Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

OVERVIEW

We are a global biotechnology company that invests in scientific innovation to create transformative medicines for people with serious diseases, with a focus on specialty markets. We have seven approved medicines: five that treat the underlying cause of cystic fibrosis (“CF”), a life-threatening genetic disease, one that treats severe sickle cell disease (“SCD”) and transfusion dependent beta thalassemia (“TDT”), life shortening inherited blood disorders, and one that treats moderate-to-severe acute pain. Our clinical-stage pipeline includes programs in CF, SCD, beta thalassemia, acute and peripheral neuropathic pain, type 1 diabetes, IgA nephropathy, primary membranous nephropathy and other autoimmune renal diseases and cytopenias, APOL1-mediated kidney disease, myotonic dystrophy type 1, and autosomal dominant polycystic kidney disease.

In December 2024, the U.S. Food and Drug Administration (the “FDA”) approved ALYFTREK (vanzacaftor/tezacaftor/deutivacaftor), our once-daily next-in-class triple combination for the treatment of people with CF 6 years of age and older, and our fifth CF medicine. ALYFTREK is also approved in the United Kingdom (the “U.K.”), the European Union (“E.U.”), and Canada. Collectively, our five medicines, led by TRIKAFTA/KAFTRIO (elexacaftor/tezacaftor/ivacaftor and ivacaftor), are being used to treat more than three quarters of the approximately 94,000 people with CF in the U.S., Europe, Australia, and Canada.

CASGEVY (exagamglogene autotemcel), our ex-vivo, non-viral CRISPR/Cas9 gene-edited cell therapy, is approved in the U.S., the E.U., the U.K., the Kingdom of Saudi Arabia (“Saudi Arabia”), the Kingdom of Bahrain (“Bahrain”), Qatar, the United Arab Emirates (the “UAE”), Switzerland and Canada for the treatment of people 12 years of age and older with SCD or TDT. We estimate approximately 60,000 people with severe SCD or TDT are or could become eligible for CASGEVY in the U.S., Canada, Europe, and the Middle East.

In January 2025, the FDA approved JOURNAVX, our selective non-opioid NaV1.8 pain signal inhibitor, for the treatment of people with moderate-to-severe acute pain. We have begun our commercial launch of JOURNAVX in the U.S. for eligible adults.

Financial Highlights

Revenues			In the second quarter of 2025, our net product revenues increased to $2.9 billion as compared to $2.6 billion in the second quarter of 2024, primarily due to continued strong patient demand for TRIKAFTA/KAFTRIO and early contributions from three ongoing launches.
Expenses			Our total research and development (“R&D”), acquired in-process research and development (“AIPR&D”), and selling, general and administrative (“SG&A”) expenses decreased to $1.4 billion in the second quarter of 2025 as compared to $5.8 billion in the second quarter of 2024, primarily due to $4.4 billion of AIPR&D expenses incurred from our acquisition of Alpine Immune Sciences, Inc. (“Alpine”) in May 2024. Cost of sales was 14% in each of the second quarter of 2025 and 2024.
Cash			Our total cash, cash equivalents and marketable securities increased to $12.0 billion as of June 30, 2025 as compared to $11.2 billion as of December 31, 2024 primarily due to cash flows provided by our operating activities partially offset by repurchases of our common stock and income tax payments.

Note: Charts above may not add due to rounding.

Business Updates

Marketed Products

Cystic Fibrosis

We expect that the number of people with CF taking our medicines will continue to grow through new approvals and reimbursement agreements, treatment of younger patients, increased survival and expansion into additional geographies. Recent and anticipated progress in activities expanding our CF business is included below:

• ALYFTREK is approved by the European Commission for the treatment of people with CF 6 years of age and older who have at least one F508del mutation or another responsive mutation in the CFTR gene. Eligible patients in Germany and Denmark have access to ALYFTREK, and we expect eligible patients in Ireland will have access in the third quarter of 2025. We will continue to work with reimbursement bodies across additional E.U. member states to ensure access for all eligible patients as quickly as possible. In addition, we have entered into a reimbursement agreement with the National Health Service (“NHS”) England for eligible CF patients to access ALYFTREK.

• Health Canada approved ALYFTREK for the treatment of people with CF 6 years of age and older who have at least one F508del mutation or another responsive mutation in the CFTR gene. We are working to secure reimbursement for eligible patients in Canada.

• Regulatory submissions for ALYFTREK are under review in Switzerland, Australia and New Zealand.

Sickle Cell Disease and Beta Thalassemia

• Through reimbursement agreements, we have secured access to CASGEVY for eligible SCD and TDT patients in 10 countries. Countries with recent reimbursement agreements include Northern Ireland, Scotland and Denmark. We will continue to work with government and reimbursement authorities globally to secure access for eligible patients.

• We have met our goal of activating more than 75 authorized treatment centers. Since launch through the end of the second quarter of 2025, approximately 115 patients have had their first cell collection, and 29 patients have received infusions of CASGEVY, including 16 patients infused in the second quarter of 2025.

Acute Pain

• Since JOURNAVX became available at pharmacies in March through mid-July, more than 110,000 prescriptions have been written and filled across the hospital and retail settings in different acute pain conditions, consistent with its broad label.

• As of mid-July, across commercial and government payers, nearly 150 million individuals have covered access to JOURNAVX, representing almost half of U.S. covered lives. This includes formal coverage agreements with two of the three large national pharmacy benefit managers and unrestricted access within 16 state Medicaid plans. We expect access to JOURNAVX to continue to expand over the course of 2025.

• More than 50 of the targeted 150 large healthcare systems and more than 500 individual hospitals of the 2,000 targeted institutions have added JOURNAVX to formularies, protocols or order sets. We have national group purchasing agreements with two of the largest group purchasing organizations in the U.S.

Pipeline

We continue to advance a diversified pipeline of potentially transformative medicines for serious diseases utilizing a range of modalities. Recent and anticipated progress in activities supporting these efforts is included below:

Cystic Fibrosis

• We are completing Phase 3 clinical trials in younger age groups to expand the TRIKAFTA/KAFTRIO and ALYFTREK labels and to enable earlier treatment of children with CF. We have completed enrollment in a global trial evaluating ALYFTREK in children 2 to 5 years of age.

• In collaboration with Moderna, Inc. (“Moderna”), we are developing VX-522, a nebulized CFTR mRNA therapy for the treatment of people with CF who do not produce full-length CFTR protein. The Independent Data Monitoring Committee has completed its review of VX-522, and endorsed restart of the Phase 1/2 clinical trial evaluating VX-522. We expect to resume dosing in the multiple ascending dose portion of this trial in the near term.

Sickle Cell Disease and Transfusion-Dependent Beta Thalassemia

• We have completed enrollment in two global Phase 3 clinical trials evaluating CASGEVY in children 5 to 11 years of age with SCD or TDT and expect to complete dosing in the second half of 2025.

Acute Pain

• We announced results from the Phase 2 placebo-controlled dose-ranging clinical trial evaluating the safety and efficacy of VX-993, an investigational selective NaV1.8 pain signal inhibitor, for the treatment of acute pain following bunionectomy surgery. Treatment with VX-993 did not result in a statistically significant improvement on the primary endpoint of the time-weighted sum of the pain intensity difference from 0 to 48 hours (SPID48) compared to placebo. VX-993 was generally safe and well-tolerated. Based on these results, we will not further advance VX-993 as monotherapy in acute pain.

Peripheral Neuropathic Pain

• We continue to enroll and dose people with diabetic peripheral neuropathy, a common form of chronic peripheral neuropathic pain, in a Phase 3 pivotal trial evaluating suzetrigine.

• As part of an End of Phase 2 discussion with the FDA, the FDA indicated that they do not see a path to a broad peripheral neuropathic pain label at this time. As such, we will not initiate a Phase 3 lumbosacral radiculopathy clinical trial. We will prioritize diabetic peripheral neuropathy as the first peripheral neuropathic pain indication, and we expect to begin a second Phase 3 clinical trial evaluating suzetrigine in diabetic peripheral neuropathy in the near term. We expect to complete enrollment in both Phase 3 clinical trials in diabetic peripheral neuropathy by the end of 2026. We plan to continue to work with the FDA to expand the diabetic peripheral neuropathy indication over time to include additional neuropathic pain conditions and assess potential pathways to secure a broad peripheral neuropathic pain label.

Type 1 Diabetes

• Zimislecel is an allogeneic, stem cell-derived, fully differentiated, insulin-producing islet cell replacement therapy, using standard immunosuppression to protect the implanted cells. We expect to complete enrollment and dosing in the Phase 3 portion of the Phase 1/2/3 clinical trial of zimislecel in people with type 1 diabetes (“T1D”) with severe hypoglycemic events and impaired awareness of hypoglycemia in the near term. We expect global regulatory submissions for zimislecel in 2026.

IgA Nephropathy, Primary Membranous Nephropathy and Other B Cell-Driven Diseases

• We are developing povetacicept, a dual antagonist of B cell activating factor (“BAFF”) and a proliferation-inducing ligand (“APRIL”) cytokines, as a potentially best-in-class approach to treat immunoglobulin A nephropathy (“IgAN”) and primary membranous nephropathy (“pMN”). We believe povetacicept holds pipeline-in-a-product potential.

• The global Phase 3 RAINIER trial evaluating povetacicept in people with IgAN completed enrollment of the interim analysis cohort in the second quarter. The interim analysis will be conducted once this cohort reaches 36 weeks of treatment, with the potential to file for Accelerated Approval in the U.S. in the first half of 2026, if results are supportive. We expect to complete enrollment in the full clinical trial in 2025. Clinical trials to support the launch of povetacicept for at-home self-administration are underway.

• Based on the strength of the Phase 2 results in the RUBY-3 clinical trial, we completed the End of Phase 2 meeting with the FDA and reached agreement with the FDA on the pivotal development program in pMN. We expect to initiate the Phase 2/3 trial evaluating povetacicept in people with pMN by the end of 2025.

• We have prioritized generalized myasthenia gravis (“gMG”) and warm autoimmune hemolytic anemia (“wAIHA”) as the next potential indications for povetacicept. Other RUBY-3 and RUBY-4 indications have been deprioritized. In the U.S. and Europe, we believe there are approximately 300,000 people diagnosed with IgAN, approximately 150,000 people diagnosed with pMN, approximately 175,000 people diagnosed with gMG, and approximately 35,000 people diagnosed with primary wAIHA.

