VRTX/Filings/10-K Diff

VRTX 10-K diff: FY 2023-12-31 → FY 2025-12-31

Paragraph-level diff of Risk Factors (Item 1A) and Management's Discussion & Analysis (Item 7).

Item 1A · Risk Factors

+1766 paragraphs −370 paragraphs ~370 changed

FY 2023-12-31 (earlier)

ITEM 1A. RISK FACTORSInvesting in our common stock involves a high degree of risk, and you should carefully consider the risks and uncertainties described below in addition to the other information included or incorporated by reference in this Annual Report on Form 10-K. If any of the following risks or uncertainties actually occurs, our business, financial condition or results of operations would likely suffer, possibly materially. In that case, the trading price of our common stock could decline. SUMMARY OF RISK FACTORS Our business is subject to numerous risks and uncertainties, discussed in more detail in the following section. These risks include, among others, the following key risks: Risks Related to Our Business • We invest significant resources in the research, development, manufacturing and supply of therapies for serious diseases, and if we are unable to successfully develop and commercialize additional products, our business could be materially harmed. • Over the last several years all of our product revenues were derived from sales of our CF medicines. If we are unable to continue to increase revenues from sales of our CF medicines, our business would be materially harmed and the market price of our common stock would likely decline. • If we are not successful in commercializing CASGEVY, our revenue growth could be limited and our business could be materially harmed. • If we are unable to successfully develop, obtain approval, and commercialize treatments for acute and neuropathic pain, our business could be materially harmed. • If our competitors bring products with superior product profiles to market, our products may not be competitive, and our revenues could decline. • If we discover safety issues with any of our products or if we fail to comply with continuing U.S. and applicable foreign regulations, commercialization efforts for the product could be negatively affected, the approved product could lose its approval or sales could be suspended, and our business could be materially harmed. • If physicians and patients do not accept our products, or if patients do not remain on treatment or comply with their prescribed dosing regimen, our product revenues would be materially harmed in future periods. • Cell and genetic therapies face increased scrutiny from the public and medical communities and commercial success will depend, in part, upon the acceptance of those communities. Risks Related to Pricing of Our Products • Government and other third-party payors seek to contain costs of health care through legislative and other means. If they fail to provide coverage and adequate reimbursement rates for our products, our revenues will be harmed. • We may experience pricing pressure on our products, which could reduce our revenues and future profitability. • Current health care laws and regulations in the U.S. and future legislative or regulatory reforms to the U.S. health care system may affect our ability to commercialize our marketed products profitably. • We have experienced challenges commercializing products outside of the U.S., and our future revenues will be dependent on our ability to obtain adequate reimbursement for our products in ex-U.S. markets. • Insurance coverage and reimbursement of our cell or genetic therapies is uncertain. Risks Related to Development and Clinical Testing of Our Products and Product Candidates • Our product candidates remain subject to clinical testing and regulatory approval, and our future success is dependent on our ability to successfully develop additional product candidates for both CF and non-CF indications. • If we are unable to obtain or are delayed in obtaining regulatory approval, we may incur additional costs, experience delays in commercialization, or be unable to commercialize our product candidates. • If clinical trials are prolonged or delayed, our development timelines for the affected development program could be extended, our costs to develop the product candidate could increase and the competitive position of the product candidate could be adversely affected.31• Difficulty in enrolling patients could delay or prevent clinical trials of our product candidates, and ultimately delay or prevent regulatory approval. • Enrollment for clinical trials for our cell and gene therapies may face additional and unique challenges and adverse developments associated with these clinical trials could result in action by regulatory bodies, including revised requirements for approval. Risks Related to Government Regulation • If regulatory authorities interpret any of our conduct, including our marketing practices, as being in violation of applicable health care laws, including fraud and abuse laws, laws prohibiting off-label promotion, disclosure laws or other similar laws, we may be subject to civil or criminal penalties. • If we fail to comply with our reporting and payment obligations under the Medicaid Drug Rebate Program or other governmental pricing programs in the U.S., we could be subject to additional reimbursement requirements, penalties, sanctions, and fines that could have a material adverse effect on our business, financial condition, results of operations and growth prospects. • If our processes and systems are not compliant with regulatory requirements, we could be subject to restrictions on marketing our products or could be delayed in submitting regulatory filings seeking approvals for our product candidates. • The regulatory approval process for our cell and genetic therapies involves additional consultations with regulatory agencies, costs, and potentially longer timelines as compared to those for small molecules. Risks Related to Supply, Manufacturing and Reliance on Third Parties • We depend on third-party manufacturers and our internal capabilities to manufacture our products and the materials we require for our clinical trials. We rely on third party logistics providers to manage our shipments globally. We may not be able to maintain our third-party relationships and could experience supply disruptions outside of our control. • We rely on third parties to conduct pre-clinical work, clinical trials and other activities, and those third parties may not perform satisfactorily, including failing to meet established deadlines for the completion of such studies and/or trials or failing to satisfy regulatory requirements. Risks Related to Business Development Activities • Our ability to execute on our long-term strategy depends in part on our ability to engage in transactions and collaborations with other entities that add to our pipeline or provide us with new commercial opportunities. • We face risks in connection with existing and future collaborations with respect to the development, manufacture and commercialization of our products and product candidates. • We may not realize the anticipated benefits of existing or future acquisitions of businesses or technologies, and the integration following any such acquisition may disrupt our business and management. Risks Related to Intellectual Property • If our patents do not protect our products and our products infringe third-party patents, we could be subject to litigation which could result in injunctions preventing us from selling out products, substantial damages, or circumvention of our patents by third parties. • Uncertainty over intellectual property in the pharmaceutical and biotechnology industry has been the source of litigation and other disputes that are inherently costly and unpredictable. • We may be subject to claims by third parties asserting that our employees or we have misappropriated their intellectual property, or claiming ownership of what we regard as our own intellectual property. Risks Related to Our Operations • If we fail to scale our operations to accommodate growth, our business may suffer. • A variety of risks associated with operating in foreign countries could materially adversely affect our business. • If we fail to attract and retain skilled employees, our business could be materially harmed. • A breakdown or breach of our information technology systems could subject us to liability or interrupt the operation of our business. Risks Related to Financial Results and Holding Our Common Stock • Our effective tax rate fluctuates, and changes in tax laws, regulations and treaties, unfavorable resolution to the tax positions we have taken or exposure to additional income tax liabilities could have a material impact on our future taxable income.32Risks Related to Our Business We invest significant resources in the research, development, manufacturing and supply of therapies for serious diseases, and if we are unable to successfully develop and commercialize additional products, our business could be materially harmed. We invest significant resources in the research and development of therapies for serious diseases, including CF, SCD, TDT, acute and neuropathic pain, AMKD, T1D, DM1, and AATD. Product development is highly uncertain and expensive, and we may experience unforeseen delays, including regulatory and commercialization delays. Product candidates that may appear promising in the early phases of research and development may fail to reach commercial success for many reasons, including the failure to demonstrate acceptable clinical trial results or obtain marketing approval, the inability to manufacture or commercialize the product candidate on economically feasible terms, or the appearance of safety issues. When we receive marketing approval for a pipeline product, we cannot be sure that we will obtain market acceptance or adequate reimbursement levels from third-party payors or foreign governments for such product. Additionally, many of the therapies that we are developing in our pipeline target rare diseases that affect a limited number of patients. There can be no guarantee that we will effectively identify patients that are eligible for enrollment in our clinical trials or treatment with our product candidates. Even if we do successfully identify eligible patients, the number of patients that our product candidates are able to treat may turn out to be lower than we expect or new patients may become increasingly difficult to identify, each of which may adversely affect our revenues and materially harm our business. If we are not able to successfully develop and commercialize additional products our business could be materially harmed. Over the last several years all of our product revenues were derived from sales of our CF medicines. If we are unable to continue to increase revenues from sales of our CF medicines, our business would be materially harmed and the market price of our common stock would likely decline. Substantially all of our net product revenues have been derived from the sale of our CF medicines over the last several years. As a result, our business is dependent upon our ability to sustain and increase revenues from sales of our CF medicines. We seek to continue to increase our CF product revenue through serial innovation, including the potential approval of our vanzacaftor/tezacaftor/deutivacaftor triple combination, development and commercialization CF medicines in younger children with CF and through securing additional approvals and reimbursements for our CF medicines in ex-U.S. markets. Our concentrated source of revenues presents a number of risks to our business, including: • that one or more competing therapies may be developed successfully as a treatment for people with CF; • that reimbursement policies of payors and other third parties may make it difficult to obtain reimbursement or reduce the net price we receive for our products; • that we may experience manufacturing or supply disruptions for our CF medicines; and • that we may experience adverse developments with respect to development or commercialization of our CF medicines. If any of the above risks were to materialize, if we are otherwise unable to increase revenues from sales of our CF medicines, or if we do not meet the expectations of investors or public equity market analysts, our business would be materially harmed and our ability to fund our operations could be adversely affected. If we are not successful in commercializing CASGEVY, our revenue growth could be limited and our business could be materially harmed. We recently obtained approval for CASGEVY for the treatment of people 12 years and older with SCD and TDT in the U.S., the E.U., the U.K., Saudi Arabia, and Bahrain. We invested significant resources in the research and development of CASGEVY. While we have previously successfully commercialized several small molecule drugs, we have limited experience with the commercialization of cell and genetic therapies. Manufacturing and commercialization of CASGEVY is subject to similar risks and uncertainties as small molecules. In addition: • the manufacturing process for CASGEVY is more complex than the manufacturing processes for our CF medicines and we may encounter difficulties in the production of CASGEVY and ensuring that the product meets required33specifications; • there are multiple steps along the CASGEVY patient treatment journey, many of which involve significant clinical complexities performed by third parties, including the collection of blood cells from patients, transfer of those cells to and from a manufacturing facility, and other procedures either before or after delivery of CASGEVY; • the commercial success of CASGEVY will depend in part on the medical community, patients, governments, and third-party or governmental payors accepting and providing adequate reimbursement of CASGEVY products, and recognizing the applicable medicine as medically useful, cost-effective, ethical, and safe; and • market acceptance will be dependent in part on the prevalence and severity of side effects associated with the procedure by which CASGEVY is administered, the prevalence and severity of any side effects resulting from the myeloablative preconditioning regime. If we are not successful in commercializing CASGEVY, our revenue growth could be limited and our business could be materially harmed. If we are unable to successfully develop, obtain approval and commercialize treatments for acute and neuropathic pain, our business could be materially harmed. We believe that a portion of the value attributed to our company by investors is based on our potential treatments for acute and neuropathic pain, including VX-548. We have completed the Phase 3 development program for VX-548 in acute pain and we are planning to submit an NDA to the FDA by mid-2024. We are planning to initiate a Phase 3 development program for VX-548 in neuropathic pain based on positive Phase 2 clinical results we received in the fourth quarter of 2023. Obtaining approval for VX-548 is uncertain process and we may not be successful. If we do not obtain approval of VX-548, our business may be materially harmed. VX-548, if approved, may not gain or maintain market acceptance among physicians and patients or other members of the medical community. In addition to the risks normally associated with launching a new branded product, VX-548 will need to compete in an acute pain market that largely consists of low-cost generic drugs, including opioids, non-steroidal anti-inflammatory drugs, acetaminophen and local anesthetics. Similarly, if we are successful in developing and obtaining approval for VX-548 in neuropathic pain, VX-548 will face competition from generic anticonvulsant and antidepressant drugs. If we are not able to successfully develop, obtain approval for and commercialize treatments for acute and neuropathic pain, our future net product revenues and cash flows will be adversely affected and our business could be materially harmed. If our competitors bring products with superior product profiles to market, our products may not be competitive, and our revenues could decline. A number of companies are seeking to identify and develop product candidates for the treatment of CF, SCD, TDT, pain, and other therapeutic areas we are targeting with our research and development activities. Our success in rapidly developing and commercializing our CF medicines may increase the resources that our competitors allocate to the development of potential competitive treatments. If one or more competing therapies are successfully developed as a treatment for people with CF, SCD, TDT, pain or any of the other disease areas we are currently targeting in our pipeline, our products and our net product revenues could face competitive pressures. If one or more competing therapies prove to be superior to our then-existing products and/or product candidates, our business could be materially adversely affected. In addition, our business faces competition from major pharmaceutical companies possessing substantially greater financial resources than we possess, as well as from numerous smaller public and private companies, academic institutions, government agencies, public and private research organizations, and charitable venture philanthropy organizations that conduct research, seek patent protection, and/or establish collaborative arrangements for research, development, manufacturing, and commercialization. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller and other early-stage companies also may prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These third parties compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs. Our products and any products that we develop in the future may not be able to compete effectively with marketed34therapies or new therapies that may be developed by competitors. The risk of competition is particularly important to our company because substantially all of our revenues are related to the treatment of people with CF. There are many other companies developing products for the same patient populations that we are pursuing. To compete successfully in these areas, we must demonstrate improved safety, efficacy and/or tolerability, ease of manufacturing, and gain and maintain market acceptance over competing products. If we discover safety issues with any of our products or if we fail to comply with continuing U.S. and applicable foreign regulations, commercialization efforts for the product could be negatively affected, the approved product could lose its approval or sales could be suspended, and our business could be materially harmed. Our products are subject to continuing regulatory oversight, including the review of additional safety information. Products are more widely used by patients once approval has been obtained and therefore side effects and other problems may be observed after approval that were not seen or anticipated, or were not as prevalent or severe, during pre-approval clinical trials or nonclinical studies. The subsequent discovery of previously unknown or underestimated problems with a product could negatively affect commercial sales of the product, result in restrictions on the product or lead to the withdrawal of the product from the market. Each of our CF products shares at least one active pharmaceutical ingredient with another of our products. As a result, if any of our CF products were to experience safety issues, our other CF products may be adversely affected. In SCD and TDT, as part of the FDA approval for CASGEVY, we are required to conduct two post-marketing requirement safety studies to assess the long-term risk of hematologic malignancies and off-target genome editing effects by CRISPR/Cas9. Negative or ambiguous results from these studies could also have a significant impact on our ability to commercialize CASGEVY. The reporting of adverse safety events involving our products or public speculation about such events could cause our stock price to decline or experience periods of volatility. Our business also may be materially harmed by impaired sales of our products, denial or withdrawal of regulatory approvals, non-renewal of conditional regulatory approvals, required label changes or additional clinical trials, reputational harm, or government investigations or lawsuits brought against us. Our products are subject to ongoing regulatory requirements governing the testing, manufacturing, labeling, packaging, storage, advertising, promotion, sale, distribution, import, export, recordkeeping, and submission of safety and other post-market information. We and our third-party manufacturers must comply with cGMP and other applicable regulations governing the manufacturing and distribution of our products. Regulatory authorities periodically inspect our drug manufacturing facilities, and those of our third-party manufacturers, to evaluate compliance with cGMP and other regulatory requirements. If we or our collaborators, or third-parties acting on our behalf, fail to comply with applicable continuing regulatory requirements, we or our collaborators may be subject to fines, suspension or withdrawal of regulatory approvals for specific products, product recalls and seizures, operating restrictions and/or criminal prosecutions, any of which could have a material adverse effect on our business, reputation, financial condition, and results of operations. If physicians and patients do not accept our products, or if patients do not remain on treatment or comply with their prescribed dosing regimen, our product revenues would be materially harmed in future periods. Our approved products may not gain or maintain market acceptance among physicians and patients or other members of the medical community. Effectively marketing our products and any of our product candidates or investigational therapies, if approved, requires substantial efforts, both prior to launch and after approval. Physicians may elect not to prescribe our products or recommend our cell or genetic therapies, and patients may elect not to take them or receive them or they may discontinue use of our products after initiation of treatment, for a variety of reasons including: • prevalence and severity of adverse side effects; • lack of reimbursement availability from third-party payors, including governmental entities; • lower demonstrated efficacy, safety and/or tolerability compared to alternative treatment methods; • lack of cost-effectiveness; • a decision to wait for the approval of other therapies in development that have significant perceived advantages over our product;35• convenience and ease of administration; • limitations or warnings contained in the labeling; • the timing of market introduction of our product as well as competitive products; • other potential advantages of alternative treatment methods; and • inadequate sales, marketing and/or distribution support. If our medicines fail to achieve or maintain market acceptance, we may not be able to generate significant revenues in future periods. Cell and genetic therapies face increased scrutiny from the public and medical communities and commercial success will depend, in part, upon the acceptance of those communities. We face uncertainty as to whether cell and gene therapy treatments will gain the acceptance of the public or the medical community. The commercial success of cell and gene therapy treatments, including CASGEVY, will depend, in part, on the acceptance of physicians, patients, and third-party payors of gene therapy products in general, and our product candidates in particular, as medically necessary, cost-effective and safe. In particular, our success will depend upon physicians prescribing our therapies in lieu of existing treatments they are already familiar with and for which greater clinical data may be available. Moreover, physicians and patients may delay acceptance of cell and gene therapies until the therapies have been on the market for a certain amount of time. In addition, medical centers, including ATCs, that administer procedures accompanying treatment could experience capacity constraints, and these centers are subject to competing priorities that could delay patient access to procedures associated with cell and gene therapy products. Negative public opinion or more restrictive government regulations may delay or impair the successful commercialization of, and demand for, cell and gene therapies. Risks Related to Pricing of Our Products Government and other third-party payors seek to contain costs of health care through legislative and other means. If they fail to provide coverage and adequate reimbursement rates for our products, our revenues will be harmed. Sales of our products depend in part upon the availability of reimbursement from third-party payors. Third-party payors include government health programs such as Medicare and Medicaid in the U.S. and the national health care systems in ex-U.S. markets, managed care providers, private health insurers and other organizations. The trend in the health care industry is cost containment, and efforts of third-party payors to contain or reduce health care costs may adversely affect our ability to establish or maintain appropriate prices for our products or any drugs that we may develop and commercialize. In the U.S., there have been, and we expect that there will continue to be, a number of federal and state proposals to implement governmental controls that are similar to those that currently exist in Europe. For example, the ACA required manufacturers of Medicare Part D brand name drugs to provide discounts on those drugs to Medicare Part D beneficiaries during the coverage gap; increased the rebates paid by pharmaceutical companies to state Medicaid programs on drugs covered by Medicaid; and imposed an annual fee, which increases annually, on sales by branded pharmaceutical manufacturers. Additionally, private payors, including health maintenance organizations and pharmacy benefit managers in the U.S., are adopting more aggressive utilization management techniques and are increasingly applying restrictive plan designs that can impact patients and manufacturers, and they continue to push for significant discounts and rebates from manufacturers. Additionally, on August 16, 2022, the IRA was enacted. Among other things, the IRA establishes a Drug Price Negotiation Program, under which the government may negotiate maximum fair prices for certain drugs covered by Medicare that do not have generic or biosimilar competition. The first set of maximum fair prices will be effective in 2026. Certain products are excluded from the negotiation program including drugs that have a single orphan drug designation and that are not approved for any other orphan or non-orphan diseases or conditions. We cannot predict with certainty whether there will be future legislative changes to the scope of these exclusions. The law also requires manufacturers to pay a rebate to Medicare if the price of a Medicare drug (under both Part B and Part D) increases faster than the rate of inflation. The law also redesigns the Part D benefit. The current Coverage Gap Discount Program, which requires manufacturers to provide a 70% discount on brand drugs and biologics during the coverage gap phase, will be eliminated after the 2024 plan year. Starting in 2025, manufacturers of brand drugs and biologics will be required to provide a 10% discount during the initial36phase and a 20% discount during the catastrophic phase of the Part D benefit. The IRA continues a trend in the U.S. toward reducing drug prices and limiting spending by the federal health care programs on drugs. We cannot predict how CMS will interpret the IRA or how the provisions of the law will affect our business once fully implemented, but it is possible that these changes or other legislative updates will have an adverse impact on our revenue. The IRA also requires the Secretary of the Department of Health and Human Services (the “Secretary”) to issue program guidance on numerous areas associated with implementation of the law’s requirements, including for drug price negotiation and inflation rebates. We cannot know what form this program guidance would take or how it would affect our business. It is possible the U.S. Congress or administration may take further actions to address health care costs and access to medicine, and specifically address coverage and reimbursement of cell and gene therapies. For example, in October 2022, President Biden issued an Executive Order directing the Center for Medicare and Medicaid Innovation (“CMMI”), to consider new healthcare payment and delivery models that would lower drug costs and promote access to innovative drug therapies for Medicare and Medicaid beneficiaries. In February 2023, the Secretary submitted a report to the White House describing three models that the Secretary selected for testing. Among the selected models is a Cell & Gene Therapy Access Model, under which CMS would structure and coordinate multi-state Medicaid outcomes-based agreements between participating states and manufacturers. The report also directs CMS to consider potential Medicare fee-for-service options to support cell and gene therapy access and affordability. In October 2023, CMMI further announced that it will move the start-date for the Cell & Gene Therapy Access Model from 2026 to 2025. On January 30, 2024,CMMI released additional information about the Cell & Gene Therapy Access Model, including the initial focus on cell and gene therapies for sickle cell disease. CMS intends to negotiate outcomes-based agreements with manufacturers between May 2024 and November 2024. In addition to the supplemental rebate negotiated under the outcomes-based agreement, participating manufacturers would be required to cover certain fertility preservation services and supports for ancillary services (e.g., travel, case management, behavioral health services). CMS is requesting that states submit an optional, non-binding letter of intent by April 2024. States may begin participating in the Cell & Gene Therapy Access Model on a rolling-basis, between January 2025 and January 2026. Third-party payors throughout the world also have been attempting to control drug spending in light of the global economic pressures. In reimbursement negotiations, many payors are requesting price discounts and caps on total expenditures and limiting both the types and variety of drugs that they will cover if they are not able to secure them. Some payors restrict reimbursement to certain patient groups or by indication. As part of these negotiations, many ex-U.S. government payors also are requiring companies to establish product cost-effectiveness as a condition of reimbursement. These cost-effectiveness reviews may overlook many of the benefits provided by innovative medicines, and for the most part, have not taken into account the specific circumstances of products that treat rare diseases. This has led to conclusions that certain medicines, including our products in certain jurisdictions, are not cost-effective. As a result, certain countries have declined to reimburse, or delayed their reimbursement of, some of our products. Although not mandated in the U.S., various organizations have started advocating for cost-effectiveness analyses in the U.S. as well as value-based contracting in which the amount of reimbursement for a product is based on patient outcomes and other clinical or economic metrics related to the performance of such product. If U.S. payors were to adopt such assessments and make negative coverage determinations or utilize value-based contracts that result in penalties to, or lower rates of, reimbursement, it could adversely affect our product revenues. Our business would be materially adversely affected if we are not able to obtain or maintain coverage and reimbursement of our products from third-party payors on a broad, timely, or satisfactory basis, or if such coverage is subject to overly broad or restrictive utilization management controls. The increasing availability and use of innovative specialty pharmaceuticals for rare diseases, combined with their higher cost as compared to other types of pharmaceutical products, is generating significant third-party payor interest in developing cost-containment strategies targeted to this sector. Government regulations in both U.S. and ex-U.S. markets could further limit the prices that can be charged for our products and may limit our commercial opportunity. The increasing use of cost-effectiveness assessments in markets around the world and the financial challenges faced by many governments may lead to significant adverse effects on our business. We may experience pricing pressure on our products, which could reduce our revenues and future profitability. There also has been an increase in state legislation and regulations related to drug pricing and drug pricing transparency. In the U.S., various states, including Nevada, Maryland, Louisiana, New York, California, Washington, Massachusetts, New Jersey, Connecticut, Vermont, New Hampshire, Utah, Minnesota, Oregon, Colorado, New Mexico, Virginia, Maine, Texas, North Dakota, West Virginia, Florida, and New Jersey have passed legislation requiring companies to disclose extensive37information relating to drug prices, drug price increases, and spending on research, development, and marketing, among other things. Although it is not always clear what states will do with the collected information, some laws were designed to obtain additional product discounts. Additionally, certain states have enacted laws establishing PDABs. Some state PDABs either have the authority or have defined a pathway where they may be granted the authority to establish upper payment limits for prescription drugs, including Colorado, Maryland, Washington, and Minnesota. Under the Washington law, the PDAB cannot select for an affordability review drugs that are solely for the treatment of an orphan-designated disease or condition. In August 2023, the Colorado PDAB selected five drugs for an affordability review, including TRIKAFTA; in December, it found TRIKAFTA to be not unaffordable, and thus not eligible for an upper payment limit. We cannot, however, predict whether future reviews by the Colorado PDAB, or any other PDAB, will come to the same conclusion about TRIKAFTA or any of our other therapies, or the amount of any potential upper payment limit. We may continue to see more state action requiring additional disclosures or other actions. Additional state actions, including the importation of drugs from other countries, also may affect the availability and accessibility of our medicines. For example, on January 5, 2024, the FDA authorized Florida’s Agency for Health Care Administration’s drug importation program under section 804 of the Federal Food, Drug, and Cosmetic Act, which eventually would allow Florida to import certain prescription drugs from Canada. The importation of drugs from Canada or other countries that potentially could compete with our medicines could create increased pressure on our revenue and profitability. In addition, we could see increased federal activity related to drug pricing and transparency requiring disclosures or other actions instead of, or in addition to, state requirements. Similar initiatives also are occurring in, or being considered by, some of our ex-U.S. markets, including Italy and Brazil. Complying with these laws can be expensive and requires significant personnel and operational resources. Furthermore, any additional required discounts would adversely affect the pricing of, and revenues from, our products. Finally, while we seek to comply with all statutory and regulatory requirements, we face increased enforcement activity by the U.S. federal government, state governments, and private payors against pharmaceutical and biotechnology companies for pricing and reimbursement-related issues as well as inquiries from the U.S. Congress. Other federal activities seeking to specifically address drug pricing and reimbursement include: • rulemaking related to importation of prescription drugs from Canada, as well as guidance related to importation of prescription drugs from other foreign countries; • attempts to establish reference pricing for certain physician-administered drugs; • executive orders relating to drug pricing that are intended to broadly impact the pharmaceutical industry; • changes to the federal anti-kickback statute safe harbors that eliminate anti-kickback statute discount safe harbor protection for certain manufacturer rebate arrangements; and • legislation relating to drug pricing, including enhanced transparency measures into drug pricing. We expect government scrutiny over drug pricing, reimbursement, and distribution to continue. Potential future government regulation of drug prices or reimbursement creates uncertainties about our portfolio and could have a material adverse effect on our operations. Moreover, antitrust and/or competition laws are increasingly being used to scrutinize pricing on high-value medicines. Defending against an antitrust or competition claim can be expensive and requires significant personnel and operational resources, may ultimately lead to a reduction in the prices of our products, and can ultimately result a material adverse effect on profitability and our business overall. Additionally, governmental efforts to pursue compulsory licensing, including the Biden Administration’s proposed framework to pursue so-called “march in” rights, could affect our pricing strategy and result in an adverse impact on our revenue. Current health care laws and regulations in the U.S. and future legislative or regulatory reforms to the U.S. health care system may affect our ability to commercialize our marketed products profitably. The U.S. government, individual states and some foreign jurisdictions also have been aggressively pursuing legislative and regulatory reforms that could affect our ability to sell products. For example, in the U.S., there have been federal legislative and administrative efforts to repeal, substantially modify, or invalidate some or all of the provisions of the ACA, which could affect coverage and payment for medicines. The federal government additionally has proposed and enacted legislation leading to aggregate reductions of Medicare payments to providers, which ultimately could affect utilization of medicines. 38 Other reforms include the Bipartisan Budget Act of 2018, which contained various provisions that affect coverage and reimbursement of drugs, including an increase in the discount that manufacturers of Medicare Part D brand name drugs must provide to Medicare Part D beneficiaries during the coverage gap from 50% to 70%. Under the IRA, the coverage gap phase and the associated coverage gap discount program will be eliminated after the 2024 plan year. Starting in 2025, there will be a new Part D manufacturer discount program, which requires a 10% discount in the initial phase and a 20% discount in the catastrophic phase of the benefit. The IRA also authorizes the government to negotiate maximum fair prices for certain Medicare drugs. It also establishes mandatory rebates for Part B and Part D drugs with prices that increase faster than inflation. These new laws or any other similar laws introduced in the future may result in additional reductions in Medicare and other health care funding, which could negatively affect our customers and accordingly, our financial operations. Moreover, payment methodologies may be subject to changes in health care legislation and regulatory initiatives. For example, CMS may develop new payment and delivery models, such as bundled payment models. Adoption of new health care reform legislation at the federal or state level could affect demand for, or pricing of, our products or product candidates if approved for sale. We cannot, however, predict the ultimate content, timing, or effect of any health care reform legislation or action, or its impact on us, including increased compliance requirements and costs, all of which may adversely affect our future business, operations, and financial results. We have experienced challenges commercializing products outside of the U.S., and our future revenues will be dependent on our ability to obtain adequate reimbursement for our products in ex-U.S. markets. In most ex-U.S. markets, the pricing and reimbursement of therapeutic and other pharmaceutical products is subject to governmental control and government authorities are making greater efforts to limit or regulate the price of drug products. The reimbursement process in ex-U.S. markets can take a significant time to conclude and reimbursement decisions are made on a country by country or region by region basis. Further, many ex-U.S. governments are introducing new legislation focusing on cost containment measures in the pharmaceutical industry. The final form of these laws and the relevant practical application is unknown at this time, but may lead to lower prices, paybacks or other forms of discounts or special taxes. Our medicines treat life-threatening conditions and address relatively small patient populations, and our research and development programs are primarily focused on developing medicines to treat similar diseases. Both government and private payors are targeting these types of therapies, in some cases refusing to pay for them. We have experienced challenges in obtaining timely reimbursement for our products in various countries outside the U.S. Our future product revenues, including from TRIKAFTA/KAFTRIO, depend on, among other things, our ability to maintain reimbursement in ex-U.S. markets for our products. There is no assurance that coverage and reimbursement will be available outside of the U.S. for our five approved medicines or any future medicine, and, even if it is available, whether the timing or the level of reimbursement will be sufficient to allow us to market our medicines. Adverse pricing limitations or a delay in obtaining coverage and reimbursement would decrease our future net product revenues and harm our business. Insurance coverage and reimbursement of cell and genetic therapies is uncertain. There is significant uncertainty related to the insurance coverage and reimbursement of cell or genetic therapy products, including gene therapies that are potential one-time treatments (e.g., CASGEVY). It is difficult to predict what third party payors, including U.S. or ex-U.S. governments or private insurance companies, will decide with respect to reimbursement for CASGEVY and the other novel cell and genetic therapies in our pipeline. Additionally, reimbursement rates for cell and genetic therapies approved before ours could create an adverse environment for reimbursement of any therapies we ultimately commercialize. The administration of our products may require procedures for the collection of cells from patients, followed by other procedures either before or after delivery of the cell or genetic therapy. The manner and level at which reimbursement is provided for these services also is important. Inadequate reimbursement for such services may discourage physicians from recommending decisions to recommend any product for which we obtain approval in the future and impair our ability to market or sell the associated cell or genetic therapy. Risks Related to Development and Clinical Testing of Our Products and Product Candidates Our product candidates remain subject to clinical testing and regulatory approval, and our future success is dependent on our ability to successfully develop additional product candidates for both CF and non-CF indications. Our business depends upon the successful development and commercialization of product candidates. These product candidates are in various stages of development and must satisfy rigorous standards of safety and efficacy before they can be 39 approved for sale by the FDA or comparable foreign regulatory authorities. To satisfy these standards, we must allocate resources among our various development programs and must engage in expensive and lengthy testing of our product candidates. Discovery and development efforts for new pharmaceutical and biological products, including new combination therapies, are resource-intensive and may take 10 to 15 years or longer for each product candidate. It is impossible to predict when or if any of our product candidates will prove effective and safe in humans or will receive regulatory approval. Despite our efforts, our product candidates may not: • offer therapeutic or other improvement over existing competitive therapies; • show the level of safety and efficacy, including the level of statistical significance, required by the FDA or other regulatory authorities for approval of a drug or biologic; • meet applicable regulatory standards; • be capable of being produced in commercial quantities at acceptable costs; or • if approved for commercial sale, be successfully marketed as pharmaceutical or biological products. We have recently completed and/or have ongoing or planned clinical trials for several of our product candidates. The strength of our product portfolio and pipeline will depend in large part upon the outcomes of these clinical trials, including those evaluating TRIKAFTA/KAFTRIO and vanzacaftor/tezacaftor/deutivacaftor in younger children with CF, VX-522 in CF, VX-548 in neuropathic pain, and VX-880 and VX-264 in T1D. Failure to advance product candidates through clinical development could impair our ability to ultimately commercialize products, which could materially harm our business and long-term prospects. Results of our clinical trials and findings from our nonclinical studies, including toxicology findings in nonclinical studies conducted concurrently with clinical trials, could lead to abrupt changes in our development activities, including the possible cessation of development activities associated with a particular product candidate or program. For example, in October 2023, we decided not to progress VX-864, a drug candidate for the treatment of AATD, into further development due to non-serious rash events in some patients. Moreover, clinical data are often susceptible to varying interpretations, and many companies that have believed their product candidates performed satisfactorily in clinical trials have nonetheless failed to obtain marketing approval of their product candidate. Furthermore, results from our clinical trials may not meet the level of statistical significance or otherwise provide the level of evidence or safety and efficacy required by the FDA or other regulatory authorities for approval of a product candidate. Finally, clinical trials are expensive and require significant operational resources to implement and maintain. Many companies in the pharmaceutical and biotechnology industries, including our company, have suffered significant setbacks in later-stage clinical trials even after achieving promising results in earlier-stage clinical trials. For example, the results from completed preclinical studies and clinical trials may not be replicated in later clinical trials, and ongoing clinical trials for our product candidates may not be predictive of the results we may obtain in later-stage clinical trials or of the likelihood of approval of a product candidate for commercial sale. In addition, from time to time, we report interim, topline, and preliminary data from our clinical trials, which is based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change. Interim or preliminary data from a clinical trial may not be predictive of final results from the clinical trial and are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment and treatment continues and more patient data become available or as patients from our clinical trials continue other treatments for their disease. Topline data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. As a result, topline data should be viewed with caution until the final data are available. If the interim, topline, or preliminary data that we report differ from actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for, and commercialize, our product candidates may be harmed, which could harm our business, operating results, prospects or financial condition. The ability of third parties to review and/or analyze data from our clinical trials, including as a result of government disclosure, also may increase the risk of commercial confidentiality breaches and result in enhanced scrutiny of our clinical trial results. For example, Clinical Trial Regulation (EU) No. 536/2014, and the EMA policy on publication of clinical data 40 for medicinal products for human use, both permit the EMA to publish clinical information submitted in marketing authorization applications. Third party review and scrutiny could result in public misconceptions regarding our drugs and product candidates. These publications could also result in the disclosure of information to our competitors that we might otherwise deem confidential, which could harm our business. If we are unable to obtain or are delayed in obtaining regulatory approval, we may incur additional costs, experience delays in commercialization, or be unable to commercialize our product candidates. The time required to complete clinical trials and to satisfy the FDA and other countries’ regulatory review processes is uncertain and typically takes many years. Our analysis of data obtained from nonclinical and clinical activities is subject to confirmation and interpretation by regulatory authorities, which could delay, limit or prevent regulatory approval. We also may encounter unanticipated delays or increased costs due to government regulation from future legislation or administrative action or changes in governmental policy during the period of drug development, clinical trials and governmental regulatory review. We may seek a Fast Track, Priority Review, Breakthrough Therapy, and/or RMAT designation for some of our product candidates. Product candidates that receive one or more of these designations may be eligible for, among other things, a priority regulatory review. Each of these designations is within the discretion of the FDA. Accordingly, even if we believe one of our product candidates meets the criteria for Fast Track, Priority Review, Breakthrough Therapy and/or RMAT designation, the FDA may disagree and instead determine not to make such designation. The receipt of one or more of these designations for a product candidate does not guarantee a faster development process, review or approval compared to products developed or considered for approval under conventional FDA procedures and does not assure ultimate approval by the FDA. In addition, even if one or more of our products or product candidates qualifies for Fast Track, Priority Review, Breakthrough Therapy and/or RMAT designation, the FDA may later decide to withdraw such designation if it determines that the product or product candidate no longer meets the conditions for qualification. Any failure to obtain regulatory approvals for a product candidate would prevent us from commercializing that product candidate. Any delay in obtaining required regulatory approvals could materially adversely affect our ability to successfully commercialize a product candidate. Furthermore, any regulatory approval to market a product may be subject to limitations that we do not expect on the indicated uses for which we may market the product. Any such limitations could reduce the size or demand of the market for the drug. We also are subject to numerous foreign regulatory requirements governing the conduct of clinical trials, manufacturing and marketing authorization, pricing and third-party reimbursement. Non-U.S. jurisdictions have different approval procedures than those required by the FDA, and these jurisdictions may impose additional testing requirements for our product candidates. The foreign regulatory approval process includes all of the risks associated with the FDA approval process described above, as well as risks attributable to the satisfaction of foreign requirements. Approval by the FDA does not ensure approval by regulatory authorities outside the U.S. and approval by a foreign regulatory authority does not ensure approval by the FDA. In addition, although the FDA may accept data from clinical trials conducted outside the U.S., acceptance of this data is subject to conditions imposed by the FDA. For example, the clinical trial must be well designed and conducted and performed by qualified investigators in accordance with ethical principles. The trial population also must adequately represent the U.S. population, and the data must be applicable to the U.S. population and U.S. medical practice in ways that the FDA deems clinically meaningful. In addition, while these clinical trials are subject to applicable local laws, FDA acceptance of the data will depend on its determination that the trials also complied with all applicable U.S. laws and regulations. If the FDA does not accept the data from any trial that we conduct outside the U.S., it would likely result in the need for additional trials, which would be costly and time-consuming and delay or permanently halt our development of the applicable product candidate. If clinical trials are prolonged or delayed, our development timelines for the affected development program could be extended, our costs to develop the product candidate could increase and the competitive position of the product candidate could be adversely affected. We cannot predict whether or not we will encounter problems with any of our completed, ongoing or planned clinical trials that will cause us or regulatory authorities to delay or suspend clinical trials, or delay the analysis of data from our completed or ongoing clinical trials. Among the factors that could delay our development programs are: 41 • ongoing discussions with the FDA or comparable foreign authorities regarding the scope or design of our clinical trials and the number of clinical trials we must conduct; • failure or delay in reaching agreement on acceptable terms with prospective contract research organizations (“CROs”) and clinical trial sites; • failure to add or delay in adding a sufficient number of clinical trial sites and obtaining institutional review board or independent ethics committee approval at each clinical trial site; • suspension or termination of clinical trials of product candidates for various reasons, including non-compliance with regulatory requirements; • clinical trial sites deviating from clinical trial protocol or dropping out of a clinical trial; • delays in enrolling volunteers or patients into clinical trials, including as a result of low numbers of patients that meet the eligibility criteria for the trial; • a lower than anticipated retention rate of volunteers or patients in clinical trials; • the need to repeat clinical trials as a result of unfavorable or inconclusive