Item 1. Financial Statements

VERTEX PHARMACEUTICALS INCORPORATED

Condensed Consolidated Statements of Income

(unaudited; in millions, except per share amounts)

	Three Months Ended March 31,
	2026		2025
Revenues:
Product revenues, net	$2,986.9		$2,760.2
Other revenues	—		10.0
Total revenues	2,986.9		2,770.2
Costs and expenses:
Cost of sales	392.8		363.0
Research and development expenses	961.6		979.7
Acquired in-process research and development expenses	0.5		19.8
Selling, general and administrative expenses	493.7		396.4
Intangible asset impairment charge	—		379.0
Change in fair value of contingent consideration	0.2		2.2
Total costs and expenses	1,848.8		2,140.1
Income from operations	1,138.1		630.1
Interest income, net	114.8		117.9
Other expense, net	—		(17.6)
Income before provision for income taxes	1,252.9		730.4
Provision for income taxes	221.5		84.1
Net income	$1,031.4		$646.3
Net income per common share:
Basic	$4.06		$2.52
Diluted	$4.02		$2.49
Shares used in per share calculations:
Basic	254.1		256.9
Diluted	256.3		259.5

The accompanying notes are an integral part of these condensed consolidated financial statements.

VERTEX PHARMACEUTICALS INCORPORATED

Condensed Consolidated Statements of Comprehensive Income

(unaudited; in millions)

	Three Months Ended March 31,
	2026		2025
Net income	$1,031.4		$646.3
Other comprehensive income (loss):
Unrealized holding (losses) gains on available-for-sale debt securities, net of tax of $8.8 and $(4.6), respectively	(31.2)		16.5
Unrealized gains (losses) on foreign currency forward contracts, net of tax of $(23.9) and $25.6, respectively	84.9		(90.3)
Foreign currency translation adjustment	(13.0)		14.1
Total other comprehensive income (loss)	40.7		(59.7)
Comprehensive income	$1,072.1		$586.6

The accompanying notes are an integral part of these condensed consolidated financial statements.

VERTEX PHARMACEUTICALS INCORPORATED

Condensed Consolidated Balance Sheets

(unaudited; in millions, except share and per share data)

	March 31, 2026		December 31, 2025
Assets
Current assets:
Cash and cash equivalents	$5,492.9		$5,084.8
Marketable securities	1,753.8		1,523.3
Accounts receivable, net	1,996.1		2,052.8
Inventories	1,766.7		1,686.8
Prepaid expenses and other current assets	720.8		853.3
Total current assets	11,730.3		11,201.0
Property and equipment, net	1,608.4		1,520.3
Goodwill	1,088.0		1,088.0
Other intangible assets, net	418.5		424.2
Deferred tax assets	2,947.8		2,897.9
Operating lease assets	1,685.1		1,562.7
Long-term marketable securities	5,749.9		5,712.3
Other assets	1,256.4		1,236.6
Total assets	$26,484.4		$25,643.0
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$489.3		$461.7
Accrued expenses	2,984.2		2,971.2
Other current liabilities	407.1		428.3
Total current liabilities	3,880.6		3,861.2
Long-term operating lease liabilities	1,986.5		1,846.5
Other long-term liabilities	1,255.4		1,269.5
Total liabilities	7,122.5		6,977.2
Commitments and contingencies (Note L)
Shareholders’ equity:
Preferred stock, $0.01 par value; 1,000,000 shares authorized; none issued	—		—
Common stock, $0.01 par value; 500,000,000 shares authorized, 254,163,953 and 253,991,224 shares issued and outstanding, respectively	2.5		2.5
Additional paid-in capital	4,743.2		5,119.2
Accumulated other comprehensive income (loss)	24.8		(15.9)
Retained earnings	14,591.4		13,560.0
Total shareholders’ equity	19,361.9		18,665.8
Total liabilities and shareholders’ equity	$26,484.4		$25,643.0

The accompanying notes are an integral part of these condensed consolidated financial statements.

VERTEX PHARMACEUTICALS INCORPORATED

Condensed Consolidated Statements of Shareholders’ Equity

(unaudited; in millions)

	Three Months Ended
	Common Stock				Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total Shareholders’ Equity
	Shares		Amount
Balance at December 31, 2024	256.9		$2.6		$6,672.4		$127.8		$9,606.8		$16,409.6
Other comprehensive loss, net of tax	—		—		—		(59.7)		—		(59.7)
Net income	—		—		—		—		646.3		646.3
Repurchases of common stock	(0.9)		—		(416.9)		—		—		(416.9)
Common stock withheld for employee tax obligations	(0.6)		—		(270.5)		—		—		(270.5)
Issuance of common stock under benefit plans	1.6		—		18.5		—		—		18.5
Stock-based compensation expense	—		—		169.0		—		—		169.0
Balance at March 31, 2025	257.0		$2.6		$6,172.5		$68.1		$10,253.1		$16,496.3
Balance at December 31, 2025	254.0		$2.5		$5,119.2		$(15.9)		$13,560.0		$18,665.8
Other comprehensive income, net of tax	—		—		—		40.7		—		40.7
Net income	—		—		—		—		1,031.4		1,031.4
Repurchases of common stock	(0.7)		—		(344.5)		—		—		(344.5)
Common stock withheld for employee tax obligations	(0.5)		—		(228.5)		—		—		(228.5)
Issuance of common stock under benefit plans	1.4		—		27.1		—		—		27.1
Stock-based compensation expense	—		—		169.9		—		—		169.9
Balance at March 31, 2026	254.2		$2.5		$4,743.2		$24.8		$14,591.4		$19,361.9

The accompanying notes are an integral part of these condensed consolidated financial statements.

