Vertex (NASDAQ: VRTX) Q1 profit climbs to $1.03B on $3.0B sales
Vertex Pharmaceuticals delivered strong Q1 2026 results, with total revenues of $2.99 billion, up 8% from Q1 2025. Growth was driven by continued cystic fibrosis (CF) therapies and rapid uptake of newer products ALYFTREK, CASGEVY and JOURNAVX.
Net income rose to $1.03 billion from $646.3 million, and diluted EPS increased to $4.02 from $2.49, helped by the absence of last year’s $379.0 million impairment and much lower acquired in-process R&D. Operating income nearly doubled to $1.14 billion.
R&D spending remained high at $961.6 million, while SG&A climbed 25% to $493.7 million as Vertex invests in launches like JOURNAVX and prepares povetacicept for IgA nephropathy. Cash, cash equivalents and marketable securities increased to $13.0 billion, even after $344.5 million of share repurchases in the quarter.
Positive
- Profitability surged: Net income increased to $1.03 billion from $646.3 million, and operating income rose to $1.14 billion, reflecting strong margins and the absence of a prior-year $379.0 million impairment.
- Robust cash generation and balance: Operating cash flow reached $1.43 billion in Q1 2026 and cash, cash equivalents and marketable securities grew to $13.0 billion while still funding $344.5 million of share repurchases.
- Diversifying revenue beyond CF: Newer products ALYFTREK, CASGEVY and JOURNAVX grew rapidly, contributing to overall 8% revenue growth and reducing dependence on any single CF product.
Negative
- None.
Insights
Vertex posted strong profit growth, diversified revenue and expanded its already large cash balance.
Vertex grew Q1 2026 revenue to $2.99 billion, up 8% year over year. CF therapies remained the core, but ALYFTREK, CASGEVY and JOURNAVX contributed meaningfully, highlighting progress in diversifying beyond CF while keeping the base franchise stable overall.
Net income jumped to $1.03 billion from $646.3 million, with operating income at $1.14 billion. The comparison benefits from the prior-year $379.0 million T1D impairment and much lower acquired in-process R&D, but still reflects attractive margins despite higher SG&A to support launches.
Cash, cash equivalents and marketable securities reached $13.0 billion, while operating cash flow was $1.43 billion in the quarter and share repurchases totaled $344.5 million. Continued heavy R&D spending of $961.6 million shows ongoing pipeline investment alongside commercial expansion, so future value will depend on clinical and regulatory milestones discussed for programs like povetacicept and T1D.
Key Figures
Total revenue: $2,986.9 million
Net income: $1,031.4 million
Diluted EPS: $4.02 per share
+5 more
8 metrics
Total revenue
$2,986.9 million
Three months ended March 31, 2026; up 8% year over year
Net income
$1,031.4 million
Three months ended March 31, 2026; vs. $646.3 million in 2025
Diluted EPS
$4.02 per share
Three months ended March 31, 2026; vs. $2.49 in 2025
Cash and marketable securities
$12,996.6 million
Cash, cash equivalents and marketable securities as of March 31, 2026
R&D expenses
$961.6 million
Research and development expenses in Q1 2026
SG&A expenses
$493.7 million
Selling, general and administrative expenses in Q1 2026; up 25% YoY
Operating cash flow
$1,428.1 million
Net cash provided by operating activities in Q1 2026
Share repurchases
$344.5 million
Aggregate repurchases of common stock in Q1 2026
Key Terms
acquired in-process research and development expenses, contingent consideration, cash flow hedges, effective tax rate, +1 more
5 terms
acquired in-process research and development expenses financial
"Our “Acquired in-process research and development expenses” (“AIPR&D”) included $0.5 million and $19.8 million..."
contingent consideration financial
"Change in fair value of contingent consideration | 0.2 | 2.2"
Contingent consideration is an additional payment agreed when one company buys another that will be paid later only if specific future targets are met, such as revenue, profit, or regulatory milestones. It matters to investors because it shifts risk between buyer and seller and affects the acquiring company's future cash flow and reported value — like promising a bonus after results are proven.
cash flow hedges financial
"foreign currency forward contracts that are designated as cash flow hedges under U.S. GAAP"
A cash flow hedge is an accounting label companies use when they enter financial contracts—like currency or interest-rate agreements—to protect expected future cash payments or receipts from unpredictable moves. For investors, it signals that the company is trying to smooth out future cash variability (think of locking in a price to avoid surprises), which can reduce reported profit swings but also means the company has exposure to derivative instruments and their associated risks.
effective tax rate financial
"Our effective tax rates for the three months ended March 31, 2026 and 2025 were lower than the U.S. statutory rate..."
The effective tax rate is the percentage of a company's profits that it pays in taxes. It shows how much of its earnings go to taxes after all deductions and credits are considered. For investors, it indicates how much of the company's income is taken by taxes, impacting overall profitability and financial health.
share repurchase program financial
"In May 2025, our Board of Directors authorized a share repurchase program (the “2025 Share Repurchase Program”)"
A share repurchase program is when a company buys back its own shares from the marketplace. This reduces the total number of shares available, which can increase the value of each remaining share and signal confidence in the company's prospects. For investors, it often suggests that the company believes its stock is undervalued or that it has extra cash to return to shareholders.
Earnings Snapshot
Total revenue: $2,986.9 million
Q1 2026
Total revenue
$2,986.9 million
+8% YoY
Net income
$1,031.4 million
up from $646.3 million
Diluted EPS
$4.02
up from $2.49
Operating cash flow
$1,428.1 million
up from $818.9 million
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FAQ
How did Vertex Pharmaceuticals (VRTX) perform financially in Q1 2026?
Vertex generated strong Q1 2026 results, with total revenues of $2.99 billion, up 8% year over year. Net income rose to $1.03 billion and diluted EPS reached $4.02, reflecting higher sales and the absence of a large prior-year impairment.
What drove Vertex Pharmaceuticals’ revenue growth in Q1 2026?
Revenue growth in Q1 2026 was driven by continued CF franchise performance and expansion into new diseases. ALYFTREK sales increased sharply, while CASGEVY and JOURNAVX also contributed, helping lift total product revenues to $2.99 billion, an 8% increase over Q1 2025.
How profitable was Vertex Pharmaceuticals (VRTX) in Q1 2026?
Vertex’s profitability was strong, with net income of $1.03 billion versus $646.3 million a year earlier. Operating income reached $1.14 billion, aided by lower acquired in-process R&D and no repeat of the prior-year $379.0 million intangible impairment charge.
