Item 1. Financial Statements

VERTEX PHARMACEUTICALS INCORPORATED

Condensed Consolidated Statements of Income

(unaudited; in millions, except per share amounts)

	Three Months Ended June 30,				Six Months Ended June 30,
	2026		2025		2026		2025
Revenues:
Product revenues, net	$3,333.9		$2,944.0		$6,320.8		$5,704.2
Other revenues	—		20.7		—		30.7
Total revenues	3,333.9		2,964.7		6,320.8		5,734.9
Costs and expenses:
Cost of sales	489.2		407.5		882.0		770.5
Research and development expenses	993.8		978.4		1,955.4		1,958.1
Acquired in-process research and development expenses	21.4		2.2		21.9		22.0
Selling, general and administrative expenses	582.2		424.6		1,075.9		821.0
Intangible asset impairment charge	—		—		—		379.0
Change in fair value of contingent consideration	0.4		0.9		0.6		3.1
Total costs and expenses	2,087.0		1,813.6		3,935.8		3,953.7
Income from operations	1,246.9		1,151.1		2,385.0		1,781.2
Interest income, net	120.6		118.7		235.4		236.6
Other income (expense), net	24.3		13.2		24.3		(4.4)
Income before provision for income taxes	1,391.8		1,283.0		2,644.7		2,013.4
Provision for income taxes	292.0		250.1		513.5		334.2
Net income	$1,099.8		$1,032.9		$2,131.2		$1,679.2
Net income per common share:
Basic	$4.34		$4.02		$8.39		$6.54
Diluted	$4.31		$3.99		$8.33		$6.48
Shares used in per share calculations:
Basic	253.7		256.7		253.9		256.8
Diluted	255.2		258.9		255.7		259.2

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 June 30,				Six Months Ended June 30,
	2026		2025		2026		2025
Net income	$1,099.8		$1,032.9		$2,131.2		$1,679.2
Other comprehensive income (loss):
Unrealized holding (losses) gains on available-for-sale debt securities, net of tax of $4.9, $(2.1), $13.7 and $(6.7), respectively	(17.4)		7.4		(48.6)		23.9
Unrealized gains (losses) on foreign currency forward contracts, net of tax of $(11.2), $54.1, $(35.1) and $79.7, respectively	39.7		(191.9)		124.6		(282.2)
Foreign currency translation adjustment	1.4		15.3		(11.6)		29.4
Total other comprehensive income (loss)	23.7		(169.2)		64.4		(228.9)
Comprehensive income	$1,123.5		$863.7		$2,195.6		$1,450.3

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)

