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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________________________________________
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2021
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM    TO   
Commission file number 000-19319
____________________________________________
Vertex Pharmaceuticals Incorporated
(Exact name of registrant as specified in its charter)

Massachusetts
(State or other jurisdiction of incorporation or organization)

50 Northern Avenue, Boston, Massachusetts
(Address of principal executive offices)

04-3039129
(I.R.S. Employer Identification No.)

02210
(Zip Code)

Registrant’s telephone number, including area code (617) 341-6100
____________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
Common Stock, $0.01 Par Value Per Share
VRTX
The Nasdaq Global Select Market
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Common Stock, par value $0.01 per share
254,251,938
Outstanding at October 29, 2021

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VERTEX PHARMACEUTICALS INCORPORATED
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2021

TABLE OF CONTENTS
Page
Condensed Consolidated Statements of Operations - Three and Nine Months Ended September 30, 2021 and 2020
Condensed Consolidated Statements of Comprehensive Income - Three and Nine Months Ended September 30, 2021 and 2020
Condensed Consolidated Balance Sheets - September 30, 2021 and December 31, 2020
Condensed Consolidated Statements of Shareholders' Equity - Three and Nine Months Ended September 30, 2021 and 2020
Condensed Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2021 and 2020
Item 1A.

“We,” “us,” “Vertex” and the “Company” as used in this Quarterly Report on Form 10-Q refer to Vertex Pharmaceuticals Incorporated, a Massachusetts corporation, and its subsidiaries.
“Vertex,” “KALYDECO®,” “ORKAMBI®,” “SYMDEKO®,” “SYMKEVI®” and “TRIKAFTA®” are registered trademarks of Vertex. The trademark for “KAFTRIOTM” is pending in the United States and registered in the European Union. Other brands, names and trademarks contained in this Quarterly Report on Form 10-Q are the property of their respective owners.
We use the brand name for our products when we refer to the product that has been approved and with respect to the indications on the approved label. Otherwise, including in discussions of our cystic fibrosis development programs, we refer to our compounds by their scientific (or generic) name or VX developmental designation.


Table of Contents
Part I. Financial Information

Item 1.  Financial Statements

VERTEX PHARMACEUTICALS INCORPORATED
Condensed Consolidated Statements of Operations
(unaudited)
(in thousands, except per share amounts)
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Revenues:
Product revenues, net$1,984,164 $1,536,271 $5,500,839 $4,575,863 
Other revenues— 2,000 1,000 2,000 
Total revenues1,984,164 1,538,271 5,501,839 4,577,863 
Costs and expenses:
Cost of sales236,512 186,182 656,813 533,199 
Research and development expenses493,751 493,497 2,356,814 1,362,953 
Selling, general and administrative expenses198,189 184,551 584,935 558,613 
Change in fair value of contingent consideration1,200 1,800 (1,100)12,600 
Total costs and expenses929,652 866,030 3,597,462 2,467,365 
Income from operations1,054,512 672,241 1,904,377 2,110,498 
Interest income1,116 3,100 3,714 19,919 
Interest expense(15,255)(13,856)(46,411)(41,863)
Other income (expense), net42,368 84,386 (2,234)139,621 
Income before provision for income taxes1,082,741 745,871 1,859,446 2,228,175 
Provision for income taxes230,813 78,437 287,456 120,718 
Net income$851,928 $667,434 $1,571,990 $2,107,457 
Net income per common share:
Basic$3.30 $2.56 $6.08 $8.10 
Diluted$3.28 $2.53 $6.03 $7.98 
Shares used in per share calculations:
Basic257,876 260,392 258,740 260,313 
Diluted259,707 264,079 260,877 264,031 
The accompanying notes are an integral part of these condensed consolidated financial statements.

2
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VERTEX PHARMACEUTICALS INCORPORATED
Condensed Consolidated Statements of Comprehensive Income
(unaudited)
(in thousands)
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Net income$851,928 $667,434 $1,571,990 $2,107,457 
Other comprehensive income (loss):
Unrealized holding (losses) gains on marketable securities, net(56)(1,132)(329)818 
Unrealized gains (losses) on foreign currency forward contracts, net of tax of $(9.6) million, $7.6 million, $(21.2) million and $7.3 million, respectively
34,766 (26,313)77,011 (27,211)
Foreign currency translation adjustment1,986 584 3,335 (12,616)
Total other comprehensive income (loss)36,696 (26,861)80,017 (39,009)
Comprehensive income$888,624 $640,573 $1,652,007 $2,068,448 
The accompanying notes are an integral part of these condensed consolidated financial statements.

3
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VERTEX PHARMACEUTICALS INCORPORATED
Condensed Consolidated Balance Sheets
(unaudited)
(in thousands, except per share amounts)
September 30,December 31,
20212020
Assets
Current assets:
Cash and cash equivalents
$6,275,698 $5,988,187 
Marketable securities
685,187 670,710 
Accounts receivable, net
1,100,372 885,352 
Inventories
333,456 280,777 
Prepaid expenses and other current assets
457,827 308,353 
Total current assets
8,852,540 8,133,379 
Property and equipment, net
1,042,347 958,534 
Goodwill
1,002,158 1,002,158 
Intangible assets
400,000 400,000 
Deferred tax assets
933,839 882,779 
Operating lease assets
312,343 325,564 
Other assets
75,518 49,394 
Total assets
$12,618,745 $11,751,808 
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable
$127,863 $155,139 
Accrued expenses
1,584,992 1,404,971 
Other current liabilities
201,409 317,423 
Total current liabilities
1,914,264 1,877,533 
Long-term finance lease liabilities
513,255 539,042 
Long-term operating lease liabilities363,545 350,463 
Long-term contingent consideration
188,500 189,600 
Other long-term liabilities
108,473 108,355 
Total liabilities
3,088,037 3,064,993 
Commitments and contingencies
— — 
Shareholders’ equity:
Preferred stock, $0.01 par value; 1,000 shares authorized; none issued and outstanding
— — 
Common stock, $0.01 par value; 500,000 shares authorized, 256,206 and 259,890 shares issued and outstanding, respectively
2,562 2,599 
Additional paid-in capital7,085,950 7,894,027 
Accumulated other comprehensive income (loss)11,537 (68,480)
Retained earnings
2,430,659 858,669 
Total shareholders’ equity
9,530,708 8,686,815 
Total liabilities and shareholders’ equity
$12,618,745 $11,751,808 
The accompanying notes are an integral part of these condensed consolidated financial statements.

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VERTEX PHARMACEUTICALS INCORPORATED
Condensed Consolidated Statements of Shareholders’ Equity
(unaudited)
(in thousands)
Three Months Ended
Common StockAdditional Paid-in CapitalAccumulated Other Comprehensive Income (Loss)Retained Earnings (Accumulated Deficit)Total Shareholders’ Equity
SharesAmount
Balance at June 30, 2020260,124 $2,601 $7,943,717 $(14,121)$(412,955)$7,519,242 
Other comprehensive loss, net of tax— — — (26,861)— (26,861)
Net income— — — — 667,434 667,434 
Repurchase of common stock(403)(4)(108,003)— — (108,007)
Common stock withheld for employee tax obligations
(141)(1)(40,527)— — (40,528)
Issuance of common stock under benefit plans594 5 21,699 — — 21,704 
Stock-based compensation expense
— — 100,489 — — 100,489 
Balance at September 30, 2020260,174 $2,601 $7,917,375 $(40,982)$254,479 $8,133,473 
Balance at June 30, 2021259,114 $2,591 $7,640,233 $(25,159)$1,578,731 $9,196,396 
Other comprehensive income, net of tax— — — 36,696 — 36,696 
Net income— — — — 851,928 851,928 
Repurchase of common stock(3,293)(33)(642,240)— — (642,273)
Common stock withheld for employee tax obligations
(144)(1)(28,558)— — (28,559)
Issuance of common stock under benefit plans529 5 12,862 — — 12,867 
Stock-based compensation expense
— — 103,653 — — 103,653 
Balance at September 30, 2021256,206 $2,562 $7,085,950 $11,537 $2,430,659 $9,530,708 
Nine Months Ended
Common Stock
Additional
Paid-in Capital
Accumulated Other Comprehensive Income (Loss)
Retained Earnings (Accumulated Deficit)
Total
Shareholders’ Equity
Shares
Amount
Balance at December 31, 2019258,993 $2,589 $7,937,606 $(1,973)$(1,852,978)$6,085,244 
Other comprehensive loss, net of tax
— — — (39,009)— (39,009)
Net income
— — — — 2,107,457 2,107,457 
Repurchase of common stock(1,807)(18)(408,015)— — (408,033)
Common stock withheld for employee tax obligations
(727)(7)(179,768)— — (179,775)
Issuance of common stock under benefit plans3,715 37 232,042 — — 232,079 
Stock-based compensation expense
— — 335,510 — — 335,510 
Balance at September 30, 2020260,174 $2,601 $7,917,375 $(40,982)$254,479 $8,133,473 
Balance at December 31, 2020259,890 $2,599 $7,894,027 $(68,480)$858,669 $8,686,815 
Other comprehensive income, net of tax— — — 80,017 — 80,017 
Net income
— — — — 1,571,990 1,571,990 
Repurchase of common stock(5,282)(53)(1,067,172)— — (1,067,225)
Common stock withheld for employee tax obligations
(633)(6)(134,217)— — (134,223)
Issuance of common stock under benefit plans2,231 22 66,707 — — 66,729 
Stock-based compensation expense
— — 326,605 — — 326,605 
Balance at September 30, 2021256,206 $2,562 $7,085,950 $11,537 $2,430,659 $9,530,708 
The accompanying notes are an integral part of these condensed consolidated financial statements.

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VERTEX PHARMACEUTICALS INCORPORATED
Condensed Consolidated Statements of Cash Flows
(unaudited)
(in thousands)
Nine Months Ended September 30,
20212020
Cash flows from operating activities:
Net income
$1,571,990 $2,107,457 
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation expense
322,792 332,434 
Depreciation expense
91,768 80,160 
(Decrease) increase in fair value of contingent consideration(1,100)12,600 
Deferred income taxes
(112,654)65,110 
Gains on equity securities(4,993)(140,866)
Other non-cash items, net
20,588 52,371 
Changes in operating assets and liabilities:
Accounts receivable, net
(231,166)(151,191)
Inventories
(65,827)(94,907)
Prepaid expenses and other assets
(107,672)(264,909)
Accounts payable
(22,043)16,153 
Accrued expenses
254,157 451,084 
Other liabilities
(67,333)296,477 
Net cash provided by operating activities
1,648,507 2,761,973 
Cash flows from investing activities:
Purchases of available-for-sale debt securities
(447,759)(246,937)
Maturities of available-for-sale debt securities
452,133 184,419 
Purchases of property and equipment(173,285)(212,109)
Investment in equity securities and notes receivable(37,991)(19,327)
Sale of equity securities
— 149,595 
Net cash used in investing activities
(206,902)(144,359)
Cash flows from financing activities:
Issuances of common stock under benefit plans
67,289 234,854 
Repurchases of common stock
(1,057,225)(408,033)
Payments in connection with common stock withheld for employee tax obligations
(134,223)(179,775)
Payments on finance leases
(34,592)(31,378)
Proceeds from finance leases
12,647 8,642 
Other financing activities4,339 

(4,399)
Net cash used in financing activities
(1,141,765)(380,089)
Effect of changes in exchange rates on cash
(8,472)2,779 
Net increase in cash, cash equivalents and restricted cash291,368 2,240,304 
Cash, cash equivalents and restricted cash—beginning of period
5,988,845 3,120,681 
Cash, cash equivalents and restricted cash—end of period
$6,280,213 $5,360,985 
Supplemental disclosure of cash flow information:
Cash paid for interest
$42,698 $40,769 
Cash paid for income taxes
$381,533 $81,684 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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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” or the “Company”) 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 the Company and its wholly-owned subsidiaries. All material intercompany balances and transactions have been eliminated. The Company operates in one segment, pharmaceuticals. The Company has reclassified certain items from the prior year’s condensed consolidated financial statements to conform to the current year’s presentation.
Certain information and footnote disclosures normally included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (the “2020 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, 2021 and 2020.
The results of operations for the interim periods 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, 2020, which are contained in the Company’s 2020 Annual Report on Form 10-K.
Use of Estimates
The preparation of condensed consolidated financial statements in accordance with U.S. GAAP requires management 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 the condensed consolidated financial statements, and the amounts of revenues and expenses during the reported periods. The Company bases its estimates on historical experience and various other assumptions, including in certain circumstances future projections that management believes 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 Adopted and Issued Accounting Standards
Income Taxes
In 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) (“ASU 2019-12”), which simplifies the accounting for income taxes. ASU 2019-12 became effective on January 1, 2021. The adoption of ASU 2019-12 did not have a significant impact on the Company’s condensed consolidated financial statements.
For a discussion of other recent accounting pronouncements please refer to Note A, “Nature of Business and Accounting Policies,” in the Company’s 2020 Annual Report on Form 10-K.
Summary of Significant Accounting Policies
The Company’s significant accounting policies are described in Note A, “Nature of Business and Accounting Policies,” in its 2020 Annual Report on Form 10-K.


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VERTEX PHARMACEUTICALS INCORPORATED
Notes to Condensed Consolidated Financial Statements (unaudited)
B.Revenue Recognition
Disaggregation of Revenue
Revenues by Product
Product revenues, net consisted of the following:
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
(in thousands)
TRIKAFTA/KAFTRIO$1,555,772 $960,308 $4,004,600 $2,773,256 
SYMDEKO/SYMKEVI81,415 156,178 339,969 501,066 
ORKAMBI184,561 225,919 624,224 692,038 
KALYDECO162,416 193,866 532,046 609,503 
Total product revenues, net$1,984,164 $1,536,271 $5,500,839 $4,575,863 
Product Revenues by Geographic Location
Total net product revenues by geographic region, based on the location of the customer, consisted of the following:
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
(in thousands)
United States
$1,382,892 $1,222,565 $3,893,245 $3,620,467 
Outside of the United States
Europe
518,826 251,366 1,382,701 766,438 
Other
82,446 62,340 224,893 188,958 
Total product revenues outside of the United States601,272 313,706 1,607,594 955,396 
Total product revenues, net
$1,984,164 $1,536,271 $5,500,839 $4,575,863 
Contract Liabilities
The Company had contract liabilities of $104.1 million and $191.5 million as of September 30, 2021 and December 31, 2020, respectively, related to annual contracts with government-owned and supported customers in international markets that limit the amount of annual reimbursement the Company can receive. Upon exceeding the annual reimbursement amount, products are provided free of charge, which is a material right. These contracts include upfront payments and fees. The Company defers a portion of the consideration received for shipments made up to the annual reimbursement limit as a portion of “Other current liabilities.” The deferred amount is recognized as revenue when the free products are shipped. The Company’s product revenue contracts include performance obligations that are one year or less.
The Company’s contract liabilities at the end of each fiscal year relate to contracts with annual reimbursement limits in international markets in which the annual period associated with the contract is not the same as the Company’s fiscal year. In these markets, the Company recognizes 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.


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VERTEX PHARMACEUTICALS INCORPORATED
Notes to Condensed Consolidated Financial Statements (unaudited)
C.Collaborative Arrangements
The Company has entered into numerous agreements pursuant to which it collaborates with third parties on research, development and commercialization programs, including in-license and out-license agreements.
The Company’s in-license and out-license agreements that had a significant impact on its financial statements for the three and nine months ended September 30, 2021 and 2020, or were new or materially revised during the nine months ended September 30, 2021, are described below. Additional in-license and out-license agreements were described in Note B, “Collaborative Arrangements,” of the Company’s 2020 Annual Report on Form 10-K.
In-license Agreements
The Company has entered into a number of in-license agreements in order to advance and obtain access to technologies and services related to its research and early-development activities. The Company is generally required to make an upfront payment upon execution of the license agreement; development, regulatory and commercialization milestones payments upon the achievement of certain product research, development and commercialization objectives; and royalty payments on future sales, if any, of commercial products resulting from the collaboration.
Pursuant to the terms of its in-license agreements, the Company’s collaborators typically lead the discovery efforts and the Company leads all preclinical, development and commercialization activities associated with the advancement of any drug candidates and funds all expenses.
The Company typically can terminate its in-license agreements by providing advance notice to its collaborators; the required length of notice is dependent on whether any product developed under the license agreement has received marketing approval. The Company’s license agreements may be terminated by either party for a material breach by the other, subject to notice and cure provisions. Unless earlier terminated, these license agreements generally remain in effect until the date on which the royalty term and all payment obligations with respect to all products in all countries have expired.
The Company’s “Research and development expenses” included $26.8 million and $986.8 million for the three and nine months ended September 30, 2021, respectively, and $80.1 million and $143.3 million for the three and nine months ended September 30, 2020, respectively, related to upfront and milestone payments pursuant to its in-license agreements.
CRISPR Therapeutics AG - CRISPR-Cas9 Gene-editing Therapies
In 2015, the Company entered into a strategic collaboration, option and license agreement (the “CRISPR Agreement”) with CRISPR Therapeutics AG and its affiliates (“CRISPR”) to collaborate on the discovery and development of potential new treatments aimed at the underlying genetic causes of human diseases using CRISPR-Cas9 gene-editing technology. The Company had the exclusive right to license certain targets. In 2019, the Company elected to exclusively license three targets, including cystic fibrosis, pursuant to the CRISPR Agreement. For each of the three targets that the Company elected to license, CRISPR has the potential to receive up to an additional $410.0 million in development, regulatory and commercial milestones as well as royalties on net product sales.
In 2017, the Company entered into a joint development and commercialization agreement with CRISPR pursuant to the terms of the CRISPR Agreement (the “Original CTX001 JDCA”), under which the Company and CRISPR were co-developing and preparing to co-commercialize CTX001 for the treatment of hemoglobinopathies, including treatments for sickle cell disease and beta thalassemia.
In the second quarter of 2021, the Company and CRISPR amended and restated the Original CTX001 JDCA (the “A&R JDCA”), pursuant to which the parties agreed to, among other things, (a) adjust the governance structure for the collaboration and adjust the responsibilities of each party thereunder; (b) adjust the allocation of net profits and net losses between the parties; and (c) exclusively license (subject to CRISPR’s reserved rights to conduct certain activities) certain intellectual property rights to the Company relating to the products that may be researched, developed, manufactured and commercialized under such agreement.
Pursuant to the A&R JDCA, the Company is now leading global development, manufacturing and commercialization of CTX001, with support from CRISPR. Subject to the terms and conditions of the A&R JDCA, the Company also has the right

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VERTEX PHARMACEUTICALS INCORPORATED
Notes to Condensed Consolidated Financial Statements (unaudited)
to conduct all research, development, manufacturing and commercialization activities relating to the product candidates and products under the A&R JDCA (including CTX001) throughout the world subject to CRISPR’s reserved right to conduct certain activities.
In connection with the amendment and restatement of this agreement, the Company made a $900.0 million upfront payment to CRISPR in the second quarter of 2021. The Company concluded that it did not have any alternative future use for the acquired in-process research and development and recorded this upfront payment to “Research and development expenses.” CRISPR has the potential to receive an additional one-time $200.0 million milestone payment upon receipt of the first marketing approval of CTX001 from the U.S. Food or Drug Administration or the European Commission.
The Company and CRISPR shared equally all expenses incurred under the Original CTX001 JDCA. On July 1, 2021, with respect to CTX001, the net profits and net losses incurred pursuant to the A&R JDCA began to be allocated 60% to the Company and 40% to CRISPR, while all other product candidates and products continued to have net profits and net losses shared equally between the parties. The Company concluded that the Original CTX001 JDCA and the A&R JDCA are cost-sharing arrangements, which result in the net impact of the arrangements being recorded in “Research and development expenses” in its condensed consolidated statements of operations. During the three and nine months ended September 30, 2021 and 2020, the Company recognized the following amounts in total related to these agreements:
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
(in thousands)
Total research and development expenses incurred under the Original CTX001 JDCA and A&R JDCA$58,659 $28,623 $147,448 $66,720 
Vertex’s share recognized in research and development expenses in condensed consolidated statement of operations35,195 14,311 79,590 33,360 
Moderna, Inc.
In 2016, the Company entered into a strategic collaboration and licensing agreement with Moderna, Inc. (“Moderna”), pursuant to which the parties are seeking to identify and develop messenger ribonucleic acid (“mRNA”) therapeutics for the treatment of CF.
In September 2020, the Company entered into a new strategic collaboration and licensing agreement with Moderna (the “2020 Moderna Agreement”) aimed at the discovery and development of lipid nanoparticles and mRNAs that can deliver gene-editing therapies to lung cells for the treatment of CF. Pursuant to the 2020 Moderna Agreement, Moderna received an upfront payment of $75.0 million and is eligible to receive up to $380.0 million in development, regulatory and commercial milestones as well as royalties on net product sales. The Company determined that substantially all of the fair value of the 2020 Moderna Agreement was attributable to in-process research and development and no substantive processes were acquired that would constitute a business. The Company concluded that it did not have any alternative future use for the acquired in-process research and development and recorded the upfront payment to “Research and development expenses” in the third quarter of 2020.
Out-license Agreements
The Company has entered into licensing agreements pursuant to which it has out-licensed rights to certain drug candidates to third-party collaborators. Pursuant to these out-license agreements, the Company’s collaborators become responsible for all costs related to the continued development of such drug candidates and obtain development and commercialization rights to these drug candidates. Depending on the terms of the agreements, the Company’s collaborators may be required to make upfront payments, milestone payments upon the achievement of certain product research and development objectives and may also be required to pay royalties on future sales, if any, of commercial products resulting from the collaboration. The termination provisions associated with these collaborations are generally the same as those described above related to the Company’s in-license agreements. None of the Company’s out-license agreements had a significant impact on the Company’s condensed consolidated statement of operations during the three and nine months ended September 30, 2021 and 2020.

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VERTEX PHARMACEUTICALS INCORPORATED
Notes to Condensed Consolidated Financial Statements (unaudited)
Cystic Fibrosis Foundation
The Company has a research, development and commercialization agreement that was originally entered into in 2004 with the Cystic Fibrosis Foundation, as successor in interest to the Cystic Fibrosis Foundation Therapeutics, Inc. This agreement was most recently amended in 2016. Pursuant to the agreement, as amended, the Company agreed to pay royalties ranging from low-single digits to mid-single digits on potential sales of certain compounds first synthesized and/or tested between March 1, 2014 and August 31, 2016, including elexacaftor, and 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 KALYDECO (ivacaftor), ORKAMBI (lumacaftor in combination with ivacaftor) and SYMDEKO/SYMKEVI (tezacaftor in combination with ivacaftor). For combination products, such as ORKAMBI, SYMDEKO/SYMKEVI and TRIKAFTA/KAFTRIO (elexacaftor/tezacaftor/ivacaftor and ivacaftor), sales are allocated equally to each of the active pharmaceutical ingredients in the combination product.