What is Vertex Pharmaceuticals’ cash position as of March 31, 2026?
As of March 31, 2026, Vertex held $13.0 billion in cash, cash equivalents and marketable securities. This increased from $12.3 billion at December 31, 2025, supported by $1.43 billion of operating cash flow, even after significant share repurchases during the quarter.
How much did Vertex Pharmaceuticals spend on R&D and SG&A in Q1 2026?
In Q1 2026, Vertex spent $961.6 million on research and development and $493.7 million on selling, general and administrative expenses. R&D remained high to support the pipeline, while SG&A rose 25% year over year to back product launches and commercialization efforts.
Did Vertex Pharmaceuticals repurchase shares in Q1 2026?
Yes. Vertex repurchased 0.7 million shares of its common stock in Q1 2026 for a total of $344.5 million. As of March 31, 2026, $3.0 billion remained available under the 2025 share repurchase program authorized by the board.
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________________________________________
FORM 10-Q
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2026
or
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
Commission file number 000-19319
____________________________________________
Vertex Pharmaceuticals Incorporated
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization)
(Address of principal executive offices)
(I.R.S. Employer Identification No.)
(Zip Code)
Registrant’s telephone number, including area code (617 ) 341-6100
____________________________________________
Securities registered pursuant to Section 12(b) of the Act: | ||||
Title of each class | Trading Symbol | Name of each exchange on which registered | ||
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting
company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Common Stock, par value $0.01 per share | Outstanding at April 30, 2026 |
Table of Contents
VERTEX PHARMACEUTICALS INCORPORATED
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2026
TABLE OF CONTENTS
Page | ||
Part I. Financial Information | ||
Item 1. | Financial Statements (unaudited) | 2 |
Condensed Consolidated Statements of Income | 2 | |
Condensed Consolidated Statements of Comprehensive Income | 3 | |
Condensed Consolidated Balance Sheets | 4 | |
Condensed Consolidated Statements of Shareholders' Equity | 5 | |
Condensed Consolidated Statements of Cash Flows | 6 | |
Notes to Condensed Consolidated Financial Statements | 7 | |
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 21 |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 31 |
Item 4. | Controls and Procedures | 31 |
Part II. Other Information | ||
Item 1. | Legal Proceedings | 31 |
Item 1A. | Risk Factors | 32 |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 33 |
Item 5. | Other Information | 33 |
Item 6. | Exhibits | 34 |
Signatures | 35 | |
“Vertex,” “we,” “us,” and “our” as used in this Quarterly Report on Form 10-Q refer to Vertex Pharmaceuticals
Incorporated, a Massachusetts corporation, and its subsidiaries.
“Vertex®,” “KALYDECO®,” “ORKAMBI®,” “SYMDEKO®,” “SYMKEVI®,” “TRIKAFTA®,” “KAFTRIO®,”
CASGEVY®, ” “ALYFTREK®,” and “JOURNAVX®” are registered trademarks of Vertex. Other brands, names and
trademarks contained in this Quarterly Report on Form 10-Q are the property of their respective owners.
We use the brand name for our products when we refer to the product that has been approved and with respect to the
indications on the approved label. Otherwise, including in discussions of our cystic fibrosis, sickle cell disease, beta
thalassemia, and pain development programs, we refer to our product candidates by their scientific (or generic) name or VX
developmental designation.
2
Table of Contents
Part I. Financial Information
Item 1. Financial Statements
VERTEX PHARMACEUTICALS INCORPORATED
Condensed Consolidated Statements of Income
(unaudited; in millions, except per share amounts)
Three Months Ended March 31, | |||
2026 | 2025 | ||
Revenues: | |||
Product revenues, net | $ | $ | |
Other revenues | |||
Total revenues | |||
Costs and expenses: | |||
Cost of sales | |||
Research and development expenses | |||
Acquired in-process research and development expenses | |||
Selling, general and administrative expenses | |||
Intangible asset impairment charge | |||
Change in fair value of contingent consideration | |||
Total costs and expenses | |||
Income from operations | |||
Interest income, net | |||
Other expense, net | ( | ||
Income before provision for income taxes | |||
Provision for income taxes | |||
Net income | $ | $ | |
Net income per common share: | |||
Basic | $ | $ | |
Diluted | $ | $ | |
Shares used in per share calculations: | |||
Basic | |||
Diluted | |||
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
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VERTEX PHARMACEUTICALS INCORPORATED
Condensed Consolidated Statements of Comprehensive Income
(unaudited; in millions)
Three Months Ended March 31, | |||
2026 | 2025 | ||
Net income | $ | $ | |
Other comprehensive income (loss): | |||
Unrealized holding (losses) gains on available-for-sale debt securities, net of tax of $ | ( | ||
Unrealized gains (losses) on foreign currency forward contracts, net of tax of $( | ( | ||
Foreign currency translation adjustment | ( | ||
Total other comprehensive income (loss) | ( | ||
Comprehensive income | $ | $ | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
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VERTEX PHARMACEUTICALS INCORPORATED
Condensed Consolidated Balance Sheets
(unaudited; in millions, except share and per share data)
March 31, 2026 | December 31, 2025 | ||
Assets | |||
Current assets: | |||
Cash and cash equivalents | $ | $ | |
Marketable securities | |||
Accounts receivable, net | |||
Inventories | |||
Prepaid expenses and other current assets | |||
Total current assets | |||
Property and equipment, net | |||
Goodwill | |||
Other intangible assets, net | |||
Deferred tax assets | |||
Operating lease assets | |||
Long-term marketable securities | |||
Other assets | |||
Total assets | $ | $ | |
Liabilities and Shareholders’ Equity | |||
Current liabilities: | |||
Accounts payable | $ | $ | |
Accrued expenses | |||
Other current liabilities | |||
Total current liabilities | |||
Long-term operating lease liabilities | |||
Other long-term liabilities | |||
Total liabilities | |||
Commitments and contingencies (Note L) | |||
Shareholders’ equity: | |||
Preferred stock, $ | |||
Common stock, $ | |||
Additional paid-in capital | |||
Accumulated other comprehensive income (loss) | ( | ||
Retained earnings | |||
Total shareholders’ equity | |||
Total liabilities and shareholders’ equity | $ | $ |
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
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VERTEX PHARMACEUTICALS INCORPORATED
Condensed Consolidated Statements of Shareholders’ Equity
(unaudited; in millions)
Three Months Ended | |||||||||||
Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings | Total Shareholders’ Equity | |||||||
Shares | Amount | ||||||||||
Balance at December 31, 2024 | $ | $ | $ | $ | $ | ||||||
Other comprehensive loss, net of tax | — | — | — | ( | — | ( | |||||
Net income | — | — | — | — | |||||||
Repurchases of common stock | ( | — | ( | — | — | ( | |||||