	June 30, 2026		December 31, 2025
Assets
Current assets:
Cash and cash equivalents	$6,143.5		$5,084.8
Marketable securities	1,708.9		1,523.3
Accounts receivable, net	2,134.3		2,052.8
Inventories	1,765.1		1,686.8
Prepaid expenses and other current assets	791.9		853.3
Total current assets	12,543.7		11,201.0
Property and equipment, net	1,665.0		1,520.3
Goodwill	1,088.0		1,088.0
Other intangible assets, net	412.8		424.2
Deferred tax assets	3,010.9		2,897.9
Operating lease assets	1,662.9		1,562.7
Long-term marketable securities	5,789.1		5,712.3
Other assets	1,250.9		1,236.6
Total assets	$27,423.3		$25,643.0
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$429.5		$461.7
Accrued expenses	3,179.0		2,971.2
Other current liabilities	329.4		428.3
Total current liabilities	3,937.9		3,861.2
Long-term operating lease liabilities	1,977.6		1,846.5
Other long-term liabilities	1,259.9		1,269.5
Total liabilities	7,175.4		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, 253,347,555 and 253,991,224 shares issued and outstanding, respectively	2.5		2.5
Additional paid-in capital	4,505.7		5,119.2
Accumulated other comprehensive income (loss)	48.5		(15.9)
Retained earnings	15,691.2		13,560.0
Total shareholders’ equity	20,247.9		18,665.8
Total liabilities and shareholders’ equity	$27,423.3		$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 March 31, 2025	257.0		$2.6		$6,172.5		$68.1		$10,253.1		$16,496.3
Other comprehensive loss, net of tax	—		—		—		(169.2)		—		(169.2)
Net income	—		—		—		—		1,032.9		1,032.9
Repurchases of common stock	(0.9)		—		(397.3)		—		—		(397.3)
Common stock withheld for employee tax obligations	—		—		(5.9)		—		—		(5.9)
Issuance of common stock under benefit plans	0.2		—		47.4		—		—		47.4
Stock-based compensation expense	—		—		171.2		—		—		171.2
Balance at June 30, 2025	256.3		$2.6		$5,987.9		$(101.1)		$11,286.0		$17,175.4
Balance at March 31, 2026	254.2		$2.5		$4,743.2		$24.8		$14,591.4		$19,361.9
Other comprehensive income, net of tax	—		—		—		23.7		—		23.7
Net income	—		—		—		—		1,099.8		1,099.8
Repurchases of common stock	(1.1)		—		(457.7)		—		—		(457.7)
Common stock withheld for employee tax obligations	—		—		(4.3)		—		—		(4.3)
Issuance of common stock under benefit plans	0.2		—		50.6		—		—		50.6
Stock-based compensation expense	—		—		173.9		—		—		173.9
Balance at June 30, 2026	253.3		$2.5		$4,505.7		$48.5		$15,691.2		$20,247.9
	Six 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	—		—		—		(228.9)		—		(228.9)
Net income	—		—		—		—		1,679.2		1,679.2
Repurchases of common stock	(1.8)		—		(814.2)		—		—		(814.2)
Common stock withheld for employee tax obligations	(0.6)		—		(276.4)		—		—		(276.4)
Issuance of common stock under benefit plans	1.8		—		65.9		—		—		65.9
Stock-based compensation expense	—		—		340.2		—		—		340.2
Balance at June 30, 2025	256.3		$2.6		$5,987.9		$(101.1)		$11,286.0		$17,175.4
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	—		—		—		64.4		—		64.4
Net income	—		—		—		—		2,131.2		2,131.2
Repurchases of common stock	(1.8)		—		(802.2)		—		—		(802.2)
Common stock withheld for employee tax obligations	(0.5)		—		(232.8)		—		—		(232.8)
Issuance of common stock under benefit plans	1.6		—		77.7		—		—		77.7
Stock-based compensation expense	—		—		343.8		—		—		343.8
Balance at June 30, 2026	253.3		$2.5		$4,505.7		$48.5		$15,691.2		$20,247.9

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

VERTEX PHARMACEUTICALS INCORPORATED

Condensed Consolida****ted Statements of Cash Flows

(unaudited; in millions)

	Six Months Ended June 30,
	2026		2025
Cash flows from operating activities:
Net income	$2,131.2		$1,679.2
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation expense	336.6		333.4
Depreciation and amortization expense	112.4		100.1
Intangible asset impairment charge	—		379.0
Deferred income taxes	(135.0)		(305.4)
Other non-cash items, net	(21.4)		106.6
Changes in operating assets and liabilities:
Accounts receivable	(100.4)		(188.0)
Inventories	(125.4)		(315.7)
Prepaid expenses and other assets	122.0		(104.5)
Accounts payable	(31.1)		33.8
Accrued expenses	293.0		214.7
Other liabilities	(28.4)		(41.2)
Net cash provided by operating activities	2,553.5		1,892.0
Cash flows from investing activities:
Purchases of available-for-sale debt securities	(4,864.1)		(3,820.6)
Sales and maturities of available-for-sale debt securities	4,558.2		3,476.3
Purchases of property and equipment	(245.6)		(186.4)
Proceeds related to convertible note	75.5		—
Other investing activities	(1.7)		(9.6)
Net cash used in investing activities	(477.7)		(540.3)
Cash flows from financing activities:
Issuances of common stock under benefit plans	74.7		65.8
Repurchases of common stock	(806.4)		(817.9)
Payments in connection with common stock withheld for employee tax obligations	(232.8)		(276.4)
Other financing activities	(1.0)		(1.1)
Net cash used in financing activities	(965.5)		(1,029.6)
Effect of changes in exchange rates on cash	(44.0)		87.7
Net increase in cash, cash equivalents and restricted cash	1,066.3		409.8
Cash, cash equivalents and restricted cash—beginning of period	5,087.8		4,572.2
Cash, cash equivalents and restricted cash—end of period	$6,154.1		$4,982.0
Supplemental disclosure of cash flow information:
Cash paid for income taxes	$501.5		$697.7
Cash paid for interest	$6.3		$6.2

