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934 For the transition period from ---------- to ------ Commission File Number 0-19319 Vertex Pharmaceuticals Incorporated (Exact name of registrant as specified in its charter) Massachusetts 04-3039129 ------------------ -------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 130 Waverly Street, Cambridge, Massachusetts 02139-4242 ------------------------------------------------------- (Address of principal executive offices, including zip code) (617) 577-6000 -------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO -------- ----------- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock, par value $.01 per share 25,096,445 - -------------------------------------- ------------------------ Class Outstanding at August 5, 1997 1
VERTEX PHARMACEUTICALS INCORPORATED INDEX Page Part I. - Financial Information Item 1. Condensed Consolidated Financial Statements Report of Independent Accountants 3 Condensed Consolidated Balance Sheets - June 30, 1997 and December 31, 1996 4 Condensed Consolidated Statements of Operations - Three Months Ended June 30, 1997 and 1996 5 Condensed Consolidated Statements of Operations - Six Months Ended June 30, 1997 and 1996 6 Condensed Consolidated Statements of Cash Flows - Six Months Ended June 30, 1997 and 1996 7 Notes to Condensed Financial Statements 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Part II. - Other Information 13 Signatures 14 2
REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Vertex Pharmaceuticals Incorporated: We have reviewed the accompanying condensed balance sheet of Vertex Pharmaceuticals Incorporated as of June 30, 1997, and the related condensed consolidated statements of operations and cash flows for the three-month and the six-month periods then ended. These financial statements are the responsibility of the company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements for them to be in conformity with generally accepted accounting principles. /s/ COOPERS & LYBRAND L.L.P. Boston, Massachusetts July 22, 1997 3
VERTEX PHARMACEUTICALS INCORPORATED CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands) <TABLE> <CAPTION> JUNE 30, DECEMBER 31, 1997 1996 ---------- ------------ <S> <C> <C> ASSETS Current assets: Cash and cash equivalents........................................................... $ 188,584 $ 34,851 Short-term investments.............................................................. 97,582 95,508 Prepaid expenses and other current assets........................................... 1,642 1,791 ---------- ------------ Total current assets............................................................. 287,808 132,150 Restricted cash........................................................................ 2,316 2,316 Property and equipment, net............................................................ 10,007 8,663 Other assets........................................................................... 535 370 ---------- ------------ Total assets..................................................................... $ 300,666 $ 143,499 ---------- ------------ ---------- ------------ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Obligations under capital lease..................................................... $ 2,815 $ 2,910 Accounts payable and accrued expenses............................................... 5,397 4,146 Deferred revenue.................................................................... 1,056 -- ---------- ------------ Total current liabilities........................................................ 9,268 7,056 ---------- ------------ Obligations under capital leases, excluding current portion..................................................................... 5,446 5,617 ---------- ------------ Total liabilities................................................................ 14,714 12,673 ---------- ------------ Stockholders' equity: Common stock........................................................................ 251 211 Additional paid-in capital.......................................................... 389,822 227,510 Equity adjustments.................................................................. 1 49 Accumulated deficit................................................................. (104,122) (96,944) ---------- ------------ Total stockholders' equity....................................................... 285,952 130,826 ---------- ------------ Total liabilities and stockholders' equity....................................... $ 300,666 $ 143,499 ---------- ------------ ---------- ------------ </TABLE> The accompanying notes are an integral part of these condensed consolidated financial statements. 4
VERTEX PHARMACEUTICALS INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except per share data) <TABLE> <CAPTION> THREE MONTHS ENDED JUNE 30, --------------------------- 1997 1996 --------- ---------- <S> <C> <C> Revenues: Collaborative and other research and development........ $ 8,320 $ 3,116 Interest income......................................... 3,835 1,030 --------- ---------- Total revenues........................................ 12,155 4,146 --------- ---------- Costs and expenses: Research and development................................ 10,798 9,490 General and administrative.............................. 2,624 1,878 License payment......................................... -- 15,000 Interest................................................ 145 103 ------------ ------------ Total costs and expenses.............................. 13,567 26,471 ------------ ------------ Net loss................................................... $ (1,412) $ (22,325) ------------ ------------ ------------ ------------ Net loss per common share.................................. $ (0.06) $ (1.28) ------------ ------------ ------------ ------------ Weighted average number of common shares outstanding............................................. 24,722 17,398 ------------ ------------ ------------ ------------ </TABLE> The accompanying notes are an integral part of these condensed consolidated financial statements. 5
VERTEX PHARMACEUTICALS INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except per share amounts) <TABLE> <CAPTION> SIX MONTHS ENDED JUNE 30, ------------------------- <S> <C> <C> 1997 1996 --------- ---------- Revenues: Collaborative and other research and development........................................ $ 12,980 $ 5,589 Interest income......................................................................... 6,093 2,308 --------- ---------- Total revenues............................................................................. 19,073 7,897 --------- ---------- Costs and expenses: Research and development................................................................ 21,112 18,827 General and administrative.............................................................. 4,841 3,641 License payment......................................................................... -- 15,000 Interest................................................................................ 298 222 --------- ---------- Total costs and expenses.............................................................. 26,251 37,690 --------- ---------- Net loss................................................................................... $ (7,178) $ (29,793) --------- ---------- --------- ---------- Net loss per common share.................................................................. $ (0.31) $ (1.72) --------- ---------- --------- ---------- Weighted average number of common shares outstanding............................................................................. 23,356 17,365 --------- ---------- --------- ---------- </TABLE> The accompanying notes are an integral part of these condensed consolidated financial statements. 6
VERTEX PHARMACEUTICALS INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) <TABLE> <CAPTION> SIX MONTHS ENDED JUNE 30, ------------------------- <S> <C> <C> 1997 1996 ----- ---- Cash flows from operating activities: Net loss....................................................................... $(7,178) $ (29,793) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation and amortization............................................... 1,644 1,675 Changes in assets and liabilities: Prepaid expenses and other current assets........................................................... 149 (789) Accounts payable and accrued expenses................................................................. 1,251 (2,380) Deferred revenue........................................................... 1,056 803 ------- -------- Net cash provided (used) by operating activities................................................. (3,078) (30,484) ------- -------- Cash flows from investing activities: Net purchases and sales of short-term investments............................. (2,116) 7,080 Expenditures for property and equipment....................................... (2,988) (1,057) Other assets.................................................................. (165) (1,085) ------- ------- Net cash provided (used) by investing activities............................................................... (5,269) 4,938 ------- ------- Cash flows from financing activities: Net proceeds from public offering of common stock............................. 148,810 -- Proceeds from private placement of common stock............................... 10,000 5,000 Other issuances of common stock............................................... 3,542 1,536 Proceeds from equipment sale/leaseback........................................ 1,179 903 Repayment of capital lease obligations........................................ (1,445) (1,034) ------ ------- Net cash provided (used) by financing activities...................................................... 162,086 6,405 ------- ------- Effect of exchange rate changes on cash.......................................... (6) 1 ------- ------- Increase (decrease) in cash and cash equivalents................................. 153,733 (19,140) Cash and cash equivalents at beginning of period................................. 34,851 28,390 ------- -------- Cash and cash equivalents at end of period.......................................$188,584 $ 9,250 -------- --------- -------- --------- </TABLE> The accompanying notes are an integral part of these condensed consolidated financial statements. 7