Common stock withheld for employee tax obligations | ( | — | ( | — | — | ( | |||||
Issuance of common stock under benefit plans | — | — | — | ||||||||
Stock-based compensation expense | — | — | — | — | |||||||
Balance at March 31, 2025 | $ | $ | $ | $ | $ | ||||||
Balance at December 31, 2025 | $ | $ | $( | $ | $ | ||||||
Other comprehensive income, net of tax | — | — | — | — | |||||||
Net income | — | — | — | — | |||||||
Repurchases of common stock | ( | — | ( | — | — | ( | |||||
Common stock withheld for employee tax obligations | ( | — | ( | — | — | ( | |||||
Issuance of common stock under benefit plans | — | — | — | ||||||||
Stock-based compensation expense | — | — | — | — | |||||||
Balance at March 31, 2026 | $ | $ | $ | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
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VERTEX PHARMACEUTICALS INCORPORATED
Condensed Consolidated Statements of Cash Flows
(unaudited; in millions)
Three Months Ended March 31, | |||
2026 | 2025 | ||
Cash flows from operating activities: | |||
Net income | $ | $ | |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Stock-based compensation expense | |||
Depreciation and amortization expense | |||
Intangible asset impairment charge | |||
Deferred income taxes | ( | ( | |
Other non-cash items, net | ( | ||
Changes in operating assets and liabilities: | |||
Accounts receivable | ( | ||
Inventories | ( | ( | |
Prepaid expenses and other assets | ( | ||
Accounts payable | |||
Accrued expenses | |||
Other liabilities | |||
Net cash provided by operating activities | |||
Cash flows from investing activities: | |||
Purchases of available-for-sale debt securities | ( | ( | |
Sales and maturities of available-for-sale debt securities | |||
Purchases of property and equipment | ( | ( | |
Other investing activities | ( | ||
Net cash used in investing activities | ( | ( | |
Cash flows from financing activities: | |||
Issuances of common stock under benefit plans | |||
Repurchases of common stock | ( | ( | |
Payments in connection with common stock withheld for employee tax obligations | ( | ( | |
Other financing activities | ( | ( | |
Net cash used in financing activities | ( | ( | |
Effect of changes in exchange rates on cash | ( | ||
Net increase in cash, cash equivalents and restricted cash | |||
Cash, cash equivalents and restricted cash—beginning of period | |||
Cash, cash equivalents and restricted cash—end of period | $ | $ | |
Supplemental disclosure of cash flow information: | |||
Cash paid for income taxes | $ | $ | |
Cash paid for interest | $ | $ | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
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VERTEX PHARMACEUTICALS INCORPORATED
Notes to Condensed Consolidated Financial Statements (unaudited)
A.Basis of Presentation and Accounting Policies
The accompanying condensed consolidated financial statements are unaudited and have been prepared by Vertex
Pharmaceuticals Incorporated (“Vertex,” “we,” “us” or “our”) in accordance with accounting principles generally accepted in
the United States of America (“U.S. GAAP”).
The condensed consolidated financial statements reflect the operations of Vertex and our wholly-owned subsidiaries. All
material intercompany balances and transactions have been eliminated. We operate in one segment , pharmaceuticals.
Certain information and footnote disclosures normally included in our Annual Report on Form 10-K for the fiscal year
ended December 31, 2025 (the “2025 Annual Report on Form 10-K”) have been condensed or omitted. These interim
financial statements, in the opinion of management, reflect all normal recurring adjustments necessary for a fair presentation
of the financial position and results of income for the interim periods ended March 31, 2026 and 2025.
The results of operations for the interim period are not necessarily indicative of the results of operations to be expected
for the full fiscal year. These interim financial statements should be read in conjunction with the audited financial statements
The preparation of condensed consolidated financial statements in accordance with U.S. GAAP requires us to make
certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of our condensed consolidated financial statements, and the amounts of revenues and expenses
during the reported periods. We base our estimates on historical experience and various other assumptions, including in
certain circumstances future projections that we believe to be reasonable under the circumstances. Actual results could differ
from those estimates. Changes in estimates are reflected in reported results in the period in which they become known.
Disaggregation of Income Statement Expenses
In 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2024-03,
Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40):
Disaggregation of Income Statement Expenses (“ASU 2024-03”), which requires public entities, among other items, to
disclose in a tabular format, on an annual and interim basis, purchases of inventory, employee compensation, depreciation,
intangible asset amortization and depletion for each income statement line item that contains those expenses. ASU 2024-03
becomes effective for the annual period starting on January 1, 2027 and interim periods starting on January 1, 2028. We are
in the process of analyzing the impact that the adoption of ASU 2024-03 will have on our disclosures.
Internal-Use Software
In 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40):
Targeted Improvements to the Accounting for Internal-Use Software (“ASU 2025-06”), which eliminates consideration of the
software project development stages and replaces them with modernized recognition and measurement guidance designed to
reflect current internal-use software development practices. ASU 2025-06 becomes effective for the annual and interim
periods starting on January 1, 2028. We are in the process of analyzing the impact that the adoption of ASU 2025-06 will
have on our consolidated financial statements and related disclosures.
Summary of Significant Accounting Policies
Our significant accounting policies are described in Note A, “Nature of Business and Accounting Policies,” in our 2025
Annual Report on Form 10-K.
B.Collaboration, License and Other Arrangements
Acquired In-Process Research and Development
We have entered into numerous business development agreements with third parties to collaborate on research,
development and commercialization programs, license technologies, or acquire assets. Our “Acquired in-process research and
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VERTEX PHARMACEUTICALS INCORPORATED
Notes to Condensed Consolidated Financial Statements (unaudited)
development expenses” (“AIPR&D”) included $0.5 million and $19.8 million in the three months ended March 31, 2026 and
2025, respectively, related to upfront, contingent milestone, or other payments pursuant to our business development
transactions.
Our collaboration, licensing and asset acquisition agreements that had a significant impact on our financial statements for
the three months ended March 31, 2026 and 2025 or were new or materially revised during the three months ended March 31,
2026, are described below. Additional agreements are described in Note B, “Collaboration, License and Other
Arrangements,” of our 2025 Annual Report on Form 10-K.