• In June, we entered into an exclusive collaboration and license agreement with Ono Pharmaceutical Co., Ltd. for the development and commercialization of povetacicept in Japan and South Korea. This partnership further expands upon the geographic expansion momentum started through a partnership with Zai Lab announced in January.

APOL1-Mediated Kidney Disease

• Inaxaplin is our small molecule for the treatment of APOL1-mediated kidney disease (“AMKD”). We expect to complete enrollment in the interim analysis cohort of the global Phase 2/3 pivotal clinical trial evaluating inaxaplin (“AMPLITUDE”) in 2025. We expect to conduct the pre-planned interim analysis once this cohort has been treated for 48 weeks, with potential to file for accelerated approval in the U.S. if the results are supportive. This trial has met its minimum target for pediatric enrollment (10 - 17 years of age) and continues to enroll both pediatric and adult patients.

Our Business Environment

In the first half of 2025, our net product revenues came primarily from the sale of our medicines for the treatment of CF. Our CF strategy involves continuing to develop and obtain approval and reimbursement for treatment regimens that will provide benefits to all people with CF and increasing the number of people with CF eligible and able to receive our medicines. We are continuing to progress commercialization of CASGEVY, which has received marketing approvals in the U.S. and across multiple geographies, including countries in Europe and the Middle East, for the treatment of SCD and TDT. In addition, we have begun our commercial launch of JOURNAVX for the treatment of acute pain, which received marketing approval in the U.S. in January 2025. We also continue to advance our pipeline of product candidates for the treatment of serious diseases outside of CF, SCD, TDT, and acute pain.

Our strategy is to combine transformative advances in the understanding of causal human biology and the science of therapeutics to discover and develop innovative medicines. This approach includes advancing multiple compounds or therapies from each program, spanning multiple modalities, into early clinical trials to obtain patient data that can inform selection of the most promising therapies for later-stage development, as well as to inform discovery and development efforts. We aim to rapidly follow our first-in-class therapies that achieve proof-of-concept with potential best-in-class candidates to provide durable clinical and commercial success.

In pursuit of new product candidates and therapies in specialty markets, we invest in research and development. We believe that pursuing research in diverse areas allows us to balance the risks inherent in product development and may provide product candidates that will form our pipeline in future years. To supplement our internal research programs, we acquire technologies and programs and collaborate with biopharmaceutical and technology companies, leading academic research institutions, government laboratories, foundations and other organizations, as needed, to advance research in our areas of therapeutic interest and to access technologies needed to execute on our strategy.

Discovery and development of a new pharmaceutical or biological product is a difficult and lengthy process that requires significant financial resources along with extensive technical and regulatory expertise. Across the industry, most potential drug or biological products never progress into development, and most products that advance into development never receive marketing approval. Our investments in product candidates are subject to considerable risks. We closely monitor our research and development activities, and frequently evaluate our pipeline programs in light of new data and scientific, business and commercial insights, with the objective of balancing risk and potential. This process can result in rapid changes in focus and priorities as new information becomes available and as we gain additional understanding of our ongoing programs and

potential new programs, as well as those of our competitors. In addition, our product candidates must satisfy rigorous standards of safety and efficacy before they can be approved for sale by regulatory authorities. Our analysis of data obtained from nonclinical and clinical activities is subject to confirmation and interpretation by regulatory authorities, which could delay, limit or prevent regulatory approval.

Our business also requires ensuring appropriate manufacturing and supply of our products. As we advance our product candidates through clinical development toward commercialization and market and sell our approved products, we build and maintain our supply chain and quality assurance resources. We rely on a global network of third parties, including some in China, and our internal capabilities to manufacture and distribute our products for commercial sale and post-approval clinical trials and to manufacture and distribute our product candidates for clinical trials. In addition to establishing supply chains for each newly approved product, we adapt our supply chain for existing products to include additional formulations or to increase scale of production for existing products as needed. Our foreign third-party manufacturers and suppliers may be subject to U.S. legislation, including the BIOSECURE Act, tariffs, sanctions, trade restrictions and other foreign regulatory requirements which could increase costs or reduce the supply of material available to us, or delay the procurement or supply of such material. The processes for biological and cell and genetic therapies can be more complex than those required for small molecule drugs and require additional investments in different systems, equipment, facilities and expertise. We are focused on ensuring the stability of the supply chains for our current products, as well as for our pipeline programs.

Sales of our products depend, to a large degree, on the extent to which our products are reimbursed by third-party payors, such as government health programs, commercial insurance and managed health care organizations. Reimbursement for our products, including our potential pipeline therapies, cannot be assured and may take significant periods of time to obtain. We dedicate substantial management and other resources to obtain and maintain appropriate levels of reimbursement for our products from third-party payors, including governmental organizations in the U.S. and ex-U.S. markets. In the U.S., for example, recently enacted changes to the Medicaid program may result in a less favorable coverage environment that may impact our revenues.

