Vertex Pharmaceuticals (VRTX) 10-K risk factor changes: FY2022 vs FY2021

- We invest significant resources in the [removed: research] [added: research, development, manufacturing] and [removed: development] [added: supply] of therapies for serious diseases other than CF, and if we are unable to successfully commercialize one or more of these therapies, our business could be materially harmed.

If we are unable to continue to increase revenues from sales of our CF [removed: medicines,] [added: medicines or to eventually derive revenues from the sales of] our [added: pipeline products, our] business would be materially harmed and the market price of our common stock would likely decline.

- [removed: Risks] [added: A variety of risks] associated with operating in foreign countries could materially adversely affect our business.

[removed: - We] [added: We] are subject to risks associated with [removed: the COVID-19 pandemic.][added: COVID-19.]

- Our effective tax rate fluctuates, and changes in tax laws, regulations and treaties, unfavorable resolution [removed: of] [added: to the] tax [removed: contingencies] [added: positions we have taken] or exposure to additional income tax liabilities could have a material impact on our future taxable income.

We invest significant resources in the [removed: research] [added: research, development, manufacturing] and [removed: development] [added: supply] of therapies for serious diseases other than CF, and if we are unable to successfully commercialize one or more of these therapies, our business could be materially harmed.

We invest significant resources in the research and development of medicines for serious diseases including SCD, beta thalassemia, [removed: APOL1-mediated kidney disease, T1D,] pain, [added: AMKD, T1D,] AATD, DMD and DM1.

Product [removed: development is highly uncertain and expensive, and product] candidates that may appear promising in the early phases of research and development may fail to reach commercial success for many reasons, including the failure to demonstrate acceptable clinical trial results or obtain marketing approval, the inability to manufacture or commercialize the product candidate on economically feasible terms, or the appearance of safety issues.

For example, in [removed: June 2021,] [added: October 2020,] we decided not to progress [removed: VX-864,] [added: VX-814,] a drug candidate for the treatment of AATD, into [removed: late-stage] [added: further] development based on [added: safety and pharmacokinetic] data [removed: obtained from] [added: observed in] a Phase 2 clinical trial.

If we are unable to continue to increase revenues from sales of our CF [removed: medicines,] [added: medicines or to eventually derive revenues from the sales of] our [added: pipeline products, our] business would be materially harmed and the market price of our common stock would likely decline.

This will require us to continue to gain approval and reimbursement for [removed: our triple combination therapy] [added: TRIKAFTA/KAFTRIO] in ex-U.S. [removed: markets and] [added: markets,] successfully develop and commercialize [removed: our triple combination therapy] [added: TRIKAFTA/KAFTRIO] for younger children with [removed: CF.][added: CF or successfully develop and commercialize products from our pipeline.]

- that we may experience adverse developments with respect to development or commercialization of our CF medicines and/or [removed: CF] [added: pipeline] product candidates.

[removed: In order to] [added: To] compete successfully in these areas, we must demonstrate improved safety, efficacy and/or tolerability, ease of manufacturing, and gain and maintain market acceptance over competing products.

[removed: In addition, our] [added: Our] products are subject to ongoing regulatory requirements governing the testing, manufacturing, labeling, packaging, storage, advertising, promotion, sale, distribution, import, export, recordkeeping, and submission of safety and other post-market information.

Our medicines may not gain or maintain market acceptance among physicians and patients or other members of the [added: medical community.]

In most ex-U.S. markets, the pricing and reimbursement of therapeutic and other pharmaceutical products is subject to governmental [removed: control,] [added: control] and government authorities are making greater efforts to limit or regulate the price of drug products.

[removed: For example, the ACA required] manufacturers of Medicare Part D brand name drugs to provide discounts on those drugs to Medicare Part D beneficiaries during the coverage gap; increased the rebates paid by pharmaceutical companies to state Medicaid programs on drugs covered by Medicaid; and imposed an annual fee, which increases annually, on sales by branded pharmaceutical manufacturers.

Third-party payors throughout the world also have been attempting to control drug spending in light of the global economic pressures, including due to [removed: the global COVID-19 pandemic.][added: COVID-19.]

As part of these negotiations, many ex-U.S. government [removed: payers] [added: payors] also are requiring companies to establish product cost-effectiveness as a condition of reimbursement.

These cost-effectiveness reviews may [removed: not account for] [added: overlook] many of the benefits provided by innovative medicines, and for the most part, have not taken into account the specific circumstances of products that treat rare diseases.

If U.S. payors were to adopt such assessments and make negative coverage determinations or utilize [removed: value-][added: value-based contracts that result in penalties to, or lower rates of, reimbursement, it could adversely affect our product revenues.]

The increasing availability and use of innovative specialty pharmaceuticals for rare diseases, combined with their [removed: relative] higher cost as compared to other types of pharmaceutical products, is generating significant third-party payor interest in developing cost-containment strategies targeted to this sector.

In the U.S., various states, including Nevada, Maryland, Louisiana, New York, California, Washington, Massachusetts, [added: New Jersey,] Connecticut, Vermont, New Hampshire, Utah, Minnesota, Oregon, Colorado, New Mexico, Virginia, Maine, Texas, North Dakota, and West Virginia, have passed legislation requiring companies to disclose extensive information relating to drug prices, drug price increases, and spending on research, development, and marketing, among other things.

[removed: Additionally,] [added: Furthermore,] any additional required discounts would adversely affect the pricing of, and revenues from, our products.

- changes to the federal anti-kickback statute safe harbors that eliminate anti-kickback statute discount safe harbor protection for certain manufacturer rebate arrangements; [added: and]

The U.S. government, individual states and some foreign jurisdictions also have been aggressively pursuing legislative [added: and regulatory reforms that could affect our ability to sell products.]

Our future product revenues, including from TRIKAFTA/KAFTRIO, depend on, among other things, our ability to [removed: complete] [added: maintain] reimbursement [removed: discussions] in ex-U.S. markets for our products.

We are investing significant resources in the research, development, manufacturing, and commercialization of cell and [removed: genetic therapies.]

Development, manufacturing, and commercialization of cell and genetic therapies are subject to [removed: the same] [added: similar] risks and uncertainties as small molecules.

- the manufacturing processes for cell and genetic therapies are [removed: different] [added: different, less mature] and more complex than the manufacturing processes required for small molecule drugs and require [removed: different] [added: investments in] systems, equipment, facilities, and expertise to develop and maintain;

- the commercial success of cell or genetic therapies, including [removed: CTX001] [added: exa-cel] and VX-880, if approved, will depend in part on the medical community, patients, governments, and third-party or governmental [removed: payers] [added: payors] accepting [added: and providing adequate reimbursement for] cell or genetic therapy products in general, and [added: recognizing] the applicable medicine as medically useful, cost-effective, ethical, and safe; and

- market acceptance will be dependent in part on the prevalence and severity of side effects associated with the procedure by which the cell or genetic therapy is administered, including, with respect to [removed: CTX001] [added: exa-cel] and VX-880, if approved, the prevalence and severity of any side effects resulting from the myeloablative preconditioning regime or immunosuppression, respectively.

As we advance our cell and genetic therapy product candidates, we will be required to consult with various regulatory authorities, and we must comply with [added: all] applicable laws, rules, and regulations, which may change from time to time, including during the course of development of our cell and genetic therapy product candidates.

Even if we comply with applicable laws, rules, and regulations, and even if we maintain close coordination with the applicable regulatory authorities with oversight over our cell and genetic therapy product candidates, our development programs may [added: experience delays or] fail to succeed.

For example, the FDA established the Office of Tissues and Advanced Therapies within its Center for Biologics Evaluation and [removed: Research, or CBER,] [added: Research (“CBER”)] to consolidate the review of cell therapies and related products, and the Cellular, Tissue and Gene Therapies Advisory Committee to advise CBER on its review.

These and other regulatory review agencies, committees and advisory [removed: groups] [added: groups,] and the requirements and guidelines they promulgate, may lengthen the regulatory review process, require us to perform additional preclinical studies or clinical trials, increase our development costs, lead to changes in regulatory positions and interpretations, delay or prevent approval and commercialization of these treatment candidates or lead to significant post-approval limitations or restrictions.

[removed: In order to] [added: To] develop and commercialize [removed: any future] cell or genetic therapies, [added: including exa-cel,] we [removed: will need to incur] [added: are incurring] substantial expenditures to develop, contract for, or otherwise arrange for the necessary [added: supplies and] manufacturing capabilities.

[added: We cannot make any assurances that these] problems will not occur, or that we will be able to resolve or address problems that occur in a timely manner, or at all.

To the extent we develop [added: manufacturing] capabilities internally, there are many risks that could result in delays and additional costs, including the need to hire and train qualified employees and obtain access to necessary equipment and third-party technology.

If we obtain regulatory approval, the commercial success of cell and gene therapy treatments will depend, in part, on the acceptance of physicians, patients, and third-party [removed: payers] [added: payors] of gene therapy products in general, and our product candidates in particular, as medically necessary, cost-effective, and safe.

Risks Related to Pricing of Our Products

- A breakdown or breach of our information technology systems could subject us to liability or interrupt the operation of our business.

Product development is highly uncertain and expensive, and we may experience unforeseen delays, including regulatory and commercialization delays.

genetic therapies, including exa-cel.

We are also devoting substantial resources to expand our commercial organization to prepare for the anticipated future product launches from our pipeline programs.

For example, with respect to exa-cel, we are creating and developing the internal and external support systems to reach and support potential future patients, in addition to establishing and ensuring the necessary supply and manufacturing infrastructure.

We cannot make any assurances that we will obtain approval for products from our pipeline programs, or that, if approved, a future product will generate substantial revenues and cash flows.

In addition, treatment with some of our cell and genetic therapy product candidates, including exa-cel and VX-880, involve myeloablative preconditioning regimens or immunosuppression, and the patients in our clinical trials receiving these treatments may experience side effects (ranging from mild to severe) or adverse events.

Such events could have a significant negative impact on our ability to develop or commercialize our product candidates.

Risks Related to Pricing of Our Products

For example, the ACA required

Additionally, private payors, including health maintenance organizations and pharmacy benefit managers in the U.S., are adopting more aggressive utilization management techniques and are increasingly applying restrictive plan designs that can impact patients and manufacturers, and they continue to push for significant discounts and rebates from manufacturers.

Additionally, on August 16, 2022, the Inflation Reduction Act was enacted.

The law establishes a Drug Price Negotiation Program, under which the government may negotiate maximum fair prices for certain drugs covered by Medicare that do not have generic or biosimilar competition.

The first set of maximum fair prices will be effective in 2026.

Certain products are excluded from the negotiation program including drugs that have a single orphan drug designation and that are not approved for any other orphan or non-orphan diseases or conditions.

We cannot predict with certainty whether there will be future legislative changes to the scope of these exclusions.

The law also requires manufacturers to pay a rebate to Medicare if the price of a Medicare drug (under both Part B and Part D) increases faster than the rate of inflation.

The law also redesigns the Part D benefit.

The current Coverage Gap Discount Program, which requires manufacturers to provide a 70% discount on brand drugs and biologics during the coverage gap phase, will be eliminated after the 2024 plan year.

Starting in 2025, manufacturers of brand drugs and biologics will be required to provide a 10% discount during the initial phase and a 20% discount during the catastrophic phase of the Part D benefit.

The Inflation Reduction Act continues a trend in the United States toward reducing drug prices and limiting spending by the federal health care programs on drugs.

We cannot predict how CMS will interpret the Inflation Reduction Act or how the provisions of the law will affect our business once fully implemented, but it is possible that these changes or other legislative updates will have an adverse impact on our revenue.

The Inflation Reduction Act also requires the Secretary of the Department of Health and Human Services to issue program guidance on numerous areas associated with implementation of the law’s requirements, including for drug price negotiation and inflation rebates.

We cannot know what form this program guidance would take or how it would affect our business.

It is possible the U.S. Congress or administration may take further actions to control prescription drug pricing.

For example, in October 2022, President Biden issued an Executive Order, directing the Center for Medicare and Medicaid Innovation (“CMMI”), to consider new healthcare payment and delivery models that would lower drug costs and promote access to innovative drug therapies for Medicare and Medicaid beneficiaries.

The Executive Order requires CMMI to submit a report to the White House on potential models.

Some payors restrict reimbursement to certain patient groups or by indication.

Additionally, certain states have enacted laws establishing Prescription Drug Affordability Boards (“PDABs”).

Some state PDABs either have the authority or have defined a pathway where they may be granted the authority, to establish upper payment limits for prescription drugs—although to date, none of the states have exercised this authority.

- legislation relating to drug pricing, including enhanced transparency measures into drug pricing.

Under the Inflation Reduction Act, the coverage gap phase and the associated coverage gap discount program will be eliminated after the 2024 plan year.

Starting in 2025, there will be a new Part D manufacturer discount program, which requires a 10% discount in the initial phase and a 20% discount in the catastrophic phase of the benefit.

The Inflation Reduction Act also authorizes the government to negotiate maximum fair prices for certain Medicare drugs.

It also establishes mandatory rebates for Part B and Part D drugs

with prices that increase faster than inflation.

Further, many ex-U.S. governments are introducing new legislation focusing on cost containment measures in the pharmaceutical industry.

The final form of these laws and the relevant practical application is unknown at this time, but may lead to lower prices, paybacks or other forms of discounts or special taxes.

Both government and private payors are targeting these types of high cost medicines, in some cases refusing to pay for them.

- Our stock price may fluctuate.

For example, if we are unable to increase revenues from sales of our CF medicines, our ability to fund our research and development programs for the discovery and development or acquisition of new products would be harmed, which would limit our ability to diversify our revenue base and our stock price would likely be adversely affected.

medical community.

based contracts that result in penalties to, or lower rates of, reimbursement, it could adversely affect our product revenues.

- support for legislation allowing direct negotiation in Medicare Part D; and

- legislation relating to drug pricing, including bills that would impose rebate obligations for Medicare (and potentially other utilization) for price increases greater than the rate of inflation, require drug pricing negotiations in Medicare, redesign the Part D benefit to lower patient costs and overall spending, and introduce enhanced transparency measures into drug pricing.

and regulatory reforms that could affect our ability to sell products.

There also are a number of ongoing activities, including the Build Back Better Act, that could affect drug pricing in the Medicare and Medicaid programs.

