VERTEX PHARMACEUTICALS INC / MA

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 inone 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 operations for the interim periods ended September 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

development expenses” (“AIPR&D”) included$40.6 million and$62.5 million in thethree and nine months ended

September 30, 2026, respectively, and$54.5 million and$76.5 million in thethree and nine months ended September 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

thethree and nine months ended September 30, 2026 and 2025 or were new or materially revised during thethree and nine

months ended September 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 thethree and nine months ended September 30, 2026 and 2025, the credits recognized in our condensed

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

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.”

C. Business Combination

On September 1, 2026, we paid$85.00 per share in cash to acquire all of the issued and outstanding shares of common

stock and cancel all outstanding equity awards of Crinetics Pharmaceuticals, Inc. (“Crinetics”), a publicly traded

biotechnology company focused on discovering, developing, and commercializing novel therapeutics for endocrine diseases

and endocrine-related tumors, for a total equity value of$10.0 billion, or$9.0 billion net of cash, cash equivalents, and

marketable securities acquired (the “Crinetics Acquisition”). The Crinetics Acquisition is expected to contribute to the

diversity of our pipeline and support our long-term growth objectives. Crinetics’ approved medicine, PALSONIFY

(paltusotine), received approval from the U.S. Food and Drug Administration in September 2025. It is a once-daily oral

therapy for adults with acromegaly, a rare and debilitating condition caused by a pituitary tumor that secretes excess growth

hormone. In addition to PALSONIFY, Crinetics’ most advanced pipeline candidate, atumelnant, is a once-daily oral

adrenocorticotropic hormone (“ACTH”) receptor antagonist currently in Phase 3 development for congenital adrenal

hyperplasia (“CAH”). Classic CAH, the most severe form of the disease, is a rare, chronic genetic condition affecting the

adrenal glands that has significant unmet medical need. Atumelnant is also in Phase 2 development for people with ACTH-

Dependent Cushing’s syndrome, an additional therapeutic area in which it has demonstrated potential.

We paid total consideration of$10.0 billion at the acquisition date, September 1, 2026, which included$9.6 billion to

acquire Crinetics and$409.6 million to accelerate and settle unvested Crinetics equity awards. The$409.6 million

represented post-acquisition expense, which was recorded as$265.5 million of “Research and development expenses” and

$144.1 million of “Selling, general and administrative expenses.”

We accounted for the Crinetics Acquisition as a business combination, and allocated the purchase price to the following

assets acquired and liabilities assumed:

The “Inventories” acquired reflect a step-up in the fair value of acquired PALSONIFY finished goods and work-in-

process inventory, which was determined using the comparative sales method. This method estimates the expected sales price

of the product, reduced by all costs expected to be incurred to complete or to dispose of the inventory, as well as a profit on

those costs and holding costs. The acquired inventory step-up adjustment is expensed to “Cost of sales” as the inventory is

sold, and was not material to our condensed consolidated statements of income for thethree and nine months ended

September 30, 2026. We expect to sell the inventory over a period of approximately three years from the acquisition date.

The “Goodwill” of$1.3 billion, which isnot deductible for tax purposes, represents the difference between the fair value

of the consideration transferred and the fair value of the assets acquired and liabilities assumed, and primarily related to

establishing the deferred tax liability for the acquired intangible assets, which have no tax basis.

The$3.0 billion finite-lived asset related to the PALSONIFY marketed product that we acquired and a$5.1 billion in-

process research and development asset related to atumelnant are recorded on our condensed consolidated balance sheet as

“Other intangible assets, net.” The fair values of the intangible assets were determined using the multi-period excess earnings

method to complete a discounted cash flow analysis with Level 3 fair value inputs, including significant assumptions

regarding (i) the probability of technical and regulatory success related to atumelnant, (ii) estimated future cash flows from

potential product sales with respect to the medicines, and (iii) earnings, which include the expected costs to continue to

develop and commercialize the medicines. The PALSONIFY finite-lived asset is being amortized on a straight-lined basis

through the period that we no longer have exclusive rights to market PALSONIFY, or approximately sixteen years. For the

three and nine months ended September 30, 2026, we recorded$15.3 million of intangible asset amortization expense related

to the PALSONIFY asset as “Cost of sales.”

The “Deferred tax liability, net” of$1.3 billion, represents net temporary differences primarily related to intangible assets

acquired and liabilities assumed, and was primarily recorded as a reduction to “Deferred tax assets” on our condensed

consolidated balance sheet.

As of September 30, 2026, our Crinetics purchase price allocation, including for certain intangible assets acquired and

tax analyses, is preliminary and will be finalized during the measurement period of up to one year from the acquisition date.

Additionally, in thethree and nine months ended September 30, 2026, we incurred transaction costs of$58.9 million

directly related to the Crinetics Acquisition, which are recorded within “Selling, general and administrative expenses.”

The financial results of Crinetics did not have a material effect on our revenue or net income in thethree and nine

months ended September 30, 2026.