In-license Agreements
CRISPR Therapeutics AG
We have a joint development and commercialization agreement (the “CRISPR JDCA”) with CRISPR Therapeutics AG
and its affiliates (“CRISPR”). Pursuant to the CRISPR JDCA, we lead global development, manufacturing and
commercialization of CASGEVY for the treatment of hemoglobinopathies, including treatments for severe sickle cell disease
(“SCD”) and transfusion-dependent beta thalassemia, with support from CRISPR.
We share with CRISPR 40 % of the net commercial profits or losses incurred with respect to CASGEVY, subject to
certain adjustments, which is recorded to “Cost of sales.” The net commercial profits or losses equal the sum of the product
revenues, cost of sales and selling, general and administrative expenses that we recognized during the applicable period
related to the CRISPR JDCA. We also are reimbursed by CRISPR for its 40 % share of the research and development
activities conducted under the CRISPR JDCA, subject to certain adjustments, and we record this reimbursement from
CRISPR as a credit within “Research and development expenses.”
In the first quarter of 2025, we recorded a $12.5 million credit to AIPR&D from CRISPR, reflecting its share of our
upfront payment paid to Orna Therapeutics in December 2024.
statements of income for CRISPR’s share of CRISPR JDCA activities were as follows:
Three Months Ended March 31, | |||
2026 | 2025 | ||
(in millions) | |||
Cost of sales | $ | $ | |
Research and development expenses | $ | $ | |
Acquired in-process research and development expenses | $ | $ | |
Cystic Fibrosis Foundation
In 2004, we entered into an agreement with the Cystic Fibrosis Foundation (the “CFF”), as successor in interest to the
Cystic Fibrosis Foundation Therapeutics, Inc., to support research and development activities. Pursuant to the agreement, as
amended, we have agreed to pay tiered royalties ranging from single digits to sub-teens on covered compounds first
synthesized and/or tested during a research term on or before February 28, 2014, including ivacaftor, lumacaftor and
tezacaftor, and royalties ranging from low-single digits to mid-single digits on net sales of certain compounds first
synthesized and/or tested between March 1, 2014 and August 31, 2016, including elexacaftor. We do not have any royalty
obligations on compounds first synthesized and tested on or after September 1, 2016. For combination products, such as
ORKAMBI, SYMDEKO/SYMKEVI, TRIKAFTA/KAFTRIO, and ALYFTREK, sales are allocated equally to each of the
active pharmaceutical ingredients in the combination product, and royalties are then paid for any royalty-bearing components
included in the combination. We record expenses related to these royalty obligations to “Cost of sales.”
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VERTEX PHARMACEUTICALS INCORPORATED
Notes to Condensed Consolidated Financial Statements (unaudited)
C.Earnings Per Share
Three Months Ended March 31, | |||
2026 | 2025 | ||
(in millions, except per share amounts) | |||
Net income | $ | $ | |
Basic weighted-average common shares outstanding | |||
Effect of potentially dilutive securities: | |||
Restricted stock units (including performance-based restricted stock units (“PSUs”)) | |||
Stock options | |||
Diluted weighted-average common shares outstanding | |||
Basic net income per common share | $ | $ | |
Diluted net income per common share | $ | $ | |
During the three months ended March 31, 2026 and 2025, the number of anti-dilutive securities that were excluded from
the computation of our diluted net income per common share was not significant.
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VERTEX PHARMACEUTICALS INCORPORATED
Notes to Condensed Consolidated Financial Statements (unaudited)
D.Fair Value Measurements
fair value hierarchy, as described in Note A, “Nature of Business and Accounting Policies,” of our 2025 Annual Report on
Form 10-K:
As of March 31, 2026 | As of December 31, 2025 | ||||||||||||||
Fair Value Hierarchy | Fair Value Hierarchy | ||||||||||||||
Total | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | ||||||||
(in millions) | |||||||||||||||
Financial instruments carried at fair value (asset positions): | |||||||||||||||
Cash equivalents | $ | $ | $ | $ | $ | $ | $ | $ | |||||||
Marketable securities: | |||||||||||||||
Corporate equity securities | |||||||||||||||
U.S. Treasury securities | |||||||||||||||
U.S. government agency securities | |||||||||||||||
Asset-backed securities | |||||||||||||||
Certificates of deposit | |||||||||||||||
Corporate debt securities | |||||||||||||||
Commercial paper | |||||||||||||||
Prepaid expenses and other current assets: | |||||||||||||||
Foreign currency forward contracts | |||||||||||||||
Other assets: | |||||||||||||||
Foreign currency forward contracts | |||||||||||||||
Total financial assets | $ | $ | $ | $ | $ | $ | $ | $ | |||||||
Financial instruments carried at fair value (liability positions): | |||||||||||||||
Other current liabilities: | |||||||||||||||
Foreign currency forward contracts | $( | $ | $( | $ | $( | $ | $( | $ | |||||||
Other long-term liabilities: | |||||||||||||||
Foreign currency forward contracts | ( | ( | ( | ( | |||||||||||
Contingent consideration | ( | ( | ( | ( | |||||||||||
Total financial liabilities | $( | $ | $( | $( | $( | $ | $( | $( | |||||||
Please refer to Note E, “Marketable Securities and Equity Investments,” for the carrying amount and related unrealized
gains (losses) by type of investment. Our cash equivalents primarily include money market funds, commercial paper, and
time deposits.
Fair Value of Corporate Equity Securities
We classify our investments in publicly traded corporate equity securities as “Marketable securities” on our condensed
consolidated balance sheets. Generally, our investments in the common stock of publicly traded companies are valued based
on Level 1 inputs because they have readily determinable fair values.
Please refer to Note E, “Marketable Securities and Equity Investments,” for further information on these investments.
Fair Value of Contingent Consideration
Our Level 3 contingent consideration liabilities of $79.2 million are related to $678.3 million of development and
regulatory milestones potentially payable to former equity holders of a privately-held company we acquired in 2019. We base
our estimates of the probability of achieving the milestones relevant to the fair value of contingent payments on industry data
attributable to gene therapies and our knowledge of the progress and viability of the associated Duchenne muscular dystrophy
programs. The discount rates used in the valuation model for contingent payments, which were between 4.4 % and 4.6 % as of
March 31, 2026, represent a measure of credit risk and market risk associated with settling the liabilities. Significant
judgment is used in determining the appropriateness of these assumptions at each reporting period.
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Notes to Condensed Consolidated Financial Statements (unaudited)
Three Months Ended March 31, 2026 | |
(in millions) | |
Balance at December 31, 2025 | $ |
Increase in fair value of contingent payments | |
Balance at March 31, 2026 | $ |
E.Marketable Securities and Equity Investments
below:
As of March 31, 2026 | As of December 31, 2025 | ||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||
(in millions) | |||||||||||||||
Cash equivalents | $ | $— | $— | $ | $ | $— | $— | $ | |||||||
Marketable securities: | |||||||||||||||
U.S. Treasury securities | ( | ( | |||||||||||||
U.S. government agency securities | ( | ||||||||||||||
Asset-backed securities | ( | ( | |||||||||||||
Certificates of deposit | |||||||||||||||
Corporate debt securities | ( | ( | |||||||||||||
Commercial paper | |||||||||||||||
Total marketable available-for- sale debt securities | ( | ( | |||||||||||||
Corporate equity securities | ( | ( | |||||||||||||
Total marketable securities | ( | ( | |||||||||||||
Total cash equivalents and marketable securities | $ | $ | $( | $ | $ | $ | $( | $ | |||||||
Amounts in the table above at fair value were classified on our condensed consolidated balance sheets as follows:
As of March 31, 2026 | As of December 31, 2025 | ||
(in millions) | |||
Cash and cash equivalents | $ | $ | |
Marketable securities | |||
Long-term marketable securities | |||
Total | $ | $ | |
Marketable available-for-sale debt securities by contractual maturity were as follows:
As of March 31, 2026 | As of December 31, 2025 | ||
(in millions) | |||
Matures within one year | $ | $ | |
Matures after one year through five years | |||
Matures after five years | |||
Total | $ | $ | |
We did no
securities during the three months ended March 31, 2026 and 2025. Additionally, we did no
losses that were material to our condensed consolidated statements of income during the three months ended March 31, 2026
and 2025. As of March 31, 2026, we held marketable available-for-sale debt securities with a total fair value of $3.4 billion
that were in unrealized loss positions totaling $13.2 million. Included in this amount were marketable available-for sale debt
securities with a total fair value of $8.4 million and total unrealized loss of $0.1 million that had been in unrealized loss
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VERTEX PHARMACEUTICALS INCORPORATED
Notes to Condensed Consolidated Financial Statements (unaudited)
positions for greater than twelve months. We intend to hold these investments until maturity and do not expect to incur
realized losses on these investments when they mature.
We record changes in the fair value of our investments in corporate equity securities to “Other expense, net” in our
condensed consolidated statements of income. During the three months ended March 31, 2026 and 2025, our net unrealized
gains (losses) on corporate equity securities with readily determinable fair values held at the conclusion of each period were
as follows:
Three Months Ended March 31, | |||
2026 | 2025 | ||
(in millions) | |||
Net unrealized gains (losses) | $ | $( | |
As of March 31, 2026 and December 31, 2025, the carrying value of our equity investments without readily determinable
fair values, which are recorded in “Other assets” on our condensed consolidated balance sheets was $81.5
F.Accumulated Other Comprehensive Income (Loss)
component:
Unrealized Holding Gains (Losses), Net of Tax | |||||||
Foreign Currency Translation Adjustment | On Available- For-Sale Debt Securities | On Foreign Currency Forward Contracts | Total | ||||
(in millions) | |||||||
Balance at December 31, 2025 | $ | $ | $( | $( | |||
Other comprehensive (loss) income before reclassifications | ( | ( | |||||
Amounts reclassified from accumulated other comprehensive income (loss) | ( | ||||||
Net current period other comprehensive (loss) income | ( | ( | |||||
Balance at March 31, 2026 | $ | $ | $( | $ | |||
Balance at December 31, 2024 | $ | $ | $ | $ | |||
Other comprehensive income before reclassifications | ( | ( | |||||
Amounts reclassified from accumulated other comprehensive income (loss) | ( | ( | ( | ||||
Net current period other comprehensive income (loss) | ( | ( | |||||
Balance at March 31, 2025 | $ | $ | $ | $ | |||
G.Hedging
Foreign currency forward contracts - Designated as hedging instruments
We maintain a hedging program intended to mitigate the effect of changes in foreign exchange rates for a portion of our
forecasted product revenues denominated in certain foreign currencies. The program includes foreign currency forward
contracts that are designated as cash flow hedges under U.S. GAAP having contractual durations from one to 36 months. We
recognize realized gains and losses for the effective portion of such contracts in “Product revenues, net” in our condensed
consolidated statements of income in the same period that we recognize the product revenues that were impacted by the
hedged foreign exchange rate changes.
We formally document the relationship between foreign currency forward contracts (hedging instruments) and forecasted
product revenues (hedged items), as well as our risk management objective and strategy for undertaking various hedging
activities, which includes matching all foreign currency forward contracts that are designated as cash flow hedges to
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VERTEX PHARMACEUTICALS INCORPORATED
Notes to Condensed Consolidated Financial Statements (unaudited)
forecasted transactions. Using regression analysis, we assess, both at the hedge’s inception and on an ongoing basis, whether
the foreign currency forward contracts are highly effective in offsetting changes in cash flows of hedged items on a
prospective and retrospective basis. As of March 31, 2026, all hedges were determined to be highly effective.
We consider the impact of our counterparties’ credit risk on the fair value of the foreign currency forward contracts. As
of March 31, 2026 and December 31, 2025, credit risk did not change the fair value of our foreign currency forward
contracts.
contracts designated as cash flow hedges under U.S. GAAP:
As of March 31, 2026 | As of December 31, 2025 | ||
Foreign Currency | (in millions) | ||
Euro | $ | $ | |
Canadian dollar | |||
British pound sterling | |||
Australian dollar | |||
Swiss franc | |||
Total foreign currency forward contracts | $ | $ | |
Foreign currency forward contracts - Not designated as hedging instruments
We enter into foreign currency forward contracts, typically with contractual maturities of approximately one month ,
which are designed to mitigate the effect of changes in foreign exchange rates on monetary assets and liabilities, including
intercompany balances. These contracts are not designated as hedging instruments under U.S. GAAP. We recognize realized
gains and losses for such contracts in “Other expense, net” in our condensed consolidated statements of income each period.