D.Earnings Per Share
Basic net income per common share is based upon the weighted-average number of common shares outstanding during the period. Diluted net income per common share utilizing the treasury-stock method is based upon the weighted-average number of common shares outstanding during the period plus additional weighted-average common equivalent shares outstanding during the period when the effect is dilutive.
The following table sets forth the computation of basic and diluted net income per common share for the periods ended:
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
(in thousands, except per share amounts)
Net income
$851,928 $667,434 $1,571,990 $2,107,457 
Basic weighted-average common shares outstanding
257,876 260,392 258,740 260,313 
Effect of potentially dilutive securities:
 Stock options971 1,887 1,124 1,936 
 Restricted stock units (including PSUs)
841 1,788 1,003 1,765 
 Employee stock purchase program
19 12 10 17 
Diluted weighted-average common shares outstanding
259,707 264,079 260,877 264,031 
Basic net income per common share
$3.30 $2.56 $6.08 $8.10 
Diluted net income per common share
$3.28 $2.53 $6.03 $7.98 
The Company did not include the securities in the following table in the computation of the net income per common share because the effect would have been anti-dilutive during each period:
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
(in thousands)
Stock options1,060 23 711 303 
Unvested restricted stock units (including PSUs)204 252 440 229 


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VERTEX PHARMACEUTICALS INCORPORATED
Notes to Condensed Consolidated Financial Statements (unaudited)
E.Fair Value Measurements
The following fair value hierarchy is used to classify assets and liabilities based on observable inputs and unobservable inputs used in order to determine the fair value of the Company’s financial assets and liabilities:
Level 1:
Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2:
Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.
Level 3:
Unobservable inputs based on the Company’s assessment of the assumptions that market participants would use in pricing the asset or liability.
The Company’s investment strategy is focused on capital preservation. The Company invests in instruments that meet the credit quality standards outlined in the Company’s investment policy. This policy also limits the amount of credit exposure to any one issue or type of instrument. The Company maintains strategic investments separately from the investment policy that governs its other cash, cash equivalents and marketable securities as described in Note F, “Marketable Securities and Equity Investments.” Additionally, the Company utilizes foreign currency forward contracts intended to mitigate the effect of changes in foreign exchange rates on its condensed consolidated statement of operations.
During the three and nine months ended September 30, 2021 and 2020, the Company did not record any other-than-temporary impairment charges related to its financial assets.

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VERTEX PHARMACEUTICALS INCORPORATED
Notes to Condensed Consolidated Financial Statements (unaudited)
The following tables set forth the Company’s financial assets and liabilities subject to fair value measurements by level within the fair value hierarchy (and does not include $2.7 billion and $2.8 billion of cash as of September 30, 2021 and December 31, 2020, respectively):
As of September 30, 2021As of December 31, 2020
Total
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
(in thousands)
Financial instruments carried at fair value (asset positions):
Cash equivalents:
Money market funds
$3,578,764 $3,578,764 $— $— $3,141,053 $3,141,053 $— $— 
Commercial paper
31,998 — 31,998 — — — — — 
Marketable securities:
Corporate equity securities218,764 218,764 — — 195,781 15,650 180,131 — 
U.S. Treasury securities46,539 46,539 — — — — — — 
Government-sponsored enterprise securities
69,002 69,002 — — 80,063 80,063 — — 
Corporate debt securities
95,359 — 95,359 — 231,598 — 231,598 — 
Commercial paper
255,523 — 255,523 — 163,268 — 163,268 — 
Prepaid expenses and other current assets:
Foreign currency forward contracts34,300 — 34,300 — — — — — 
Other assets:
Foreign currency forward contracts4,781 — 4,781 — — — — — 
Total financial assets
$4,335,030 $3,913,069 $421,961 $— $3,811,763 $3,236,766 $574,997 $— 
Financial instruments carried at fair value (liability positions):
Other current liabilities:
Foreign currency forward contracts
$(4,356)$— $(4,356)$— $(59,184)$— $(59,184)$— 
Long-term contingent consideration
(188,500)— — (188,500)(189,600)— — (189,600)
Other long-term liabilities:
Foreign currency forward contracts
(29)— (29)— (4,283)— (4,283)— 
Total financial liabilities
$(192,885)$— $(4,385)$(188,500)$(253,067)$— $(63,467)$(189,600)
Please refer to Note F, “Marketable Securities and Equity Investments,” for the carrying amount and related unrealized gains (losses) by type of investment.
Fair Value of Corporate Equity Securities
The Company classifies its investments in publicly traded corporate equity securities as “Marketable securities” on its condensed consolidated balance sheets. Generally, the Company’s investments in the common stock of these publicly traded companies are valued based on Level 1 inputs because they have readily determinable fair values. However, certain of the Company’s investments in publicly traded companies have been or continue to be valued based on Level 2 inputs due to transfer restrictions associated with these investments. Please refer to Note F, “Marketable Securities and Equity Investments,” for further information on these investments.
Fair Value of Contingent Consideration
In 2019, the Company acquired Exonics Therapeutics, Inc. (“Exonics”), a privately-held company focused on creating transformative gene-editing therapies to repair mutations that cause DMD and other severe neuromuscular diseases, including DM1. The Company’s Level 3 contingent consideration liabilities are related to $678.3 million of development and regulatory milestones potentially payable to Exonics’ former equity holders. The Company bases its estimates of the probability of achieving the milestones relevant to the fair value of contingent payments on industry data attributable to rare diseases. The discount rates used in the valuation model for contingent payments, which were between 0.3% and 2.2% as of September 30, 2021, represent a measure of credit risk and market risk associated with settling the liabilities. Significant

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VERTEX PHARMACEUTICALS INCORPORATED
Notes to Condensed Consolidated Financial Statements (unaudited)
judgment is used in determining the appropriateness of these assumptions at each reporting period. Due to the uncertainties associated with development and commercialization of drug candidates in the pharmaceutical industry and the effects of changes in other assumptions including discount rates, the Company expects its estimates regarding the fair value of contingent consideration to change in the future, resulting in adjustments to the fair value of the Company’s contingent consideration liabilities, and the effect of any such adjustments could be material.
The following table represents a rollforward of the fair value of the Company’s contingent consideration liabilities:
Nine Months Ended September 30, 2021
(in thousands)
Balance at December 31, 2020$189,600 
Decrease in fair value of contingent payments
(1,100)
Balance at September 30, 2021$188,500 

F.Marketable Securities and Equity Investments
A summary of the Company’s cash equivalents and marketable securities, which are recorded at fair value (and do not include $2.7 billion and $2.8 billion of cash as of September 30, 2021 and December 31, 2020, respectively), is shown below:
As of September 30, 2021As of December 31, 2020
Amortized Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
Amortized Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
(in thousands)
Cash equivalents:
Money market funds
$3,578,764 $— $— $3,578,764 $3,141,053 $— $— $3,141,053 
Commercial paper31,997 1 — 31,998 — — — — 
Total cash equivalents
$3,610,761 $1 $— $3,610,762 $3,141,053 $— $— $3,141,053 
Marketable securities:
U.S. Treasury securities$46,536 $4 $(1)$46,539 $— $— $— $— 
Government-sponsored enterprise securities
68,996 8 (2)69,002 80,046 17 — 80,063 
Corporate debt securities
95,385 26 (52)95,359 231,263 377 (42)231,598 
Commercial paper
255,501 40 (18)255,523 163,286 19 (37)163,268 
Total marketable debt securities
466,418 78 (73)466,423 474,595 413 (79)474,929 
Corporate equity securities
69,418 150,263 (917)218,764 51,427 144,354 — 195,781 
Total marketable securities
$535,836 $150,341 $(990)$685,187 $526,022 $144,767 $(79)$670,710 
Available-for-sale debt securities were classified on the Company's condensed consolidated balance sheets at fair value as follows:
As of September 30, 2021As of December 31, 2020
(in thousands)
Cash and cash equivalents
$3,610,762 $3,141,053 
Marketable securities
466,423 474,929 
Total
$4,077,185 $3,615,982 

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VERTEX PHARMACEUTICALS INCORPORATED
Notes to Condensed Consolidated Financial Statements (unaudited)
Available-for-sale debt securities by contractual maturity were as follows:
As of September 30, 2021As of December 31, 2020
(in thousands)
Matures within one year$4,014,441 $3,526,185 
Matures after one year through five years
62,744 89,797 
Total
$4,077,185 $3,615,982 
The Company has a limited number of available-for-sale debt securities in insignificant loss positions as of September 30, 2021, which it does not intend to sell and has concluded it will not be required to sell before recovery of the amortized costs for the investments at maturity. The Company did not record any charges for other-than-temporary declines in the fair value of available-for-sale debt securities or gross realized gains or losses in the three and nine months ended September 30, 2021 and 2020.
The Company records changes in the fair value of its investments in corporate equity securities to “Other income (expense), net” on its condensed consolidated statements of operations. During the three and nine months ended September 30, 2021 and 2020, the Company’s net unrealized gains on corporate equity securities held at the conclusion of each period were as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
(in thousands)
Net unrealized gains $46,679 $69,834 $4,993 $102,317 
During the nine months ended September 30, 2020, the Company received proceeds of $149.6 million related to the sale of the common stock of publicly traded companies, which had a total original weighted-average cost basis of $51.3 million. There were no sales of the common stock of publicly traded companies during the nine months ended September 30, 2021.
As of September 30, 2021, the carrying value of the Company’s equity investments without readily determinable fair values, which are recorded in “Other assets” on its condensed consolidated balance sheets, was $35.9 million.


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VERTEX PHARMACEUTICALS INCORPORATED
Notes to Condensed Consolidated Financial Statements (unaudited)
G.Accumulated Other Comprehensive Income (Loss)
The following table summarizes the changes in accumulated other comprehensive income (loss) by component:
Foreign Currency Translation AdjustmentUnrealized Holding Gains (Losses), Net of TaxTotal
On Available-For-Sale Debt SecuritiesOn Foreign Currency Forward Contracts
(in thousands)
Balance at December 31, 2020$(15,678)$334 $(53,136)$(68,480)
Other comprehensive income (loss) before reclassifications3,335 (329)46,175 49,181 
Amounts reclassified from accumulated other comprehensive (loss) income— — 30,836 30,836 
Net current period other comprehensive income (loss)3,335 (329)77,011 80,017 
Balance at September 30, 2021$(12,343)$5 $23,875 $11,537 
Balance at December 31, 2019$(895)$503 $(1,581)$(1,973)
Other comprehensive (loss) income before reclassifications(12,616)818 (20,913)(32,711)
Amounts reclassified from accumulated other comprehensive loss— — (6,298)(6,298)
Net current period other comprehensive (loss) income(12,616)818 (27,211)(39,009)
Balance at September 30, 2020$(13,511)$1,321 $(28,792)$(40,982)

H.Hedging
Foreign currency forward contracts - Designated as hedging instruments
The Company maintains a hedging program intended to mitigate the effect of changes in foreign exchange rates for a portion of the Company’s 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 eighteen months. The Company recognizes realized gains and losses for the effective portion of such contracts in “Product revenues, net” in its condensed consolidated statements of operations in the same period that it recognizes the product revenues that were impacted by the hedged foreign exchange rate changes.
The Company formally documents the relationship between foreign currency forward contracts (hedging instruments) and forecasted product revenues (hedged items), as well as the Company’s 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. The Company also formally assesses, 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. If the Company were to determine that a (i) foreign currency forward contract is not highly effective as a cash flow hedge, (ii) foreign currency forward contract has ceased to be a highly effective hedge or (iii) forecasted transaction is no longer probable of occurring, the Company would discontinue hedge accounting treatment prospectively. The Company measures effectiveness based on the change in fair value of the forward contracts and the fair value of the hypothetical foreign currency forward contracts with terms that match the critical terms of the risk being hedged. As of September 30, 2021, all hedges were determined to be highly effective.
The Company considers the impact of its counterparties’ credit risk on the fair value of the foreign currency forward contracts. As of September 30, 2021 and December 31, 2020, credit risk did not change the fair value of the Company’s foreign currency forward contracts.