Supplemental Pro Forma Financial Information

The following table presents unaudited supplemental pro forma financial information for thethree and nine months

ended September 30, 2026 and 2025, as if the Crinetics Acquisition had occurred on January 1, 2025:

The unaudited supplemental pro forma financial information was prepared using the acquisition method of accounting

and is based on the historical financial information of Vertex and Crinetics. In order to reflect the occurrence of the Crinetics

Acquisition on January 1, 2025, as required, the most significant adjustments reflected in the unaudited supplemental pro

forma financial information are as follows:

•incremental amortization expense based on the fair value of the PALSONIFY intangible asset described above;

•incremental cost of sales related to the amortization of the step-up in the fair value of finished goods and work-in-

process inventory for PALSONIFY described above;

•compensation expense to accelerate and settle unvested Crinetics equity awards and transaction costs directly related

to the Crinetics Acquisition, reflected in the nine months ended September 30, 2025 instead of primarily in the three

and nine months ended September 30, 2026;

•additional interest expense associated with the issuance of the 2026 Term Loan described in Note M, “Commitments

and Contingencies;” and

•the income tax effects of the above adjustments plus Crinetics’ historical losses at applicable effective tax rates.

The unaudited supplemental pro forma financial information is not necessarily indicative of what the condensed

consolidated results of operations would have been had the Crinetics Acquisition been completed on January 1, 2025. In

addition, the unaudited supplemental pro forma financial information is not a projection of future results of operations of the

combined company, nor does it reflect the expected realization of any synergies or cost savings associated with the Crinetics

Acquisition.

D. Earnings Per Share

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

During thethree and nine months ended September 30, 2026 and 2025, the number of anti-dilutive securities that were

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

E. Fair Value Measurements

The following table sets forth our financial assets and liabilities measured at fair value on a recurring basis 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:

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

Fair Value of Contingent Consideration

Our Level 3 contingent consideration liabilities of$76.1 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 5.6% and 5.7% as of

September 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.

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

Fair Value of 2026 Term Loan

We estimate the fair value of our 2026 Term Loan, as defined in Note M, “Commitments and Contingencies,” using

Level 2 inputs. The fair value of the 2026 Term Loan approximates its carrying value as of September 30, 2026, because it

bears interest at a variable rate that reflects current market rates. Please refer to Note M for further details.

F. 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:

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

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

We didnot record any allowances for credit losses to adjust the fair value of our marketable available-for-sale debt

securities during thethree and nine months ended September 30, 2026 and 2025. Additionally, we didnot record any realized

gains or losses related to these investments that were material to our condensed consolidated statements ofincome during the

three and nine months ended September 30, 2026 and 2025. As of September 30, 2026, we held marketable available-for-sale

debt securities with a total fair value of$4.2 billion that were in unrealized loss positions totaling$53.0 million, including an

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

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

our condensed consolidated statements ofincome. During thethree and nine months ended September 30, 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:

As of September 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$88.0

million and$81.5 million, respectively.

During thenine months ended September 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(expense) income, net” in our condensed consolidated statements ofincome.

G. Accumulated Other Comprehensive Income (Loss)

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

component:

H. 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 fromone 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 ofincome 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

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 September 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 September 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:

Foreign currency forward contracts - Not designated as hedging instruments

We enter into foreign currency forward contracts, typically with contractual maturities of approximatelyone 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) income, net” in our condensed consolidated statements ofincome

each period. As of September 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$1.2 billion and$612.6 million,

respectively.

During thethree and nine months ended September 30, 2026 and 2025, we recognized the following related to foreign

currency forward contracts in our condensed consolidated statements ofincome:

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 September 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:

I. Inventories

“Inventories” consisted of the following:

As described in Note C, “Business Combination,” we acquired a total fair value of$461.8 million PALSONIFY

inventory as part of the Crinetics Acquisition in the third quarter of 2026.

J. Intangible Assets

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

As described in Note C, “Business Combination,” we recorded a$3.0 billion finite-lived asset related to the

PALSONIFY marketed product that we acquired and a$5.1 billion in-process research and development asset related to

atumelnant as part of the purchase accounting for the Crinetics Acquisition in September 2026.

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 September 30, 2026,$224.6 million of our total indefinite-lived in-process research and development assets was

associated with our T1D program.

As of September 30,2026, the estimated future amortization of our finite-lived intangible assets through 2030 was as

follows:

K. Stock-based Compensation Expense and Share Repurchase Programs

Stock-based compensation expense

During thethree and nine months ended September 30, 2026 and 2025, we recognized the following stock-based

compensation expense:

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 September 30, 2026, we had

$2.5 billion remaining available under the 2025 Share Repurchase Program.

During thenine months ended September 30, 2026 and 2025, we repurchased 2.0 million and 4.5 million shares of our

common stock under our share repurchase programs, respectively, for aggregate repurchases of$921.3 million and$1.9

billion, respectively.

L. Income Taxes

We are subject to U.S. federal, state, and foreign income taxes. During thethree and nine months ended September 30,

2026 and 2025, we recorded the following provisions for income taxes and effective tax rates as compared to ourincome

before provision for income taxes.