Those activities seek to reduce or limit the prices of drugs, make them more affordable for patients, reform Medicare Part D pharmaceutical benefits, bring more transparency to drug prices, require data collection and reporting of information such as rebates, fees, and other remuneration provided by drug manufacturers, and enable the government to negotiate prices.

In most ex-U.S. markets, the pricing and reimbursement of therapeutic and other pharmaceutical products is subject to governmental control.

Given recent global economic pressures, including due to the COVID-19 pandemic, and geopolitical uncertainty, government authorities throughout the world are increasingly attempting to limit or regulate the price of drug products.

Particular attention is being paid by payors, including government and private payors, to these types of high-cost medicines, and countries are increasingly refusing to reimburse costly medicines.

We cannot make any assurances that these

To satisfy these standards, we must allocate

For example, in June 2021, we announced that we had achieved our primary endpoint and established proof of mechanism in a Phase 2 clinical trial evaluating our Z-AAT corrector, VX-864.

However, because the magnitude of treatment effect was unlikely to translate into substantial clinical benefit, we decided not to advance VX-864 into late-stage development.

on publication of clinical data for medicinal products for human use both permit the EMA to publish clinical information submitted in MAAs.

It also is possible that other federal, state, or foreign

rights of action in some jurisdictions, and potential significant penalties if we are found to be non-compliant.

existing collaboration.

For example, in April 2021, we amended and restated the original JDCA, positioning us to lead global development, manufacturing and commercialization of CTX001, with support from CRISPR.

medicines for commercial sale, a majority of the manufacturing steps needed to produce our medicines, product candidates, and drug products are performed through a third-party manufacturing network.

Any litigation, including litigation related to Abbreviated New Drug Applications, or ANDA, litigation related to 505(b)(2) applications, interference proceedings to determine priority of

On September 24, 2021, the District Court consolidated the cases against Sun and Lupin described above and scheduled trial for the consolidated cases beginning on October 23, 2023.

Decisions rendered to date in these proceedings may be subject to appeal.

The patents and patent applications within the patent portfolios of the CVC Group, the Broad Institute, Sigma-Aldrich, and/or ToolGen are, or may in the future be, involved in proceedings similar to interferences or priority disputes in Europe or other foreign jurisdictions.

hinder our ability to, or prevent us from being able to, manufacture and market our products.

We are subject to risks associated with the COVID-19 pandemic.

many regions and has put a significant strain on healthcare resources.

To date, the most significant effect on our business operations has been the requirement that a majority of our employees work remotely.

Currently, our sites are open where appropriate and permitted by local laws and guidelines.

The effects on our research, development, manufacturing, and commercialization activities, including the continued launch and uptake of our products, will be dependent on, among other things, the severity and duration of the COVID-19 pandemic and any worsening of the global economic environment as a result thereof, as well as the impact of the pandemic on our third-party manufacturers, suppliers, distributors, subcontractors and customers.

While the ultimate impact of COVID-19 on our business is highly uncertain, any negative impacts that materialize could materially adversely affect our operations, financial performance and stock price.

Our business faces potential risks relating to the U.K.’s withdrawal from the E.U.

Our European headquarters and European research facility are located in the U.K. On January 31, 2020, the U.K. formally withdrew from the E.U., also known as Brexit.

The U.K. and the E.U. negotiated a detailed post-Brexit Trade and Cooperating Agreement which went into effect on January 1, 2021.

As of January 1, 2021, E.U. Treaties, E.U. free movement rights and the general principals of E.U. law no longer apply in relation to the U.K. By virtue of the E.U. (Withdrawal) Act 2018, E.U. relations will continue to apply in U.K. domestic law to the extent that they are not modified or revoked by regulations under that Act.

Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the U.K. determines which E.U. laws to replace or replicate.

Given the lack of comparable precedent, it is unclear what financial, trade, regulatory and legal implications the withdrawal of the U.K. from the E.U. would have and how such withdrawal would affect us.

Any of these effects of Brexit, among others, could adversely affect our business, financial condition and operating results.

*Our discussion and analysis of our financial condition and results of operations for [removed: 2021] [added: 2022] as compared to [removed: 2020] [added: 2021] are discussed below.

For a discussion of our financial condition and results of operations for [removed: 2020] [added: 2021] as compared to [removed: 2019,] [added: 2020,] please refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our [removed: 2020] [added: 2021] Annual Report on Form 10-K, except as set forth below.*

We [removed: invest] [added: are a global biotechnology company that invests] in scientific innovation to create transformative medicines for people with serious [removed: diseases] [added: diseases,] with a focus on specialty markets.

[removed: Our triple combination regimen, TRIKAFTA/KAFTRIO was approved in 2019 in the United States, or U.S., and in 2020 in the European Union, or E.U.] Collectively, our four medicines are being used by the majority of the approximately [removed: 83,000] [added: 88,000] people with CF in North America, [removed: Europe] [added: Europe,] and Australia.

We are evaluating our medicines in additional patient populations, including younger children, with the goal of having small molecule treatments for [removed: approximately 90% of] [added: all] people [removed: with CF.][added: who have at least one mutation in their cystic fibrosis transmembrane conductance regulator (“CFTR”) gene that is response to our CFTR modulators.]

| *Revenues* | | | In [removed: 2021,] [added: 2022,] our net product revenues [removed: continued] [added: increased] to [removed: increase] [added: $8.9 billion as compared to $7.6 billion in 2021, primarily] due to the [added: strong] uptake of [removed: KAFTRIO] [added: TRIKAFTA/KAFTRIO] in [removed: Europe] [added: multiple countries internationally] and continued [removed: strong] [added: steady] performance of TRIKAFTA in the U.S., [removed: including] [added: following] the [removed: expanded indication] [added: June 2021 launch] of TRIKAFTA for children with CF 6 through 11 years of age. | | |

| *Expenses* | | | Our total [removed: R&D] [added: research] and [removed: SG&A] [added: development (“R&D”), acquired in-process research and development (“AIPR&D”), and selling, general and administrative (“SG&A”)] expenses [removed: increased] [added: decreased] to [removed: $3.9] [added: $3.6] billion as compared to [removed: $2.6] [added: $3.9] billion in [removed: 2020] [added: 2021. The decrease was] primarily due to [added: decreased AIPR&D following] a $900.0 million upfront payment we made [added: in 2021] to CRISPR in connection with an amendment to our [removed: CTX001 collaboration. In 2021, cost] [added: exa-cel collaboration, partially offset by increased spend to advance the progression] of [added: several product candidates into mid- to late-stage clinical development. Cost of] sales was 12% of our net product [removed: revenues.] [added: revenues in 2022 and 2021.] | | |

| *Cash* | | | Our cash, cash equivalents and marketable securities increased to [removed: $7.5] [added: $10.8] billion as of December 31, [removed: 2021] [added: 2022] as compared to [removed: $6.7] [added: $7.5] billion as of December 31, [removed: 2020] [added: 2021] primarily due to our net product revenues and [removed: profitability,] [added: operating cash flows, partially] offset by [removed: repurchases of our common stock] [added: income tax payments] and [removed: the $900.0] [added: our $315.0] million [removed: payment to CRISPR.] [added: acquisition of ViaCyte.] | | |

[removed: ][added: ]

We expect to continue to grow our CF business by increasing the number of people with CF [added: who are] eligible and able to receive our [removed: medicines] [added: medicines, including younger people,] and providing improved treatment options for people who are already eligible for one of our medicines.

- The U.S. Food and Drug [removed: Administration, or the FDA,] [added: Administration (the “FDA”)] approved the use of [removed: TRIKAFTA for] [added: ORKAMBI in] children with CF [removed: 6 through 11 years] [added: 12 months to less than 24 months] of age who [removed: have at least one] [added: are homozygous for the] F508del mutation [removed: or at least one mutation that is responsive to TRIKAFTA.][added: in the CFTR gene.]

- [removed: In January 2022, the] [added: The] European Commission and the [removed: U.K.’s] [added: United Kingdom’s] Medicines and Healthcare products Regulatory Agency [added: (“MHRA”)] granted marketing authorization for KAFTRIO [removed: in] [added: for] the treatment of children with CF 6 through 11 years of age who have at least one F508del mutation in the CFTR gene.

- TRIKAFTA/KAFTRIO is now approved and reimbursed or accessible in more than [removed: 20] [added: 30] countries outside the U.S.

We continue to advance a pipeline of potentially transformative small [removed: molecule,] [added: molecule] and cell and genetic therapies aimed at treating serious diseases.

[removed: Enrollment is underway in these two Phase 3 clinical trials, and we] [added: We] expect to complete [removed: enrollment in both] [added: these Phase 3] trials [removed: by] [added: in] late [removed: 2022] [added: 2023] or early [removed: 2023.][added: 2024.]

- We are evaluating the use of a non-viral [removed: ex vivo] [added: *ex vivo*] CRISPR gene-editing therapy, [added: exagamglogene autotemcel (“exa-cel”), formerly known as] CTX001, for the treatment of [removed: severe] sickle cell [removed: disease, or SCD,] [added: disease (“SCD”)] and transfusion-dependent beta [removed: thalassemia, or TDT.][added: thalassemia (“TDT”).]

- VX-880 is a stem cell-derived, allogeneic, fully differentiated, [removed: insulin-secreting] [added: insulin-producing] islet cell replacement therapy, using standard immunosuppression to protect the implanted cells.

- We [removed: also are pursuing] [added: continue to advance] additional programs in T1D, in which these [added: same] stem cell-derived, fully differentiated, [removed: insulin-secreting] [added: insulin-producing] islet cells are encapsulated and implanted in an immunoprotective device or [added: are] modified to produce hypoimmune [removed: cells.][added: cells with the goal of eliminating the need for immunosuppression.]

We are conducting [removed: IND-enabling] [added: enabling] studies for [removed: the cells and device program,] [added: our first in vivo gene-editing therapy for DMD] and we expect to submit an [removed: Investigational New Drug Application, or IND,] [added: IND] for this program in [removed: 2022.][added: 2023.]

Alpha-1 [removed: Antitrypsin, or AAT,] [added: Antitrypsin] Deficiency

[removed: *Investments] [added: *Investment] in External Innovation*

[removed: *Our] [added: Our] Business [removed: Environment*][added: Environment]

We are [removed: actively pursuing a] [added: advancing our] pipeline of product candidates for the treatment of serious diseases outside of CF.

Our strategy is to combine transformative advances in the understanding of [added: causal] human [removed: disease] biology and the science of therapeutics [removed: in order] to discover and develop [removed: new] [added: innovative] medicines.

This approach includes advancing multiple compounds from each program, spanning multiple modalities, into early clinical trials [removed: and evaluating] [added: to obtain] patient data [added: that can inform selection of the most promising compounds for later-stage development, and] to inform discovery and development of additional [removed: compounds, with the goal of bringing first-in-class and best-in-class therapies to patients, and to provide durable clinical and commercial success.][added: compounds.]

[removed: Most chemical compounds that are investigated as] [added: Across the industry, most] potential drug or biological [removed: product candidates] [added: products] never progress into development, and most [removed: product candidates] [added: products] that do advance into development never receive marketing approval.

This process can result in rapid changes in focus and priorities as new [added: information becomes available and as we gain additional understanding of our ongoing programs and potential new programs, as well as those of our competitors.]

The processes for cell and genetic therapies can be more complex than those required for small molecule drugs and require [added: additional investments in] different systems, equipment, facilities and expertise.

[removed: We] dedicate substantial management and other resources [removed: in order] to obtain and maintain appropriate levels of reimbursement for our products from third-party payors, including governmental [removed: organizations,] [added: organizations] in the U.S. and ex-U.S. markets.

In the U.S., we have worked successfully with third-party payors [removed: in order] to promptly obtain appropriate levels of reimbursement for our CF medicines.

In [removed: Europe and other] ex-U.S. markets, we seek government reimbursement for our medicines on a country-by-country or region-by-region basis, as required.

We expect to continue to focus significant resources to obtain expanded reimbursement for our CF medicines and, ultimately, pipeline [removed: therapies] [added: therapies,] in U.S. and ex-U.S. markets.

[added: As of the acquisition date, the cash payment was allocated primarily to] goodwill and the fair value of [removed: several] [added: an] in-process research and development [removed: assets that we acquired.][added: asset.]

Operating expenses incurred by [removed: Exonics and Semma] [added: ViaCyte] after the acquisition [removed: dates] [added: date] and specific expenses associated with the [removed: acquisitions] [added: acquisition] are reflected in our consolidated statement of operations.

*Collaboration and [removed: Licensing] [added: In-Licensing] Arrangements*

[removed: In-License Agreements][added: *Out-License Agreements*]

Over the last several years, we entered into collaboration agreements with a number of companies, including Arbor Biotechnologies, Inc., CRISPR, Kymera Therapeutics, Inc., Mammoth Biosciences, Inc., Moderna, Inc., [removed: and] Obsidian Therapeutics, [added: Inc., and Verve Therapeutics,] Inc. Generally, when we in-license a technology or product candidate, we make upfront payments to the collaborator, assume the costs of the [removed: program,] [added: program] and/or agree to make contingent payments, which could consist of milestone, [removed: royalty,] [added: royalty] and option payments.

Most of these collaboration payments are expensed as [removed: research and development expenses;] [added: AIPR&D;] however, depending on many factors, including the structure of the collaboration, the [added: stage of development of the acquired technology, the] significance of the in-licensed product candidate to the collaborator’s operations and the other activities in which our collaborators are engaged, the accounting for these transactions can vary significantly.

[removed: *Joint] [added: Joint] Development and Commercialization Agreement with [removed: CRISPR*][added: CRISPR]

In 2017, we entered into a joint development and commercialization [removed: agreement, or the Original JDCA,] [added: agreement (the “Original JDCA”)] with [removed: CRISPR] [added: CRISPR,] pursuant to which we are developing and preparing to commercialize [removed: CTX001] [added: exa-cel] for [removed: TDT] [added: SCD] and [removed: SCD.][added: TDT.]

We have four approved medicines that treat the underlying cause of cystic fibrosis (“CF”), a life-threatening genetic disease, and we continue to focus on developing additional treatments for CF.

Beyond CF, we have a pipeline that includes mid- and late-stage clinical programs in sickle cell disease, beta thalassemia, acute and neuropathic pain, APOL1-mediated kidney disease, type 1 diabetes, and alpha-1 antitrypsin deficiency, and earlier-stage programs in diseases such as muscular dystrophies.