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VERTEX PHARMACEUTICALS INCORPORATED
Notes to Condensed Consolidated Financial Statements (unaudited)
The following table summarizes the notional amount in U.S. dollars of the Company’s outstanding foreign currency forward contracts designated as cash flow hedges under U.S. GAAP:
As of September 30, 2021As of December 31, 2020
Foreign Currency
(in thousands)
Euro
$1,194,338 $745,099 
British pound sterling
277,815 160,427 
Australian dollar
95,970 99,922 
Canadian dollar
87,259 86,468 
Swiss Franc41,335 — 
Total foreign currency forward contracts
$1,696,717 $1,091,916 
Foreign currency forward contracts - Not designated as hedging instruments
The Company also enters into foreign currency forward contracts with contractual maturities of less than 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. The Company recognizes realized gains and losses for such contracts in “Other income (expense), net” in its condensed consolidated statements of operations each period. As of September 30, 2021, the notional amount of the Company’s outstanding foreign currency forward contracts where hedge accounting under U.S. GAAP is not applied was $306.2 million.
During the three and nine months ended September 30, 2021 and 2020, the Company recognized the following related to foreign currency forward contracts in its condensed consolidated statements of operations:
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
(in thousands)
Designated as hedging instruments - Reclassified from AOCI
Product revenues, net$(5,224)$(7,249)$(39,342)$8,039 
Not designated as hedging instruments
Other income (expense), net$(400)$25,897 $(9,350)$15,724 
Total reported in the Condensed Consolidated Statement of Operations
Product revenues, net$1,984,164 $1,536,271 $5,500,839 $4,575,863 
Other income (expense), net$42,368 $84,386 $(2,234)$139,621 
The following table summarizes the fair value of the Company’s outstanding foreign currency forward contracts designated as cash flow hedges under U.S. GAAP included on its condensed consolidated balance sheets:
As of September 30, 2021
AssetsLiabilities
ClassificationFair ValueClassificationFair Value
(in thousands)
Prepaid expenses and other current assets
$34,300 
Other current liabilities
$(4,356)
Other assets
4,781 
Other long-term liabilities
(29)
Total assets
$39,081 
Total liabilities
$(4,385)

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VERTEX PHARMACEUTICALS INCORPORATED
Notes to Condensed Consolidated Financial Statements (unaudited)
As of December 31, 2020
AssetsLiabilities
ClassificationFair ValueClassificationFair Value
(in thousands)
Prepaid expenses and other current assets
$— 
Other current liabilities
$(59,184)
Other assets
— 
Other long-term liabilities
(4,283)
Total assets
$— 
Total liabilities
$(63,467)
As of September 30, 2021, the Company expects the amounts that are related to foreign exchange 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.
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 the Company’s condensed consolidated balance sheets:
As of September 30, 2021
Gross Amounts RecognizedGross Amounts OffsetGross Amounts PresentedGross Amounts Not OffsetLegal Offset
Foreign currency forward contracts(in thousands)
Total assets$39,081 $— $39,081 $(4,385)$34,696 
Total liabilities
(4,385)— (4,385)4,385 — 
As of December 31, 2020
Gross Amounts RecognizedGross Amounts OffsetGross Amounts PresentedGross Amounts Not OffsetLegal Offset
Foreign currency forward contracts(in thousands)
Total assets$— $— $— $— $— 
Total liabilities(63,467)— (63,467)— (63,467)

I.Inventories
Inventories consisted of the following:
As of September 30, 2021As of December 31, 2020
(in thousands)
Raw materials
$45,990 $46,232 
Work-in-process
192,650 161,324 
Finished goods
94,816 73,221 
Total
$333,456 $280,777 


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VERTEX PHARMACEUTICALS INCORPORATED
Notes to Condensed Consolidated Financial Statements (unaudited)
J.Stock-based Compensation Expense and Share Repurchase Programs
Stock-based compensation expense
During the three and nine months ended September 30, 2021 and 2020, the Company recognized the following stock-based compensation expense:
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
(in thousands)
Stock-based compensation expense by type of award:
Restricted stock units (including PSUs) and restricted stock$89,458 $84,043 $279,131 $279,611 
Stock options7,875 13,221 29,580 47,334 
ESPP share issuances6,321 3,225 17,895 8,565 
Stock-based compensation expense related to inventories
(658)(950)(3,814)(3,076)
Total stock-based compensation expense included in costs and expenses
$102,996 $99,539 $322,792 $332,434 
Stock-based compensation expense by line item:
Cost of sales$1,599 $1,250 $4,570 $3,998 
Research and development expenses60,995 60,770 196,412 203,732 
Selling, general and administrative expenses40,402 37,519 121,810 124,704 
Total stock-based compensation expense included in costs and expenses
102,996 99,539 322,792 332,434 
Income tax effect
(21,556)(35,295)(73,663)(130,692)
Total stock-based compensation expense, net of tax
$81,440 $64,244 $249,129 $201,742 
Share repurchase programs
In 2019, the Company’s Board of Directors approved a share repurchase program (the “2019 Share Repurchase Program”), pursuant to which the Company repurchased $500.0 million of its common stock in 2019 and 2020. During the nine months ended September 30, 2020, the Company repurchased 1,806,587 shares of its common stock under the 2019 Share Repurchase Program for an aggregate of $408.0 million.
In November 2020, the Company’s Board of Directors approved a share repurchase program (the “2020 Share Repurchase Program”), pursuant to which the Company repurchased $500.0 million of its common stock in 2020 and the first quarter of 2021. During the three months ended March 31, 2021, the Company repurchased 1,988,941 shares of its common stock under the 2020 Share Repurchase Program for an aggregate of $424.9 million.
On June 23, 2021, the Company’s Board of Directors approved a new share repurchase program (the “2021 Share Repurchase Program”), pursuant to which the Company is authorized to repurchase up to $1.5 billion of its common stock by December 31, 2022. During the three months ended September 30, 2021, the Company repurchased 3,293,161 shares of its common stock under the 2021 Share Repurchase Program for an aggregate of $642.2 million. As of September 30, 2021, a total of $857.8 million remained available under this program.


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VERTEX PHARMACEUTICALS INCORPORATED
Notes to Condensed Consolidated Financial Statements (unaudited)
K.Income Taxes
The Company is subject to U.S. federal, state, and foreign income taxes. During the three and nine months ended September 30, 2021 and 2020, the Company recorded the following provisions for income taxes and effective tax rates as compared to its income before provision for income taxes:
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
(in thousands, except percentages)
Income before provision for income taxes$1,082,741 $745,871 $1,859,446 $2,228,175 
Provision for income taxes230,813 78,437 287,456 120,718 
Effective tax rate21 %11 %15 %5 %
The Company’s effective tax rate for the three months ended September 30, 2021 was similar to the U.S. statutory rate. The Company’s effective tax rate for the nine months ended September 30, 2021 was lower than the U.S. statutory rate primarily due to a $99.7 million discrete tax benefit associated with an increase in the U.K.’s corporate tax rate from 19% to 25%, which was enacted in June 2021 and will become effective in April 2023.
The Company’s effective tax rate for the three months ended September 30, 2020 was lower than the U.S. statutory rate primarily due to a discrete tax benefit associated with an increase in the U.K.’s corporate tax rate from 17% to 19%, which was enacted and became effective in July 2020. The Company’s effective tax rate for the nine months ended September 30, 2020 was lower than the U.S. statutory rate due to a discrete tax benefit of $209.0 million associated with an intra-entity transfer of intellectual property rights to the U.K., a discrete benefit related to the write-off of a long-term intercompany receivable, the increase in the U.K.’s corporate tax rate from 17% to 19% noted above and excess tax benefits related to stock-based compensation.
As part of the U.S. Tax Cut and Jobs Act of 2017, the Company is subject to a territorial tax system, under which it must establish an accounting policy to provide for tax on Global Intangible Low Taxed Income (“GILTI”) earned by certain foreign subsidiaries. The Company has elected to treat the impact of GILTI as a current tax expense in its provision for income taxes.
The Company has reviewed the tax positions taken, or to be taken, in its tax returns for all tax years currently open to examination by a taxing authority. Unrecognized tax benefits represent the aggregate tax effect of differences between tax return positions and the benefits recognized in the consolidated financial statements. As of September 30, 2021 and December 31, 2020, the Company had $89.0 million and $75.8 million, respectively, of net unrecognized tax benefits, which would affect the Company’s tax rate if recognized. The Company does not expect that its unrecognized tax benefits will materially change within the next twelve months.
As of September 30, 2021, foreign earnings have been retained by foreign subsidiaries for indefinite reinvestment. Upon repatriation of those earnings, in the form of dividends or otherwise, the Company could be subject to withholding taxes payable to the various foreign countries.
The Company files U.S. federal income tax returns and income tax returns in various state, local and foreign jurisdictions. The Company has various income tax audits ongoing at any time throughout the world. The Company is no longer subject to any tax assessment from an income tax examination in the U.S. or any other major taxing jurisdiction before 2011, except where the Company has net operating losses or tax credit carryforwards that originate before 2011.

L.Commitments and Contingencies
Revolving Credit Facilities
The Company and certain of its subsidiaries have entered into two credit agreements (the “Credit Agreements”) with Bank of America, N.A., as administrative agent and the lenders referred to therein (the “Lenders”). The Credit Agreements

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VERTEX PHARMACEUTICALS INCORPORATED
Notes to Condensed Consolidated Financial Statements (unaudited)
were not drawn upon at closing and the Company has not drawn upon them to date. Amounts drawn pursuant to the Credit Agreements, if any, will be used for general corporate purposes. Any amounts borrowed under the Credit Agreements will bear interest, at the Company’s option, at either a base rate or a Eurocurrency rate, in each case plus an applicable margin based on the Company’s consolidated leverage ratio (the ratio of the Company’s total consolidated funded indebtedness to the Company’s consolidated EBITDA for the most recently completed four fiscal quarter period).
In September 2019, the Company and certain of its subsidiaries entered into a $500.0 million unsecured revolving facility (the “2019 Credit Agreement”) with the Lenders, which matures on September 17, 2024. Under the 2019 Credit Agreement, the applicable margins on base rate loans range from 0.125% to 0.500% and the applicable margins on Eurocurrency loans range from 1.125% to 1.500%. The 2019 Credit Agreement provides a sublimit of $50.0 million for letters of credit.
In September 2020, the Company and certain of its subsidiaries entered into a $2.0 billion unsecured revolving facility (the “2020 Credit Agreement”) with the Lenders, which matures on September 18, 2022. Under the 2020 Credit Agreement, the applicable margins on base rate loans range from 0.500% to 0.875% and the applicable margins on Eurocurrency loans range from 1.500% to 1.875%. The 2020 Credit Agreement does not support letters of credit.
Subject to satisfaction of certain conditions, the Company may request that the borrowing capacity for each of the Credit Agreements be increased by an additional $500.0 million. Any amounts borrowed pursuant to the Credit Agreements are guaranteed by certain of the Company’s existing and future domestic subsidiaries, subject to certain exceptions.
The Credit Agreements contain customary representations and warranties and affirmative and negative covenants, including financial covenants to maintain (x) subject to certain limited exceptions, a consolidated leverage ratio of 3.50 to 1.00, subject to an increase to 4.00 to 1.00 following a material acquisition and (y) a consolidated interest coverage ratio of 2.50 to 1.00, in each case measured on a quarterly basis. As of September 30, 2021, the Company was in compliance with the covenants described above. The Credit Agreements also contain customary events of default. In the case of a continuing event of default, the administrative agent would be entitled to exercise various remedies, including the acceleration of amounts due under outstanding loans.
Direct costs related to the Credit Agreements are recorded over the term of the Credit Agreements and were not material to the Company’s financial statements.
Guaranties and Indemnifications
As permitted under Massachusetts law, the Company’s Articles of Organization and By-laws provide that the Company will indemnify certain of its 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 the Company could be required to make under these indemnification provisions is unlimited. However, the Company has purchased directors’ and officers’ liability insurance policies that could reduce its monetary exposure and enable it to recover a portion of any future amounts paid. No indemnification claims currently are outstanding, and the Company believes the estimated fair value of these indemnification arrangements is minimal.
The Company customarily agrees in the ordinary course of its business to indemnification provisions in agreements with clinical trial investigators and sites in its drug development programs, sponsored research agreements with academic and not-for-profit institutions, various comparable agreements involving parties performing services for the Company and its real estate leases. The Company also customarily agrees to certain indemnification provisions in its drug discovery, development and commercialization collaboration agreements. With respect to the Company’s 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 the Company’s contractual obligations arising out of the research or clinical testing of the Company’s compounds or drug 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 the Company, to violations of law by the Company or to certain breaches of the Company’s contractual obligations. The indemnification provisions appearing in the Company’s collaboration agreements are similar to those for the other agreements discussed above, but in addition provide some limited indemnification for its collaborator in the event of third-party claims alleging infringement of intellectual property rights. In