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 June 30, 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 $21.4 million and $21.9 million in the three and six months ended June 30,

2026, respectively, and $2.2 million and $22.0 million in the three and six months ended June 30, 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 and six months ended June 30, 2026 and 2025 or were new or materially revised during the three and six months

ended June 30, 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 and six months ended June 30, 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 June 30,				Six Months Ended June 30,
	2026		2025		2026		2025
	(in millions)
Cost of sales	$21.8		$30.1		$44.9		$66.3
Research and development expenses	$14.4		$15.1		$30.5		$31.1
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 June 30,				Six Months Ended June 30,
	2026		2025		2026		2025
	(in millions, except per share amounts)
Net income	$1,099.8		$1,032.9		$2,131.2		$1,679.2
Basic weighted-average common shares outstanding	253.7		256.7		253.9		256.8
Effect of potentially dilutive securities:
Restricted stock units (including performance-based restricted stock units (“PSUs”))	0.9		1.3		1.2		1.4
Stock options	0.6		0.9		0.6		1.0
Diluted weighted-average common shares outstanding	255.2		258.9		255.7		259.2
Basic net income per common share	$4.34		$4.02		$8.39		$6.54
Diluted net income per common share	$4.31		$3.99		$8.33		$6.48

During the three and six months ended June 30, 2026 and 2025, the number of anti-dilutive securities that were excluded

from the computation of our diluted net income per common share were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2026		2025		2026		2025
	(in millions)
Unvested restricted stock units (including PSUs)	0.6		—		0.3		—
Stock options	—		—		—		—

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 June 30, 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	$2,656.9		$1,351.5		$1,305.4		$—		$2,779.1		$1,770.7		$1,008.4		$—
Marketable securities:
Corporate equity securities	11.9		11.9		—		—		16.6		16.6		—		—
U.S. Treasury securities	1,660.4		1,660.4		—		—		1,864.9		1,864.9		—		—
U.S. government agency securities	190.8		—		190.8		—		262.4		—		262.4		—
Asset-backed securities	1,233.5		—		1,233.5		—		1,357.0		—		1,357.0		—
Certificates of deposit	18.9		—		18.9		—		26.2		—		26.2		—
Corporate debt securities	4,317.8		—		4,317.8		—		3,693.9		—		3,693.9		—
Commercial paper	64.7		—		64.7		—		14.6		—		14.6		—
Prepaid expenses and other current assets:
Foreign currency forward contracts	60.8		—		60.8		—		6.2		—		6.2		—
Other assets:
Foreign currency forward contracts	39.9		—		39.9		—		12.7		—		12.7		—
Total financial assets	$10,255.6		$3,023.8		$7,231.8		$—		$10,033.6		$3,652.2		$6,381.4		$—
Financial instruments carried at fair value (liability positions):
Other current liabilities:
Foreign currency forward contracts	$(35.2)		$—		$(35.2)		$—		$(79.4)		$—		$(79.4)		$—
Other long-term liabilities:
Foreign currency forward contracts	(17.4)		—		(17.4)		—		(51.0)		—		(51.0)		—
Contingent consideration	(79.6)		—		—		(79.6)		(79.0)		—		—		(79.0)
Total financial liabilities	$(132.2)		$—		$(52.6)		$(79.6)		$(209.4)		$—		$(130.4)		$(79.0)