VERTEX PHARMACEUTICALS INCORPORATED NOTES TO CONDENSED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION The year end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. Certain information and footnote disclosures normally included in the Company's annual financial statements have been condensed or omitted. The interim financial statements, in the opinion of management, reflect all adjustments (including normal recurring accruals) necessary for a fair statement of the results for the interim periods ended June 30, 1997 and 1996. The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the fiscal year, although the Company expects to incur a substantial loss for the year ended December 31, 1997. These interim financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 1996, which are contained in the Company's 1996 Annual Report to its shareholders and in its Form 10-K filed with the Securities and Exchange Commission. 2. CASH AND CASH EQUIVALENTS For purposes of the statement of cash flows, the Company considers all highly liquid investments with maturities of three months or less at the date of purchase to be cash equivalents. Changes in cash and cash equivalents may be affected by shifts in investment portfolio maturities as well as by actual net cash receipts or disbursements. 3. NET LOSS PER COMMON SHARE The net loss per common share is computed based upon the weighted average number of common shares outstanding. Common equivalent shares are not included in the per-share calculations where the effect would be anti-dilutive. 4. RECENTLY ISSUED ACCOUNTING STANDARDS The Financial Accounting Standards Board ("FASB") has issued Statement of Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings Per Share" which modifies the way in which earnings per share ("EPS") is calculated and disclosed. SFAS 128 requires a dual presentation of basic and diluted EPS for all years presented in the income statements. SFAS 128 is effective for financial statements for periods ending after December 15, 1997. The adoption of SFAS 128 is not expected to have a material impact on the Company's EPS calculation. The FASB has recently issued Statement of Financial Accounting Standards No. 130 ("SFAS 130"), "Reporting Comprehensive Income". This Statement requires that total comprehensive income be reported and that changes be shown in a financial statement displayed with the same prominence as other financial statements. SFAS 130 is effective for fiscal years beginning after December 15, 1997. Reclassification of financial statements for earlier periods is required for comparative purposes. The Company does not believe that this will have a material impact on results of operations. 8
VERTEX PHARMACEUTICALS INCORPORATED NOTES TO CONDENSED FINANCIAL STATEMENTS 5. COLLABORATIVE AGREEMENT WITH ELI LILLY AND COMPANY In June 1997, Vertex and Eli Lilly and Company ("Lilly") entered into a collaborative agreement for the research, development and commercialization of novel, small molecule compounds to treat hepatitis C infection. Under the terms of the agreement, Lilly will pay the Company up to $51 million composed of a $3 million initial research funding payment paid in June 1997, $33 million of product research funding over six years and $15 million of development and commercialization milestone payments. The Company and Lilly will jointly manage the research, development, manufacturing and marketing of drug candidates emerging from the collaboration. The Company will have primary responsibility for drug design, process development and pre-commercial drug substance manufacturing, and Lilly will have primary responsibility for formulation, preclinical and clinical development and global marketing. The Company has the option to supply 100 percent of Lilly's commercial drug substance supply needs. The Company will receive royalties on future product sales, if any. If the Company exercises its commercial supply option, the Company will receive drug supply payments in addition to royalties on future product sales, if any. Lilly has the right to terminate the agreement without cause upon six months' notice after June 1999. In connection with this collaboration, Lilly purchased 263,922 shares of the Company's common stock for $10,000,000. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company is engaged in the discovery, development and commercialization of novel, small molecule pharmaceuticals for the treatment of major diseases for which there are currently limited or no effective treatments. The Company is a leader in the use of structure-based drug design, an approach to drug discovery that integrates advanced biology, biophysics and chemistry. The Company is conducting nine significant pharmaceutical research and development programs to develop pharmaceuticals for the treatment of viral diseases, multidrug resistance in cancer, hemoglobin disorders, autoimmune diseases, inflammatory diseases and neurodegenerative disorders. Five of these programs are in the development phase, and the other four are in the research phase. During the second quarter of 1997, Vertex's partner, Glaxo Wellcome plc ("Glaxo Wellcome"), advanced Phase II and Phase III clinical development of VX-478 (141W94), the lead compound in the Company's HIV program, in the United States, Canada and Europe. Kissei Pharmaceutical Co., Ltd. ("Kissei") is also developing VX-478 as Vertex's partner for the HIV program in the Far East. Through a series of Phase II clinical trials underway or planned, Vertex and its partner for development and marketing of VX-710 in Canada, BioChem Therapeutics Inc. ("BioChem"), are evaluating VX-710 to reverse cancer multidrug resistance in solid tumors. In addition, Vertex signed a research, development and commercialization agreement with Eli Lilly and Company ("Lilly") to develop new drugs to treat hepatitis C infection. To date, the Company has not received any revenues from the sale of pharmaceutical products and does not expect to receive such revenues this fiscal year, if ever. The Company has incurred since its inception, and may incur over the next several years, significant operating losses as a result of expenditures for its research and development programs. The Company expects that losses will fluctuate from quarter to quarter and that such fluctuations may be substantial. 9
VERTEX PHARMACEUTICALS INCORPORATED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Three Months Ended June 30, 1997 Compared with Three Months Ended June 30, 1996. For the second quarter of 1997, the Company's total revenues were $12,155,000 as compared to $4,146,000 during the same period in 1996. From quarter to quarter, the Company's revenues fluctuate as a result of changes in the timing and amount of partner research support payments, partner reimbursements of Vertex drug development costs, and payments for the achievement of various research and development milestones. In the second quarter of 1997, the Company received $7,822,000 in revenue from its collaborative agreements, $3,835,000 in interest received on invested funds and $498,000 from government grants and other revenue. In the second quarter of 1996, the Company received $2,715,000 in revenue from its collaborative agreements, $1,030,000 in interest received on invested funds and $401,000 from government grants and other revenue. The increase in revenue for the second quarter in 1997 is attributable to greater collaborative revenue and interest income on higher levels of cash and short-term investments. Collaborative revenue in the second quarter of 1997 included a $3,000,000 up-front payment and approximately $190,000 in research funding for the Company's hepatitis C program received from Lilly under the collaborative agreement signed in June 1997. In addition, the Company received a $2,000,000 payment from Kissei for reimbursement of costs associated with an ongoing Phase II clinical trial of Vertex's HIV protease inhibitor, VX-478, as single-drug therapy for HIV infection. Also during the second quarter of 1997, Ciba Geigy Limited exercised a development option resulting in a milestone payment of $200,000 and research revenue of $200,000 pursuant to a collaboration with the Company's subsidiary, Altus Biologics Inc. ("Altus") in the field of detergents. The Company's total costs and expenses decreased to $13,567,000 in the second quarter of 1997, from $26,471,000 during the same period in 1996. During the second quarter in 1996, the Company made a one-time payment of $15,000,000 to obtain a non-exclusive, worldwide license under certain G.D. Searle & Co. ("Searle") patent applications claiming HIV protease inhibitors. Research and development expenses were $10,798,000 in the second quarter of 1997 as compared to $9,490,000 during the same period in 1996. This increase in cost is principally a result of the continued growth of the Company's research and development organization and increasing expenditures for the preclinical development of VX-497, the Company's lead candidate in its IMPDH program for potential new therapies for autoimmune diseases and also increased costs associated with expanded Phase II clinical trials of VX-710, the Company's lead compound in the multidrug resistance program. General and administrative expenses increased during the second quarter of 1997 to $2,624,000 from $1,878,000 in the second quarter of 1996 due primarily to increases in administrative personnel, increased legal costs associated with patents and other matters, as well as an increase in marketing efforts by Altus. Interest expense increased to $145,000 in the second quarter of 1997 as compared to $103,000 during the same period in 1996 due to higher levels of equipment financing. The Company incurred a net loss of $1,412,000 or $0.06 per share in the second quarter of 1997 as compared to a net loss of $22,325,000 or $1.28 per share in the second quarter of 1996. 10
VERTEX PHARMACEUTICALS INCORPORATED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Six Months Ended June 30, 1997 Compared with Six Months Ended June 30, 1996. The Company's total revenues increased to $19,073,000 for the six months ended June 30, 1997 from $7,897,000 for the six months ended June 30, 1996. In 1997, the Company's revenues consisted of $12,059,000 earned under the Company's collaborative agreements, $6,093,000 in interest income and $921,000 in government grants and other income. The Company's revenues during the same period in 1996, consisted of $5,147,000 earned under the Company's collaborative agreements, $2,308,000 in interest income and $442,000 in government grants and other income. The increase in revenue for the first half of 1997 compared to the same period in 1996 was principally due to the up-front payment of $3,000,000 by Lilly upon the commencement of the hepatitis C collaboration, $4,000,000 in development reimbursements from Kissei for an ongoing clinical trial of Vertex's HIV protease inhibitor, and increased investment income from higher levels of cash and investments due to the successful completion of public offerings of the Company's stock in August 1996 and March 1997. The Company's total costs decreased to $26,251,000 for the six months ended June 30, 1997 from $37,690,000 for the six months ended June 30, 1996. The Company paid $15,000,000 in the first half of 1996 to obtain a non-exclusive, worldwide license under certain Searle patent applications claiming HIV protease inhibitors. Research and development expenses increased to $21,112,000 in the first half of 1997 from $18,827,000 in the first half of 1996, primarily due to additional scientific staffing as well as the commencement of preclinical activities for VX-497, the lead compound in the Company's IMPDH program. General and administrative expenses increased during the first half of 1997 to $4,841,000 from $3,641,000 in the first half of 1996 due primarily to increases in administrative personnel, increased legal costs associated with patents and other matters, as well as an increase in marketing efforts of Altus. Interest expense was $298,000 in the second half of 1997, an increase from $222,000 in the second half of 1996 as a result of higher levels of equipment financing during the period. For the reasons stated above, the Company incurred a net loss of $7,178,000 or $0.31 per share in the six months ended June 30, 1997 compared to a net loss of $29,793,000 or $1.72 per share in the six months ended June 30, 1996. LIQUIDITY AND CAPITAL RESOURCES The Company's operations have been funded principally through strategic collaborative agreements, public offerings and private placements of the Company's equity securities, equipment lease financing, government grants and interest income. The Company expects to incur increased research and development and related supporting expenses and, consequently, continued losses on a quarterly and annual basis as it continues to develop existing and future compounds and to conduct clinical trials of potential drugs. The Company also expects to incur substantial administrative and commercialization expenditures in the future and additional expenses related to the filing, prosecution, defense and enforcement of patent and other intellectual property rights. 11
VERTEX PHARMACEUTICALS INCORPORATED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company expects to finance these substantial cash needs with its existing cash and investments at June 30, 1997 of approximately $286 million, together with interest earned thereon, future payments under its existing collaborative agreements, and facilities and equipment financing. To the extent that funds from these sources are not sufficient to fund the Company's activities, it will be necessary to raise additional funds through public offerings or private placements of securities or other methods of financing. There can be no assurance that such financing will be available on acceptable terms, if at all. In June 1997, the Company entered into a collaborative agreement for up to $51 million with Lilly for the research, development and commercialization of compounds in connection with the Company's hepatitis C program. The Company has the option to supply 100 percent of Lilly's commercial drug substance supply needs. The Company will receive royalties on future product sales, if any. If the Company exercises its commercial supply option, the Company will receive drug supply payments in addition to royalties on future product sales, if any. In connection with this collaboration, Lilly purchased 263,922 shares of the Company's common stock for $10,000,000. The Company's aggregate cash and investments increased by $155,807,000 during the six months ended June 30, 1997 to $286,166,000, principally due to the public offering completed in March 1997, with net proceeds of approximately $148,810,000, and an equity investment by Lilly in June 1997 of $10,000,000. Cash used by operations, principally to fund research and development activities, was $3,078,000 