In the U.S., we have worked successfully with third-party payors to promptly obtain appropriate levels of reimbursement for our CF medicines. In addition, we are working with U.S. government and commercial payors with respect to CASGEVY and JOURNAVX. We anticipate broad access with government and commercial payors for CASGEVY in the U.S., and we have recently entered into multiple agreements with government and commercial health insurance providers to provide such access. For JOURNAVX in the U.S., we have been working with government and commercial payors pre- and post-approval to support rapid and broad access. We plan to continue to engage in discussions with numerous commercial insurers and managed health care organizations, along with government health programs that are typically managed by authorities in the individual states, to ensure that payors recognize the significant benefits that all our therapies provide and provide patients with appropriate levels of access to our medicines and therapies now and in the future. We cannot, however, predict how changes in the law, including through the Inflation Reduction Act of 2022 and passage of state laws (e.g., transparency laws and prescription drug affordability boards), will affect our ability to negotiate successfully with third-party payors and distribute our products. In addition, federal and state governments in the U.S. continue to consider policies to lower prescription drug costs. The logistics of such initiatives continue to be discussed, and we cannot anticipate how these actions, if enacted, may impact our revenues and our business. Similarly, in ex-U.S. markets, we seek government reimbursement for our medicines on a country-by-country or region-by-region basis, as required. This is necessary for each new medicine, as well as for label expansions for our current medicines. We are working with ex-U.S. payors with respect to CASGEVY, and we are pursuing long-term reimbursement agreements. We have secured reimbursed access for people with SCD or TDT across multiple geographies, including countries in Europe and the Middle East. We expect to continue to focus significant resources to expand and maintain reimbursement for our CF medicines, CASGEVY, JOURNAVX, and, ultimately, our pipeline therapies, in U.S. and ex-U.S. markets.

Strategic Transactions

Acquisitions

As part of our business strategy, we seek to acquire technologies, products, product candidates and other businesses that are aligned with our corporate and research and development strategies and complement and advance our ongoing research and development efforts. We have acquired multiple biotechnology companies over the last several years and expect to continue to identify and evaluate such opportunities. The accounting for these acquisitions can vary significantly based on whether we conclude the transactions represent business combinations or asset acquisitions. In May 2024, we acquired Alpine Immune Sciences, Inc. (“Alpine”) for approximately $5.0 billion in cash. Alpine’s lead molecule, povetacicept, has shown potential to treat multiple diseases or conditions and become a pipeline-in-a-product. We accounted for the Alpine transaction as an asset acquisition because povetacicept represented substantially all of the fair value of the gross assets that we acquired. As a result, $4.4 billion of the fair value attributed to povetacicept was expensed as AIPR&D in the second

quarter of 2024. In 2019 and 2022, we acquired Semma Therapeutics, Inc. (“Semma”) and ViaCyte, Inc. (“ViaCyte”), respectively, pursuant to which we established and accelerated the development of our T1D program. We accounted for each of these acquisitions as a business combination.

Collaboration and In-Licensing Arrangements

We enter into arrangements with third parties, including collaboration and licensing arrangements, for the development, manufacture and commercialization of products, product candidates and other technologies that have the potential to complement our ongoing research and development efforts.

Over the last several years, we entered into collaboration agreements with a number of companies, including CRISPR Therapeutics AG (“CRISPR”), Entrada Therapeutics, Inc. (“Entrada”), and Moderna.

Generally, when we in-license a technology or product candidate, we make upfront payments to the collaborator, assume the costs of the program and/or agree to make contingent payments, which could consist of milestone, royalty and option payments. Most of these collaboration payments are expensed as AIPR&D, including a $75.0 million milestone due to Entrada in the first quarter of 2024. These payments were expensed to AIPR&D because they were primarily attributable to acquired in-process research and development for which there was no alternative future use. However, depending on many factors, including the structure of the collaboration, the 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. We expect to continue to identify and evaluate collaboration and licensing opportunities that may be similar to or different from the collaborations and licenses that we have engaged in previously.

Acquired In-Process Research and Development Expenses

In the first half of 2025 and 2024, our AIPR&D included $22.0 million and $4.5 billion, respectively, related to upfront, contingent milestone, or other payments pursuant to our business development transactions, including the asset acquisitions, collaborations, and licenses of third-party technologies described above. Please refer to Note B, “Collaboration, License and Other Arrangements,” for further information regarding our asset acquisitions, collaborations and in-license agreements.

Out-licensing Arrangements

We also have out-licensed certain development programs to collaborators who are leading the development or commercialization of these programs, either globally or within certain geographic regions.

In January 2025 and June 2025, we entered into agreements with Zai Lab Limited (“Zai”) and Ono Pharmaceuticals Co., Ltd (“Ono”), respectively, for the development and commercialization of povetacicept in various Asian markets. Zai licensed povetacicept in mainland China, Hong Kong SAR, Macau SAR, Taiwan region and Singapore, while Ono licensed povetacicept in Japan and South Korea. Zai and Ono are responsible for povetacicept clinical trials, regulatory submissions, and all commercialization activities, if povetacicept becomes an approved product, in their licensed territories. We are eligible to receive certain regulatory milestone payments and tiered royalties on future net sales of povetacicept in these regions.