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VERTEX PHARMACEUTICALS INCORPORATED
Notes to Condensed Consolidated Financial Statements (unaudited)
each of the cases above, the indemnification obligation generally survives the termination of the agreement for some extended period, although the Company believes 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 the Company could be required to make under these provisions is generally unlimited. The Company has purchased insurance policies covering personal injury, property damage and general liability that reduce its exposure for indemnification and would enable it in many cases to recover all or a portion of any future amounts paid. The Company has never paid any material amounts to defend lawsuits or settle claims related to these indemnification provisions. Accordingly, the Company believes the estimated fair value of these indemnification arrangements is minimal.
Other Contingencies
The Company has certain contingent liabilities that arise in the ordinary course of its business activities. The Company accrues a reserve for contingent liabilities when it is probable that future expenditures will be made, and such expenditures can be reasonably estimated. Other than the Company’s contingent consideration liabilities discussed in Note E, “Fair Value Measurements,” there were no material contingent liabilities accrued as of September 30, 2021 or December 31, 2020.

M.Additional Cash Flow Information
The cash, cash equivalents and restricted cash at the beginning and ending of each period presented in the Company’s condensed consolidated statements of cash flows consisted of the following:
Nine Months Ended September 30,
20212020
Beginning of periodEnd of periodBeginning of periodEnd of period
(in thousands)
Cash and cash equivalents
$5,988,187 $6,275,698 $3,109,322 $5,358,087 
Prepaid expenses and other current assets
658 4,515 8,004 2,898 
Other assets
— — 3,355 — 
Cash, cash equivalents and restricted cash per condensed consolidated statement of cash flows$5,988,845 $6,280,213 $3,120,681 $5,360,985 


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Item 2.     Management’s Discussion and Analysis of Financial Condition and Results of Operations
OVERVIEW
We invest in scientific innovation to create transformative medicines for people with serious diseases with a focus on specialty markets. We have four approved medicines to treat cystic fibrosis, or CF, a life-threatening genetic disease, and are focused on increasing the number of people with CF eligible and able to receive our medicines through label expansions, approval of new medicines, and expanded reimbursement. We are broadening our pipeline into additional disease areas through internal research efforts and accessing external innovation through business development transactions.
Our triple combination regimen, TRIKAFTA/KAFTRIO (elexacaftor/tezacaftor/ivacaftor and ivacaftor), was approved in 2019 in the United States, or U.S., and in 2020 in the European Union, or E.U. Collectively, our four medicines are approved to treat the majority of the approximately 83,000 people with CF in North America, Europe and Australia. We are evaluating our medicines in additional patient populations, including younger children, with the goal of having small molecule treatments for up to 90% of people with CF. We are also pursuing genetic therapies to address the remaining 10% of people with CF who are not eligible for our small molecule correctors.
Beyond CF, we continue to research and develop small molecule drug candidates for the treatment of serious diseases, including alpha-1 antitrypsin, or AAT, deficiency, APOL1-mediated kidney diseases, and pain. We are also focused on developing cell and genetic therapies for various diseases in our pipeline, including sickle cell disease, or SCD, beta thalassemia, type 1 diabetes, or T1D, Duchenne muscular dystrophy, or DMD, myotonic dystrophy, or DM1, and CF. We are evaluating CTX001, a genetic therapy, as a potential treatment for SCD and transfusion-dependent beta thalassemia, or TDT, the most severe form of beta thalassemia, in collaboration with CRISPR Therapeutics AG, or CRISPR. In T1D, we are pursuing two programs for the transplant of functional islets into patients: transplantation of islet cells alone, using immunosuppression to protect the implanted cells, and implantation of the islet cells inside a novel immunoprotective device.
Financial Highlights
Revenues
In the third quarter of 2021, our net product revenues continued to increase due to the uptake of KAFTRIO in Europe and continued performance of TRIKAFTA in the U.S.
Cash
Our cash, cash equivalent and marketable securities increased to $6.96 billion as of September 30, 2021 as compared to $6.66 billion as of December 31, 2020 primarily due to our net product revenues and profitability, offset by repurchases of our common stock, and a $900.0 million payment we made to CRISPR in connection with an amendment to our CTX001 collaboration.
Expenses
Our total R&D and SG&A expenses increased to $691.9 million in the third quarter of 2021 as compared to $678.0 million in the third quarter of 2020. In the third quarter of 2021, cost of sales was 12% of our net product revenues.
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Business Updates
Cystic Fibrosis Marketed Products
We expect to continue to grow our CF business by increasing the number of people with CF eligible and able to receive our medicines. Recent progress in our CF business is included below.
•We have signed a letter of intent with the pan-Canadian Pharmaceutical Alliance regarding the public reimbursement of TRIKAFTA for eligible people with CF. We have reached multiple provincial reimbursement agreements across Canada providing approximately 90% of Canadian patients 12 years of age and older and covered by government insurance with reimbursed access to TRIKAFTA.
•Our application for approval of TRIKAFTA in children 6 through 11 years of age has been accepted for priority review by Health Canada.
•TRIKAFTA/KAFTRIO is now approved and reimbursed or accessible in more than 20 countries outside the U.S., including Italy, France and Canada.
Pipeline
We continue to advance a pipeline of potentially transformative small molecule, and cell and genetic therapies aimed at treating serious diseases. Recent and anticipated progress in activities supporting these efforts is included below.
Cystic Fibrosis
•We recently initiated our Phase 3 clinical trials evaluating the new once-daily investigational triple combination of VX-121/tezacaftor/VX-561 (deutivacaftor).
•In collaboration with Moderna, Inc., we are seeking to discover and develop CF mRNA therapeutics designed to treat the underlying cause of CF by enabling cells in the lungs to produce functional CF transmembrane conductance regulator, or CFTR, protein for the treatment of the 10% of patients who do not produce any CFTR protein. We are conducting enabling studies and expect to submit an Investigational New Drug Application, or IND, for this program in 2022.
Beta Thalassemia and Sickle Cell Disease
•We and our collaborator, CRISPR, are evaluating the use of a non-viral ex vivo CRISPR gene-editing therapy, CTX001, for the treatment of TDT and severe SCD. This approach aims to edit a person’s hematopoietic stem cells to produce fetal hemoglobin in red blood cells, which has the potential to reduce or eliminate symptoms associated with the diseases.
•Data presented to date support the potential profile of CTX001 as a one-time functional cure for people with TDT and severe SCD, showing consistent and durable benefit across all treated patients. CTX001 safety data to date is generally consistent with an autologous stem cell transplant and myeloablative conditioning.
•Target enrollment has been achieved in the ongoing clinical trials evaluating CTX001 in TDT and severe SCD. We anticipate submissions for regulatory approval of CTX001 in late 2022.
Type 1 Diabetes
•We are developing cell therapies designed to replace insulin-producing islet cells that are destroyed in people with T1D, with the goal of delivering a potential functional cure.
•VX-880 is a stem cell-derived, allogeneic, fully differentiated, insulin-secreting islet cell replacement therapy, using standard immunosuppression to protect the implanted cells. Our Phase 1/2 clinical trial evaluating VX-880 as a potential treatment for T1D is ongoing at multiple clinical sites in the U.S. and the Clinical Trial Application has been approved in Canada. In October 2021, we announced positive Day 90 data for the first T1D patient in the Phase 1/2 clinical trial of VX-880.

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•We are pursuing a second program in which these stem cell-derived, fully differentiated, insulin-secreting islet cells are encapsulated and implanted in an immunoprotective device. We are conducting IND-enabling studies, and we expect to submit an IND for this cells and device program in 2022.
APOL1-Mediated Kidney Diseases
•We are evaluating the potential of oral, small molecule inhibitors of APOL1 function to treat people with APOL1-mediated kidney diseases.
•Enrollment is complete in the Phase 2 proof-of-concept clinical trial evaluating VX-147 for treatment of people with APOL1-mediated focal segmental glomerulosclerosis with reduction of proteinuria as the primary endpoint. We expect results from this clinical trial in the fourth quarter of 2021 and expect that these results will inform the potential progression of VX-147 into pivotal clinical trials in the broader population of people with APOL1-mediated non-diabetic proteinuric kidney diseases.
Pain
•NaV1.8 is a genetically and pharmacologically validated novel target for the treatment of pain. We previously have demonstrated clinical proof-of-concept with a small molecule investigational treatment targeting NaV1.8 in multiple pain indications including acute pain, neuropathic pain and musculoskeletal pain. We have discovered multiple selective small molecule inhibitors of NaV1.8 with the objective of creating a new class of medicines that have the potential to be highly effective for both acute and chronic pain, without the limitations of opioids and other existing pain medications.
•Two Phase 2 dose ranging acute pain clinical trials evaluating VX-548 are underway; one following bunionectomy surgery and the other following abdominoplasty surgery. We expect to have data from the clinical trials evaluating VX-548 following bunionectomy and abdominoplasty surgeries in the first quarter of 2022.
Alpha-1 Antitrypsin Deficiency
•We are evaluating multiple preclinical compounds with the potential to correct the misfolding of Z-AAT protein in the liver, in order to increase the systemic levels of functional AAT. Misfolded Z-AAT protein is the root cause of AAT deficiency and our small molecule corrector program targets both the liver and lung manifestations of the disease.
•We plan to advance one or more novel small molecule Z-AAT correctors into the clinic in 2022.
Investments in External Innovation
•In the third quarter of 2021, we entered into a new collaboration with Arbor Biotechnologies, Inc., or Arbor, to enhance efforts in developing ex vivo engineered cell therapies for multiple serious diseases using Arbor’s proprietary CRISPR gene-editing technology.
•In October 2021, we entered into a collaboration with Mammoth Biosciences, Inc., or Mammoth, to develop in vivo gene-editing therapies for two diseases using Mammoth’s next-generation CRISPR systems.
COVID-19
We continue to monitor the impacts of the COVID-19 global pandemic on our business. COVID-19 has not affected our supply chain or the demand for our medicines, and we believe that we will be able to continue to supply all of our approved medicines to patients globally. We adjusted our business operations in response to COVID-19 and have continued to monitor local COVID-19 trends and government guidance for each of our site locations. We are utilizing a phased, site-specific approach to assess and permit employee access to our sites. Currently, our sites are open to certain employees where appropriate and permitted by local laws and guidelines.
Research
We continue to invest in our research programs and foster scientific innovation in order to identify and develop transformative medicines. Our strategy is to combine transformative advances in the understanding of human disease and the

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science of therapeutics in order to identify and develop new medicines. We believe that pursuing research in diverse areas allows us to balance the risks inherent in drug development and may provide drug candidates that will form our pipeline in future years. To supplement our internal research programs, we acquire technologies and programs and collaborate with biopharmaceutical and technology companies, leading academic research institutions, government laboratories, foundations and other organizations, as needed, to advance research in our areas of therapeutic interest and to access technologies needed to execute on our strategy.
Drug Discovery and Development
Discovery and development of a new pharmaceutical product is a difficult and lengthy process that requires significant financial resources along with extensive technical and regulatory expertise. Potential drug candidates are subjected to rigorous evaluations, driven in part by stringent regulatory considerations, designed to generate information concerning efficacy, side effects, proper dosage levels and a variety of other physical and chemical characteristics that are important in determining whether a drug candidate should be approved for marketing as a pharmaceutical product. Most chemical compounds that are investigated as potential drug candidates never progress into development, and most drug candidates that do advance into development never receive marketing approval. Our investments in drug candidates are subject to considerable risks. We closely monitor the results of our discovery, research, clinical trials and nonclinical studies and frequently evaluate our drug development programs in light of new data and scientific, business and commercial insights, with the objective of balancing risk and potential. This process can result in rapid changes in focus and priorities as new information becomes available and as we gain additional understanding of our ongoing programs and potential new programs, as well as those of our competitors. For example, in June 2021, we decided not to progress VX-864, a drug candidate for the treatment of AAT deficiency, into late-stage development based on data obtained from a Phase 2 clinical trial.
If we believe that data from a completed registration program support approval of a drug candidate, we submit an New Drug Application or Biologics License Application to the FDA requesting approval to market the drug candidate in the U.S. and seek analogous approvals from comparable regulatory authorities in jurisdictions outside the U.S. To obtain approval, we must, among other things, demonstrate with evidence gathered in nonclinical studies and well-controlled clinical trials that the drug candidate is safe and effective for the disease it is intended to treat and that the manufacturing facilities, processes and controls for the manufacture of the drug candidate are adequate. The FDA and ex-U.S. regulatory authorities have substantial discretion in deciding whether or not a drug candidate should be granted approval based on the benefits and risks of the drug candidate in the treatment of a particular disease, and could delay, limit or deny regulatory approval. If regulatory delays are significant or regulatory approval is limited or denied altogether, our financial results and the commercial prospects for the drug candidate involved will be harmed.
Regulatory Compliance
Our marketing of pharmaceutical products is subject to extensive and complex laws and regulations. We have a corporate compliance program designed to actively identify, prevent and mitigate risk through the implementation of compliance policies and systems and through the promotion of a culture of compliance. Among other laws, regulations and standards, we are subject to various U.S. federal and state laws, and comparable laws in other jurisdictions, pertaining to health care fraud and abuse, including anti-kickback and false claims laws, and laws prohibiting the promotion of drugs for unapproved or off-label uses. Anti-kickback laws generally make it illegal for a prescription drug manufacturer to knowingly and willfully solicit, offer, receive or pay any remuneration in return for or to induce the referral of business, including the purchase or prescription of a particular drug that is reimbursed by a state or federal health care program. False claims laws prohibit anyone from knowingly or willfully presenting for payment to third-party payors, including Medicare and Medicaid, claims for reimbursed drugs or services that are false or fraudulent, claims for items or services not provided as claimed, or claims for medically unnecessary items or services. We are subject to laws and regulations that regulate the sales and marketing practices of pharmaceutical manufacturers, as well as laws such as the U.S. Foreign Corrupt Practices Act, which govern our international business practices with respect to payments to government officials. In addition, we are subject to various data protection and privacy laws and regulations in the U.S., E.U., U.K., Canada, Australia and other jurisdictions.

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We expect to continue to devote substantial resources to maintain, administer and expand these compliance programs globally.
Reimbursement
Sales of our products depend, to a large degree, on the extent to which our products are reimbursed by third-party payors, such as government health programs, commercial insurance and managed health care organizations. Reimbursement for our products, including our potential pipeline therapies, cannot be assured and may take significant periods of time to obtain. We dedicate substantial management and other resources in order to obtain and maintain appropriate levels of reimbursement for our products from third-party payors, including governmental organizations in the U.S. and ex-U.S. markets.
In the U.S., we have worked successfully with third party payors in order to promptly obtain appropriate levels of reimbursement for our CF medicines. We plan to continue to engage in discussions with numerous commercial insurers and managed health care organizations, along with government health programs that are typically managed by authorities in the individual states, to ensure that payors recognize the significant benefits that our medicines provide and provide patients with appropriate levels of access to our medicines.
In Europe and other ex-U.S. markets, we seek government reimbursement for our medicines on a country-by-country basis. This is necessary for each new medicine, as well as for label expansions for our current medicines. We have obtained broad reimbursement for our CF medicines in ex-U.S. markets. TRIKAFTA/KAFTRIO is reimbursed or accessible in more than 20 countries outside the U.S., including England, Ireland, Italy, France and Canada. We expect to continue to focus significant resources to obtain expanded reimbursement for our CF medicines and pipeline therapies in ex-U.S. markets.
Strategic Transactions
Acquisitions
As part of our business strategy, we seek to acquire drugs, drug candidates and other technologies and businesses that have the potential to complement our ongoing research and development efforts. In 2019, we invested significantly in business development transactions designed to augment our pipeline, including the acquisition of Semma Therapeutics, Inc., or Semma, a privately-held company focused on the use of stem cell-derived human islets as a treatment for T1D, and Exonics Therapeutics, Inc., or Exonics, a privately-held company focused on creating transformative gene-editing therapies to repair mutations that cause DMD and other severe neuromuscular diseases, including DM1. We expect to continue to identify and evaluate potential acquisitions and may include larger transactions or later-stage assets.
Collaboration and Licensing Arrangements
We enter into arrangements with third parties, including collaboration and licensing arrangements, for the development, manufacture and commercialization of drugs, drug candidates and other technologies that have the potential to complement our ongoing research and development efforts. We expect to continue to identify and evaluate collaboration and licensing opportunities that may be similar to or different from the collaborations and licenses that we have engaged in previously.
In-License Agreements
We have entered into collaborations with biotechnology and pharmaceutical companies in order to acquire rights or to license drug candidates or technologies that enhance our pipeline and/or our research capabilities. Over the last several years, we entered into collaboration agreements with a number of companies, including Arbor, CRISPR, Kymera Therapeutics, Inc., Mammoth, Moderna, Inc., and Obsidian Therapeutics, Inc. Generally, when we in-license a technology or drug candidate, we make upfront payments to the collaborator, assume the costs of the program and/or agree to make contingent payments, which could consist of milestone, royalty and option payments. Most of these collaboration payments are expensed as research and development expenses; however, depending on many factors, including the structure of the collaboration, the significance of the in-licensed drug candidate to the collaborator’s operations and the other activities in which our collaborators are engaged, the accounting for these transactions can vary significantly. In the nine months ended September 30, 2021 and 2020, our research and development expenses included $986.8 million and $143.3 million, respectively, related to upfront and milestones payments pursuant to our collaboration agreements. In the nine months ended September 30, 2021, these payments were primarily related to the $900.0 million upfront payment we made to CRISPR in the second quarter of 2021.

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Joint Development and Commercialization Agreement with CRISPR
In 2017, we entered into a joint development and commercialization agreement, or JDCA, with CRISPR pursuant to which we are developing and preparing to commercialize CTX001 for TDT and SCD. This JDCA was entered into following our exercise of an option to co-develop and co-commercialize the hemoglobinopathies program that was contained in the collaboration agreement that we entered into with CRISPR in 2015.
In April 2021, we and CRISPR entered into an amended and restated joint development and commercialization agreement, or the A&R JDCA. In June 2021, we made a $900.0 million upfront payment to CRISPR in connection with the closing of the transactions contemplated by the A&R JDCA, which we recorded to research and development expenses. Under the terms of the A&R JDCA, we are leading worldwide development, manufacturing and commercialization of CTX001. Additionally, 60% of the net profits and net losses for CTX001 are allocated to us and 40% of the net profits and net losses for CTX001 are allocated to CRISPR. CRISPR may earn an additional one-time $200.0 million milestone payment upon regulatory approval of CTX001.
Out-License Agreements
We also have out-licensed internally developed programs to collaborators who are leading the development of these programs. These out-license arrangements include our agreement with Merck KGaA, Darmstadt, Germany, which licensed oncology research and development programs from us in early 2017. Pursuant to these out-licensing arrangements, our collaborators are responsible for the research, development and commercialization costs associated with these programs, and we are entitled to receive contingent milestone and/or royalty payments. As a result, we do not expect to incur significant expenses in connection with these programs and have the potential for future collaborative and royalty revenues resulting from these programs.
Please refer to Note C, “Collaborative Arrangements,” for further information regarding our in-license agreements and out-license agreements.
Strategic Investments
In connection with our business development activities, we have periodically made equity investments in our collaborators. As of September 30, 2021, we held strategic equity investments in public companies and certain private companies, and we plan to make additional strategic equity investments in the future. While we invest the majority of our cash, cash equivalents and marketable securities in instruments that meet specific credit quality standards and limit our exposure to any one issue or type of instrument, our strategic investments are maintained and managed separately from our other cash, cash equivalents and marketable securities. Any changes in the fair value of equity investments with readily determinable fair values (including publicly traded securities) are recorded to other income (expense), net in our condensed consolidated statement of operations.
In the nine months ended September 30, 2021 and 2020, we recorded within other income (expense), gains of $5.0 million and $140.9 million, respectively, related to changes in the fair value of our strategic investments, and from sales of certain equity investments. As of September 30, 2021, the fair value of our investments in publicly traded companies was $218.8 million. To the extent that we continue to hold strategic investments, particularly strategic investments in publicly traded companies, we will record other income (expense) related to these strategic investments on a quarterly basis. Due to the volatility of the global markets, including as a result of COVID-19, and the high volatility of stocks in the biotechnology industry, we expect the value of these strategic investments to fluctuate and that the increases or decreases in the fair value of these strategic investments will continue to have material impacts on our net income (expense) and our profitability on a quarterly and/or annual basis.

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RESULTS OF OPERATIONS
Three Months Ended September 30,
Increase/(Decrease)
Nine Months Ended September 30,
Increase/(Decrease)
20212020
$
%
20212020
$
%
(in thousands, except percentages and per share amounts)
Revenues$1,984,164 $1,538,271 $445,893 29%$5,501,839 $4,577,863 $923,976 20%
Operating costs and expenses929,652 866,030 63,622 7%3,597,462 2,467,365 1,130,097 46%
Income from operations
1,054,512 672,241 382,271 57%1,904,377 2,110,498 (206,121)(10)%
Other non-operating income (expense), net28,229 73,630 (45,401)(62)%(44,931)117,677 (162,608)**
Provision for income taxes
230,813 78,437 152,376 194%287,456 120,718 166,738 138%
Net income
$851,928 $667,434 $184,494 28%$1,571,990 $2,107,457 $(535,467)(25)%
Net income per diluted common share$3.28 $2.53 $6.03 $7.98 
Diluted shares used in per share calculations
259,707 264,079 260,877 264,031 
** Not meaningful
Net Income
Our net income increased in the third quarter of 2021 as compared to the third quarter of 2020 primarily due to increased revenues resulting from the continued uptake of KAFTRIO in Europe and strong performance of TRIKAFTA in the U.S., including the launch of TRIKAFTA in children with CF 6 through 11 years of age. Our increased revenues were partially offset by increased cost of sales consistent with increased product revenues, changes in the fair value of our strategic investments and an increased provision for income taxes.
Our net income decreased in the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020 primarily due to the $900.0 million upfront payment we made to CRISPR in the second quarter of 2021 in connection with the amendment of our CTX001 collaboration. Changes in the fair value of our strategic investments, increased cost of sales consistent with increased product revenues and an increased provision for income taxes also decreased our net income. These decreases to our net income were partially offset by increased revenues resulting from the uptake of KAFTRIO in Europe and strong performance of TRIKAFTA in the U.S.

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Revenues
Three Months Ended September 30,
Increase/(Decrease)
Nine Months Ended September 30,
Increase/(Decrease)
20212020
$
%
20212020
$
%
(in thousands, except percentages)
Product revenues, net$1,984,164 $1,536,271 $447,893 29%$5,500,839 $4,575,863 $924,976 20%
Other revenues— 2,000 (2,000)N/A1,000 2,000 (1,000)(50)%
Total revenues$1,984,164 $1,538,271 $445,893 29%$5,501,839 $4,577,863 $923,976 20%
Product Revenues, Net
Three Months Ended September 30,
Increase/(Decrease)
Nine Months Ended September 30,
Increase/(Decrease)
20212020$%20212020$%
(in thousands, except percentages)
TRIKAFTA/KAFTRIO$1,555,772 $960,308 $595,464 62%$4,004,600 $2,773,256 $1,231,344 44%
SYMDEKO/SYMKEVI81,415 156,178 (74,763)(48)%339,969 501,066 (161,097)(32)%
ORKAMBI184,561 225,919 (41,358)(18)%624,224 692,038 (67,814)(10)%
KALYDECO162,416 193,866 (31,450)(16)%532,046 609,503 (77,457)(13)%
Total product revenues, net$1,984,164 $1,536,271 $447,893 29%$5,500,839 $4,575,863 $924,976 20%
In the third quarter and nine months ended September 30, 2021, our net product revenues increased by $447.9 million and $925.0 million, respectively, as compared to the third quarter and nine months ended September 30, 2020. The increase in our net product revenues in the third quarter and nine months ended September 30, 2021 was primarily due to the continued uptake of KAFTRIO, which was approved in the E.U. in the third quarter of 2020, and the strong performance of TRIKAFTA in the U.S., including the launch of TRIKAFTA in June 2021 in children with CF 6 through 11 years of age. Decreases in revenues for our products other than TRIKAFTA/KAFTRIO were primarily the result of patients switching from these medicines to TRIKAFTA/KAFTRIO.
Our net product revenues from U.S. and ex-U.S. markets were as follows:
Three Months Ended September 30,Increase/(Decrease)Nine Months Ended September 30,Increase/(Decrease)
20212020%20212020%
(in thousands, except percentages)
U.S. markets$1,382,892 $1,222,565 13%$3,893,245 $3,620,467 8%
Ex-U.S. markets601,272 313,706 92%1,607,594 955,396 68%
Total product revenues, net$1,984,164 $1,536,271 29%$5,500,839 $4,575,863 20%
Other Revenues
Our other revenues were $1.0 million and $2.0 million related to collaborative milestones that we earned in the nine months ended September 30, 2021 and 2020, respectively. Our other revenues have historically fluctuated significantly from one period to another based on our collaborative out-license activities, and may continue to fluctuate in the future. Our future royalty revenues will be dependent on if, and when, our collaborators are able to successfully develop drug candidates that we have out-licensed to them.

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Operating Costs and Expenses
`
Three Months Ended September 30,
Increase/(Decrease)
Nine Months Ended September 30,
Increase/(Decrease)
20212020
$
%
20212020
$
%
(in thousands, except percentages)
Cost of sales$236,512 $186,182 $50,330 27%$656,813 $533,199 $123,614 23%
Research and development expenses493,751 493,497 254 —%2,356,814 1,362,953 993,861 73%
Selling, general and administrative expenses198,189 184,551 13,638 7%584,935 558,613 26,322 5%
Change in fair value of contingent consideration1,200 1,800 (600)(33)%(1,100)12,600 (13,700)**
Total costs and expenses$929,652 $866,030 $63,622 7%$3,597,462 $2,467,365 $1,130,097 46%
** Not meaningful
Cost of Sales
Our cost of sales primarily consists of third-party royalties payable on our net sales of our products as well as the cost of producing inventories that corresponded to product revenues for the reporting period. Pursuant to our agreement with the Cystic Fibrosis Foundation our tiered third-party royalties on sales of TRIKAFTA/KAFTRIO, SYMDEKO/SYMKEVI, KALYDECO and ORKAMBI, calculated as a percentage of net sales, range from the single digits to the sub-teens, with royalties on sales of TRIKAFTA/KAFTRIO slightly lower than for our other products. Over the last several years, our cost of sales has been increasing due to increased net product revenues. Our cost of sales as a percentage of our net product revenues was 12% in each of the third quarter of 2021 and 2020 and nine months ended September 30, 2021 and 2020.
Research and Development Expenses
Three Months Ended September 30,
Increase/(Decrease)
Nine Months Ended September 30,
Increase/(Decrease)
20212020
$
%
20212020
$
%
(in thousands, except percentages)
Research expenses
$148,620 $186,152 $(37,532)(20)%$426,352 $477,560 $(51,208)(11)%
Development expenses
345,131 307,345 37,786 12%1,930,462 885,393 1,045,069 118%
Total research and development expenses
$493,751 $493,497 $254 —%$2,356,814 $1,362,953 $993,861 73%
Our research and development expenses include internal and external costs incurred for research and development of our drugs and drug candidates and expenses related to certain technologies that we acquire or license through business development transactions. We do not assign our internal costs, such as salary and benefits, stock-based compensation expense, laboratory supplies and other direct expenses and infrastructure costs, to individual drugs or drug candidates, because the employees within our research and development groups typically are deployed across multiple research and development programs. These internal costs are significantly greater than our external costs excluding collaborative upfront and milestone payments, such as the costs of services provided to us by clinical research organizations and other outsourced research, which we allocate by individual program. All research and development costs for our drugs and drug candidates are expensed as incurred.
Since January 2019, we have incurred approximately $5.9 billion in research and development expenses associated with drug discovery and development. The successful development of our drug candidates is highly uncertain and subject to a number of risks. In addition, the duration of clinical trials may vary substantially according to the type, complexity and novelty of the drug candidate and the disease indication being targeted. The FDA and comparable agencies in foreign countries impose substantial requirements on the introduction of therapeutic pharmaceutical products, typically requiring lengthy and detailed laboratory and clinical testing procedures, sampling activities and other costly and time-consuming procedures. Data obtained from nonclinical and clinical activities at any step in the testing process may be adverse and lead to discontinuation or redirection of development activities. Data obtained from these activities also are susceptible to varying interpretations, which could delay, limit or prevent regulatory approval. The duration and cost of discovery, nonclinical

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studies and clinical trials may vary significantly over the life of a project and are difficult to predict. Therefore, accurate and meaningful estimates of the ultimate costs to bring our drug candidates to market are not available.
In 2020 and the nine months ended September 30, 2021, costs related to our CF programs represented the largest portion of our development costs, excluding the $900.0 million upfront payment to CRISPR. Any estimates regarding development and regulatory timelines for our drug candidates are highly subjective and subject to change. Until we have data from Phase 3 clinical trials, we cannot make a meaningful estimate regarding when, or if, a clinical development program will generate revenues and cash flows.
Research Expenses
Three Months Ended September 30,
Increase/(Decrease)
Nine Months Ended September 30,
Increase/(Decrease)
20212020
$
%
20212020
$
%
(in thousands, except percentages)
Research Expenses:
Salary and benefits
$34,635 $32,145 $2,490 8%$102,529 $97,513 $5,016 5%
Stock-based compensation expense
17,388 15,301 2,087 14%56,361 68,206 (11,845)(17)%
Outsourced services and other direct expenses
35,798 27,911 7,887 28%114,920 79,837 35,083 44%
Collaborative payments26,750 80,050 (53,300)(67)%54,150 143,300 (89,150)(62)%
Infrastructure costs
34,049 30,745 3,304 11%98,392 88,704 9,688 11%
Total research expenses
$148,620 $186,152 $(37,532)(20)%$426,352 $477,560 $(51,208)(11)%
We expect to continue to invest in our research programs with a focus on creating transformative medicines for serious diseases. Our research expenses have historically fluctuated, and are expected to continue to fluctuate, from one period to another due to upfront and milestone payments related to our business development activities that are reflected in the preceding table as collaborative payments. Our research expenses, excluding these collaborative payments, have been increasing over the last several years as we have invested in our pipeline and expanded our cell and genetic therapy capabilities.
Development Expenses
Three Months Ended September 30,
Increase/(Decrease)
Nine Months Ended September 30,
Increase/(Decrease)
20212020
$
%
20212020
$
%
(in thousands, except percentages)
Development Expenses:
Salary and benefits
$88,568 $73,698 $14,870 20%$252,173 $221,828 $30,345 14%
Stock-based compensation expense
43,607 45,469 (1,862)(4)%140,051 135,526 4,525 3%
Outsourced services and other direct expenses
149,627 133,595 16,032 12%426,441 374,926 51,515 14%
Collaborative payments— — — N/A932,650 — 932,650 **
Infrastructure costs
63,329 54,583 8,746 16%179,147 153,113 26,034 17%
Total development expenses
$345,131 $307,345 $37,786 12%$1,930,462 $885,393 $1,045,069 118%
** Not meaningful
Our development expenses increased by $37.8 million in the third quarter of 2021 as compared to third quarter of 2020, primarily due to increased expenses related to our diversifying pipeline, including clinical trials, headcount and infrastructure costs. Our development expenses increased by $1.05 billion in the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020, primarily due to the $900.0 million upfront payment to CRISPR in the second quarter of 2021, that is included in the preceding table under collaborative payments, and increased expenses related to our diversifying pipeline, including clinical trials, headcount and infrastructure costs.

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Selling, General and Administrative Expenses
Three Months Ended September 30,
Increase/(Decrease)
Nine Months Ended September 30,
Increase/(Decrease)
20212020
$
%
20212020
$
%
(in thousands, except percentages)
Selling, general and administrative expenses$198,189 $184,551 $13,638 7%$584,935 $558,613 $26,322 5%
Selling, general and administrative expenses increased by 7% in the third quarter of 2021 as compared to third quarter of 2020 and increased by 5% in the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020, primarily due to the continued investment to support the commercialization of our medicines and increased support for our CF pipeline products and other disease areas.
Contingent Consideration
The fair value of contingent consideration potentially payable to Exonics’ former equity holders increased $1.2 million and decreased $1.1 million in the third quarter and nine months ended September 30, 2021, respectively. The fair value of contingent consideration increased by $1.8 million and $12.6 million in the third quarter and nine months ended September 30, 2020, respectively.
Other Non-Operating Income (Expense), Net
Interest Income
Interest income was $1.1 million and $3.7 million in the third quarter and nine months ended September 30, 2021, respectively, which was lower than our interest income of $3.1 million and $19.9 million in the third quarter and nine months ended September 30, 2020, respectively, due to a decrease in prevailing market interest rates, despite an increase in our cash equivalents and available-for-sale debt securities. Our future interest income will be dependent on the amount of, and prevailing market interest rates on, our outstanding cash equivalents and available-for-sale debt securities.
Interest Expense
Interest expense was $15.3 million and $46.4 million in the third quarter and nine months ended September 30, 2021, respectively, as compared to $13.9 million and $41.9 million in the third quarter and nine months ended September 30, 2020, respectively. The majority of our interest expense in these periods was related to imputed interest expense associated with our leased corporate headquarters in Boston. Our future interest expense will be dependent on whether, and to what extent, we borrow amounts under our credit facilities.
Other Income (Expense), Net
Other income (expense), net was income of $42.4 million and expense of $2.2 million in the third quarter and nine months ended September 30, 2021, respectively, as compared to income of $84.4 million and $139.6 million in the third quarter and nine months ended September 30, 2020, respectively. Our other income (expense), net in these periods was primarily related to changes in the fair value of our strategic investments. We expect that due to the volatility of the stock price of biotechnology companies, our other income (expense), net will fluctuate in future periods based on increases or decreases in the fair value of our strategic investments.
Income Taxes
We recorded provisions for income taxes of $230.8 million and $287.5 million in the third quarter and nine months ended September 30, 2021, respectively, as compared to provisions for income taxes of $78.4 million and $120.7 million in the third quarter and nine months ended September 30, 2020, respectively. Our effective tax rate of 15% for the nine months ended September 30, 2021 was lower than the U.S. statutory rate primarily due to a $100 million discrete tax benefit associated with an increase in the U.K.’s corporate tax rate from 19% to 25%, which was enacted in June 2021 and will become effective in April 2023. Our effective tax rate of 5% for the nine months ended September 30, 2020 was lower than the U.S. statutory rate primarily due to (i) a $209 million discrete tax benefit associated with the transfer of intellectual property rights to the U.K., (ii) a discrete tax benefit associated with the write off of a long-term intercompany receivable,

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(iii) a discrete tax benefit associated with an increase in the U.K.’s corporate tax rate from 17% to 19%, which was enacted and became effective in July 2020, and (iv) excess tax benefits related to stock-based compensation.

LIQUIDITY AND CAPITAL RESOURCES
The following table summarizes the components of our financial condition as of September 30, 2021 and December 31, 2020:
September 30,December 31,
Increase/(Decrease)
20212020
$
%
(in thousands)
Cash, cash equivalents and marketable securities
$6,960,885 $6,658,897 $301,988 5%
Working Capital:
Total current assets
8,852,540 8,133,379 719,161 9%
Total current liabilities
(1,914,264)(1,877,533)36,731 2%
Total working capital
$6,938,276 $6,255,846 $682,430 11%
As of September 30, 2021, total working capital was $6.94 billion, which represented an increase of $682.4 million from $6.26 billion as of December 31, 2020. The increase in total working capital in the nine months ended September 30, 2021 was primarily related to $1.65 billion of cash provided by operations, which was net of our $900.0 million payment to CRISPR, partially offset by $1.06 billion of cash used to repurchase our common stock pursuant to our share repurchase programs and expenditures for property and equipment of $173.3 million.
Sources of Liquidity
As of September 30, 2021, we had cash, cash equivalents and marketable securities of $6.96 billion, which represented an increase of $302 million from $6.66 billion as of December 31, 2020. We intend to rely on our existing cash, cash equivalents and marketable securities together with cash flows from product sales as our primary source of liquidity.
We may borrow up to a total of $2.5 billion pursuant to two revolving credit facilities. We may repay and reborrow amounts under these revolving credit agreements without penalty. Subject to certain conditions, we may request that the borrowing capacity for each of the credit agreements be increased by an additional $500.0 million, for a total of $3.5 billion collectively.
Other possible sources of future liquidity include commercial debt, public and private offerings of our equity and debt securities, strategic sales of assets or businesses and financial transactions. Negative covenants in our credit agreement may prohibit or limit our ability to access these sources of liquidity. As of September 30, 2021, we were in compliance with these covenants.
Future Capital Requirements
We have significant future capital requirements, including:
•significant expected operating expenses to conduct research and development activities and to operate our organization; and
•substantial facility and finance lease obligations.
In addition:
•We have entered into certain collaboration agreements with third parties that include the funding of certain research, development and commercialization efforts. Certain of our business development transactions, including collaborations and acquisitions, include the potential for future milestone and royalty payments by us upon the achievement of pre-established developmental and regulatory targets and/or commercial targets. We may enter into additional business development transactions, including acquisitions, collaborations and equity investments, that require additional capital.

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•To the extent we borrow amounts under the credit agreements we entered into in 2020 and 2019, we would be required to repay any outstanding principal amounts in 2022 or 2024, respectively.
•As of September 30, 2021, we had $857.8 million available under our 2021 Share Repurchase Program. We repurchased an additional $357.8 million of our common stock during October 2021.
We expect that cash flows from our products together with our current cash, cash equivalents and marketable securities will be sufficient to fund our operations for at least the next twelve months. The adequacy of our available funds to meet our future operating and capital requirements will depend on many factors, including the amounts of future revenues generated by our products, and the potential introduction of one or more of our other drug candidates to the market, the level of our business development activities and the number, breadth, cost and prospects of our research and development programs.
Financing Strategy
We may raise additional capital by borrowing under credit agreements, through public offerings or private placements of our securities or securing new collaborative agreements or other methods of financing. We will continue to manage our capital structure and will consider all financing opportunities, whenever they may occur, that could strengthen our long-term liquidity profile. There can be no assurance that any such financing opportunities will be available on acceptable terms, if at all.

CONTRACTUAL COMMITMENTS AND OBLIGATIONS
Our commitments and obligations were reported in our Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the Securities and Exchange Commission, or SEC, on February 11, 2021. There have been no material changes from the contractual commitments and obligations previously disclosed in that Annual Report on Form 10-K.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements prepared in accordance with generally accepted accounting principles in the U.S. The preparation of these financial statements requires us to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reported periods. These items are monitored and analyzed by management for changes in facts and circumstances, and material changes in these estimates could occur in the future. Changes in estimates are reflected in reported results for the period in which the change occurs. We base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from our estimates if past experience or other assumptions do not turn out to be substantially accurate. During the nine months ended September 30, 2021, there were no material changes to our critical accounting policies as reported in our Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the SEC on February 11, 2021.

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

Item 3.    Quantitative and Qualitative Disclosures About Market Risk
Information required by this item is incorporated by reference from the discussion in Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” of our Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the SEC on February 11, 2021.


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Item 4.    Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management (under the supervision and with the participation of our chief executive officer and chief financial officer), after evaluating the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Quarterly Report on Form 10-Q, has concluded that, based on such evaluation, as of September 30, 2021 our disclosure controls and procedures were effective and designed to provide reasonable assurance that the information required to be disclosed is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. In designing and evaluating our disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Changes in Internal Controls Over Financial Reporting
No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended) occurred during the three months ended September 30, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. Other Information

Item 1. Legal Proceedings
We are not currently subject to any material legal proceedings.

Item 1A. Risk Factors
Information regarding risk factors appears in Part I, Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the SEC on February 11, 2021. There have been no material changes from the risk factors previously disclosed in the Annual Report on Form 10-K.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q and, in particular, our Management’s Discussion and Analysis of Financial Condition and Results of Operations set forth in Part I, Item 2, contain a number of forward-looking statements. Forward-looking statements are not purely historical and may be accompanied by words such as “anticipates,” “may,” “forecasts,” “expects,” “intends,” “plans,” “potentially,” “believes,” “seeks,” “estimates,” and other words and terms of similar meaning. Such statements may relate to:
•our expectations regarding the amount of, timing of, and trends with respect to our financial performance, including revenues, costs and expenses and other gains and losses, including those related to net product revenues;
•our expectations regarding clinical trials, development timelines, regulatory authority filings, submissions and potential approvals and label expansions for our medicines, product candidates and other pipeline programs, including timing and structure of clinical trials, anticipated enrollment and dosing of patients, timing of availability of data from our ongoing and planned clinical trials, and timing of anticipated regulatory filings;
•our ability to obtain reimbursement for our medicines in the U.S. and ex-U.S. markets and our ability to launch, commercialize and market our medicines or any of our other drug candidates for which we obtain regulatory approval;
•the data that will be generated by ongoing and planned clinical trials and the ability to use that data to advance compounds, continue development or support regulatory filings;

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•our beliefs regarding the support provided by clinical trials and preclinical and nonclinical studies of our drug candidates and other pipeline programs for further investigation, clinical trials or potential use as a treatment;
•our beliefs regarding the number of people with CF and those potentially eligible for our medicines, and our ability to grow our CF business by increasing the number of people with CF eligible and able to receive our medicines;
•our expectations regarding the potential benefits and commercial potential of our product candidates, including the potential approach to treating or curing specific diseases;
•our plan to continue investing in our research and development programs, including anticipated timelines for our programs, and our strategy to develop our pipeline programs, alone or with third party-collaborators;
•the potential future benefits of our acquisitions and collaborations, including our CTX001 collaboration with CRISPR, our CF mRNA therapeutics collaboration with Moderna, Inc., our collaboration with Arbor and our collaboration with Mammoth;
•the establishment, development and maintenance of collaborative relationships, including potential milestone payments or other obligations;
•potential business development activities, including the identification of potential collaborative partners or acquisition targets;
•our expectations regarding the effect of COVID-19 on, among other things, our financial performance, liquidity, business and operations, including manufacturing, supply chain, research and development activities and pipeline programs;
•potential fluctuations in foreign currency exchange rates;
•our expectations regarding our provision for or benefit from income taxes and the utilization of our deferred tax assets;
•our ability to use our research programs to identify and develop new drug candidates to address serious diseases and significant unmet medical needs; and
•our liquidity and our expectations regarding the possibility of raising additional capital.
Forward-looking statements are subject to certain risks, uncertainties, or other factors that are difficult to predict and could cause actual events or results to differ materially from those indicated in any such statements. These risks, uncertainties, and other factors include, but are not limited to, those described in our “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the SEC on February 11, 2021, and those described from time to time in our future reports filed with the Securities and Exchange Commission.
Any such forward-looking statements are made on the basis of our views and assumptions as of the date of the filing and are not estimates of future performance. Except as required by law, we undertake no obligation to publicly update any forward-looking statements. The reader is cautioned not to place undue reliance on any such statements.



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Table of Contents
Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Repurchases of Equity Securities
On June 23, 2021, our Board of Directors approved a share repurchase program (the “2021 Share Repurchase Program”), pursuant to which we are authorized to repurchase up to $1.5 billion of our common stock by December 31, 2022. The table set forth below shows repurchases of securities by us during the three months ended September 30, 2021 under our 2021 Share Repurchase Program.
PeriodTotal Number
of Shares Purchased		Average Price
Paid per Share		Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs (1)		Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (1)
July 1, 2021 to July 31, 2021
— $— — $1,500,000,000 
August 1, 2021 to August 31, 2021
2,532,454 $197.79 2,532,454 $999,107,701 
September 1, 2021 to September 30, 2021
760,707 $185.77 760,707 $857,793,473 
Total3,293,161 $195.01 3,293,161 $857,793,473 
(1) Under our 2021 Share Repurchase Program, we are authorized to purchase shares from time to time through open market or privately negotiated transactions. Such purchases may be pursuant to Rule 10b5-1 plans or other means as determined by our management and in accordance with the requirements of the Securities and Exchange Commission.

Item 6.    Exhibits
Exhibit Number
Exhibit Description
10.1
10.2
10.3
10.4
31.1
31.2
32.1
101.INSXBRL Instance - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCHXBRL Taxonomy Extension Schema
101.CALXBRL Taxonomy Extension Calculation
101.LABXBRL Taxonomy Extension Labels
101.PREXBRL Taxonomy Extension Presentation
101.DEFXBRL Taxonomy Extension Definition
104Cover Page Interactive Data File––the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
†Confidential portions of this document have been redacted according to the applicable rules.


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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Vertex Pharmaceuticals Incorporated
November 3, 2021
By:
/s/ Charles F. Wagner, Jr.
Charles F. Wagner, Jr.
Executive Vice President, Chief Financial Officer
(principal financial officer and
duly authorized officer)

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