Our triple combination regimen, TRIKAFTA/KAFTRIO (elexacaftor/tezacaftor/ivacaftor and ivacaftor), was approved in 2019 in the United States (the “U.S.”) and in 2020 in the European Union (the “E.U.”).

We also are pursuing genetic therapies for people with CF who do not make CFTR protein and, as a result, cannot benefit from our current CF medicines.

Recent and anticipated progress in activities supporting these efforts is included below:

- In the fourth quarter of 2022, we submitted global regulatory filings for TRIKAFTA/KAFTRIO in children with CF 2 to 5 years of age and for KALYDECO in children with CF from 1 month to less than 4 months of age.

Recent and anticipated progress in activities supporting these efforts is included below.

- We are conducting two Phase 3 global, randomized, double-blind, active-controlled clinical trials, SKYLINE 102 and SKYLINE 103, evaluating our new once-daily investigational triple combination of vanzacaftor/tezacaftor/deutivacaftor, formerly known as VX-121/tezacaftor/VX-561, in people with CF 12 years of age and older, and have completed enrollment in these trials.

We expect to complete these clinical trials by the end of 2023.

We also have initiated a clinical trial of vanzacaftor/tezacaftor/deutivacaftor in children with CF 6 to 11 years of age, known as the RIDGELINE study.

- In collaboration with Moderna, we are developing VX-522, an mRNA therapeutic for the treatment of people with CF who do not produce any CFTR protein.

In December 2022, the FDA cleared our Investigational New Drug Application (“IND”) for VX-522.

We have initiated a single-ascending dose clinical trial for VX-522 in people with CF, which is active and enrolling patients.

We expect to complete this single ascending dose clinical trial and initiate the multiple ascending dose clinical trial in 2023.

The FDA has granted Fast Track designation for VX-522.

- In the fourth quarter of 2022, we completed regulatory submissions to the European Medicines Agency (“EMA”) and the MHRA for exa-cel for SCD and TDT, and both the EMA and the MHRA have validated the marketing authorization application.

Exa-cel has been granted EMA Priority Medicines (“PRIME”) designation in the E.U. and Orphan Drug designation in the E.U. and the United Kingdom (the “U.K.”).

- In November 2022, we initiated the submission of a biologics licensing application (“BLA”) for exa-cel for SCD and TDT for rolling review by the FDA, and expect to complete the submission by the end of the first quarter of 2023.

In the U.S., exa-cel has been granted Fast Track, Regenerative Medicine Advanced Therapy, Rare Pediatric Disease, and Orphan Drug designations.

- Two additional Phase 3 clinical trials evaluating exa-cel in pediatric patients with SCD and TDT are ongoing.

- We have discovered multiple selective small molecule inhibitors of NaV1.8, with the objective of creating a new class of pain medicines that provide effective non-opioid pain relief, without abuse potential.

In March 2022, we announced positive Phase 2 data for VX-548, a NaV1.8 inhibitor, for treatment of acute pain.

We have initiated two randomized, double-blind, placebo-controlled Phase 3 trials with a total of 2,000 patients with moderate to severe acute pain following bunionectomy or abdominoplasty surgery.

The Phase 3 program for VX-548 also includes a single-arm study evaluating the safety and effectiveness of VX-548 in multiple other types of moderate to severe pain.

- The FDA granted VX-548 Breakthrough Therapy and Fast Track designations for the treatment of moderate to severe acute pain.

- At the end of 2022, we initiated a Phase 2 clinical trial evaluating VX-548 in diabetic peripheral neuropathy, a common form of peripheral neuropathic pain.

- Inaxaplin, formerly known as VX-147, is our small molecule for the treatment of APOL1-mediated kidney disease (“AMKD”), including APOL1-mediated focal segmental glomerulosclerosis (“FSGS”).

Based on positive Phase 2 data in FSGS, we initiated pivotal development of inaxaplin in a single Phase 2/3 adaptive clinical trial in patients with AMKD.

We continue to enroll patients in this Phase 2/3 clinical trial and we expect to complete the Phase 2 dose-ranging portion of the trial in 2023.

- The FDA granted inaxaplin Breakthrough Therapy designation for APOL1-mediated FSGS and the EMA granted inaxaplin Orphan Drug and PRIME designations for AMKD.

A clinical trial is ongoing to evaluate VX-880 as a potential treatment for type 1 diabetes (“T1D”), and proof-of-concept has been achieved.

We have completed enrollment in Part B of the Phase 1/2 clinical trial and, after completion of Part B, we expect to begin Part C of the trial, with concurrent dosing, in 2023.

In December 2022, our Clinical Trial Application (“CTA”) in Canada for VX-264, the cells and device program, was authorized and we plan to begin screening, enrollment and dosing in Canada in the coming months.

In the U.S., the IND is on hold.

- We are working to address the underlying genetic cause of alpha-1 antitrypsin (“AAT”) deficiency (“AATD”).

We are developing novel small molecule correctors of Z-AAT protein folding, with the goal of enabling the secretion of functional AAT into the blood and addressing both the lung and the liver aspects of AATD.

We have initiated a Phase 1 clinical trial for VX-634, which is the first in a series of next-wave investigational molecules with significantly improved potency and drug-like properties as compared to our previous AAT correctors, allowing potential exploration of the full dose response.

- We initiated a second Phase 2 clinical trial of VX-864, a first-generation AAT corrector, to assess the impact of longer-term treatment on the liver, as well as the levels of functional AAT in the plasma.

Duchenne Muscular Dystrophy

- We are investigating a novel approach to treating Duchenne muscular dystrophy (“DMD”), which delivers CRISPR/Cas9 gene-editing technology to muscle cells, with the goal of restoring near-full length dystrophin protein expression by targeting specific mutations in the dystrophin gene that cause the disease.

We have four approved medicines to treat cystic fibrosis, or CF, a life-threatening genetic disease, and are focused on increasing the number of people with CF eligible and able to receive our medicines through label expansions, approval of new medicines and expanded reimbursement.

We are broadening our pipeline into additional disease areas through internal research efforts and accessing external innovation through business development transactions.

We continue to research and develop product candidates for the treatment of serious diseases, including genetic therapies to address the remaining approximately 10% of people with CF, sickle cell disease, beta thalassemia, APOL1-mediated kidney disease, type 1 diabetes, pain, alpha-1 antitrypsin deficiency, Duchenne muscular dystrophy, and myotonic dystrophy type 1.


Since the beginning of 2021, we have made significant progress in activities supporting these efforts.

- Our Phase 3 clinical trial evaluating ORKAMBI for the treatment of children with CF 12 through 24 months of age met its primary endpoint.

Based on these data, we plan to submit regulatory filings in the U.S. and Europe in the first and second quarters of 2022, respectively.

Since the beginning of 2021, we have made important progress in activities supporting these programs.

- In the third quarter of 2021, we announced the initiation of Phase 3 clinical trials evaluating a once-daily investigational triple combination of VX-121/tezacaftor/VX-561 (deutivacaftor).

- We are conducting enabling studies for CF messenger ribonucleic acid, or mRNA, therapeutics designed to treat the underlying cause of CF by enabling cells in the lungs to produce functional CFTR protein for the treatment of the approximately 10% of people with CF who do not produce any CFTR protein.

We expect to submit an Investigational New Drug Application, or IND, for this program in 2022.

Enrollment is complete in the ongoing clinical trials evaluating CTX001 in severe SCD and TDT.

- Data presented to date support the profile of CTX001 as a potential one-time functional cure for people with severe SCD and TDT.

CTX001 safety data to date is generally consistent with an autologous stem cell transplant and myeloablative conditioning.

We anticipate regulatory submissions of CTX001 in late 2022.

- In December 2021, we announced that patients with APOL1-mediated focal segmental glomerulosclerosis, or FSGS, treated with VX-147, a small molecule inhibitor of APOL1 function, on top of standard of care achieved a statistically significant, substantial and clinically meaningful reduction of proteinuria in a Phase 2 proof-of-concept clinical trial.

We anticipate completing our end of Phase 2 meetings with regulators and advancing VX-147 into pivotal development in people with APOL1-mediated kidney disease, or AMKD, including APOL1-mediated FSGS, in the first quarter of 2022.

Our Phase 1/2 clinical trial evaluating VX-880 as a potential treatment for type 1 diabetes, or T1D, is ongoing at multiple clinical sites in the U.S. In January 2022, we announced positive Day 150 data for the first T1D patient in this clinical trial, including restoration of islet cell function and rapid improvements in multiple measures.

In this first patient, the safety of VX-880 was generally consistent with the immunosuppressive regimen used in this study.

We will continue to dose patients in 2022.

- Two Phase 2 dose ranging acute pain clinical trials evaluating VX-548, a selective small molecule inhibitor of NaV1.8, are underway; one following bunionectomy surgery and the other following abdominoplasty surgery.

We expect to obtain data from the clinical trials evaluating VX-548 in the first quarter of 2022.

- We plan to advance one or more novel small molecule Z-AAT correctors into the clinic in 2022.

- Pursuant to a collaboration with CRISPR that we amended in 2021, we now lead global development, manufacturing and commercialization of CTX001, with support from CRISPR.

- We entered into research collaborations with Obsidian Therapeutics, Inc., Arbor Biotechnologies, Inc., and Mammoth Biosciences, Inc.

information becomes available and as we gain additional understanding of our ongoing programs and potential new programs, as well as those of our competitors.

*COVID-19*

We continue to monitor the impacts of the COVID-19 global pandemic on our business, including in our clinical trials, manufacturing facilities and capabilities, and ability to access necessary resources.

COVID-19 has not materially affected our supply chain or the demand for our medicines, and we believe that we will be able to continue to supply all of our approved medicines to patients globally.

We adjusted our business operations in response to COVID-19 and have continued to monitor local COVID-19 trends and government guidance for each of our site locations.

We are utilizing a site-specific approach to assess and permit employee access to our sites.

Currently, our sites are open to certain employees where appropriate and permitted by local laws and guidelines.

In 2019, we invested significantly in business development transactions designed to augment our pipeline, including the acquisition of Semma Therapeutics, Inc., or Semma, a privately-held company focused on the use of stem cell-derived human islets as a treatment for T1D, and Exonics Therapeutics, Inc., or Exonics, a privately-held company focused on creating transformative gene-editing therapies to repair mutations that cause Duchenne muscular dystrophy, or DMD, and other severe neuromuscular diseases, including myotonic dystrophy type 1, or DM1.

In the Semma acquisition, we paid approximately $950.0 million in cash to Semma equity holders.

In the Exonics acquisition, we paid approximately $245.0 million upfront to Exonics equity holders and agreed to additional payments based upon successful achievement of specified development and regulatory milestones.

Both of our 2019 acquisitions were accounted for as business combinations.

As of the acquisition date for each transaction, the cash payments, as well as the fair value of contingent consideration for Exonics, were allocated primarily to

The fair value of contingent consideration related to Exonics was recorded as a liability and continues to be adjusted on a quarterly basis.

As a result, these acquisitions are primarily reflected in additional assets and liabilities on our consolidated balance sheet.

We have entered into collaborations with biotechnology and pharmaceutical companies in order to acquire rights or to license product candidates or technologies that enhance our pipeline and/or our research capabilities.

[removed: None of these market risk-sensitive instruments] [added: These investments] are [added: denominated in U.S. Dollars and none are] held for trading purposes.

[removed: We invest our cash in a variety of financial instruments,] [added: These instruments] principally [added: include] securities issued by the U.S. government and its agencies, investment-grade corporate bonds and commercial paper, and money market funds.

All of our interest-bearing securities are subject to interest rate risk and could [removed: decline] [added: change] in value if interest rates [removed: fluctuate, including potential fluctuations as a result of COVID-19.][added: fluctuate.]

Due to the conservative nature of these instruments, we do not believe that [removed: we have] [added: the fair value of our investments has a] material exposure to interest rate risk.

Loans under [removed: these] [added: this] credit [removed: agreements] [added: agreement] bear interest, at our option, at [removed: either] a base rate or a [removed: Eurocurrency rate, in each case] [added: Secured Overnight Financing Rate (“SOFR”),] plus an applicable margin based on our consolidated leverage ratio (the ratio of our total consolidated funded indebtedness to our consolidated EBITDA for the most recently completed four fiscal quarter period).

Pursuant to [removed: the] [added: our] credit [removed: agreement that we entered into in 2019,] [added: agreement,] the applicable margin on base rate loans ranges from [removed: 0.125%] [added: 0.000%] to 0.500% and the applicable margin on [removed: Eurocurrency] [added: SOFR] loans ranges from [removed: 1.125%] [added: 1.000%] to 1.500%.

We do not believe that changes in interest rates related to [removed: either] [added: our] credit agreement would have a material effect on our consolidated financial statements.

As of December 31, [removed: 2021,] [added: 2022,] we had no principal or interest outstanding under [removed: either of] our [removed: existing] credit [removed: facilities.][added: facility.]

A portion of our “Interest expense” in [removed: 2022] [added: 2023] will be dependent on whether, and to what extent, we borrow amounts under [removed: these existing facilities.][added: this facility.]

As a result of our foreign operations, we face [added: significant] exposure to movements in foreign currency exchange rates, primarily the Euro and British Pound against the U.S. [removed: Dollar.][added: dollar.]

Fluctuations in the [removed: global markets, including as a result] [added: amounts] of [removed: COVID-19,] [added: our foreign revenues and fluctuations in foreign currency exchange rates,] may have a positive or negative effect on our foreign exchange rate exposure.

We have a foreign currency management [removed: program] [added: program, which is separate from our investment policy and portfolio,] with the objective of reducing the effect of exchange rate fluctuations on our operating results and forecasted revenues [removed: and expenses] denominated in foreign currencies.

As of December 31, [removed: 2021,] [added: 2022,] we held foreign exchange forward contracts that were designated as cash flow hedges with notional amounts totaling [removed: $1.9] [added: $2.2] billion representing a net fair value of [removed: $38.2] [added: $33.1] million [removed: recorded] on our consolidated balance sheet.

If the December 31, [removed: 2021] [added: 2022] exchange rates were to change by a hypothetical 10%, the fair value recorded on our consolidated balance sheet related to our foreign exchange forward contracts that were designated as cash flow hedges as of December 31, [removed: 2021] [added: 2022] would change by approximately [removed: $189.3] [added: $220.2] million.