Our effective taxrates for thethree and nine months ended September 30, 2026 were lower than the U.S. statutory rate,

primarily due toa benefit from a research and development tax credit study that was completed in the third quarter of 2026,

and excess tax benefits related to stock-based compensation.

Our effective tax rate for thethree and nine months ended September 30, 2025 was lower than the U.S. statutory rate,

primarily due toa benefit from a research and development tax credit study that was completed in the third quarter of 2025,

excess tax benefits related to stock-based compensation, and increased utilization of foreign tax credits, partially offset by

changes in uncertain tax positions.

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 September 30, 2026 and December 31, 2025, we had$477.4 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.

M. Commitments and Contingencies

2026 Term Loan

On July 30, 2026, we entered into a term loan credit agreement (the “2026 Term Loan”) with the lenders 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. Pursuant to the 2026 Term Loan, we borrowed the entire$4.5 billion on September 1, 2026, which was used

to finance a portion of the Crinetics Acquisition. Upon entry into the 2026 Term Loan, a debt commitment letter we entered

into concurrently with entry into the merger agreement for the Crinetics Acquisition terminated. As of September 30, 2026,

$4.5 billion remained outstanding under the 2026 Term Loan.

The amounts that we borrowed under the 2026 Term Loan (the “Term Loans”) are payable in full as follows: (a) a

$1.0 billion tranche due on August 31, 2027 (“Tranche 1 Loans”), (b) a$1.0 billion tranche due on September 1, 2028

(“Tranche 2 Loans”), and (c) a$2.5 billion tranche due on August 31, 2029 (“Tranche 3 Loans”). There are no mandatory

prepayments or amortization required in connection with the loans made under the 2026 Term Loan.

The Term Loans bear interest at a rate per annum equal to a Secured Overnight Financing Rate (“SOFR”) plus an

applicable margin ranging from 0.875% to 1.500% for Tranche 1 and Tranche 2 Loans and from 1.000% to 1.625% for

Tranche 3 Loans.

2026 Revolving Credit Agreement

On July 30, 2026, Vertex and certain of its subsidiaries entered into a$500.0 million senior unsecured revolving facility

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

July 30, 2031. We havenot 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, and/or that incremental term loans be provided, in an aggregate amount of up to

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 SOFR-based rate, 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%.

Prior Revolving Credit Agreement

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.

Terms Applicable to both of the 2026 Term Loan and 2026 Revolving Credit Agreement

In addition to the terms described above, unless specifically noted below, the 2026 Term Loan and the 2026 Revolver

(the “2026 Debt Agreements”) share similar terms described below.

For each of the 2026 Debt Agreements, the applicable margin applied to any amounts borrowed is dependent 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 under the 2026 Revolver 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 Debt Agreements may

be prepaid and commitments under the 2026 Revolver may be reduced at any time, in whole or in part, without premium or

penalty (other than customary breakage costs).

Loans made under the 2026 Debt Agreements are, or will be, guaranteed by certain of our existing and future domestic

subsidiaries.

The 2026 Debt Agreements contain 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

maximum consolidated net leverage ratio (calculated net of up to$1.0 billion of unrestricted cash and cash equivalents) of

3.50 to 1.00, subject to an increase, at our election (which may be made up tothree times), to 4.00 to 1.00 for each of the four

fiscal quarters following a material acquisition. As of September 30, 2026, we were in compliance with all covenants

associated with the 2026 Debt Agreements.

The 2026 Debt Agreements also contain customary events of default. In the case of a continuing event of default, the

administrative agent associated with each agreement would be entitled to exercise various remedies, including the

acceleration of amounts due under any outstanding loan.

Direct costs related to the 2026 Debt Agreements are recorded over their terms and are not material to our condensed

consolidated 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.

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$2.5 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 wereno

material loss contingencies accrued as of September 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 E, “Fair Value Measurements,” there wereno

significant contingent liabilities accrued as of September 30, 2026 or December 31, 2025.

N. Segment Information

Revenues by Product

“Product revenues, net” consisted of the following:

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:

In the nine months ended September 30, 2025, our “Other revenues” of$30.7 million were attributed to the U.S.

Significant Segment Expenses

Significant segment expenses are set forth in the following table:

(1)Other segment items included in “Netincome” primarily include interest expense, a realized gain related to an

investment in a privately held company in thethree and nine months ended September 30, 2026, changes in the fair

value of equity investments and changes in the fair value of contingent consideration.

Additional Segment Information

During thethree and nine months ended September 30, 2026 and 2025, we recorded total depreciation and amortization

expense of$69.2 million,$54.0 million, and$181.6 million and$154.1 million, respectively.

O. Additional Balance Sheet & Cash Flow Information

Contract Liabilities

We had contract liabilities of$124.4 million and$171.8 million as of September 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 additionalone-year periods, unless

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

We obtained$68.1 million and$310.8 million of net right-of-use operating lease assets in exchange for a similar amount

of net lease obligations during thenine months ended September 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: