Vertex Raises $155M Through Debt Financing for Hepatitis C Drug in Europe

Xconomy Boston — 

Vertex Pharmaceuticals said today it will bring in $155 million in cash through a pair of deals related to the potential commercialization of its lead hepatitis C drug in Europe, the company said this afternoon. In both transactions, investors are betting on telaprevir, a projected multibillion-dollar seller, to win European approval.

The Cambridge, MA-based drug developer (NASDAQ:VRTX), which also has a significant presence in San Diego, is receiving about $120 million in cash from the sale of corporate debt that must be paid back by October 31, 2012. The notes are secured by $155 million in milestone payments Vertex is eligible to receive from Janssen Pharmaceutica for the European commercialization of telaprevir. In the second transaction, the firm will be paid $35 million in cash for the rights to potential milestone payments Vertex is in line to receive from Janssen for the European market introduction of telaprevir. And Vertex won’t have to repay the $35 million if it doesn’t earn the milestone payments.

Vertex, which is counting on telaprevir to be its first big moneymaking product, has been burning through huge amounts of cash this year as it goes through the final phase of drug development. The company reported a second-quarter net loss of $171.3 million, and said it had $754 million of cash left in the bank on June 30, in its most recent quarterly report. The new debt financing, and a $105 million payment from Japanese partner Mitsubishi Tanabe Pharma will bolster the company’s reserves, so that Vertex should finish this year with $800 million in the bank, according to a separate statement issued today. The company plans to continue to burn through cash as it pursues FDA approval for telaprevir in the second half of 2010.

Vertex spokeswoman Jane Kramer said that the investors in both deals included hedge funds and other firms, but the names of the investors will not be disclosed.

Vertex has retained full commercial rights to telaprevir in the U.S. market, while it has partnered with Janssen, a Johnson & Johnson subsidiary, and Mitsubishi Tanabe to commercialize the potential blockbuster drug in Europe and Asia, respectively.