However, since these contracts hedge a specific portion of our forecasted product revenues denominated in certain foreign currencies, any change in the fair value of these contracts is recorded in “Accumulated other comprehensive [removed: income (loss)”] [added: income”] on our consolidated balance [removed: sheet] [added: sheets] and is [removed: reclassified to earnings in the same periods during which the underlying product revenues affect earnings.]

Financial Instruments

The investment portfolio is used to preserve our capital, provide adequate liquidity and earn returns commensurate with our risk appetite.

We invest in instruments that meet the credit quality standards outlined in our investment policy, which also limits the amount of credit exposure to any one issue or type of instrument.

Since we account for these securities as available-for-sale, no gains or losses are realized due to changes in the fair value of our investments unless we sell our investments prior to maturity or incur a credit loss.

While we are exposed to global interest rate fluctuations, our investment portfolio is most affected by fluctuations in U.S. interest rates, which affect the interest earned on our cash, cash equivalents and marketable securities.

Credit Agreement

In 2022, we entered into a $500.0 million unsecured revolving credit facility (“credit agreement”).

reclassified to earnings in the same periods during which the underlying product revenues affect earnings.

The investment portfolio is used to preserve our capital.

We do not have derivative financial instruments in our investment portfolio.

These investments are denominated in U.S. Dollars.

If interest rates were to increase or decrease by 1%, the fair value of our investment portfolio would increase or decrease by an immaterial amount.

We entered into a credit agreement in each of 2020 and 2019.

Pursuant to the credit agreement that we entered into in 2020, the applicable margin on base rate loans ranges from 0.500% to 0.875% and the applicable margin on Eurocurrency loans ranges from 1.500% to 1.875%.

Both positive and negative effects to our net revenues from international product sales from movements in exchange rates are partially mitigated by the natural, opposite effect that exchange rates have on our international operating costs and expenses.

We are a global biotechnology company that invests in scientific innovation to create transformative medicines for people with serious [removed: diseases] [added: diseases,] with a focus on specialty markets.

We have [removed: multiple] [added: four] approved medicines that treat the underlying cause of cystic [removed: fibrosis, or CF,] [added: fibrosis (“CF”),] a life-threatening genetic disease, and we [removed: have several ongoing clinical and research programs] [added: continue] to [removed: advance and extend treatment of] [added: focus on developing additional treatments for] CF.

Beyond CF, we have a pipeline [removed: of investigational therapies] [added: that includes mid- and late-stage clinical programs] in [removed: other serious diseases where we are leveraging insight into causal human biology, including] sickle cell disease, beta thalassemia, [added: acute and neuropathic pain,] APOL1-mediated kidney disease, type 1 diabetes, [removed: pain,] [added: and] alpha-1 antitrypsin deficiency, and [added: earlier-stage programs in diseases such as] muscular dystrophies.

Collectively, our [removed: four] [added: CF] medicines are being used to treat the majority of the approximately [removed: 83,000] [added: 88,000] people with CF in North America, Europe and Australia.

[removed: We] [added: Through label expansions, approval of new medicines, and expanded reimbursement, we] are focused on increasing the number of people with CF [added: who are] eligible and able to receive our [removed: medicines through label expansions, approval of new medicines, and expanded reimbursement.][added: medicines.]

We are evaluating our current medicines in additional patient populations, including younger children, with the goal of having small molecule treatments for [removed: approximately 90% of] [added: all] people [removed: with CF.][added: who have at least one mutation in their cystic fibrosis transmembrane conductance regulator (“CFTR”) gene that is responsive to our CFTR modulators.]

Our [added: core] strategy is to discover and develop innovative medicines by combining transformative advances in the understanding of human disease [removed: biology] and [removed: in] the science of [removed: therapeutics.][added: therapeutics to dramatically advance human health.]

[removed: This] [added: Our] research and early development strategy includes advancing multiple compounds [added: or therapies] from each program into early clinical trials [removed: and evaluating the resulting] [added: to obtain] patient data [removed: to] [added: that can] inform [added: selection of] the [added: most promising compounds for later stage development as well as inform our ongoing] discovery and development [removed: of additional compounds, with the goal of bringing first-in-class and best-in-class therapies to patients.][added: efforts.]

[removed: Our strategy and] [added: This serial innovation] approach [removed: are] [added: is] intended to increase the likelihood of successfully bringing transformative medicines to [removed: patients,] [added: patients] and [removed: to] provide durable clinical and commercial success.

[removed: We] [added: Beyond CF, we] are advancing programs across multiple disease areas and modalities, including:

[removed: - *Cystic Fibrosis.*] We are evaluating [removed: in Phase 3 clinical trials] a [removed: new,] once-daily [removed: investigational] triple combination of [removed: VX-121/tezacaftor/VX-561 (deutivacaftor).][added: vanzacaftor/tezacaftor/deutivacaftor, formerly known as VX-121/tezacaftor/VX-561, in Phase 3 clinical trials.]

We [removed: also are researching] [added: continue to research] genetic [removed: therapies] [added: therapies, such as mRNA,] and gene-editing [removed: approaches] [added: approaches,] to treat [removed: the remaining approximately 10% of] people with CF who [removed: are] [added: do] not [removed: expected to] [added: make CFTR protein and, as a result, cannot] benefit from our [removed: small molecule medicines.][added: CFTR modulators.]

- *Sickle Cell Disease and Beta Thalassemia.* We [removed: are evaluating] [added: have completed enrollment] in [added: two ongoing] Phase 3 clinical trials [added: of exagamglogene autotemcel (“exa-cel”), formerly known as] CTX001, an investigational CRISPR/Cas9-based gene-editing therapy for severe sickle cell [removed: disease, or SCD,] [added: disease (“SCD”),] and transfusion-dependent beta [removed: thalassemia, or TDT, with CRISPR Therapeutics AG, or CRISPR.][added: thalassemia (“TDT”).]

- *Type 1 Diabetes.* We are evaluating VX-880, [removed: a] [added: an investigational] stem-cell derived [added: fully-differentiated] islet cell [removed: therapy involving the transplantation of islet cells,] [added: therapy,] for the [removed: potential] treatment of type 1 [removed: diabetes, or T1D,] [added: diabetes (“T1D”)] in a Phase 1/2 clinical [removed: trial, and recently announced positive Day 150 data for the first T1D patient] [added: trial] in [removed: this clinical trial.][added: which patients receive immunosuppressive therapy to protect the islet cells from immune rejection.]

We are evaluating VX-548, a [added: non-opioid, investigational] NaV 1.8 inhibitor, for the [removed: non-opioid] treatment of [removed: acute pain in two Phase 2 clinical trials.][added: pain.]

We are [removed: also] exploring [removed: potential small molecule] [added: multiple] approaches to address the underlying causal biology for [removed: both DMD and DM1.][added: Myotonic Dystrophy Type 1 (“DM1”), including small molecules.]

We plan to continue investing [removed: in] [added: to advance] our [removed: research and development programs and] [added: strategy,] fostering scientific innovation by identifying additional product candidates through [removed: our] internal research [removed: efforts] [added: efforts,] and investing in business development transactions to access emerging technologies, products and product candidates.

[removed: CYSTIC FIBROSIS][added: *Cystic Fibrosis Foundation*]

CF is a life-shortening genetic disease caused by a defective or missing [removed: cystic fibrosis transmembrane conductance regulator, or CFTR,] [added: CFTR] protein resulting from mutations in the CFTR gene.

CFTR potentiators such as ivacaftor and [removed: VX-561] [added: deutivacaftor, formerly VX-561,] increase the probability that the CFTR protein channels open on the cell surface, increasing the flow of salt and water into and out of the cell.

CFTR correctors, such as lumacaftor, tezacaftor, [removed: and] elexacaftor, [removed: help] [added: and vanzacaftor, formerly VX-121, increase the proper protein processing and folding of mutant] CFTR [removed: proteins reach] [added: proteins, such that a larger amount of functional CFTR protein reaches] the cell surface.

Our medicines are collectively being used by [removed: the majority] [added: approximately two-thirds] of people with CF in North America, Europe and Australia.

Our approved medicines, including information regarding the indication and age groups for which the medicine is [removed: approved,] [added: approved in the U.S. and Europe,] are set forth in the table below.

| [removed: ] [added: ] | | | elexacaftor/tezacaftor/ivacaftor and ivacaftor | | | U.S. (2019) | | | People with CF with (i) at least one F508del mutation, or (ii) another mutation that is responsive to elexacaftor/tezacaftor/ivacaftor and ivacaftor | | | 6 years of age and older | | |

| [removed: ] [added: ] | | | elexacaftor/tezacaftor/ivacaftor and ivacaftor | | | E.U. (2020) | | | People with CF with at least one F508del mutation | | | 6 years of age and older | | |

| [removed: ] [added: ] | | | tezacaftor/ivacaftor and ivacaftor | | | U.S. (2018) | | | People with CF (i) homozygous for the F508del mutation or (ii) with at least one mutation that is responsive to tezacaftor/ivacaftor | | | 6 years of age and older | | |

| [removed: ] [added: ] | | | tezacaftor/ivacaftor | | | E.U. (2018) | | | People with CF (i) homozygous for the F508del mutation or (ii) with one copy of the F508del mutation and one copy of certain mutations that result in residual CFTR activity | | | 6 years of age and older | | |

| [removed: ] [added: ] | | | lumacaftor/ivacaftor | | | U.S. (2015) | | | People with CF homozygous for the F508del mutation | | | [removed: 2 years] [added: 1 year] of age and older | | |

| [removed: ] [added: ] | | | ivacaftor | | | U.S. (2012) | | | People with CF with a mutation that is responsive to ivacaftor | | | 4 months of age and older | | |

| (1) At the end of the Brexit transition period on January 1, 2021, the [removed: Medicines and Healthcare products Regulatory Agency, or] MHRA, in Great Britain approved licenses for supply of each product in England, Scotland and Wales. The existing [removed: European Medicines Agency, or EMA,] [added: EMA] licenses continue to authorize supply in Northern Ireland. | | | | | | | | | | | | | | |

[added: TRIKAFTA/KAFTRIO is now approved and reimbursed or accessible in more than 30 countries outside the U.S.] In addition to the European [removed: Union, or the E.U.] [added: Union (the “E.U.”)] and the [removed: United States, or the] U.S., we market our products in additional countries, including the United [removed: Kingdom, or the U.K.,] [added: Kingdom (the “U.K.”),] Australia, [removed: Switzerland, Israel,] and Canada.

Since the beginning of [removed: 2021,] [added: 2022,] events that have resulted from our efforts include:

- Health Canada granted marketing authorization for TRIKAFTA for people with CF [removed: 12] [added: 6 through 11] years of age [removed: and older] who have at least one F508del mutation.

- [removed: In January 2022, the] [added: The] European Commission and the MHRA granted marketing authorization for KAFTRIO for the treatment of children with CF 6 through 11 years of age who have at least one F508del mutation in the CFTR gene.

[removed: -] TRIKAFTA/KAFTRIO is [removed: now approved and] reimbursed or accessible in more than [removed: 20] [added: 30] countries outside the U.S. [added: We expect to continue to focus significant resources to obtain expanded reimbursement for our CF medicines and pipeline therapies in ex-U.S. markets.]

Our research strategy is to combine transformative advances in the understanding of human disease [removed: biology] and [added: in] the science of therapeutics to [removed: discover and develop new medicines.][added: dramatically advance human health.]

[removed: Our] [added: This] approach [removed: to drug discovery] has been validated through our success in moving novel [removed: small molecule] product candidates into clinical trials and obtaining marketing approvals for TRIKAFTA/KAFTRIO, KALYDECO, ORKAMBI, and SYMDEKO/SYMKEVI for the treatment of CF and INCIVEK (telaprevir) for the treatment of hepatitis C infection.

We continue to research and develop small molecule product candidates for the treatment of serious diseases, including CF, [removed: APOL1-mediated kidney disease,] pain, [removed: AATD, DMD] [added: AMKD, AAT deficiency (“AATD”)] and DM1.

Our research and development approach includes [removed: advancing multiple candidates into clinical trials,] pursuing multiple modalities [removed: and evaluating] [added: tailored to the specific disease target under investigation, using] clinical and non-clinical data to inform drug discovery and development, [added: and advancing multiple candidates into clinical trials] with the goal of bringing [added: first-in-class followed by] best-in-class therapies to patients.

We have increased our internal investment in cell and genetic therapies, including establishment of a new research and [removed: development] [added: current Good Manufacturing Practices (“cGMP”) clinical manufacturing] site in Boston, Massachusetts [removed: focused primarily on] [added: to bring together our portfolio of] cell and genetic [removed: therapies.][added: therapy technologies and teams.]

We believe this new triple-combination has the potential to provide enhanced benefits to CF patients who have at least one mutation in their CFTR gene.

This regimen also carries a lower royalty burden.

In addition, in December 2022, the U.S. Food and Drug Administration (“FDA”), cleared our Investigational New Drug Application (“IND”) for VX-522, a messenger ribonucleic acid (“mRNA”) therapeutic we are developing in collaboration with Moderna, Inc. (“Moderna”), that has the potential to benefit the approximately 5,000 people with CF in North America, Europe and Australia who cannot benefit from CFTR modulators.

In the fourth quarter of 2022, we completed European regulatory submissions for exa-cel and initiated a rolling submission in the United States (the “U.S.”).

The European Medicines Agency (“EMA”) and the Medicines and Healthcare products Regulatory Agency (“MHRA”) have validated the marketing authorization application (“MAA”) for exa-cel.

Our most advanced clinical trials in pain are three Phase 3 clinical trials of VX-548 as a potential treatment for moderate to severe acute pain.

In addition, we have initiated a Phase 2 clinical trial evaluating VX-548 in chronic neuropathic pain.

- *APOL1-Mediated Kidney Disease.* We are evaluating inaxaplin, formerly known as VX-147, our investigational small molecule for the treatment of APOL1-mediated kidney disease (“AMKD”) in a Phase 2/3 clinical trial.

Our Clinical Trial Application (“CTA”) in Canada for our second program in T1D, VX-264, in which the implanted islet cells are encapsulated in an immunoprotective device, was authorized and we plan to begin screening, enrollment and dosing in Canada in the coming months.

In the U.S., the IND is on hold.

- *Alpha-1 Antitrypsin Deficiency.* We initiated a clinical trial for VX-634, which is the first in a series of next-wave investigational molecules with significantly improved potency and drug-like properties as compared to our previous Alpha-1 Antitrypsin (“AAT”) correctors.