VERTEX PHARMACEUTICALS INCORPORATED

Condensed Consolidated Statements of Cash Flows

(unaudited; in millions)

	Three Months Ended March 31,
	2026		2025
Cash flows from operating activities:
Net income	$1,031.4		$646.3
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation expense	166.4		166.1
Depreciation and amortization expense	55.9		48.4
Intangible asset impairment charge	—		379.0
Deferred income taxes	(65.3)		(191.6)
Other non-cash items, net	(5.0)		39.2
Changes in operating assets and liabilities:
Accounts receivable	39.8		(169.6)
Inventories	(97.7)		(167.1)
Prepaid expenses and other assets	173.4		(28.1)
Accounts payable	35.6		26.2
Accrued expenses	70.5		48.1
Other liabilities	23.1		22.0
Net cash provided by operating activities	1,428.1		818.9
Cash flows from investing activities:
Purchases of available-for-sale debt securities	(2,507.6)		(1,647.4)
Sales and maturities of available-for-sale debt securities	2,209.1		1,637.6
Purchases of property and equipment	(133.4)		(40.7)
Other investing activities	—		(5.3)
Net cash used in investing activities	(431.9)		(55.8)
Cash flows from financing activities:
Issuances of common stock under benefit plans	27.0		16.7
Repurchases of common stock	(336.9)		(426.1)
Payments in connection with common stock withheld for employee tax obligations	(228.5)		(270.5)
Other financing activities	(0.4)		(0.5)
Net cash used in financing activities	(538.8)		(680.4)
Effect of changes in exchange rates on cash	(40.3)		30.5
Net increase in cash, cash equivalents and restricted cash	417.1		113.2
Cash, cash equivalents and restricted cash—beginning of period	5,087.8		4,572.2
Cash, cash equivalents and restricted cash—end of period	$5,504.9		$4,685.4
Supplemental disclosure of cash flow information:
Cash paid for income taxes	$82.3		$184.4
Cash paid for interest	$3.2		$2.7

The accompanying notes are an integral part of these condensed consolidated financial statements.

VERTEX PHARMACEUTICALS INCORPORATED

Notes to Condensed Consolidated Financial Statements (unaudited)

**A.**Basis of Presentation and Accounting Policies

Basis of Presentation

The accompanying condensed consolidated financial statements are unaudited and have been prepared by Vertex

Pharmaceuticals Incorporated (“Vertex,” “we,” “us” or “our”) in accordance with accounting principles generally accepted in

the United States of America (“U.S. GAAP”).

The condensed consolidated financial statements reflect the operations of Vertex and our wholly-owned subsidiaries. All

material intercompany balances and transactions have been eliminated. We operate in one segment, pharmaceuticals.

Certain information and footnote disclosures normally included in our Annual Report on Form 10-K for the fiscal year

ended December 31, 2025 (the “2025 Annual Report on Form 10-K”) have been condensed or omitted. These interim

financial statements, in the opinion of management, reflect all normal recurring adjustments necessary for a fair presentation

of the financial position and results of income for the interim periods ended March 31, 2026 and 2025.

The results of operations for the interim period are not necessarily indicative of the results of operations to be expected

for the full fiscal year. These interim financial statements should be read in conjunction with the audited financial statements

for the year ended December 31, 2025, which are contained in our 2025 Annual Report on Form 10-K.

Use of Estimates

The preparation of condensed consolidated financial statements in accordance with U.S. GAAP requires us to make

certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets

and liabilities at the date of our condensed consolidated financial statements, and the amounts of revenues and expenses

during the reported periods. We base our estimates on historical experience and various other assumptions, including in

certain circumstances future projections that we believe to be reasonable under the circumstances. Actual results could differ

from those estimates. Changes in estimates are reflected in reported results in the period in which they become known.

Recently Issued Accounting Standards

Disaggregation of Income Statement Expenses

In 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2024-03,

Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses (“ASU 2024-03”), which requires public entities, among other items, to

disclose in a tabular format, on an annual and interim basis, purchases of inventory, employee compensation, depreciation,

intangible asset amortization and depletion for each income statement line item that contains those expenses. ASU 2024-03

becomes effective for the annual period starting on January 1, 2027 and interim periods starting on January 1, 2028. We are

in the process of analyzing the impact that the adoption of ASU 2024-03 will have on our disclosures.

Internal-Use Software

In 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40):

Targeted Improvements to the Accounting for Internal-Use Software (“ASU 2025-06”), which eliminates consideration of the

software project development stages and replaces them with modernized recognition and measurement guidance designed to

reflect current internal-use software development practices. ASU 2025-06 becomes effective for the annual and interim

periods starting on January 1, 2028. We are in the process of analyzing the impact that the adoption of ASU 2025-06 will

have on our consolidated financial statements and related disclosures.

Summary of Significant Accounting Policies

Our significant accounting policies are described in Note A, “Nature of Business and Accounting Policies,” in our 2025

Annual Report on Form 10-K.

**B.**Collaboration, License and Other Arrangements

Acquired In-Process Research and Development

We have entered into numerous business development agreements with third parties to collaborate on research,

development and commercialization programs, license technologies, or acquire assets. Our “Acquired in-process research and

VERTEX PHARMACEUTICALS INCORPORATED

Notes to Condensed Consolidated Financial Statements (unaudited)

development expenses” (“AIPR&D”) included $0.5 million and $19.8 million in the three months ended March 31, 2026 and

2025, respectively, related to upfront, contingent milestone, or other payments pursuant to our business development

transactions.

Our collaboration, licensing and asset acquisition agreements that had a significant impact on our financial statements for

the three months ended March 31, 2026 and 2025 or were new or materially revised during the three months ended March 31,

2026, are described below. Additional agreements are described in Note B, “Collaboration, License and Other

Arrangements,” of our 2025 Annual Report on Form 10-K.

In-license Agreements

CRISPR Therapeutics AG

We have a joint development and commercialization agreement (the “CRISPR JDCA”) with CRISPR Therapeutics AG

and its affiliates (“CRISPR”). Pursuant to the CRISPR JDCA, we lead global development, manufacturing and

commercialization of CASGEVY for the treatment of hemoglobinopathies, including treatments for severe sickle cell disease

(“SCD”) and transfusion-dependent beta thalassemia, with support from CRISPR.

We share with CRISPR 40% of the net commercial profits or losses incurred with respect to CASGEVY, subject to

certain adjustments, which is recorded to “Cost of sales.” The net commercial profits or losses equal the sum of the product

revenues, cost of sales and selling, general and administrative expenses that we recognized during the applicable period

related to the CRISPR JDCA. We also are reimbursed by CRISPR for its 40% share of the research and development

activities conducted under the CRISPR JDCA, subject to certain adjustments, and we record this reimbursement from

CRISPR as a credit within “Research and development expenses.”

In the first quarter of 2025, we recorded a $12.5 million credit to AIPR&D from CRISPR, reflecting its share of our

upfront payment paid to Orna Therapeutics in December 2024.

During the three months ended March 31, 2026 and 2025, the credits recognized in our condensed consolidated

statements of income for CRISPR’s share of CRISPR JDCA activities were as follows:

	Three Months Ended March 31,
	2026		2025
(in millions)
Cost of sales	$23.1		$36.2
Research and development expenses	$16.1		$16.0
Acquired in-process research and development expenses	$—		$12.5

Cystic Fibrosis Foundation

In 2004, we entered into an agreement with the Cystic Fibrosis Foundation (the “CFF”), as successor in interest to the

Cystic Fibrosis Foundation Therapeutics, Inc., to support research and development activities. Pursuant to the agreement, as

amended, we have agreed to pay tiered royalties ranging from single digits to sub-teens on covered compounds first

synthesized and/or tested during a research term on or before February 28, 2014, including ivacaftor, lumacaftor and

tezacaftor, and royalties ranging from low-single digits to mid-single digits on net sales of certain compounds first

synthesized and/or tested between March 1, 2014 and August 31, 2016, including elexacaftor. We do not have any royalty

obligations on compounds first synthesized and tested on or after September 1, 2016. For combination products, such as

ORKAMBI, SYMDEKO/SYMKEVI, TRIKAFTA/KAFTRIO, and ALYFTREK, sales are allocated equally to each of the

active pharmaceutical ingredients in the combination product, and royalties are then paid for any royalty-bearing components

included in the combination. We record expenses related to these royalty obligations to “Cost of sales.”

VERTEX PHARMACEUTICALS INCORPORATED

Notes to Condensed Consolidated Financial Statements (unaudited)

**C.**Earnings Per Share

The following table sets forth the computation of basic and diluted net income per common share for the periods ended:

	Three Months Ended March 31,
	2026		2025
(in millions, except per share amounts)
Net income	$1,031.4		$646.3
Basic weighted-average common shares outstanding	254.1		256.9
Effect of potentially dilutive securities:
Restricted stock units (including performance-based restricted stock units (“PSUs”))	1.5		1.6
Stock options	0.7		1.0
Diluted weighted-average common shares outstanding	256.3		259.5
Basic net income per common share	$4.06		$2.52
Diluted net income per common share	$4.02		$2.49

During the three months ended March 31, 2026 and 2025, the number of anti-dilutive securities that were excluded from

the computation of our diluted net income per common share was not significant.

VERTEX PHARMACEUTICALS INCORPORATED

Notes to Condensed Consolidated Financial Statements (unaudited)

**D.**Fair Value Measurements

The following table sets forth our financial assets and liabilities subject to fair value measurements by level within the

fair value hierarchy, as described in Note A, “Nature of Business and Accounting Policies,” of our 2025 Annual Report on

Form 10-K:

	As of March 31, 2026								As of December 31, 2025
			Fair Value Hierarchy								Fair Value Hierarchy
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
	(in millions)
Financial instruments carried at fair value (asset positions):
Cash equivalents	$2,569.8		$1,312.8		$1,257.0		$—		$2,779.1		$1,770.7		$1,008.4		$—
Marketable securities:
Corporate equity securities	20.4		20.4		—		—		16.6		16.6		—		—
U.S. Treasury securities	1,744.8		1,744.8		—		—		1,864.9		1,864.9		—		—
U.S. government agency securities	208.2		—		208.2		—		262.4		—		262.4		—
Asset-backed securities	1,293.6		—		1,293.6		—		1,357.0		—		1,357.0		—
Certificates of deposit	36.6		—		36.6		—		26.2		—		26.2		—
Corporate debt securities	4,170.5		—		4,170.5		—		3,693.9		—		3,693.9		—
Commercial paper	29.6		—		29.6		—		14.6		—		14.6		—
Prepaid expenses and other current assets:
Foreign currency forward contracts	36.1		—		36.1		—		6.2		—		6.2		—
Other assets:
Foreign currency forward contracts	39.4		—		39.4		—		12.7		—		12.7		—
Total financial assets	$10,149.0		$3,078.0		$7,071.0		$—		$10,033.6		$3,652.2		$6,381.4		$—
Financial instruments carried at fair value (liability positions):
Other current liabilities:
Foreign currency forward contracts	$(50.1)		$—		$(50.1)		$—		$(79.4)		$—		$(79.4)		$—
Other long-term liabilities:
Foreign currency forward contracts	(28.1)		—		(28.1)		—		(51.0)		—		(51.0)		—
Contingent consideration	(79.2)		—		—		(79.2)		(79.0)		—		—		(79.0)
Total financial liabilities	$(157.4)		$—		$(78.2)		$(79.2)		$(209.4)		$—		$(130.4)		$(79.0)

Please refer to Note E, “Marketable Securities and Equity Investments,” for the carrying amount and related unrealized

gains (losses) by type of investment. Our cash equivalents primarily include money market funds, commercial paper, and

time deposits.

Fair Value of Corporate Equity Securities

We classify our investments in publicly traded corporate equity securities as “Marketable securities” on our condensed

consolidated balance sheets. Generally, our investments in the common stock of publicly traded companies are valued based

on Level 1 inputs because they have readily determinable fair values.

Please refer to Note E, “Marketable Securities and Equity Investments,” for further information on these investments.

Fair Value of Contingent Consideration

Our Level 3 contingent consideration liabilities of $79.2 million are related to $678.3 million of development and

regulatory milestones potentially payable to former equity holders of a privately-held company we acquired in 2019. We base

our estimates of the probability of achieving the milestones relevant to the fair value of contingent payments on industry data

attributable to gene therapies and our knowledge of the progress and viability of the associated Duchenne muscular dystrophy

programs. The discount rates used in the valuation model for contingent payments, which were between 4.4% and 4.6% as of

March 31, 2026, represent a measure of credit risk and market risk associated with settling the liabilities. Significant

judgment is used in determining the appropriateness of these assumptions at each reporting period.

VERTEX PHARMACEUTICALS INCORPORATED

Notes to Condensed Consolidated Financial Statements (unaudited)

The following table represents a rollforward of the fair value of our contingent consideration liabilities:

	Three Months Ended March 31, 2026
	(in millions)
Balance at December 31, 2025	$79.0
Increase in fair value of contingent payments	0.2
Balance at March 31, 2026	$79.2

**E.**Marketable Securities and Equity Investments

A summary of our cash equivalents and marketable debt and equity securities, which are recorded at fair value, is shown

below:

	As of March 31, 2026								As of December 31, 2025
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(in millions)
Cash equivalents	$2,569.8		$—		$—		$2,569.8		$2,779.1		$—		$—		$2,779.1
Marketable securities:
U.S. Treasury securities	1,744.9		2.8		(2.9)		1,744.8		1,852.9		12.1		(0.1)		1,864.9
U.S. government agency securities	207.8		0.6		(0.2)		208.2		261.2		1.2		—		262.4
Asset-backed securities	1,293.2		2.6		(2.2)		1,293.6		1,351.1		6.0		(0.1)		1,357.0
Certificates of deposit	36.6		—		—		36.6		26.2		—		—		26.2
Corporate debt securities	4,167.5		10.9		(7.9)		4,170.5		3,669.3		25.0		(0.4)		3,693.9
Commercial paper	29.6		—		—		29.6		14.6		—		—		14.6
Total marketable available-for- sale debt securities	7,479.6		16.9		(13.2)		7,483.3		7,175.3		44.3		(0.6)		7,219.0
Corporate equity securities	25.0		—		(4.6)		20.4		25.0		—		(8.4)		16.6
Total marketable securities	7,504.6		16.9		(17.8)		7,503.7		7,200.3		44.3		(9.0)		7,235.6
Total cash equivalents and marketable securities	$10,074.4		$16.9		$(17.8)		$10,073.5		$9,979.4		$44.3		$(9.0)		$10,014.7

Amounts in the table above at fair value were classified on our condensed consolidated balance sheets as follows:

	As of March 31, 2026		As of December 31, 2025
	(in millions)
Cash and cash equivalents	$2,569.8		$2,779.1
Marketable securities	1,753.8		1,523.3
Long-term marketable securities	5,749.9		5,712.3
Total	$10,073.5		$10,014.7

Marketable available-for-sale debt securities by contractual maturity were as follows:

	As of March 31, 2026		As of December 31, 2025
	(in millions)
Matures within one year	$1,733.4		$1,506.7
Matures after one year through five years	5,669.5		5,595.8
Matures after five years	80.4		116.5
Total	$7,483.3		$7,219.0

We did not record any allowances for credit losses to adjust the fair value of our marketable available-for-sale debt

securities during the three months ended March 31, 2026 and 2025. Additionally, we did not record any realized gains or

losses that were material to our condensed consolidated statements of income during the three months ended March 31, 2026

and 2025. As of March 31, 2026, we held marketable available-for-sale debt securities with a total fair value of $3.4 billion

that were in unrealized loss positions totaling $13.2 million. Included in this amount were marketable available-for sale debt

securities with a total fair value of $8.4 million and total unrealized loss of $0.1 million that had been in unrealized loss

VERTEX PHARMACEUTICALS INCORPORATED

Notes to Condensed Consolidated Financial Statements (unaudited)

positions for greater than twelve months. We intend to hold these investments until maturity and do not expect to incur

realized losses on these investments when they mature.

We record changes in the fair value of our investments in corporate equity securities to “Other expense, net” in our

condensed consolidated statements of income. During the three months ended March 31, 2026 and 2025, our net unrealized

gains (losses) on corporate equity securities with readily determinable fair values held at the conclusion of each period were

as follows:

	Three Months Ended March 31,
	2026		2025
(in millions)
Net unrealized gains (losses)	$3.8		$(15.0)

As of March 31, 2026 and December 31, 2025, the carrying value of our equity investments without readily determinable

fair values, which are recorded in “Other assets” on our condensed consolidated balance sheets was $81.5 million.

**F.**Accumulated Other Comprehensive Income (Loss)

The following table summarizes the changes in accumulated other comprehensive income (loss) (“AOCI”) by

component:

			Unrealized Holding Gains (Losses), Net of Tax
	Foreign Currency Translation Adjustment		On Available- For-Sale Debt Securities		On Foreign Currency Forward Contracts		Total
	(in millions)
Balance at December 31, 2025	$37.2		$34.0		$(87.1)		$(15.9)
Other comprehensive (loss) income before reclassifications	(13.0)		(29.3)		65.0		22.7
Amounts reclassified from accumulated other comprehensive income (loss)	—		(1.9)		19.9		18.0
Net current period other comprehensive (loss) income	(13.0)		(31.2)		84.9		40.7
Balance at March 31, 2026	$24.2		$2.8		$(2.2)		$24.8
Balance at December 31, 2024	$9.7		$7.1		$111.0		$127.8
Other comprehensive income before reclassifications	14.1		18.3		(71.5)		(39.1)
Amounts reclassified from accumulated other comprehensive income (loss)	—		(1.8)		(18.8)		(20.6)
Net current period other comprehensive income (loss)	14.1		16.5		(90.3)		(59.7)
Balance at March 31, 2025	$23.8		$23.6		$20.7		$68.1

**G.**Hedging

Foreign currency forward contracts - Designated as hedging instruments

We maintain a hedging program intended to mitigate the effect of changes in foreign exchange rates for a portion of our

forecasted product revenues denominated in certain foreign currencies. The program includes foreign currency forward

contracts that are designated as cash flow hedges under U.S. GAAP having contractual durations from one to 36 months. We

recognize realized gains and losses for the effective portion of such contracts in “Product revenues, net” in our condensed

consolidated statements of income in the same period that we recognize the product revenues that were impacted by the

hedged foreign exchange rate changes.

We formally document the relationship between foreign currency forward contracts (hedging instruments) and forecasted

product revenues (hedged items), as well as our risk management objective and strategy for undertaking various hedging

activities, which includes matching all foreign currency forward contracts that are designated as cash flow hedges to

VERTEX PHARMACEUTICALS INCORPORATED

Notes to Condensed Consolidated Financial Statements (unaudited)

forecasted transactions. Using regression analysis, we assess, both at the hedge’s inception and on an ongoing basis, whether

the foreign currency forward contracts are highly effective in offsetting changes in cash flows of hedged items on a

prospective and retrospective basis. As of March 31, 2026, all hedges were determined to be highly effective.

We consider the impact of our counterparties’ credit risk on the fair value of the foreign currency forward contracts. As

of March 31, 2026 and December 31, 2025, credit risk did not change the fair value of our foreign currency forward

contracts.

The following table summarizes the notional amount in U.S. dollars of our outstanding foreign currency forward

contracts designated as cash flow hedges under U.S. GAAP:

	As of March 31, 2026		As of December 31, 2025
Foreign Currency	(in millions)
Euro	$4,112.0		$4,677.9
Canadian dollar	445.2		516.1
British pound sterling	423.7		492.6
Australian dollar	231.5		267.5
Swiss franc	109.2		126.0
Total foreign currency forward contracts	$5,321.6		$6,080.1

Foreign currency forward contracts - Not designated as hedging instruments

We enter into foreign currency forward contracts, typically with contractual maturities of approximately one month,

which are designed to mitigate the effect of changes in foreign exchange rates on monetary assets and liabilities, including

intercompany balances. These contracts are not designated as hedging instruments under U.S. GAAP. We recognize realized

gains and losses for such contracts in “Other expense, net” in our condensed consolidated statements of income each period.

As of March 31, 2026 and December 31, 2025, the notional amount of our outstanding foreign currency forward contracts

where hedge accounting under U.S. GAAP was not applied was $868.0 million and $612.6 million, respectively.

During the three months ended March 31, 2026 and 2025, we recognized the following related to foreign currency

forward contracts in our condensed consolidated statements of income:

	Three Months Ended March 31,
	2026		2025
(in millions)
Designated as hedging instruments - Reclassified from AOCI
Product revenues, net	$(25.5)		$24.1
Not designated as hedging instruments
Other expense, net	$2.9		$(1.2)
Total reported in the Condensed Consolidated Statements of Income
Product revenues, net	$2,986.9		$2,760.2
Other expense, net	$—		$(17.6)

The following table summarizes the fair value of our outstanding foreign currency forward contracts designated as cash

flow hedges under U.S. GAAP included on our condensed consolidated balance sheets:

As of March 31, 2026
Assets				Liabilities
Classification		Fair Value		Classification		Fair Value
(in millions)
Prepaid expenses and other current assets		$36.1		Other current liabilities		$(50.1)
Other assets		39.4		Other long-term liabilities		(28.1)
Total assets		$75.5		Total liabilities		$(78.2)

VERTEX PHARMACEUTICALS INCORPORATED

Notes to Condensed Consolidated Financial Statements (unaudited)

As of December 31, 2025
Assets				Liabilities
Classification		Fair Value		Classification		Fair Value
(in millions)
Prepaid expenses and other current assets		$6.2		Other current liabilities		$(79.4)
Other assets		12.7		Other long-term liabilities		(51.0)
Total assets		$18.9		Total liabilities		$(130.4)

As of March 31, 2026, we expect the amounts that are related to foreign currency forward contracts designated as cash

flow hedges under U.S. GAAP recorded in “Prepaid expenses and other current assets” and “Other current liabilities” to be

reclassified to earnings within twelve months.

We present the fair value of our foreign currency forward contracts on a gross basis within our condensed consolidated

balance sheets. The following table summarizes the potential effect of offsetting derivatives by type of financial instrument

designated as cash flow hedges under U.S. GAAP on our condensed consolidated balance sheets:

	As of March 31, 2026
	Gross Amounts Recognized		Gross Amounts Offset		Gross Amounts Presented		Gross Amounts Not Offset		Legal Offset
Foreign currency forward contracts	(in millions)
Total assets	$75.5		$—		$75.5		$(75.5)		$—
Total liabilities	(78.2)		—		(78.2)		75.5		(2.7)

	As of December 31, 2025
	Gross Amounts Recognized		Gross Amounts Offset		Gross Amounts Presented		Gross Amounts Not Offset		Legal Offset
Foreign currency forward contracts	(in millions)
Total assets	$18.9		$—		$18.9		$(18.9)		$—
Total liabilities	(130.4)		—		(130.4)		18.9		(111.5)

**H.**Inventories

“Inventories” consisted of the following:

	As of March 31, 2026		As of December 31, 2025
	(in millions)
Raw materials	$267.4		$259.8
Work-in-process	1,243.4		1,196.9
Finished goods	255.9		230.1
Total	$1,766.7		$1,686.8

VERTEX PHARMACEUTICALS INCORPORATED

Notes to Condensed Consolidated Financial Statements (unaudited)

**I.**Intangible Assets

“Other intangible assets, net” consisted of the following:

			As of March 31, 2026						As of December 31, 2025
	Estimated Useful Lives		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
			(in millions, except useful lives)
In-process research and development	Indefinite		$224.6		$—		$224.6		$224.6		$—		$224.6
Finite-lived intangible assets - marketed products	10 to 12 years		238.0		(47.1)		190.9		238.0		(42.1)		195.9
Finite-lived intangible assets - assembled workforce	3 years		7.7		(4.7)		3.0		7.7		(4.0)		3.7
Total other intangible assets, net			$470.3		$(51.8)		$418.5		$470.3		$(46.1)		$424.2

In March 2025, based on results from a Phase 1/2 clinical trial evaluating our VX-264 clinical program in patients with

type 1 diabetes (“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, using the multi period earnings

method of the income approach, we recorded a full intangible asset impairment charge of $379.0 million in the first quarter of

2025. As of March 31, 2026, our remaining indefinite-lived in-process research and development assets were associated with

our T1D program.

**J.**Stock-based Compensation Expense and Share Repurchase Programs

Stock-based compensation expense

During the three months ended March 31, 2026 and 2025, we recognized the following stock-based compensation

expense:

	Three Months Ended March 31,
	2026		2025
(in millions)
Stock-based compensation expense by type of award:
Restricted stock units (including PSUs)	$166.5		$163.4
ESPP share issuances	3.4		5.6
Stock-based compensation expense related to inventories	(3.5)		(2.9)
Total stock-based compensation expense included in “Total costs and expenses”	$166.4		$166.1
Stock-based compensation expense by line item:
Cost of sales	$3.2		$2.6
Research and development expenses	101.7		100.1
Selling, general and administrative expenses	61.5		63.4
Total stock-based compensation expense included in “Total costs and expenses”	166.4		166.1
Income tax effect	(35.3)		(75.2)
Total stock-based compensation expense, net of tax	$131.1		$90.9

VERTEX PHARMACEUTICALS INCORPORATED

Notes to Condensed Consolidated Financial Statements (unaudited)

Share repurchase program

In February 2023, our Board of Directors authorized a share repurchase program (the “2023 Share Repurchase

Program”), pursuant to which we were authorized to repurchase up to $3.0 billion of our common stock. As of September 30,

2025, we had repurchased the full amount authorized under the 2023 Share Repurchase Program.

In May 2025, our Board of Directors authorized an additional share repurchase program (the “2025 Share Repurchase

Program”), pursuant to which we are authorized to repurchase up to $4.0 billion of our common stock. The 2025 Share

Repurchase Program does not have an expiration date and can be discontinued at any time.

During the three months ended March 31, 2026 and 2025, we repurchased 0.7 million and 0.9 million shares of our

common stock under our share repurchase programs, respectively, for aggregate repurchases of $344.5 million and $416.9

million, respectively. As of March 31, 2026, we had $3.0 billion remaining available under the 2025 Share Repurchase

Program.

**K.**Income Taxes

We are subject to U.S. federal, state, and foreign income taxes. During the three months ended March 31, 2026 and 2025,

we recorded the following provisions for income taxes and effective tax rates as compared to our income before provision for

income taxes.

	Three Months Ended March 31,
	2026		2025
(in millions, except percentages)
Income before provision for income taxes	$1,252.9		$730.4
Provision for income taxes	$221.5		$84.1

Effective tax rate	17.7%		11.5%

Our effective tax rates for the three months ended March 31, 2026 and 2025 were lower than the U.S. statutory rate

primarily due to excess tax benefits related to stock-based compensation.

We have reviewed the tax positions taken, or to be taken, in our tax returns for all tax years currently open to

examination by a taxing authority. As of March 31, 2026 and December 31, 2025, we had $420.3 million and $436.6 million,

respectively, of net unrecognized tax benefits, which would affect our tax rate if recognized.

We file U.S. federal income tax returns and income tax returns in various state, local and foreign jurisdictions. We have

various income tax audits ongoing at any time throughout the world. Except for jurisdictions where we have net operating

losses or tax credit carryforwards, we are no longer subject to any tax assessment from tax authorities for years prior to 2014

in jurisdictions that have a material impact on our consolidated financial statements. Due to the nature of the adjustments

from a settlement with the United Kingdom’s HM Revenue & Customs in 2023, we have asserted our rights under the U.S./

U.K. Income Tax Convention pursuant to the mutual agreement procedures for the relief of double taxation for these matters.

In December 2022, European Union member states reached an agreement to implement the minimum tax component

(“Pillar Two”) of the Organization for Economic Co-operation and Development’s (the “OECD’s”), global international tax

reform initiative with effective dates of January 1, 2024 and 2025. On January 5, 2026, the OECD announced that a ‘side-by-

side’ agreement was reached with member countries creating safe harbors to exempt U.S. multi-nationals from certain taxes

under the Pillar Two regime by recognizing the U.S. tax system as a compatible domestic minimum tax regime. Our exposure

to other countries’ minimum tax regimes was limited before these changes, but the side-by-side agreement allows for

certainty as our structure may change in the future.

In July 2025, the U.S. enacted H.R.1, which includes significant provisions modifying the U.S. tax framework, including

the ability for companies to immediately deduct research and development expenditures for 2025 and provisions for

deducting previously capitalized amounts. H.R.1 does not have a material impact on our U.S. taxes for the first quarter of

2026, but we expect further guidance to be issued. We will review guidance when issued for impacts on future years and

disclose any impacts if needed at that time. These legislative changes could have an impact on our future effective tax rates,

tax liabilities, and cash taxes.

VERTEX PHARMACEUTICALS INCORPORATED

Notes to Condensed Consolidated Financial Statements (unaudited)

**L.**Commitments and Contingencies

2022 Credit Facility

In July 2022, Vertex and certain of its subsidiaries entered into a $500.0 million unsecured revolving facility (the “Credit

Agreement”) with Bank of America, N.A., as administrative agent and the lenders referred to therein (the “Lenders”), which

matures on July 1, 2027. The Credit Agreement was not drawn upon at closing and we have not drawn upon it to date.

Amounts drawn pursuant to the Credit Agreement, if any, will be used for general corporate purposes. Subject to satisfaction

of certain conditions, we may request that the borrowing capacity for the Credit Agreement be increased by an additional

$500.0 million. Additionally, the Credit Agreement provides a sublimit of $100.0 million for letters of credit.

Any amounts borrowed under the Credit Agreement will bear interest, at our option, at either a base rate or a Secured

Overnight Financing Rate (“SOFR”), in each case plus an applicable margin. Under the Credit Agreement, the applicable

margins on base rate loans range from 0.000% to 0.500% and the applicable margins on SOFR loans range from 1.000% to

1.500%, in each case 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).

Any amounts borrowed pursuant to the Credit Agreement are guaranteed by certain of our existing and future domestic

subsidiaries, subject to certain exceptions.

The Credit Agreement contains customary representations and warranties and affirmative and negative covenants,

including a financial covenant to maintain subject to certain limited exceptions, a consolidated leverage ratio of 3.50 to 1.00,

subject to an increase to 4.00 to 1.00 following a material acquisition. As of March 31, 2026, we were in compliance with the

covenants described above. The Credit Agreement also contains customary events of default. In the case of a continuing

event of default, the administrative agent would be entitled to exercise various remedies, including the acceleration of

amounts due under outstanding loans.

Direct costs related to the Credit Agreement are recorded over its term and are not material to our financial statements.

Guaranties and Indemnifications

As permitted under Massachusetts law, our Articles of Organization and By-laws provide that we will indemnify certain

of our officers and directors for certain claims asserted against them in connection with their service as an officer or director.

The maximum potential amount of future payments that we could be required to make under these indemnification provisions

is unlimited. However, we have purchased directors’ and officers’ liability insurance policies that could reduce our monetary

exposure and enable us to recover a portion of any future amounts paid. No indemnification claims currently are outstanding,

and we believe the estimated fair value of these indemnification arrangements is minimal.

We customarily agree in the ordinary course of our business to indemnification provisions in agreements with clinical

trial investigators and sites in our product development programs, sponsored research agreements with academic and not-for-

profit institutions, various comparable agreements involving parties performing services for us, and our real estate leases. We

also customarily agree to certain indemnification provisions in our drug discovery, development and commercialization

collaboration agreements. With respect to our clinical trials and sponsored research agreements, these indemnification

provisions typically apply to any claim asserted against the investigator or the investigator’s institution relating to personal

injury or property damage, violations of law or certain breaches of our contractual obligations arising out of the research or

clinical testing of our compounds or product candidates. With respect to lease agreements, the indemnification provisions

typically apply to claims asserted against the landlord relating to personal injury or property damage caused by us, to

violations of law by us or to certain breaches of our contractual obligations. The indemnification provisions appearing in our

collaboration agreements are similar to those for the other agreements discussed above, but in addition provide some limited

indemnification for our collaborator in the event of third-party claims alleging infringement of intellectual property rights. In

each of the cases above, the indemnification obligation generally survives the termination of the agreement for some

extended period, although we believe the obligation typically has the most relevance during the contract term and for a short

period of time thereafter. The maximum potential amount of future payments that we could be required to make under these

provisions is generally unlimited. We have purchased insurance policies covering personal injury, property damage and

general liability that reduce our exposure for indemnification and would enable us in many cases to recover all or a portion of

any future amounts paid. We have never paid any material amounts to defend lawsuits or settle claims related to these

indemnification provisions. Accordingly, we believe the estimated fair value of these indemnification arrangements is

minimal.

VERTEX PHARMACEUTICALS INCORPORATED

Notes to Condensed Consolidated Financial Statements (unaudited)

Legal Matters and Other Contingencies

As described in Note B, “Collaboration, License and Other Arrangements,” we have an agreement with the CFF (the

“CFF Agreement”) pursuant to which we owe third-party royalties payable on net sales of certain CF products, including

ALYFTREK. Since inception, our ALYFTREK net product revenues total $1.3 billion. Based on the CFF Agreement, our

position is that the royalty burden associated with ALYFTREK is 4%. On October 10, 2025, Royalty Pharma plc (“RP”), the

third party to whom the CFF assigned its rights (and the CFF, which remains a party to the CFF Agreement), initiated a

confidential arbitration alleging the royalty burden on ALYFTREK is approximately 8%. RP is seeking a declaratory

judgment regarding the royalty burden on ALYFTREK as well as alleged unpaid royalties and other alleged damages

available under the CFF Agreement or applicable law, costs, expenses, attorneys’ fees, and interest. We believe RP’s position

is contrary to the plain terms of the CFF Agreement and intend to vigorously defend our position under the CFF Agreement.

On a quarterly basis, we evaluate developments with claims, whether asserted or unasserted, and legal proceedings that

could result in a loss contingency accrual, or an increase or decrease to a previously accrued loss contingency. There were no

material loss contingencies accrued as of March 31, 2026 or December 31, 2025.

We also have certain contingent liabilities that arise in the ordinary course of our business activities. We accrue for such

contingent liabilities when it is probable that future expenditures will be made and such expenditures can be reasonably

estimated. Other than our contingent consideration liabilities discussed in Note D, “Fair Value Measurements,” there were no

significant contingent liabilities accrued as of March 31, 2026 or December 31, 2025.

**M.**Segment Information

Re**venues by Product

“Product revenues, net” consisted of the following:

	Three Months Ended March 31,
	2026		2025
(in millions)
TRIKAFTA/KAFTRIO	$2,354.7		$2,535.5
ALYFTREK	424.4		53.9
Other CF product revenues (1)	135.9		155.3
Total CF product revenues, net	2,915.0		2,744.7
CASGEVY	42.9		14.2
JOURNAVX	29.0		1.3
Total product revenues, net	$2,986.9		$2,760.2
(1) Include KALYDECO, ORKAMBI, and SYMDEKO/SYMKEVI.

Revenues by Geographic Location

“Product revenues, net” are allocated based on the location of the customer. “Other revenues” are allocated based on the

location of the Vertex entity associated with such revenues. Our “Total revenues” consisted of the following:

	Three Months Ended March 31,
	2026		2025
(in millions)
United States	$1,775.9		$1,663.5
Outside of the United States
Europe	950.0		826.6
Other	261.0		280.1
Total revenues outside of the United States	1,211.0		1,106.7
Total revenues	$2,986.9		$2,770.2

We did not have any “Other revenues” in the three months ended March 31, 2026. In the three months ended March 31,

2025, our “Other revenues” of $10.0 million were attributed to the U.S.

VERTEX PHARMACEUTICALS INCORPORATED

Notes to Condensed Consolidated Financial Statements (unaudited)

Significant Segment Expenses

Significant segment expenses are set forth in the following table:

	Three Months Ended March 31,
	2026		2025
(in millions)
Total revenues	$2,986.9		$2,770.2
Costs and expenses:
Cost of sales - products	160.2		130.6
Cost of sales - royalty	232.6		232.4
Research expenses	205.0		206.1
Development expenses	756.6		773.6
Acquired in-process research and development expenses	0.5		19.8
Selling and other commercial expenses	313.6		241.1
General and administrative expenses	180.1		155.3
Intangible asset impairment charge	—		379.0
Interest income, net	(114.8)		(117.9)
Other segment items (1)	0.2		19.8
Provision for income taxes	221.5		84.1
Net income	$1,031.4		$646.3

(1)Other segment items included in “Net income” primarily include changes in the fair value of contingent

consideration and changes in the fair value of equity investments.

Additional Segment Information

During the three months ended March 31, 2026 and 2025, we recorded total depreciation and amortization expense of

$55.9 million and $48.4 million, respectively.

**N.**Additional Balance Sheet & Cash Flow Information

Contract Liabilities

We had contract liabilities of $218.7 million and $171.8 million as of March 31, 2026 and December 31, 2025,

respectively, primarily related to annual contracts with government-owned and supported customers in international markets

that limit the amount of annual reimbursement we can receive for our CF products. Upon exceeding the annual

reimbursement amount provided by the customer’s contract with us, our CF products are provided free of charge, which is a

material right. These contracts include upfront payments and fees. If we estimate that we will exceed the annual

reimbursement amount under a contract, we defer a portion of the consideration received for shipments made up to the annual

reimbursement limit as a portion of “Other current liabilities.” Once the reimbursement limit has been reached, we recognize

the deferred amount as revenue when we ship the free products. Our CF product revenue contracts include performance

obligations that are one year or less.

Our contract liabilities at the end of each fiscal year relate to contracts with CF annual reimbursement limits in

international markets in which the annual period associated with the contract is not the same as our fiscal year. In these

markets, we recognize revenues related to performance obligations satisfied in previous years; however, these revenues do

not relate to any performance obligations that were satisfied more than 12 months prior to the beginning of the current year.

Operating Lease Assets and Liabilities

In 2023, we entered into a strategic agreement with Lonza to support the manufacture of T1D cell therapy product

candidates. As part of this agreement, we have partnered with Lonza to build a 130,000 square foot dedicated new facility in

New Hampshire, which will be operated by Lonza (the “Lonza Facility”) and is an embedded lease for accounting purposes.

The lease commencement for the Lonza Facility occurred during the first quarter of 2026, upon which we recorded a right-of-

use asset and corresponding lease liability of $95.8 million within each of “Operating lease assets” and “Long-term operating

lease liabilities” on our condensed consolidated balance sheet. In accordance with our policy for embedded leases with

VERTEX PHARMACEUTICALS INCORPORATED

Notes to Condensed Consolidated Financial Statements (unaudited)

contract manufacturing organizations, we account for the lease component separately from the variable non-lease

components, which we expense as incurred. Payments will continue through the tenth anniversary of the Lonza Facility’s

regulatory approval for commercial production. The lease will automatically renew for additional one-year periods, unless

either we or Lonza provides written notice of intent to not renew. We utilize the initial period as our lease term.

We obtained $148.2 million and $5.2 million of right-of-use operating lease assets in exchange for a similar amount of

lease obligations, including the Lonza Facility amounts described above, during the three months ended March 31, 2026 and

2025, respectively. These represent non-cash operating activities associated with our condensed consolidated statement of

cash flows.

Cash, Cash Equivalents and Restricted Cash Presented in Condensed Consolidated Statements of Cash Flows

The cash, cash equivalents and restricted cash at the beginning and ending of each period presented in our condensed

consolidated statements of cash flows consisted of the following:

	Three Months Ended March 31,
	2026				2025
	Beginning of period		End of period		Beginning of period		End of period
	(in millions)
Cash and cash equivalents	$5,084.8		$5,492.9		$4,569.6		$4,674.7
Prepaid expenses and other current assets	3.0		12.0		2.6		10.7
Cash, cash equivalents and restricted cash per condensed consolidated statement of cash flows	$5,087.8		$5,504.9		$4,572.2		$4,685.4