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

Fair Value of Contingent Consideration

Our Level 3 contingent consideration liabilities of $79.6 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 4.6% and 4.7% as of

June 30, 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:

	Six Months Ended June 30, 2026
	(in millions)
Balance at December 31, 2025	$79.0
Increase in fair value of contingent payments	0.6
Balance at June 30, 2026	$79.6

**E.**Marketable Securities and Other Investments

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

below:

	As of June 30, 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	$2,656.9		$—		$—		$2,656.9		$2,779.1		$—		$—		$2,779.1
Marketable securities:
U.S. Treasury securities	1,668.0		0.4		(8.0)		1,660.4		1,852.9		12.1		(0.1)		1,864.9
U.S. government agency securities	191.0		0.2		(0.4)		190.8		261.2		1.2		—		262.4
Asset-backed securities	1,236.1		1.2		(3.8)		1,233.5		1,351.1		6.0		(0.1)		1,357.0
Certificates of deposit	18.9		—		—		18.9		26.2		—		—		26.2
Corporate debt securities	4,326.1		5.7		(14.0)		4,317.8		3,669.3		25.0		(0.4)		3,693.9
Commercial paper	64.7		—		—		64.7		14.6		—		—		14.6
Total marketable available-for- sale debt securities	7,504.8		7.5		(26.2)		7,486.1		7,175.3		44.3		(0.6)		7,219.0
Corporate equity securities	25.0		—		(13.1)		11.9		25.0		—		(8.4)		16.6
Total marketable securities	7,529.8		7.5		(39.3)		7,498.0		7,200.3		44.3		(9.0)		7,235.6
Total cash equivalents and marketable securities	$10,186.7		$7.5		$(39.3)		$10,154.9		$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 June 30, 2026		As of December 31, 2025
	(in millions)
Cash and cash equivalents	$2,656.9		$2,779.1
Marketable securities	1,708.9		1,523.3
Long-term marketable securities	5,789.1		5,712.3
Total	$10,154.9		$10,014.7

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

	As of June 30, 2026		As of December 31, 2025
	(in millions)
Matures within one year	$1,697.0		$1,506.7
Matures after one year through five years	5,689.5		5,595.8
Matures after five years	99.6		116.5
Total	$7,486.1		$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 and six months ended June 30, 2026 and 2025. Additionally, we did not record any realized gains

or losses related to these investments that were material to our condensed consolidated statements of income during the three

and six months ended June 30, 2026 and 2025. As of June 30, 2026, we held marketable available-for-sale debt securities

with a total fair value of $4.8 billion that were in unrealized loss positions totaling $26.2 million, including an insignificant

amount that had been in unrealized loss positions for greater than twelve months.

VERTEX PHARMACEUTICALS INCORPORATED

Notes to Condensed Consolidated Financial Statements (unaudited)

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

our condensed consolidated statements of income. During the three and six months ended June 30, 2026 and 2025, our net

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

period were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2026		2025		2026		2025
	(in millions)
Net unrealized (losses) gains	$(8.5)		$6.4		$(4.7)		$(8.6)

As of June 30, 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 $80.1 million and

$81.5 million, respectively.

During the three and six months ended June 30, 2026, we received $75.5 million cash proceeds following the conversion

of a note receivable we held from a privately-held company that was acquired. As a result, we recognized a realized gain of

$48.7 million within “Other income (expense), net” in our condensed consolidated statements of income.

**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	(11.6)		(49.1)		96.7		36.0
Amounts reclassified from accumulated other comprehensive income (loss)	—		0.5		27.9		28.4
Net current period other comprehensive (loss) income	(11.6)		(48.6)		124.6		64.4
Balance at June 30, 2026	$25.6		$(14.6)		$37.5		$48.5
Balance at December 31, 2024	$9.7		$7.1		$111.0		$127.8
Other comprehensive income (loss) before reclassifications	29.4		26.3		(280.0)		(224.3)
Amounts reclassified from accumulated other comprehensive income (loss)	—		(2.4)		(2.2)		(4.6)
Net current period other comprehensive income (loss)	29.4		23.9		(282.2)		(228.9)
Balance at June 30, 2025	$39.1		$31.0		$(171.2)		$(101.1)

**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.

VERTEX PHARMACEUTICALS INCORPORATED

Notes to Condensed Consolidated Financial Statements (unaudited)

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

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 June 30, 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 June 30, 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 June 30, 2026		As of December 31, 2025
Foreign Currency	(in millions)
Euro	$3,520.1		$4,677.9
Canadian dollar	371.7		516.1
British pound sterling	351.6		492.6
Australian dollar	278.0		267.5
Swiss franc	91.2		126.0
Total foreign currency forward contracts	$4,612.6		$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 income (expense), net” in our condensed consolidated statements of income

each period. As of June 30, 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 $670.9 million and $612.6 million, respectively.

During the three and six months ended June 30, 2026 and 2025, we recognized the following related to foreign currency

forward contracts in our condensed consolidated statements of income:

	Three Months Ended June 30,				Six Months Ended June 30,
	2026		2025		2026		2025
	(in millions)
Designated as hedging instruments - Reclassified from AOCI
Product revenues, net	$(10.2)		$(21.3)		$(35.7)		$2.8
Not designated as hedging instruments
Other income (expense), net	$(13.4)		$(3.1)		$(16.3)		$(4.3)
Total reported in the Condensed Consolidated Statements of Income
Product revenues, net	$3,333.9		$2,944.0		$6,320.8		$5,704.2
Other income (expense), net	$24.3		$13.2		$24.3		$(4.4)

VERTEX PHARMACEUTICALS INCORPORATED

Notes to Condensed Consolidated Financial Statements (unaudited)

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 June 30, 2026
Assets				Liabilities
Classification		Fair Value		Classification		Fair Value
(in millions)
Prepaid expenses and other current assets		$60.8		Other current liabilities		$(35.2)
Other assets		39.9		Other long-term liabilities		(17.4)
Total assets		$100.7		Total liabilities		$(52.6)

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 June 30, 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 June 30, 2026
	Gross Amounts Recognized		Gross Amounts Offset		Gross Amounts Presented		Gross Amounts Not Offset		Legal Offset
Foreign currency forward contracts	(in millions)
Total assets	$100.7		$—		$100.7		$(52.6)		$48.1
Total liabilities	(52.6)		—		(52.6)		52.6		—

	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 June 30, 2026		As of December 31, 2025
	(in millions)
Raw materials	$233.0		$259.8
Work-in-process	1,253.9		1,196.9
Finished goods	278.2		230.1
Total	$1,765.1		$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 June 30, 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		(52.2)		185.8		238.0		(42.1)		195.9
Finite-lived intangible assets - assembled workforce	3 years		7.7		(5.3)		2.4		7.7		(4.0)		3.7
Total other intangible assets, net			$470.3		$(57.5)		$412.8		$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 June 30, 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 and six months ended June 30, 2026 and 2025, we recognized the following stock-based compensation

expense:

	Three Months Ended June 30,				Six Months Ended June 30,
	2026		2025		2026		2025
	(in millions)
Stock-based compensation expense by type of award:
Restricted stock units (including PSUs)	$165.9		$162.9		$332.4		$326.3
ESPP share issuances	5.8		7.1		9.2		12.7
Stock options	2.2		1.2		2.2		1.2
Stock-based compensation expense related to inventories	(3.7)		(3.9)		(7.2)		(6.8)
Total stock-based compensation expense included in “Total costs and expenses”	$170.2		$167.3		$336.6		$333.4
Stock-based compensation expense by line item:
Cost of sales	$3.8		$2.5		$7.0		$5.1
Research and development expenses	104.4		99.6		206.1		199.7
Selling, general and administrative expenses	62.0		65.2		123.5		128.6
Total stock-based compensation expense included in “Total costs and expenses”	170.2		167.3		336.6		333.4
Income tax effect	(35.3)		(36.5)		(70.6)		(111.7)
Total stock-based compensation expense, net of tax	$134.9		$130.8		$266.0		$221.7

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. As of June 30, 2026, we had $2.6

billion remaining available under the 2025 Share Repurchase Program.

During each of the six months ended June 30, 2026 and 2025, we repurchased 1.8 million shares of our common stock

under our share repurchase programs, for aggregate repurchases of $799.5 million and $811.4 million, respectively.

**K.**Income Taxes

We are subject to U.S. federal, state, and foreign income taxes. During the three and six months ended June 30, 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 June 30,				Six Months Ended June 30,
	2026		2025		2026		2025
	(in millions, except percentages)
Income before provision for income taxes	$1,391.8		$1,283.0		$2,644.7		$2,013.4
Provision for income taxes	$292.0		$250.1		$513.5		$334.2

Effective tax rate	21.0%		19.5%		19.4%		16.6%

Our effective tax rates were equal to the U.S. statutory rate for the three months ended June 30, 2026, and lower than the

U.S. statutory rate for the six months ended June 30, 2026, primarily due to excess tax benefits related to stock-based

compensation.

Our effective tax rate for the three and six months ended June 30, 2025 was lower than the U.S. statutory rate primarily

due to excess tax benefits related to stock-based compensation and tax credits.

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 June 30, 2026 and December 31, 2025, we had $439.4 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 half 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

2026 Revolving Credit Agreement

In July 2026, Vertex and certain of its subsidiaries entered into a $500.0 million senior unsecured revolving facility (the

“2026 Revolver”) with the lenders and issuing banks party thereto and Bank of America, N.A., as administrative agent, which

matures on July 30, 2031. We have not drawn upon the 2026 Revolver to date. Amounts drawn pursuant to the 2026

Revolver, if any, will be used for general corporate purposes. Subject to satisfaction of certain conditions, we may request

that the borrowing capacity for the 2026 Revolver be increased by an additional $500.0 million. Up to $100.0 million of the

2026 Revolver may be allocated for loans and letters of credit in certain non-U.S. Dollar currencies. Additionally, the 2026

Revolver provides a sublimit of $100.0 million for letters of credit.

Any U.S. Dollar-denominated amounts borrowed under the 2026 Revolver will bear interest, at our option, at a rate per

annum equal to either a base rate or a Secured Overnight Financing Rate (“SOFR”), in each case, plus an applicable margin.

Under the 2026 Revolver, the applicable margins on base rate loans range from 0.000% to 0.500% and the applicable margins

on SOFR-based loans range from 0.875% to 1.500%, in each case, depending upon, either (x) 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) or (y) to the extent available, our credit rating. Any amounts borrowed in non-U.S. Dollar currencies

will bear interest at a rate per annum equal to the applicable benchmark rate for such currency plus the applicable margin.

Loans made under the 2026 Revolver may be prepaid and commitments under the 2026 Revolver may be reduced at any

time, in whole or in part, without premium or penalty.

Loans made under the 2026 Revolver will be guaranteed by certain of our existing and future domestic subsidiaries,

subject to certain customary exceptions and limitations.

The 2026 Revolver contains customary representations and warranties and affirmative and negative covenants, which

include limitations on subsidiary debt, liens and fundamental changes, as well as a financial covenant to maintain a

consolidated leverage ratio of 3.50 to 1.00, subject to an increase, at our election, to 4.00 to 1.00 for each of the four fiscal

quarters following a material acquisition.

The 2026 Revolver 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 any

outstanding loans.

Direct costs related to the 2026 Revolver are recorded over its term and are not material to our financial statements.

Prior Credit Facility

In July 2026, in conjunction with entering into the 2026 Revolver, we terminated the $500.0 million revolving credit

agreement we entered into in 2022. As of June 30, 2026, we were in compliance with all covenants associated with this

revolving credit agreement.

2026 Term Loan

In July 2026, we entered into the 2026 Term Loan, as defined and described in Note O, “Subsequent Events.”

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

VERTEX PHARMACEUTICALS INCORPORATED

Notes to Condensed Consolidated Financial Statements (unaudited)

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.

Legal Matters and Other Contingencie**s

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 $1.8 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 June 30, 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 June 30, 2026 or December 31, 2025.

**M.**Segment Information

Revenues by Product

“Product revenues, net” consisted of the following:

	Three Months Ended June 30,				Six Months Ended June 30,
	2026		2025		2026		2025
	(in millions)
TRIKAFTA/KAFTRIO	$2,497.2		$2,551.1		$4,851.9		$5,086.6
ALYFTREK	573.6		156.8		998.0		210.7
Other CF product revenues (1)	137.1		193.7		273.0		349.0
Total CF product revenues, net	3,207.9		2,901.6		6,122.9		5,646.3
CASGEVY	76.4		30.4		119.3		44.6
JOURNAVX	49.6		12.0		78.6		13.3
Total product revenues, net	$3,333.9		$2,944.0		$6,320.8		$5,704.2
(1) Include KALYDECO, ORKAMBI, and SYMDEKO/SYMKEVI.

VERTEX PHARMACEUTICALS INCORPORATED

Notes to Condensed Consolidated Financial Statements (unaudited)

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 June 30,				Six Months Ended June 30,
	2026		2025		2026		2025
	(in millions)
United States	$2,056.4		$1,848.2		$3,832.3		$3,511.7
Outside of the United States
Europe	977.7		910.9		1,927.7		1,737.5
Other	299.8		205.6		560.8		485.7
Total revenues outside of the United States	1,277.5		1,116.5		2,488.5		2,223.2
Total revenues	$3,333.9		$2,964.7		$6,320.8		$5,734.9

We did not have any “Other revenues” in the three and six months ended June 30, 2026. In the three and six months

ended June 30, 2025, our “Other revenues” of $20.7 million and $30.7 million, respectively, were attributed to the U.S.

Significant Segment Expenses

Significant segment expenses are set forth in the following table:

	Three Months Ended June 30,				Six Months Ended June 30,
	2026		2025		2026		2025
	(in millions)
Total revenues	$3,333.9		$2,964.7		$6,320.8		$5,734.9
Costs and expenses:
Cost of sales - products	218.3		140.5		378.5		271.1
Cost of sales - royalty	270.9		267.0		503.5		499.4
Research expenses	207.3		209.3		412.3		415.4
Development expenses	786.5		769.1		1,543.1		1,542.7
Acquired in-process research and development expenses	21.4		2.2		21.9		22.0
Selling and other commercial expenses	388.1		264.6		701.7		505.7
General and administrative expenses	194.1		160.0		374.2		315.3
Intangible asset impairment charge	—		—		—		379.0
Interest income, net	(120.6)		(118.7)		(235.4)		(236.6)
Other segment items (1)	(23.9)		(12.3)		(23.7)		7.5
Provision for income taxes	292.0		250.1		513.5		334.2
Net income	$1,099.8		$1,032.9		$2,131.2		$1,679.2

(1)Other segment items included in “Net income” primarily include a realized gain related to an investment in a

privately held company in the three and six months ended June 30, 2026, changes in the fair value of equity

investments and changes in the fair value of contingent consideration.

Additional Segment Information

During the three and six months ended June 30, 2026 and 2025, we recorded total depreciation and amortization expense

of $56.5 million, $51.7 million, and $112.4 million and $100.1 million, respectively.