We initiated a Phase 2 clinical trial of VX-864, a first-generation AAT corrector, to assess the impact of longer-term treatment on the liver, as well as the levels of functional AAT in the plasma.

- *Duchenne Muscular Dystrophy and Myotonic Dystrophy Type 1.* We are conducting IND-enabling studies for our first in vivo gene-editing therapy for Duchenne Muscular Dystrophy (“DMD”), and we expect to submit an IND for this program in 2023.

- In addition to the programs listed above, we have a number of earlier-stage research programs aimed at diseases that fit our research and development strategy.

That strategy focuses on validated targets that address causal human biology, predictive lab assays and clinical biomarkers, rapid paths to registration and approval, and product candidates that hold the potential for transformative patient benefit.

We aim to rapidly follow our first-in-class therapies that achieve proof-of-concept with potential best-in-class candidates.

We continue to invest in active research to identify additional candidate therapies in support of the clinical stage programs described above and in other targets that are consistent with our core research strategy.

- The FDA approved the use of ORKAMBI for children with CF 12 to less than 24 months of age who are homozygous for the F508del mutation in the CFTR gene.

- In the fourth quarter of 2022, we submitted global regulatory filings for TRIKAFTA/KAFTRIO in children with CF 2 to 5 years of age and for KALYDECO in children with CF from 1 month to less than 4 months of age.

Our approach to drug discovery has been further validated by our successful demonstration of clinical proof-of-concept in six additional disease areas: in SCD and beta thalassemia with exa-cel, in acute and neuropathic pain with our NaV1.8 inhibitors, in AMKD with inaxaplin, and in T1D with a stem cell-derived islet cell therapy.

- our acquisition of ViaCyte, Inc. (“ViaCyte”), a biotechnology company with intellectual property, tools, technologies and assets with potential to accelerate development of our stem-cell based T1D programs;

Consistent with our research and development strategy, all of our investments in research and development and in external innovation are designed to deliver a portfolio with greater likelihood of success.

We focus on:

- rapid path to registration and approval; and

- potential for transformative benefit regardless of modality.

on our strategy.

In parallel, we have initiated a clinical trial, RIDGELINE, evaluating vanzacaftor/tezacaftor/deutivacaftor in children with CF 6 to 11 years of age.

We expect to complete the SKYLINE 102 and SKYLINE 103 clinical trials by the end of 2023.

In December 2022, the FDA cleared our IND for VX-522.

We have initiated a single ascending dose clinical trial for VX-522 in people with CF, which is active and enrolling patients.

We expect to complete the single ascending dose clinical trial and initiate the multiple ascending dose clinical trial in 2023.

We completed regulatory submissions to the EMA and the MHRA for exa-cel for SCD and TDT in the fourth quarter of 2022, and both the EMA and MHRA have validated the MAA.

We also initiated the submission of a biologics licensing application (“BLA”) for exa-cel for SCD and TDT for rolling review by the FDA in November 2022, and we expect to complete the submission by the end of the first quarter of 2023.

We are enrolling in two Phase 3 clinical trials of exa-cel in patients 5 to 11 years of age, one in SCD and a second in TDT.

Patients with pain can be categorized as suffering from one of three types of pain: acute pain, chronic neuropathic pain (caused primarily by damage or dysfunction of the nervous system) or chronic musculoskeletal pain (caused primarily by damage to muscle, joints or bone).

Acute pain usually resolves in days or weeks (for example, following surgery or an injury), while chronic pain generally lasts greater than three months due to unresolved or ongoing damage to tissues.

We have discovered multiple selective small molecule inhibitors of NaV1.8 as potential treatments for pain.

In early 2022, we reported positive data from two Phase 2 acute pain clinical trials for VX-548, a NaV1.8 inhibitor.

Both Phase 2 trials met their primary endpoint and established proof-of-concept for VX-548 for the treatment of acute pain following bunionectomy or abdominoplasty surgery.

In addition, VX-548 was generally well tolerated by patients in these studies.

Research and Development

Enrollment is complete, and we anticipate regulatory submissions for CTX001 in late 2022.

- *APOL1-Mediated Kidney Disease.* Based on positive Phase 2 data for VX-147, our small molecule for the treatment of APOL1-mediated focal segmental glomerulosclerosis, or FSGS, we expect to advance VX-147 into pivotal development in a broader population of people with APOL1-mediated kidney disease, or AMKD, in the first quarter of 2022.

We will continue to dose patients in 2022.

We also are pursuing additional programs in T1D, in which the implanted islet cells are encapsulated in an immunoprotective device or modified to produce hypoimmune cells.

We expect to have data from these clinical trials in the first quarter of 2022.

- *Alpha-1 Antitrypsin, or AAT, Deficiency.* We obtained proof-of-mechanism for VX-864 in a Phase 2 study of protein folding correction of the Z-AAT protein.

We plan to advance into the clinic one or more novel small molecule correctors intended to address the lung and liver manifestations of AAT deficiency, or AATD, in 2022.

- *Duchenne muscular dystrophy, or DMD, and myotonic dystrophy type 1, or DM1.* We are focused on advancing gene-editing therapies aimed at treating the underlying cause of DMD and DM1.

- In addition to the clinical stage programs listed above, we have a number of early-stage research programs aimed at other targets that represent the causal human biology of serious diseases.

Background

Our Medicines

- The U.S. Food and Drug Administration, or the FDA, approved the use of TRIKAFTA for children with CF 6 through 11 years of age who have at least one F508del mutation or at least one other mutation that is responsive to TRIKAFTA.

Our application for approval of TRIKAFTA for children 6 through 11 years of age has been accepted for priority review by Health Canada.

In addition, we have achieved clinical proof-of-concept for gene-editing of BCL11A for the treatment of beta thalassemia and SCD, for APOL1 inhibition to decrease proteinuria in patients with APOL1-mediated kidney disease, and for NaV1.8 inhibition in the treatment of three different pain models.

The experience we gained developing medicines for CF and our analysis of research and development programs conducted by other companies in our industry have shaped a disciplined strategy that guides our investments in research and development and external innovation that focuses on:

- transformative treatments for life-threatening diseases with a high unmet medical need;

- innovative therapeutic approaches to addressing those targets;

- efficient clinical and regulatory paths to bring new medicines to patients.

We will

Both clinical trials will measure the regulatory-enabling endpoint of absolute change in ppFEV1, a measure of lung function, that will be analyzed for non-inferiority to TRIKAFTA.

The clinical trials also are designed to assess the absolute change from baseline in ppFEV1 and sweat chloride for superiority to TRIKAFTA.

We continue to research genetic therapies, such as messenger ribonucleic acid, or mRNA, and gene-editing approaches, to treat the remaining approximately 10% of people with CF who do not make CFTR protein and, as a result, are not expected to benefit from our small molecule medicines.

Enrollment is complete in the ongoing clinical trials evaluating CTX001 in severe SCD and TDT.

We anticipate regulatory submissions of CTX001 in late 2022.

Patients with AMKD inherit two mutations in the APOL1 gene resulting in significant proteinuria, and are characterized by a high risk of progression to end stage renal disease.

We anticipate completing our end of Phase 2 meetings with regulators and advancing VX-147 into pivotal development in people with APOL1-mediated kidney disease, including APOL1-mediated FSGS, in the first quarter of 2022.

development of hypoimmune cells to optimize how we protect the implanted islet cells from the immune system.

In January 2022, we announced positive Day 150 data for the first T1D patient in the Phase 1/2 clinical trial of VX-880, including restoration of islet cell function and rapid improvements in multiple measures.

We will continue to dose patients in 2022.

Patients with pain can suffer from acute pain (for example, following surgery or an injury), neuropathic pain (when there is damage to a nerve), and musculoskeletal pain.

VX-548 is a next generation NaV1.8 inhibitor.

We are conducting two Phase 2 dose ranging acute pain clinical trials; one following bunionectomy surgery and the other following abdominoplasty surgery.

We expect to have data from both clinical trials in the first quarter of 2022.

In June 2021, we announced that we had achieved our primary endpoint and established proof of mechanism in a Phase 2 clinical trial evaluating our Z-AAT corrector, VX-864, for the treatment of people with AATD who have two copies of the Z mutation.

However, because the magnitude of treatment effect was unlikely to translate into substantial clinical benefit, we decided not to advance VX-864 into late-stage development.

We continue to discover and develop additional molecules with increased potential to correct AATD, and we plan to advance one or more novel small molecule Z-AAT correctors into the clinic in 2022.

In 2019, we acquired Exonics and expanded our collaboration with CRISPR establishing preclinical programs to develop gene-editing therapies for DMD and DM1.

We are focused on advancing gene-editing therapies aimed at treating the underlying cause of

DMD by restoring expression of near-full length dystrophin protein, and in DM1, by addressing the repeat expansion that causes the disease.

For the Fiscal Year Ended December 31, [removed: 2021][added: 2022]

The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant based on the closing price on June 30, [removed: 2021] [added: 2022] (the last business day of the registrant’s most recently completed second fiscal quarter of [removed: 2021)] [added: 2022)] was [removed: $51.6] [added: $71.8] billion.

As of January 31, [removed: 2022,] [added: 2023,] the registrant had [removed: 254,576,691] [added: 257,091,441] shares of common stock outstanding.

Portions of the definitive proxy statement for the [removed: 2022] [added: 2023] Annual Meeting of Shareholders, which we expect to hold on May [removed: 18, 2022,] [added: 17, 2023,] are incorporated by reference into Part III of this Annual Report on Form 10-K.

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“VERTEX®,” “KALYDECO®,” “ORKAMBI®,” “SYMDEKO®,” [removed: “SYMKEVI®” and] [added: “SYMKEVI®,”] “TRIKAFTA®” [added: and “KAFTRIO®”] are registered trademarks of Vertex.

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b).

| [PART I](#i5c4c42cb7ea848439e393b69b8c9b2a8_10) | | | | | | | | |

| [PART II](#i5c4c42cb7ea848439e393b69b8c9b2a8_64) | | | | | | | | |

| [Item 9C.](#i5c4c42cb7ea848439e393b69b8c9b2a8_1939) | | | [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](#i5c4c42cb7ea848439e393b69b8c9b2a8_1939) | | | [85](#i5c4c42cb7ea848439e393b69b8c9b2a8_1939) | | |

| [PART III](#i5c4c42cb7ea848439e393b69b8c9b2a8_103) | | | | | | | | |

| [PART IV](#i5c4c42cb7ea848439e393b69b8c9b2a8_121) | | | | | | | | |

| | | | [Signatures](#i5c4c42cb7ea848439e393b69b8c9b2a8_130) | | | [90](#i5c4c42cb7ea848439e393b69b8c9b2a8_130) | | |

| [PART I](#iaef11c99474e4a9694d7f63d097bb40f_10) | | | | | | | | |

| [PART II](#iaef11c99474e4a9694d7f63d097bb40f_64) | | | | | | | | |

| [PART III](#iaef11c99474e4a9694d7f63d097bb40f_106) | | | | | | | | |

| [PART IV](#iaef11c99474e4a9694d7f63d097bb40f_124) | | | | | | | | |

| | | | [Signatures](#iaef11c99474e4a9694d7f63d097bb40f_133) | | | [85](#iaef11c99474e4a9694d7f63d097bb40f_133) | | |

The trademark for “KAFTRIO” is pending in the United States and registered in the European Union.

We did not receive any written comments from the Securities and Exchange Commission prior to the date 180 days before the end of the fiscal year ended December 31, [removed: 2021] [added: 2022] regarding our filings under the Securities Exchange Act of 1934, as amended, that have not been resolved.

In addition to our corporate headquarters, we lease an aggregate of approximately [removed: 728,000] [added: 838,000] square feet of space globally.

As of January 31, [removed: 2022,] [added: 2023,] there were 107 holders of record of our common stock.

[removed: ][added: ]

Our performance graph includes the NASDAQ Biotechnology Index, which we believe is a comparable index consisting of companies with similar industry classifications, and which we plan to use in our future performance graphs.

We have never paid any cash dividends on our common stock, and we do not anticipate paying any in the foreseeable future.

We did not repurchase any shares of our common stock under the 2021 Share Repurchase Program in the three months ended December 31, 2022.

On December 31, 2022, the 2021 Share Repurchase Program expired with $499.7 million remaining authorization.

In February 2023, our Board of Directors approved a share repurchase program (the “2023 Share Repurchase Program”) pursuant to which we are authorized to repurchase up to $3.0 billion of our common stock.

We currently expect that any future earnings will be retained for use in our business.

Any future determination to declare cash dividends will be subject to the discretion of our board of directors and applicable law and will depend on various factors, including our results of operations, financial condition, prospects and any other factors deemed relevant by our board of directors.

In addition, our credit agreement limits our ability to pay cash dividends on our common stock.

The table set forth below shows repurchases of securities by us during the three months ended December 31, 2021 under our 2021 Share Repurchase Program.

| | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Period | | | Total Number of Shares Purchased | | | | | | Average Price Paid per Share | | | | | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) | | | | | | Approximate dollar value of Shares that May Yet be Purchased Under the Plans or Programs (1) | | |

| Oct. 1, 2021 to Oct. 31, 2021 | | | 1,984,142 | | | | | | $ | 180.33 | | | | | 1,984,142 | | | | | | $ | 500,000,086 | |

| Nov. 1, 2021 to Nov. 30, 2021 | | | 1,900 | | | | | | $ | 180.00 | | | | | 1,900 | | | | | | $ | 499,658,094 | |

| Dec. 1, 2021 to Dec. 31, 2021 | | | — | | | | | | $ | — | | | | | — | | | | | | $ | 499,658,094 | |

| Total | | | 1,986,042 | | | | | | $ | 180.33 | | | | | 1,986,042 | | | | | | $ | 499,658,094 | |

(1)Under our 2021 Share Repurchase Program, we are authorized to purchase shares from time to time through open market or privately negotiated transactions.

Such purchases may be made pursuant to Rule 10b5-1 plans or other means as determined by our management and in accordance with the requirements of the Securities and Exchange Commission.

The approximate dollar value of shares that may yet be repurchased is based solely on shares that may be repurchased under the share repurchase program and excludes any shares that may be repurchased under our employee equity programs.

Management assessed the effectiveness of our internal control over financial reporting as of December 31, [removed: 2021.][added: 2022.]