results, unforeseen complications in testing or clinical investigator error; • inadequate supply or deficient quality of product candidate materials or other materials necessary for the conduct of our clinical trials; • unfavorable FDA or foreign regulatory authority inspection and review of a manufacturing facility that supplied clinical trial materials or its relevant manufacturing records or a clinical trial site or records of any clinical or preclinical investigation; • unfavorable or inconclusive scientific results from clinical trials; • serious and unexpected treatment-related side-effects experienced by participants in our clinical trials or by participants in clinical trials being conducted by our competitors to evaluate product candidates with similar mechanisms of action or structures to therapies that we are developing; • favorable results in testing of our competitors’ product candidates, or FDA or foreign regulatory authority approval of our competitors’ product candidates; or • action by the FDA or a foreign regulatory authority to place a clinical hold or partial clinical hold on a trial or compound or deeming the clinical trial conduct as problematic. For planning purposes, we estimate the timing of the accomplishment of various scientific, clinical, regulatory, and other product development goals, which we sometimes refer to as milestones. These milestones may include the commencement or completion of scientific studies and clinical trials and the submission of regulatory filings. From time to time, we publicly announce the expected timing of some of these milestones. All of these milestones are based on a variety of assumptions. The actual timing of these milestones can vary dramatically compared to our estimates, in many cases for reasons beyond our control. If we do not meet these milestones as publicly announced, the commercialization of our products may be delayed and the credibility of our estimates may be adversely affected and, as a result, our stock price may decline. Difficulty in enrolling patients could delay or prevent clinical trials of our product candidates, and ultimately delay or prevent regulatory approval. Our ability to enroll patients in our clinical trials in sufficient numbers and on a timely basis is subject to a number of factors. Clinical trials are expensive and require significant operational resources. Delays in patient enrollment or unforeseen drop-out rates may result in increased costs and longer development times. The enrollment of patients further depends on many factors, including: • the proximity of patients to clinical trial sites; • the size of the patient population, the nature of the protocol, and the design of the clinical trial; 42 • our ability to recruit clinical trial investigators with the appropriate competencies and experience; • the number of other clinical trials ongoing and competing for patients in the same indication; • our ability to obtain and maintain patient consents; • reporting of the preliminary results of any of our clinical trials; • the availability of effective treatments for the relevant disease and eligibility criteria for the clinical trial; • the risk that patients enrolled in clinical trials will drop out of the clinical trials before clinical trial completion; and • factors we may not be able to control, such as current or potential pandemics that may limit patients, principal investigators or staff or clinical site availability. We, our collaborators, the FDA, or other applicable regulatory authorities may suspend clinical trials of a product candidate at any time if we or they believe the healthy volunteers or patients participating in such clinical trials are being exposed to unacceptable health risks or for other reasons. Any such suspension could materially adversely affect the development of a particular product candidate and our business. Enrollment for clinical trials for our cell and gene therapies may face additional and unique challenges and adverse developments associated with these clinical trials could result in action by regulatory bodies, including revised requirements for approval. For cell and genetic therapy programs addressing rare genetic diseases with small patient populations, we may not be able to identify, recruit and enroll a sufficient number of patients, or those with required or desired characteristics, to complete our clinical studies in an adequate and timely manner. Additionally, patients may be unwilling to participate in our clinical trials because of concerns that cell and genetic therapies are unsafe or unethical, negative publicity from adverse safety events in the biotechnology or gene therapy industries, or for other reasons, including competitive clinical studies for similar patient populations. Moreover, adverse developments in clinical trials conducted by others of cell and genetic therapy products or products created using similar technology, or adverse public perception of the field of cell and genetic therapies, may cause the FDA and other regulatory bodies to revise the requirements for approval of any cell or genetic therapy product candidates we may develop or limit the use of products utilizing technologies such as ours, either of which could materially harm our business. Risks Related to Government Regulation If regulatory authorities interpret any of our conduct, including our marketing practices, as being in violation of applicable health care laws, including fraud and abuse laws, laws prohibiting off-label promotion, disclosure laws or other similar laws, we may be subject to civil or criminal penalties. We are subject to health care fraud and abuse laws, such as the FCA and the AKS, and other similar laws and regulations both in the U.S. and in non-U.S. markets. In the U.S., the Federal Anti-Kickback Statute prohibits knowingly and willfully offering, paying, soliciting, receiving or providing remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual, or the ordering, furnishing, arranging for or recommending of an item or service that is reimbursable, in whole or in part, by a federal health care program, such as Medicare or Medicaid. Because of the broad scope of the prohibition, most financial interactions between pharmaceutical manufacturers and prescribers, purchasers, third party payors and patients would be subject to the statute. Although there are a number of statutory exceptions and regulatory safe harbors protecting certain common activities from prosecution, financial interactions must be structured carefully to qualify for protection or otherwise withstand scrutiny. Federal false claims laws, including the FCA, prohibit any person from knowingly presenting, or causing to be presented, a false claim for payment to the federal government, or knowingly making, or causing to be made, a false statement to get a false claim paid. Pharmaceutical companies have been prosecuted under these laws for a variety of alleged promotional and marketing activities, such as providing free product to customers with the expectation that the customers would bill federal programs for the product; reporting to pricing services inflated average wholesale prices that were then used by federal programs to set reimbursement rates; engaging in promotion for uses that the FDA has not approved, known as “off-label” uses, that caused claims to be submitted to Medicaid for those off-label uses; submitting inflated “best price” information to 43 the Medicaid Rebate Program; and certain manufacturing-related violations. The scope of this and other laws may expand in ways that make compliance more difficult and expensive. The FDA and other regulatory agencies closely regulate the post-approval marketing and promotion of products to ensure that they are marketed only for the approved indications and in accordance with the provisions of the approved labeling. Although physicians are generally permitted, based on their medical judgment, to prescribe products for indications other than those approved by the applicable regulatory agency, manufacturers are prohibited from promoting their products for such off-label uses. We market our products to eligible people with CF, SCD, and TDT for whom the applicable product has been approved and provide promotional materials and informational programs to physicians regarding the use of each product in these patient populations. These eligible people do not represent all people with CF, SCD, and TDT. If a regulatory agency determines that our promotional materials, or other activities constitute off-label promotion, it could request that we modify our promotional materials or other activities, conduct corrective advertising, or subject us to regulatory enforcement actions, such as the issuance of a warning or untitled letter, injunction, seizure, civil fines and criminal penalties. It also is possible that other federal, state, or foreign enforcement authorities might take action if they believe that the alleged improper promotion led to the submission and payment of claims for an off-label use, which could result in significant fines or penalties under other statutory authorities, such as laws prohibiting false claims for reimbursement. Even if it is later determined we were not in violation of these laws, we may be faced with negative publicity, incur significant expenses defending our actions, and have to divert significant management resources from other matters. In the U.S., federal and state laws regulate financial interactions between pharmaceutical manufacturers and healthcare providers, require disclosure to government authorities and the public of such interactions, and mandate the adoption of compliance standards or programs. For example, the so-called federal “sunshine law” requires pharmaceutical manufacturers to report annually to CMS payments or other transfers of value made by that entity to physicians, physicians assistants, advanced practice registered nurses, and teaching hospitals. We also have similar reporting obligations with respect to financial interactions throughout the E.U. We expended significant efforts to establish, and are continuing to devote significant resources to maintain and enhance, systems and processes to comply with these regulations. Requirements to track and disclose financial interactions with health care providers and organizations increase government and public scrutiny of these financial interactions. Failure to comply with the reporting requirements could result in significant civil monetary penalties. The sales and marketing practices of our industry have been the subject of increased scrutiny from government authorities in the U.S. and other countries in which we market our products, and we believe that this trend will continue. Many of these laws have not been fully interpreted by the government authorities or the courts, and their provisions are subject to a variety of interpretations. While we have a corporate compliance program which, together with our policies and procedures, is designed to actively identify, prevent and mitigate risk through the implementation of compliance policies and systems and the promotion of a culture of compliance, if we are found not to be in full compliance with these laws and regulations, our business could be materially harmed. We may be subject to penalties, including civil and criminal penalties, damages, fines, exclusion from federal health care programs and/or the curtailment or restructuring of our operations. Even if we successfully defend against government challenge, responding to the challenge may cause us to incur significant legal expenses and divert our management’s attention from the operation of our business. If we fail to comply with our reporting and payment obligations under the Medicaid Drug Rebate Program or other governmental pricing programs in the U.S., we could be subject to additional reimbursement requirements, penalties, sanctions, and fines that could have a material adverse effect on our business, financial condition, results of operations and growth prospects. We participate in the Medicaid Drug Rebate Program, the 340B program, and a number of other federal and state government pricing programs in the U.S. to obtain coverage for our products by certain government health care programs. These programs require us to pay rebates or provide discounts to certain government payors or private purchasers in connection with our products when dispensed to beneficiaries of these programs. In some cases, such as with the Medicaid Drug Rebate Program, the rebates are based on pricing and rebate calculations that we report on a monthly and quarterly basis to the government agencies that administer the programs. The terms, scope and complexity of these government pricing programs change frequently. For example, regulations finalized in December 2020 created an alternative Medicaid rebate formula for “line extensions” of oral solid dosage forms. Moreover, in December 2020, CMS finalized changes to Medicaid Drug Rebate Program pricing calculations regarding the provision of co-payment assistance to patients that may be impacted by so-called accumulator programs operated by private insurers or pharmacy benefit managers. The portion of this rule 44 dealing with manufacturer co-payment assistance was struck down by the U.S. District Court for the District of Columbia in May 2022 (and the deadline for an appeal has lapsed). In May 2023, CMS issued a proposed rule, which would withdraw the challenged accumulator adjustment regulations, consistent with the Court’s order. The rule also proposes significant changes, which, if finalized, could have an impact on our Medicaid rebate liability, impact our participation in the Medicaid Drug Rebate Program, and impose new reporting requirements. Additionally, the expansion of the 340B Drug Discount Program through the ACA has increased the number of purchasers who are eligible for significant discounts on branded drugs. These and future changes to government pricing programs, laws, and regulations may have a material adverse impact on our revenue and operations. We also may have reimbursement obligations or be subject to penalties if we fail to provide timely and accurate information to the government, pay the correct rebates, or offer the correct discounted pricing. Changes to the price reporting or rebate requirements of these programs would affect our obligations to pay rebates or offer discounts. For example, the removal of the current statutory 100% of Average Manufacturer Price per-unit cap on Medicaid rebate liability for single source and innovator multiple source drugs, effective as of January 1, 2024, under the American Rescue Plan Act of 2021 may affect the amount of rebates paid on prescription drugs under Medicaid and the prices that are required to be charged to covered entities under the 340B Drug Discount Program. Additionally, the IRA requires manufacturers to pay rebates for Medicare Part B and Part D drugs with prices that increase faster than the rate of inflation. Responding to current and future changes to these and other Medicaid Drug Rebate Program requirements may reduce our net revenues and the complexity of compliance, will be time-consuming, and could have a material adverse effect on our results of operations. If our processes and systems are not compliant with regulatory requirements, we could be subject to restrictions on marketing our products or could be delayed in submitting regulatory filings seeking approvals for our product candidates. We have a number of regulated processes and systems that are required both prior to and following approval of our drugs and product candidates. These processes and systems are subject to continual review and periodic inspection by the FDA and other regulatory bodies. In addition, the clinical research organizations and other third parties that we work with in our non-clinical studies and clinical trials and our oversight of such parties are subject to similar reviews and periodic inspection by the FDA and other regulatory bodies. If compliance issues are identified at any point in the development and approval process, we may experience delays in filing for regulatory approval for our product candidates, or delays in obtaining regulatory approval after filing, if at all. Any later discovery of previously unknown problems or safety issues with approved drugs or manufacturing processes, or failure to comply with regulatory requirements, may result in restrictions on such drugs or manufacturing processes, withdrawal of drugs from the market, the imposition of civil or criminal penalties or a refusal by the FDA and/or other regulatory bodies to approve pending applications for marketing approval of new drugs or supplements to approved applications, any of which could have a material adverse effect on our business. In addition, we are party to agreements that transfer responsibility for complying with specified regulatory requirements, such as filing and maintenance of marketing authorizations and safety reporting or compliance with manufacturing requirements, to our collaborators and third-party manufacturers. If our collaborators or third-party manufacturers do not fulfill these regulatory obligations, any drugs for which we or they obtain approval may be subject to later restrictions on manufacturing or sale, which could have a material adverse effect on our business. The regulatory approval process for our cell or genetic therapies involves additional consultations with regulatory agencies, costs, and potentially longer timelines as compared to those for small molecules. As we advance our cell and genetic therapy product candidates, we will be required to consult with various regulatory authorities, and we must comply with all applicable laws, rules, and regulations, which may change from time to time, including during the course of development of our cell and genetic therapy product candidates. If we fail to do so, we may be required to delay or discontinue the clinical development of certain of our cell and genetic therapy product candidates. These additional processes may result in a review and approval process that is longer than we otherwise would have expected. Even if we comply with applicable laws, rules, and regulations, and even if we maintain close coordination with the applicable regulatory authorities with oversight over our cell and genetic therapy product candidates, our development programs may experience delays or fail to succeed. Delay or failure to obtain, or unexpected costs in obtaining, the regulatory approval necessary to bring a potential cell or genetic therapy product to market would materially adversely affect our business, financial condition, results of operations and prospects. The regulatory approval process and clinical trial requirements for cell and genetic therapies can be more expensive and take longer than for other, better known or more extensively studied product candidates, and regulatory requirements 45 governing cell and genetic therapy products have changed frequently and may continue to change in the future. For example, the FDA established the Office of Tissues and Advanced Therapies within its Center for Biologics Evaluation and Research (“CBER”) to consolidate the review of cell therapies and related products, and the Cellular, Tissue and Gene Therapies Advisory Committee to advise CBER on its review. These and other regulatory review agencies, committees and advisory groups, and the requirements and guidelines they promulgate, may lengthen the regulatory review process, require us to perform additional preclinical studies or clinical trials, increase our development costs, lead to changes in regulatory positions and interpretations, delay or prevent approval and commercialization of these treatment candidates or lead to significant post-approval limitations or restrictions. We are subject to various and evolving laws and regulations governing the privacy and security of personal data, and our failure to comply could adversely affect our business, result in fines and/or criminal penalties, and damage our reputation. We are subject to data privacy and security laws and regulations in various jurisdictions that apply to the collection, storage, use, sharing, and security of personal data, including health information, and impose significant compliance obligations. In addition, numerous other federal and state laws, including state security breach notification laws, state health information privacy laws and federal and state consumer protection laws, govern the collection, use, disclosure and security of personal information. The legislative and regulatory landscape for privacy and data protection continues to evolve, and there has been an increasing focus on privacy and data protection issues with the potential to affect our business. For example, the E.U. General Data Protection Regulation (“GDPR”) went into effect in 2018 and has imposed new obligations on us with respect to our processing of personal data and the cross-border transfer of such data, including higher standards of obtaining consent, more robust transparency requirements, data breach notification requirements, requirements for contractual language with our data processors, and stronger individual data rights. Different E.U. member states have interpreted the GDPR differently and many have imposed additional requirements, which add to the complexity of processing personal data in the E.U. The GDPR also imposes strict rules on the transfer of personal data to countries outside the E.U., including the U.S. and the U.K., and permits data protection authorities to impose large penalties for violations of the GDPR. The GDPR rules related to cross border data transfers continue to evolve based on E.U. court decisions and regulator guidance, which presents certain practical challenges to compliance. Regulators also continue to focus enforcement efforts on behavioral advertising and other online tracking technologies commonly used by companies. Compliance with these evolving rules is challenging, as country specific guidance and rules are continually changing and limited alternatives currently exist in the market. Compliance with the GDPR is a rigorous and time-intensive process that may increase our cost of doing business or require us to change our business practices, and despite those efforts, there is a risk that we may be subject to fines and penalties, litigation, and reputational harm in connection with any activities falling within the scope of the GDPR. In the U.S., California has passed the California Consumer Privacy Act (the “CCPA”), which went into effect on January 1, 2020. In November 2020, California also passed the California Privacy Rights Act (the “CPRA”), which expands and builds upon the consumer privacy rights of the CCPA. The CPRA came into effect January 1, 2023. Certain other states have also enacted legislation governing the protection of personal data and several other states and the federal government are actively considering similar proposed legislation. A number of other states have also introduced privacy legislation, with some focusing specifically on health data. Additionally, Brazil passed the General Data Protection Law, which went into effect in August 2020. While we continue to address the implications of the new data privacy regulations, data privacy remains an evolving landscape at both the domestic and international level, with new regulations coming into effect and continued legal challenges. Each law is also subject to various interpretations by courts and regulatory agencies, creating even more uncertainty. While we have a global privacy program that addresses such laws and regulations, our efforts to comply with the evolving data protection rules may be unsuccessful. We must devote significant resources to understanding and complying with the changing landscape in this area. Failure to comply with data protection laws may expose us to risk of enforcement actions taken by data protection authorities, private rights of action in some jurisdictions, and potential significant penalties if we are found to be non-compliant. Failure to comply with the GDPR and applicable national data protection laws of European Economic Area member states could lead to fines of up to €20,000,000 or up to 4% of the total worldwide annual revenue of the preceding financial year, whichever is higher. Some of these laws and regulations also carry the possibility of criminal sanctions. For example, while we are not directly subject to the Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act (“HIPAA”), we could be subject to penalties, including criminal penalties if we knowingly obtain or disclose individually identifiable health information from a HIPAA-covered health care provider or 46 research institution that has not complied with HIPAA’s requirements for disclosing such information. In addition, the commercialization of cell and gene therapies requires the collection and processing of a greater amount of personal data than traditional therapies, potentially increasing risk. Furthermore, the number of government investigations related to data security incidents and privacy violations, with a specific focus on online data sharing, continue to increase and government investigations typically require significant resources and generate negative publicity, which could harm our business and our reputation. The COVID-19 pandemic has added further complexity to the processing of personal data. For example, safety measures and government health regulations intended to protect our employees, contractors, and other visitors to our sites may require the collection of certain personal data. Although we are focused on ensuring that personal data is properly protected, our efforts may be unsuccessful and we could unintentionally be subject to unauthorized access or disclosure of such personal data. If we do not comply with laws regulating the protection of the environment and health and human safety, our business could be adversely affected. Our research and development efforts involve the regulated use of hazardous materials, chemicals, and various controlled and radioactive compounds. Although we believe that our safety procedures for handling and disposing of these materials comply with the standards prescribed by state, federal and foreign regulations, the risk of loss of, or accidental contamination or injury from, these materials cannot be eliminated. If an accident occurs, we could be held liable for resulting damages, which could be substantial. We also are subject to numerous environmental, health, and workplace safety laws and regulations, including those governing laboratory procedures, exposure to blood-borne pathogens, and the handling of biohazardous materials. Although we maintain workers’ compensation insurance to cover us for costs we may incur due to injuries to our employees resulting from the use of these materials, this insurance may not provide adequate coverage against potential liabilities. We maintain insurance to cover pollution conditions or other extraordinary or unanticipated events relating to our use and disposal of hazardous materials that we believe is appropriate based on the small amount of hazardous materials we generate. Additional federal, state and local laws and regulations affecting our operations may be adopted in the future. We may incur substantial costs to comply with, and substantial fines or penalties if we violate, any of these laws or regulations. Risks Related to Supply, Manufacturing and Reliance on Third Parties We depend on third-party manufacturers and our internal capabilities to manufacture our products and the materials we require for our clinical trials. We rely on third party logistics providers to manage our shipments globally. We may not be able to maintain our third-party relationships and could experience supply disruptions outside of our control. We rely on a worldwide network of third-party manufacturers and our internal capabilities, including our own manufacturing facilities in Boston, to manufacture product candidates for clinical trials as well as our medicines for commercial use. While we have developed internal capabilities to supply product candidates for use in our clinical trials as well as our products for commercial sale, a majority of the manufacturing steps needed to produce our medicines, product candidates, and drug products are performed through a third-party manufacturing network. The manufacture of our products and product candidates can be complex, which may require lengthy technology transfers between us and the third parties on which we rely. We expect that we will continue to rely on third parties to meet our commercial supply needs and a significant portion of our clinical supply needs for the foreseeable future. We could be subject to significant supply interruptions as a result of disruptions to third party or our internal manufacturing capabilities. Our supply chain for sourcing raw materials and manufacturing drug product ready for distribution, including obtaining necessary supplies, is a multi-step international endeavor. Third-party contract manufacturers, including some in China, perform different parts of our manufacturing process. Contract manufacturers may supply us with raw materials, convert these raw materials into drug substance and/or convert the drug substance into final dosage form. Third parties are used for packaging, warehousing and distribution of products. The manufacturing and logistics for cell and genetic therapies are highly complex, short lead time operations that require partnership with an extensive network of third parties to deliver product. These manufacturing and logistics operations require significant investment by us to secure capacity at third parties with expertise to meet our requirements. Even with the relevant experience and expertise, manufacturers of cell and genetic therapy products often encounter difficulties in production, including difficulties with production costs and yields, quality control, and compliance with federal, state and 47 foreign regulations. There are many risks that could result in delays and additional costs, including the need to hire and train qualified employees and obtain access to necessary equipment and third-party technology. This capacity may be limited by the number of other clinical trials and commercial manufacturing ongoing for other companies seeking similar support. If third parties are unwilling or unable to meet our requirements, we could experience supply disruptions outside of our control. Additionally, manufacturing facilities, both foreign and domestic, are subject to inspections by the FDA and other U.S. and foreign government authorities. Although we actively engage with regulatory authorities, the timing of regulatory approvals for each of these facilities may be delayed for a variety of reasons. We may experience supply disruptions if regulatory agencies are unable to inspect the manufacturing facilities on which we rely. In addition, we and the third parties with whom we engage are required to maintain compliance with quality regulations globally. An inability to maintain compliance with such regulations, including cGMP requirements, could cause significant disruptions to our business and operations. Additionally, establishing, managing and expanding our global manufacturing and supply chain requires a significant financial commitment and the creation and maintenance of our numerous third-party contractual relationships. We may not be able to agree on contractual terms with third parties as needed for manufacturing of our products. Although we attempt to manage the business relationships with our partners, we could be subject to supply disruptions outside of our control. Supply disruptions may result from a number of factors, including shortages in product raw materials, labor or technical difficulties, regulatory inspections or restrictions, shipping or customs delays, general global supply chain disruptions, or any other performance failure by us or any third-party manufacturer on which we rely. Additionally, unfavorable geopolitical events or situations could affect our ability to interact with or conduct business with specific vendors within our global supply network, or could prevent or delay the transportation of supplies or products to their planned destination. Any such disruptions could disrupt sales of our products and/or the timing or advancement of our clinical trials. If we or our third-party manufacturers become unable or unwilling to continue manufacturing product and we are not able to promptly identify another manufacturer, we could experience a disruption in the commercial supply of our then-marketed medicines, which would have a significant effect on patients, our business, and our product revenues. Similarly, a disruption in the clinical supply of product candidates could delay the completion of clinical trials and affect timelines for regulatory filings. We have a limited number of critical steps in our manufacturing process that are single sourced, including for commercialized products. To ensure the stability of our supply chains, we continue to develop alternative suppliers for our manufacturing processes. However, there can be no assurance that we will be able to establish and maintain additional manufacturers or capacity for all of our product candidates and products on a timely basis or at all. In the course of providing its services, a contract manufacturer may develop process technology related to the manufacture of our products or product candidates that the manufacturer owns, either independently or jointly with us. This would increase our reliance on that manufacturer or require us to obtain a license from that manufacturer to have our products or product candidates manufactured by other suppliers utilizing the same process. We rely on third parties to conduct pre-clinical work, clinical trials and other activities, and those third parties may not perform satisfactorily, including failing to meet established deadlines for the completion of such studies and/or trials or failing to satisfy regulatory requirements. We rely on third parties such as CROs to help manage certain pre-clinical work and our clinical trials and on medical institutions, clinical investigators, and clinical research organizations such as the Therapeutic Development Network, which is primarily funded by the Cystic Fibrosis Foundation, to assist in the design and review of, and to conduct our clinical trials, including enrolling qualified patients. In addition, we engage third party contractors to support numerous other research, commercial and administrative activities. Our reliance on these third parties for clinical development activities reduces our control over these activities but does not relieve us of our responsibilities. For example, we remain responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigational plan and protocols for the clinical trial. Moreover, the FDA requires us to comply with standards, commonly referred to as good laboratory practices and good clinical practices, for conducting, recording and reporting the results of pre-clinical and clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of trial participants are protected. Such standards, particularly with respect to newer cell and genetic therapies, will continue to evolve and subject us and third parties to new or changing requirements. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may be 48 required to replace them. Although we believe that there are a number of other third-party contractors we could engage to continue the activities, it may result in a delay of the affected clinical trial, drug development program or applicable activity. If clinical trials are not conducted in accordance with our contractual expectations or regulatory requirements, action by regulatory authorities might significantly and adversely affect the conduct or progress of these clinical trials or in specific circumstances might result in a requirement that a clinical trial be redone. Accordingly, our efforts to obtain regulatory approvals for and commercialize our product candidates could be delayed. In addition, failure of any third-party contractor to conduct activities in accordance with our expectations, could adversely affect the relevant research, development, commercial or administrative activity. Risks Related to Business Development Activities Our ability to execute on our long-term strategy depends in part on our ability to engage in transactions and collaborations with other entities that add to our pipeline or provide us with new commercial opportunities. To achieve our long-term business objectives, we seek to license or acquire products, product candidates and other technologies that have the potential to complement our ongoing research and development efforts, access emerging technologies and license or acquire pipeline assets. These transactions may be similar to prior transactions, may be structured differently than prior transactions, or may involve larger transactions or later-stage assets. We have faced and will continue to face significant competition for the acquisition of rights to these types of products, product candidates and other technologies from a variety of other companies, some of which have significantly more financial resources and experience in business development activities than we have. In addition, non-profit organizations may be willing to provide capital to the companies that control additional products, product candidates or technologies, which may provide incentives for companies to advance these products, product candidates or technologies independently. Also, the cost of acquiring, in-licensing or otherwise obtaining rights to such products, product candidates or other technologies has grown dramatically in recent years and may be at levels that we cannot afford or that we believe are not justified by market potential. As a result, we may not be able to acquire, in-license or otherwise obtain rights to additional products, product candidates or other technologies on acceptable terms or at all. We face risks in connection with existing and future collaborations with respect to the development, manufacture and commercialization of our products and product candidates. The risks that we face in connection with our current collaborations, including with CRISPR, Moderna, and Entrada, and any future collaborations, include the following: • Collaborators may develop and commercialize, either alone or with others, drugs or therapies that are similar to or competitive with the products or product candidates that are the subject of their collaborations with us. • Disagreements with collaborators, including disagreements over proprietary rights, contract interpretation or the preferred course of development, might cause delays or termination of the research, development or commercialization of product candidates, might lead to additional responsibilities or costs for us with respect to product candidates, or might result in litigation or arbitration. Any such disagreements would divert management attention and resources and would be time-consuming and expensive. • Collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential litigation. • Collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability. • Investigations and/or compliance or enforcement actions against a collaborator, which may expose us to indirect liability as a result of our partnership with such collaborator. If a collaborator were to be involved in a business combination with a third party, it might de-emphasize or terminate the development or commercialization of any product candidate licensed to it by us. If one of our collaborators terminates its agreement with us, we may find it more difficult to attract new collaborators and our perception in the business and financial communities could be harmed. 49 Moreover, as part of our ongoing strategy, we may seek additional collaborative arrangements for certain of our development programs and/or seek to expand existing collaborations to cover additional commercialization and/or development activities. Whether we reach a definitive agreement for a collaboration will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors. Those factors may include the design or results of clinical trials, the likelihood of approval by the FDA, EMA or other regulatory authorities, the potential market for the subject product candidate, the costs and complexities of manufacturing and delivering such product candidate to patients, the potential of competing products, the existence of uncertainty with respect to our ownership of the applicable intellectual property, which can exist if there is a challenge to such ownership without regard to the merits of the challenge, and industry and market conditions generally. No assurance can be given that any efforts we make to seek additional collaborative arrangements will be successfully completed on a timely basis or at all. We may not realize the anticipated benefits of existing or future acquisitions of businesses or technologies, and the integration following any such acquisition may disrupt our business and management. Effectively integrating acquired businesses, technologies and exclusive licenses is challenging. We may not realize the benefits anticipated from our external innovation transactions. Achieving the anticipated benefits of any transaction and successfully integrating acquired businesses or technologies involves a number of risks, including: • failure to successfully develop and commercialize the acquired products, product candidates or technologies or to achieve other strategic objectives; • delays or inability to progress preclinical programs into clinical development or unfavorable data from clinical trials evaluating the acquired or licensed product or product candidates; • difficulty in integrating the products, product candidates, technologies, business operations and personnel of an acquired asset or company; • disruption of our ongoing business and distraction of our management and employees from daily operations or other opportunities and challenges; • the potential loss of key employees of an acquired company; • entry into markets in which we have no or limited direct prior experience or where competitors in such markets have stronger market positions; • potential failure of the due diligence processes to identify significant problems, liabilities or challenges of an acquired company, or acquired or licensed products, product candidate or technology, including problems, liabilities or challenges with respect to intellectual property, clinical or non-clinical data, safety, accounting practices, employee, or third-party relations and other known and unknown liabilities; • liability for activities of the acquired company or licensor before the acquisition or license, including intellectual property infringement claims, violations of laws, commercial disputes, tax liabilities, and other known and unknown liabilities; • exposure to litigation or other claims in connection with, or inheritance of claims or litigation risk as a result of an acquisition or license, including claims from terminated employees, customers, former equity holders or other third parties; and • difficulties in the integration of the acquired company’s departments, systems, including accounting, human resource and other administrative systems, technologies, books and records, and procedures, as well as in maintaining uniform standards, controls, including internal control over financial reporting required by the Sarbanes-Oxley Act of 2002 and related procedures and policies. Acquisitions, licensing arrangements and other strategic transactions are inherently risky, and ultimately, if we do not complete an announced acquisition, collaboration or strategic transaction or integrate an acquired or licensed asset, business or technology successfully and in a timely manner, we may not realize the anticipated benefits of the strategic transaction. We may later incur impairment charges related to assets acquired in any such transaction. Even if we achieve the long- 50 term benefits associated with our strategic transactions, our expenses and short-term costs may increase materially and adversely affect our liquidity and short-term net income. Future strategic transactions could result in increased operating expenses, potentially dilutive issuances of equity securities, the incurrence of debt, the creation of contingent liabilities, impairment expenses related to goodwill, or impairment or amortization expenses related to other intangible assets, all of which could harm our financial condition. Risks Related to Intellectual Property If our patents do not protect our products or our products infringe third-party patents, we could be subject to litigation which could result in injunctions preventing us from selling our products, substantial damages, or circumvention of our patents by third parties. We own and/or control numerous issued patents and pending patent applications in the U.S., as well as counterparts in other countries. Our success will depend, in significant part, on our ability to obtain and defend U.S. and foreign patents covering our products, their uses and our processes, to preserve our trade secrets and to operate without infringing the proprietary rights of third parties. We cannot be certain that any patents will issue from our pending patent applications or, even if patents issue or have issued, that the issued claims will provide us with adequate protection against competitive products or otherwise be commercially valuable. U.S. and foreign patent applications typically are maintained in confidence for a period of time after they initially are filed with the applicable patent office. Consequently, we cannot be certain that we were the first to file patent applications on our products or product candidates or their use. If a third-party has an earlier filed patent application relating to our product or product candidates, their uses, or a similar invention, we may be unable to obtain an issued patent from our application. Due to evolving legal standards relating to the patentability, validity, and enforceability of patents covering pharmaceutical and biotechnological inventions and the scope of claims made under these patents, our ability to obtain, maintain and enforce patents is uncertain and involves complex legal and factual questions. The issuance of a patent is not conclusive as to its inventorship, scope, validity, or enforceability. Our patents may be challenged by third parties and certain of our patents have been challenged. This could result in the patent being deemed invalid, unenforceable or narrowed in scope, or the third party may circumvent any such issued patents, including through compulsory licensing mechanisms. Also, our pending patent applications may not issue, and we may not receive any additional patents. Our patents or patents we license might not contain claims that are sufficiently broad to prevent others from developing competing products. For instance, issued patents, or patents that may issue in the future, (i) relating to our small molecules may be limited to a particular molecule or molecules and may not cover similar molecules that have similar clinical properties, and (ii) relating to cell or genetic therapies may not cover similar technologies that would allow competitors to achieve similar results. Consequently, our competitors may independently develop competing products that do not infringe our patents or other intellectual property. The laws of many foreign jurisdictions do not protect intellectual property rights to the same extent as in the U.S. and many companies in our segment of the pharmaceutical industry have encountered significant difficulties in protecting and defending such rights in foreign jurisdictions. If we encounter such difficulties in protecting or are otherwise precluded from effectively protecting our intellectual property rights in foreign jurisdictions, including through compulsory licensing, our business could be substantially harmed. Because of the extensive time required for the discovery, development, testing and regulatory review of product candidates, it is possible that a patent may expire before a product candidate can be commercialized, or a patent may expire or remain in effect for only a short period following commercialization of such product candidate. This would result in a minimal or non-existent period of patent exclusivity. If our product candidates are not commercialized significantly ahead of the expiration date of any applicable patent, or if we have no patent protection on such product candidates, then, to the extent available we would rely on other forms of exclusivity, such as data exclusivity or orphan drug exclusivity. Uncertainty over intellectual property in the pharmaceutical and biotechnology industry has been the source of litigation and other disputes that are inherently costly and unpredictable. There is considerable uncertainty within our industry about the validity, scope, and enforceability of many issued patents in the U.S. and elsewhere in the world, and, to date, the law and practice remains in flux both in the agencies that grant 51 patents and in the courts. We cannot currently determine the ultimate scope and validity of patents which may be granted to third parties in the future or which patents might be asserted as being infringed by the manufacture, use and sale of our products. There has been, and we expect that there may continue to be, significant litigation in the pharmaceutical industry regarding patents and other intellectual property rights. Litigation, arbitrations, administrative proceedings, and other legal actions with private parties and governmental authorities concerning patents and other intellectual property rights may be protracted, expensive, and distracting to management. Competitors may sue us as a way of delaying the introduction of our products or to remove our products from the market. Any litigation, including litigation related to Abbreviated New Drug Applications (“ANDA”), litigation related to 505(b)(2) applications, interference proceedings to determine priority of inventions, derivations proceedings, inter partes review, oppositions to patents in foreign countries, litigation against our collaborators or similar actions, may be costly and time consuming and could harm our business. We expect that litigation may be necessary in some instances to determine the validity and scope of certain of our proprietary rights. Litigation may be necessary in other instances to determine the validity, scope or non-infringement of certain patent rights claimed by third parties to be pertinent to the manufacture, use or sale of our products. Ultimately, the outcome of such litigation could adversely affect the validity and scope of our patent or other proprietary rights, hinder our ability to manufacture and market our products, or result in the assessment of significant monetary damages against us that may exceed amounts, if any, accrued in our consolidated financial statements. On July 24, 2020, we filed a lawsuit against Sun Pharmaceutical Industries Limited (“Sun”) in the U.S. District Court for the District of Delaware alleging infringement of our U.S. Patent No. 10,646,481 (“the ’481 patent”). The lawsuit follows our receipt of a Notice Letter on June 11, 2020, advising that Sun had submitted an ANDA to the FDA seeking approval to manufacture and market a generic version of the 150 mg tablet of KALYDECO in the U.S. The Notice Letter indicated that Sun submitted a “Paragraph IV” certification to the FDA in which Sun asserts that the ’481 patent is invalid or would not be infringed by Sun’s generic product. The ’481 patent, which expires on August 13, 2029, was issued on May 12, 2020, and listed in the Orange Book with respect to the KALYDECO tablet on June 1, 2020. By letter dated June 5, 2023, Sun notified us that it had amended its ANDA to include a Paragraph IV certification with respect to our U.S. Patent No. 11,564,916 (“the ’916 patent”), which issued on January 31, 2023, is related to the ’481 patent and was listed in the FDA’s Orange Book on February 28, 2023. On June 16, 2023, we filed a lawsuit against Sun in the U.S. District Court for the District of Delaware alleging infringement of the ’916 patent. In December 2023, we settled the case against Sun. The terms of the settlement are confidential. On July 13, 2021, we filed a lawsuit against Lupin Limited and Lupin Pharmaceuticals, Inc. (collectively, “Lupin”) in the U.S. District Court for the District of Delaware alleging infringement of the ’481 patent. The lawsuit follows our receipt of a Notice Letter on June 2, 2021, advising that Lupin had submitted an ANDA to the FDA seeking approval to manufacture and market a generic version of the 150 mg tablet of KALYDECO in the U.S. The Notice Letter indicated that Lupin submitted a “Paragraph IV” certification to the FDA in which Lupin asserts that the ’481 patent is invalid or would not be infringed by Lupin’s generic product. By letter dated April 25, 2023, Lupin notified us that it had amended its ANDA to include a Paragraph IV certification with respect to the ’916 patent. On May 26, 2023, we filed a lawsuit against Lupin in the U.S. District Court for the District of Delaware alleging infringement of the ’916 patent. In November 2023, we settled the case against Lupin. The terms of the settlement agreement are confidential. On June 2, 2022, we filed a lawsuit against Aurobindo Pharma Limited (“Aurobindo”) in the U.S. District Court for the District of Delaware alleging infringement of the ’481 patent. The lawsuit follows our receipt of a Notice Letter on April 21, 2022, advising that Aurobindo had submitted an ANDA to the FDA seeking approval to manufacture and market a generic version of the 150 mg tablet of KALYDECO in the U.S. The Notice Letter indicated that Aurobindo submitted a “Paragraph IV” certification to the FDA in which Aurobindo asserts that the ’481 patent is invalid or would not be infringed by Aurobindo’s generic product. By letter dated April 12, 2023, Aurobindo notified us that it had amended its ANDA to include a Paragraph IV certification with respect to the ’916 patent. On May 26, 2023, we filed a lawsuit against Aurobindo in the U.S. District Court for the District of Delaware alleging infringement of the ’916 patent. In November 2023, we settled the case against Aurobindo. The terms of the settlement agreement are confidential. On July 22, 2022, we filed a lawsuit against Lupin in the U.S. District Court for the District of Delaware alleging infringement of the ’481 patent and U.S. Patent Nos. 8,883,206 (“the ’206 patent”), 10,272,046 (“the ’046 patent”), and 11,147,770 (“the ’770 patent”). The lawsuit follows our receipt of a Notice Letter on June 9, 2022, advising that Lupin had submitted an ANDA to the FDA seeking approval to manufacture and market a generic version of KALYDECO granules in 52 the U.S. The Notice Letter indicated that Lupin submitted a “Paragraph IV” certification to the FDA in which Lupin asserts that the ’481 patent, the ’206 patent, and the ’046 patent are invalid or would not be infringed by Lupin’s generic product. By letter dated April 25, 2023, Lupin notified us that it had amended its ANDA to include a Paragraph IV certification with respect to the ’916 patent. On May 26, 2023, we filed a lawsuit against Lupin in the U.S. District Court for the District of Delaware alleging infringement of the ’916 patent. On October 11, 2023, U.S. Patent No. 11,752,106 (the “’106 patent”) was listed in the Orange Book as covering KALYDECO granules. We have not yet received notification that Lupin has submitted a “Paragraph IV” certification for the ’106 patent. Other than the ’770 patent, which was listed in the Orange Book on April 14, 2022, Lupin does not appear to challenge our other U.S. patents covering KALYDECO granules, the last of which expires on August 5, 2027. Therefore, regardless of the outcome of the litigation, Lupin cannot receive final approval of its ANDA before that date. A scheduling order has been entered by the court and trial is set for April 2025. We intend to vigorously enforce our intellectual property rights relating to KALYDECO granules and the ’481, ’206, ’046, ’770, ’916, and ’106 patents. CRISPR has licensed certain rights to a worldwide patent portfolio that covers various aspects of the CRISPR/Cas9 editing platform technology including, for example, compositions of matter and methods of use in targeting or cutting DNA from Dr. Emmanuelle Charpentier, one of the named inventors of this patent portfolio. The patent portfolio also has named inventors who assigned their rights to the CVC Group. For example, in connection with their collaboration, Novartis and Intellia Therapeutics, Inc. have reportedly obtained a license to this patent portfolio in certain fields. Both the CVC Group and Broad have obtained granted patents that purport to cover aspects of CRISPR/Cas9 editing platform technology. Patents and patent applications in this patent portfolio have been the subject of numerous contentious proceedings in the U.S., Europe, and other jurisdictions, including interference proceedings in the USPTO between the CVC Group and (separately) Broad, Sigma-Aldrich and ToolGen. On February 28, 2021, the USPTO issued a decision in Interference No. 106, 115, concluding that Broad invented certain applications of CRISPR/Cas9 technology in eukaryotic cells before the CVC Group. The CVC Group has appealed the decision to the U.S. Court of Appeals for the Federal Circuit. If the decision is upheld on appeal (including a potential subsequent appeal to the Supreme Court), Broad would maintain its granted patents directed to those applications CRISPR/Cas9 technology in eukaryotic cells, and the CVC Group’s pending patent applications directed to that subject matter would not proceed to grant. We can give no assurances to the ultimate outcome of these proceedings or the disputes between the CVC Group and Broad, Sigma-Aldrich and ToolGen. In December 2023, we entered into an agreement with Editas, providing us a non-exclusive sublicense to certain patents relating to CRISPR/Cas9 technology owned by Broad and Harvard, which are licensed to Editas. In addition to Broad, other third parties have filed patent applications claiming CRISPR/Cas9-related inventions and may allege that they invented one or more of the inventions claimed by the CVC Group. Thus, the USPTO may, in the future, declare an interference between certain CVC Group patent applications and one or more patent applications. Third parties could seek to assert their patents, if issued, against us based on our CRISPR/Cas9-based activities, including commercialization. Defense of these claims, regardless of their merit, could involve substantial litigation expense and could result in a substantial diversion of management and other employee resources from our business. In the event of a successful claim of infringement against us, we may have to pay substantial damages, obtain one or more licenses from third parties, pay royalties or redesign our infringing products, which may be impossible or require substantial time and monetary expenditure. In that event, we could be unable to further develop and commercialize CASGEVY or other products that we may develop using the CRISPR/Cas9 technology we license from CRISPR. To the extent that valid present or future third-party patents or other intellectual property rights cover our products, product candidates or technologies, we or our strategic collaborators may seek licenses or other agreements from the holders of such rights to avoid or settle legal claims. Such licenses may not be available on acceptable terms, which may hinder our ability to, or prevent us from being able to, manufacture and market our products. Payments under any licenses that we are able to obtain would reduce our profits derived from the covered products. We may be subject to claims by third parties asserting that our employees or we have misappropriated their intellectual property, or claiming ownership of what we regard as our own intellectual property. Many of our employees were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although we try to ensure that our employees do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that these employees or we have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such employee’s former employer. Litigation may be necessary to defend against these claims. 53 In addition, while it is our policy to require our employees and contractors who may be involved in the development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who in fact develops intellectual property that we regard as our own. Our and their assignment agreements may not be self-executing or may be breached, and we may be forced to bring claims against third parties, or defend claims they may bring against us, to determine the ownership of what we regard as our intellectual property. If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to management. Risks Related To Our Operations If we fail to scale our operations to accommodate growth, our business may suffer. We have expanded and are continuing to expand our global operations and capabilities, which has placed, and will continue to place, significant demands on our management and our operational, research and development and financial infrastructure. To effectively manage our business, we need to continue to adapt as our business grows in scale and complexity across multiple disease states, modalities, and geographies, including by: • implement and clearly communicating our corporate-wide strategies; • enhancing our operational and financial infrastructure, including expansion of our controls over data, records and information; • enhancing our operational, administrative, financial and management processes, including our cross-functional decision-making processes and our budget prioritization systems; • effectively growing, training and managing our global employee base; and • expanding our compliance and legal resources. A variety of risks associated with operating in foreign countries could materially adversely affect our business. We have expanded our international operations over the past several years to market our medicines and expand our research and development capabilities. New laws and industry codes in the E.U. and elsewhere have expanded transparency requirements regarding payments and transfers of value to healthcare professionals, requirements surrounding patient-level clinical trial data, the protection of personal data and increased sanctions for violations. Collectively, our expansion and these new requirements are adding to our compliance costs and potentially exposes us to sanctions in the event of an infringement or failure to report in these jurisdictions. In addition, a significant portion of our commercial supply chain, including sourcing of raw materials and manufacturing, is located in China and the E.U. Consequently, we are, and will continue to be, subject to risks related to operating in foreign countries, including risks relating to intellectual property protections and business interruptions. These risks are increased with respect to countries such as China that have substantially different local laws and business practices and weaker protections for intellectual property. Risks associated with operating a global biotechnology company include: • differing regulatory requirements for drug approvals and regulation of approved drugs in foreign countries; • varying reimbursement regimes and difficulties or the inability to obtain reimbursement for our products in foreign countries in a timely manner; • differing patient treatment infrastructures, particularly since our business is focused on the treatment of serious diseases that affect relatively smaller numbers of patients and are typically prescribed by specialist physicians; • collectability of accounts receivable; • changes in tariffs, trade barriers, and regulatory requirements, the risks of which appear to have increased in the current political environment; 54 • economic weakness, including recession and inflation, or political instability in particular foreign economies and markets; • differing levels of enforcement and/or recognition of contractual and intellectual property rights; • complying with local laws and regulations, which can change significantly over time; • foreign taxes, including withholding of payroll taxes; • foreign currency fluctuations, which could result in reduced revenues or increased operating expenses, and other obligations incident to doing business or operating in another country; • workforce uncertainty in countries where labor unrest is more common than in the U.S.; • reliance on third-party vendors, distributors and suppliers; • import and export licensing requirements, tariffs, and other trade and travel restrictions; • global or regional public health emergencies that could affect our operations or business; • production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and • business interruptions resulting from geo-political actions, including war and terrorism. Our revenues are subject to foreign exchange rate fluctuations due to the global nature of our operations. Although we have foreign currency forward contracts to hedge certain forecasted product revenues denominated in foreign currencies, our efforts to reduce currency exchange losses may not be successful. As a result, currency fluctuations among our reporting currency, the U.S. dollar, and the currencies in which we do business will affect our operating results, often in unpredictable ways. In addition, our international operations are subject to regulation under U.S. law. For example, the FCPA prohibits U.S. companies and their representatives from offering, promising, authorizing or making payments to foreign officials for the purpose of obtaining or retaining business abroad. In many countries, the health care professionals we regularly interact with may meet the definition of a foreign government official for purposes of the FCPA. We also are subject to import/export control laws. Failure to comply with domestic or foreign laws could result in various adverse consequences, including the possible delay in approval or refusal to approve a product, recalls, seizures, withdrawal of an approved product from the market, the imposition of civil or criminal sanctions, the prosecution of executives overseeing our international operations and corresponding bad publicity and negative perception of our company in foreign countries. If we fail to attract and retain skilled employees, our business could be materially harmed. Due to the highly technical nature of our drug discovery and development activities, we require the services of highly qualified and trained scientists who have the skills necessary to conduct these activities. In addition, we need to attract and retain employees with experience in development, marketing and commercialization of medicines and therapies, including cell and genetic therapies. We provide stock-related compensation benefits to all of our key employees that vest over time and therefore induce them to remain with us and have entered into employment agreements with some executives. However, the employment agreements can be terminated by the executive on relatively short notice. The value to employees of stock-related benefits that vest over time can be significantly affected by movements in our stock price and business performance, and may, at any point in time, be insufficient to counteract more lucrative offers from other companies. We face intense competition for our personnel from our competitors and other companies throughout our industry, especially with respect to employees with expertise in cell or genetic therapies. We also experience competition for the hiring of scientific and clinical personnel from universities and research institutions. Moreover, the growth of local biotechnology companies and the expansion of major pharmaceutical companies into the Boston area has increased competition for the available pool of skilled employees, especially in technical fields. The high cost of living can make it difficult to attract employees to our global headquarters in Boston and our international headquarters in London. Current job market dynamics, caused in part by the effects of COVID-19 and other macro-level events, with many employers unable to fill existing openings at all levels of their organizations, could result in significant increases to our costs to recruit and retain employees. Challenges could adversely affect our operations and financial results if we do not have sufficient staff to perform necessary functions. In addition, the 55 available pool of skilled employees would be further reduced if immigration laws change in a manner that increases restrictions on immigration. Our ability to continue to commercialize our products and achieve our research and development objectives depends on our ability to respond effectively to these demands. If we are unable to hire and retain qualified personnel, there could be a material adverse effect on our business. A breakdown or breach of our information technology systems could subject us to liability or interrupt the operation of our business. We maintain and rely extensively on information technology systems and network infrastructures for the effective operation of our business. In the course of our business, we collect, store, and transmit confidential information (including personal information and intellectual property), and it is critical that we do so in a secure manner to maintain the confidentiality, integrity, and availability of such confidential information. A disruption, infiltration, or failure of our information technology systems or any of our data centers as a result of software or hardware malfunctions, computer viruses, cyber-attacks, employee theft or misuse, power disruptions, natural disasters, floods or accidents could cause breaches of data security and loss of critical data, which in turn could materially adversely affect our business and subject us to both private and governmental causes of action. While we have implemented security measures to minimize these risks to our data and information technology systems and have adopted a business continuity plan to deal with a disruption to our information technology systems, there can be no assurance that our efforts to protect our data and information systems will prevent breakdowns or breaches in our systems that could adversely affect our business. In addition, we maintain cyber liability insurance, however, this insurance may not be sufficient to cover the financial, legal, business or reputational losses that may result from an interruption or breach of our systems and those of critical third parties. Cyber-attacks are increasing in their frequency, sophistication, and intensity, and are becoming increasingly difficult to detect. They are often carried out by well-resourced and skilled parties, including nation states, organized crime groups, “hacktivists” and employees or contractors acting carelessly or with malicious intent. Cyber-attacks include deployment of harmful malware and key loggers, ransomware, denial-of-service attacks, malicious websites, the use of social engineering, and other means to affect the confidentiality, integrity and availability of our technology systems and data. Cyber-attacks also include manufacturing, hardware or software supply chain attacks, which could cause a delay in the manufacturing of products or products produced for contract manufacturing or lead to a data privacy or security breach. Our key business partners face similar risks, and any security breach of their systems could adversely affect our security. In addition, our increased use of cloud technologies heightens these third party and other operational risks, and any failure by cloud or other technology service providers to adequately safeguard their systems and prevent cyber-attacks could disrupt our operations and result in misappropriation, corruption, or loss of confidential or propriety information. A significant portion of our workforce continues to leverage hybrid work. Risk of cyber-attack is increased with employees working remotely. Remote work increases the risk we may be vulnerable to cybersecurity-related events such as phishing attacks and other security threats. Our business has a substantial risk of product liability claims and other litigation liability. We are or may be involved in various legal proceedings, including securities/shareholder matters and claims related to product liability, intellectual property, employment law, competition law, data privacy, and breach of contract. Such proceedings may involve claims for, or the possibility of, damages or fines and penalties involving substantial amounts of money or other relief, including civil or criminal fines and penalties. If any of these legal proceedings were to result in an adverse outcome, it could have a material adverse effect on our business. With respect to product liability and clinical trial risks, in the ordinary course of business we are subject to liability claims and lawsuits, including potential class actions, alleging that our products or product candidates have caused, or could cause, serious adverse events or other injury. We have product liability insurance and clinical trial insurance in amounts that we believe are adequate to cover this risk. However, our insurance may not provide adequate coverage against all potential liabilities. If a claim is brought against us, we might be required to pay legal and other expenses to defend the claim, as well as pay uncovered damage awards resulting from a claim brought successfully against us and these damages could be significant and have a material adverse effect on our financial condition. Furthermore, whether or not we are ultimately successful in defending any such claims, we might be required to direct significant financial and managerial resources to such defense and adverse publicity is likely to result. 56 If our facilities were to experience a catastrophic loss, our operations would be seriously harmed. Most of our operations, including our research and development activities, are conducted in a limited number of facilities. If any of our major facilities were to experience a catastrophic loss, due to an earthquake, severe storms, fire or similar event, our operations could be seriously harmed. For example, our corporate headquarters, as well as additional leased space that we use for certain logistical and laboratory operations and manufacturing, are located in a flood zone along the Massachusetts coast. We have adopted business continuity plans to address most crises. However, if we are unable to fully implement our business continuity plans, we may experience delays in recovery of data and/or an inability to perform vital corporate functions, which could result in a significant disruption in our research, development, manufacturing and/or commercial activities, large expenses to repair or replace the facility and/or the loss of critical data, which could have a material adverse effect on our business. The use of social media platforms and artificial intelligence tools presents risks and challenges. Social media is being used by third parties to communicate about our products and product candidates and the diseases our therapies are designed to treat. We believe that members of the communities supporting serious diseases may be more active on social media a s compared to other patient populations due to the demographics of those patient populations. Social media practices in the pharmaceutical and biotechnology industries are evolving, which creates uncertainty and risk of noncompliance with regulations applicable to our business. For example, patients may use social media platforms to comment on the effectiveness of, or adverse experiences with, a product or a product candidate, which could result in reporting obligations. In addition, our employees may engage on social media in ways that may not comply with legal or regulatory requirements, which may give rise to liability, lead to the loss of trade secrets and other intellectual property, or result in public disclosure of protected personal information. There is a risk of inappropriate disclosure of sensitive information or negative or inaccurate posts or comments about us on any social networking website. Negative sentiment about us or our business shared over social media, or misinformation disseminated from fraudulent accounts impersonating our employees or our business, or otherwise, could harm our business and reputation, whether or not it is based in fact. Certain data protection regulations, such as the GDPR, apply to personal data contained on social media. If any of these events were to occur or we otherwise fail to comply with applicable regulations, we could incur liability, face regulatory actions or incur harm to our business, including damage to our reputation. Similar risks relating to inappropriate disclosure of sensitive information or inaccurate information appearing in the public domain may also apply from our employees engaging with and use of new artificial intelligence tools, such as ChatGPT. Risks Related to Financial Results and Holding Our Common Stock Our stock price may fluctuate. Market prices for securities of companies such as ours are highly volatile. From January 1, 2023 to December 31, 2023, our common stock traded between $282.21 and $413.00 per share. The market for our stock, like that of other companies in the biotechnology industry, has experienced significant price and volume fluctuations. The future market price of our securities could be significantly and adversely affected by factors such as: • the information contained in our quarterly earnings releases, including updates regarding our commercialized products or our product candidates, our net product revenues and operating expenses for completed periods and financial guidance regarding future periods; • announcements of FDA actions with respect to our therapies or those of our competitors, or regulatory filings for our therapies or those of our competitors, or announcements of interim or final results of clinical trials or nonclinical studies relating to our therapies or those of our competitors; • announcements we make or commentary by public equity analysts with respect to clinical development of the product candidates in our pain program; • developments in domestic and international governmental policy or regulation, for example, relating to drug pricing and tax reform; • technological innovations or the introduction of new drugs by our competitors; • government regulatory action; 57 • public concern as to the safety of drugs developed by us or our competitors; • developments in patent or other intellectual property rights or announcements relating to these matters; • information disclosed by third parties regarding our business or products; • developments relating specifically to other companies and market conditions for pharmaceutical and biotechnology stocks or stocks in general; • business development, capital structuring or financing activities; and • general worldwide or national economic, political and capital market conditions, including as a result of inflation and rapid fluctuations in interest rates. Following periods of volatility in the market price of a company’s securities, stockholder derivative lawsuits and securities class action litigation are common. Such litigation, if instituted against us or our officers and directors, could result in substantial costs and a diversion of management’s attention and resources. Our effective tax rate fluctuates, and changes in tax laws, regulations and treaties, unfavorable resolution to the tax positions we have taken or exposure to additional income tax liabilities could have a material impact on our future taxable income. Our effective tax rate is derived from a combination of applicable tax rates in the various places that we operate globally. Our effective tax rate may be different than experienced in the past due to numerous factors, including changes in the mix of our profitability from country to country, tax authority examinations/audits of our tax filings, adjustments to the value of our uncertain tax positions, changes in accounting for income taxes, and changes in tax laws or modifications of treaties in various jurisdictions. Any of these factors could cause us to experience an effective tax rate that is significantly different from previous periods or our current expectations. On December 12, 2022, E.U. member states reached an agreement to implement the minimum tax component (“Pillar Two”) of the Organization for Economic Co-operation and Development’s (the “OECD’s”), global international tax reform initiative with effective dates of January 1, 2024 and 2025. On July 17, 2023, the OECD published Administrative Guidance proposing certain safe harbors that effectively extend certain effective dates to January 1, 2027. E.U. member states need to adopt this Administrative Guidance in their local Pillar Two legislation for such safe harbors to apply. In addition, the U.K. has independently released draft legislation to introduce the OECD’s Pillar Two reforms into U.K. law. We are continuing to evaluate the potential impact on future periods of the Pillar Two guidance, pending legislative adoption by individual countries, including those in which we do business . We are subject to ongoing tax audits in various jurisdictions, and local tax authorities may disagree with certain positions we have taken and assess additional taxes. We regularly assess the probable outcomes of these audits to determine the appropriateness of our tax provision, and we have established contingency reserves for material tax exposures. However, there can be no assurance that we will accurately predict the outcomes of these disputes or other tax audits or that issues raised by tax authorities will be resolved at a financial cost that does not exceed our related reserves and the actual outcomes of these disputes and other tax audits could have a material impact on our results of operations or financial condition. Our quarterly operating results are subject to significant fluctuation. Our operating results have fluctuated from quarter to quarter in the past, and we expect that they will continue to do so in the future. Our revenues are primarily dependent on the amount of net product revenues from sales of our CF medicines. Our total net product revenues could vary on a quarterly basis based on, among other factors, the timing of orders from our significant customers. Additional factors that have caused quarterly fluctuations to our operating results in recent years include variable amounts of revenues; expenses resulting from our significant investments in research and development, acquired in-process research and development, and commercialization activities; changes in the fair value of our strategic investments, derivative instruments and contingent consideration liabilities; charges for excess and obsolete inventories, interest income, interest expenses; and our provision for income taxes. Our revenues also are subject to foreign exchange rate fluctuations due to the global nature of our operations. Although we have foreign currency forward contracts to hedge forecasted product revenues denominated in foreign currencies, our efforts to reduce currency exchange losses may not be successful. As a result, currency fluctuations among our reporting currency, the U.S. dollar, and the currencies in which we 58 do business may affect our operating results, often in unpredictable ways. Our quarterly results also could be materially affected by significant charges, which may or may not be similar to charges we have experienced in the past. Most of our operating expenses relate to our research and development activities, do not vary directly with the amount of revenues and are difficult to adjust in the short term. As a result, if revenues in a particular quarter are below expectations, we are unlikely to reduce operating expenses proportionately for that quarter. These examples are only illustrative and other risks, including those discussed in these “Risk Factors,” could also cause fluctuations in our reported financial results. Our operating results during any one period do not necessarily suggest the results of future periods. We expect that results from our clinical development activities and the clinical development activities of our competitors will continue to be released periodically, and may result in significant volatility in the price of our common stock. Any new information regarding our products and product candidates, or competitive products or potentially competitive product candidates, can substantially affect investors’ perceptions regarding our future prospects. We, our collaborators, and our competitors periodically provide updates regarding drug and therapy development programs, typically through press releases, conference calls and presentations at medical conferences. These periodic updates often include interim or final results from clinical trials conducted by us or our competitors and/or information about our or our competitors’ expectations regarding regulatory filings and submissions as well as future clinical development of our products or product candidates, competitive products or potentially competitive product candidates. The timing of the release of information by us regarding our drug and therapy development programs is often beyond our control and is influenced by the timing of receipt of data from our clinical trials and by the general preference among pharmaceutical companies to disclose clinical data during medical conferences. In addition, the information disclosed about our clinical trials, or our competitors’ clinical trials, may be based on interim rather than final data that may involve interpretation difficulties and may in any event not accurately predict final results. The release of such information may result in volatility in the price of our common stock.General Risk FactorsFuture indebtedness could materially and adversely affect our financial condition, and the terms of our credit agreements impose restrictions on our business, reducing our operational flexibility and creating default risks. In July 2022, we entered into a credit agreement providing for a $500.0 million revolving credit facility and terminated an existing $500.0 million credit agreement entered into in 2019. In September 2022, our $2.0 billion credit agreement that was entered into in 2020 expired in accordance with its terms. Subject to certain conditions, our current credit agreement provides that we may request the borrowing capacity be increased by an additional $500.0 million for a total of $1.0 billion. If we borrow under our current credit agreement or any future credit agreements, such indebtedness could have important consequences to our business, including increasing our vulnerability to general adverse financial, business, economic and industry conditions, as well as other factors that are beyond our control. The credit agreement requires that we comply with certain financial covenants, including a consolidated leverage ratio covenant. Further, the credit agreement includes negative covenants, subject to exceptions, restricting or limiting our ability and the ability of our subsidiaries to, among other things, incur additional indebtedness, grant liens, engage in certain investment, acquisition and disposition transactions, and enter into transactions with affiliates. As a result, we may be restricted from engaging in business activities that may otherwise improve our business. Failure to comply with the covenants could result in an event of default that could trigger acceleration of our indebtedness, which would require us to repay all amounts owed under the credit agreements and/or our finance leases and could have a material adverse effect on our business. Additionally, our obligations under the credit agreement are unconditionally guaranteed by certain of our domestic subsidiaries. If we incur additional indebtedness, the risks related to our business and our ability to service or repay our indebtedness would increase. Issuances of additional shares of our common stock could cause the price of our common stock to decline. As of December 31, 2023, we had 257.7 million shares of common stock issued and outstanding. As of December 31, 2023, we also had 3.0 million unvested restricted stock units (“RSUs”), 1.2 million unvested performance stock units (“PSUs”), and outstanding options to purchase 1.9 million shares of common stock with a weighted-average exercise price of $151.37 per share. The majority of our unvested RSUs are likely to vest based on our employees’ continued employment. The number of PSUs that vest is dependent on a potential range of shares issuable pursuant to certain financial and non-financial milestones, and our employees’ continued employment. Outstanding vested options are likely to be exercised if the market price of our common stock exceeds the applicable exercise price. In the future, we expect to issue a limited number of additional options 59 to our directors. In addition, we may issue additional common stock or restricted securities in the future as part of financing activities or business development activities and any such issuances may have a dilutive effect on our then-existing shareholders. Sales of substantial amounts of our common stock in the open market, or the availability of such shares for sale, could adversely affect the price of our common stock. The issuance of restricted common stock or common stock upon exercise of any outstanding options would be dilutive, and may cause the market price for a share of our common stock to decline. There can be no assurance that we will repurchase shares of common stock or that we will repurchase shares at favorable prices. In February 2023, our Board of Directors approved a share repurchase program (the “Share Repurchase Program”) pursuant to which we are authorized to repurchase up to $3.0 billion of our common stock from time to time through open market or privately negotiated transactions. Our stock repurchases will depend upon, among other factors, market conditions, our cash balances and potential future capital requirements, results of operations, financial condition, and other factors that we may deem relevant. We can provide no assurance that we will repurchase stock at favorable prices, if at all. We have adopted provisions in our articles of organization and by-laws and are subject to Massachusetts corporate laws that may frustrate any attempt to remove or replace members of our board or to effectuate certain types of business combinations involving us. Provisions of our articles of organization, by-laws and Massachusetts state laws may frustrate any attempt to remove or replace members of our current Board of Directors and may discourage certain types of business combinations involving us. Our by-laws allow the Board of Directors to adjourn any meetings of shareholders prior to the time the meeting has been convened. We may issue shares of any class or series of preferred stock in the future without shareholder approval and upon such terms as our Board of Directors may determine. The rights of the holders of common stock will be subject to, and may be adversely affected by, the rights of the holders of any class or series of preferred stock that may be issued in the future. Massachusetts state law also prohibits us from engaging in specified business combinations with an interested stockholder, subject to certain exceptions, unless the combination is approved or consummated in a prescribed manner, places restrictions on voting by any shareholder who acquires 20% or more of the aggregate shareholder voting power without approval by non-interested shareholders. As a result, shareholders or other parties may find it difficult to remove or replace our directors or to effectuate certain types of business combinations involving us.SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTSThis Annual Report on Form 10-K, including the descriptions of our Business set forth in Part I, Item 1, our Risk Factors set forth in Part I, Item 1A, and our Management’s Discussion and Analysis of Financial Condition and Results of Operations set forth in Part II, Item 7, contains 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; • our expectations regarding clinical trials, including expectations for patient enrollment, development timelines, the expected timing of data from our ongoing and planned clinical trials, and regulatory authority filings and other submissions for our therapies; • our ability to maintain and obtain adequate reimbursement for our products and product candidates, our ability to launch, commercialize and market our products or any of our other therapies for which we obtain regulatory approval, including CASGEVY, and our ability to obtain label expansions for existing therapies; • our expectations regarding our ability to continue to grow our CF business by increasing the number of people with CF eligible and able to receive our medicines and providing improved treatment options for people who are already eligible for one of our medicines; 60 • 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, including from the multiple ascending dose portion of the Phase 1/2 clinical trial of VX-522, the durable efficacy and effectiveness of CASGEVY as one-time functional cure for people with SCD and TDT, and the benefit risk profile supporting VX-548 as a transformative option for acute pain as compared to existing agents, and that our triple combinations of vanzacaftor/tezacaftor/deutivacaftor will provide additional clinical benefits to people with CF who have at least one mutation in their CFTR ; • our beliefs and plans with respect to the potential near-term launch of our triple combinations of vanzacaftor/tezacaftor/deutivacaftor for treatment of CF and for VX-548 for the treatment of acute pain; • our beliefs regarding the support provided by clinical trials and preclinical and nonclinical studies of our therapies for further investigation, clinical trials or potential use as a treatment; • our plans 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;• our beliefs regarding the approximate patient populations for the disease areas on which we focus;• the potential benefits and therapeutic scope of our acquisitions and collaborations, including our acquisition of ViaCyte and its potential to accelerate development of our stem-cell based T1D programs, and our collaboration with CRISPR for their gene-editing technology to accelerate the development of our hypoimmune cell therapies for T1D; • potential business development activities, including the identification of potential collaborative partners or acquisition targets; • the establishment, development and maintenance of collaborative relationships, including potential milestone payments or other obligations; • our ability to expand and protect our intellectual property portfolio and otherwise maintain exclusive rights to products; • potential fluctuations in foreign currency exchange rates and the effectiveness of our foreign currency management program; • our expectations regarding the amount of cash to generated by operations, our cash balance and expected generation and interest income; • 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 product candidates to address serious diseases and significant unmet medical needs; • the effectiveness of our governance, plans and strategy with respect to managing cybersecurity risks and other threats to our information technology systems; • our plans to expand, strengthen, and invest in our global supply chains and manufacturing infrastructure and capabilities, including for cell and gene therapies;• our ability to attract and retain skilled personnel; • our expectations involving governmental cost containment and other regulatory efforts; • our expectations surrounding the competitive landscape facing our products and product candidates; 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, set forth in Part I, Item 1A, and elsewhere in this report 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. 61

FY 2025-12-31 (later)

Item 1A, for a discussion of our forward-looking statements and the related risks and uncertainties of such statements. 1 PART I ITEM 1. B USINESS OVERVIEW We are a global biotechnology company that invests in scientific innovation to create transformative medicines for people with serious diseases, with a focus on specialty markets. We have approved medicines for cystic fibrosis (“CF”), sickle cell disease (“SCD”), transfusion dependent beta thalassemia (“TDT”), and acute pain, and we continue to serially innovate and advance next-generation clinical and research programs in these areas. O ur mid- and late-stage clinical pipeline includes programs across a range of modalities in additional serious diseases, including IgA nephropathy, APOL1-mediated kidney disease, neuropathic pain, type 1 diabetes, primary membranous nephropathy, autosomal dominant polycystic kidney disease, and myotonic dystrophy type 1 . The following chart sets forth our approved products, clinical-stage programs, and select pre-clinical programs: We are advancing five pivotal programs across multiple disease areas: • IgA Nephropathy . We are developing povetacicept, a dual inhibitor of the B cell activating factor (“BAFF”) and a proliferation-inducing ligand (“APRIL”) pathways, as a potentially best-in-class approach to treat IgA nephropathy (“IgAN”), a serious, progressive, life-threatening kidney disease that often progresses to end-stage renal disease . We completed enrollment in the IgAN Phase 3 clinical trial and submitted the first module of the rolling Biologics Licensing Application (“BLA”) for povetacicept in IgAN in the fourth quarter of 2025. We expect to complete the submission for potential accelerated approval in the U.S. in the first half of 2026 . • APOL1-Mediated Kidney Disease. We are developing inaxaplin, a small molecule inhibitor of APOL1 as a potential first-in-class treatment for APOL1-mediated kidney disease (“AMKD”) . We have completed the enrollment of the interim analysis cohort of the Phase 2/3 clinical trial and will conduct the pre-planned interim analysis once this cohort reaches 48 weeks of treatment. W e expect to share data from the interim analysis in late 2026 or early 2027 . • Peripheral Neuropathic Pain. We are developing suzetrigine, a selective non-opioid NaV1.8 pain signal inhibitor, for diabetic peripheral neuropathy (“DPN”), a common form of peripheral neuropathic pain. We are evaluating suzetrigine for the treatment of DPN in two Phase 3 clinical trials. We expect to complete enrollment in both Phase 3 clinical trials by the end of 2026. 2 • Type 1 Diabetes. Z imislecel is an allogeneic stem-cell derived, fully differentiated islet cell therapy in pivotal development for the treatment of type 1 diabetes (“T1D”). We have completed enrollment in the Phase 1/2/3 clinical trial of zimislecel in people with T1D. We have temporarily postponed completion of the dosing in this clinical trial, pending an ongoing internal manufacturing analysis. • Primary Membranous Nephropathy. We are also developing povetacicept to treat primary membranous nephropathy (“pMN”), a rare and serious autoimmune glomerular disease that can lead to kidney damage and renal failure, and which has no treatments specifically approved for this condition. We continue to enroll and dose patients in the adaptive Phase 2/3 pivotal trial in people with pMN. We expect to complete the Phase 2 portion of the clinical trial and to initiate the Phase 3 portion in mid-2026. Our core strategy is to discover, develop, and commercialize innovative medicines by combining transformative advances in the understanding of human disease and the science of therapeutics, to dramatically advance human health. We focus on validated targets that address causal human biology, predictive lab assays and clinical biomarkers, rapid paths to registration and approval, and product candidates that hold the potential for transformative patient benefit. Our approach includes advancing multiple compounds or therapies from each program into early clinical trials to obtain patient data that can inform selection of the most promising therapies for later stage development as well as inform our ongoing discovery and development efforts. We aim to serially innovate in our disease areas of interest and follow our first-in-class therapies with potential best-in-class candidates. We plan to continue investing to advance our strategy, fostering scientific innovation by identifying additional product candidates through internal research efforts, and investing in business development transactions to access emerging technologies, products and product candidates. Our serial innovation approach is intended to increase the likelihood of successfully bringing transformative medicines to patients and to provide durable clinical and commercial success. We are working to ensure broad access for eligible patients with these conditions in all countries with regulatory approval. Within our clinical pipeline, we are rapidly progressing multiple programs into pivotal development. We maintain a strong financial profile as we continue to invest in our serial innovation strategy, launch new products, advance our diverse pipeline, and expand geographically. 3 MARKETED PRODUCTS Information regarding our marketed products, including information regarding the disease area, initial approval and age group for which the therapy is approved, are set forth in the table below. Disease Initial Approval Eligible Age Group (1) Cystic Fibrosis 2024 6 years of age and older 2019 2 years of age and older 2018 6 years of age and older 2015 1 year of age and older 2012 1 month of age and older Sickle Cell Disease and Transfusion-Dependent Beta Thalassemia 2023 12 years of age and older Acute Pain 2025 Adults (1) Specifies the youngest eligible age group in any major market. CF CF is a life-shortening genetic disease caused by a defective or missing cystic fibrosis transmembrane conductance receptor (“CFTR”) protein resulting from mutations in the CFTR gene. The absence of working CFTR protein results in poor flow of salt and water into and out of cells in a number of organs, including the lungs, where mucus builds up, causing chronic lung infections and progressive lung damage. Our CFTR modulators, including ivacaftor, deutivacaftor, lumacaftor, tezacaftor, elexacaftor, and vanzacaftor, target the underlying cause of disease by improving CFTR protein function, and as such have been shown to provide transformative benefit for people living with CF. Our marketed CF medicines, ALYFTREK (vanzacaftor/tezacaftor/deutivacaftor) , TRIKAFTA/KAFTRIO (elexacaftor/ tezacaftor/ivacaftor and ivacaftor), SYMDEKO/SYMKEVI (tezacaftor/ivacaftor and ivacaftor), ORKAMBI (lumacaftor/ ivacaftor) and KALYDECO (ivacaftor) , are being used by nearly three quarters of the approximately 97,000 people with CF in the U.S., Europe, Australia, and Canada. We estimate that there are approximately 112,000 people with CF in all target markets. 4 Our CF medicines are reimbursed or accessible in more than 60 countries across six continents. ALYFTREK, our most- recently approved triple combination CF medicine, has the benefit of a once-daily dosing regimen and demonstrated non- inferiority to TRIKAFTA in ppFEV 1 , a measure of lung function, and an improvement in sweat chloride levels as compared to TRIKAFTA. We expect that the majority of people with CF will transition to ALYFTREK over time. Sickle Cell Disease and Transfusion-Dependent Beta Thalassemia SCD and TDT are hemoglobinopathies, a group of inherited blood disorders that result from gene mutations that alter hemoglobin, a protein in red blood cells that delivers oxygen throughout the body. SCD is caused by the change of a single amino acid in the β-hemoglobin gene that causes red cells to change shape in settings of low oxygen. These sickled cells block blood flow and can lead to severe pain (known as vaso-occlusive crises), organ damage, and shortened life span. Treatment is typically focused on relieving pain and minimizing organ damage, requiring medication and, for some patients, monthly blood transfusions and frequent hospital visits. Beta thalassemia is caused by loss-of-function mutations in the same β-hemoglobin gene that lead to severe anemia in patients, which causes fatigue and shortness of breath. In infants, beta thalassemia causes failure to thrive, jaundice, and feeding problems. Complications of beta thalassemia can lead to an enlarged spleen, liver and/or heart, misshapen bones and delayed puberty. Treatment for beta thalassemia varies depending on the disease severity for each patient. People with TDT, the most severe form of the disease, require regular blood transfusions, as frequently as every two to four weeks. Repeated blood transfusions eventually cause an unhealthy buildup of iron in the patient, leading to organ damage. CASGEVY (exagamglogene autotemcel), our ex-vivo, non-viral CRISPR/Cas9-based gene-editing therapy for severe SCD and TDT, is approved in the U.S. and across multiple geographies including Europe, Canada, and the Middle East . We estimate approximately 60,000 people with severe SCD or TDT are or could become eligible for CASGEVY in these geographies. To receive CASGEVY, patients first undergo a treatment at an authorized treatment center (“ATC”) that mobilizes a population of hematopoietic stem and progenitor cells (“HSPC”) from the bone marrow into the bloodstream. These cells are collected from the patient’s bloodstream and transferred to a manufacturing facility where the HSPCs are isolated and CRISPR/Cas9 gene-editing is performed on the cells. The gene-editing procedure results in a precise and specific gene-edit in a non-coding intron of the BCL11A gene. Following manufacturing, the edited cells, now called CASGEVY, are transferred back to the ATC. Patients are preconditioned with a myeloablative conditioning treatment that ablates their bone marrow to create space for the edited cells. After CASGEVY is infused into the patient and the edited cells engraft, the levels of fetal hemoglobin erythrocytes increase, thereby reducing or eliminating symptoms associated with disease. Efficacy data support the profile of CASGEVY as a potential one-time functional cure for people with severe SCD and TDT. CASGEVY is broadly reimbursed by third-party payors in the U.S., including the federal government and commercial payors. In addition, we have agreements with national and regional payors covering more than 275 million lives, to provide access to CASGEVY. Outside of the U.S., patients have access to CASGEVY in Austria, Denmark, the U.K., Italy, Luxembourg, Bahrain, Saudi Arabia, the UAE, and Kuwait. We continue to expand access and pursue additional long-term reimbursement arrangements and to engage with payors in the E.U. and the Middle East. Globally in 2025, approximately 300 people with SCD or TDT initiated treatment with CASGEVY, 147 people had their first cell collection for CASGEVY, and 64 people received infusions of CASGEVY. In 2026, w e expect to reach more eligible patients and drive patient infusions through our global ATC network . Acute Pain Acute pain is a disabling condition that may occur suddenly but typically lasts less than 90 days and resolves in days or weeks (for example, following surgery or an injury). It is estimated that over 80 million people are prescribed a medicine for acute pain every year in the U.S. Currently available treatments have limitations around efficacy or side effects, including a risk of addiction with opioids. Because of these challenges, over- and under-utilization, as well as misutilization, of current pain medicines may occur. JOURNAVX (suzetrigine) is a first-in-class, oral pain signal inhibitor that is highly selective for voltage-gated sodium channel NaV1.8 . Through this mechanism, JOURNAVX provides effective relief of pain without evidence of the several limitations of other currently available therapies, including the addictive potential of opioids. JOURNAVX was approved by the U.S. Food and Drug Administration (“FDA”) in January 2025 for the treatment of moderate-to-severe acute pain in adults . 5 Since JOURNAVX became available at U.S. p harmacies in March 2025 and through the end of 2025, more than 550,000 prescriptions were written and filled across the hospital and retail settings in different acute pain conditions, consistent with the product’s broad label. We have secured access for JOURNAVX with all three national pharmacy benefit managers, and a s of January 2026, more than 200 million individuals across commercial and government payors hav e coverage to JOURNAVX, representing two-thirds of U.S. covered lives. In addition, 21 states provide coverage via Medicaid. C OMMERCIALIZATION OF OUR MEDICINES We sell our medicines primarily to a limited number of specialty pharmacy and specialty distributors globally, as well as to certain major wholesalers in the U.S. Our customers in the U.S. subsequently resell our medicines to patients, health care providers, retail pharmacies, hospitals, or ATCs. Outside of the U.S., we generate sales primarily through distributor arrangements and to retail pharmacies, as well as to hospitals and clinics, many of which are government-owned or supported customers. In certain markets, we may not utilize a specialty distributor or specialty pharmacy to distribute CASGEVY and instead may sell CASGEVY directly to ATCs. We contract with government agencies so that our medicines will be eligible for purchase by, or partial or full reimbursement from, such third-party payors. We promote the use of our medicines directly to healthcare professionals and organizations such as doctors, nurse practitioners, physician assistants, pharmacists, hospitals, and pharmacy benefit managers. Through our field sales and medical organizations, we explain the risks and benefits of our medicines to these healthcare professionals and organizations. Our marketing is limited to the approved uses of the particular medicine. We also continue to develop scientific data and other information about potential additional uses of our medicines and provide such information through clinical or medical affairs teams as scientific exchange at scientific congresses or in other ways, including the development of publications, or in response to unsolicited inquiries from healthcare professionals and organizations. In the U.S., we also market directly to consumers by communicating the approved uses, benefits and risks. We are dedicated to helping patients obtain access to our therapies. We work to gain access for our medicines on formularies and reimbursement plans (lists of formulary-recommended or approved medicines and other products) by providing information about the clinical profiles of our medicines. Our patient support representatives help patients understand their insurance coverage and, in the U.S., we have established programs that provide co-pay assistance or free medicine for qualified uninsured or underinsured patients, based on specific eligibility criteria. RESEARCH AND DEVELOPMENT PROGRAMS We invest in research and development to discover and develop transformative medicines for people with serious diseases, with a focus on specialty markets. Our research strategy is to combine transformative advances in the understanding of human disease and in the science of therapeutics to dramatically advance human health. We focus on: • disease areas with known causal human biology; • targets validated by causal human biology; • predictive lab assays and clinical biomarkers; • potential for transformative benefit regardless of modality; and • efficient path to registration and approval. Our development-stage product candidates are focused on the treatment of serious diseases. In pursuit of serial innovation, our research and development approach includes advancing multiple candidates into clinical trials and pursuing multiple modalities with the goal of bringing first-in-class and/or best-in-class therapies to patients. Our research and development strategy has been validated through our success in moving novel product candidates into clinical trials and obtaining marketing approvals for our five CF medicines, CASGEVY, and JOURNAVX. Our approach to drug discovery has been further validated by ongoing pivotal development in five additional disease areas: in IgAN and pMN with povetacicept, in AMKD with inaxaplin, in T1D with zimislecel, and in diabetic peripheral neuropathy with suzetrigine. To augment our internal programs, we acquire businesses and technologies and collaborate with biopharmaceutical and technology companies, leading academic research institutions, government laboratories, foundations and other organizations to advance research in our disease areas of interest, as well as to access technologies needed to execute on our strategy. Our 6 internal and external innovation approaches are based on the same strategy, which enables us to effectively integrate and execute on new internal capabilities as we invest in external innovation. Our investments in external innovation include our collaboration with CRISPR, which resulted in the successful development and approval of CASGEVY; our acquisition of Semma Therapeutics, Inc. (“Semma”), which established and advanced our T1D program; our expansion of our renal programs through our acquisition of Alpine Immune Sciences, Inc. (“Alpine”); our mRNA therapeutic, VX-522, for treatment of CF through our collaboration with Moderna ; and our intracellular therapeutic for myotonic dystrophy type 1 (“DM1”), VX-670, through our collaboration with Entrada. CF Our goal in CF is to continue to extend our leadership by developing treatment regimens that will provide benefits to all people with CF. W e have completed the Phase 3 clinical trial evaluating TRIKAFTA/KAFTR IO in children one year to less than two years of age. T he data showed that TRIKAFTA was generally safe and well-tolerated, consistent with the established s afety profil e. Treatment with TRIKAFTA in this age group resulted in rapid, robust, and clinically meaningful improvement in the secondary endpoint of sweat chloride reduction. We expect to begin submissions for global regulatory approvals in this age group in the first half of 2026. We completed the global trial evaluating ALYFTREK in children 2 to 5 years of age. The data showed that ALYFTREK was generally safe and well-tolerated, consistent with the established safety profile. Treatment with ALYFTREK in this age group resulted in a clinically meaningful improvement in the CFTR function as measured by sweat chloride. We expect to submit for approval with global regulators in this age group in the first half of 2026. In addition, we initiated a pivotal trial evaluating ALYFTREK in children one to less than two years of age. W e estimate that nearly 95% of people with CF could benefit from our five approved medicines, and, in connection with our serial innovation approach, we continue to identify and develop additional CFTR modulators with the goal of developing best-in-class medicines that can treat more people with CF. We h ave advanced several next-generation, 3.0 CFTR modulators into the clinic. VX-828 is the first of these and is being evaluated in a proof-of-concept clinical trial of people with CF . We expect to complete enrollment and dosing in the first half of 2026. W e are also enrolling and dosing in a Phase 1 clinical trial of VX-581, another corrector in the next-generation 3.0 class, in healthy volunteers. To treat people with CF who do not make full-length CFTR protein, and as a result, cannot benefit from our CFTR modulators, we are researching and developing genetic therapies, such as mRNA, and gene-editing approaches to CF. In collaboration with Moderna, we are developing VX-522, a nebulized CF mRNA therapeutic designed to treat the underlying cause of CF lung disease for these people by enabling cells in the lungs to produce functional CFTR protein. We are targeting completion of dosing in the multiple ascending dose portion of the Phase 1/2 clinical trial evaluating VX-522 and disclosure of the data in the second half of 202 6. Sickle Cell Disease and Transfusion-Dependent Beta Thalassemia In December 2025, we presented positive data from the pivotal trials evaluating CASGEVY in children 5 to 11 years of age with severe SCD (the CLIMB SCD-151 clinical trial) and TDT (the CLIMB THAL-141 clinical trial ). We expect to initiate global regulatory submissions for this age group, including in the U.S., in the first half of 2026 . In the U.S., CASGEVY has received a Commissioner’s National Priority Voucher for use in this age group , which is meant to accelerate the FDA’s review of the application once submitted. In connection with our serial innovation approach, we are advancing preclinical assets for myeloablative conditioning agents with improved tolerability profiles, which we refer to as “improved conditioning agents,” which could be used in connection with treatment with CASGEVY, significantly broadening the eligible SCD and TDT patient population. We are also investigating in vivo gene-editing approaches and small molecules for the potential treatment of SCD and TDT. Pain Pain can be debilitating and develop from a variety of conditions. Most commonly, people with pain can be categorized as suffering from one of three types of pain: acute pain, chronic neuropathic pain (caused primarily by damage or dysfunction of peripheral nerves), or chronic musculoskeletal pain (caused primarily by damage to muscle, joints or bone). Acute pain usually resolves in days or weeks (for example, following surgery or an injury), while chronic pain generally lasts greater than three months due to unresolved or ongoing damage to tissues or nerves. Currently available treatments have limitations 7 around efficacy or side effects, including a risk of addiction. Because of these challenges, over, under, and mis-utilization of current pain medicines may occur. The sodium channels NaV1.8 and NaV1.7 play important roles in the physiology of pain. We have discovered multiple selective small molecule inhibitors of NaV1.8 as potential treatments for pain. We obtained pharmacological validation of NaV1.8 inhibition with a first generation NaV1.8 inhibitor in acute pain, chronic neuropathic pain, and chronic musculoskeletal pain. Acute Pain In August 2025, we announced results from the Phase 2 placebo-controlled dose-ranging clinical trial evaluating the safety and efficacy of VX-993, an investigational selective NaV1.8 pain signal inhibitor, for the treatment of acute pain following bunionectomy surgery. The clinical trial was powered to determine whether VX-993 would result in higher clinical efficacy than previously demonstrated with the NaV1.8 pathway. Based on the efficacy results of the clinical trial, we did not expect VX-993 to be superior to suzetrigine and therefore chose not to further advance VX-993 as monotherapy in acute pain. VX-993 was generally safe and well-tolerated. Peripheral Neuropathic Pain There are no approved medicines in the U.S. that are labeled for the treatment of peripheral neuropathic pain. We are evaluating suzetrigine, our selective non-opioid NaV1.8 pain signal inhibitor, for the treatment of DPN, a type of peripheral neuropathic pain, in two Phase 3 clinical trials. We expect to complete enrollment in both Phase 3 clinical trials by the end of 2026. The FDA granted Breakthrough Therapy Designation to suzetrigine in DPN. We are also enrolling and dosing people with DPN in a Phase 2 clinical trial evaluating VX-993. In connection with our serial innovation approach, we are advancing multiple NaV1.8 inhibitors and NaV1.7 inhibitors, which could be used alone or in combination, for the treatment of acute pain and peripheral neuropathic pain . IgA Nephropathy IgAN is a serious, progressive, life-threatening chronic kidney disease driven by uncontrolled autoreactive B cell activity that causes inflammation and damage to the kidneys. It is the most common cause of primary glomerulonephritis worldwide. We estimate that IgAN affects approximately 330,000 people in the U.S. and Europe, and, globally, more than 1.5 million people are diagnosed with IgAN. A high percentage of people with IgAN progress to end-stage kidney disease. IgAN is thought to occur when the body produces an abnormal form of IgA, a type of antibody that normally helps the body fight infections. The body generates an abnormal immune response, including antibodies (autoantibodies), against this abnormal IgA, and these antibodies can combine to create larger molecules called immune complexes. These immune complexes can deposit in the kidneys, triggering damage and inflammation, especially within the glomeruli, impairing the kidneys’ ability to properly filter waste and fluid. We are developing povetacicept for multiple diseases and believe that it has pipeline-in-a-product potential. Povetacicept is a potent dual inhibitor of the BAFF and APRIL cytokines, which promote B cell proliferation, differentiation and survival, and provides B cell control by inhibiting the ability of BAFF and APRIL to drive the pathogenesis of multiple autoimmune diseases, such as IgAN, pMN and generalized myasthenia gravis (“gMG”) (as described below). Povetacicept was specifically engineered to achieve improvements in binding affinity, potency, pharmacokinetics, and tissue distribution. Povetacicept has demonstrated potential best-in-class efficacy in a global Phase 1/2 clinical trial in people with IgAN. A small volume dose of povetacicept is expected to be self-administered at home once every four weeks via a subcutaneous auto-injector. We completed enrollment in RAINIER, the global Phase 3 pivotal trial of povetacicept versus placebo in people with IgAN. The clinical trial design contemplates a pre-planned interim analysis evaluating the change from baseline in urine protein-to-creatine ratio (“UPCR”) after a certain number of patients reach 36 weeks of treatment. We expect to share data from the interim analysis in the first half of 2026 . If positive, the interim analysis may serve as the basis to seek accelerated approval in the U.S. The final analysis will occur when patients reach two years of treatment and will evaluate total eGFR (estimated glomerular filtration rate) slope. The FDA has granted Breakthrough Therapy Designation for povetacicept in IgAN. We submitted the first module of the IgAN BLA to the FDA at the end of 2025 under the rolling submission pathway, 8 and we expect to complete the submission in the first half of 2026, pending positive results from the interim analysis. We are using a priority review voucher to expedite the FDA review of the povetacicept BLA from ten months to six months. Our serial innovation approach continues with respect to IgAN and other B cell-mediated diseases. APOL1-Mediated Kidney Disease AMKD is a rapidly progressive, proteinuric kidney disease caused by variants in the APOL1 gene. In AMKD, the kidney’s filtering units, known as the glomeruli, and within them the cells known as podocytes, are damaged, leading to leakage of protein into the urine, deterioration in kidney function, scarring, and, ultimately, end stage renal disease. People with AMKD progress to end stage kidney disease at a faster rate than those with other forms of chronic kidney disease and reach kidney failure at a median age of 45 years old. AMKD occurs in people with African ancestry, with an estimated patient population of approximately 150,000 people in the U.S. and Europe. In addition, we estimate that there are approximately 100,000 people with AMKD with comorbidities, such as type 2 diabetes, in the U.S. and Europe . In a Phase 2 proof-of-concept clinical trial, people with APOL1-mediated focal segmental glomerulosclerosis (“FSGS”) treated with inaxaplin on top of standard of care achieved a statistically significant, substantial, and clinically meaningful reduction of proteinuria. I naxaplin was generally safe and well tolerated by patients. Based on the positive Phase 2 data, the FDA granted Breakthrough Therapy Designation to inaxaplin for FSGS and the European Medicines Agency (“EMA”) granted Priority Medicines (“PRIME”) designation to inaxaplin for AMKD. We initiated pivotal development of inaxaplin in a single Phase 2/3 adaptive clinical trial (“AMPLITUDE”) in people with AMKD in 2022. We completed enrollment of the interim analysis cohort of AMPLITUDE in 2025 and we expect to conduct the pre-planned interim analysis once this cohort has been treated for 48 weeks. W e expect to share data from the interim analysis in late 2026 or early 202 7, and w e expect to complete full enrollment in the AMPLITUDE clinical trial in the second half of 2026. Our serial innovation strategy in AMKD focuses on indication expansion: evaluating inaxaplin in new populations of people with AMKD not included in the AMPLITUDE clinical trial. The Phase 2 clinical trial (“AMPLIFIED”) evaluates inaxaplin as a treatment for people with AMKD with moderate proteinuria, or with AMKD and type 2 diabetes, two populations that are not being studied in the AMPLITUDE trial. We expect to complete the AMPLIFIED clinical trial and share results in mid-2026. Type 1 Diabetes T1D is a chronic metabolic disorder caused by insufficient insulin secretion by the beta cells in the pancreas. In people with T1D, the insulin-producing islet cells of the pancreas are destroyed by the person’s own immune system, resulting in a lack of insulin and impairment of blood glucose control. While insulin therapy allows patients to live for decades with the disease, challenges of insulin therapy include inadequate control of blood sugar (both hyper- and hypo-glycemia), a substantial burden of care on patients and families, and long-term vascular complications. Current standards of care do not address the underlying causes of the disease, and there are limited treatment options beyond insulin for the management of T1D. We are developing non-autologous (allogeneic) fully differentiated, stem-cell derived islet cell therapies designed to replace insulin-producing islet cells that are destroyed in people with T1D, with the goal of delivering a functional cure. Zimislecel, our first program, is a stem cell-derived, allogeneic, fully differentiated, insulin-producing islet cell replacement therapy, using standard immunosuppression to protect the implanted cells. We believe that zimislecel has the potential to transform the lives of eligible people with T1D. In the U.S. and Europe, we estimate that there are approximately four million people diagnosed with T1D. At initial launch, we expect there will be approximately 65,000 people with high unmet need who experience severe hypoglycemic events who will be eligible for zimislecel. We have completed enrollment in the Phase 1/2/3 clinical trial evaluating the safety and efficacy of zimislecel. We have temporarily postponed completion of the dosing pending an ongoing internal manufacturing analysis. The most recent data from this trial, published online in the New England Journal of Medicine in June 2025, continue to demonstrate the transformative potential of zimislecel with consistent and durable patient benefit. The safety profile is generally consistent with the immunosuppressive regimen used in the trial, the infusion procedure, and complications from long-standing diabetes. Zimislecel has been granted Regenerative Medicine Advanced Therapy and Fast Track designations from the FDA, PRIME designation from the EMA, Breakthrough Medicine designation from the Kingdom of Saudi Arabia (“Saudi 9 Arabia”), and has secured an Innovation Passport under the Innovative Licensing and Access Pathway from the U.K. Medicines and Healthcare products Regulatory Agency (the “MHRA”). In March 2025, we announced results from the Phase 1/2 clinical trial evaluating VX-264, which encapsulated zimislecel in an immunoprotective device. VX-264 was generally safe and well-tolerated but did not meet its efficacy endpoint, and we have discontinued development of this program. In connection with our serial innovation approach, we are pursuing research-stage programs to evaluate additional approaches that could provide transformative benefits to people with T1D and reduce or eliminate the need for standard immunosuppressive regimens, including targeting improved immunosuppression for zimislecel. Primary Membranous Nephropathy pMN is a serious, progressive, life-threatening chronic kidney disease driven by uncontrolled autoreactive B cell activity that causes inflammation and damage to the kidneys. It is a rare autoimmune glomerular disease that occurs when the body generates an abnormal immune response, including antibodies (autoantibodies), against proteins that are part of the kidney. We estimate that pMN affects approximately 150,000 people in the U.S. and Europe, and more than 600,000 people globally. Autoantibodies trigger damage and inflammation, especially within the glomeruli, impairing the kidneys’ ability to properly filter waste and fluid. People with pMN can experience a variety of serious complications, including blood clots, infection, and heart disease. At time of diagnosis, most people with pMN are at risk of progression to end-stage renal disease. There are no therapies specifically approved for the treatment of pMN. We believe povetacicept represents a potentially best-in-class approach to control B cell activity in people with pMN. We have received Fast Track Designation from the FDA and PRIME designation from the EMA for povetacicept in pMN. Based on the strength of the Phase 2 results in the RUBY-3 clinical trial, we completed the End of Phase 2 meeting with the FDA and reached agreement on an adaptive Phase 2/3 pivotal development program for pMN; we are enrolling and dosing people with pMN in that clinical trial. We expect to complete the Phase 2 portion of the clinical trial and to initiate the Phase 3 portion of the trial in mid-2026. Autosomal Dominant Polycystic Kidney Disease ADPKD is a life-shortening genetic kidney disease characterized by the growth of numerous kidney-enlarging cysts that impair kidney function and can ultimately lead to end stage renal disease. In most cases, ADPKD is caused by variants in the PKD1 and PKD2 genes; the majority of ADPKD patients have a variant in the PKD1 gene. Around half of people with ADPKD experience kidney failure by the age of 60. We estimate that there are approximately 300,000 people diagnosed with ADPKD in the U.S. and Europe. VX-407 is a first-in-class small molecule corrector that is designed to target the underlying cause of ADPKD in people with a subset of PKD1 variants, which represents up to approximately 10% of the overall patient population living with ADPKD. We are enrolling and dosing patients in a Phase 2 proof-of-concept clinical trial evaluating VX-407 (“AGLOW”) for the treatment of ADPKD. We expect to complete enrollment in the AGLOW clinical trial by the end of 2026. In connection with our serial innovation approach, we are progressing multiple research-stage assets in ADPKD. Myotonic Dystrophy Type 1 DM1 is an inherited disease that results in the weakening and destruction of skeletal muscles over time. Muscle weakness, muscle wasting and myotonia (sustained muscle contraction and difficulty relaxing muscles) are the hallmark features of DM1. It is a serious life-shortening disease with no approved treatments, and we estimate that it affects approximately 110,000 people in the U.S. and Europe. VX-670, our lead approach for DM1, holds the potential to address the underlying cause of DM1. VX-670 is an oligonucleotide connected to a cyclic peptide to promote effective delivery into cells. We continue to enroll and dose in the multiple ascending dose portion of the global Phase 1/2 clinical trial of VX-670 in people with DM1 (“GALILEO”), which evaluates both safety and efficacy of VX-670. We expect to complete enrollment and dosing in this trial in mid-2026. Our serial innovation approach in DM1 includes a small molecule program in preclinical development. 10 Generalized Myasthenia Gravis gMG is a serious, chronic, and debilitating B cell-mediated immune disorder. This rare condition is caused by the formation of pathogenic autoantibodies to key proteins that function in neuromuscular transmission. These pathogenic antibodies block, alter, or damage the neuromuscular junction, which is the connection point between nerve cells and the muscles they control. As a result, people with gMG experience muscle weakness and fatigue, which can lead to inability to perform the activities of daily living and, in severe cases, compromise of respiratory muscles that can lead to life-threatening respiratory failure. Current therapies address only subsets of the gMG population, and many advanced treatments require cyclic treatment and drug holidays due to safety challenges and immunosuppression. As a consequence, there is significant unmet medical need for improved therapies. We estimate that gMG affects approximately 175,000 people in the U.S. and Europe and more than 300,000 people globally. Povetacicept is a potent dual inhibitor of BAFF and APRIL, two cytokines that are elevated in gMG, where they play distinct roles in the proliferation, differentiation, and survival of B cells. In gMG, elevated expression of both BAFF and APRIL drives uncontrolled B cell growth and activation, triggering overproduction of the pathogenic autoantibodies driving disease activity. By inhibiting both BAFF and APRIL, we believe povetacicept represents a potential best-in-class approach to reducing production of these pathogenic autoantibodies in gMG. We expect to initiate a placebo-controlled, Phase 2 dose-ranging proof-of-concept clinical trial evaluating povetacicept for the treatment of people with gMG in the first half of 2026. STRATEGIC TRANSACTIONS As part of our business strategy, we seek to license or acquire technologies, products, product candidates, and businesses that are aligned with our corporate and research and development strategies and that complement and advance our ongoing research and development efforts. In addition, we establish business relationships with collaborators to support our research activities and to lead or support development and/or commercialization of certain product candidates. We expect to continue to identify and evaluate potential acquisitions, licenses and collaborations that may be similar to or different from the transactions that we have engaged in previously. Acquisitions In 2024, we acquired Alpine for approximately $5.0 billion. Alpine’s lead molecule, povetacicept, is a highly potent and effective dual inhibitor of BAFF and APRIL. We are currently evaluating povetacicept in a pivotal trial as a potentially best- in-class approach to treat IgAN. We also believe povetacicept holds pipeline-in-a-product potential for other indications, such as pMN and gMG. We previously made other acquisitions which have expanded and advanced our pipeline, including: • In 2019, we established our T1D program through our acquisition of Semma, a privately held company focused on the use of stem cell-derived human islets as a potentially curative treatment for T1D. We are evaluating zimislecel for the potential treatment of T1D in a Phase 1/2/3 clinical trial. • In 2017, we enhanced our CF portfolio through our acquisition of certain CF assets, including deutivacaftor, from Concert Pharmaceuticals Inc. In 2024, the FDA approved ALYFTREK for people with CF 6 years of age and older. We expect to continue to identify and make acquisitions to expand and advance our pipeline and business. Collaboration and Licensing Arrangements Joint Development and Commercialization Agreement with CRISPR In 2017, we entered into a joint development and commercialization agreement (“Original JDCA”) with CRISPR Therapeutics AG (“CRISPR”), pursuant to which we are co-developing and co-commercializing CASGEVY for SCD and TDT. In 2021, we and CRISPR amended and restated the Original JDCA (the “A&R JDCA”). Pursuant to the A&R JDCA, we lead global development, manufacturing and commercialization of CASGEVY, with support from CRISPR. Subject to the terms and conditions of the A&R JDCA, we have the right to conduct all research, 11 development, manufacturing, and commercialization activities relating to the product candidates and products under the A&R JDCA (including CASGEVY) throughout the world, subject to CRISPR’s reserved right to conduct certain activities. The net profits and net losses incurred pursuant to the A&R JDCA with respect to CASGEVY are allocated 60% to us and 40% to CRISPR, subject to certain adjustments, while all other product candidates and products under the A&R JDCA have net profits and net losses shared equally between the parties. Either party may terminate the A&R JDCA upon the other party’s material breach, subject to specified notice and cure provisions, or, in our case, in the event that CRISPR becomes subject to specified bankruptcy, winding up, or similar circumstances. Either party may terminate the A&R JDCA in the event the other party commences or participates in any action or proceeding challenging the validity or enforceability of any patent that is licensed to such challenging party pursuant to the A&R JDCA. We also have the right to terminate the A&R JDCA for convenience at any time after giving prior written notice. If circumstances arise pursuant to which a party would have the right to terminate the A&R JDCA on account of an uncured material breach, such party may elect to keep the A&R JDCA in effect and cause such breaching party to be treated as if it had exercised its opt-out rights with respect to the products associated with such uncured material breach and the royalties payable to the breaching party would be reduced by a specified percentage. Either party may opt out of the development of a product candidate under the A&R JDCA after predetermined points in the development of the product candidate, on a candidate-by-candidate basis. In the event of such opt-out, the party opting- out will no longer share in the net profits and net losses associated with such product candidate and, instead, the opting out party will be entitled to high single to mid-teen percentage royalties on the net sales of such product, if commercialized. In-License Agreements We have entered into various agreements pursuant to which we have obtained access to technologies from third parties and are conducting research and development activities with collaborators. Pursuant to these arrangements, we have obtained development and commercialization rights to resulting product candidates. Depending on the terms of the arrangements, we may be responsible for the costs of research activities, required to make upfront payments and/or milestone payments upon the achievement of certain research, development, and commercial objectives, and/or pay royalties on future sales, if any, of commercial products resulting from the collaboration. O ur current in-license agreements include: • CRISPR Therapeutics AG. In addition to our arrangement with CRISPR described above, we have exercised options to exclusively license treatments for specific targets, including CF, that were subject to the research program under the collaboration agreement we entered into with CRISPR in 2015. In 2019, we obtained exclusive worldwide rights to CRISPR’s intellectual property for Duchenne muscular dystrophy (“DMD”) and DM1 gene-editing products through a new agreement with CRISPR. In 2023, we obtained non-exclusive rights to CRISPR’s intellectual property for the development of hypoimmune gene-edited cell therapies for T1D through a new agreement with CRISPR. • Moderna, Inc. In 2016, we entered into a collaboration with Moderna for the identification and development of mRNA therapeutics encoding CFTR for the treatment of CF. We are evaluating VX-522, an mRNA therapeutic, pursuant to this collaboration. • Entrada Therapeutics, Inc. In 2022, we established a collaboration with Entrada focused on enabling efficient intracellular delivery of an oligonucleotide for DM1. This collaboration includes VX-670, an investigational candidate for the treatment of DM1 that is in clinical development. We are evaluating VX-670 in people with DM1 pursuant to this collaboration. Out-license Agreements We have entered into various agreements pursuant to which we have out-licensed rights to certain product candidates to third-party collaborators. Pursuant to these out-license arrangements, our collaborators are responsible for certain costs related to the continued development of such product candidates and obtain development and commercialization rights to these product candidates. Depending on the terms of the arrangements, our collaborators may be required to make upfront payments, milestone payments upon the achievement of certain research and development objectives and/or pay royalties on future sales, if any, of commercial products licensed under the agreement. 12 In 2025, we entered into agreements with Zai Lab Limited (“Zai”) and Ono Pharmaceuticals Co., Ltd (“Ono”) related to the development and commercialization of povetacicept in certain Asian markets. Zai licensed povetacicept for mainland China, Hong Kong SAR, Macau SAR, Taiwan region, and Singapore, while Ono licensed povetacicept for Japan and South Korea. Zai and Ono will help advance povetacicept clinical trials and will be responsible for obtaining marketing authorizations and commercialization activities in the licensed territories, if povetacicept becomes an approved product. Cystic Fibrosis Foundation In 2004, we entered into an agreement (the “CFF Agreement”) with the Cystic Fibrosis Foundation (the “CFF”), as successor in interest to the Cystic Fibrosis Foundation Therapeutics, Inc., to support research and development activities. Pursuant to the CFF Agreement, as amended, we have agreed to pay tiered royalties ranging from single digits to sub-teens on covered compounds first synthesized and/or tested during a research term on or before February 28, 2014, including ivacaftor, lumacaftor and tezacaftor, and royalties ranging from low-single digits to mid-single digits on net sales of certain compounds first synthesized and/or tested between March 1, 2014 and August 31, 2016, including elexacaftor. We do not have any royalty obligations on compounds first synthesized and tested on or after September 1, 2016. For combination products, such as ORKAMBI, SYMDEKO/SYMKEVI, TRIKAFTA/KAFTRIO, and ALYFTREK, sales are allocated equally to each of the active pharmaceutical ingredients in the combination product, and royalties are then paid for any royalty-bearing components included in the combination. For TRIKAFTA/KAFTRIO, the CFF Agreement does not identify a specific date on which royalty obligations terminate. To qualify as a royalty bearing “Drug Product” as defined under the CFF Agreement, a compound must be covered by intellectual property protection (including patents) that Vertex has the legal right to license to another party. INTELLECTUAL PROPERTY Patents and other intellectual property rights such as trademarks, trade secrets, and copyrights are critical to our business. We actively seek protection for our products and proprietary information by means of U.S. and foreign patents, trademarks, and copyrights, as appropriate. In addition, we rely upon trade secret protection and contractual arrangements to protect certain of our proprietary information. Patents provide a period of exclusivity that can make it more difficult for competitors to market and use our technology. We own and control patents and pending patent applications that relate to compounds, formulations, synthetic routes, intermediates, devices, treatment of diseases, and other inventions. To protect our intellectual property, we typically apply for patents several years before a product receives marketing approval. Under current law, a patent expires 20 years from its first effective filing date. Since the drug development process may last for many years, there may be a period of time in which we have an issued patent but not marketing approval to sell the drug. To compensate for patent term lost while a product is in clinical trials and undergoing review for marketing approval, we may be able to apply for patent term extensions or supplementary protection certificates (“SPCs”) in some countries. In addition to patent protection, we receive regulatory exclusivity from U.S. and European regulatory agencies for the active pharmaceutical and biological agents and, where applicable, their approved orphan indications for a certain time period. Regulatory exclusivity runs concurrently with patent exclusivity and provides complementary protection for our products. For our approved commercial products, and those in development, we own or hold exclusive and non-exclusive licenses to several hundred patents around the world. In the U.S., once a New Drug Application (“NDA”), or a supplement thereto, is approved we are required to list with the FDA each U.S. patent with claims that cover our product or a method of using the product. The FDA publishes the patents we list in a book referred to as the Orange Book. We have fourteen issued U.S. patents listed in the Orange Book that cover the active pharmaceutical ingredients in KALYDECO, its marketed formulations, and/or its approved indication. We have 22 issued U.S. patents listed in the Orange Book that cover the active pharmaceutical ingredients in ORKAMBI, its marketed formulations, and/or its approved indication. We have 25 issued U.S. patents listed in the Orange Book that cover the active pharmaceutical ingredients in SYMDEKO, its marketed formulations, and/or its approved indication. W e have 34 issued U.S. patents listed in the Orange Book that cover the active pharmaceutical ingredients in TRIKAFTA, its marketed formulations, and/or its approved indication. We have 35 issued U.S. patents listed in the Orange Book that cover the active pharmaceutical ingredients in ALYFTREK, its marketed formulations, and/or its approved indication . We have an issued patent listed in the Orange Book that covers the active pharmaceutical ingredient in JOURNAVX, its marketed formulation, and/or its approved indication. 13 Products approved by the FDA under a BLA, including CASGEVY, receive 12 years of regulatory exclusivity in the U.S. from a product’s approval date. Additionally, we have licenses to dozens of issued U.S. patents that cover CASGEVY, its approved indication, and/or its manufacture. Products approved by the FDA under a BLA are not subject to the Orange Book patent listing requirement. The table below sets forth the year of projected expiration for the basic product patent covering each of our approved products. For products that are combinations of two or more active ingredients, the table lists the projected expiration of the latest expiring patent covering any of the active pharmaceutical ingredients (lumacaftor for ORKAMBI, tezacaftor for SYMDEKO/SYMKEVI, elexacaftor for TRIKAFTA/KAFTRIO and vanzacaftor for ALYFTREK). Unless otherwise noted, patent term extensions, and pediatric exclusivity periods are not reflected in the expiration dates listed in the table below and may extend protection. In some instances, we also own later-expiring patents and applications relating to solid forms, formulations, methods of manufacture, or the use of these drugs in the treatment of particular diseases or conditions. In some cases, however, such patents may not protect our drug from generic competition after the expiration of the basic patent. Product Expiration Year of U.S. Basic Product Patent Expiration Year of European Basic Product Patent KALYDECO 2028 1 2027 2,3 ORKAMBI 2031 1 2030 2 SYMDEKO/SYMKEVI 2027 2033 2 TRIKAFTA/KAFTRIO 2037 2037 CASGEVY 2035 4 2034 5,6 ALYFTREK 2039 2039 JOURNAVX 2040 2040 1 Includes pediatric exclusivity. 2 Expiration date reflects SPCs granted in the five major European markets (France, Germany, Italy, Spain and the U.K.). 3 SPC expires in 2028 in Germany; application for pediatric extension pending in France, Italy, Spain, and the U.K. 4 Expiration year reflects the expiration of regulatory exclusivity, which expires later than the basic product patent for this product in this market. 5 Expiration year reflects the expiration of regulatory exclusivity in the E.U., which expires later than the basic product patent for this product in this market. 6 Product is approved in Great Britain with regulatory exclusivity until November 2033, which is later than the expiration of the basic product patent. In addition to protecting our marketed products, we actively file patent applications in the U.S. and in foreign countries on inventions relating to our pipeline. For example, we also own and/or control U.S. and foreign patents and/or patent applications relating to the following: • Other CF potentiators and correctors and many other related compounds, and the use of those compounds for the treatment of CF. • VX-522 and other mRNA-based approaches for treating CF. • VX-993, VX-973, and other compounds being studied for the potential treatment of pain. • Povetacicept for the treatment of IgAN , pMN and gMG. • Inaxaplin for the potential treatment of AMKD. • Zimislecel and other cell-based approaches for treating T1D. • VX-407 and other compounds being studied for the potential treatment of ADPKD. • VX-670 for the treatment of DM1. • Other pre-clinical and clinical candidates and the use of such candidates to treat specified diseases. 14 • The manufacture, pharmaceutical compositions, related solid forms, formulations, dosing regimens, and methods of use of many of the above compounds. We and CRISPR intend to rely upon a combination of rights, including patent rights, trade secret protection, and regulatory exclusivities to protect CASGEVY. CRISPR has licensed certain rights to a worldwide patent portfolio that covers various aspects of the CRISPR/Cas9 editing platform technology including, for example, compositions of matter and methods of use, including their use in targeting or cutting DNA, from Dr. Emmanuelle Charpentier. In addition to Dr. Charpentier, this patent portfolio has named inventors who assigned their rights to the Regents of the University of California or the University of Vienna, to whom we refer, together with Dr. Charpentier, as the CVC Group. CRISPR has non-exclusive or co-exclusive rights to the patent rights that protect the core CRISPR/Cas9 gene-editing technology. For example, certain third parties, including competitors, have reported obtaining a license to rights in this patent portfolio in certain fields. In addition, patents and patent applications in this patent portfolio are the subject of adversarial proceedings in the U.S., Europe, and other jurisdictions, including proceedings in the U.S. Patent and Trademark Office (the “USPTO”), between the CVC Group and, separately, Sigma-Aldrich, Co. LLC (“Sigma-Aldrich”), ToolGen, Inc. (“ToolGen”), and the Broad Institute, Harvard University, and Massachusetts Institute of Technology (collectively, “Broad”). To date, both the CVC Group and Broad have obtained granted patents that purport to cover aspects of CRISPR/Cas9 editing platform technology. The patents and patent applications within the patent portfolios of the CVC Group, Broad, Sigma-Aldrich and/or ToolGen are, or may in the future be, involved in proceedings similar to interferences or priority disputes in Europe or other foreign jurisdictions. In December 2023, we entered into an agreement with Editas Medicine, Inc. (“Editas”), providing us a non-exclusive sublicense to certain patents relating to CRISPR/Cas9 technology, owned by Broad and Harvard, which are licensed to Editas. In addition to the patent portfolios licensed from Dr. Charpentier, Broad, and Harvard, we own patents and/or patent applications relating to the composition, manufacture, and use of CASGEVY. We and our CASGEVY manufacturing partners are engaged in patent litigation against ToolGen in the U.S., the U.K., and the Netherlands. In these cases, ToolGen alleges that the CASGEVY manufacturing process infringes its patents relating to CRISPR/Cas9. We have argued in the U.K. and the Netherlands that ToolGen’s patents are invalid, and we filed oppositions at the European Patent Office seeking the revocation of the patents asserted in the U.K. and the Netherlands cases. We intend to respond to the U.S. case in the first half of 2026. From time to time, we enter into exclusive and non-exclusive license agreements for proprietary third-party technology used in connection with our research activities. These license agreements typically provide for the payment by us of a license fee but may also include terms providing for milestone payments or royalties for the development and/or commercialization of our drug products arising from the related research. We cannot be certain that issued patents we own or license will be enforceable or provide adequate protection or that pending patent applications will result in issued patents. The existence of patents does not guarantee our right to practice the patented technology or commercialize the patented product. Litigation, interferences, oppositions, inter partes reviews, administrative challenges or other similar types of proceedings may be necessary in some instances to determine the validity and scope of certain patents, regulatory exclusivities or other proprietary rights, and in other instances to determine the validity, scope or non-infringement of intellectual property rights that may be claimed by third parties to be pertinent to the manufacture, use or sale of our products. MANUFACTURING As we market and sell our approved products and advance our product candidates through clinical development toward commercialization, we continue to build and maintain our supply chain and quality assurance resources. We rely on internal capabilities and a global network of third parties to manufacture and distribute our product candidates for clinical trials, as well as our products for commercial sale and post-approval clinical trials. In addition to establishing supply chains for newly approved products, we must adapt our supply chains for existing products to increase scale of production or to include additional formulations. We are focused on ensuring the stability of the supply chains for our current products, including our CF medicines, CASGEVY, and JOURNAVX, and for our pipeline programs. We are also focused on identifying and ensuring efficient manufacturing and delivery processes for the biologics and cell and genetic therapies we are developing, including our stem cell therapy program for T1D, and biologics manufacturing for povetacicept. We have established our own small molecule manufacturing capabilities in Boston, which we use for clinical trial and commercial supplies, including certain manufacturing steps related to our commercial supply of TRIKAFTA/KAFTRIO. We 15 expect to continue to rely on third parties to meet our commercial supply needs and a significant portion of our clinical supply needs for the foreseeable future. Our supply chain for sourcing raw materials and manufacturing our products and product candidates, including obtaining all necessary supplies, is a multi-step, global endeavor. In general, these raw materials and other necessary supplies are available from multiple sources. Third-party contract manufacturers, including some based in China, perform different parts of our manufacturing process. Contract manufacturers supply us with raw materials, convert these raw materials into drug substance and/or convert the drug substance or product into final dosage form. In addition, third parties assist us with packaging, warehousing, and global distribution of our products. Establishing and managing this global supply chain for each of our products and product candidates requires a significant financial commitment and the creation and maintenance of numerous third-party contractual relationships. We have established and we maintain second sources for the vast majority of our commercial products, including active ingredients, drug product, and finished dosage form packaging. Similarly, commercial manufacturing for the vast majority of our small molecule drug products is in the U.S. The manufacturing processes for biologics and cell and genetic therapies are more complex than those required for small molecule drugs and require different systems, equipment, facilities, and expertise. Additionally, we are unable to utilize a single process for all of our biologics and cell and genetic therapies; they must be customized for each program and therapy. We are investing and plan to continue to invest significant resources in expanding and strengthening our manufacturing infrastructure and capabilities, such as current Good Manufacturing Practices (“cGMP”) clinical manufacturing, both independently and through third-party networks, in an effort to develop and commercialize our biologics and cell and genetic therapies. We have secured agreements to meet our current demands for these products and product candidates. We continue to evaluate additional suppliers for all of our late-stage clinical programs for additional capacity and redundancy to support commercial supply. We rely on third-party manufacturers to produce or process cell culture reagents and gene-editing components, such as Cas9 protein and guide RNA molecules, for clinical trials and commercial supply of CASGEVY, and to generate gene-edited cells to supply CASGEVY. The manufacturing process for CASGEVY involves a number of steps prior to the final infusion of drug product into patients. Following mobilization and collection of blood cells from the patient, cells are transferred to a manufacturing site where HSPCs are purified and CRISPR/Cas9 gene-editing is performed. The edited cellular product, called CASGEVY, is frozen and transported back to the authorized treatment center where it is stored prior to infusion into the patient. Each step must be completed successfully, and in a timely manner, requiring coordination between us, authorized treatment centers, third-party manufacturers and shipping vendors. We are making investments to enhance the CASGEVY manufacturing process, to secure additional capacity, and to coordinate manufacturing, testing, and logistics activities at a larger scale across multiple facilities to serve the geographies in which we are treating and expect to treat additional people with CASGEVY. In addition, we have established cell therapy manufacturing capabilities at our facilities in the Boston area to supply clinical and potentially commercial quantities of our cell therapies as our needs evolve, including our plans to utilize our own manufacturing capabilities in Boston for additional commercial supply of CASGEVY. To further expand our ability to supply clinical and potentially commercial quantities of our cell therapies, we have a strategic agreement with Lonza to support the manufacture of T1D cell therapy product candidates. We also rely on third-party manufacturers to produce drug substance and finished drug product for clinical trials for povetacicept. In addition, we have obligations to supply product to global third parties that support the development and commercialization of povetacicept. We have developed systems and processes to track, monitor, and oversee our and our third-party manufacturers’ activities, including a quality assurance program intended to ensure that our third-party manufacturers comply with cGMP and the foreign jurisdictional equivalents when applicable. We devote substantial time, resources, and effort in the areas of production, quality control, and quality assurance to maintain cGMP compliance. We regularly evaluate the performance of our third-party manufacturers with the objective of confirming their continuing capabilities to meet our needs compliantly, efficiently, and economically. Manufacturing facilities, both foreign and domestic, are subject to inspections by or under the authority of the FDA and other U.S. and foreign government authorities. Although we actively engage with regulatory authorities, the timing of inspections and regulatory approvals for each of these facilities is the remit of the third-party manufacturer and not within our control and may be delayed for a number of reasons. 16 COMPETITION The pharmaceutical industry is characterized by extensive research efforts, rapid technological progress, and intense competition. There are many public and private companies, including pharmaceutical companies and biotechnology companies, engaged in developing products for the indications our medicines are approved to treat and the therapeutic areas we are targeting with our research and development activities. Potential competitors also include academic institutions, government agencies, other public and private research organizations and charitable venture philanthropy organizations that conduct research, seek patent protection and/or establish collaborative arrangements for research, development, manufacturing and commercialization. Mergers and acquisitions in the pharmaceutical, biotechnology and gene therapy industries may result in a larger concentration of resources among a smaller number of our competitors. Some of our competitors may have substantially greater financial, technical, sales and marketing, and human resources than we do. Competition may be based, among other things, on efficacy, safety, availability, patient convenience, frequency of dosing, ease of use, delivery devices and overall patient experience; formulary placement, price, payer coverage and reimbursement rates; regulatory approvals and exclusivity; patent and other intellectual property positions; marketing effectiveness; and research and development of new products, processes, modalities, indications, and uses. Early market entry and rapid patient access can also be important to achieve product acceptance and success. Accordingly, the relative speed with which we can develop therapies, complete the testing and approval process, and supply commercial quantities of such therapies will have a significant impact on our competitive position. Our therapies must compete with other branded or generic products already on the market or those that are developed in the future. The introduction of new products or technologies, including the development of new processes or technologies by competitors or new information about existing products or technologies, results in increased competition for our marketed products and pricing pressure on our marketed products. For example, the number of compounds available to treat a particular disease typically increases over time and can result in slowed sales growth or reduced sales of our products in that therapeutic area. The development of new or improved treatment options could eliminate the use of our medicines or may limit the utility and application of ongoing clinical trials for our product candidates. Similarly, developments of new standards of care practices, treatment options or cures for the diseases our medicines treat could have similar impacts. We believe our long-term competitive success depends on discovering and developing or acquiring transformative medicines for people with serious diseases and continuously improving the productivity of our operations in a highly competitive environment. There can be no assurance that our efforts will result in commercially successful medicines, and it is possible that our medicines will be, or will become, uncompetitive from time to time. See also Item 1A., Risk Factors – “Competing products and technological advances from our competitors may negatively affect our business and market position.” of this Annual Report on Form 10-K. GOVERNMENT REGULATION Our operations and activities are subject to extensive regulation by numerous government authorities in the U.S., Europe and other countries, including with respect to the testing, manufacture, labeling, storage, record keeping, approval, pricing and price reporting, and advertising and promotion of our products. Regulations Concerning Product Development and Approval United States . The process for obtaining regulatory approvals to market a new pharmaceutical product, or an additional indication of an existing product, requires substantial effort and financial resources and takes several years to complete. The applicant must complete preclinical tests and submit protocols to the FDA before commencing clinical trials. Clinical trials are intended to establish the safety and efficacy of the pharmaceutical product and typically are conducted in sequential phases, although the phases may overlap or be combined. If the required clinical testing is successful, the results are submitted to the FDA in the form of an NDA or BLA requesting approval to market the product for one or more indications. The FDA reviews an NDA or BLA to determine whether a product is safe and effective for its intended use and whether its manufacturing is compliant with cGMP. The FDA can employ several tools to facilitate the development of certain drugs or expedite certain applications, including fast track designation, Breakthrough Therapy designation, regenerative medicine advanced therapy designation, priority review, accelerated approval, incentives for orphan drugs developed for rare diseases and others. 17 Compliance with regulatory requirements is assured through periodic, announced or unannounced inspections by the FDA and other regulatory authorities, and these inspections associated with clinical development may include the sponsor, investigator sites, laboratories, hospitals and manufacturing facilities of our subcontractors or other third-party manufacturers. Failure to comply with applicable regulatory requirements can result in enforcement action by the FDA, including rejection of an NDA or BLA. Even if an NDA or a BLA receives approval, the applicant must comply with post-approval requirements. For example, holders of an approval must report adverse reactions, provide updated safety and efficacy information and comply with requirements concerning advertising and promotional materials and activities. Also, quality control and manufacturing procedures must continue to conform to cGMP after approval, and certain changes to the manufacturing procedures and finished product must be submitted and approved by the FDA prior to implementation. The FDA periodically inspects manufacturing facilities to assess compliance with cGMP, which imposes extensive procedural and record keeping requirements. In addition, as a condition of approval, the FDA may require post-marketing testing and surveillance to further assess and monitor the product's safety or efficacy after commercialization, which may require additional clinical trials, patient registries, observational data or additional work on chemistry, manufacturing and controls. Any post-approval regulatory obligations, and the cost of complying with such obligations, could expand in the future. Further, the FDA continues to regulate product labeling and prohibits the promotion of products for unapproved or “off-label” uses along with other labeling restrictions. Outside the United States . We are subject to similar regulatory requirements outside the United States for approval and marketing of pharmaceutical products. We must obtain approval of a clinical trial application or product from applicable supervising regulatory authorities before it can commence clinical trials or marketing of the product in target markets. The approval requirements and process for each country can vary, and the time required to obtain approval may be longer or shorter than that required for FDA approval in the United States. For example, we may submit marketing authorizations in the E.U. under either a centralized or decentralized procedure. The centralized procedure is mandatory for the approval of biotechnology products and many pharmaceutical products and provides for a single marketing authorization that is valid for all E.U. member states. Under the centralized procedure, a single marketing authorization application is submitted to the European Medicines Agency. After the agency evaluates the application, it makes a recommendation to the European Commission, which then makes the final determination on whether to approve the application. The decentralized procedure provides for mutual recognition of individual national approval decisions and is available for products that are not subject to the centralized procedure. In April 2023, the European Commission adopted a proposal to revise the E.U. pharmaceutical legislation. In April 2024, the European Parliament introduced amendments to the European Commission’s proposal. The legislative process remains ongoing, with several stages still required before the reform can receive final approval. Once completed, the reform is likely to be the most comprehensive overhaul of E.U.’s medicines regulation in over 20 years, with a wide range of impacts including on approval procedures, regulatory data protection, and environmental protection measures. Once approved, certain provisions of the reform could potentially have an adverse impact on our business. The requirements governing the conduct of clinical trials and product licensing also vary. In addition, post-approval regulatory obligations such as adverse event reporting and cGMP compliance generally apply and may vary by country. For example, after a marketing authorization has been granted in the E.U., periodic safety reports must be submitted and other pharmacovigilance measures may be required. Regulations Concerning Pricing and Reimbursement Sales of our products depend, to a large degree, on the extent to which our products will be reimbursed by third-party payors, such as government health programs, commercial insurance companies, and managed health care organizations. Increasingly, these third-party payors are becoming stricter in the ways they evaluate and reimburse medical products and services. Additionally, the containment of health care costs has become a priority of many governments, and the prices of drugs have been a focus in this effort. The U.S. government, state legislatures and foreign governments have shown significant interest in implementing cost-containment programs, including price controls, restrictions on reimbursement and requirements for substitution of generic products. Adoption of price controls and cost-containment measures, and adoption of 18 more restrictive policies in jurisdictions with existing controls and measures, could limit our revenues. Decisions by third- party payors to not cover a product could reduce physician usage of the product. United States . In the U.S., we participate in the Medicaid Drug Rebate Program, Medicare, and other governmental pricing programs. Medicaid is a joint federal and state program that is administered by the states for low-income and disabled beneficiaries. Under the Medicaid Drug Rebate program, we are required to pay a rebate to each state Medicaid program for our covered outpatient drugs, which includes select inpatient drugs for which there is “direct reimbursement.” Medicaid rebates are based on pricing data reported by us on a monthly and quarterly basis to CMS, the federal agency that administers the Medicaid and Medicare programs. Any company that participates in the Medicaid Drug Rebate Program also must participate in the 340B drug pricing program (the “340B program”), and the Federal Supply Schedule (“FSS”) pricing program. The 340B program, which is administered by the Health Resources and Services Administration, requires participating companies to agree to charge statutorily defined “covered entities” no more than the 340B “ceiling price” for covered outpatient drugs. The 340B ceiling price is calculated using a statutory formula, which is based on pricing data calculated under the Medicaid Drug Rebate Program. The FSS pricing program, which is administered by the Department of Veterans Affairs (“VA”), also requires participating companies to extend discounted prices to the VA, Department of Defense, Coast Guard, and Public Health Service. Similar to the 340B program, FSS prices are calculated utilizing pricing data reported by us to the VA on a quarterly and annual basis. Medicare is a federal program that is administered by the federal government. The program covers individuals age 65 and over as well as those with certain disabilities. Medicare Part A generally covers certain inpatient hospital services for eligible beneficiaries. Prescription drugs that are used as part of an inpatient hospital stay will be covered by Medicare Part A, and these products typically are paid as part of a bundled or composite rate (e.g., diagnosis related group). Medicare Part D provides coverage to enrolled Medicare patients for self-administered drugs (i.e., drugs that are not administered by a physician). Medicare Part D is administered by private prescription drug plans approved by the U.S. government. Subject to certain statutory parameters, each drug plan establishes its own Medicare Part D formulary for prescription drug coverage and pricing, which the drug plan may modify from time-to-time. The prescription drug plans negotiate pricing with manufacturers and pharmacies, and may condition formulary placement on the availability of manufacturer discounts. The U.S. government has shown significant interest in implementing cost-containment programs for medicines and has enacted reforms at the federal level designed to, among other things, modify prescription drug reimbursement amounts and methodologies, and otherwise control health care costs. For example, the Patient Protection and Affordable Care Act (“ACA”) was enacted in March 2010 and was designed to expand coverage for the uninsured while at the same time containing overall health care costs. With regard to pharmaceutical products, among other things, the ACA was designed to expand and increase manufacturer rebates for drugs covered under Medicaid programs, impose an annual fee on branded pharmaceutical manufacturers, subject biological products to potential competition by lower-cost biosimilars, and make changes to the coverage requirements under the Medicare Part D program. Additionally, in August 2022, the Inflation Reduction Act (“IRA”) was enacted, establishing a Medicare Drug Price Negotiation Program, a Medicare inflationary rebate, and a redesign of the Part D benefit structure. Certain drugs, including our CF medicines and CASGEVY, currently are excluded from the IRA negotiation program. Nevertheless, other elements of the IRA may have a material impact on our business, including the redesign of the Part D benefit and the Manufacturer Discount Program, which requires manufacturers to take on more of the beneficiary cost previously subsidized by the federal government through the application of increased drug discounts. We anticipate that the U.S. government will continue to engage in activities seeking to address drug pricing and reimbursement. Furthermore, certain states have enacted laws establishing Prescription Drug Affordability Boards (“PDABs”). Some state PDABs, including those in Colorado, Maryland, Washington, and Minnesota, either have the authority or have defined a pathway pursuant to which they may be granted the authority to establish upper payment limits for prescription drugs. In certain states, there is pending litigation that would establish a PDAB or expand the authority of an existing PDAB. Additionally, the U.S. government continues to focus on obtaining most-favored-nation pricing on U.S. prescription drug prices in government programs. For example, CMS recently issued a proposed rule called the Guarding U.S. Medicare Against Rising Drug Costs Model (“GUARD”). GUARD is a proposed mandatory model that would assess rebates for certain drugs payable under Medicare Part D if the prices exceed those paid in economically comparable 19 countries. While there is significant uncertainty around the potential implementation of GUARD and related executive orders and rulemaking, implementation of mandatory initiatives could result in reduced pricing and reimbursement for our products. Outside the United States . In Europe and other foreign jurisdictions, the success of our products depends largely on obtaining and maintaining government reimbursement, because patients are generally unable to access prescription pharmaceutical products that are not reimbursed by their governments. In some countries, such as Germany, commercial sales of a new product may begin while pricing and reimbursement terms are under discussion. In other countries, a company must complete reimbursement negotiations prior to the commencement of commercial supply of the pharmaceutical product. The requirements governing drug pricing vary widely country-by-country and region-by-region. For example, the member states of the E.U. can restrict the range of drugs for which their national health insurance systems provide reimbursement and can control the prices of prescription drugs. Many countries in the E.U. also attempt to contain drug costs by engaging in some form of reference pricing in which authorities examine pre-determined internal or external markets for published prices of a product or national class of drugs. In addition, many ex-U.S. government payors require companies to provide health economic assessments of products, which are evaluated by government agencies set up for this purpose. A member state may approve a specific price for the drug, or it may instead adopt a system of direct or indirect controls on the total amount of money that a company may receive for supply of a drug. Countries also may consider increasing mandatory discounts over time in an attempt to manage increased demands on healthcare budgets. Reimbursement discussions in foreign countries often result in a reimbursement price that is lower than the net price that companies can obtain for the product in the U.S. In addition, reimbursement discussions may take a significant period of time resulting in commercialization delays. In some countries where reimbursement has not yet been obtained, or where there are a limited number of eligible people and our medicines or therapies are unregistered, the governments of such countries may agree to purchase our medicines and therapies on an unlicensed and/or named patient basis. Reimbursement for our products cannot be assured because a country or region may only provide for reimbursement on terms that we do not deem adequate. Further, many governments outside of the U.S. have introduced or are in the process of introducing legislation focusing on cost containment measures in the pharmaceutical industry. The impact of these laws where finalized, the final form of laws under consideration, and their relevant practical application, are unknown at this time, but may lead to lower prices, paybacks, or other forms of discounts or special taxes. Reforms in our product markets, including those that may stem from periods of uneven economic growth or downturns or uncertainty, or as a result of high inflation, emergence, or escalation of, and responses to, international tension and conflicts, or government budgeting priorities, may continue to result in added pressure on pricing, access, and reimbursement for our products. Other Regulations The manufacturing process for pharmaceutical products is highly regulated and regulators may shut down manufacturing facilities that they observe are not complying with regulations. We, our commercial manufacturing organizations (“CMOs”) and our corporate partners are subject to cGMP, which are extensive regulations governing manufacturing processes, stability testing, record keeping and quality standards as defined by FDA and EMA. Similar regulations are in effect in other jurisdictions. Suppliers of key components and materials must be named in the NDA or marketing authorization application filed with the regulatory authority for any product candidate for which we are seeking marketing approval, and significant delays can occur if the qualification of a new supplier is required. Even after our facilities or a third-party supplier is qualified by the regulatory authority, investment and effort must continue to be expended in the areas of production and quality control to maintain full compliance with applicable regulatory requirements, including cGMP. Our manufacturing operations and third-party suppliers are subject to regular periodic inspections by regulatory authorities following initial approval. Pharmaceutical companies must also monitor information on side effects and adverse events reported during clinical studies and after marketing approval and report such information and events to regulatory agencies. Non-compliance with the applicable safety reporting requirements may result in civil or criminal penalties. Side effects or adverse events that are reported during clinical trials can delay, impede or prevent marketing approval. Based on new safety information that emerges after approval, the FDA can mandate product labeling changes, impose risk evaluation and mitigation strategies, require new post-marketing studies (including additional clinical trials) or suspend or withdraw approval of the product. These requirements may affect our ability to maintain marketing approval of our products or require us to make significant expenditures to obtain or maintain such approvals. 20 Pharmaceutical companies are also subject to various laws pertaining to healthcare “fraud and abuse,” including the federal Anti-Kickback Statute (“AKS”), the False Claims Act (“FCA”), and other state and federal laws and regulations in and outside of the U.S. In the U.S., the Anti-Kickback Statute generally makes it illegal 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. The FCA prohibits knowingly and willingly presenting or causing to be presented for payment to third-party payors (including Medicare and Medicaid), any 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. Violations of fraud and abuse laws may be punishable by criminal and/or civil sanctions, including fines and civil monetary penalties, as well as by the possibility of exclusion from federal healthcare programs (including Medicare and Medicaid). Liability under the FCA may also arise when a violation of certain laws or regulations related to the underlying products (e.g., violations regarding improper promotional activity, manufacturing regulations, or unlawful payments) contributes to the submission of a false claim. If we were subject to allegations concerning, or convicted of violating, these laws, our business could be harmed. Laws and regulations also have been enacted by the federal government and various states to regulate the sales and marketing practices of pharmaceutical manufacturers. The laws and regulations generally limit financial interactions between manufacturers and health care providers, require manufacturers to adopt certain compliance standards or require disclosure to the government and public of such interactions. The laws include U.S. federal and state “sunshine” provisions. The federal sunshine provisions apply to pharmaceutical manufacturers with products reimbursed under certain government programs and require those manufacturers to disclose annually to the federal government (for re-disclosure to the public) certain payments and other transfers of value made to physicians, physicians assistants, advanced practice registered nurses, and teaching hospitals. State laws may also require disclosure of pharmaceutical pricing information and marketing expenditures. Many of these laws and regulations contain requirements that are subject to interpretation. Outside the U.S., other countries have implemented laws and regulations limiting financial interactions between manufacturers and health care providers and providing requirements for disclosure of financial interactions with healthcare providers and additional countries may consider or implement such laws. We are subject to various federal and foreign laws that govern our international business practices with respect to payments to government officials. Those laws include the U.S. Foreign Corrupt Practices Act (“FCPA”), which prohibits U.S. companies and their representatives from paying, offering to pay, promising, or authorizing the payment of anything of value to any foreign government official, government staff member, political party, or political candidate for the purpose of obtaining or retaining business or to otherwise obtain favorable treatment or influence a person working in an official capacity. In many countries, the health care professionals we regularly interact with may meet the FCPA’s definition of a foreign government official. We are also subject to U.K. Bribery Act 2010 (“the Bribery Act”), which proscribes giving and receiving bribes in the public and private sectors, bribing a foreign public official, and failing to have adequate procedures to prevent employees and other agents from giving bribes. U.S. companies that conduct business in the U.K. generally will be subject to the Bribery Act. We are subject to extensive privacy and data protection laws and regulations concerning the collection, use and sharing of personal data. We routinely collect and use sensitive personal information relating to health. The legislative, regulatory and litigation landscape for privacy and data protection requirements is rapidly evolving and changing, and may limit our ability to use data globally or across borders. For example, the E.U. General Data Protection Regulation (“GDPR”) imposes obligations on us with respect to our processing of personal data and the cross-border transfer of such data, including higher standards of obtaining consent, more robust transparency requirements, data breach notification requirements, requirements for contractual language with our data processors, and stronger individual data rights. In addition, several U.S. jurisdictions have similar data privacy laws, such as the California Consumer Privacy Act and California Privacy Rights Act. Data protection requirements are not universal and can conflict between jurisdictions. There has also been an increase in enforcement actions from the Federal Trade Commission, with a specific focus on companies operating health-related websites. Compliance with these laws and regulations is made more complex by the lack of consistent standards, common definitions, or clear regulatory expectations. At the same time, enforcement of these laws and regulations is increasing and litigation, fines, and penalties are also becoming more common. In addition, as we expand our pipeline and contemplate different approaches that may incorporate the use of medical devices, such approaches may necessitate compliance with regulatory laws applicable to medical devices, including those governing the testing, manufacture, approval, distribution, and marketing of medical devices. Furthermore, the extent of government regulation, which might result from future legislation or administrative action, cannot accurately be predicted. 21 EMPLOYEES AND HUMAN CAPITAL MANAGEMENT As of December 31, 2025 , we had approximately 6,400 employees. Of these employees, approximately 5,200 were based in the U.S. and approximately 1,200 were based outside the U.S. None of our U.S. employees are covered by a collective bargaining agreement. A small number of employees outside the U.S. are covered by such agreements due to local law or industry requirements. We consider our relations with our employees to be good. We rely on skilled, experienced, and innovative employees to conduct the operations of our company. The biotechnology industry is very competitive, and recruiting and retaining such employees is important to the continued success of our business. We are committed to building an outstanding, committed, and passionate team, and we focus on a culture that values all employees. We focus on recruiting, retaining, and developing qualified and talented employees from a range of backgrounds to conduct our research, development, commercial, and other business activities because we believe that each employee brings unique perspectives and strengths, and by embracing these strengths, we can do our best work for patients. We support our employees through a variety of initiatives including learning resources and forums that promote belonging in our workplaces; five global employee resource networks open to all employees that promote connectivity and collaboration across levels and functions; and investments that advance access to opportunity in our surrounding communities. To promote our employees’ continued well-being, we offer comprehensive benefits and resources, including those focused on health and income protection, such as life insurance and retirement savings programs. We continue to promote and enhance wellness tools supporting our employees’ mental, social, physical and financial health. We continually review and augment our programs to include benefits that support the evolving needs of our workforce. In addition, we provide our employees with career development and advancement opportunities, including job rotations, mentoring, and training. We are committed to identifying and developing our next generation of leaders, which is reflected in our manager excellence and talent readiness programs designed for critical roles in our organization. OTHER MATTERS Financial Information and Significant Customers We operate in one segment, pharmaceuticals. Financial information about our revenue by product and significant customers is set forth in Note Q, “Segment Information,” to our consolidated financial statements included in this Annual Report on Form 10-K. Information Available on the Internet Our internet address is www.vrtx.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and all amendments to those reports, are available to you free of charge through the “Investors/ Financial Information/SEC Filings” section of our website as soon as reasonably practicable after those materials have been electronically filed with, or furnished to, the Securities and Exchange Commission. Corporate Information Vertex was incorporated in Massachusetts in 1989, and our principal executive offices are located at 50 Northern Avenue Boston, Massachusetts 02210. 22 INFORMATION ABOUT OUR EXECUTIVE OFFICERS The names, ages and positions held by our executive officers are as follows: Name Age Position Reshma Kewalramani, M.D. 53 Chief Executive Officer and President Jeffrey M. Leiden, M.D., Ph.D. 70 Executive Chairman E. Morrow “Morrey” Atkinson, III, Ph.D. 60 Executive Vice President, Chief Technical Operations Officer, Head of Biopharmaceutical Science and Manufacturing Operations Jonathan Biller, J.D. 62 Executive Vice President, Chief Legal Officer Carmen Bozic, M.D. 63 Executive Vice President, Global Medicines Development and Medical Affairs, and Chief Medical Officer Mark Bunnage, D.Phil 57 Executive Vice President, Chief Scientific Officer Duncan J. McKechnie 57 Executive Vice President, Chief Commercial Officer Amit K. Sachdev, J.D. 58 Executive Vice President, Chief Patient and External Affairs Officer Ourania “Nia” Tatsis, Ph.D. 56 Executive Vice President, Chief Regulatory and Quality Officer Charles F. Wagner, Jr. 57 Executive Vice President, Chief Operating and Financial Officer Kristen C. Ambrose, CPA 49 Senior Vice President, Chief Accounting Officer Dr. Kewalramani has been our Chief Executive Officer (CEO”) and President since April 2020 and a member of our Board of Directors since February 2020. Dr. Kewalramani was our Executive Vice President and Chief Medical Officer from April 2018 through April 2020. She was our Senior Vice President, Late Development from February 2017 until April 2018. Dr. Kewalramani also served on the board of Ginkgo Bioworks from September 2021 to June 2024. From August 2004 to January 2017, she served in roles of increasing responsibility at Amgen Inc., most recently as Vice President and Head of U.S. Medical Organization. From 2014 through 2019, Dr. Kewalramani was the industry representative to the FDA’s Endocrine and Metabolic Drug Advisory Committee. She completed her internship and residency in Internal Medicine at the Massachusetts General Hospital and her fellowship in Nephrology at the Massachusetts General Hospital and Brigham and Women’s Hospital combined program. Dr. Kewalramani holds a B.A. from Boston University and an M.D. from Boston University School of Medicine. She is an alumna of the Harvard Business School, having completed the General Management Program. Dr. Leiden is our Executive Chairman, a position he has held since in April 2020. He was our Chief Executive Officer and President from 2012 through March 2020. He has been a member of our Board of Directors since July 2009, the Chairman of our Board of Directors since May 2012, and served as our lead independent director from October 2010 through December 2011. Dr. Leiden was a Managing Director at Clarus Ventures, a life sciences venture capital firm, from 2006 through January 2012. Dr. Leiden was President and Chief Operating Officer of Abbott Laboratories, Pharmaceuticals Products Group, and a member of the Board of Directors of Abbott Laboratories from 2001 to 2006. From 1987 to 2000, Dr. Leiden held several academic appointments, including the Rawson Professor of Medicine and Pathology and Chief of Cardiology and Director of the Cardiovascular Research Institute at the University of Chicago, the Elkan R. Blout Professor of Biological Sciences at the Harvard School of Public Health, and Professor of Medicine at Harvard Medical School. He is an elected member of both the American Academy of Arts and Sciences and the Institute of Medicine of the National Academy of Sciences. Dr. Leiden was a director and the non-executive Vice Chairman of the board of Shire plc, from 2006 to January 2012, a director of Quest Diagnostics, from December 2014 to May 2019, and the Chairman of Revolution Healthcare Acquisition Corp., from April 2021 to December 2022. Dr. Leiden received his M.D., Ph.D. and B.A. degrees from the University of Chicago. Dr. Atkinson has been our Executive Vice President, Chief Technical Operations Officer, Head of Biopharmaceutical Sciences and Manufacturing Operations since August 2023. He previously served as our Senior Vice President, Head of Commercial Manufacturing and Supply Chain since July 2020. Prior to joining us, Dr. Atkinson served in various roles at Bristol-Myers Squibb Co., including as Senior Vice President, Global Manufacturing Operations from September 2019 to June 2020; Vice President and Integration Leader, Corporate Cell Therapy and Global Development and Manufacturing from January 2019 to September 2019; Vice President, Internal Manufacturing, Biologics from June 2017 to January 2019; and Vice President, Biologics Development and Clinical Manufacturing from 2012 to June 2017. Before Bristol-Myers Squibb, he held various roles at Cook Pharmica, LLC (now owned by Novo Holdings) and Eli Lilly. Dr. Atkinson served as a 23 member of the Board of Directors of 89bio, Inc. from February 2022 until October 2025, when it was acquired by Roche. Dr. Atkinson holds a B.S. in Biology from Indiana University and a Ph.D. in Biological Sciences from Stanford University. Mr. Biller has been our Executive Vice President, Chief Legal Officer since September 2022. From November 2019 until he joined us, Mr. Biller served in several executive roles at Agios Pharmaceuticals, Inc., including Chief Legal Officer and, most recently, Chief Financial Officer and Head of Corporate Affairs. Prior to Agios, he served as Executive Vice President, General Counsel at Celgene from July 2018 to November 2019, where he was responsible for their global legal function, and served as Senior Vice President, Tax and Treasury from 2011 to June 2018. Prior to Celgene, Mr. Biller was General Counsel, Chief Tax Officer and Secretary at Bunge Limited, a global publicly traded agriculture and food company. Earlier in his career he held various leadership roles at Alcon, Inc. and was a partner at Hopkins & Sutter and Foley & Lardner. Mr. Biller holds a B.A. from Brown University and a J.D. from Yale Law School. Dr. Bozic is our Executive Vice President, Global Medicines Development and Medical Affairs, a position she has held since October 2019, and she has been our Chief Medical Officer since April 2020. She was our Senior Vice President and Head of Global Clinical Development from May 2019 to October 2019. Prior to joining us, Dr. Bozic spent more than 20 years at Biogen Inc., a biotechnology company focused on neurological diseases, most recently as Senior Vice President of Global Development and Portfolio Transformation from 2015 to May 2019 and as Senior Vice President of Clinical and Safety Sciences from 2013 to 2015. Dr. Bozic has served as the industry representative to the FDA’s Risk Communication Advisory Committee, and was a member of PhRMA’s Clinical and Preclinical Development Committee and the Board of Managers at BioMotiv. She received her M.D., C.M., completed her residency, and was Chief Resident in Internal Medicine at McGill University. She completed her fellowship in Pulmonary and Critical Care Medicine at Brigham and Women’s Hospital and was an Associate Physician at Beth Israel Deaconess Medical Center and Harvard Medical School before joining the biopharmaceutical industry. Dr. Bunnage is our Executive Vice President and Chief Scientific Officer, a position he has held since February 2026. He was our Senior Vice President & Head of Global Research from March 2024 through January 2026, our Senior Vice President & Head of Research from July 2021 to March 2024, and our Senior Vice President & Site Head, Boston Research, from August 2016 to July 2021. Prior to joining Vertex, Dr. Bunnage had a 20-year career at Pfizer Inc. where he held positions of increasing responsibility, including Vice President, Worldwide Medicinal Chemistry and Head of Medicinal Chemistry, Sandwich Laboratories. Dr. Bunnage is a Fellow of the Royal Society of Chemistry and a Fellow of the Royal Society of Biology. He also serves as a visiting professor in chemistry at the University of Oxford, United Kingdom, and is a member of the Strategic Advisory Board for the Department of Chemistry at the University of Durham, United Kingdom. Dr. Bunnage received his B.Sc in Chemistry from the University of Durham and his D.Phil in Chemistry from the University of Oxford. He completed his postdoctoral research as a NATO Fellow at The Scripps Research Institute in La Jolla, California. Mr. McKechnie is our Executive Vice President, Chief Commercial Officer, a position he has held since July 1, 2025. Mr. McKechnie previously served as our Senior Vice President, Head of North America Commercial from October 2018 to July 2025, and as our Vice President of Global Marketing from June 2013 to September 2018. Prior to joining Vertex, Mr. McKechnie held positions of increasing responsibility at Novartis AG, including Vice President, Respiratory Franchise from January 2013 to June 2013; Vice President and Head Brand Maximization and Established Medicines from April 2012 to April 2013; and Vice President, Cardiovascular Marketing from November 2008 to March 2012. Before Novartis, Mr. McKechnie held various roles at GlaxoSmithKline plc. Mr. McKechnie holds a Business & Marketing degree from the University of Plymouth in England. Mr. Sachdev is our Executive Vice President, Chief Patient and External Affairs Officer, a role he has held since July 2023. From October 2019 to July 2023, he was our Executive Vice President, Chief Patient Officer. In addition, Mr. Sachdev served in the role of Chief of Staff to the CEO from April 2020 to March 2023. He served as our Executive Vice President and Chief Regulatory Officer from January 2017 until September 2019, and as our Executive Vice President, Policy, Access and Value from October 2014 through December 2016. In 2010, he established our first international commercial operations in Canada. In 2007, he joined us as a Senior Vice President, to establish our government affairs and public policy activities, as well as our patient advocacy programs. Prior to joining us, Mr. Sachdev served as Executive Vice President, Health, of the Biotechnology Industry Organization (BIO) and was the Deputy Commissioner for Policy at the FDA, where he also served in several other senior positions. Prior to the FDA, Mr. Sachdev served as Majority Counsel to the Committee on Energy and Commerce in the U.S. House of Representatives and practiced law at the American Chemistry Council, and subsequently at the law firm of Ropes & Gray LLP. He served as a member of the Board of Directors of Eiger BioPharmaceuticals from 24 April 2019 to September 2024. Mr. Sachdev holds a B.S from Carnegie Mellon University and a J.D. from Emory University School of Law. Dr. Tatsis is our Executive Vice President, Chief Regulatory and Quality Officer, a position she has held since August 2020. Previously, she was our Senior Vice President and Chief Regulatory Officer from October 2019 to August 2020, and our Senior Vice President, Global Regulatory Affairs from September 2017 to October 2019. Prior to joining us, Dr. Tatsis held positions of increasing responsibility at several pharmaceutical companies, including Sanofi, Stemnion, Pfizer, and Wyeth. Most recently, from 2014 to 2017, she was Vice President, Head of Global Regulatory Affairs, at the Sanofi Genzyme Business Unit focused on Inflammation/Immunology, Rare Disease, Multiple Sclerosis, Ophthalmology, Neurology, and Oncology/Immuno-Oncology. Dr. Tatsis also worked as an associate staff scientist and research fellow in Immunology and Vaccine Development at the Wistar Institute and completed a post-doctoral research fellowship in Immunology at Thomas Jefferson University. Dr. Tatsis has served as a member of the board of directors at Odyssey Therapeutics since October 2025, and previously served on the board of directors of Verve Therapeutics from June 2024 until July 2025, when it was acquired by Eli Lilly. She received her Ph.D. in Cell and Molecular Biology from the University of Vermont and holds a B.S. in Biology from Temple University. Mr. Wagner is our Executive Vice President, Chief Operating & Financial Officer, a position he has held since July 2025. Mr. Wagner was our Executive Vice President, Chief Financial Officer from April 2019 through June 2025 . Prior to his role at Vertex, Mr. Wagner was Chief Financial Officer and Executive Vice President, Finance, of Ortho Clinical Diagnostics, a Carlyle Group portfolio company, from June 2015 to March 2019. In that role, he led the finance, accounting, tax, treasury, global financial systems, lender relations, and acquisitions and divestiture groups. From July 2012 to June 2015, Mr. Wagner served as Executive Vice President, Chief Financial Officer of Bruker Corporation, a scientific instruments manufacturer. Prior to that, Mr. Wagner served as Chief Financial Officer for Progress Software Corporation, a provider of enterprise software, and Millipore Corporation, a global provider of products and services in the life science tools market. Mr. Wagner served as a director of Good Start Genetics, Inc., from April 2014 to August 2017 and served as a director and member of the Audit Committee of Bruker Corporation from August 2010 to June 2012. He has served as a member of the Board of Directors of The TJX Companies, Inc., since September 2023. Mr. Wagner holds a B.S. in Accounting from Boston College and a M.B.A from Harvard Business School. Ms. Ambrose is our Senior Vice President, Chief Accounting Officer, a position she has held since May 2021. Ms. Ambrose previously served as our Senior Vice President, Accounting, Tax, Treasury, Strategic Sourcing and Corporate Services since March 2021. From February 2003 until she joined us, Ms. Ambrose held roles of increasing responsibility at Boston Scientific Corporation, a medical device company, most recently as Vice President of Finance and Controller of the Global Endoscopy Division from July 2019 to March 2021 and as Vice President of Global Internal Audit from February 2017 to June 2019. Prior to Boston Scientific Corporation, Ms. Ambrose served as an accountant at Ernst & Young LLP. She received her B.S. in Commerce from the University of Virginia and is a Certified Public Accountant. 25ITEM 1A. RISK FACTORSInvesting in our common stock involves a high degree of risk, and you should carefully consider the risks and uncertainties described below in addition to the other information included or incorporated by reference in this Annual Report on Form 10-K. If any of the following risks or uncertainties occur, our business, financial condition or results of operations would likely suffer, possibly materially. In that case, the trading price of our common stock could decline. Risks Related to Our Business and Products Our success depends on our ability to develop and commercialize additional medicines. We invest significant resources in research and development to discover and develop transformative medicines for people with serious diseases. Product development is highly uncertain and expensive. Product candidates may appear promising in research and development but may fail to reach commercial success for many reasons, including: • the failure to establish safety and efficacy through clinical trials; • the failure to obtain marketing approval; • the inability to manufacture on economically feasible terms; • the failure to gain and maintain market acceptance among physicians and patients or other members of the medical community; • the failure to obtain adequate pricing or reimbursement levels from third-party payors or foreign governments; and • competition based on, among other factors, safety, efficacy, patient convenience, pricing and reimbursement. If we are not able to successfully develop and commercialize additional medicines, our business would be materially harmed. Our business is substantially dependent on the success of our CF medicines. Substantially all our net product revenues have been derived from the sale of our CF medicines. We may be unable to sustain or increase revenues from sales of our CF medicines in the future for any number of reasons, including the potential introduction of competitive products or the inability to successfully develop and commercialize next-generation medications or medicines to treat people with CF who cannot benefit from our current CF medicines. Our concentrated source of revenue increases the risks associated with potential manufacturing or supply disruptions, safety issues that may be identified with respect to our CF medicines, and failure to gain and/or maintain market acceptance or adequate pricing or reimbursement for our CF medicines. If we are unable to sustain or increase revenues from sales of our CF medicines, or if we do not meet the expectations of investors, our business would be materially harmed and our ability to fund our operations could be adversely affected. If we are unable to successfully develop and commercialize medicines for acute and neuropathic pain, our business could be materially harmed. A portion of the value attributed to our company by investors is based on the expected commercial success of JOURNAVX for acute pain and on our development programs for both acute and peripheral neuropathic pain. JOURNAVX may not gain or maintain market acceptance among physicians, patients, or payors due to various factors, including the availability of lower-cost alternatives, and sales, marketing, pricing, and/or distribution challenges associated with introducing a product into a highly competitive market. Furthermore, we may not succeed in developing JOURNAVX for additional indications or in advancing other product candidates, including NaV1.8 or NaV1.7 inhibitors, for the treatment of acute or peripheral neuropathic pain. Even if we obtain marketing approvals for these product candidates, they will face significant competition and there can be no assurance of commercial success. We may not be able to increase or maintain CASGEVY product revenues. The future commercial success of CASGEVY depends on physicians, patients, or payors accepting it as medically useful, cost-effective, ethical, safe, and preferred with respect to current and potential future competitive therapies, and on 26 payors providing adequate reimbursement. In addition to risks generally associated with the commercialization of medicines, the cell collection processes, manufacturing and other procedures required to manufacture and administer CASGEVY are more complex, resource-intensive, and operationally demanding than for small molecules. For example, the cost of manufacturing CASGEVY as a percentage of revenue is significantly higher than for our CF medicines. Moreover, market acceptance continues to be dependent in part on the prevalence and severity of side effects associated with the procedure by which CASGEVY is administered, including those resulting from the myeloablative preconditioning regime. There can be no assurance that we will be able to increase or maintain our revenues from CASGEVY in future periods. Risks Related to Commercialization We are subject to pricing and reimbursement pressures that could have a material adverse effect on our business, revenues, and results of operations. Revenues from our products depend, to a large degree, on the extent to which the products are purchased by customers, such as wholesalers, pharmacies, and hospitals, and reimbursed by third-party payors, such as government health programs, commercial insurers, and managed health care organizations. Increasingly, these third-party payors are becoming more critical in evaluating and reimbursing medicines. The containment of health care costs continues to be a priority for many governments, and drug pricing has been a focus in this effort. The U.S. federal government and state legislatures and foreign governments have shown significant and evolving interest in implementing cost-containment programs, including price controls, restrictions on reimbursement, value-based and reference pricing, compulsory licensing, including the pursuit of so- called “march in” rights, and mandatory substitution with generic products, all of which could limit the prices of, or access to, our products. Decisions by third-party payors to not cover a product or restrict access to a product may shift over time and could reduce market acceptance of the product and limit product revenues. We must also compete to be placed on formularies of managed care providers, as exclusion of our products from a formulary would limit usage by managed care providers and patients. In the U.S., pricing and access is primarily governed by practices of private managed care providers and institutional and governmental purchasers, federal laws and regulations related to Medicare and Medicaid, including the ACA and the IRA, and state activities, including the establishment of PDABs and price transparency rules. For example, in August 2023, the Colorado PDAB selected five drugs for an affordability review, including TRIKAFTA. Although the Colorado PDAB later found TRIKAFTA to be ineligible for an upper payment limit we cannot predict whether future reviews by the Colorado PDAB, or any other PDAB, will come to the same conclusion about TRIKAFTA or any of our other therapies, or the amount of any potential upper payment limit. Furthermore, changes to the health care system enacted as part of health care reform in the U.S., as well as increased purchasing power of entities that negotiate on behalf of Medicare, Medicaid, and private payors, could result in further pricing pressures. F or example, initiatives by the U.S. government to impose most-favored- nation pricing on U.S. prescription drug prices in government programs, including the recently proposed GUARD Model by the CMS. While there is significant uncertainty around the related executive orders and rulemaking, mandatory initiatives could result in reduced pricing and reimbursement for our products . In most markets outside of the U.S., the pricing and reimbursement medicines is subject to governmental control and governments are making greater efforts to reduce drug prices and limit drug spending. The reimbursement process in ex-U.S. markets vary widely and can take a significant time to complete, and reimbursement decisions are made on a country-by- country and region-by-region basis. Reimbursement for our products by governments, including the timing of any reimbursements, may also be affected by budgetary or political constraints, particularly in challenging economic environments. We have experienced challenges in obtaining timely reimbursement for our products in various countries outside the U.S., and our future revenues depend on maintaining such reimbursement. There is no assurance that coverage and reimbursement will continue for our current products or be available for our future products. Even if reimbursement is available, there is no assurance that the timing or level of reimbursement will be sufficient. Furthermore, many ex-U.S. governments are introducing new legislation focused on cost containment measures applicable to the pharmaceutical industry; such legislation, if finalized, could lead to lower prices, rebates or other forms of discounts or special taxes. Our failure to obtain or maintain adequate prices, coverage, or reimbursement for our products would have an adverse effect on our business, revenue and results of operations, could curtail or eliminate our ability to adequately fund our research and development programs and/or could cause a decline or volatility in our stock price. 27 Competing products and technological advances from our competitors may negatively affect our business and market position. Our products and product candidates face or may face competition from existing and potential competing products. See also Item 1., Business – Competition of this Annual Report on Form 10-K . Competing products may be more effective, safer, more effectively marketed, have lower prices or better coverage or reimbursement levels, eliminate or minimize the need for treatment with our products or product candidates, or have other differentiating factors that negatively affect the demand for our products or product candidates. If a competitor obtains approval and reimbursement before we do, approval and/or reimbursement of our products or product candidates could be delayed, denied, or otherwise adversely affected. We compete with an array of companies and other organizations, including those that have substantially greater resources, more mature development, manufacturing and commercial organizations, and/or other competitive advantages. Smaller companies with innovative programs or technologies are frequently acquired by and enter into collaborations with larger competitors, which may result in the acceleration or enhancement of competitive programs. We cannot predict the timing or impact of the introduction of competitive products. If a competing product is successfully developed and commercialized for a patient population we are currently treating or are seeking to treat, our revenues, business or market position could be materially adversely affected. In addition, the release of new information, including clinical data and regulatory approval timelines, by our competitors regarding competitive products or potentially competitive product candidates can affect investors’ perceptions regarding the prospects of our products and product candidates, and has caused and may in the future cause our stock price to decline or experience periods of significant volatility. If we discover safety or efficacy issues with any of our products, commercialization efforts for the product could be negatively affected, the approved product could lose its approval, and our business could be materially harmed. After regulatory approval and launch, our products are used over longer periods of time and by larger populations of patients than during pre-approval clinical trials. Additional clinical and non-clinical studies, such as for label expansions, new combinations or otherwise, may also be conducted after regulatory approval. For example, as part of FDA approval for CASGEVY, we are required to conduct post-marketing safety studies to assess certain long-term risks associated with the treatment. Additionally, when post-marketing studies involve our marketed products, or an active pharmaceutical ingredient thereof, they can raise new safety issues for our existing products. The subsequent discovery or appearance of previously unknown or underestimated safety or efficacy concerns with a product could negatively affect commercial sales of the product, result in reduced coverage or reimbursement by payors, cause reputational harm, government investigations, and/or lawsuits against us. Subsequent adverse safety events, as well as safety or efficacy issues affecting suppliers or competing products, may also lead to recalls, denial or withdrawal of regulatory approvals, non-renewal of conditional regulatory approvals, label changes, obligations to conduct additional or more extensive clinical trials or to implement a risk management plan, and reductions in market acceptance. Each of our CF products shares at least one active pharmaceutical ingredient with another of our products. If any of our CF products were to experience safety issues or labeling modifications, our other CF products may be adversely affected. For example, in December 2024, the FDA required us to modify the TRIKAFTA label by revising information regarding liver injury and liver failure and moving that information from the “warnings and precautions” section to a “boxed warning” section; the FDA required similar language in the ALYFTREK label. In addition, safety or efficacy issues affecting suppliers’ or competitors’ products also may reduce the market acceptance of our products. The discovery of safety events involving our products or public speculation about such events could limit or reduce product revenues and cause our stock price to decline or experience periods of volatility. Risks Related to Product Development The data from our product development activities may not support advancement or regulatory approval of our product candidates, or label expansions for our marketed products, or provide sufficient data to support the successful commercialization of our approved products. Extensive testing is required for our product candidates and for new indications of our marketed products. The outcomes of such clinical and non-clinical testing are highly uncertain, may not generate sufficient safety, efficacy, or other data, and may not support regulatory approval of our product candidates. Clinical and non-clinical testing, and in particular our later- stage clinical trials, are expensive and resource intensive. The data from our preclinical studies and other research activities have in the past and may in the future fail to predict results in clinical trials. For example, despite considerable non-clinical testing, the clinical study of VX-264 in T1D did not meet its efficacy endpoint. Similarly, results from earlier-stage clinical 28 trials may not be predictive of the results from later-stage clinical trials, or of the likelihood of approval of a product candidate for commercial sale. In addition, interim or preliminary data from a clinical trial may not be predictive of final results from the clinical trial and are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment and treatment continues, more patient data become available, or as patients continue other treatments for their disease. The data from our clinical programs may not support approval or successful commercialization of our product candidates, and we may be unable to recoup the significant research and development, clinical trial, acquisition-related, and other expenses incurred, which could have an adverse effect on our business, financial condition and results of operations, and/or cause our stock price to decline or experience periods of volatility. In addition, results of our clinical trials and findings from nonclinical studies could lead to abrupt changes in our development activities, including the possible cessation of development activities associated with a particular product candidate or program. For example, after VX-264 did not meet its efficacy endpoint, we announced that the program would not advance into further clinical studies. Failure to advance product candidates through clinical development would impair our ability to commercialize products, which could materially harm our business, financial condition and long-term prospects. Our research and development activities are highly regulated, and it is possible that the FDA and other regulatory authorities: • pause or halt our clinical trials based on their assessment of the potential or actual risks of continuing; • disagree with our conclusions about the results from our clinical trials; • require a dditional clinical trials, including confirmatory trials, or disagree with our clinical trial design or endpoint; • fail to approve the facilities or processes used to manufacture a product candidate, or our dosing or delivery methods; • grant marketing approval that is more restricted than anticipated, including limiting indications to narrow patient populations and imposing safety monitoring requirements, or risk evaluation and mitigation strategies; • withdraw approval of a product or indication, including when the product or indication was approved under an accelerated approval pathway and confirmatory studies were unsuccessful. Furthermore, we periodically release new information, including clinical data, regarding our products and product candidates, which may affect investors’ perceptions regarding our products and product candidates, and cause our stock price to decline or experience periods of significant volatility. For example, our stock price decreased in August 2025 after we released Phase 2 data for VX-993 and informed investors that the FDA did not see a path toward a broad peripheral neuropathic pain label for suzetrigine at that time. The timing of the release of information by us regarding our product development programs is often beyond our control and is influenced by the timing of receipt of communications from regulators and data from our clinical trials, among other things. If we fail to successfully conduct our clinical activities, our clinical trials or future regulatory approvals may be delayed or denied. Conducting clinical trials is a complex, lengthy and expensive process. Our ability to complete clinical trials on our anticipated timelines depends on numerous factors, including proper and efficient protocol design, regulatory and institutional review board approval, adequate patient enrollment and retention rates, and compliance with current good clinical practices. Delays or complications in clinical trials may arise from difficulties in enrolling or retaining patients, competition from other clinical trials, the occurrence of significant and/or unexpected adverse safety events, changes in regulatory requirements, supply chain issues or disruptions at clinical trial sites. Further, we may face additional challenges identifying and enrolling sufficient patients for clinical trials for rare diseases and cell and gene therapies due to small patient populations. With respect to cell and genetic therapies there may be additional concerns regarding the safety of these more novel therapeutic approaches to the treatment of these diseases. If we or our third-party clinical trial providers, including contract research organizations (“CROs”), do not successfully conduct and manage our clinical activities or adequately comply with regulatory requirements, our clinical trials may experience delays or increased costs, and the potential regulatory approval of a product candidate or 29 expansion of a label for a marketed product may be delayed or denied. Any delay in obtaining required regulatory approvals could adversely affect our ability to successfully commercialize a product candidate. Regulatory, Intellectual Property and Other Legal Risks The extensive regulatory framework governing the health care industry could adversely affect our ability to obtain approval and market our medicines and failure to comply with these regulations could result in fines, penalties or other non-monetary remedies. The health care industry is highly regulated and subject to complex and increasing regulations. U.S. federal and state regulators, including the FDA and comparable ex-U.S. regulators directly regulate our most critical business activities, including those related to research, development, manufacturing, and commercialization, as described in Item 1, “ Business – Government Regulation .” The process for obtaining regulatory approvals to market a product is costly and time consuming, and approvals may not be granted for future products, or additional indications of existing products, on a timely basis or at all. In addition, we cannot guarantee that we will remain compliant with applicable regulatory requirements once approval has been obtained. These requirements govern, among other things, our manufacturing practices, communications regarding our products, and reporting of safety events. Maintaining compliance with these extensive regulations is complex, expensive, and time consuming, and failure to comply may result in additional regulatory actions, including recalls, withdrawal or suspension of product approvals, civil and criminal charges, reputational harm, and fines, penalties, or other monetary or non-monetary remedies, including exclusion from receipt of payment from U.S. federal and state healthcare programs like Medicare and Medicaid. Compliance with the regulatory requirements for biologics and cell and gene therapies can be more burdensome, expensive and time-consuming than for other, better known or more extensively studied types of medicines, such as small molecules. Regulatory requirements governing cell and genetic therapy products have changed frequently and may continue to change in the future. Furthermore, risks relating to compliance with laws and regulations may be heightened as we continue to expand our global operations and enter new therapeutic areas with different patient populations, which may require different commercialization activities from those we currently utilize. We expect that regulation of the healthcare industry will continue to evolve through political and legal action, as future proposals to reform healthcare systems are considered by U.S. and foreign governments and regulatory authorities. We cannot predict when additional changes in the healthcare industry in general, or the pharmaceutical industry in particular, will occur, or what the impact of such changes may be. For example, new proposals or requirements regarding local manufacturing of pharmaceutical products, enhanced data security and privacy measures, sustainability, importation restrictions, embargoes, or trade sanctions may negatively impact our business. In addition, our development and commercialization activities could be harmed or delayed by a shutdown of the U.S. government or events that affect the manner in which the FDA operates. Commercialization of our products requires that we operate in compliance with applicable health care laws, including laws regulating promotional activities, prohibiting fraud and abuse and requiring reporting of government pricing information. We market our products to health care providers and provide promotional materials and informational programs regarding the use of each product in these patient populations. In jurisdictions where permitted, we also market our products to patients for whom the applicable product has been approved, as well as to their caregivers. If a regulatory authority interprets any of our conduct, including our marketing practices or patient support programs, as promotion of unapproved uses or otherwise false and misleading, it could request that we modify or withdraw our promotional materials or issue corrective advertising. It could also take enforcement action, such as issuing warning or untitled letters, prohibiting certain of our activities, seizing products, and imposing civil fines and criminal penalties. It is also possible that other federal, state, or foreign enforcement authorities might take action if they believe that the alleged conduct led to the submission and payment of claims for unapproved uses of our product, which could result in significant fines or penalties. Even if it is later determined we were not in violation of these laws, we may be faced with negative publicity, incur significant expenses defending our actions, and have to divert significant management resources from other matters. Our interactions with health care providers that prescribe or purchase our products are also subject to laws and regulations designed to prevent fraud and abuse in the sale and use of medicines and that place significant restrictions on the marketing practices of biopharmaceutical companies. The relationships between companies and health care providers are 30 scrutinized and have been the target of lawsuits and investigations alleging various problematic conduct, including submission of incorrect pricing information, improper promotion of pharmaceutical products, payments intended to influence the referral of health care business, submission of false claims for government reimbursement, and anticompetitive behavior. We are required to track and disclose financial interactions with health care providers and health care organizations, which may increase government and public scrutiny of these financial interactions. Failure to comply with these reporting requirements could result in significant civil monetary penalties. As we commercialize products for new patient populations and in new geographies, we will have more interactions with a broader set of healthcare providers and we must continue to expend significant efforts to establish, maintain and enhance systems and processes to comply with laws and regulations governing those interactions. Government price reporting and payment regulations are also complex, requiring us to continually assess the methods by which we calculate and report pricing in accordance with these obligations. Our methodologies for calculations are inherently subject to assumptions and may be subject to review and challenge by various government agencies, which may disagree with our interpretation. If the government disagrees with our reported calculations, we may need to restate previously reported data and could be subject to additional financial and legal liability. If we are unable to obtain, maintain and enforce our intellectual property rights, our business could be harmed. Our success depends, in significant part, on our ability to obtain, maintain, and enforce patents and intellectual property rights such as trademarks and copyrights that protect our products, product candidates, and technologies. In addition, we rely upon trade secret protection and contractual arrangements to protect certain of our proprietary information. Due to the complexity of the legal standards and factual questions relating to the patentability, validity, and enforceability of patents covering pharmaceutical and biotechnological inventions and the scope of claims made under these patents, our ability to obtain, maintain and enforce our patents is uncertain. The initial grant of patents or regulatory exclusivity in the U.S. and ex- U.S. markets depends upon decisions of the patent offices, courts, and governments in those countries. We may fail to obtain, defend or otherwise preserve patent and other intellectual property rights, including certain forms of regulatory exclusivity, and our current intellectual property rights or protections and those we obtain in the future may not be broad enough or sufficient to protect our commercial interests in all countries where we conduct business. In the U.S. and ex-U.S. markets, third parties have challenged and may continue to challenge, invalidate, or circumvent our patents and patent applications relating to our products, product candidates, and technologies. We have had and may continue to have disputes with respect to the rights to products, product candidates, and technologies developed in collaboration with other parties. If we cannot resolve disputes and obtain adequate intellectual property right protections, we may not be able to develop or market our products. Settlements of such proceedings could also result in reducing the period of exclusivity and other protections, resulting in a reduction in revenue from affected products. Any litigation, including litigation related to Abbreviated New Drug Applications (“ANDA”), litigation related to 505(b)(2) applications, interference proceedings to determine priority of inventions, derivations proceedings, inter partes review, oppositions to patents in foreign countries, litigation against our collaborators, or similar actions, could harm our business. Difficulties in, or preclusion from, protecting our intellectual property rights in foreign jurisdictions could substantially harm our business. Third-party manufacturers may be able to sell generic versions of our products in countries that do not provide effective mechanisms for enforcement of our patents or other intellectual property rights. For example, we have experienced a violation of our intellectual property rights in Russia, where a copy product that infringes our patents has been made available. In addition, many foreign countries have compulsory licensing laws under which a patent owner must grant licenses to third parties in certain circumstances. Compulsory licenses have been used in certain countries for market access purposes and, in some cases, as a cost-containment measure. Compulsory licenses issued for our patents may diminish or reduce revenue from those jurisdictions and negatively affect our results of operations. Third parties may also illegally distribute and sell counterfeit versions of our products. Copy or counterfeit products may not meet our rigorous manufacturing and testing standards and a patient who receives such product may be at risk for a number of dangerous health consequences. Our business and reputation could suffer harm as a result of illegally produced and distributed generic versions of our products, as well as counterfeit products sold under our brand name. The diversion of products from their authorized market into other channels may result in reduced revenues and negatively affect our profitability.31If we are not able to operate without infringing upon intellectual property rights of third parties, our business could be harmed. Our competitors seek to protect their products, product candidates and proprietary information through patents, trademarks, trade secrets, and copyrights. T hird parties have claimed and may claim in the future that our products or other activities infringe their intellectual property rights or that our employees have misappropriated their intellectual property rights . See also Item 1., Business – Intellectual Property of this Annual Report on Form 10-K. Resolving an intellectual property infringement or other claim can be costly and time consuming and may require us to enter into license agreements, which may not be available on commercially reasonable terms. A successful claim of patent infringement or other violation or misappropriation of intellectual property rights by a third party could subject us to significant damages and/or an injunction preventing the manufacture, sale, or use of the affected product or products, and/or require us to pay royalties or redesign our infringing products, which may be impossible or require substantial time and monetary expenditure. Our business has a substantial risk of product liability claims and other litigation liability. The testing, manufacturing, marketing and use of our products and product candidates involve substantial risk of product liability claims. These claims may be made directly by consumers, patients, healthcare providers, or others. Product liability claims and lawsuits and safety alerts or product recalls, regardless of their ultimate outcome, may decrease demand for our products or any product candidate for which we obtain marketing approval, and may have a material adverse effect on our business, results of operations, reputation, and our ability to market our products. Our product liability and clinical trial insurance may not provide adequate coverage against all potential liabilities. There continues to be a significant volume of government and regulatory investigations and litigation against companies operating in our industry, a s well as robust regulatory enforcement and whistleblower claims. Investigations into aspects of our business include inquiries, subpoenas, and other types of information demands from government and regulatory authorities. We are also involved in and are subject to other various legal proceedings, including litigation, and other dispute- related proceedings. These activities require significant financial and internal resources. This includes the arbitration initiated by the third party to whom the CFF has assigned its ALYFTREK royalty rights. Please see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Annual Report on Form 10-K for more information. The outcome of such legal proceedings, investigations or any other dispute-related proceedings are inherently uncertain and adverse developments or outcomes can result in significant expenses, monetary damages, penalties, injunctions, or other relief against us, and in the ALYFTREK arbitration, could result in higher future costs of goods if royalty fees are higher than anticipated. For a description of our litigation, investigation and other dispute-related matters, see Note P., Commitments and Contingencies — Legal Matters and Other Contingencies, included in this Annual Report on Form 10-K. We are subject to various and evolving laws and regulations governing the privacy and security of personal data. We are subject to a variety of evolving and developing data privacy and security laws and regulations in various jurisdictions related to the collection, storage, use, sharing, and security of personal data, including health information. Regulators globally are imposing data privacy and security requirements, such as the E.U.’s GDPR and other domestic data privacy and security laws, such as the California Consumer Privacy Act and the California Privacy Rights Act. These and other similar types of laws and regulations that have been or may be passed often include requirements with respect to personal information. Compliance with privacy laws and regulations is a rigorous and time-intensive process that may increase our cost of doing business or require us to change our business practices. Failure to comply may result in liability through government enforcement, private actions, civil and criminal fines and penalties, litigation, and reputational harm. Although we are not directly subject to HIPAA, we could face penalties, including criminal liability, for knowingly obtaining or disclosing protected health information from non-compliant HIPAA-covered entities. The commercialization of cell and genetic therapies involves processing more personal data than traditional therapies, increasing our risk exposure. Furthermore, the number of government investigations, enforcement actions, and class action lawsuits related to data security incidents and privacy violations, particularly focused on online data sharing, continue to increase. Government investigations typically require significant resources and generate negative publicity, which could harm our business and reputation.32Risks Related to Our Operations We may face manufacturing, supply, and distribution delays, difficulties, and disruptions, among other challenges, including at our third-party providers. We could be subject to significant supply interruptions for our commercial products or product candidates as a result of disruptions to our internal manufacturing capabilities or those of our suppliers or partners. Supply disruptions may result from a variety of factors, including shortages in product raw materials or labor, technical difficulties, regulatory inspections or restrictions, delays in construction, regulatory approval, and inspection of new facilities or the expansion of existing facilities, shipping or customs delays, inability to maintain compliance with quality or other regulations, including cGMP requirements, general global supply chain disruptions, and performance failures by us or any third-party manufacturer on which we rely. Disruption in our supply chain or manufacturing capabilities can result in shipment delays, inventory shortages, lot failures, product withdrawals, recalls and other interruptions in the commercial and clinical supply of our products and product candidates. Any such disruption with respect to our commercial products could result in a failure to meet market demand, could negatively affect our patients, could reduce our net product revenues and/or increase our costs. Any such disruption in the supply of product candidates to our clinical trials could negatively affect the subjects enrolled in our clinical trials and/or cause delays in our clinical trials and applications for regulatory approval. Additionally, unfavorable geopolitical events could affect our ability to interact with or conduct business with specific vendors within our global supply network or could prevent or delay the transportation of supplies or products to their planned destination. For example, we depend on China-based suppliers for portions of our supply chain. Finding alternative suppliers due to geopolitical developments or otherwise may not be feasible or could take a significant amount of time and involve significant expense due to the nature of our products and the need to obtain regulatory approvals. If we are unable to maintain and expand our supply chain and manufacturing capabilities, our ability to develop our product candidates and manufacture our products would be harmed. We continue to invest in and expand our manufacturing capabilities and supplier relationships to ensure the stability of our supply chains and to support the anticipated demand for our products. Establishing, managing and expanding our global manufacturing capabilities and supply chain, particularly as we enter new therapeutic modalities, requires significant financial commitment. This includes the creation and maintenance of numerous third-party contractual relationships upon which we rely. There can be no assurance that we will be able to identify, establish and maintain additional manufacturers or capacity for our product candidates and products on a timely basis, on commercially reasonable terms, or at all. The foregoing risks may be heightened where our products and the materials that we utilize in our operations are manufactured by only one supplier or at only one facility. In addition, in the course of providing its services, a contract manufacturer may develop process technology related to the manufacture of our products or product candidates that the manufacturer owns, either independently or jointly with us. This would increase our reliance on that manufacturer or require us to obtain a license from that manufacturer to have our products or product candidates manufactured by other suppliers utilizing the same process. In addition, we and our CMOs and corporate partners are subject to cGMP, as well as comparable regulations in other jurisdictions. Manufacturing operations are also subject to routine inspections by regulatory agencies. Even after a supplier is qualified by the regulatory authority, the supplier must continue to expend time, money and effort in the area of production and quality control to maintain full compliance with applicable regulatory requirements, including cGMP. If, as a result of these inspections, a regulatory authority determines that the equipment, facilities, laboratories or processes do not comply with applicable regulations and conditions of product approval, the regulatory authority may suspend the manufacturing operations. There can be no assurance that we or our CMOs and corporate partners will be able to remedy any deficiencies cited by FDA or other regulatory agencies in their inspections. Furthermore, the manufacturing and logistics for drug products are highly complex and can require significant investment, including to scale-up manufacturing processes and to secure capacity at third parties with expertise to meet our requirements. This capacity may be limited by the number of other clinical trials and commercial manufacturing ongoing for other companies seeking similar support. There are many risks that could result in delays and additional costs, including the need to hire and train qualified employees and obtain access to necessary equipment and third-party technology. Additionally, even with relevant experience and expertise, drug manufacturers often encounter difficulties in scale-up and production, including difficulties with production costs and yields, quality control, and compliance with federal, state and foreign33regulations, which can prevent manufacturers from completing clinical trials or commercializing products on a timely or profitable basis, if at all. Reliance on third-party relationships could adversely affect our business. Our business depends on relationships with third parties, including activities critical to research, development, manufacturing, commercialization, and technology. For example, we rely on third parties such as CROs for the day-to-day management and oversight of our clinical trials, on CMOs for active ingredient manufacturing and finishing operations, and on logistics providers for the distribution of our products. We are expanding our relationships with CROs, CMOs, and other third parties as we enter markets in which we have no or limited experience. Failure by any of our third parties to meet their contractual, regulatory, or other obligations, any disruption in the relationship between Vertex and a third party upon whom we rely, or the failure of a third party to conduct activities in accordance with our expectations, could adversely affect the relevant research, development, manufacturing, commercial, or administrative activity and our business. The foregoing risks may be heightened as a result of the limited number or specialized nature of certain third parties, as we may not be able to replace such third party in a timely manner, on commercially reasonable terms, or at all. The third parties upon which we rely are subject to their own operational and financial risks, as well as other difficulties, which, if realized, could negatively affect our business. If any of our third parties violate, or are alleged to have violated, any laws or regulations, including anti-corruption or anti-bribery regulations, the GDPR, or other laws and regulations, during the performance of their obligations to us, we could suffer financial and reputational harm or other negative outcomes, including possible legal consequences. If we fail to scale our operations to accommodate growth, our business may suffer. As we continue to expand our global operations and capabilities, we face increasing demands on our management and infrastructure. To effectively manage our growing business, we need to: • implement and clearly communicate corporate-wide strategies and effectively prioritize resources; • enhance our operational and financial infrastructure, including data and information controls; • effectively leverage technology and automation where appropriate to enable efficient growth and remain competitive; • improve our administrative, financial and management processes, including decision-making processes and budget prioritization; • effectively grow, train and manage our global employee base; and • expand our compliance and legal resources. A variety of risks associated with operating in foreign countries could materially adversely affect our business. Our global operations subject us to risks that could adversely affect our business and revenue. In addition to the ex-U.S. risks we face with respect to compliance with local laws and regulatory requirements, pricing and reimbursement, intellectual property, manufacturing capabilities and supply chain, foreign exchange risks, and reliance on third parties, risks associated with operating a global biotechnology company include the potential for: • economic weakness, including recession and inflation, or political instability globally or with respect to particular foreign economies and markets; • business interruptions resulting from geo-political actions, including war and terrorism; • import and export licensing requirements, tariffs, trade barriers, and other trade and travel restrictions, the risks of which appear to have increased in the current political environment; • credit risks related to our customers, which may be higher in less developed markets; and • global or regional public health emergencies.34If any of the above risks were to occur, our revenues, results of operations, financial condition or business could be materially harmed. Current or future U.S. legislation, including executive orders, or other new changes in laws, regulations or policies in the U.S. or other countries could negatively impact our business by increasing costs, decreasing demand for our products, and increasing government cost controls, among other risks. For example, U.S. legislation has been introduced to limit certain U.S. biotechnology companies from using equipment or services from select Chinese biotechnology companies, and others in Congress have advocated for limitations on those Chinese service providers’ ability to engage in business in the U.S. We cannot predict what actions may ultimately be taken with respect to trade relations between the United States and China or other countries, what products and services may be subject to such actions, the effective date or duration of such actions, or what actions may be taken by the other countries in response to actions by the United States. If we are unable to obtain or use services from existing service providers or become unable to export or sell our products to any of our customers or service providers, our business could be materially and adversely affected. A breakdown or breach of our information technology systems, or unauthorized access to confidential information could adversely affect our business. We maintain and rely extensively on information technology systems and network infrastructures, internally and with third parties for the effective operation of our business. We collect, store, and transmit confidential information, including personal information, financial information and intellectual property . Disruption, infiltration, or failure of our information technology systems because of software or hardware malfunctions, computer viruses, cyber-attacks, employee theft or misuse, power disruptions, natural disasters or accidents could cause breaches of data security and/or loss of critical data, which in turn could materially adversely affect our business. Cyber-attacks and incidents are increasing in their frequency, sophistication, and intensity, and are difficult to detect. Cyber-attacks are carried out by well-resourced groups and individuals with a wide range of motives and expertise. Due to the nature of some cyber-attacks and incidents, there is a risk that they may remain undetected for a period of time. Recent developments in the threat landscape include the use of adversarial artificial intelligence techniques and machine learning, as well as an increased number of cyber extortion attacks with higher financial ransom demand amounts and increasing sophistication and variety of ransomware techniques. Cyber-attacks and incidents also include manufacturing, hardware or software supply chain attacks, which could cause disruption to or a delay in the manufacturing of our products or product candidates, or lead to data privacy or security breach. We use cloud technologies and any failure by cloud or other technology service providers to adequately safeguard their systems and prevent cyber-attacks or data privacy incidents could disrupt our operations and result in misappropriation, corruption, or loss of confidential or proprietary information. The third parties upon which we rely face similar risks and when they experience a security breach of their systems, our security can be adversely affected. Like many companies, we have experienced immaterial cybersecurity incidents, including temporary service interruptions of third-party suppliers. There can be no assurance that our efforts to protect our data and information systems will prevent breakdowns or breaches in our systems that could adversely affect our business. While we maintain cyber liability insurance, this insurance may not be sufficient to cover the financial, legal, business or reputational losses that may result from an interruption or breach of our systems and those of critical third parties. Cybersecurity incidents can cause the loss of critical or sensitive information, including personal information, and could give rise to legal liability and regulatory action under data protection and privacy laws. In addition, we face certain risks as we seek to leverage artificial intelligence to optimize productivity and efficiency in various aspects of the organization. Flaws, biases, or malfunctions in these systems could lead to operational disruptions, data loss, or erroneous decision-making, impacting our operations, financial condition, and reputation. Ethical and legal challenges may arise, including biases or discrimination in generated outcomes, non-compliance with data protection regulations and laws specifically governing the use of artificial intelligence systems and tools, and lack of transparency. Furthermore, the deployment of artificial intelligence systems could expose us to increased cybersecurity threats, such as data breaches and unauthorized access. We also face competitive risks if we do not implement artificial intelligence or other machine learning technologies in a timely fashion.35Our operations may be disrupted by the occurrence of a natural disaster, catastrophic event, or by other serious accidents occurring at our facilities. Most of our operations, including our research and development activities, are conducted in a limited number of facilities. If any of our major facilities were to experience a catastrophic loss due to an earthquake, flood, severe storms, fire or similar event, our operations would be seriously harmed. For example, our corporate headquarters, as well as additional leased space that we use for certain logistical and laboratory operations and manufacturing, are located in a flood zone along the Massachusetts coast. If we are unable to effectively implement our business continuity plans, we may experience delays in recovery of data and/or an inability to perform vital corporate functions, which could result in a significant disruption in our operations, large expenses to repair or replace the facility and/or the loss of critical data. Additionally, we use hazardous materials in some of our facilities, and any accident, injury or other loss related thereto could result in substantial liability. Our property or other relevant insurance may not be sufficient to cover all potential losses that may result from an interruption to our operations or damage resulting from these risks. Strategic and Financial Risks Our business development strategy, including strategic transactions and collaborations, may not be successful, and there may be delays or failures in realizing the anticipated benefits of these activities. As part of our business strategy, we seek to enter into strategic transactions to acquire, license, or collaborate with other entities, in each case that have potential to complement and advance our ongoing research, development, manufacturing, and commercialization efforts. Over the last several years we have engaged in a number of strategic transactions and collaborations, including our acquisition of Alpine and its lead asset, povetacicept, as well as several smaller transactions and collaboration arrangements. See also Item 1. , Business – Strategic Transactions of this Annual Report on Form 10-K. Our future transactions and collaborations may be similar to prior transactions, may be structured differently from prior transactions, or may involve larger transactions or later-stage assets. We face significant competition for potential strategic transactions and collaborations from a variety of other companies, some of which have significantly more financial resources and experience in business development activities. We may not complete future transactions in a timely manner, or at all, including due to the possibility that a governmental entity or regulatory body may delay or refuse to grant approval for the consummation of the transaction. We may not realize the anticipated benefits of our completed or future strategic transactions. The product candidates or products contemplated by those transactions may be delayed or terminated at any point during research or clinical development. Even if a product is approved, we may not be able to successfully commercialize it. As a result, we may fail to generate expected revenue growth or income contribution within the anticipated timeframe or at all. We also face risks that we: • may not effectively integrate acquired assets or businesses into our ongoing business; • may incur additional expenses or fail to achieve anticipated cost savings related to the strategic transactions; • may incur impairment charges related to assets acquired in any such transactions; or • may acquire unanticipated liabilities. In addition, future strategic transactions could result in potentially dilutive issuances of equity securities or the incurrence of debt. We continue to collaborate with outside partners on research, development, manufacturing, and/or commercialization activities with respect to product candidates and products. We face the same research, development, manufacturing, and commercialization risks with respect to product candidates and products that are subject to collaborations as with product candidates and products that we have developed ourselves. We face additional risks in connection with our current and future collaborative arrangements, including with respect to the performance of the collaborator and their compliance with contractual obligations.36Our effective tax rate fluctuates, and changes in tax laws, regulations and treaties, unfavorable resolution to the tax positions we have taken, and exposure to additional income tax liabilities could have a material impact on our future taxable income. Our effective tax rate is derived from a combination of applicable tax rates in the various places that we operate globally. Our effective tax rate may be different than experienced in the past due to numerous factors, including: • changes in the mix of our profitability from country to country; • tax authority examinations/audits of our tax filings; • adjustments to the value of our uncertain tax positions; • changes in accounting for income taxes; and • changes in tax laws or modifications of treaties in various jurisdictions. Any of these factors could cause us to experience an effective tax rate that is significantly different from previous periods or our current expectations. For example, actions taken with respect to tax-related matters by associations such as the Organisation for Economic Co-operation and Development and the European Commission could influence tax laws in jurisdictions in which we operate, such as the enactments by both E.U. and non-E.U. member countries of a global minimum tax. We are subject to ongoing tax audits in various jurisdictions, and local tax authorities may disagree with certain positions we have taken and assess additional taxes. We regularly assess the probable outcomes of these audits to determine the appropriateness of our tax provision, and we have established contingency reserves for material tax exposures. However, there can be no assurance that we will accurately predict the outcomes of these disputes or other tax audits or that issues raised by tax authorities will be resolved at a financial cost that does not exceed our related reserves and the actual outcomes of these disputes and other tax audits could have a material impact on our results of operations or financial condition. Changes in foreign currency rates, interest rate risks, the value of our investment portfolio, and inflation affect our results of operations and financial condition. Fluctuations in currency exchange rates and interest rates, changes in the value of our investment portfolio, and inflation have affected and will continue to affect our cash flows, results of operations, and financial condition. The exchange rates among our reporting currency, the U.S. dollar, and the currencies in which we do business are volatile and our efforts to mitigate against these risks may not be successful. We invest our available cash in a range of investments, including investments in cash equivalents and debt securities, and fluctuations in interest rates, among other factors, could materially negatively affect the value of this investment portfolio. In addition, systemic economic downturns, as well as inflationary pressures, such as those observed in recent periods, may adversely impact our business and financial results. See also Item 7A., Quantitative and Qualitative Disclosures About Market Risk of this Annual Report on Form 10-K. Future indebtedness could materially and adversely affect our financial condition, and the terms of our credit agreements impose restrictions on our business. If we borrow under our current credit agreement or any future credit agreements, or otherwise issue or incur additional debt, such indebtedness could have important consequences to our business. The credit agreement requires that we comply with certain financial covenants, including a consolidated leverage ratio covenant and negative covenants, restricting or limiting our ability and the ability of our subsidiaries to, among other things, incur additional indebtedness, grant liens, engage in certain investment, acquisition and disposition transactions, and enter into transactions with affiliates. As a result, we may be restricted from engaging in business activities that may otherwise improve our business. Failure to comply with the covenants could result in an event of default that could trigger acceleration of our indebtedness. If we incur additional indebtedness, the risks related to our business and our ability to service or repay our indebtedness would increase. There can be no assurance that we will repurchase shares of common stock or that we will repurchase shares at favorable prices. In May 2025, our Board of Directors approved a share repurchase program pursuant to which we are authorized to repurchase up to $4.0 billion of our common stock from time to time through open market or privately negotiated transactions, of which $618.5 million has been repurchased as of December 31, 2025 . Our stock repurchases will depend37upon, among other factors, market conditions, our cash balances and potential future capital requirements, results of operations, financial condition, and other factors that we may deem relevant. We can provide no assurance that we will repurchase stock at favorable prices, if at all.General Risk FactorsOur stock price is volatile. Our stock price is subject to significant fluctuations. From January 1, 2025 to December 31, 2025 , our common stock traded between $362.50 and $519.68 per share. Our future stock price could be significantly and adversely affected by: • announcements o r investor analyst commentary regarding the clinical development of our product candidates a s new information, including efficacy and safety information becomes available; • our financial guidance and/ or financial results, including quarterly and annual fluctuations resulting from factors such as the timing and amount of our revenues and expenses ; and • other factors including the risks described in these “ Risk Factors .” Fluctuations in our stock price can result in substantial losses for shareholders. Following periods of volatility in the market price of a company’s securities, shareholder derivative lawsuits and securities class action litigation are common. Such litigation, if instituted against us or our officers and directors, could result in substantial costs and other harm to our business. If we fail to attract and retain skilled employees, our business could be materially harmed. We must attract and retain highly qualified and trained scientists, as well as employees with experience in the development, manufacture, and commercialization of medicines, including biologic and cell and genetic therapies. We face intense competition for such talent from our competitors, other companies, academic institutions, and other organizations throughout our industry, especially with respect to employees with expertise in cell or genetic therapies. Our compensation program, including equity awards, may not be sufficient to retain employees, especially if our stock price declines or other employers offer more attractive opportunities. Our ability to commercialize our products and achieve our research and development objectives depends on our ability to respond effectively to these demands. If we are unable to hire and retain qualified personnel, our ability to advance our pipeline, commercialize our products, and achieve our business objectives could be materially adversely affected. The use of social media platforms presents risks and challenges. Social media is increasingly used by patients, advocacy groups, and other third parties to discuss our products and product candidates. Social media posts may include statements about efficacy or adverse events that could create reporting obligations or regulatory scrutiny. Our employees’ use of social media also presents risks, including potential noncompliance with legal or regulatory requirements, inappropriate disclosure of confidential information or personal information, and loss of intellectual property. In addition, misinformation, negative sentiment, or impersonation of our business on social media could cause reputational damage or otherwise harm our business. Failure to appropriately manage these risks could result in regulatory actions, liability, or other adverse consequences. We have adopted provisions in our articles of organization and by-laws and are subject to Massachusetts corporate laws that may frustrate any attempt to remove or replace members of our board or to effectuate certain types of business combinations involving us. Provisions of our articles of organization, by-laws and Massachusetts state laws may frustrate any attempt to remove or replace members of our current Board of Directors and may discourage certain types of business combinations involving us. Our by-laws allow the Board of Directors to adjourn any meetings of shareholders prior to the time the meeting has been convened. We may issue shares of any class or series of preferred stock in the future without shareholder approval and upon such terms as our Board of Directors may determine. The rights of the holders of common stock will be subject to, and may be adversely affected by, the rights of the holders of any class or series of preferred stock that may be issued in the future. Massachusetts state law also prohibits us from engaging in specified business combinations with an interested stockholder, subject to certain exceptions, unless the combination is approved or consummated in a prescribed manner, and places 38 restrictions on voting by any shareholder who acquires 20% or more of the aggregate shareholder voting power without approval by non-interested shareholders. As a result, shareholders or other parties may find it difficult to remove or replace our directors or to effectuate certain types of business combinations involving us.SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTSThis Annual Report on Form 10-K, including the descriptions of our Business set forth in Part I, Item 1, our Risk Factors set forth in Part I, Item 1A, and our Management’s Discussion and Analysis of Financial Condition and Results of Operations set forth in Part II, Item 7, contains 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; • our expectations regarding clinical trials, including expectations for patient enrollment, development timelines, the expected timing of data from our ongoing and planned clinical trials, and regulatory authority filings and other submissions for our therapies; • our beliefs, expectations, and plans with respect to the commercial launches of CASGEVY for the treatment of SCD and TDT, ALYFTREK for the treatment of CF, and JOURNAVX for the treatment of moderate-to-severe acute pain, and the anticipated launch of povetacicept for the treatment of IgAN ; • our ability to maintain and obtain adequate reimbursement for our products and product candidates, our ability to launch, commercialize and market our products or any of our other therapies for which we obtain regulatory approval, and our ability to obtain label expansions for existing therapies; • our expectations regarding our ability to continue to grow our CF business by increasing the number of people with CF eligible and able to receive our medicines and providing improved treatment options for people who are already eligible for one of our medicines, and our beliefs that t he majority of people with CF will transition to ALYFTREK over time ; • our beliefs regarding the support provided by clinical trials and preclinical and nonclinical studies of our therapies for further investigation, clinical trials or potential use as a treatment, including with respect to povetacicept as a pipeline-in-a-product and as a potential best-in-class approach for the treatment of IgAN, pMN, and gMG; • the data that will be generated by ongoing and planned clinical trials and the ability to use that data to advance compounds, continue development, support regulatory filings, or accelerate regulatory approval, including our plans to complete the full submission for potential accelerated approval of povetacicept in IgAN in the first half of 2026 and to share data from the interim analysis of the Phase 2/3 clinical trial of inaxaplin in AMKD in late 2026 or early 2027 and from the Phase 2 trial in people with AMKD in mid-2026; • our beliefs that ALYFTREK will provide additional clinical benefits to eligible people with CF, regarding the durable efficacy and effectiveness of CASGEVY as one-time functional cure for people with SCD and TDT, and regarding the clinical benefits of JOURNAVX without the evidence of the several limitations of other available therapies; • our plans 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;• our beliefs regarding the approximate patient populations for the disease areas on which we focus;• the potential benefits and therapeutic scope of our acquisitions and collaborations, including our acquisition of Alpine and its lead asset, povetacicept, its potential to become a pipeline-in-a-product , and our expectations regarding our agreements with Zai, Ono and WuXi; • our expectations regarding the lower royalty burden for ALYFTREK; • our plans to expand, strengthen, and invest in our global supply chains and manufacturing infrastructure and capabilities, including for biologic and cell and gene therapies; • the effects of import and export licensing requirements, tariffs, trade barriers, and other trade and travel restrictions; • potential business development activities, including the identification of potential collaborative partners or acquisition targets; 39 • our ability to expand and protect our intellectual property portfolio and otherwise maintain exclusive rights to products; • our expectations or beliefs regarding any legal proceedings in which we are involved, including any litigation, arbitration or other similar proceedings involving our products, product candidates or activities; • the establishment, development and maintenance of collaborative relationships, including potential milestone payments or other obligations; • potential fluctuations in foreign currency exchange rates and the effectiveness of our foreign currency management program; • our expectations regarding the amount of cash to generated by operations, our cash balance and expected generation and interest income; • 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 product candidates to address serious diseases and significant unmet medical needs; • the effectiveness of our governance, plans and strategy with respect to managing cybersecurity risks and other threats to our information technology systems; • our ability to effectively implement artificial intelligence systems and tools;• our ability to attract and retain skilled personnel; • our expectations involving governmental cost containment and other regulatory efforts; • our expectations surrounding the competitive landscape facing our products and product candidates; 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, set forth in Part I, Item 1A, and elsewhere in this report 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.

Item 7 · Management's Discussion & Analysis

+724 paragraphs −234 paragraphs ~234 changed

FY 2023-12-31 (earlier)

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Our discussion and analysis of our financial condition and results of operations for 2023 as compared to 2022 are discussed below. For a discussion of our financial condition and results of operations for 2022 as compared to 2021, please refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2022 Annual Report on Form 10-K, except as set forth below.OVERVIEWWe are a global biotechnology company that invests in scientific innovation to create transformative medicines for people with serious diseases, with a focus on specialty markets. We have four approved medicines that treat the underlying cause of cystic fibrosis (“CF”), a life-threatening genetic disease, and one approved therapy that treats severe sickle cell disease (“SCD”) and transfusion dependent beta thalassemia (“TDT”), life shortening inherited blood disorders. Our pipeline includes clinical-stage programs in CF, sickle cell disease, beta thalassemia, acute and neuropathic pain, APOL1-mediated kidney disease, type 1 diabetes, myotonic dystrophy type 1 and alpha-1 antitrypsin deficiency. Our triple combination regimen, TRIKAFTA/KAFTRIO (elexacaftor/tezacaftor/ivacaftor and ivacaftor), was approved in 2019 in the United States (“U.S.”) and in 2020 in the European Union (“E.U.”). Collectively, our four medicines are being used to treat nearly three quarters of the approximately 92,000 people with CF in North America, Europe, and Australia. We are evaluating our CF medicines in additional patient populations, including younger children, with the goal of having small molecule treatments for all people who have at least one mutation in their cystic fibrosis transmembrane conductance regulator (“CFTR”) gene that is responsive to our CFTR modulators. We also are pursuing messenger ribonucleic acid (“mRNA”) and genetic therapies for people with CF who do not make full-length CFTR protein and, as a result, cannot benefit from our current CF medicines. CASGEVY (exagamglogene autotemcel or “exa-cel”), an ex-vivo, non-viral CRISPR/Cas9 gene-edited cell therapy, was recently approved in the U.S., the E.U., the United Kingdom (“U.K.”), the Kingdom of Saudi Arabia (“Saudi Arabia”), and the Kingdom of Bahrain (“Bahrain”) for the treatment of people 12 years of age and older with SCD and TDT. We estimate approximately 35,000 people with severe SCD or TDT could be eligible for CASGEVY in the U.S. and Europe, with additional people in Saudi Arabia and Bahrain. In addition, we are preparing for near-term launches of potential new products in CF and acute pain.Financial HighlightsRevenues In 2023, our net product revenues increased to $9.9 billion as compared to $8.9 billion in 2022. The increase was primarily due to the continued strong uptake of TRIKAFTA/KAFTRIO in ex-U.S. markets and label extensions in younger age groups, and the continued performance of TRIKAFTA in the U.S., following the launch of TRIKAFTA in children with CF 2 to 5 years of age.ExpensesOur total research and development (“R&D”), acquired in-process research and development (“AIPR&D”), and selling, general and administrative (“SG&A”) expenses increased to $4.8 billion in 2023 as compared to $3.6 billion in 2022. The increase was primarily due to increased AIPR&D, the progression of several product candidates in mid- to late-stage clinical development and costs to support global launches. Cost of sales was 13% and 12% of our net product revenues in 2023 and 2022, respectively.CashOur total cash, cash equivalents and marketable securities increased to $13.7 billion as of December 31, 2023 as compared to $10.9 billion as of December 31, 2022 primarily due to our income from operations driven by our net product revenues, and interest income, partially offset by our income tax payments and repurchases of our common stock. 66Note: Charts above may not add due to rounding. Business Updates Marketed Products Cystic FibrosisWe expect to grow our CF business with (i) continued uptake by patients in countries where we are early in our launch, such as those with recently achieved reimbursement agreements, (ii) label expansions, including into younger patient groups, and (iii) growth in the number of people living with CF. Recent progress in activities supporting continued uptake and label expansions is included below: • The U.S. Food and Drug Administration (“FDA”), the European Commission, the Medicines and Healthcare Products Regulatory Agency (“MHRA”), and Health Canada approved TRIKAFTA/KAFTRIO for the treatment of children with CF 2 to 5 years of age who have at least one F508del mutation in the CFTR gene. • The European Medicines Agency (“EMA”) validated the Marketing Authorization Application (“MAA”) extension for KAFTRIO in combination with ivacaftor to include people with CF who have a rare mutation in the CFTR gene that is responsive based on clinical and/or in vitro data, including the N1303K mutation. We plan to submit regulatory filings for these mutations in Australia, Brazil, Canada, New Zealand and Switzerland, and we plan to submit for regulatory approval of a subset of these mutations not currently included in the U.S. TRIKAFTA label to the FDA. • The FDA and the European Commission approved the use of ORKAMBI for children with CF 12 to less than 24 months of age who are homozygous for the F508del mutation in the CFTR gene. • The FDA and MHRA approved KALYDECO in children with CF from 1 month to less than 4 months of age.Sickle Cell Disease and Beta Thalassemia• CASGEVY is now approved in the U.S., the E.U., the U.K., Saudi Arabia, and Bahrain for people 12 years of age and older with SCD or TDT. • The French National Authority for Health (“HAS”) approved our request for the implementation of an early access program (“EAP”) for the use of CASGEVY to treat eligible people with TDT from 12 to 35 years of age. We are also pursuing an EAP submission for SCD in France and we expect to receive the outcome of this decision in the coming months. • Our regulatory submission for CASGEVY in both SCD and TDT is currently under review in Switzerland. We expect to submit for regulatory approval of CASGEVY in Canada in the first half of 2024. 67 • We have activated 12 authorized treatment centers (“ATCs”) in the U.S. and three ATCs in Europe. We are aiming to activate approximately 50 ATCs in the U.S. and 25 in Europe. We also have activated one of two planned ATCs in Saudi Arabia. • We entered into an agreement with Synergie Medication Collective, a medication contracting organization, which covers approximately 100 million people, to provide access to CASGEVY. Potential Near-Term Launch Opportunities We are preparing for the following near-term launches of potential new products: Vanzacaftor/tezacaftor/deutivacaftor in CF • We completed the pivotal SKYLINE 102 and SKYLINE 103 clinical trials, which evaluate the efficacy and safety of our new once-daily investigational triple combination vanzacaftor/tezacaftor/deutivacaftor relative to TRIKAFTA in people with CF 12 years of age and older, and the RIDGELINE clinical trial of vanzacaftor/tezacaftor/deutivacaftor in children with CF 6 to 11 years of age, at the end of 2023. • In February 2024, we announced positive data from this Phase 3 program evaluating the new triple combination regimen. We expect to submit global regulatory filings by mid-2024, including a New Drug Application (“NDA”) to the FDA, using a priority review voucher, and MAAs to the EMA and Health Canada. VX-548 in Acute Pain • We completed the pivotal program evaluating our lead compound, VX-548, for the treatment of moderate-to-severe acute pain, which included one randomized controlled Phase 3 pivotal trial in abdominoplasty, one randomized, controlled Phase 3 clinical trial in bunionectomy, and one single-arm safety and effectiveness clinical trial. In January 2024, we announced positive results from these clinical trials and we announced our plans to submit an NDA to the FDA for VX-548 in moderate-to-severe acute pain by mid-2024. • In the U.S., VX-548 has been granted Breakthrough Therapy and Fast Track designations for moderate-to-severe acute pain. Pipeline We continue to advance a diversified pipeline of potentially transformative medicines for serious diseases utilizing a range of modalities. Recent and anticipated progress in activities supporting these efforts is included below: Cystic Fibrosis • In collaboration with Moderna, we are developing VX-522, a CFTR mRNA therapeutic for the treatment of people with CF who do not produce full-length CFTR protein. We completed dosing in the single ascending dose part of the clinical trial for VX-522 and initiated the multiple ascending dose part of the clinical trial in late 2023. We expect to share data from this clinical trial in late 2024 or early 2025. In the U.S., the FDA has granted Fast Track designation for VX-522. • We are investigating a portfolio of other small molecules targeting the underlying cause of CF with the aim of achieving carrier levels of CFTR function. We also are investigating additional potential treatments for people with CF who do not make full-length CFTR protein and cannot benefit from CFTR modulators. Sickle Cell Disease and Beta Thalassemia • We have completed enrollment in two global Phase 3 clinical trials evaluating CASGEVY in children 5 to 11 years of age with SCD or TDT. • We continue to work on preclinical assets for myeloablative conditioning agents that would have milder side-effects and could be used in connection with CASGEVY, which could broaden the eligible patient population. 68 Peripheral Neuropathic Pain • We have completed the Phase 2 dose-ranging clinical trial evaluating VX-548 in patients with diabetic peripheral neuropathy, a common form of chronic peripheral neuropathic pain, and announced positive results from this clinical trial. We plan to meet with regulators in the first quarter of 2024 and then we expect to advance VX-548 for the treatment of diabetic peripheral neuropathy into pivotal development. • We initiated a second Phase 2 clinical trial evaluating VX-548 in patients with peripheral neuropathic pain in December 2023. This clinical trial will evaluate VX-548 in patients with lumbosacral radiculopathy, a second type of peripheral neuropathic pain. Screening, enrollment and dosing are underway in this clinical trial. • We expect to initiate a Phase 2 clinical trial evaluating the oral formulation of VX-993, a next generation NaV1.8 inhibitor, for the treatment of peripheral neuropathic pain in 2024.Acute Pain• We have completed a Phase 1 clinical trial evaluating an oral formulation of VX-993, a next generation NaV1.8 inhibitor. We expect to initiate a Phase 2 clinical trial evaluating the oral formulation of VX-993 for the treatment of moderate-to-severe acute pain in the second half of 2024. • We anticipate completing IND-enabling studies and filing an Investigational New Drug Application (“IND”) for an intravenous formulation of VX-993 for the treatment of moderate-to-severe acute pain in 2024. • We are advancing multiple NaV1.7 inhibitors, including in combination with NaV1.8 inhibitors, through research and earlier stages of development for both acute and peripheral neuropathic pain.APOL1-Mediated Kidney Disease• Inaxaplin is our small molecule for the treatment of APOL1-mediated kidney disease (“AMKD”), including APOL1-mediated focal segmental glomerulosclerosis (“FSGS”). We completed enrollment in the Phase 2B dose-ranging portion of the pivotal program for inaxaplin, a single Phase 2/3 clinical trial in patients with AMKD. W e expect to select a dose and begin the Phase 3 portion of the clinical trial in the first quarter of 2024. • The FDA granted Breakthrough Therapy designation to inaxaplin for APOL1-mediated FSGS and the EMA granted Orphan Drug and PRIME designations to inaxaplin for AMKD.Type 1 Diabetes• VX-880 is an allogeneic stem cell-derived, fully differentiated, insulin-producing islet cell replacement therapy, using standard immunosuppression to protect the implanted cells. We are evaluating VX-880 as a potential treatment for type 1 diabetes (“T1D”) in a sequential, three-part Phase 1/2 clinical trial. We have completed enrollment in Part C of the clinical trial. We have placed the clinical trial on a protocol-specified pause, pending review of the totality of the data by an independent data monitoring committee and global regulators, following two patient deaths, both unrelated to VX-880. • Our second Phase 1/2 program in T1D evaluates VX-264, which encapsulates the same VX-880 cells in a novel device designed to eliminate the need for immunosuppression. This trial is a sequential, multi-part study to evaluate the safety, tolerability and efficacy of VX-264. We have completed Part A of the clinical trial and Part B has been initiated in multiple centers and countries. • Our hypoimmune islet cell program uses CRISPR/Cas9 technology to gene-edit the same allogeneic stem cell-derived, fully differentiated islets used in the VX-880 and VX-264 programs. The goal is to cloak the cells from the immune system to explore another possible path to eliminate the need for immunosuppressive therapy. This program continues to progress through the research stage. 69 Myotonic Dystrophy Type 1 • We have established a collaboration with Entrada Therapeutics, Inc. (“Entrada”) to address the functional impact of the causal mutation in the gene that causes myotonic dystrophy type 1 (“DM1”), which includes VX-670. VX-670 is designed to enable efficient intracellular delivery of an oligonucleotide, which we believe will address the underlying pathophysiology and restore normal cell function. • We initiated a Phase 1/2 clinical trial evaluating VX-670 in patients with DM1. The clinical trial is active and enrolling in Canada and will initiate in the U.K. in the near term. Alpha-1 Antitrypsin Deficiency • We are working to address the underlying genetic cause of alpha-1 antitrypsin (“AAT”) deficiency (“AATD”). We are developing novel small molecule correctors of Z-AAT protein folding, with the goal of enabling the secretion of functional AAT into the blood and addressing both the lung and the liver aspects of AATD. We continue to enroll and dose healthy volunteers in Phase 1 clinical trials evaluating VX-634 and VX-668, our next-wave investigational molecule AAT correctors with significantly improved potency and drug-like properties as compared to the first-generation AATD correctors.Our Business EnvironmentIn 2023, our net product revenues came from the sale of our medicines for the treatment of CF. Our CF strategy involves continuing to develop and obtain approval and reimbursement for treatment regimens that will provide benefits to all people with CF and increasing the number of people with CF eligible and able to receive our medicines, including through label expansions, expanded reimbursement, and the development of new medicines. We are advancing our pipeline of product candidates for the treatment of serious diseases outside of CF, including CASGEVY, which recently received marketing approvals in the U.S., the E.U., the U.K., Saudi Arabia, and Bahrain for the treatment of SCD and TDT. We anticipate broad access with government and commercial payors for CASGEVY in the U.S., and we anticipate early access programs initially, such as the recently approved early access program for TDT in France, and are pursuing long-term reimbursement agreements outside of the U.S. Our strategy is to combine transformative advances in the understanding of causal human biology and the science of therapeutics to discover and develop innovative medicines. This approach includes advancing multiple compounds or therapies from each program, spanning multiple modalities, into early clinical trials to obtain patient data that can inform selection of the most promising therapies for later-stage development, as well as to inform discovery and development efforts. We aim to rapidly follow our first-in-class therapies that achieve proof-of-concept with potential best-in-class candidates to provide durable clinical and commercial success. In pursuit of new product candidates and therapies in specialty markets, we invest in research and development. We believe that pursuing research in diverse areas allows us to balance the risks inherent in product development and may provide product candidates that will form our pipeline in future years. To supplement our internal research programs, we acquire technologies and programs and collaborate with biopharmaceutical and technology companies, leading academic research institutions, government laboratories, foundations and other organizations, as needed, to advance research in our areas of therapeutic interest and to access technologies needed to execute on our strategy. Discovery and development of a new pharmaceutical or biological product is a difficult and lengthy process that requires significant financial resources along with extensive technical and regulatory expertise. Across the industry, most potential drug or biological products never progress into development, and most products that do advance into development never receive marketing approval. Our investments in product candidates are subject to considerable risks. We closely monitor the results of our discovery, research, clinical trials and nonclinical studies and frequently evaluate our product 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. Our business also requires ensuring appropriate manufacturing and reimbursement of our products. As we advance our product candidates through clinical development toward commercialization and market and sell our approved products, we build and maintain our supply chain and quality assurance resources. We rely on a global network of third parties and our internal capabilities to manufacture and distribute our products for commercial sale and post-approval clinical trials and to 70 manufacture and distribute our product candidates for clinical trials. In addition to establishing supply chains for each new approved product, we adapt our supply chain for existing products to include additional formulations or to increase scale of production for existing products as needed. The processes for cell and genetic therapies can be more complex than those required for small molecule drugs and require additional investments in different systems, equipment, facilities and expertise. We are focused on ensuring the stability of the supply chains for our current products, as well as for our pipeline programs. Sales of our products depend, to a large degree, on the extent to which our products are reimbursed by third-party payors, such as government health programs, commercial insurance and managed health care organizations. Reimbursement for our products, including our potential pipeline therapies, cannot be assured and may take significant periods of time to obtain. We dedicate substantial management and other resources to obtain and maintain appropriate levels of reimbursement for our products from third-party payors, including governmental organizations in the U.S. and ex-U.S. markets. In the U.S., we have worked successfully with third-party payors to promptly obtain appropriate levels of reimbursement for our CF medicines and are currently working with U.S. government and commercial payors with respect to CASGEVY. 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 therapies provide and provide patients with appropriate levels of access to our medicines and therapies now and in the future. We cannot, however, predict how recent changes in the law, including through the Inflation Reduction Act of 2022 and passage of state laws (e.g., transparency laws and prescription drug affordability boards), will affect our ability to negotiate successfully with third-party payors and distribute our products. Similarly, in ex-U.S. markets, we seek government reimbursement for our medicines on a country-by-country or region-by-region basis, as required. This is necessary for each new medicine, as well as for label expansions for our current medicines. We are beginning to work with ex-U.S. payors with respect to CASGEVY. We expect to continue to focus significant resources to expand and maintain reimbursement for our CF medicines, CASGEVY and, ultimately, pipeline therapies, in U.S. and ex-U.S. markets.Strategic Transactions AcquisitionsAs part of our business strategy, we seek to acquire technologies, products, product candidates and other businesses that are aligned with our corporate and research and development strategies and complement and advance our ongoing research and development efforts. We have engaged in a number of acquisitions of privately held biotechnology companies over the last several years. In 2019, we acquired Semma Therapeutics, Inc., pursuant to which we established our T1D program, and Exonics Therapeutics, Inc., which enhanced our gene-editing capabilities to repair mutations that cause severe neuromuscular diseases, such as DM1 and Duchenne muscular dystrophy. In 2022, we acquired ViaCyte, Inc. (“ViaCyte”), which had intellectual property, tools, technologies and assets with the potential to accelerate development of our T1D programs. Our acquisition of ViaCyte, for $315.0 million, was accounted for as a business combination. As of the acquisition date, the cash payment was allocated primarily to goodwill and the fair value of an in-process research and development asset. In 2023 and 2022, we also acquired programs that were accounted for as asset acquisitions resulting in $47.5 million and $60.0 million of AIPR&D, respectively. Please refer to our critical accounting policies, “Acquisitions,” for further information regarding the significant judgments and estimates related to our acquisitions.Collaboration and In-Licensing ArrangementsWe enter into arrangements with third parties, including collaboration and licensing arrangements, for the development, manufacture and commercialization of products, product candidates, and other technologies that have the potential to complement our ongoing research and development efforts. Over the last several years, we entered into collaboration agreements with a number of companies, including CRISPR, Entrada, and Moderna, Inc. Generally, when we in-license a technology or product candidate, we make upfront payments to the collaborator, assume the costs of the program and/or agree to make contingent payments, which could consist of milestone, royalty and option payments. Most of these collaboration payments are expensed as AIPR&D, including, in 2023, our total payments of $242.6 million to Entrada and our total upfront and milestone payments of $170.0 million to CRISPR related to T1D, because they are primarily attributable to acquired in-process research and development for which there is no 71 alternative future use. However, depending on many factors, including the structure of the collaboration, the stage of development of the acquired technology, the significance of the in-licensed product candidate to the collaborator’s operations and the other activities in which our collaborators are engaged, the accounting for these transactions can vary significantly. We expect to continue to identify and evaluate collaboration and licensing opportunities that may be similar to or different from the collaborations and licenses that we have engaged in previously.Joint Development and Commercialization Agreement with CRISPRIn 2017, we entered into a joint development and commercialization agreement (the “Original JDCA”) with CRISPR, pursuant to which we are developing and commercializing CASGEVY for SCD and TDT. The Original JDCA was entered into following our exercise of an option to co-develop and co-commercialize the hemoglobinopathies program that was contained in a collaboration agreement that we entered into with CRISPR in 2015. In April 2021, we and CRISPR entered into an amendment and restatement of the Original JDCA (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. We concluded that we did not have any alternative future use for the acquired in-process research and development and recorded this upfront payment to AIPR&D. Under the terms of the A&R JDCA, we lead worldwide development, manufacturing, and commercialization of CASGEVY. As of July 1, 2021, 60% of the net profits and net losses for CASGEVY are allocated to us and 40% of the net profits and net losses for CASGEVY are allocated to CRISPR, subject to certain adjustments. We concluded that the Original JDCA and the A&R JDCA are cost-sharing arrangements, which result in the net impact of the arrangements, excluding amounts recorded to AIPR&D, being recorded in “Research and development expenses” or “Selling, general and administrative expenses.” in our consolidated statements of income. CASGEVY was approved by the FDA in December 2023 for the treatment of SCD. Upon this approval, we made a $200.0 million milestone payment to CRISPR, which we recorded within “Other intangible assets, net” on our consolidated balance sheet as of December 31, 2023. We also recorded an immaterial amount of intangible asset amortization expense to “Cost of sales” in the fourth quarter of 2023 related to this intangible asset. Subsequent to receiving marketing approval for CASGEVY, we continue to lead the research and development activities under the A&R JDCA, subject to CRISPR’s reserved right to conduct certain activities. We are reimbursed by CRISPR for its 40% share of these research and development activities, subject to certain adjustments, and we continue to record this reimbursement from CRISPR within “Research and development expenses.” We also share with CRISPR 40% of the net commercial profits or losses incurred with respect to CASGEVY, subject to certain adjustments. In 2023, the net commercial loss incurred with respect to CASGEVY was not material to our consolidated statement of income.Acquired In-Process Research and Development ExpensesIn 2023 and 2022, our AIPR&D included $527.1 million and $115.5 million, respectively, related to upfront, contingent milestone, or other payments pursuant to our business development transactions, including the collaborations, licenses of third-party technologies, and asset acquisitions described above. Please refer to Note B, “Collaboration, License and Other Arrangements,” for further information regarding our collaboration, in-license agreements and asset acquisitions. 72RESULTS OF OPERATIONS2023 % Change 2022 % Change 2021 (in millions, except percentages and per share amounts) Revenues $ 9,869.2 11% $ 8,930.7 18% $ 7,574.4 Operating costs and expenses 6,037.2 31% 4,623.3 (4)% 4,792.3 Income from operations 3,832.0 (11)% 4,307.4 55% 2,782.1 Other non-operating income (expense), net 547.8 ** (75.0) 45% (51.7) Provision for income taxes 760.2 (16)% 910.4 134% 388.3 Net income $ 3,619.6 9% $ 3,322.0 42% $ 2,342.1 Net income per diluted common share $ 13.89 $ 12.82 $ 9.01 Diluted shares used in per share calculations 260.5 259.1 259.9 ** Not meaningful Revenues 2023 % Change 2022 % Change 2021(in millions, except percentages)TRIKAFTA/KAFTRIO $ 8,944.7 16% $ 7,686.8 35% $ 5,697.2 KALYDECO 475.5 (14)% 553.2 (19)% 684.2 ORKAMBI 326.0 (36)% 510.7 (34)% 771.6 SYMDEKO/SYMKEVI 123.0 (32)% 180.0 (57)% 420.4 Product revenues, net 9,869.2 11% 8,930.7 18% 7,573.4Other revenues— ** — ** 1.0 Total revenues $ 9,869.2 11% $ 8,930.7 18% $ 7,574.4** Not meaningful Product Revenues, NetIn 2023, our net product revenues increased by $938.5 million, or 11%, as compared to 2022. The increase was primarily due to the continued strong uptake of TRIKAFTA/KAFTRIO in ex-U.S. markets and label extensions in younger age groups, and the continued performance of TRIKAFTA in the U.S., following the launch of TRIKAFTA in children with CF 2 to 5 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 the U.S. and from ex-U.S. markets were as follows: 2023 % Change 2022 % Change 2021(in millions, except percentages)United States $ 6,040.4 6% $ 5,699.3 8% $ 5,287.3 ex-U.S. 3,828.8 18% 3,231.4 41% 2,286.1 Product revenues, net $ 9,869.2 11% $ 8,930.7 18% $ 7,573.4 We expect that our CF net product revenues will increase in 2024 as a result of the continued performance of TRIKAFTA/KAFTRIO, label expansions into younger age groups for our previously approved products, and expanded access to our medicines. Starting in the fourth quarter of 2023, we have received approval for CASGEVY in the U.S., the E.U., the U.K., Saudi Arabia, and Bahrain for the treatment of SCD and TDT. We expect 2024 to be a foundational year for CASGEVY, as we lay the groundwork for the first patients to initiate this multi-month treatment. 73Operating Costs and Expenses2023 % Change 2022 % Change 2021(in millions, except percentages)Cost of sales $ 1,262.2 17% $ 1,080.3 19% $ 904.2 Research and development expenses 3,162.9 25% 2,540.3 31% 1,937.8 Acquired in-process research and development expenses 527.1 356% 115.5 (90)% 1,113.3 Selling, general and administrative expenses 1,136.6 20% 944.7 12% 840.1 Change in fair value of contingent consideration (51.6) ** (57.5) ** (3.1) Total costs and expenses $ 6,037.2 31% $ 4,623.3 (4)% $ 4,792.3** Not meaningfulBeginning in 2022, we separately classify upfront, contingent milestone, or other payments pursuant to our business development transactions, including collaborations, licenses of third-party technologies, and asset acquisitions as “Acquired in-process research and development expenses,” in our consolidated statements of income in cases where such acquired assets do not have an alternative future use. To conform prior periods to our current presentation, we have reclassified $1.1 billion from “Research and development expenses” to AIPR&D for 2021.Cost of SalesOur cost of sales primarily consists of third-party royalties payable on net sales of our products as well as the cost of producing inventories. Pursuant to our agreement with the Cystic Fibrosis Foundation, our tiered third-party royalties on sales of TRIKAFTA/KAFTRIO, SYMDEKO/SYMKEVI, KALYDECO, and ORKAMBI, calculated as a percentage of net sales, range from the single digits to the sub-teens, with lower royalties on sales of TRIKAFTA/KAFTRIO 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 13% and 12% in 2023 and 2022, respectively. In 2024, we expect our total cost of sales, including as a percentage of our net product revenues, will increase due to expected increases in our CF net product revenues and costs associated with CASGEVY.Research and Development Expenses2023 % Change 2022 % Change 2021(in millions, except percentages)Research expenses $ 705.6 13% $ 626.7 22% $ 512.3Development expenses2,457.3 28% 1,913.6 34% 1,425.5Total research and development expenses$ 3,162.9 25% $ 2,540.3 31% $ 1,937.8 Our research and development expenses include internal and external costs incurred for research and development of our products and product candidates. 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 products or product candidates, because the employees within our research and development groups typically are deployed across multiple research and development programs. We assign external costs of services provided to us by clinical research organizations and other outsourced research by individual program. Our internal costs are greater than our external costs. All research and development costs for our products and product candidates are expensed as incurred. Over the past three years, we have incurred $9.4 billion in total research and development and AIPR&D expenses associated with product discovery and development. The successful development of our product 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 product 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 74 discovery, nonclinical 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 product candidates to market are not available. Any estimates regarding development and regulatory timelines for our product 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 Expenses2023 Change % 2022 Change % 2021(in millions, except percentages) Research Expenses:Salary and benefits $ 184.1 15% $ 159.5 17% $ 136.7 Stock-based compensation expense 92.4 10% 84.0 9% 77.3 Outsourced services and other direct expenses 237.0 25% 189.6 19% 160.0 Intangible asset impairment charge — ** 13.0 ** —Infrastructure costs192.1 6% 180.6 31% 138.3Total research expenses$ 705.6 13% $ 626.7 22% $ 512.3 ** Not meaningful Our research expenses have been increasing over the last several years as we have invested in our pipeline and expanded our cell and genetic therapy capabilities, resulting in increased headcount, outside services and other direct expenses, and infrastructure costs associated with our research facilities. We expect to continue to invest in our research programs with a focus on creating transformative medicines for serious diseases.Development Expenses2023 Change % 2022 Change % 2021(in millions, except percentages) Development Expenses:Salary and benefits $ 590.9 24% $ 475.1 37% $ 347.6 Stock-based compensation expense 262.5 23% 213.9 12% 191.0 Outsourced services and other direct expenses 1,238.7 36% 912.9 45% 629.4Infrastructure costs365.2 17% 311.7 21% 257.5Total development expenses$ 2,457.3 28% $ 1,913.6 34% $ 1,425.5 Our development expenses increased by $543.7 million, or 28%, in 2023 as compared to 2022, primarily due to increased costs to support clinical trials and drug supply associated with our advancing pipeline programs, including pain and T1D, and our stock-based compensation expense. We are investing significantly in headcount, leveraging outsourced services, and in infrastructure to support these programs. Our stock-based compensation expense increased in 2023 as compared to 2022, primarily due increased headcount eligible for our employee stock programs and the timing of expense recognition related to certain performance-based restricted stock units. We expect our development expenses to continue to increase in 2024 due to our advancing pipeline programs, including our T1D program. Acquired In-process Research and Development Expenses 2023 % Change 2022 % Change 2021(in millions, except percentages)Acquired in-process research and development expenses $ 527.1 356% $ 115.5 (90)% $ 1,113.3 AIPR&D in 2023 was primarily related to our $225.1 million upfront payment to Entrada, $100.0 million upfront 75 payment and $70.0 million T1D research milestone to CRISPR, $47.5 million acquisition of a novel GPCR program from Septerna, and various other payments. AIPR&D in 2022 was primarily related to the $60.0 million payment to acquire Catalyst’s complement portfolio, a $25.0 million upfront payment pursuant to our license agreement with Verve, and various other payments. Our AIPR&D has historically fluctuated, and is expected to continue to fluctuate, from one period to another due to upfront, contingent milestone, and other payments pursuant to our existing and future business development transactions, including collaborations, licenses of third-party technologies, and asset acquisitions. AIPR&D in 2021 primarily related to the $900.0 million upfront payment we made to CRISPR in connection with the A&R JDCA.Selling, General and Administrative Expenses2023 % Change 2022 % Change 2021(in millions, except percentages)Selling, general and administrative expenses $ 1,136.6 20% $ 944.7 12% $ 840.1 Selling, general and administrative expenses increased by 20% in 2023 as compared to 2022, primarily due to the continued investment to support the commercialization of our medicines, including increased commercial headcount, outsourced services to support our pipeline product candidates and stock-based compensation expense. We expect our selling, general and administrative expenses to continue to increase in 2024 as we progress our efforts in preparation for the potential commercialization of VX-548 and launch CASGEVY. Contingent Consideration In 2023, the fair value of our contingent consideration decreased by $51.6 million primarily due to our determination that additional pre-clinical studies of the delivery system for our gene-editing components for Duchenne muscular dystrophy (“DMD”) will be required. In 2022, the fair value of our contingent consideration decreased by $57.5 million, primarily as a result of a revision to the scope of certain gene-editing programs in the second quarter of 2022. In future periods, we expect the fair value of contingent consideration to increase or decrease based on, among other things, our estimates of the probability of achieving and the timing of these contingent development and regulatory milestone payments, as well as the time value of money and changes in market interest rates. Other Non-Operating Income (Expense), NetInterest IncomeInterest income increased to $614.7 million in 2023, as compared to $144.6 million in 2022, primarily due to increased market interest rates and increased cash equivalents and available-for-sale debt securities. Our future interest income is dependent on the amount of, and prevailing market interest rates on, our outstanding cash equivalents and available-for-sale debt securities. Interest Expense Interest expense was $44.1 million in 2023, as compared to $54.8 million in 2022. The majority of our interest expense in these periods was related to imputed interest expense associated with our leased corporate headquarters in Boston.Other Income (Expense), NetOther income (expense), net was expenses of $22.8 million and $164.8 million in 2023 and 2022, respectively. These amounts related primarily to net unrealized gains or losses resulting from changes in the fair value or sales of certain of our strategic equity investments, which consist of investments in our collaborators that may be public or private companies. To the extent that we continue to hold strategic equity investments in publicly traded companies, 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 equity investments. As of December 31, 2023, these investments had a fair value of $46.0 million. We discuss these potential future fluctuations further in Item 7a. Quantitative and Qualitative Disclosures About Market Risk. 76Income TaxesOur effective tax rate fluctuates from year to year due to the global nature of our operations. The factors that most significantly impact our effective tax rate include changes in tax laws, variability in the allocation of our taxable earnings among multiple jurisdictions, the amount and characterization of our research and development expenses, the levels of certain deductions and credits, adjustments to the value of our uncertain tax positions, acquisitions and third-party collaboration and licensing transactions. Our provision for income taxes was $760.2 million for 2023 and $910.4 million for 2022. Our effective tax rate of 17.4% for 2023 was lower than the U.S. statutory rate primarily due to a benefit from a research and development tax credit study that was completed in 2023 and excess tax benefits related to stock-based compensation, partially offset by changes in uncertain tax positions. Our effective tax rate of 21.5% for 2022 was higher than the U.S. statutory rate primarily due to an increase in our uncertain tax positions associated with intercompany transfer pricing matters partially offset by excess tax benefits related to stock-based compensation, tax credits, and changes in our estimated prior-year tax liabilities.LIQUIDITY AND CAPITAL RESOURCESThe following table summarizes the components of our financial condition as of December 31, 2023 and 2022: 2023 2022 % Change(in millions, except percentages) Cash, cash equivalents and marketable securities:Cash and cash equivalents $ 10,369.1 $ 10,504.0 Marketable securities 849.2 274.5 Long-term marketable securities 2,497.8 112.2 Total cash, cash equivalents and marketable securities $ 13,716.1 $ 10,890.7 26%Working Capital:Total current assets $ 14,144.2 $ 13,234.8 7% Total current liabilities (3,547.4) (2,742.1) 29% Total working capital $ 10,596.8 $ 10,492.7 1%Working CapitalOur total working capital of $10.6 billion as of December 31, 2023 was similar to our total working capital of $10.5 billion as of December 31, 2022 primarily due to $3.8 billion of income from operations mostly offset by net purchases of long-term marketable securities of $2.4 billion, income tax payments and repurchases of our common stock of $427.6 million.Cash Flows2023 2022 2021(in millions) Net cash provided by (used in):Operating activities $ 3,537.3 $ 4,129.9 $ 2,643.5Investing activities$ (3,141.7) $ (321.1) $ (340.9) Financing activities $ (562.2) $ (67.7) $ (1,478.0)Operating ActivitiesCash provided by operating activities was $3.5 billion in 2023 as compared to $4.1 billion in 2022. The largest driver of 77 the decrease in cash provided by operating activities in 2023 as compared to 2022 was an increase in cash paid for income taxes.Investing ActivitiesCash used in investing activities was $3.1 billion and $321.1 million in 2023 and 2022, respectively. In 2023, our investing activities primarily related to net purchases of available-for-sale debt securities of $2.9 billion. In 2022, our investing activities included a net payment of $295.9 million to acquire ViaCyte and $204.7 million in purchases of property and equipment, partially offset by net sales and maturities of available-for-sale debt securities of $227.3 million.Financing ActivitiesCash used in financing activities was $562.2 million and $67.7 million in 2023 and 2022, respectively. In 2023, our financing activities primarily related to repurchases of our common stock pursuant to our share repurchase program and payments related to our employee stock benefit plans. In 2022, the largest portions of our financing activities were payments related to our employee stock benefit plans and payments on finance leases.Sources and Uses of LiquidityAs of December 31, 2023, we had current cash, cash equivalents, and marketable securities of $11.2 billion, which represented an increase of $439.8 million from $10.8 billion as of December 31, 2022. We intend to rely on our existing cash, cash equivalents and current marketable securities together with cash flows from product sales as our primary source of liquidity. We expect that cash flows from our product sales together with our cash, cash equivalents and current marketable securities will be sufficient to fund our operations for at least the next twelve months. The adequacy of our available funds to meet our future operating and capital requirements will depend on many factors, including our future product sales, and the potential introduction of one or more of our other product candidates to the market, our business development activities and the number, breadth, cost and prospects of our research and development programs.Credit Facilities & Financing StrategyWe may borrow up to a total of $500.0 million pursuant to a revolving credit facility that we entered into in July 2022 and could repay and reborrow amounts under this revolving credit agreement without penalty. Subject to certain conditions, we could request that the borrowing capacity be increased by an additional $500.0 million, for a total of $1.0 billion. Negative covenants in our credit agreement could prohibit or limit our ability to access this source of liquidity. As of December 31, 2023, the facility was undrawn, and we were in compliance with these covenants. We may also raise additional capital by borrowing under credit agreements, through public offerings or private placements of our securities, or securing new collaborative agreements or other methods of financing. We will continue to manage our capital structure and will consider all financing opportunities, whenever they may occur, that could strengthen our long-term liquidity profile. There can be no assurance that any such financing opportunities will be available on acceptable terms, if at all.Future Capital Requirements We have significant future capital requirements, including:• Expected operating expenses to conduct research and development activities, manufacture and commercialize our existing and future products, and to operate our organization.• Cash that we pay for income taxes. • Royalties we pay related to sales of our CF products. • Facility, operating and finance lease obligations as described below. • Firm purchase obligations related to our supply and manufacturing processes. In addition, other potential significant future capital requirements may include:78 • We have entered into certain business development-related and strategic agreements with third parties that include the funding of certain research, development, manufacturing and commercialization efforts. Certain of our transactions, including collaborations, licensing arrangements, and asset acquisitions, include the potential for future milestone and royalty payments by us upon the achievement of pre-established developmental and regulatory targets and/or commercial targets. Other transactions include the potential for future lease-related expenses and other costs. Our obligation to fund these research and development and commercialization efforts and to pay these potential milestones, expenses and royalties is contingent upon continued involvement in the programs and/or the lack of any adverse events that could cause their discontinuance. We may enter into additional business development transactions and strategic agreements, including acquisitions, collaborations, licensing arrangements and equity investments, which require additional capital. • To the extent we borrow amounts under our existing credit agreement, we would be required to repay any outstanding principal amounts in 2027. • As of December 31, 2023, we had $2.6 billion remaining authorization available under our $3.0 billion Share Repurchase Program that our Board of Directors approved in February 2023. We expect to fund repurchases of our common stock through a combination of cash on hand and cash generated by operations. This program does not have an expiration date and can be discontinued at any time.Additional information on several of our future capital requirements is provided below.Research and Development CostsAt any point in time, we have several ongoing clinical trials at various stages of clinical development. Our clinical trial costs are dependent on, among other things, our research activities advancing to later-stage clinical development as well as the size, number, and length of our clinical trials.LeasesFinance Leases Our corporate headquarters is in two buildings that we lease at Fan Pier in Boston, Massachusetts. We commenced lease payments on these buildings in 2013 and the initial lease periods end in December 2028. We also lease office and laboratory space in San Diego, California. We commenced lease payments for this building in 2019 pursuant to an initial 16-year lease term. We account for each of these buildings as finance leases. Operating Leases We account for our remaining real estate leases as operating leases, including office and laboratory space at the Jeffrey Leiden Center for Cell and Genetic Therapies near our corporate headquarters. Base rent payments commenced in 2021 pursuant to an initial 15-year lease term for this building. Our total future minimum lease payments for our finance and operating leases for each of the next five years and in total are included in Note L, “Leases.” The total future undiscounted minimum lease payments were $583.0 million and $436.1 million related to our finance and operating leases, respectively, as of December 31, 2023.CRITICAL ACCOUNTING POLICIES AND ESTIMATESOur discussion and analysis of our financial condition and results of operations are based upon our 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 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. 79 We believe that our application of the following accounting policies, each of which requires significant judgments and estimates on the part of management, are the most critical to aid in fully understanding and evaluating our reported financial results:• revenue recognition;• acquisitions, including intangible assets, goodwill and contingent consideration; and• income taxes.Our accounting policies, including the ones discussed below, are more fully described in Note A, “Nature of Business and Accounting Policies.”Revenue RecognitionCF Product Revenues, Net We generate CF product revenues from sales in the U.S. and in international markets. We sell our CF products principally to a limited number of specialty pharmacy and specialty distributors in the U.S., which account for the largest portion of our total revenues. Our customers in the U.S. subsequently resell our products to patients and health care providers. We contract with government agencies so that our products will be eligible for purchase by, or partial or full reimbursement from, such third-party payors. We make international sales primarily through distributor arrangements and to retail pharmacies, as well as to hospitals and clinics, many of which are government-owned or supported customers. We recognize net CF product revenues from sales of our products when our customers obtain control of our products, which typically occurs upon delivery to our customers. Revenues from our CF product sales are recorded at the net sales price, or transaction price, which requires us to make several significant estimates regarding the net sales price. The most significant estimate we are required to make for our CF product revenues is related to government and private payor rebates, chargebacks, discounts and fees, collectively rebates. The values of the rebates provided to third-party payors per course of treatment vary significantly and are based on government-mandated discounts and our arrangements with other third-party payors. To estimate our total rebates, we estimate the percentage of prescriptions that will be covered by each third-party payor, which is referred to as the payor mix. We track available information regarding changes, if any, to the payor mix for our products, to our contractual terms with third-party payors and to applicable governmental programs and regulations and levels of our products in the distribution channel. We adjust our estimated rebates based upon new information as it becomes available, including information regarding actual rebates for our products. Claims by third-party payors for rebates are submitted to us significantly after the related sales, potentially resulting in adjustments in the period in which the new information becomes known. The following table summarizes activity related to our CF product revenue accruals for rebates for 2023, 2022 and 2021:(in millions)Balance as of December 31, 2020 $ 775.6 Provision related to 2021 sales 2,126.1 Adjustments related to prior year(s) sales (27.6) Credits/payments made (2,035.5) Balance as of December 31, 2021 $ 838.6 Provision related to 2022 sales 2,977.2 Adjustments related to prior year(s) sales (10.4) Credits/payments made (2,514.0) Balance as of December 31, 2022$ 1,291.4 Provision related to 2023 sales 3,481.4Adjustments related to prior year(s) sales (6.5) Credits/payments made (3,064.7) Balance as of December 31, 2023$ 1,701.680 We have also entered into annual contracts with government-owned and supported customers in international markets that limit the amount of annual reimbursement we can receive for our CF products. Upon exceeding the annual reimbursement amount provided by the customer’s contract with us, products are provided free of charge, which is a material right. If we estimate that the annual reimbursement amount under a contract will be exceeded for an annual period, we defer a portion of the consideration received, which includes upfront payments and fees, for shipments made up to the annual reimbursement limit as “Other current liabilities.” Once the annual reimbursement limit has been reached, we recognize the deferred amount as revenue when we ship the free products. To estimate the portion of the consideration received to be recognized as revenue and the portion of the amount to be deferred, we rely on our forecast of the number of units we will distribute during the applicable annual period in each international market in which our contracts with government-owned and supported customers limit the amount of annual reimbursement we can receive. Our forecasts are based on, among other things, our historical experience. The preceding estimates and judgments materially affect our recognition of net CF product revenues. Changes in our estimates of net CF product revenues could have a material effect on net CF product revenues recorded in the period in which we determine that change occurs.AcquisitionsAs part of our business strategy, we seek to acquire products, product candidates and other technologies and businesses that are aligned with our corporate and research and development strategies and complement and advance our ongoing research and development efforts. If we determine that substantially all the fair value associated with an acquisition is concentrated in a single asset, and the acquisition does not constitute a business, we account for it as an asset acquisition. For an asset acquisition involving rights to intellectual property related to in-process research and development that is not yet associated with a product that has achieved regulatory approval, we generally record our upfront payment to AIPR&D, because there is no alternative future use for the asset that was acquired. For example, we accounted for our A&R JDCA with CRISPR in 2021 as an asset acquisition of rights to in-process research and development for which we did not have any alternative future use and recorded the associated $900.0 million upfront payment to AIPR&D. If the fair value that we acquired in an acquisition is distributed among more than one asset, and the acquisition constitutes a business, we account for it as a business combination. We are required to make several significant judgments and estimates to calculate the purchase price for our business combinations and then allocate it to the assets that we have acquired and the liabilities that we have assumed on our consolidated balance sheet. The most significant judgments and estimates relate to the fair value of the in-process research and development assets and contingent consideration liabilities related to these business combinations. Based on these judgments and estimates, the fair value of the goodwill that we record as a result of these business combinations may be material.In-process Research and Development Intangible AssetsAs of each of December 31, 2023 and 2022, we had $603.6 million of in-process research and development assets on our consolidated balance sheet within “Other intangible assets, net.” Most recently, we recorded a $216.6 million in-process research and development intangible asset related to our acquisition of ViaCyte on our consolidated balance sheet in 2022. We characterize in-process research and development assets on our consolidated balance sheets as indefinite-lived intangible assets until either the project underlying it is completed or the asset becomes impaired and is subsequently written-off. We test our in-process research and development intangible assets for impairment on an annual basis, and more frequently if indicators are present or changes in circumstances suggest that impairment may exist. When we determine that an indefinite-lived intangible asset has become impaired or we abandon the associated research and development project, we write down the carrying value to its fair value and record an impairment charge in the period in which the impairment occurs. For example, we recorded a $13.0 million impairment of an in-process research and development intangible asset to “Research and development expenses” in 2022 due to a decision to revise the scope of certain acquired gene-editing programs. If one of our product candidates achieves regulatory approval, the in-process research and development intangible assets associated with the product candidate become finite-lived intangible assets as described below. To determine the fair value of our in-process research and development assets, we have utilized either the multi-period excess earnings or the relief from royalty methods of the income approach. Each method requires us to estimate the probability of technical and regulatory success, revenue projections and growth rates, and appropriate discount and tax rates. 81 The multi-period excess earnings method also requires us to estimate development and commercial costs. The relief from royalty method also requires us to estimate the after-tax royalty savings expected from ownership of the asset that we acquired. Contingent Consideration As of December 31, 2023 and 2022, we had $77.4 million and $129.0 million, respectively, of liabilities on our consolidated balance sheets attributable to the fair value of the contingent development and regulatory payments that we may owe to Exonics’ former equity holders upon the achievement of certain events associated with research programs focused on DMD and other severe neuromuscular diseases, including DM1. We record an increase or a decrease in the fair value of the contingent consideration liabilities on our consolidated balance sheet and in our consolidated statement of income on a quarterly basis. We determine the fair value of our contingent consideration liabilities using a probability weighted discounted cash flow method of the income approach, which requires us to make estimates of the timing of regulatory and commercial milestone achievement and the corresponding estimated probability of technical and regulatory success rates. We use significant judgment in determining the appropriateness of these assumptions during each reporting period. Reasonable changes in these assumptions can cause material changes to the fair value of our contingent consideration liabilities. Due to the early stage of Exonics’ programs, these significant assumptions could be affected by future economic and market conditions. In November 2023, we determined that additional pre-clinical studies of the delivery system for our gene-editing components for DMD will be required. As a result, we revised our estimates regarding the timing of the development and regulatory milestones and the probability of achieving those milestones, which reduced the estimated fair value of our contingent consideration as of December 31, 2023. Goodwill As of December 31, 2023 and 2022, we had goodwill of $1.1 billion on our consolidated balance sheets. During 2023, we did not have any business combinations. In 2022, we recorded $85.8 million of goodwill on our consolidated balance sheet related to our acquisition of ViaCyte. Goodwill reflects the difference between the fair value of the consideration transferred and the fair value of the net assets acquired. Thus, the goodwill that we record is dependent on the significant judgments and estimates inherent in these fair values. We have one reporting unit for goodwill reporting purposes. We evaluate our goodwill for impairment on an annual basis, and more frequently if indicators are present or changes in circumstances suggest that impairment may exist. We have not identified any goodwill impairment to date.Finite-lived Intangible AssetsAs of December 31, 2023, we had $236.3 million of finite-lived intangible assets on our consolidated balance sheet within “Other intangible assets, net.” These finite-lived intangible assets, which were recorded during 2023, relate to $208.0 million of CASGEVY regulatory approval milestones, including $200.0 million we paid to CRISPR pursuant to the A&R JDCA, and $30.0 million for a non-exclusive sublicense of developed technology related to CASGEVY. We amortize our finite-lived intangible assets using the straight-line method within “Cost of sales” over the remaining estimated life of the assets beginning in the period in which regulatory approval is achieved or the assets are acquired and continuing through the period that we no longer have either exclusive rights to market the products associated with the assets or in-license rights to the intellectual property underlying the assets. We test finite-lived intangible assets for impairment if indicators are present or changes in circumstances suggest that the carrying value of an asset may not be recoverable. If we determine that the carrying value of a finite-lived intangible asset may not be recoverable, we compare the carrying value of the asset to the undiscounted cash flows that we expect the asset to generate. When we determine that a finite-lived intangible asset has become impaired, we write down the carrying value of the asset to its fair value and record an impairment charge in the period in which the impairment occurs.Income TaxesWe utilize the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement carrying amounts and tax basis of assets and liabilities using enacted tax rates in effect for years in which the temporary differences are expected to reverse. If our estimate of the tax effect of reversing temporary differences is (i) not reflective of actual outcomes, (ii) modified to reflect new 82 developments or interpretations of the tax law, or (iii) revised to incorporate new accounting principles, or changes in the expected timing or manner of the reversal, our results of operations could be materially impacted. We provide a valuation allowance when it is more likely than not that deferred tax assets will not be realized. On a periodic basis, we reassess our valuation allowances on our deferred tax assets, weighing positive and negative evidence to assess the recoverability of the deferred tax assets. Significant judgment is required in making these assessments to maintain or adjust our valuation allowances and, to the extent our future expectations change we would have to assess the recoverability of these deferred tax assets at that time. As of December 31, 2023, we maintained a valuation allowance of $266.6 million related primarily to U.S. state tax attributes. We record liabilities related to uncertain tax positions by prescribing a minimum recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. We adjust our liability to reflect any subsequent changes in the relevant facts and circumstances surrounding the uncertain positions. We are subject to tax laws and audits in multiple jurisdictions and significant judgment is required in making this assessment. Consequently, we regularly re-evaluate uncertain tax positions and consider various factors, including changes in tax law, the measurement of tax positions taken or expected to be taken in tax returns, and changes in facts or circumstances related to a tax position. As of December 31, 2023, our liability for uncertain tax positions was $615.9 million.RECENT ACCOUNTING PRONOUNCEMENTSRefer to Note A, “Nature of Business and Accounting Policies,” in the accompanying notes to the consolidated financial statements for a discussion of recent accounting pronouncements and new accounting pronouncements adopted during 2023. 83

FY 2025-12-31 (later)

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Our discussion and analysis of our financial condition and results of operations for 2025 as compared to 2024 are discussed below. For a discussion of our financial condition and results of operations for 2024 as compared to 2023 , please refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2024 Annual Report on Form 10-K, except as set forth below.OVERVIEWWe are a global biotechnology company that invests in scientific innovation to create transformative medicines for people with serious diseases, with a focus on specialty markets. We have approved medicines for cystic fibrosis (“CF”), sickle cell disease (“SCD”), transfusion dependent beta thalassemia (“TDT”), and acute pain, and we continue to serially innovate and advance next-generation clinical and research programs in these areas. Our mid- and late-stage clinical pipeline includes programs across a range of modalities in additional serious diseases, including IgA nephropathy, APOL1-mediated kidney disease, neuropathic pain, type 1 diabetes, primary membranous nephropathy, autosomal dominant polycystic kidney disease, and myotonic dystrophy type 1. Collectively, our five CF medicines, led by TRIKAFTA/KAFTRIO, are being used to treat nearly three quarters of the people with CF in the U.S., Europe, Australia, and Canada. ALYFTREK, our newest CF medicine, is approved in the United States (the “U.S.”), the United Kingdom (the “U.K.”), the European Union (the “E.U.”), Canada, New Zealand, Switzerland, Australia and Israel. CASGEVY, our ex-vivo, non-viral CRISPR/Cas9 gene-edited cell therapy, is approved in the U.S., the E.U., the U.K., the Kingdom of Saudi Arabia (“Saudi Arabia”), the Kingdom of Bahrain (“Bahrain”), Qatar, the United Arab Emirates (the “UAE”), Kuwait, Switzerland and Canada for the treatment of people 12 years of age and older with SCD or TDT. JOURNAVX, our selective non-opioid NaV1.8 pain signal inhibitor, is approved in the U.S. for the treatment of people with moderate-to-severe acute pain. We are continuing our commercial launch of JOURNAVX for eligible adults.Financial HighlightsTotal Revenues In 2025 , our total revenues increased to $12.0 billion as compared to $11.0 billion in 2024 , primarily due to continued strong demand for TRIKAFTA/KAFTRIO as well as contributions from our launches of ALYFTREK, JOURNAVX and CASGEVY. Cost of Sales Our cost of sales as a percentage of our net product revenues decreased from 13.9% in 2024 to 13.8% in 2025 as a result of a lower overall royalty rate for our CF medicines, partially offset by changes in our product mix, and investments in network expansion and manufacturing process improvements. Total R&D and SG&AExpensesOur total research and development (“R&D”) and selling, general and administrative (“SG&A”) expenses increased to $5.7 billion in 2025 as compared to $5.1 billion in 2024, primarily due to increased investment to commercialize our new products and to advance our R&D pipeline. AIPR&D Expenses In 2025, our acquired in-process research and development expenses (“AIPR&D”) of $133.0 million included various upfront and milestone payments related to our collaboration and in- licensing arrangements. In 2024, AIPR&D included $4.4 billion resulting from our acquisition of Alpine Immune Sciences, Inc. (“Alpine”), which was accounted for as an asset acquisition.CashOur total cash, cash equivalents and marketable securities increased to $12.3 billion as of December 31, 2025 as compared to $11.2 billion as of December 31, 2024 primarily due to cash flows provided by our operating activities partially offset by repurchases of our common stock. $0.1 45 $0.1 2024 2025 December 31, 2025 December 31, 2024Note: Charts above may not add due to rounding. Business Updates Marketed Products Cystic FibrosisWe expect that the number of people with CF taking our medicines will continue to grow through new approvals and reimbursement agreements, treatment of younger patients, increased survival and expansion into additional geographies. • ALYFTREK is reimbursed for eligible people with CF in the U .S., England, Ireland, Germany, Denmark, Northern Ireland, Norway, Wales, Italy, Australia, New Zealand and Luxembourg. We are working to secure access for eligible patients in additional countries.Sickle Cell Disease and Beta Thalassemia• In 2025 , we recorded $115.8 million of CASGEVY product revenues. This reflects 64 patients receiving infusions of CASGEVY in 2025, including 30 people infused in the fourth quarter. Globally, in 2025, 147 people with SCD or TDT had their first cell collection for CASGEVY. • As of the end of 2025, approximately 90 percent of people with SCD or TDT in the U.S. have reimbursed access to CASGEVY, which is also reimbursed in the U.K., Italy, Austria, Denmark, Luxembourg, Saudi Arabia, the UAE, Bahrain, and Kuwait. In January 2026, we secured reimbursed access to CASGEVY for eligible people with SCD in Scotland, consistent with the reimbursement agreement reached in 2025 for people with TDT. • We expect to begin global regulatory submissions for approvals for CASGEVY in children 5 to 11 years of age, in the first half of 2026. The FDA awarded Vertex with a Commissioner’s National Priority Voucher for this pediatric submission, indicating an accelerated timeline for review once the submission is complete.Acute Pain• Since pharmacy availability in March 2025 through year-end 2025, more than 550,000 prescriptions for JOURNAVX were written and filled across the hospital and retail settings in different acute pain conditions, consistent with JOURNAVX’s broad label. • We have secured access for JOURNAVX with all three national pharmacy benefit managers, and, a s of January 2026, over 200 million individuals across commercial and government payers have coverage, representing two- thirds of U.S. covered lives . In addition, 21 states provide coverage via Medicaid. • More than 100 of the targeted 150 healthcare systems and more than 950 individual hospitals of the 2,000 targeted institutions have added JOURNAVX to formularies, protocols or order sets. 46 Select R&D Pipeline Programs We continue to advance a diversified pipeline of potentially transformative medicines for serious diseases utilizing a range of modalities. Recent and anticipated progress in activities supporting these efforts is included below: Cystic Fibrosis • We completed the global trial evaluating ALYFTREK in children 2 to 5 years of age. Following positive results from this clinical trial, w e expect to submit for approval with global regulators in this age group in the first half of 2026. We also initiated a pivotal trial of ALYFTREK in children 1 year to less than 2 years of age. • Following positive results from the clinical trial evaluating TRIKAFTA in children 1 year to less than 2 years of age, we expect to begin submissions for global regulatory approvals in this age group in the first half of 2026. IgA Nephropathy • We are developing povetacicept, a dual inhibitor of B cell activating factor (“BAFF”) and a proliferation-inducing ligand (“APRIL”) cytokines, for multiple diseases. Povetacicept represents a potentially best-in-class approach to control B cell activity in immunoglobulin A nephropathy (“IgAN”). • We completed enrollment in the Phase 3 clinical trial evaluating povetacicept for IgAN and, in the fourth quarter of 2025, we initiated the rolling Biologics Licensing Application (“BLA”) filing for U.S. accelerated approval with submission of the first module. We expect to release interim analysis data in the first half of 2026 and we expect to complete the submission in the first half of 2026, if data from the interim analysis are supportive . We are using a priority review voucher to expedite the review of the povetacicept BLA from ten months to six months.APOL1-Mediated Kidney Disease• Inaxaplin is our small molecule for the treatment of APOL1-mediated kidney disease (“AMKD”). We completed enrollment in the interim analysis cohort of the global Phase 2/3 pivotal clinical trial evaluating inaxaplin in people with primary AMKD (“AMPLITUDE”). We expect to conduct the pre-planned interim analysis once this cohort has been treated for 48 weeks and we expect to share data from the interim analysis in l ate 2026 or early 2027. We expect to complete full enrollment in AMPLITUDE in the second half of 2026. Peripheral Neuropathic Pain • We previously initiated the first Phase 3 clinical trial evaluating suzetrigine for the treatment of people with diabetic peripheral neuropathy (“DPN”), a common form of peripheral neuropathic pain, and have initiated a second Phase 3 clinical trial evaluating suzetrigine in DPN in the fourth quarter of 2025. We expect to complete enrollment in both Phase 3 clinical trials by the end of 2026.Type 1 Diabetes• Zimislecel is an allogeneic, stem cell-derived, fully differentiated, insulin-producing islet cell replacement therapy, using standard immunosuppression to protect the implanted cells. We have completed enrollment in the Phase 1/2/3 clinical trial of zimislecel in people with type 1 diabetes (“T1D”). We have temporarily postponed completion of dosing in this clinical trial, pending an internal manufacturing analysis. Primary Membranous Nephropathy • Povetacicept represents a potentially best-in-class approach to control B cell activity in primary membranous nephropathy (“pMN”), another B cell-mediated disease. We are enrolling and dosing patients in the adaptive Phase 2/3 pivotal clinical trial of povetacicept for the treatment of people with pMN. We expect to complete the Phase 2 portion of the clinical trial and to initiate the Phase 3 portion in mid-2026. 47 External Innovation Recent investments in external innovation include: • An exclusive global license agreement with WuXi Biologics to develop and commercialize a trispecific T cell engager for B cell-mediated autoimmune diseases, which is currently in preclinical development.Our Business EnvironmentIn 2025 , our net product revenues were primarily from the sale of our medicines for the treatment of CF. Our CF strategy involves continuing to develop and obtain approval and reimbursement for treatment regimens that will provide benefits to all people with CF and increasing the number of people with CF eligible and able to receive our medicines. Outside of CF, we continue to advance the commercialization of CASGEVY for the treatment of SCD and TDT, and JOURNAVX for the treatment of acute pain. In addition, we are advancing our pipeline of product candidates for the treatment of serious diseases outside of CF, SCD, TDT and acute pain. Our strategy is to combine transformative advances in the understanding of causal human biology and the science of therapeutics to discover and develop innovative medicines. This approach includes advancing multiple compounds or therapies from each program, spanning multiple modalities, into early clinical trials to obtain patient data that can inform selection of the most promising therapies for later-stage development, as well as to inform discovery and development efforts. We aim to serially innovate in our disease areas of interest and follow our first-in-class therapies with potential best- in-class candidates to provide durable clinical and commercial success. In pursuit of new product candidates and therapies in specialty markets, we invest in research and development. We believe that pursuing research in diverse areas allows us to balance the risks inherent in product development and may provide product candidates that will form our pipeline in future years. To supplement our internal research programs, we acquire technologies and programs and collaborate with biopharmaceutical and technology companies, leading academic research institutions, government laboratories, foundations and other organizations, as needed, to advance research in our areas of therapeutic interest and to access technologies needed to execute on our strategy. Discovery and development of a new pharmaceutical or biological product is a difficult and lengthy process that requires significant financial resources along with extensive technical and regulatory expertise. Across the industry, most potential drug or biological products never progress into development, and most products that advance into development never receive marketing approval. Our investments in product candidates are subject to considerable risks. We closely monitor our research and development activities, and frequently evaluate our pipeline programs in light of new data and scientific, business and commercial insights, with the objective of balancing risk and potential. This process can result in rapid changes in focus and priorities as new information becomes available and as we gain additional understanding of our ongoing programs and potential new programs, as well as those of our competitors. In addition, our product candidates must satisfy rigorous standards of safety and efficacy before they can be approved for sale by regulatory authorities. Our analysis of data obtained from nonclinical and clinical activities is subject to confirmation and interpretation by regulatory authorities, which could delay, limit or prevent regulatory approval. Our business also requires ensuring appropriate manufacturing and supply of our products. As we advance our product candidates through clinical development toward commercialization and market and sell our approved products, we build and maintain our supply chain and quality assurance resources. We rely on a global network of third parties, including some in China, and our internal capabilities to manufacture and distribute our products for commercial sale and post-approval clinical trials and to manufacture and distribute our product candidates for clinical trials. In addition to establishing supply chains for each newly approved product, we adapt our supply chain for existing products to include additional formulations or to increase scale of production for existing products as needed. The processes for biological and cell and genetic therapies can be more complex than those required for small molecule drugs and require additional investments in different systems, equipment, facilities and expertise. We are focused on ensuring the stability of the supply chains for our current products, as well as for our pipeline programs. Sales of our products depend, to a large degree, on the extent to which our products are reimbursed by third-party payors, such as government health programs, commercial insurance and managed health care organizations. Reimbursement for our products, including our potential pipeline therapies, cannot be assured and may take significant periods of time to obtain. We dedicate substantial management and other resources to obtain and maintain appropriate levels of reimbursement for our 48 products from third-party payors, including governmental organizations in the U.S. and ex-U.S. markets. In the U.S., we work with government and commercial payors to obtain and maintain appropriate levels of reimbursement for our medicines. In ex-U.S. markets, we seek government reimbursement for our medicines on a country-by-country or region-by-region, as required. This is necessary for each new medicine, as well as for label expansions for our current medicines. We expect to continue to focus significant resources to expand and maintain reimbursement for our CF medicines, CASGEVY, JOURNAVX, and, ultimately, our pipeline therapies, in U.S. and ex-U.S. markets.Strategic Transactions AcquisitionsAs part of our business strategy, we seek to acquire technologies, products, product candidates and other businesses that are aligned with our corporate and research and development strategies and complement and advance our ongoing research and development efforts. We have acquired multiple biotechnology companies over the last several years and expect to continue to identify and evaluate such opportunities. The accounting for these acquisitions can vary significantly based on whether we conclude the transactions represent business combinations or asset acquisitions. In 2024, we acquired Alpine and its lead molecule, povetacicept, for approximately $5.0 billion. Povetacicept has shown potential to treat multiple diseases or conditions and become a pipeline-in-a-product. We accounted for the Alpine transaction as an asset acquisition because povetacicept represented substantially all of the fair value of the gross assets that we acquired. As a result, $4.4 billion of the fair value attributed to povetacicept was expensed as AIPR&D in 2024. In 2019 and 2022, we acquired Semma Therapeutics, Inc. (“Semma”) and ViaCyte, Inc. (“ViaCyte”), respectively, pursuant to which we established and accelerated the development of our T1D program. We accounted for each of these acquisitions as a business combination. Please refer to our critical accounting policies, “ Acquisitions ,” for further information regarding the significant judgments and estimates related to our acquisitions.Collaboration and In-Licensing ArrangementsWe enter into arrangements with third parties, including collaboration and licensing arrangements, for the development, manufacture and commercialization of products, product candidates, and other technologies that have the potential to complement our ongoing research and development efforts. Over the last several years, we entered into collaboration agreements with a number of companies, including CRISPR Therapeutics AG (“CRISPR”), Entrada Therapeutics, Inc. (“Entrada”), and Moderna, Inc. Generally, when we in-license a technology or product candidate, we make upfront payments to the collaborator, assume the costs of the program and/or agree to make contingent payments, which could consist of milestone, royalty and option payments. Most of these collaboration payments are expensed as AIPR&D, including, a $75.0 million milestone paid to Entrada in 2024, and, in 2023, total payments of $242.6 million to Entrada and total upfront and milestone payments of $170.0 million to CRISPR related to T1D. These payments were expensed to AIPR&D because they were primarily attributable to acquired in-process research and development for which there was no alternative future use. However, depending on many factors, including the structure of the collaboration, the stage of development of the acquired technology, the significance of the in-licensed product candidate to the collaborator’s operations and the other activities in which our collaborators are engaged, the accounting for these transactions can vary significantly. We expect to continue to identify and evaluate collaboration and licensing opportunities that may be similar to or different from the collaborations and licenses that we have engaged in previously.Joint Development and Commercialization Agreement with CRISPRIn 2017, we entered into a joint development and commercialization agreement with CRISPR (the “CRISPR JDCA”), which we amended and restated in 2021. Pursuant to the CRISPR JDCA, we lead global development, manufacturing and commercialization of CASGEVY, with support from CRISPR. We also conduct all research, development, manufacturing and commercialization activities relating to other product candidates and products under the CRISPR JDCA throughout the world subject to CRISPR’s reserved right to conduct certain activities. 49 CASGEVY was approved by the FDA in December 2023 for the treatment of SCD. In connection with this approval, we made a $200.0 million milestone payment to CRISPR in January 2024. We are recording intangible asset amortization expense to “ Cost of sales ” related to this intangible asset. Subsequent to receiving marketing approval for CASGEVY, we continue to lead the research and development activities under the CRISPR JDCA, subject to CRISPR’s reserved right to conduct certain activities. We are reimbursed by CRISPR for its 40% share of these research and development activities, subject to certain adjustments, and we record this reimbursement from CRISPR as a credit within “ Research and development expenses .” We also share with CRISPR 40% of the net commercial profits or losses incurred with respect to CASGEVY, subject to certain adjustments, which is recorded to “ Cost of sales .” The net commercial profits or losses equal the sum of the product revenues, cost of sales and selling, general and administrative expenses that we have recognized related to the CRISPR JDCA. Prior to receiving marketing approval from the FDA for CASGEVY in December 2023, we accounted for the CRISPR JDCA as a cost-sharing arrangement, with costs incurred related to CASGEVY allocated 60% to us and 40% to CRISPR, subject to certain adjustments. In 2023, we recognized net reimbursements from CRISPR as credits to “Research and development expenses” and to “Selling, general and administrative expenses,” related to CRISPR’s share of the CRISPR JDCA’s operating expenses.Acquired In-Process Research and Development ExpensesIn 2025 and 2024 , our AIPR&D included $133.0 million and $4.6 billion , respectively, related to upfront, contingent milestone, or other payments pursuant to our business development transactions, including the asset acquisitions, collaborations, and licenses of third-party technologies described above. Please refer to Note B, “Collaboration, License and Other Arrangements,” for further information regarding our asset acquisitions, collaborations, and in-license agreements. Out-licensing Arrangements We also have out-licensed certain development programs to collaborators who are leading the development or commercialization of these programs, either globally or within certain geographic regions. I n 2025, we entered into agreements with Zai Lab Limited (“Zai”) and Ono Pharmaceuticals, Co Ltd (“Ono”) respectively, for the development and commercialization of povetacicept in various Asian markets. Zai licensed povetacicept for mainland China, Hong Kong SAR, Macau SAR, Taiwan region, and Singapore, while Ono licensed povetacicept for Japan and South Korea. Zai and Ono will help advance povetacicept c linical trials, and will be responsible for obtaining marketing authorizations and commercialization activities, if povetacicept becomes an approved product, in their licensed territories. We are eligible to receive certain future milestone payments and tiered royalties on future net sales of povetacicept in these regions.RESULTS OF OPERATIONSTotal Revenues 2025 % Change 2024 % Change 2023(in millions, except percentages)TRIKAFTA/KAFTRIO $ 10,312.7 1% $ 10,238.6 14% $ 8,944.7 ALYFTREK 837.8 ** — ** — Other product revenues 820.1 5% 781.5 (15)% 924.5 Product revenues, net 11,970.6 9% 11,020.1 12% 9,869.2Other revenues30.7 ** — ** — Total revenues $ 12,001.3 9% $ 11,020.1 12% $ 9,869.2** Not meaningful Product Revenues, NetIn 2025 , our net product revenues increased $950.5 million , or 9% , as compared to 2024 , primarily due to continued strong demand for TRIKAFTA/KAFTRIO as well as contributions from our launches of ALYFTREK, JOURNAVX and 50 CASGEVY. In 2025 , “ Other product revenues ” included $115.8 million from CASGEVY and $59.6 million from JOURNAVX. In 2024 , “ Other product revenues ” included CASGEVY product revenues of $10.0 million . Our remaining “Other product revenues” are related to KALYDECO, ORKAMBI, and SYMDEKO/SYMKEVI, our other CF products. Other Revenues In 2025 , other revenues were $30.7 million, which included $20.6 million and $10.0 million related to upfront payments received from our agreements with Ono and Zai, respectively. Revenues by Geographic Location Our total revenues from the U.S. and from ex-U.S. markets were as follows: 2025 % Change 2024 % Change 2023(in millions, except percentages)United States $ 7,548.6 13% $ 6,684.9 11% $ 6,040.4 ex-U.S. 4,452.7 3% 4,335.2 13% 3,828.8 Total revenues $ 12,001.3 9% $ 11,020.1 12% $ 9,869.2 Our U.S. total revenues increased 13% in 2025 , as compared to 2024 , due to continued strong patient demand, new patient initiations and higher realized net prices. Our ex-U.S. total revenues increased 3% in 2025 , as compared to 2024 , primarily due to solid CF performance across multiple geographies and increased CASGEVY product revenues, partially offset by a decline in product revenues in Russia, where we are continuing to experience a violation of our intellectual property rights. In 2026 , we expect our total revenues to increase due to continued growth of our CF product revenues, including from ALYFTREK globally, and increased contributions from CASGEVY and JOURNAVX.Operating Costs and Expenses2025 % Change 2024 % Change 2023(in millions, except percentages)Cost of sales $ 1,651.3 8% $ 1,530.5 21% $ 1,262.2 Research and development expenses 3,909.5 8% 3,630.3 15% 3,162.9 Acquired in-process research and development expenses 133.0 ** 4,628.4 ** 527.1 Selling, general and administrative expenses 1,753.1 20% 1,464.3 29% 1,136.6 Intangible asset impairment charge 379.0 ** — ** — Change in fair value of contingent consideration 2.1 ** (0.5) ** (51.6) Total costs and expenses $ 7,828.0 (30)% $ 11,253.0 86% $ 6,037.2** Not meaningfulCost of SalesOur cost of sales primarily consists of third-party royalties payable on net sales of our CF products as well as the cost of producing inventories. Pursuant to our agreement (the “CFF Agreement”) with the Cystic Fibrosis Foundation (the “CFF”), our tiered third-party royalties on sales of ALYFTREK, TRIKAFTA/KAFTRIO, SYMDEKO/SYMKEVI, KALYDECO, and ORKAMBI, calculated as a percentage of net sales, range from the single digits to the sub-teens, with lower royalties on sales of ALYFTREK and TRIKAFTA/KAFTRIO than for our other products. The royalty burden associated with TRIKAFTA/ KAFTRIO is 9.33% and our position is that the royalty burden associated with ALYFTREK is 4%. On October 10, 2025, Royalty Pharma plc (“RP”), the third party to whom the CFF assigned its rights (and the CFF, which remains a party to the CFF Agreement), initiated a confidential arbitration alleging the royalty burden on ALYFTREK is approximately 8%. RP is seeking a declaratory judgment regarding the royalty burden on ALYFTREK as well as alleged unpaid royalties and other alleged damages available under the CFF Agreement or applicable law, costs, expenses, attorneys’ fees, and interest. We 51 believe RP’s position is contrary to the plain terms of the CFF Agreement and intend to vigorously defend our position under the CFF Agreement. Our cost of sales as a percentage of our net product revenues was 13.8% and 13.9% in 2025 and 2024 , respectively, primarily due to ALYFTREK sales in 2025, which has the royalty burden lower than TRIKAFTA/KAFTRIO, partially offset by changes in product mix, and investments in network expansion and manufacturing process improvements. In 2026 , we expect our cost of sales as a percentage of our net product revenues to increase due to a higher proportion of products outside of CF, which currently have greater manufacturing costs relative to their net product revenue contributions, and continued investments in efficient manufacturing and delivery processes .Research and Development Expenses2025 % Change 2024 % Change 2023(in millions, except percentages)Research expenses $ 827.9 3% $ 804.5 14% $ 705.6Development expenses3,081.6 9% 2,825.8 15% 2,457.3Total research and development expenses$ 3,909.5 8% $ 3,630.3 15% $ 3,162.9 Over the past three years, we have incurred approximately $10.7 billion in research and development expenses associated with product discovery and development. Our research and development expenses include internal and external costs incurred for research and development of our products and product candidates. We assign external costs of services provided to us by clinical research organizations and other outsourced research by individual program. Our internal costs include salary and benefits, stock-based compensation expense, laboratory supplies and other direct expenses and infrastructure costs, the majority of which are not assigned to individual products or product candidates.Research Expenses2025 Change % 2024 Change % 2023(in millions, except percentages) Research Expenses:Salary and benefits $ 203.9 (3)% $ 210.7 14% $ 184.1 Stock-based compensation expense 94.8 (15)% 112.1 21% 92.4 Outsourced services and other direct expenses 286.2 5% 271.4 15% 237.0Infrastructure costs243.0 16% 210.3 9% 192.1Total research expenses$ 827.9 3% $ 804.5 14% $ 705.6 Our research expenses reflect investment in our pipeline and expansion of our cell and genetic therapy capabilities, which has increased our outsourced services and other direct expenses and infrastructure costs in 2025 as compared to 2024 . Salary and benefits in 2024 included $13.1 million associated with cash-settled unvested Alpine equity awards. Compared to 2024 , our total res earch expenses in 2025 increased $23.4 million , or 3% . We expect to continue to invest in our research programs with a focus on creating transformative medicines for serious diseases. 52Development Expenses2025 Change % 2024 Change % 2023(in millions, except percentages) Development Expenses:Salary and benefits $ 744.8 8% $ 686.7 16% $ 590.9 Stock-based compensation expense 320.6 2% 313.7 20% 262.5 Compensation expense for cash-settled unvested Alpine equity awards — ** 151.9 ** — Outsourced services and other direct expenses 1,493.5 21% 1,239.1 0% 1,238.7Infrastructure costs522.7 20% 434.4 19% 365.2Total development expenses$ 3,081.6 9% $ 2,825.8 15% $ 2,457.3 ** Not meaningful As we have advanced our pipeline of transformative medicines, we have invested in internal headcount and infrastructure to support multiple mid- and late-stage clinical development program s. These include our povetacicept programs acquired from Alpine, pain and T1D programs, which together have increased our outsourced services and other direct expenses. In conjunction with our acquisition of Alpine, we incurred $151.9 million associated with cash-settled unvested Alpine equity awards within development expenses in 2024. Compared to 2024 , our total de velopment expenses in 2025 increased by $255.8 million , or 9% . In 2026 , we expect our development expenses to continue to increase due to our advancing pipeline programs, including our T1D pro grams. Our stock-based compensation expenses, including those recorded as research and development expenses, have historically fluctuated and are expected to continue to fluctuate from one period to another primarily due to changes in the probability of achieving milestones associated with our performance-based awards. Acquired In-P rocess Research and Development Expenses 2025 % Change 2024 % Change 2023(in millions, except percentages)Acquired in-process research and development expenses $ 133.0 ** $ 4,628.4 ** $ 527.1 ** Not meaningful In 2025, AIPR&D included various upfront and mileston e payment s related to our collaboration and in-licensing arrangements. I n 2024, AIPR&D included $4.4 billion resulting from our acquisition of Alpine, which was accounted for as an asset acquisition, and various other upfront and milestone payments. Our AIPR&D has historically fluctuated, and is expected to continue to fluctuate, from one period to another due to upfront, contingent milestone, and other payments pursuant to our existing and future business development transactions, including collaborations, licenses of third-party technologies, and asset acquisitions.Selling, General and Administrative Expenses2025 % Change 2024 % Change 2023(in millions, except percentages)Selling, general and administrative expenses $ 1,753.1 20% $ 1,464.3 29% $ 1,136.6 Selling, general and administrative expenses increased by 20% in 2025 as compared to 2024 , primarily due to increased commercial investment to support the launch of JOURNAVX. We expect our selling, general and administrative expenses to continue to increase in 2026 to as we expand the commercialization of JOURNAVX, prepare for our anticipated launch of povetacicept for the treatment of IgAN, and further investments in infrastructure to scale our organization. 53 Intangible Asset Impairment Charge In the first quarter of 2025, based on results from a Phase 1/2 clinical trial evaluating our VX-264 clinical program in patients with T1D, we concluded that VX-264 will not be advancing further in clinical development. Based on this event, we performed an interim impairment test on the fair value of our VX-264 indefinite-lived in-process research and development asset that we acquired from Semma Therapeutics, Inc. As a result, we recorded a full intangible asset impairment charge of $379.0 million associated with VX-264 in the first quarter of 2025. Non-Operating Income (Expense), NetInterest IncomeInterest income decreased from $598.1 million in 2024 to $490.9 million in 2025 , primarily due to decreased market interest rat es. Our future interest income is dependent on the amount of, and prevailing market interest rates on, our outstanding cash, cash e quivalents and available-for-sale debt securities.Other Income (Expense), NetOther income (expense), net were expenses of $7.7 million and $86.1 million in 2025 and 2024 , respectively. These amounts primarily related to net unrealized and realized losses resulting from changes in the fair value of certain of our strategic equity investments a nd net foreign currency exchange losses.Income TaxesOur effective tax rate fluctuates from year to year due to the global nature of our operations. The factors that most significantly impact our effective tax rate include changes in tax laws, variability in the amount and allocation of our taxable earnings among multiple jurisdictions, the amount and characterization of our research and development expenses, the levels of certain deductions and credits, adjustments to the value of our uncertain tax positions, acquisitions and third-party collaboration and licensing transactions. In July 2025, the U.S. enacted H.R.1, which includes significant provisions modifying the U.S. tax framework, including the ability for companies to immediately deduct research and development expenditures for 2025 and provisions for deducting previously capitalized amounts. H.R.1 does not have a material impact on our 2025 U.S. taxes, but we expect further guidance to be issued. We will review guidance when issued for impacts on future years and disclose any impacts if needed at that time. These legislative changes could have an impact on our future effective tax rates, tax liabilities, and cash taxes. Our provision for income taxes was $690.0 million in 2025 and $784.1 million in 2024 . In 2025, our 14.9% effective tax rate was lower than the U.S. statutory rate primarily due to research and development tax credits, increased utilization of foreign tax credits, and excess tax benefits related to stock-based compensation . In 2024, our 315.5% effective tax rate was materially different than the U.S. statutory rate primarily due to the $4.4 billion of non-deductible AIPR&D resulting from our acquisition of Alpine, which significantly lowered our pre-tax income. The non-deductible AIPR&D was partially offset by a benefit from a research and development tax credit study that was completed in 2024 and excess tax benefits related to stock-based compensation . 54LIQUIDITY AND CAPITAL RESOURCESThe following table summarizes the components of our financial condition as of December 31, 2025 and 2024 : 2025 2024 % Change(in millions, except percentages) Cash, cash equivalents and marketable securities:Cash and cash equivalents $ 5,084.8 $ 4,569.6 Marketable securities 1,523.3 1,546.3 Long-term marketable securities 5,712.3 5,107.9 Total cash, cash equivalents and marketable securities $ 12,320.4 $ 11,223.8 10%Working Capital:Total current assets $ 11,201.0 $ 9,596.4 17% Total current liabilities (3,861.2) (3,564.6) 8% Total working capital $ 7,339.8 $ 6,031.8 22%Working CapitalAs of December 31, 2025 , total working capital was $7.3 billion , which represented an increase of $1.3 billion , or 22% , from $6.0 billion as of December 31, 2024 , primarily due to increased cash and marketable securities due to product revenue growth, as well as increased inventories to support our recent commercial launches.Cash Flows2025 2024 2023(in millions) Net cash provided by (used in):Operating activities $ 3,631.4 $ (492.6) $ 3,537.3Investing activities$ (945.4) $ (3,770.0) $ (3,141.7) Financing activities $ (2,261.3) $ (1,494.9) $ (562.2)Operating ActivitiesCash provided by operating activities was $3.6 billion in 2025 , primarily due to income from operations of $4.2 billion driven by our net product revenues partially offset by purchases of inventory and other changes in operating assets and liabilities. Cash used in operating activities was $492.6 million in 2024 , primarily due to our acquisition of Alpine partially offset by cash flows provided by other operating activities.Investing ActivitiesCash used in investing activities was $945.4 million in 2025 , primarily related to net purchases of available-for-sale debt securities and purchases of property and equipment. Cash used in investing activities was $3.8 billion in 2024 , which included net purchases of available-for-sale debt securities of $3.0 billion .Financing ActivitiesCash used in financing activities were $2.3 billion and $1.5 billion in 2025 and 2024 , respectively. Our financing activities in each year were primarily related to repurchases of our common stock pursuant to our share repurchase programs and payments in connection with common stock withheld for employee tax obligations. 55Sources and Uses of LiquidityWe intend to rely on our existing cash, cash equivalents and current marketable securities together with our operating profitability as our primary source of liquidity. We expect that cash flows from our product sales together with our cash, cash equivalents and current marketable securities will be sufficient to fund our operations for at least the next twelve months. The adequacy of our available funds to meet our future operating and capital requirements will depend on many factors, including our future sales of currently marketed products, and the potential introduction of one or more new product candidates to the market, our business development activities, and the number, breadth and cost of our research and development programs.Credit Facilities & Financing StrategyWe may borrow up to a total of $500.0 million pursuant to a revolving credit facility that we entered into in July 2022 and could repay and reborrow amounts under this revolving credit agreement without penalty. Subject to certain conditions, we could request that the borrowing capacity be increased by an additional $500.0 million, for a total of $1.0 billion. Negative covenants in our credit agreement could prohibit or limit our ability to access this source of liquidity. As of December 31, 2025 , the facility was undrawn, and we were in compliance with these covenants. We may also raise additional capital by borrowing under credit agreements, through public offerings or private placements of our securities, or securing new collaborative agreements or other methods of financing. We will continue to manage our capital structure and will consider all financing opportunities, whenever they may occur, that could strengthen our long-term liquidity profile. There can be no assurance that any such financing opportunities will be available on acceptable terms, if at all.Future Capital Requirements We have significant future capital requirements, including:• Expected operating expenses to conduct research and development activities, manufacture and commercialize our existing and future products, and to operate our organization.• Cash that we pay for income taxes. • Royalties we pay related to sales of our CF products. • Facility, operating and finance lease obligations as described below. • Firm purchase obligations related to our supply and manufacturing processes. In addition, other potential significant future capital requirements may include:• We have entered into certain agreements with third parties that include the funding of certain research, development, manufacturing and commercialization efforts. Certain of our transactions, including collaborations, licensing arrangements, and asset acquisitions, include the potential for future milestone and royalty payments by us upon the achievement of pre-established developmental and regulatory targets and/or commercial targets. Other transactions include the potential for future lease-related expenses and other costs. Our obligation to fund these research and development and commercialization efforts and to pay these potential milestones, expenses and royalties is contingent upon continued involvement in the programs and/or the lack of any adverse events that could cause their discontinuance. We may enter into additional agreements, including acquisitions, collaborations, licensing arrangements and equity investments, which require additional capital. • To the extent we borrow amounts under our existing credit agreement, we would be required to repay any outstanding principal amounts in 2027. • As of December 31, 2025 , we had $3.4 billion remaining authorization available under the share repurchase program that our Board of Directors approved in May 2025. The program does not have an expiration date and can be discontinued at any time. We expect to fund the program through a combination of cash on hand and cash generated by operations.Additional information on several of our future capital requirements is provided below.56Research and Development CostsWe have ongoing clinical trials of product candidates at various stages of clinical development. Our clinical trial costs are dependent on, among other things, the size, number, and length of our clinical trials. These costs can increase as product candidates move from earlier-stage clinical trials into later-stage clinical development.LeasesWe account for the majority of our real estate leases and each of our embedded leases with contract manufacturing organizations as operating leases. These include leases for our corporate headquarters at Fan Pier in Boston, Massachusetts, which continues through June 2044, and office and laboratory space at the Jeffrey Leiden Center for Biologics, Cell and Genetic Therapies Campus (the “Leiden Campus”) near our corporate headquarters. As of December 31, 2025 , the longest lease at the Leiden Campus continues through the first quarter of 2042. W e also have several embedded leases with contract manufacturing organizations related to the manufacturing and commercialization of our products with remaining lease terms up to 7 years as of December 31, 2025 . Our total future minimum lease payments for our leases for each of the next five years and in total are included in Note L, “Leases.” The total future undiscounted minimum lease payments were $3.2 billion and $178.1 million related to our operating and finance leases, respectively, as of December 31, 2025 . In addition to the items described above, w e have a strategic agreement with Lonza to support the manufacture of T1D cell therapy product candidates, pursuant to which we have partnered with Lonza to build a 130,000 square foot dedicated new facility operated by Lonza in New Hampshire. Lease payments will begin in the first quarter of 2026 and continue through the tenth anniversary of the facility’s regulatory approval for commercial production . We may enter into additional lease agreements to support future product development and commercialization efforts, which would require additional capital.CRITICAL ACCOUNTING POLICIES AND ESTIMATESOur discussion and analysis of our financial condition and results of operations are based upon our 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 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. We believe that our application of the following accounting policies, each of which requires significant judgments and estimates on the part of management, are the most critical to aid in fully understanding and evaluating our reported financial results:• revenue recognition;• acquisitions, including intangible assets; • pre-launch inventories; and• income taxes.Our accounting policies, including the ones discussed below, are more fully described in Note A, “Nature of Business and Accounting Policies.” 57Revenue RecognitionProduct Revenues, Net We generate product revenues from sales in the U.S. and in international markets. We sell our products principally to a limited number of specialty pharmacy and specialty distributors as well as certain major wholesalers in the U.S., which account for the largest portion of our total revenues. Our customers in the U.S. subsequently resell our products to patients, health care providers, retail pharmacies, hospitals, or authorized treatment centers (“ATCs”) for CASGEVY. We contract with government agencies so that our products will be eligible for purchase by, or partial or full reimbursement from, such third-party payors. We make international sales primarily through distributor arrangements and to retail pharmacies, as well as to hospitals and clinics, many of which are government-owned or supported customers. In certain markets, we may not utilize a specialty distributor or specialty pharmacy to distribute CASGEVY. In these markets, we sell CASGEVY directly to ATCs. We recognize net product revenues from sales of our products when our customers obtain control of our products, which typically occurs upon delivery to customers for our small molecule products, including our CF products and JOURNAVX, and upon infusion of our gene-therapy products, including CASGEVY. Revenues from our product sales are recorded at the net sales price, or transaction price, which requires us to make several significant estimates regarding the net sales price. We are required to make estimates for o ur product reve nues related to government, commercial, and private payor rebates, chargebacks, discounts and fees, collectively rebates. The values of the rebates provided to third-party payors per course of treatment vary significantly and are based on government-mandated discounts and our arrangements with other third-party payors. Our most significant estimate relates to determining amounts due pursuant to the Medicaid Drug Rebate Program, including estimating the level of expected utilization of the rebates based on the amount of product sold to eligible patients. We track available information regarding changes, if any, to the payor mix for our products, to our contractual terms with third-party payors and to applicable governmental programs and regulations and levels of our products in the distribution channel. We adjust our estimated rebates based upon new information as it becomes available, including information regarding actual rebates for our products. Claims by third-party payors for rebates are submitted to us significantly after the related sales, potentially resulting in adjustments in the period in which the new information becomes known. The following table summarizes activity related to our product revenue accr uals for rebates for 2025 , 2024 and 2023 :(in millions)Balance at December 31, 2022$ 1,291.4 Provision related to 2023 sales 3,481.4Adjustments related to prior year(s) sales (6.5) Credits/payments made (3,064.7) Balance at December 31, 2023$ 1,701.6Provision related to 2024 sales 3,673.0 Adjustments related to prior year(s) sales (42.1) Credits/payments made (3,725.4) Balance at December 31, 2024 $ 1,607.1 Provision related to 2025 sales 3,780.4 Adjustments related to prior year(s) sales (90.4) Credits/payments made (3,519.5) Balance at December 31, 2025 $ 1,777.6 We have also entered into annual contracts with government-owned and supported customers in international markets that limit the amount of annual reimbursement we can receive for our products. Upon exceeding the annual reimbursement amount provided by the customer’s contract with us, products are provided free of charge, which is a material right. If we estimate that the annual reimbursement amount under a contract will be exceeded for an annual period, we defer a portion of the consideration received, which includes upfront payments and fees, for shipments made up to the annual reimbursement limit as “ Other current liabilities .” Once the annual reimbursement limit has been reached, we recognize the deferred amount 58 as revenue when we deliver the free products. To estimate the portion of the consideration received to be recognized as revenue and the portion of the amount to be deferred, we rely on our forecast of the number of units we will distribute during the applicable annual period in each international market in which our contracts with government-owned and supported customers limit the amount of annual reimbursement we can receive. Our forecasts are based on, among other things, our historical experience. The preceding estimates and judgments materially affect our recognition of net product revenues. Changes in our estimates of net product revenues could have a material effect on net product revenues recorded in the period in which we determine that change occurs.AcquisitionsAs part of our business strategy, we seek to acquire products, product candidates and other technologies and businesses that are aligned with our corporate and research and development strategies and complement and advance our ongoing research and development efforts. We are required to make several significant judgments and estimates to determine the accounting treatment for each acquisition transaction. If we determine that substantially all the fair value associated with an acquisition is concentrated in a single asset, or the acquisition does not constitute a business, we account for it as an asset acquisition. For example, we accounted for our $5.0 billion acquisition of Alpine in 2024 as an asset acquisition because povetacicept, Alpine’s lead molecule, represented substantially all of the fair value of the gross assets that we acquired. As a result, $4.4 billion of the fair value attributed to povetacicept was expensed to AIPR&D in 2024. If the fair value that we acquired in an acquisition is distributed among more than one asset, and the acquisition constitutes a business, we account for it as a business combination. For an asset acquisition involving rights to intellectual property related to in-process research and development that is not yet associated with a product that has achieved regulatory approval, we generally expense our upfront payment to AIPR&D, because there is no alternative future use for the asset that was acquired. For business combinations, we are required to make several significant judgments and estimates to calculate and allocate the purchase price, including the fair value of contingent consideration liabilities, to the assets that we have acquired and the liabilities that we have assumed on our consolidated balance sheet. The most significant judgment and estimate we have made for our business combinations relates to the fair value of the in-process research and development assets.In-process Research and Development Intangible AssetsAs of December 31, 2025 and 2024 , we had $224.6 million and $603.6 million , respectively, of in-process research and development assets on our consolidated balance sheet within “ Other intangible assets, net .” During 2025, we recorded a $379.0 million impairment of one of these assets, which was classified as an “ Intangible asset impairment charge .” As of December 31, 2025 , our remaining indefinite-lived in-process research and development assets were associated with our T1D program. We characterize in-process research and development assets on our consolidated balance sheets as indefinite-lived intangible assets until the completion or abandonment of the associated research and development efforts. We test our in- process research and development intangible assets for impairment on an annual basis, and more frequently if indicators are present or changes in circumstances suggest that impairment may exist. When we determine that an indefinite-lived intangible asset has become impaired or we abandon the associated research and development project, we write down the carrying value to its fair value and record an impairment charge in the period in which the impairment occurs. For example, i n 2025 , based on results from a Phase 1/2 clinical trial evaluating our VX-264 clinical program in patients with T1D, we concluded that VX-264 will not be advancing further in clinical development. Based on this event, we performed an interim impairment test on the fair value of our VX-264 indefinite-lived in-process research and development asset that we acquired from Semma Therapeutics, Inc. in 2019. We recorded the $379.0 million impairment charge based on the results of this impairment test. We use significant judgment to determine the fair value of our in-process research and development assets and have utilized either the multi-period excess earnings or the relief from royalty methods of the income approach. Each method requires us to estimate the probability of technical and regulatory success, revenue projections and growth rates, and 59 appropriate discount and tax rates. The multi-period excess earnings method also requires us to estimate development and commercial costs. The relief from royalty method also requires us to estimate the after-tax royalty savings expected from ownership of the asset that we acquired. In 2025, we used the multi-period earnings method to record the impairment described above. If one of our product candidates achieves regulatory approval, the in-process research and development intangible assets associated with the product candidate become finite-lived intangible assets as described below.Finite-lived Intangible AssetsAs of December 31, 2025 and 2024 , we had $199.6 million and $222.3 million , respectively, of finite-lived intangible assets on our consolidated balance sheet within “ Other intangible assets, net .” These finite-lived intangible assets primarily relate to $208.0 million of CASGEVY regulatory approval milestones recorded in 2023. We amortize our finite-lived intangible assets related to our marketed products, which represent the majority of our finite-lived intangible assets, using the straight-line method within “ Cost of sales ” over the remaining estimated life of the assets beginning in the period in which regulatory approval is achieved or the assets are acquired and continuing through the period that we no longer have either exclusive rights to market the products associated with the assets or in-license rights to the intellectual property underlying the assets. We test finite-lived intangible assets for impairment if indicators are present or changes in circumstances suggest that the carrying value of an asset may not be recoverable. If we determine that the carrying value of a finite-lived intangible asset may not be recoverable, we compare the carrying value of the asset to the undiscounted cash flows that we expect the asset to generate. When we determine that a finite-lived intangible asset has become impaired, we write down the carrying value of the asset to its fair value and record an impairment charge in the period in which the impairment occurs. Pre-Launch Inventories We capitalize inventories prior to regulatory approval when we consider the related product candidate to have a high likelihood of regulatory approval and expect to recover the related costs. In making this determination, we evaluate, among other factors, the status of regulatory submissions and communications with regulatory authorities, information regarding the product candidate’s safety and efficacy, and the outlook for commercial sales, including the existence of any competition. As an example, during the first quarter of 2024, following positive results related to our Phase 3 trials for JOURNAVX, we began capitalizing inventories produced in preparation for our planned product launch. In January 2025, we received approval from the FDA to market JOURNAVX in the U.S. Prior to making this determination, we expensed inventoriable and related costs associated with JOURNAVX as “ Research and development expenses .”Income TaxesWe utilize the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement carrying amounts and tax basis of assets and liabilities using enacted tax rates in effect for years in which the temporary differences are expected to reverse. If our estimate of the tax effect of reversing temporary differences is (i) not reflective of actual outcomes, (ii) modified to reflect new developments or interpretations of the tax law, or (iii) revised to incorporate new accounting principles, or changes in the expected timing or manner of the reversal, our results of operations could be materially impacted. We provide a valuation allowance when it is more likely than not that deferred tax assets will not be realized. On a periodic basis, we reassess our valuation allowances on our deferred tax assets, weighing positive and negative evidence to assess the recoverability of the deferred tax assets. Judgment is required in making these assessments to maintain or adjust our valuation allowances and, to the extent our future expectations change we would have to assess the recoverability of these deferred tax assets at that time. As of December 31, 2025 , we maintained a valuation allowance of $326.2 million related primarily to U.S. state tax attributes. We record liabilities related to uncertain tax positions by prescribing a minimum recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. We adjust our liability to reflect any subsequent changes in the relevant facts and circumstances surrounding the uncertain positions. We are subject to tax laws and audits in multiple jurisdictions and judgment is required in making this assessment. Consequently, we regularly re-evaluate uncertain tax positions and consider various factors, including changes in 60 tax law, the measurement of tax positions taken or expected to be taken in tax returns, and changes in facts or circumstances related to a tax position. As of December 31, 2025 , our liability for uncertain tax positions was $852.1 million .RECENT ACCOUNTING PRONOUNCEMENTSRefer to Note A, “Nature of Business and Accounting Policies,” in the accompanying notes to the consolidated financial statements for a discussion of recent accounting pronouncements and new accounting pronouncements adopted during 2025 .