VERTEX PHARMACEUTICALS INCORPORATED

Notes to Condensed Consolidated Financial Statements (unaudited)

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

Contract Liabilities

We had contract liabilities of $157.0 million and $171.8 million as of June 30, 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

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 $148.8 million and $5.1 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 six months ended June 30, 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 end of each period presented in our condensed

consolidated statements of cash flows consisted of the following:

	Six Months Ended June 30,
	2026				2025
	Beginning of period		End of period		Beginning of period		End of period
	(in millions)
Cash and cash equivalents	$5,084.8		$6,143.5		$4,569.6		$4,972.2
Prepaid expenses and other current assets	3.0		10.6		2.6		9.8
Cash, cash equivalents and restricted cash per condensed consolidated statement of cash flows	$5,087.8		$6,154.1		$4,572.2		$4,982.0

**O.**Subsequent Events

Crinetics Acquisition

On July 6, 2026, we entered into an agreement and plan of merger to acquire (the “Crinetics Acquisition”) all of the

issued and outstanding shares of common stock of Crinetics Pharmaceuticals, Inc., a publicly traded biotechnology company

focused on discovering, developing, and commercializing novel therapeutics for endocrine diseases and endocrine-related

tumors, for $85.00 per share in cash, for a total equity value of approximately $10.0 billion. The transaction is expected to

VERTEX PHARMACEUTICALS INCORPORATED

Notes to Condensed Consolidated Financial Statements (unaudited)

close in the third quarter of 2026, subject to certain customary closing conditions. We will account for the acquisition in the

period that it closes. We intend to fund the acquisition using a combination of our cash, cash equivalents, and proceeds from

the 2026 Term Loan, as defined below. The Crinetics Acquisition is not conditioned on our receipt of financing.

Concurrently with entry into the merger agreement for the Crinetics Acquisition, we entered into a debt commitment

letter dated July 6, 2026 with Bank of America, N.A., BofA Securities, Inc. and Morgan Stanley Senior Funding, Inc.,

pursuant to which they agreed to provide us with an unsecured 364-day bridge loan facility. On July 30, 2026, this

commitment was terminated upon entry into the 2026 Term Loan, described below.

Term Loan Credit Agreement

On July 30, 2026, we entered into a term loan credit agreement (the “2026 Term Loan”) with the lenders and issuing

banks party thereto and Bank of America, N.A., as administrative agent, which provides for a $4.5 billion senior unsecured

delayed draw term loan A facility. Amounts borrowed under the 2026 Term Loan will be used to finance a portion of the

Crinetics Acquisition.

Any amounts borrowed under the 2026 Term Loan will become payable in full as follows: (a) a $1.0 billion tranche due

364 days after the amounts are borrowed (the “Funding Date”) (“Tranche 1 Loans”), (b) a $1.0 billion tranche due on the date

that is two years after the Funding Date (“Tranche 2 Loans”), and (c) a $2.5 billion tranche due on the date that is three years

after the Funding Date (“Tranche 3 Loans”). We have not drawn upon the 2026 Term Loan to date.

Loans made under the 2026 Term Loan will bear interest, at our option, at a rate per annum equal to either a base rate or

a SOFR-based rate, in each case, plus an applicable margin. Under the 2026 Term Loan, the applicable margin on base rate

loans ranges from 0.000% to 0.500% for Tranche 1 and Tranche 2 Loans and from 0.000% to 0.625% for Tranche 3 Loans,

and the applicable margin on SOFR-based loans ranges from 0.8750% to 1.500% for Tranche 1 and Tranche 2 Loans and

from 1.000% to 1.625% for Tranche 3 Loans, in each case, depending upon, either (x) 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) or (y) to the extent available, our credit rating. Loans made under the 2026 Term Loan may be prepaid and

commitments under the 2026 Term Loan may be reduced at any time, in whole or in part, without premium or penalty. There

are no mandatory prepayments or amortization required in connection with the loans made under the 2026 Term Loan.

Loans made under the 2026 Term Loan will be guaranteed by certain of our existing and future domestic subsidiaries.

The 2026 Term Loan also contains customary representations and warranties and affirmative and negative covenants, in

each case, that are substantially consistent with the representations and warranties and covenants contained in the 2026

Revolver and which include a financial covenant to maintain a consolidated leverage ratio of 3.50 to 1.00, subject to an

increase, at our election, to 4.00 to 1.00 for each of the four fiscal quarters following a material acquisition.

The 2026 Term Loan also contains customary events of default that are substantially consistent with the events of default

contained in the 2026 Revolver. 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 any outstanding loan.