In making this assessment, we used the criteria set forth in the *Internal Control—Integrated Framework (2013)* issued by the Committee of Sponsoring Organizations of the Treadway Commission [removed: (COSO).][added: (“COSO”).]

Based on our assessment, management has concluded that, as of December 31, [removed: 2021,] [added: 2022,] our internal control over financial reporting is effective based on those criteria.

(3) Changes in Internal Controls. During the quarter ended December 31, [removed: 2021,] [added: 2022,] there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

We have audited Vertex Pharmaceuticals Incorporated’s internal control over financial reporting as of December 31, [removed: 2021,] [added: 2022,] based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

In our opinion, Vertex Pharmaceuticals Incorporated (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2021,] [added: 2022,] based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the [removed: 2021] [added: 2022] consolidated financial statements of the Company and our report dated February [removed: 9, 2022,] [added: 10, 2023,] expressed an unqualified opinion thereon.

February 10, 2023

February 9, 2022

On February [removed: 7, 2022,] [added: 8, 2023,] the Company entered into an amendment to Dr. Jeffrey Leiden’s employment agreement, which was scheduled to expire on March 31, [removed: 2023.][added: 2024.]

Among other things, the amendment extends the term for one year through March 31, [removed: 2024] [added: 2025] and provides that Dr. Leiden’s equity compensation during the final year of the amended employment agreement will be equivalent to his equity compensation in the preceding year.

The foregoing description of the amendment to Dr. Leiden’s employment agreement does not purport to be complete and is qualified in its entirety by reference to the full text of such agreement, which is filed as Exhibit [removed: 10.24] [added: 10.23] to this Annual Report on Form 10-K and incorporated [added: herein] by [removed: reference herein.][added: reference.]

*Amended and Restated By-Laws*

On February 8, 2023, our Board of Directors approved an amendment and restatement of our By-Laws (the “Amended and Restated By-Laws”), effective immediately upon approval by the Board.

The Amended and Restated By-Laws had the effect of amending the previous By-Laws of the Company by:

- expanding the advanced notice by-law to cover both board nominations by a shareholder and any other business brought by a shareholder before an annual or special meeting (unless the proposal is made pursuant to Rule 14a-8 of the Exchange Act, in which case Rule 14a-8 of the Exchange Act will govern);

- providing that, for an annual meeting of shareholder, a shareholders’ advanced notice of shareholder business or a nomination must be provided no earlier than 120 days and no later than 90 days prior to the anniversary date of the immediately preceding annual meeting;

- expanding the disclosures required to be made by a shareholder seeking to bring business or a nomination before a shareholders’ meeting under the by-laws, including, among other things, certain ownership information of the nominating shareholder and a completed director questionnaire with respect to the nominee;

- requiring a nominating shareholder to comply with Rule 14a-9 under the U.S. Securities Exchange Act of 1934, as amended, which is also known as the “universal proxy card rules”;

- mandating that a nominating shareholder use a color for its proxy card that is other than white;

- expressly permitting the Chief Executive Officer to call special meetings of the Board, and increasing the number of directors necessary to call a special meeting from two to three; and

- expressly stating that the Chief Executive Officer of the Company (which may or may not be the same person as the President of the Company) is an officer of the Company.

The amendments also include various conforming, technical and non-substantive changes, including gender-neutral language.

The foregoing summary of the amendments to the Amended and Restated By-Laws does not purport to be complete and is qualified in its entirety by reference to the Amended and Restated By-Laws, which is filed as Exhibit 3.2 to this Annual Report on Form 10-K and is incorporated herein by reference.

*Jeffrey Leiden Amendment*

PART III

Portions of our definitive Proxy Statement for the 2022 Annual Meeting of Shareholders, or 2022 Proxy Statement, are incorporated by reference into this Part III of our Annual Report on Form 10-K.

None.

PART III

Portions of our definitive Proxy Statement for the 2023 Annual Meeting of Shareholders (“2023 Proxy Statement”) are incorporated by reference into this Part III of our Annual Report on Form 10-K.

The information regarding directors required by this Item 10 will be included in our [removed: 2022] [added: 2023] Proxy Statement and is incorporated herein by reference.

We expect this information to be provided under “Election of Directors,” “Corporate Governance and Risk Management,” “Shareholder Proposals for the [removed: 2022] [added: 2024] Annual Meeting and Nominations for Director,” “Delinquent Section 16(a) Reports” and “Code of Conduct.” The information regarding executive officers required by this Item 10 is included in Part I of this Annual Report on Form 10-K.

The information required by this Item 11 will be included in the [removed: 2022] [added: 2023] Proxy Statement and is incorporated herein by reference.

The information required by this Item 12 will be included in the [removed: 2022] [added: 2023] Proxy Statement and is incorporated herein by reference.

The information required by this Item 13 will be included in the [removed: 2022] [added: 2023] Proxy Statement and is incorporated herein by reference.

The information required by this Item 14 will be included in the [removed: 2022] [added: 2023] Proxy Statement and is incorporated herein by reference.

| Report of Independent Registered Public Accounting Firm (PCAOB ID: 42) | | | [removed: F-[1](#iaef11c99474e4a9694d7f63d097bb40f_136)] [added: F-[1](#i5c4c42cb7ea848439e393b69b8c9b2a8_133)] | | |

| Consolidated Statements of Operations for the years ended December 31, [removed: 2021, 2020] [added: 2022, 2021] and [removed: 2019] [added: 2020] | | | [removed: F-[3](#iaef11c99474e4a9694d7f63d097bb40f_139)] [added: F-[3](#i5c4c42cb7ea848439e393b69b8c9b2a8_136)] | | |

| Consolidated Statements of Comprehensive Income for the years ended December 31, [removed: 2021, 2020] [added: 2022, 2021] and [removed: 2019] [added: 2020] | | | [removed: F-[4](#iaef11c99474e4a9694d7f63d097bb40f_142)] [added: F-[4](#i5c4c42cb7ea848439e393b69b8c9b2a8_139)] | | |

| Consolidated Balance Sheets as of December 31, [removed: 2021] [added: 2022] and [removed: 2020] [added: 2021] | | | [removed: F-[5](#iaef11c99474e4a9694d7f63d097bb40f_145)] [added: F-[5](#i5c4c42cb7ea848439e393b69b8c9b2a8_142)] | | |

| Consolidated Statements of Shareholders’ Equity for the years ended December 31, [removed: 2021, 2020] [added: 2022, 2021] and [removed: 2019] [added: 2020] | | | [removed: F-[6](#iaef11c99474e4a9694d7f63d097bb40f_148)] [added: F-[6](#i5c4c42cb7ea848439e393b69b8c9b2a8_145)] | | |

| Consolidated Statements of Cash Flows for the years ended December 31, [removed: 2021, 2020] [added: 2022, 2021] and [removed: 2019] [added: 2020] | | | [removed: F-[7](#iaef11c99474e4a9694d7f63d097bb40f_151)] [added: F-[7](#i5c4c42cb7ea848439e393b69b8c9b2a8_148)] | | |

| Notes to Consolidated Financial Statements | | | [removed: F-[8](#iaef11c99474e4a9694d7f63d097bb40f_157)] [added: F-[8](#i5c4c42cb7ea848439e393b69b8c9b2a8_151)] | | |

| 3.2 | | | [Amended and Restated By-Laws of Vertex Pharmaceuticals [removed: Incorporated.](http://www.sec.gov/Archives/edgar/data/875320/000087532020000019/a2020q110-qexhibit32.htm)] [added: Incorporated.](https://www.sec.gov/Archives/edgar/data/875320/000087532023000007/a10k_2022-exhibit32.htm)] | | | [added: X] | | | [removed: 10-Q (Exhibit 3.2)] | | | [removed: May 1, 2020] | | | [removed: 000-19319] | | |

| 4.2 | | | [Description of [removed: Securities.](https://www.sec.gov/Archives/edgar/data/875320/000087532020000007/a10k2019-exhibit42.htm)] [added: Securities.](https://www.sec.gov/Archives/edgar/data/875320/000087532023000007/a10k_2022-exhibit42.htm)] | | | [added: X] | | | [removed: 10-K (Exhibit 4.2)] | | | [removed: February 13, 2020] | | | [removed: 000-19319] | | |

| 10.9 | | | [Credit Agreement, dated as [removed: of September 17, 2019,] [added: of](https://www.sec.gov/Archives/edgar/data/875320/000087532022000030/a2022q210-qexhibit101.htm) [July 1, 2022](https://www.sec.gov/Archives/edgar/data/875320/000087532022000030/a2022q210-qexhibit101.htm)[,] by and among Vertex Pharmaceuticals Incorporated, Bank of America, N.A. and the other lenders party [removed: thereto.](http://www.sec.gov/Archives/edgar/data/875320/000087532019000057/a2019q310-qexhibit101.htm)] [added: thereto.](https://www.sec.gov/Archives/edgar/data/875320/000087532022000030/a2022q210-qexhibit101.htm)] | | | | | | 10-Q (Exhibit 10.1) | | | [removed: October 31, 2019] [added: August 5, 2022] | | | 000-19319 | | |

| [removed: 10.10] [added: 10.35] | | | [removed: [First Amendment to Credit] [added: [Employment] Agreement, dated [removed: as of December 29,] [added: August 1,] 2020, by and [removed: among] [added: between] Vertex Pharmaceuticals [removed: Incorporated, Bank of America, N.A.] [added: Incorporated] and [removed: the other lender parties thereto.](https://www.sec.gov/Archives/edgar/data/875320/000087532021000006/a10k_2020-exhibit1010.htm)] [added: Nia Tatsis.*](https://www.sec.gov/Archives/edgar/data/875320/000087532022000007/a10k_2021-exhibit1036.htm)] | | | | | | 10-K (Exhibit [removed: 10.10)] [added: 10.36)] | | | February [removed: 11, 2021] [added: 9, 2022] | | | 000-19319 | | |

| [removed: 10.12] [added: 10.1] | | | [Amended and Restated 2006 Stock and Option Plan.*](http://www.sec.gov/Archives/edgar/data/875320/000087532018000029/a2018q310-q_exhibit101.htm) | | | | | | 10-Q (Exhibit 10.1) | | | October 25, 2018 | | | 000-19319 | | |

| [removed: 10.13] [added: 10.11] | | | [Form of Stock Option Agreement under Amended and Restated 2006 Stock and Option [removed: Plan](http://www.sec.gov/Archives/edgar/data/875320/000110465906035103/a06-11895_1ex10d2.htm) [(granted] [added: Plan (granted] prior to July 30, 2013).*](http://www.sec.gov/Archives/edgar/data/875320/000110465906035103/a06-11895_1ex10d2.htm) | | | | | | 8-K (Exhibit 10.2) | | | May 15, 2006 | | | 000-19319 | | |

| [removed: 10.14] [added: 10.12] | | | [Form of Stock Option Agreement under Amended and Restated 2006 Stock and Option Plan (granted on or after July 30, 2013).*](http://www.sec.gov/Archives/edgar/data/875320/000087532015000012/vrtx10k_2014-exhibit1020.htm) | | | | | | 10-K (Exhibit 10.20) | | | February 13, 2015 | | | 000-19319 | | |

| [removed: 10.15] [added: 10.13] | | | [Amended and Restated 2013 Stock and Option [removed: Plan.*](http://www.sec.gov/Archives/edgar/data/875320/000130817919000189/lvrt2019_def14a.htm)] [added: Plan.*](https://www.sec.gov/Archives/edgar/data/875320/000130817922000210/lvrtx2022_def14a.htm)] | | | | | | DEF 14A (Appendix A) | | | April [removed: 26, 2019] [added: 7, 2022] | | | 000-19319 | | |

| [removed: 10.16] [added: 10.14] | | | [Form of Non-Qualified Stock Option Agreement under 2013 Stock and Option Plan.*](http://www.sec.gov/Archives/edgar/data/875320/000087532015000012/vrtx10k_2014-exhibit1017.htm) | | | | | | 10-K (Exhibit 10.17) | | | February 13, 2015 | | | 000-19319 | | |

| [removed: 10.17] [added: 10.15] | | | [Form of Restricted Stock Agreement under 2013 Stock and Option Plan.*](http://www.sec.gov/Archives/edgar/data/875320/000087532015000012/vrtx10k_2014-exhibit1018.htm) | | | | | | 10-K (Exhibit 10.18) | | | February 13, 2015 | | | 000-19319 | | |

| [removed: 10.18] [added: 10.16] | | | [Form of Restricted Stock Unit Agreement under 2013 Stock and Option Plan (U.S.).*](http://www.sec.gov/Archives/edgar/data/875320/000087532016000067/vrtx10k_2015-exhibit1025.htm) | | | | | | 10-K (Exhibit 10.25) | | | February 16, 2016 | | | 000-19319 | | |

| [removed: 10.19] [added: 10.17] | | | [Form of Restricted Stock Unit Agreement under 2013 Stock and Option Plan (International).*](http://www.sec.gov/Archives/edgar/data/875320/000087532015000012/vrtx10k_2014-exhibit1019.htm) | | | | | | 10-K (Exhibit 10.19) | | | February 13, 2015 | | | 000-19319 | | |

| [removed: 10.20] [added: 10.18] | | | [Form of Restricted Stock Unit Agreement Under 2013 Stock and Option Plan.*](http://www.sec.gov/Archives/edgar/data/875320/000087532020000007/a10k2019-exhibit1017.htm) | | | | | | 10-K (Exhibit 10.17) | | | February 13, 2020 | | | 000-19319 | | |

| [removed: 10.21] [added: 10.19] | | | [Non-Employee Director Deferred Compensation Plan.*](http://www.sec.gov/Archives/edgar/data/875320/000087532016000067/vrtx10k_2015-exhibit1027.htm) | | | | | | 10-K (Exhibit 10.27) | | | February 16, 2016 | | | 000-19319 | | |

| [removed: 10.22] [added: 10.20] | | | [Vertex Pharmaceuticals Incorporated Employee Stock Purchase Plan.*](http://www.sec.gov/Archives/edgar/data/875320/000130817919000189/lvrt2019_def14a.htm) | | | | | | DEF 14A (Appendix B) | | | April 26, 2019 | | | 000-19319 | | |

| [removed: 10.23] [added: 10.21] | | | [Employment Agreement, dated as of April 1, 2020, by and between Vertex Pharmaceuticals Incorporated and Jeffrey M. Leiden, M.D., Ph.D.*](http://www.sec.gov/Archives/edgar/data/875320/000087532020000011/employmentagreement.htm) | | | | | | 8-K (Exhibit 10.1) | | | April 1, 2020 | | | 000-19319 | | |

| [removed: 10.24] [added: 10.22] | | | [Amendment No. 1 to Employment Agreement, between Jeffrey M. Leiden and [removed: Vertex](https://www.sec.gov/Archives/edgar/data/875320/000087532022000007/a10k_2021-exhibit1024.htm) [Pharmaceuticals Incorporated](https://www.sec.gov/Archives/edgar/data/875320/000087532022000007/a10k_2021-exhibit1024.htm)[,] [added: Vertex Pharmaceuticals Incorporated,] dated as of February 7, 2022.*](https://www.sec.gov/Archives/edgar/data/875320/000087532022000007/a10k_2021-exhibit1024.htm) | | | [removed: X] | | | [added: 10-K (Exhibit 10.24)] | | | [added: February 9, 2022] | | | [added: 000-19319] | | |

| [removed: 10.25] [added: 10.24] | | | [Employee Non-disclosure, Non-competition and Inventions Agreement between Jeffrey M. Leiden and [removed: Vertex](http://www.sec.gov/Archives/edgar/data/875320/000104746912001298/a2206536zex-10_35.htm) [Pharmaceuticals Incorporated](http://www.sec.gov/Archives/edgar/data/875320/000104746912001298/a2206536zex-10_35.htm)[,] [added: Vertex Pharmaceuticals Incorporated,] dated December 14, 2011.*](http://www.sec.gov/Archives/edgar/data/875320/000104746912001298/a2206536zex-10_35.htm) | | | | | | 10-K (Exhibit 10.35) | | | February 22, 2012 | | | 000-19319 | | |

| [removed: 10.26] [added: 10.25] | | | [Employment Agreement, dated as of July 24, 2019, between Vertex Pharmaceuticals Incorporated and Reshma Kewalramani.*](http://www.sec.gov/Archives/edgar/data/875320/000087532019000026/executiveemploymentagreeme.htm) | | | | | | 8-K (Exhibit 10.1) | | | July 25, 2019 | | | 000-19319 | | |

| [removed: 10.27] [added: 10.26] | | | [Change of Control Agreement, dated as of July 24, 2019, between Vertex Pharmaceuticals Incorporated and Reshma Kewalramani.*](http://www.sec.gov/Archives/edgar/data/875320/000087532019000026/changeofcontrol-rk1.htm) | | | | | | 8-K (Exhibit 10.2) | | | July 25, 2019 | | | 000-19319 | | |

| [removed: 10.28] [added: 10.27] | | | [Employment Agreement, dated as of August 27, 2012, between Vertex Pharmaceuticals Incorporated and Stuart Arbuckle.*](http://www.sec.gov/Archives/edgar/data/875320/000104746912010125/a2211595zex-10_1.htm) | | | | | | 10-Q (Exhibit 10.1) | | | November 6, 2012 | | | 000-19319 | | |

| [removed: 10.29] [added: 10.28] | | | [Change of Control Agreement, dated as of August 27, 2012, between Vertex Pharmaceuticals Incorporated and Stuart Arbuckle.*](http://www.sec.gov/Archives/edgar/data/875320/000104746912010125/a2211595zex-10_2.htm) | | | | | | 10-Q (Exhibit 10.2) | | | November 6, 2012 | | | 000-19319 | | |

| [removed: 10.30] [added: 10.29] | | | [Employment Agreement, dated as of December 12, 2014, between Vertex Pharmaceuticals Incorporated and David Altshuler.*](http://www.sec.gov/Archives/edgar/data/875320/000087532016000067/vrtx10-k_2015xexhibit1034.htm) | | | | | | 10-K (Exhibit 10.34) | | | February 16, 2016 | | | 000-19319 | | |

| [removed: 10.31] [added: 10.30] | | | [Change of Control Agreement, dated as of December 10, 2014, between Vertex Pharmaceuticals Incorporated and David Altshuler.*](http://www.sec.gov/Archives/edgar/data/875320/000087532016000067/vrtx10-k2015xexhibit1035.htm) | | | | | | 10-K (Exhibit 10.35) | | | February 16, 2016 | | | 000-19319 | | |

| [removed: 10.32] [added: 10.31] | | | [Third Amended and Restated Employment Agreement, dated as of February 26, 2013, between Vertex Pharmaceuticals Incorporated and Amit Sachdev.*](http://www.sec.gov/Archives/edgar/data/875320/000087532017000017/a10k_2016-exhibit1042.htm) | | | | | | 10-K (Exhibit 10.42) | | | February 23, 2017 | | | 000-19319 | | |

| [removed: 10.33] [added: 10.32] | | | [Third Amended and Restated Change of Control Agreement, dated as of February 26, 2013, between Vertex Pharmaceuticals Incorporated and Amit Sachdev.*](http://www.sec.gov/Archives/edgar/data/875320/000087532017000017/a10k_2016-exhibit1043.htm) | | | | | | 10-K (Exhibit 10.43) | | | February 23, 2017 | | | 000-19319 | | |

| [removed: 10.34] [added: 10.33] | | | [Employment Agreement, dated March 28, 2019, by and between Vertex Pharmaceuticals Incorporated and Charles F. Wagner, Jr.*](http://www.sec.gov/Archives/edgar/data/875320/000087532019000019/a2019q110-q_exhibit101.htm) | | | | | | 10-Q (Exhibit 10.1) | | | May 1, 2019 | | | 000-19319 | | |

| [removed: 10.35] [added: 10.34] | | | [Change of Control Agreement, dated as of March 28, 2019, by and between Vertex Pharmaceuticals Incorporated and Charles F. Wagner, Jr.*](http://www.sec.gov/Archives/edgar/data/875320/000087532019000019/a2019q110-qexhibit102.htm) | | | | | | 10-Q (Exhibit 10.2) | | | May 1, 2019 | | | 000-19319 | | |

| 10.36 | | | [removed: [Employment] [added: [Change of Control] Agreement, dated August 1, 2020, by and between Vertex Pharmaceuticals Incorporated and Nia [removed: Tatsis](https://www.sec.gov/Archives/edgar/data/875320/000087532022000007/a10k_2021-exhibit1036.htm)[.](https://www.sec.gov/Archives/edgar/data/875320/000087532022000007/a10k_2021-exhibit1036.htm)[*](https://www.sec.gov/Archives/edgar/data/875320/000087532022000007/a10k_2021-exhibit1036.htm)] [added: Tatsis.*](https://www.sec.gov/Archives/edgar/data/875320/000087532022000007/a10k_2021-exhibit1037.htm)] | | | [removed: X] | | | [added: 10-K (Exhibit 10.37)] | | | [added: February 9, 2022] | | | [added: 000-19319] | | |

| [removed: 10.37] [added: 10.23] | | | [removed: [Change of Control] [added: [Amendment No. 2 to Employment] Agreement, [removed: dated August 1, 2020, by and] between [added: Jeffrey M. Leiden and] Vertex Pharmaceuticals [removed: Incorporated and Nia Tatsis](https://www.sec.gov/Archives/edgar/data/875320/000087532022000007/a10k_2021-exhibit1037.htm)[.*](https://www.sec.gov/Archives/edgar/data/875320/000087532022000007/a10k_2021-exhibit1037.htm)] [added: Incorporated, dated as of February](https://www.sec.gov/Archives/edgar/data/875320/000087532023000007/a10k_2022-exhibit1023.htm) [8](https://www.sec.gov/Archives/edgar/data/875320/000087532023000007/a10k_2022-exhibit1023.htm)[, 2023*](https://www.sec.gov/Archives/edgar/data/875320/000087532023000007/a10k_2022-exhibit1023.htm)] | | | X | | | | | | | | | | | |

| 10.38 | | | [removed: [Vertex](http://www.sec.gov/Archives/edgar/data/875320/000087532018000009/a10k_2017-exhibit1046.htm) [Pharmaceuticals](http://www.sec.gov/Archives/edgar/data/875320/000087532018000009/a10k_2017-exhibit1046.htm) [Employee Compensation Plan.*](http://www.sec.gov/Archives/edgar/data/875320/000087532018000009/a10k_2017-exhibit1046.htm)] [added: [Vertex Pharmaceuticals Non-Employee Board Compensation.*](https://www.sec.gov/Archives/edgar/data/875320/000087532022000007/a10k_2021-exhibit1039.htm)] | | | | | | 10-K (Exhibit [removed: 10.46)] [added: 10.39)] | | | February [removed: 15, 2018] [added: 9, 2022] | | | 000-19319 | | |

| [removed: 10.39] [added: 10.37] | | | [Vertex Pharmaceuticals [removed: Non-Employee Board Compensation.*](https://www.sec.gov/Archives/edgar/data/875320/000087532022000007/a10k_2021-exhibit1039.htm)] [added: Employee Compensation Plan.*](https://www.sec.gov/Archives/edgar/data/875320/000087532023000007/a10k_2022-exhibit1037.htm)] | | | X | | | | | | | | | | | |

| 21.1 | | | [Subsidiaries of Vertex Pharmaceuticals [removed: Incorporated.](https://www.sec.gov/Archives/edgar/data/875320/000087532022000007/a10k_2021-exhibit211.htm)] [added: Incorporated.](https://www.sec.gov/Archives/edgar/data/875320/000087532023000007/a10k_2022-exhibit211.htm)] | | | X | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | |

| 10.11 | | | [Credit Agreement, dated as of September 18, 2020, by and among Vertex Pharmaceuticals Incorporated, Bank of America, N.A. and the other lender parties thereto.](http://www.sec.gov/Archives/edgar/data/875320/000087532020000043/a2020q310-qexhibit101.htm) | | | | | | 10-Q (Exhibit 10.1) | | | October 30, 2020 | | | 000-19319 | | |

| February [removed: 9, 2022] [added: 10, 2023] | | | By: | | | /s/ Reshma Kewalramani | | |

| Reshma Kewalramani | | | | | | | | | | | | President, Chief Executive Officer and Director (Principal Executive Officer) | | | | | | | | | | | | | | | February [removed: 9, 2022] [added: 10, 2023] | | | | | | | | | | | | | | |

| Charles F. Wagner, Jr. | | | | | | | | | | | | Executive Vice President and Chief Financial Officer (Principal Financial Officer) | | | | | | | | | | | | | | | February [removed: 9, 2022] [added: 10, 2023] | | | | | | | | | | | | | | |

| Kristen C. Ambrose | | | | | | | | | | | | Senior Vice President and Chief Accounting Officer (Principal Accounting Officer) | | | | | | | | | | | | | | | February [removed: 9, 2022] [added: 10, 2023] | | | | | | | | | | | | | | |

| Jeffrey M. Leiden | | | | | | | | | | | | Executive Chairman | | | | | | | | | | | | | | | February [removed: 9, 2022] [added: 10, 2023] | | | | | | | | | | | | | | |

| Sangeeta N. Bhatia | | | | | | | | | | | | Director | | | | | | | | | | | | | | | February [removed: 9, 2022] [added: 10, 2023] | | | | | | | | | | | | | | |

| Lloyd Carney | | | | | | | | | | | | Director | | | | | | | | | | | | | | | February [removed: 9, 2022] [added: 10, 2023] | | | | | | | | | | | | | | |

| Alan Garber | | | | | | | | | | | | Director | | | | | | | | | | | | | | | February [removed: 9, 2022] [added: 10, 2023] | | | | | | | | | | | | | | |

| Terrence C. Kearney | | | | | | | | | | | | Director | | | | | | | | | | | | | | | February [removed: 9, 2022] [added: 10, 2023] | | | | | | | | | | | | | | |

| Yuchun Lee | | | | | | | | | | | | Director | | | | | | | | | | | | | | | February [removed: 9, 2022] [added: 10, 2023] | | | | | | | | | | | | | | |

| Margaret G. McGlynn | | | | | | | | | | | | Director | | | | | | | | | | | | | | | February [removed: 9, 2022] [added: 10, 2023] | | | | | | | | | | | | | | |

| Diana McKenzie | | | | | | | | | | | | Director | | | | | | | | | | | | | | | February [removed: 9, 2022] [added: 10, 2023] | | | | | | | | | | | | | | |

| Bruce I. Sachs | | | | | | | | | | | | Director | | | | | | | | | | | | | | | February [removed: 9, 2022] [added: 10, 2023] | | | | | | | | | | | | | | |

We have audited the accompanying consolidated balance sheets of Vertex Pharmaceuticals Incorporated (the Company) as of December 31, [removed: 2021] [added: 2022] and [removed: 2020,] [added: 2021,] the related consolidated statements of operations, comprehensive income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, [removed: 2021,] [added: 2022,] and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, [removed: 2021] [added: 2022] and [removed: 2020,] [added: 2021,] and the results of its operations and its cash flows for each of the three years in the period ended December 31, [removed: 2021,] [added: 2022,] in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, [removed: 2021,] [added: 2022,] based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February [removed: 9, 2022,] [added: 10, 2023,] expressed an unqualified opinion thereon.

| *Description of the Matter* | | | | | | As discussed in Note A to the Company’s consolidated financial statements, the Company records product sales at the net sales price, or “transaction price,” which requires the Company to make several significant estimates regarding the net sales price. The most significant estimates relate to government rebates, chargebacks, discounts and fees, [added: and] collectively rebates. Due to the delay in receipt of claims by third-party payors, the Company estimates the percentage of prescriptions that will be covered by each third-party payor, which is referred to as the payor mix. Rebate accruals inclusive of estimated amounts due for claims not yet received or processed are recorded within accrued expenses on the Company’s consolidated balance sheet. Auditing the measurement of the Company’s net product revenues was complex and judgmental due to the significant estimation required in determining the amount of consideration that will be collected net of estimates for payor rebates. In particular, the net sales price is affected by assumptions in payor behavior such as changes in payor mix, payor collections, current customer contractual requirements, and experience with ultimate collection from third-party payors. | | |

| *How We Addressed the Matter in Our Audit* | | | | | | We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s revenue recognition process, including controls over the underlying assumptions and inputs used by management to estimate amounts due to third-party payors and the completeness and accuracy of the data used in the estimates. We also tested the Company’s controls to assess the completeness and accuracy of the current and historical data that supports the estimate. Our audit procedures to test the Company’s recognition of net product revenues included, among others, assessing the methodology used to determine the estimate and testing the significant assumptions and the underlying data used by the Company in its analysis, which included historical claims data. [added: In addition, we involved our government pricing subject matter professionals to assist in evaluating management’s methodology and calculations used in the measurement of certain estimated rebates.] To assess the payor mix assumptions we tested contracted rates, historical claims and payment data and related trends, and other relevant factors. We also assessed the historical accuracy of the Company’s estimates of third-party payor rebates. | | |

| | | | [added: 2022 | | | | | |] 2021 | | | | | | 2020 | | | | | | 2019 | | |

| Product revenues, net | | | $ | [removed: 7,573.4] [added: 8,930.7] | | | | | $ | [removed: 6,202.8] [added: 7,573.4] | | | | | $ | [removed: 4,160.7] [added: 6,202.8] | |

| Other revenues | | | [removed: 1.0] [added: —] | | | | | | [removed: 2.9] [added: 1.0] | | | | | | [removed: 2.1] [added: 2.9] | | |

| Total revenues | | | [removed: 7,574.4] [added: 8,930.7] | | | | | | [removed: 6,205.7] [added: 7,574.4] | | | | | | [removed: 4,162.8] [added: 6,205.7] | | |

| Cost of sales | | | [removed: 904.2] [added: 1,080.3] | | | | | | [removed: 736.3] [added: 904.2] | | | | | | [removed: 547.8] [added: 736.3] | | |

[removed: |] [added: *Acquired In-process] Research and [removed: development expenses | | | 3,051.1 | | | | | | 1,829.5 | | | | | | 1,754.5 | | |][added: Development Expenses*]

| Selling, general and administrative expenses | | | [removed: 840.1] [added: 944.7] | | | | | | [removed: 770.5] [added: 840.1] | | | | | | [removed: 658.5] [added: 770.5] | | |

| Change in fair value of contingent consideration | | | [removed: (3.1)] [added: (57.5)] | | | | | | [removed: 13.1] [added: (3.1)] | | | | | | [removed: 4.5] [added: 13.1] | | |

| Total costs and expenses | | | [removed: 4,792.3] [added: 4,623.3] | | | | | | [removed: 3,349.4] [added: 4,792.3] | | | | | | [removed: 2,965.3] [added: 3,349.4] | | |

| Income from operations | | | [removed: 2,782.1] [added: 4,307.4] | | | | | | [removed: 2,856.3] [added: 2,782.1] | | | | | | [removed: 1,197.5] [added: 2,856.3] | | |

| Interest income | | | [removed: 4.9] [added: 144.6] | | | | | | [removed: 22.2] [added: 4.9] | | | | | | [removed: 63.7] [added: 22.2] | | |

| Interest expense | | | [removed: (61.5)] [added: (54.8)] | | | | | | [removed: (58.2)] [added: (61.5)] | | | | | | [removed: (58.5)] [added: (58.2)] | | |

| Other [added: (expense)] income, net | | | [removed: 4.9] [added: (164.8)] | | | | | | [removed: 296.6] [added: 4.9] | | | | | | [removed: 192.2] [added: 296.6] | | |

| Income before provision for income taxes | | | [removed: 2,730.4] [added: 4,232.4] | | | | | | [removed: 3,116.9] [added: 2,730.4] | | | | | | [removed: 1,394.9] [added: 3,116.9] | | |

| Provision for income taxes | | | [removed: 388.3] [added: 910.4] | | | | | | [removed: 405.2] [added: 388.3] | | | | | | [removed: 218.1] [added: 405.2] | | |

| Net income | | | $ | [removed: 2,342.1] [added: 3,322.0] | | | | | $ | [removed: 2,711.7] [added: 2,342.1] | | | | | $ | [removed: 1,176.8] [added: 2,711.7] | |

| Basic | | | $ | [removed: 9.09] [added: 12.97] | | | | | $ | [removed: 10.44] [added: 9.09] | | | | | $ | [removed: 4.58] [added: 10.44] | |

| Diluted | | | $ | [removed: 9.01] [added: 12.82] | | | | | $ | [removed: 10.29] [added: 9.01] | | | | | $ | [removed: 4.51] [added: 10.29] | |

| Basic | | | [removed: 257.7] [added: 256.1] | | | | | | [removed: 259.8] [added: 257.7] | | | | | | [removed: 256.7] [added: 259.8] | | |

| Diluted | | | [removed: 259.9] [added: 259.1] | | | | | | [removed: 263.4] [added: 259.9] | | | | | | [removed: 260.7] [added: 263.4] | | |

| | | | [removed: 2021] [added: 2022] | | | | | | [removed: 2020] [added: 2021] | | | | | | [removed: 2019] [added: 2020] | | |

| Net income | | | $ | [removed: 2,342.1] [added: 3,322.0] | | | | | $ | [removed: 2,711.7] [added: 2,342.1] | | | | | $ | [removed: 1,176.8] [added: 2,711.7] | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| /s/ Suketu Upadhyay | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Suketu Upadhyay | | | | | | | | | | | | Director | | | | | | | | | | | | | | | February 10, 2023 | | | | | | | | | | | | | | |

February 10, 2023

| Research and development expenses | | | 2,540.3 | | | | | | 1,937.8 | | | | | | 1,644.9 | | |

| Acquired in-process research and development expenses | | | 115.5 | | | | | | 1,113.3 | | | | | | 184.6 | | |

Please refer to Note A, “Nature of Business and Accounting Policies,” for an explanation of amounts reclassified from “Research and development expenses” to “Acquired in-process research and development expenses” for 2021 and 2020.

| | | | 2022 | | | | | | 2021 | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Balance, December 31, 2022 | | | 257.0 | | | | | | $ | 2.6 | | | | | $ | 7,386.5 | | | | | $ | 0.8 | | | | | $ | 6,522.8 | | | | | $ | 13,912.7 | |

Beginning in 2022, we separately classify upfront, contingent milestone, and other payments pursuant to our business development transactions, including collaborations, licenses of third-party technologies, and asset acquisitions as “Acquired in-process research and development expenses” in our consolidated statements of operations in cases where such acquired assets do not have an alternative future use.

To conform prior periods to current presentation, we reclassified $1.1 billion and $184.6 million from “Research and development expenses” to “Acquired in-process research and development expenses” for 2021 and 2020, respectively.

when that performance obligation is satisfied or as it is satisfied.

The remainder of our marketable securities are classified as long-term assets within “Other assets” on our consolidated balance sheets.

Our research and development activities include upfront, contingent milestone, and other payments pursuant to our business development transactions, including collaborations, licenses of third-party technologies, and asset acquisitions.

*Cloud Computing Service Contracts*

We classify costs incurred to implement cloud computing service contracts as “Other assets” on our consolidated balance sheets.

Amortization is recorded over the noncancellable term of the cloud computing service contract, plus any optional renewal periods that are reasonably certain to be exercised.

Our provision for income taxes is accounted for under the asset and liability method and includes federal, state, local and foreign taxes.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which the temporary differences are expected to be recovered or settled.

establish an accounting policy to provide for tax on Global Intangible Low Taxed Income (“GILTI”) earned by certain foreign subsidiaries.

The fair value of our in-process research and development assets is determined using either the multi-period excess earnings or the relief from royalty methods of the income approach.

The multi-period excess earnings method also requires us to estimate the timing of and the expected costs to develop and commercialize a product candidate.

The relief from royalty method also requires us to estimate the after-tax royalty savings expected from ownership of a product candidate that we acquired.

We record our contingent consideration liabilities at fair value on our consolidated balance sheets as “Other current liabilities” or “Other long-term liabilities” depending on when we estimate we will pay them.

We have not been required to adopt any accounting standards that had a significant impact on our consolidated financial statements in the three years ended December 31, 2022.

B.Acquired In-Process Research and Development and Other Arrangements

We typically can terminate our in-license agreements by providing advance notice to our collaborators.

In December 2022, we announced a strategic collaboration and license agreement (the “Entrada Agreement”) with Entrada Therapeutics, Inc. (“Entrada”) focused on discovering and developing intracellular Endosomal Escape Vehicle (EEV) therapeutics for myotonic dystrophy type 1 (“DM1”).

In February 2023, the Entrada Agreement closed upon, among other things, the satisfaction of customary closing conditions and the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act, resulting in no financial statement impact during 2022.

The collaboration includes Entrada’s program for DM1, ENTR-701, which is in late preclinical development.

Upon closing, we made an upfront payment of approximately $224.0 million to Entrada, and purchased approximately $26.0 million of Entrada’s common stock in connection with the Entrada Agreements.

Entrada is eligible to receive up to an additional $485.0 million in research, development, regulatory and commercial milestones for any products that may result from the Entrada Agreement, as well as royalties on net product sales.

We will account for the Entrada Agreement in the first quarter of 2023.

Verve Therapeutics, Inc.

In 2022, we entered into a strategic collaboration and license agreement with Verve Therapeutics, Inc. (“Verve”) focused on discovering and developing an in vivo gene-editing program for a liver disease.

Under the terms of the agreement, we made a $25.0 million upfront payment to Verve and also purchased $35.0 million of Verve’s common stock in connection with the agreement.

Verve is also eligible to receive up to $66.0 million in success payments, up to an additional $340.0 million in development, regulatory and commercial milestones for any products that may result from the collaboration agreement, and royalties on net product sales.

We concluded that there is no alternative future use for the acquired in-process research and development and recorded the upfront payment to “Acquired in-process research and development expenses.” The investment in Verve’s common stock is recorded at fair value on our consolidated balance sheet within “Marketable securities.”

ApoLo1 Bio, LLC

February 9, 2022

| | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Balance, December 31, 2018 | | | 255.2 | | | | | | $ | 2.5 | | | | | $ | 7,421.5 | | | | | $ | 0.7 | | | | | $ | (2,989.5) | | | | | $ | 4,435.2 | |

| Cumulative effect adjustment for adoption of new accounting guidance | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | (40.3) | | | | | | (40.3) | | |

| Repurchases of common stock | | | (1,425.4) | | | | | | (539.1) | | | | | | (186.0) | | |

We make international sales primarily to specialty

charge, which is a material right.

French Early Access Programs

In 2015, we began distributing ORKAMBI through early access programs in France and remained engaged in reimbursement discussions with the French government until November 2019, when we reached an agreement with the French government for ORKAMBI, including ORKAMBI distributed through early access programs.

From the time we began distributing ORKAMBI through early access programs in France, we expected the difference between the amounts collected based on the invoiced amount and the final amount for ORKAMBI distributed through early access programs would be returned to the French government.

Through the third quarter of 2019, we recognized net product revenues for ORKAMBI sales in France under the early access programs based on a transaction price that reflected our estimate of consideration we expected to retain that would not be subject to a significant reversal in amounts recognized.

When determining if variable consideration should be constrained, we consider whether there are factors outside our control that could result in a significant reversal of revenue.

In making these assessments, we consider the likelihood and magnitude of a potential reversal of revenue.

Upon reaching an agreement with the French government for ORKAMBI, including ORKAMBI distributed through early access programs in November 2019, we updated the transaction price to reflect the final amount for ORKAMBI distributed through early access programs.

As a result, we recognized net product revenues of $155.8 million related to prior period ORKAMBI early access program sales in the fourth quarter of 2019 because the updated transaction price for ORKAMBI distributed through these programs exceeded our previous estimate of the consideration we expected to retain that would not be subject to a significant reversal in amounts recognized.

We paid the final amount due to the French government in 2020.

Other Revenues

We have not recorded significant revenues other than our product revenues during the three years ended December 31, 2021; however, in future periods, we may recognize collaborative revenues generated through collaborative research, development and/or commercialization agreements related to one or more of the following: nonrefundable, upfront license fees; development and commercial milestones; funding of research and/or development activities; and royalties on net sales of licensed products.

Revenue is recognized upon satisfaction of a performance obligation by transferring control of a good or service to our collaborator.

For each collaborative research, development, and/or commercialization agreement that results in revenue, we identify all material performance obligations and determine the transaction price by estimating the amount of variable consideration at the outset of the contract.

We constrain (reduce) the estimate of variable consideration such that it is probable that a significant reversal of previously recognized revenue will not occur throughout the life of the contract.

Once the estimated transaction price is established, amounts are allocated to each separate performance obligation that has been identified on a relative standalone selling price basis.

*Upfront License Fees:* If we determine that a license to our intellectual property is distinct from the other performance obligations identified in an arrangement, we recognize revenue from the related nonrefundable, upfront license fees based on the relative standalone selling price prescribed to the license compared to the total selling price of

the arrangement.

We recognize revenue when the license is transferred to our collaborator and our collaborator is able to use and benefit from the license.

For licenses that are not distinct from other obligations identified in the arrangement, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time.

If the combined performance obligation is satisfied over time, we apply an appropriate method of measuring progress for purposes of recognizing revenue from nonrefundable, upfront license fees.

We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition.

*Development and Regulatory Milestone Payments:* Depending on facts and circumstances, we may include certain milestones in the estimated transaction price or fully constrain the milestones.

We include a milestone payment in the transaction price in the reporting period that it is probable that recording revenue in the period will not result in a significant reversal in amounts recognized in future periods.

This may result in us recognizing revenues from certain milestones and a corresponding contract asset in a reporting period before the milestone is achieved.

We fully constrain milestone payments that have not been included in the transaction price to date until we conclude that their achievement is probable and that recognition of the related revenue will not result in a significant reversal in amounts recognized in future periods.

We re-evaluate the probability of achievement of such development milestones and any related constraint each reporting period and adjust our estimate of the overall transaction price, including the amount of collaborative revenue that we have recorded, if necessary.

*Research and Development Activities/Transition Services:* If we are entitled to reimbursement from our collaborators for specified research and development expenses, we account for the related services as separate performance obligations if these services represent a material right.

We also determine whether to account for the reimbursement of research and development expenses as collaborative revenues or an offset to research and development expenses in accordance with the provisions of gross or net revenue presentation.

We recognize the corresponding revenues or record the corresponding offset to research and development expenses as we satisfy the related performance obligations.

These amounts at times may exceed federally insured limits.

Marketable securities are classified as long-term assets on our consolidated balance sheets if (i) they have been in an unrealized loss position for longer than one year and (ii) we have the ability and intent to hold them (a) until the carrying value is recovered and (b) such holding period may be longer than one year.

Our marketable securities are stated at fair value.