during the same period. The Company also expended $2,988,000 during this period to acquire property and equipment, principally for research equipment and facilities. During the first quarter of 1997, the Company entered into equipment lease financing in the aggregate amount of $1,179,000 and repaid $1,445,000 of its lease obligations. In July 1997, the Company purchased a portfolio of ten patent application families claiming ICE (interleukin-1 beta converting enzyme) and its inhibitors from Sanofi S.A. Through this acquisition, the Company has obtained the rights, title and interest to all the patent properties in Sanofi's ICE portfolio. The Financial Accounting Standards Board ("FASB") has issued Statement of Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings Per Share" which modifies the way in which earnings per share ("EPS") is calculated and disclosed. SFAS 128 requires a dual presentation of basic and diluted EPS for all years presented in the income statements. SFAS 128 is effective for financial statements for periods ending after December 15, 1997. The adoption of SFAS 128 is not expected to have a material impact on the Company's EPS calculation. The FASB has recently issued Statement of Financial Accounting Standards No. 130 ("SFAS 130"), "Reporting Comprehensive Income". This Statement requires that total comprehensive income be reported and that changes be shown in a financial statement displayed with the same prominence as other financial statements. SFAS 130 is effective for fiscal years beginning after December 15, 1997. Reclassification of financial statements for earlier periods is required for comparative purposes. The Company does not believe that this will have a material impact on results of operations. 12
PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS: None ITEM 2. CHANGES IN SECURITIES: Recent Sales of Unregistered Securities On June 18, 1997, the Company issued and sold to Lilly, for cash, 263,922 shares of the Company's Common Stock for an aggregate purchase price of $10,000,000. The securities issued were not registered under the Securities Act of 1933, as amended (the "Securities Act"), in reliance on the exemption set forth in Section 4(2) of the Securities Act. The sale to Lilly was a privately negotiated sale by the Company not involving any public offering. ITEM 3. DEFAULTS UPON SENIOR SECURITIES: None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS: The Company's Annual Meeting of Stockholders was held on May 8, 1997. The stockholders elected Charles A. Sanders to the class of directors whose term expires in 1998 and Barry M. Bloom and William W. Helman IV to the class of directors whose term expires in 2000. The tabulation of votes with respect to the election of such directors is as follows: <TABLE> <CAPTION> TOTAL VOTE TOTAL VOTE FOR: WITHHELD: ------------- ------------------ <S> <C> <C> Charles A. Sanders............................................................ 19,500,766 78,310 Barry M. Bloom................................................................ 19,492,781 118,597 William W. Helman IV.......................................................... 19,492,981 118,397 </TABLE> The stockholders approved an amendment to the Company's Restated Articles of Organization to increase the number of authorized shares of Common Stock of the Company from 50,000,000 to 100,000,000 by a vote of 18,591,245 shares in favor, 979,121 shares against, and 41,012 shares abstaining. A proposal to amend the Company's Restated Articles of Organization to increase the number of authorized shares of Preferred Stock from 1,000,000 to 5,000,000 was not approved, with 9,304,131 shares voted in favor, 6,971,564 shares voted against, 42,442 shares abstaining, and 3,293,241 broker non-votes. The stockholders approved the Company's 1996 Stock and Option Plan, with 9,695,876 shares voted in favor, 6,595,383 shares voted against, 63,262 shares abstaining, and 3,256,857 broker non-votes. 13
In addition, the stockholders approved the appointment of Coopers & Lybrand L.L.P. as the Company's independent accountants for the 1997 fiscal year by a vote of 19,548,868 shares in favor, 32,608 shares against, and 29,902 shares abstaining. ITEM 5. OTHER INFORMATION: None ITEM 6. EXHIBITS: 10.1 Research and Development Agreement between the Company and Eli Lilly and Company effective June 11, 1997 (filed herewith with certain confidential information deleted). 27 Financial Data Schedule. (Exhibit 27 is submitted as an exhibit only in the electronic format of this Quarterly Report on Form 10-Q submitted to the Securities and Exchange Commission.). 99 Letter of Independent Accountants. Reports on Form 8-K: None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. VERTEX PHARMACEUTICALS INCORPORATED Date: August 14, 1997 /s/Thomas G. Auchincloss, Jr. -------------------------------------- Thomas G. Auchincloss, Jr. Vice President of Finance and Treasurer (Principal Financial Officer) Date: August 14, 1997 /s/Hans D. van Houte -------------------------------------- Hans D. van Houte Controller (Principal Accounting Officer) 14