RESULTS OF OPERATIONS

			Three Months Ended June 30,																		Six Months Ended June 30,
			2025						2024						Change						2025						2024						Change
			(in millions, except percentages and per share amounts)
Total revenues			$	2,964.7					$	2,645.6					12%						$	5,734.9					$	5,336.2					7%
Acquired in-process research and development expenses			2.2						4,449.1						**						22.0						4,525.9						**
Intangible asset impairment charge			—						—						**						379.0						—						**
Other operating costs and expenses			1,811.4						1,711.2						6%						3,552.7						3,185.5						12%
Income (loss) from operations			1,151.1						(3,514.7)						**						1,781.2						(2,375.2)						**
Other non-operating income, net			131.9						123.5						7%						232.2						263.1						(12)%
Provision for income taxes			250.1						202.4						24%						334.2						381.9						(12)%
Net income (loss)			$	1,032.9					$	(3,593.6)					**						$	1,679.2					$	(2,494.0)					**
Net income (loss) per diluted common share			$	3.99					$	(13.92)											$	6.48					$	(9.66)
Diluted shares used in per share calculations			258.9						258.1												259.2						258.1
																					** Not meaningful

Total Revenues

			Three Months Ended June 30,																		Six Months Ended June 30,
			2025						2024						Change						2025						2024						Change
			(in millions, except percentages)
TRIKAFTA/KAFTRIO			$	2,551.1					$	2,449.2					4%						$	5,086.6					$	4,932.8					3%
ALYFTREK			156.8						—						**						210.7						—						**
Other product revenues			236.1						196.4						20%						406.9						403.4						1%
Product revenues, net			2,944.0						2,645.6						11%						5,704.2						5,336.2						7%
Other revenues			20.7						—						**						30.7						—						**
Total revenues			$	2,964.7					$	2,645.6					12%						$	5,734.9					$	5,336.2					7%
																					** Not meaningful

Product Revenues, Net

In the second quarter and first half of 2025, our net product revenues increased by $298.4 million and $368.0 million, or 11% and 7%, as compared to the second quarter and first half of 2024, respectively, primarily due to continued strong demand for TRIKAFTA/KAFTRIO and early contributions from three ongoing launches. In the second quarter and first half of 2025, "Other product revenues" included $30.4 million and $44.6 million, respectively, from CASGEVY, and $12.0 million and $13.3 million, respectively, from JOURNAVX. In the second quarter and first half of 2024, there were no revenues for these products.

Our net product revenues from the U.S. and from ex-U.S. markets were as follows:

			Three Months Ended June 30,																		Six Months Ended June 30,
			2025						2024						Change						2025						2024						Change
			(in millions, except percentages)
United States			$	1,827.5					$	1,614.3					13%						$	3,481.0					$	3,134.2					11%
ex-U.S.			1,116.5						1,031.3						8%						2,223.2						2,202.0						1%
Product revenues, net			$	2,944.0					$	2,645.6					11%						$	5,704.2					$	5,336.2					7%

In the second quarter and first half of 2025, our net product revenues increased 13% and 11% in the U.S., as compared to the second quarter and first half of 2024, respectively, due to higher net realized pricing and continued strong patient demand. In the second quarter of 2025, our ex-U.S. net product revenues increased 8% as compared to the second quarter of 2024, primarily due to strong performance across multiple geographies. In the first half of 2025, our ex-U.S. net product revenues increased 1%, as compared to the first half of 2024, primarily due to an expected decline in product revenues in Russia, where we are continuing to experience a violation of our intellectual property rights.

Other Revenues

In the second quarter and first half of 2025, “Other revenues” were $20.7 million and $30.7 million, respectively. In the second quarter of 2025, Other revenues included a $20.6 million upfront payment received from our collaboration agreement with Ono. In the first half of 2025, Other revenues also included a $10.0 million upfront payment received from our collaboration agreement with Zai.

Operating Costs and Expenses

			Three Months Ended June 30,																		Six Months Ended June 30,
			2025						2024						Change						2025						2024						Change
			(in millions, except percentages)
Cost of sales			$	407.5					$	371.9					10%						$	770.5					$	714.5					8%
Research and development expenses			978.4						966.6						1%						1,958.1						1,755.7						12%
Acquired in-process research and development expenses			2.2						4,449.1						**						22.0						4,525.9						**
Selling, general and administrative expenses			424.6						372.2						14%						821.0						714.9						15%
Intangible asset impairment charge			—						—						**						379.0						—						**
Change in fair value of contingent consideration			0.9						0.5						**						3.1						0.4						**
Total costs and expenses			$	1,813.6					$	6,160.3					(71)%						$	3,953.7					$	7,711.4					(49)%
																					** Not meaningful

Cost of Sales

Our cost of sales primarily consists of third-party royalties payable on net sales of our CF products as well as the cost of producing inventories. Pursuant to our agreement with the Cystic Fibrosis Foundation, our tiered third-party royalties on sales of ALYFTREK, TRIKAFTA/KAFTRIO, SYMDEKO/SYMKEVI, KALYDECO, and ORKAMBI, calculated as a percentage of net sales, range from the single digits to the sub-teens, with lower royalties on sales of ALYFTREK and TRIKAFTA/KAFTRIO than for our other products. The royalty burden associated with TRIKAFTA is 9.33% and the royalty burden associated with ALYFTREK is 4%. As previously disclosed, the third party to whom the Cystic Fibrosis Foundation has assigned its ALYFTREK royalty rights has made public statements that they believe the ALYFTREK royalty burden is in the high single-digits. We believe that these statements are inconsistent with the plain terms of our agreement with the Cystic Fibrosis Foundation and would not survive close scrutiny. Following our earnings call on August 4, 2025, the third party requested that we engage in discussions to resolve this disagreement, which engagement is required by the agreement.

In the second quarter and first half of 2025, our cost of sales increased $35.6 million and $56.0 million, or 10% and 8%, as compared to the second quarter and first half of 2024, respectively, primarily due to increased sales volume and changes in product mix. Our cost of sales as a percentage of our net product revenues was 14% in each of the second quarter of 2025, second quarter of 2024, and first half of 2025, and 13% in the first half of 2024.

Research and Development Expenses

			Three Months Ended June 30,																		Six Months Ended June 30,
			2025						2024						Change						2025						2024						Change
			(in millions, except percentages)
Research expenses			$	209.3					$	207.3					1%						$	415.4					$	403.4					3%
Development expenses			769.1						759.3						1%						1,542.7						1,352.3						14%
Total research and development expenses			$	978.4					$	966.6					1%						$	1,958.1					$	1,755.7					12%

Since January 2023, we have incurred approximately $8.8 billion in research and development expenses associated with product discovery and development. Our research and development expenses include internal and external costs incurred for research and development of our products and product candidates. We assign external costs of services provided to us by clinical research organizations and other outsourced research by individual program. Our internal costs include salary and benefits, stock-based compensation expense, laboratory supplies and other direct expenses and infrastructure costs, the majority of which are not assigned to individual products or product candidates.

Research Expenses

			Three Months Ended June 30,																		Six Months Ended June 30,
			2025						2024						Change						2025						2024						Change
			(in millions, except percentages)
Research Expenses:
Salary and benefits			$	53.1					$	61.9					(14)%						$	106.2					$	114.9					(8)%
Stock-based compensation expense			22.5						28.6						(21)%						44.8						58.5						(23)%
Outsourced services and other direct expenses			71.0						67.0						6%						144.1						131.4						10%
Infrastructure costs			62.7						49.8						26%						120.3						98.6						22%
Total research expenses			$	209.3					$	207.3					1%						$	415.4					$	403.4					3%

Our research expenses reflect investment in our pipeline and expansion of our cell and genetic therapy capabilities, which has increased our outsourced services and other direct expenses and infrastructure costs in the second quarter and first half of 2025 as compared to the second quarter and first half of 2024. Salary and benefits in the second quarter and first half of 2024 included $13.1 million associated with cash-settled unvested Alpine equity awards. Compared to the second quarter and first half of 2024, our research expenses increased by $2.0 million, or 1%, and $12.0 million, or 3%, respectively. We expect to continue to invest in our research programs with a focus on creating transformative medicines for serious diseases.

Development Expenses

			Three Months Ended June 30,																		Six Months Ended June 30,
			2025						2024						Change						2025						2024						Change
			(in millions, except percentages)
Development Expenses:
Salary and benefits			$	187.3					$	167.2					12%						$	383.2					$	337.3					14%
Stock-based compensation expense			77.1						68.5						13%						154.9						158.0						(2)%
Compensation expense for cash-settled unvested Alpine equity awards			—						151.9						**						—						151.9						**
Outsourced services and other direct expenses			372.5						267.2						39%						752.2						503.3						49%
Infrastructure costs			132.2						104.5						27%						252.4						201.8						25%
Total development expenses			$	769.1					$	759.3					1%						$	1,542.7					$	1,352.3					14%
																					** Not meaningful

As we have advanced our pipeline of transformative medicines, we have invested in internal headcount and infrastructure to support multiple mid- and late-stage clinical development programs, including from our povetacicept programs acquired from Alpine, CF, T1D and pain programs. In conjunction with our acquisition of Alpine, we incurred $151.9 million associated with cash-settled unvested Alpine equity awards within development expenses in the second quarter and first half of 2024. Compared to the second quarter and first half of 2024, our development expenses increased by $9.8 million, or 1%, and $190.4 million, or 14%, respectively.

Our stock-based compensation expenses, including those recorded as research and development expenses, have historically fluctuated and is expected to continue to fluctuate from one period to another primarily due to changes in the probability of achieving milestones associated with our performance-based awards.

Acquired In-process Research and Development Expenses

			Three Months Ended June 30,																		Six Months Ended June 30,
			2025						2024						Change						2025						2024						Change
			(in millions, except percentages)
Acquired in-process research and development expenses			$	2.2					$	4,449.1					**						$	22.0					$	4,525.9					**
																					** Not meaningful

AIPR&D in the second quarter and first half of 2025 included milestone payments. AIPR&D in the second quarter and first half of 2024 was primarily related to $4.4 billion AIPR&D resulting from our acquisition of Alpine, which was accounted for as an asset acquisition. AIPR&D in the first half of 2024 also included the $75.0 million milestone paid to Entrada during the first quarter of 2024. Our AIPR&D has historically fluctuated, and is expected to continue to fluctuate, from one period to another due to upfront, contingent milestone, and other payments pursuant to our existing and future business development transactions, including collaborations, licenses of third-party technologies, and asset acquisitions.

Selling, General and Administrative Expenses

			Three Months Ended June 30,																		Six Months Ended June 30,
			2025						2024						Change						2025						2024						Change
			(in millions, except percentages)
Selling, general and administrative expenses			$	424.6					$	372.2					14%						$	821.0					$	714.9					15%

Selling, general and administrative expenses increased by 14% and 15% in the second quarter and first half of 2025, respectively, as compared to the second quarter and first half of 2024 primarily due to increased commercial investment to support the launch of JOURNAVX.

Intangible Asset Impairment Charge

In the first quarter of 2025, based on results from a Phase 1/2 clinical trial evaluating our VX-264 clinical program in patients with T1D, we concluded that VX-264 will not be advancing further in clinical development. Based on this event, we performed an interim impairment test on the fair value of our VX-264 indefinite-lived in-process research and development asset that we acquired from Semma Therapeutics, Inc. in 2019. As a result, we recorded a full intangible asset impairment charge of $379.0 million associated with VX-264 in the first quarter of 2025.

Contingent Consideration

The fair value of our contingent consideration increased by $0.9 million and $3.1 million in the second quarter and first half of 2025, respectively, and increased by $0.5 million and $0.4 million in the second quarter and first half of 2024, respectively.

Other Non-Operating Income (Expense), Net

Interest Income

Interest income decreased from $156.5 million and $337.7 million in the second quarter and first half of 2024, respectively, to $122.4 million and $243.3 million in the second quarter and first half of 2025, respectively, primarily due to decreased market interest rates and decreased cash equivalents and available-for-sale debt securities following our acquisition of Alpine in the second quarter of 2024. Our future interest income is dependent on the amount of, and prevailing market interest rates on, our outstanding cash equivalents and available-for-sale debt securities.

Interest Expense

Interest expense was $3.7 million and $6.7 million in the second quarter and first half of 2025, respectively, and $9.9 million and $20.3 million in the second quarter and first half of 2024, respectively. Prior to the third quarter of 2024, the majority of our interest expense related to imputed interest expense associated with our corporate headquarters leases in Boston. Following the amendment of these leases in the third quarter of 2024 that changed their classifications from finance to operating leases, the operating lease costs associated with the leases are recorded entirely within operating expenses in our condensed consolidated statements of income (loss).

Other Income (Expense), Net

Other income (expense), net was income of $13.2 million and expense of $23.1 million in the second quarter of 2025 and 2024, respectively, and expenses of $4.4 million and $54.3 million in the first half of 2025 and 2024, respectively. These amounts primarily related to net unrealized gains or losses resulting from changes in the fair value of certain of our strategic equity investments, which consist of investments in our collaborators that may be public or privately-held companies. To the extent that we continue to hold strategic equity investments in publicly traded biotechnology companies, we expect that our other income (expense), net will continue to fluctuate in future periods due to the volatility in the stock prices of these companies that impacts the fair value of our investments. As of June 30, 2025, the fair value of our investments in publicly traded companies was $27.9 million.

Income Taxes

Our effective tax rate fluctuates from period to period due to the global nature of our operations. The factors that most significantly impact our effective tax rate include changes in tax laws, variability in the amount and allocation of our taxable earnings among multiple jurisdictions, the amount and characterization of our research and development expenses, the levels of certain deductions and credits, adjustments to the value of our uncertain tax positions, acquisitions and third-party collaboration and licensing transactions.

In July 2025, the U.S. enacted H.R.1, which includes significant provisions modifying the U.S. tax framework. We are currently evaluating the impact of these legislative changes and will review additional interpretative guidance as it becomes available. These legislative changes could have an impact on our future effective tax rates, tax liabilities, and cash taxes. As required by ASC 740, Income Taxes, the estimated impact of H.R.1 will be included in our financial results in the third quarter of 2025, the period of enactment.

We recorded provisions for income taxes of $250.1 million and $202.4 million in the second quarter of 2025 and 2024, respectively, and $334.2 million and $381.9 million in the first half of 2025 and 2024, respectively. Our effective tax rate of 16.6% in the first half of 2025 was lower than the U.S. statutory rate primarily due to excess tax benefits related to stock-based compensation and tax credits. Our effective tax rate of (18.1)% in the first half of 2024 was materially different than the U.S. statutory rate primarily due to the $4.4 billion of AIPR&D resulting from our acquisition of Alpine, which drove our pre-tax loss in the first half of 2024.

LIQUIDITY AND CAPITAL RESOURCES

The following table summarizes the components of our financial condition as of June 30, 2025 and December 31, 2024:

			As of June 30, 2025						As of December 31, 2024						Change
			(in millions, except percentages)
Cash, cash equivalents and marketable securities:
Cash and cash equivalents			$	4,972.2					$	4,569.6
Marketable securities			1,410.6						1,546.3
Long-term marketable securities			5,645.9						5,107.9
Total cash, cash equivalents and marketable securities			$	12,028.7					$	11,223.8					7%
Working Capital:
Total current assets			$	10,427.9					$	9,596.4					9%
Total current liabilities			(4,138.4)						(3,564.6)						16%
Total working capital			$	6,289.5					$	6,031.8					4%

Working Capital

As of June 30, 2025, total working capital was $6.3 billion, which represented an increase of $257.7 million, or 4%, compared to December 31, 2024, primarily due to increased cash and cash equivalents resulting from our operations and increased inventories following the commercial launches of ALYFTREK and JOURNAVX.

Cash Flows

			Six Months Ended June 30,
			2025						2024
			(in millions)
Net cash provided by (used in):
Operating activities			$	1,892.0					$	(2,447.0)
Investing activities			$	(540.3)					$	(2,600.1)
Financing activities			$	(1,029.6)					$	(716.1)

Operating Activities

Cash provided by operating activities was $1.9 billion in the first half of 2025 primarily due to income from operations of $1.8 billion driven by our net product revenues. Cash used by operations was $2.4 billion in the first half of 2024 primarily due to our acquisition of Alpine partially offset by cash flows provided by other operating activities.

Investing Activities

Cash used in investing activities was $540.3 million in the first half of 2025, primarily related to net purchases of available-for-sale debt securities and purchases of property and equipment. Cash used in investing activities was $2.6 billion in the first half of 2024. The largest portion of our investing activities in the first half of 2024 were net purchases of available-for-sale debt securities.

Financing Activities

Cash used in financing activities were $1.0 billion and $716.1 million in the first half of 2025 and 2024, respectively. Our financing activities in each of these periods were primarily related to repurchases of our common stock pursuant to our share repurchase program and payments related to our employee stock benefit plans.

Sources and Uses of Liquidity

We intend to rely on our existing cash, cash equivalents and current marketable securities together with our operating profitability as our primary source of liquidity. We expect that cash flows from our product sales together with our cash, cash

equivalents and current marketable securities will be sufficient to fund our operations for at least the next twelve months. The adequacy of our available funds to meet our future operating and capital requirements will depend on many factors, including our future sales of currently marketed products, and the potential introduction of one or more new product candidates to the market, our business development activities, and the number, breadth and cost of our research and development programs.

Credit Facilities & Financing Strategy

We may borrow up to a total of $500.0 million pursuant to a revolving credit facility that we entered into in July 2022 and could repay and reborrow amounts under this revolving credit agreement without penalty. Subject to certain conditions, we could request that the borrowing capacity be increased by an additional $500.0 million, for a total of $1.0 billion. Negative covenants in our credit agreement could prohibit or limit our ability to access this source of liquidity. As of June 30, 2025, the facility was undrawn, and we were in compliance with these covenants.

We may also raise additional capital by borrowing under credit agreements, through public offerings or private placements of our securities, or securing new collaborative agreements or other methods of financing. We will continue to manage our capital structure and will consider all financing opportunities, whenever they may occur, that could strengthen our long-term liquidity profile. There can be no assurance that any such financing opportunities will be available on acceptable terms, if at all.

Future Capital Requirements

We have significant future capital requirements, including:

• Expected operating expenses to conduct research and development activities, manufacture and commercialize our existing and future products, and to operate our organization.

• Cash that we pay for income taxes.

• Royalties we pay related to sales of our CF products.

• Facility, operating and finance lease obligations.

• Firm purchase obligations related to our supply and manufacturing processes.

In addition, other potential significant future capital requirements may include:

• We have entered into certain agreements with third parties that include the funding of certain research, development, manufacturing and commercialization efforts. Certain of our transactions, including collaborations, licensing arrangements, and asset acquisitions, include the potential for future milestone and royalty payments by us upon the achievement of pre-established developmental and regulatory targets and/or commercial targets. Other transactions include the potential for future lease-related expenses and other costs. Our obligation to fund these research and development and commercialization efforts and to pay these potential milestones, expenses and royalties is contingent upon continued involvement in the programs and/or the lack of any adverse events that could cause their discontinuance. We may enter into additional agreements, including acquisitions, collaborations, licensing arrangements and equity investments, which require additional capital.

• To the extent we borrow amounts under our existing credit agreement, we would be required to repay any outstanding principal amounts in 2027.

• As of June 30, 2025, we had $4.6 billion remaining authorization available in total under the share repurchase programs that our Board of Directors approved in February 2023 and May 2025. The programs do not have expiration dates and can be discontinued at any time. We expect to fund the programs through a combination of cash on hand and cash generated by operations.

There have not been any material changes to our future capital requirements disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the Securities and Exchange Commission, or SEC, on February 13, 2025.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements prepared in accordance with generally accepted accounting principles in the U.S. The preparation of these financial statements requires us to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reported periods. These items are monitored and analyzed by management for changes in facts and circumstances, and material changes in these estimates could occur in the future. Changes in estimates are reflected in reported results for the period in which the change occurs. We base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from our estimates if past experience or other assumptions do not turn out to be substantially accurate. During the six months ended June 30, 2025, there were no material changes to our critical accounting policies as reported in our Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the SEC on February 13, 2025.

RECENT ACCOUNTING PRONOUNCEMENTS

For a discussion of recent accounting pronouncements, please refer to Note A, “Basis of Presentation and Accounting Policies.”