As of March 31, 2026 and December 31, 2025, the notional amount of our outstanding foreign currency forward contracts
where hedge accounting under U.S. GAAP was not applied was $868.0 million and $612.6 million, respectively.
forward contracts in our condensed consolidated statements of income:
Three Months Ended March 31, | |||
2026 | 2025 | ||
(in millions) | |||
Designated as hedging instruments - Reclassified from AOCI | |||
Product revenues, net | $( | $ | |
Not designated as hedging instruments | |||
Other expense, net | $ | $( | |
Total reported in the Condensed Consolidated Statements of Income | |||
Product revenues, net | $ | $ | |
Other expense, net | $ | $( | |
flow hedges under U.S. GAAP included on our condensed consolidated balance sheets:
As of March 31, 2026 | ||||||
Assets | Liabilities | |||||
Classification | Fair Value | Classification | Fair Value | |||
(in millions) | ||||||
Prepaid expenses and other current assets | $ | Other current liabilities | $( | |||
Other assets | Other long-term liabilities | ( | ||||
Total assets | $ | Total liabilities | $( | |||
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VERTEX PHARMACEUTICALS INCORPORATED
Notes to Condensed Consolidated Financial Statements (unaudited)
As of December 31, 2025 | ||||||
Assets | Liabilities | |||||
Classification | Fair Value | Classification | Fair Value | |||
(in millions) | ||||||
Prepaid expenses and other current assets | $ | Other current liabilities | $( | |||
Other assets | Other long-term liabilities | ( | ||||
Total assets | $ | Total liabilities | $( | |||
As of March 31, 2026, we expect the amounts that are related to foreign currency forward contracts designated as cash
flow hedges under U.S. GAAP recorded in “Prepaid expenses and other current assets” and “Other current liabilities” to be
reclassified to earnings within twelve months.
We present the fair value of our foreign currency forward contracts on a gross basis within our condensed consolidated
balance sheets. The following table summarizes the potential effect of offsetting derivatives by type of financial instrument
designated as cash flow hedges under U.S. GAAP on our condensed consolidated balance sheets:
As of March 31, 2026 | |||||||||
Gross Amounts Recognized | Gross Amounts Offset | Gross Amounts Presented | Gross Amounts Not Offset | Legal Offset | |||||
Foreign currency forward contracts | (in millions) | ||||||||
Total assets | $ | $ | $ | $( | $ | ||||
Total liabilities | ( | ( | ( | ||||||
As of December 31, 2025 | |||||||||
Gross Amounts Recognized | Gross Amounts Offset | Gross Amounts Presented | Gross Amounts Not Offset | Legal Offset | |||||
Foreign currency forward contracts | (in millions) | ||||||||
Total assets | $ | $ | $ | $( | $ | ||||
Total liabilities | ( | ( | ( | ||||||
H.Inventories
As of March 31, 2026 | As of December 31, 2025 | ||
(in millions) | |||
Raw materials | $ | $ | |
Work-in-process | |||
Finished goods | |||
Total | $ | $ | |
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VERTEX PHARMACEUTICALS INCORPORATED
Notes to Condensed Consolidated Financial Statements (unaudited)
I.Intangible Assets
As of March 31, 2026 | As of December 31, 2025 | ||||||||||||
Estimated Useful Lives | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | |||||||
(in millions, except useful lives) | |||||||||||||
In-process research and development | Indefinite | $ | $— | $ | $ | $— | $ | ||||||
Finite-lived intangible assets - marketed products | ( | ( | |||||||||||
Finite-lived intangible assets - assembled workforce | ( | ( | |||||||||||
Total other intangible assets, net | $ | $( | $ | $ | $( | $ | |||||||
In March 2025, based on results from a Phase 1/2 clinical trial evaluating our VX-264 clinical program in patients with
type 1 diabetes (“T1D”), we concluded that VX-264 will not be advancing further in clinical development. Based on this
event, we performed an interim impairment test on the fair value of our VX-264 indefinite-lived in-process research and
development asset that we acquired from Semma Therapeutics, Inc. in 2019. As a result, using the multi period earnings
method of the income approach, we recorded a full intangible asset impairment charge of $379.0 million in the first quarter of
2025. As of March 31, 2026, our remaining indefinite-lived in-process research and development assets were associated with
our T1D program.
J.Stock-based Compensation Expense and Share Repurchase Programs
Stock-based compensation expense
expense:
Three Months Ended March 31, | |||
2026 | 2025 | ||
(in millions) | |||
Stock-based compensation expense by type of award: | |||
Restricted stock units (including PSUs) | $ | $ | |
ESPP share issuances | |||
Stock-based compensation expense related to inventories | ( | ( | |
Total stock-based compensation expense included in “Total costs and expenses” | $ | $ | |
Stock-based compensation expense by line item: | |||
Cost of sales | $ | $ | |
Research and development expenses | |||
Selling, general and administrative expenses | |||
Total stock-based compensation expense included in “Total costs and expenses” | |||
Income tax effect | ( | ( | |
Total stock-based compensation expense, net of tax | $ | $ | |
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VERTEX PHARMACEUTICALS INCORPORATED
Notes to Condensed Consolidated Financial Statements (unaudited)
Share repurchase program
In February 2023, our Board of Directors authorized a share repurchase program (the “2023 Share Repurchase
Program”), pursuant to which we were authorized to repurchase up to $3.0 billion of our common stock. As of September 30,
2025, we had repurchased the full amount authorized under the 2023 Share Repurchase Program.
In May 2025, our Board of Directors authorized an additional share repurchase program (the “2025 Share Repurchase
Program”), pursuant to which we are authorized to repurchase up to $4.0 billion of our common stock. The 2025 Share
Repurchase Program does not have an expiration date and can be discontinued at any time.
During the three months ended March 31, 2026 and 2025, we repurchased 0.7 million and 0.9 million shares of our
common stock under our share repurchase programs, respectively, for aggregate repurchases of $344.5 million and $416.9
million, respectively. As of March 31, 2026, we had $3.0 billion remaining available under the 2025 Share Repurchase
Program.
K.Income Taxes
We are subject to U.S. federal, state, and foreign income taxes. During the three months ended March 31, 2026 and 2025,
we recorded the following provisions for income taxes and effective tax rates as compared to our income before provision for
income taxes.
Three Months Ended March 31, | |||
2026 | 2025 | ||
(in millions, except percentages) | |||
Income before provision for income taxes | $ | $ | |
Provision for income taxes | $ | $ | |
Effective tax rate |
Our effective tax rates for the three months ended March 31, 2026 and 2025 were lower than the U.S. statutory rate
primarily due to excess tax benefits related to stock-based compensation.
We have reviewed the tax positions taken, or to be taken, in our tax returns for all tax years currently open to
examination by a taxing authority. As of March 31, 2026 and December 31, 2025, we had $420.3 million and $436.6 million,
respectively, of net unrecognized tax benefits, which would affect our tax rate if recognized.
We file U.S. federal income tax returns and income tax returns in various state, local and foreign jurisdictions. We have
various income tax audits ongoing at any time throughout the world. Except for jurisdictions where we have net operating
losses or tax credit carryforwards, we are no longer subject to any tax assessment from tax authorities for years prior to 2014
in jurisdictions that have a material impact on our consolidated financial statements. Due to the nature of the adjustments
from a settlement with the United Kingdom’s HM Revenue & Customs in 2023, we have asserted our rights under the U.S./
U.K. Income Tax Convention pursuant to the mutual agreement procedures for the relief of double taxation for these matters.
In December 2022, European Union member states reached an agreement to implement the minimum tax component
(“Pillar Two”) of the Organization for Economic Co-operation and Development’s (the “OECD’s”), global international tax
reform initiative with effective dates of January 1, 2024 and 2025. On January 5, 2026, the OECD announced that a ‘side-by-
side’ agreement was reached with member countries creating safe harbors to exempt U.S. multi-nationals from certain taxes
under the Pillar Two regime by recognizing the U.S. tax system as a compatible domestic minimum tax regime. Our exposure
to other countries’ minimum tax regimes was limited before these changes, but the side-by-side agreement allows for
certainty as our structure may change in the future.
In July 2025, the U.S. enacted H.R.1, which includes significant provisions modifying the U.S. tax framework, including
the ability for companies to immediately deduct research and development expenditures for 2025 and provisions for
deducting previously capitalized amounts. H.R.1 does not have a material impact on our U.S. taxes for the first quarter of
2026, but we expect further guidance to be issued. We will review guidance when issued for impacts on future years and
disclose any impacts if needed at that time. These legislative changes could have an impact on our future effective tax rates,
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Notes to Condensed Consolidated Financial Statements (unaudited)
L.Commitments and Contingencies
2022 Credit Facility
In July 2022, Vertex and certain of its subsidiaries entered into a $500.0 million unsecured revolving facility (the “Credit
Agreement”) with Bank of America, N.A., as administrative agent and the lenders referred to therein (the “Lenders”), which
matures on July 1, 2027. The Credit Agreement was not drawn upon at closing and we have not drawn upon it to date.
Amounts drawn pursuant to the Credit Agreement, if any, will be used for general corporate purposes. Subject to satisfaction
of certain conditions, we may request that the borrowing capacity for the Credit Agreement be increased by an additional
$500.0 million. Additionally, the Credit Agreement provides a sublimit of $100.0 million for letters of credit.
Any amounts borrowed under the Credit Agreement will bear interest, at our option, at either a base rate or a Secured
Overnight Financing Rate (“SOFR”), in each case plus an applicable margin. Under the Credit Agreement, the applicable
margins on base rate loans range from 0.000 % to 0.500 % and the applicable margins on SOFR loans range from 1.000 % to
consolidated EBITDA for the most recently completed four fiscal quarter period).
Any amounts borrowed pursuant to the Credit Agreement are guaranteed by certain of our existing and future domestic
subsidiaries, subject to certain exceptions.
The Credit Agreement contains customary representations and warranties and affirmative and negative covenants,
including a financial covenant to maintain subject to certain limited exceptions, a consolidated leverage ratio of 3.50 to 1.00,
subject to an increase to 4.00 to 1.00 following a material acquisition. As of March 31, 2026, we were in compliance with the
covenants described above. The Credit Agreement also contains customary events of default. In the case of a continuing
event of default, the administrative agent would be entitled to exercise various remedies, including the acceleration of
amounts due under outstanding loans.
Direct costs related to the Credit Agreement are recorded over its term and are not material to our financial statements.
Guaranties and Indemnifications
As permitted under Massachusetts law, our Articles of Organization and By-laws provide that we will indemnify certain
of our officers and directors for certain claims asserted against them in connection with their service as an officer or director.
The maximum potential amount of future payments that we could be required to make under these indemnification provisions
is unlimited. However, we have purchased directors’ and officers’ liability insurance policies that could reduce our monetary
exposure and enable us to recover a portion of any future amounts paid. No indemnification claims currently are outstanding,
and we believe the estimated fair value of these indemnification arrangements is minimal.
We customarily agree in the ordinary course of our business to indemnification provisions in agreements with clinical
trial investigators and sites in our product development programs, sponsored research agreements with academic and not-for-
profit institutions, various comparable agreements involving parties performing services for us, and our real estate leases. We
also customarily agree to certain indemnification provisions in our drug discovery, development and commercialization
collaboration agreements. With respect to our clinical trials and sponsored research agreements, these indemnification
provisions typically apply to any claim asserted against the investigator or the investigator’s institution relating to personal
injury or property damage, violations of law or certain breaches of our contractual obligations arising out of the research or
clinical testing of our compounds or product candidates. With respect to lease agreements, the indemnification provisions
typically apply to claims asserted against the landlord relating to personal injury or property damage caused by us, to
violations of law by us or to certain breaches of our contractual obligations. The indemnification provisions appearing in our
collaboration agreements are similar to those for the other agreements discussed above, but in addition provide some limited
indemnification for our collaborator in the event of third-party claims alleging infringement of intellectual property rights. In
each of the cases above, the indemnification obligation generally survives the termination of the agreement for some
extended period, although we believe the obligation typically has the most relevance during the contract term and for a short
period of time thereafter. The maximum potential amount of future payments that we could be required to make under these
provisions is generally unlimited. We have purchased insurance policies covering personal injury, property damage and
general liability that reduce our exposure for indemnification and would enable us in many cases to recover all or a portion of
any future amounts paid. We have never paid any material amounts to defend lawsuits or settle claims related to these
indemnification provisions. Accordingly, we believe the estimated fair value of these indemnification arrangements is
minimal.
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VERTEX PHARMACEUTICALS INCORPORATED
Notes to Condensed Consolidated Financial Statements (unaudited)
Legal Matters and Other Contingencies
As described in Note B, “Collaboration, License and Other Arrangements,” we have an agreement with the CFF (the
“CFF Agreement”) pursuant to which we owe third-party royalties payable on net sales of certain CF products, including
ALYFTREK. Since inception, our ALYFTREK net product revenues total $1.3 billion. Based on the CFF Agreement, our
position is that the royalty burden associated with ALYFTREK is 4 %. On October 10, 2025, Royalty Pharma plc (“RP”), the
third party to whom the CFF assigned its rights (and the CFF, which remains a party to the CFF Agreement), initiated a
confidential arbitration alleging the royalty burden on ALYFTREK is approximately 8 %. RP is seeking a declaratory
judgment regarding the royalty burden on ALYFTREK as well as alleged unpaid royalties and other alleged damages
available under the CFF Agreement or applicable law, costs, expenses, attorneys’ fees, and interest. We believe RP’s position
is contrary to the plain terms of the CFF Agreement and intend to vigorously defend our position under the CFF Agreement.
On a quarterly basis, we evaluate developments with claims, whether asserted or unasserted, and legal proceedings that
could result in a loss contingency accrual, or an increase or decrease to a previously accrued loss contingency. There were no
material loss contingencies accrued as of March 31, 2026 or December 31, 2025.
We also have certain contingent liabilities that arise in the ordinary course of our business activities. We accrue for such
contingent liabilities when it is probable that future expenditures will be made and such expenditures can be reasonably
estimated. Other than our contingent consideration liabilities discussed in Note D, “Fair Value Measurements,” there were no
significant contingent liabilities accrued as of March 31, 2026 or December 31, 2025.
M.Segment Information
Revenues by Product
Three Months Ended March 31, | |||
2026 | 2025 | ||
(in millions) | |||
TRIKAFTA/KAFTRIO | $ | $ | |
ALYFTREK | |||
Other CF product revenues (1) | |||
Total CF product revenues, net | |||
CASGEVY | |||
JOURNAVX | |||
Total product revenues, net | $ | $ | |
(1) Include KALYDECO, ORKAMBI, and SYMDEKO/SYMKEVI. | |||
Revenues by Geographic Location
location of the Vertex entity associated with such revenues. Our “Total revenues” consisted of the following:
Three Months Ended March 31, | |||
2026 | 2025 | ||
(in millions) | |||
United States | $ | $ | |
Outside of the United States | |||
Europe | |||
Other | |||
Total revenues outside of the United States | |||
Total revenues | $ | $ | |
We did no t have any “Other revenues” in the three months ended March 31, 2026. In the three months ended March 31,
2025, our “Other revenues” of $10.0 million were attributed to the U.S.
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VERTEX PHARMACEUTICALS INCORPORATED
Notes to Condensed Consolidated Financial Statements (unaudited)
Significant Segment Expenses
Three Months Ended March 31, | |||
2026 | 2025 | ||
(in millions) | |||
Total revenues | $ | $ | |
Costs and expenses: | |||
Cost of sales - products | |||
Cost of sales - royalty | |||
Research expenses | |||
Development expenses | |||
Acquired in-process research and development expenses | |||
Selling and other commercial expenses | |||
General and administrative expenses | |||
Intangible asset impairment charge | |||
Interest income, net | ( | ( | |
Other segment items (1) | |||
Provision for income taxes | |||
Net income | $ | $ | |
(1)Other segment items included in “Net income” primarily include changes in the fair value of contingent
consideration and changes in the fair value of equity investments.
Additional Segment Information
During the three months ended March 31, 2026 and 2025, we recorded total depreciation and amortization expense of
$55.9 million and $48.4 million, respectively.
N.Additional Balance Sheet & Cash Flow Information
Contract Liabilities
We had contract liabilities of $218.7 million and $171.8 million as of March 31, 2026 and December 31, 2025,
respectively, primarily related to annual contracts with government-owned and supported customers in international markets
that limit the amount of annual reimbursement we can receive for our CF products. Upon exceeding the annual
reimbursement amount provided by the customer’s contract with us, our CF products are provided free of charge, which is a
material right. These contracts include upfront payments and fees. If we estimate that we will exceed the annual
reimbursement amount under a contract, we defer a portion of the consideration received for shipments made up to the annual
reimbursement limit as a portion of “Other current liabilities.” Once the reimbursement limit has been reached, we recognize
the deferred amount as revenue when we ship the free products. Our CF product revenue contracts include performance
obligations that are one year or less.
Our contract liabilities at the end of each fiscal year relate to contracts with CF annual reimbursement limits in
international markets in which the annual period associated with the contract is not the same as our fiscal year. In these
markets, we recognize revenues related to performance obligations satisfied in previous years; however, these revenues do
not relate to any performance obligations that were satisfied more than 12 months prior to the beginning of the current year.
Operating Lease Assets and Liabilities
In 2023, we entered into a strategic agreement with Lonza to support the manufacture of T1D cell therapy product
candidates. As part of this agreement, we have partnered with Lonza to build a 130,000 square foot dedicated new facility in
New Hampshire, which will be operated by Lonza (the “Lonza Facility”) and is an embedded lease for accounting purposes.
The lease commencement for the Lonza Facility occurred during the first quarter of 2026, upon which we recorded a right-of-
use asset and corresponding lease liability of $95.8
lease liabilities” on our condensed consolidated balance sheet. In accordance with our policy for embedded leases with
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Notes to Condensed Consolidated Financial Statements (unaudited)
contract manufacturing organizations, we account for the lease component separately from the variable non-lease
components, which we expense as incurred. Payments will continue through the tenth anniversary of the Lonza Facility’s
regulatory approval for commercial production. The lease will automatically renew for additional one-year periods, unless
either we or Lonza provides written notice of intent to not renew. We utilize the initial period as our lease term.
We obtained $148.2 million and $5.2 million of right-of-use operating lease assets in exchange for a similar amount of
lease obligations, including the Lonza Facility amounts described above, during the three months ended March 31, 2026 and
2025, respectively. These represent non-cash operating activities associated with our condensed consolidated statement of
cash flows.
Cash, Cash Equivalents and Restricted Cash Presented in Condensed Consolidated Statements of Cash Flows
consolidated statements of cash flows consisted of the following:
Three Months Ended March 31, | |||||||
2026 | 2025 | ||||||
Beginning of period | End of period | Beginning of period | End of period | ||||
(in millions) | |||||||
Cash and cash equivalents | $ | $ | $ | $ | |||
Prepaid expenses and other current assets | |||||||
Cash, cash equivalents and restricted cash per condensed consolidated statement of cash flows | $ | $ | $ | $ | |||
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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 seven approved medicines: five that treat the
underlying cause of cystic fibrosis (“CF”), a life-threatening genetic disease, one that treats severe sickle cell disease
(“SCD”) and transfusion dependent beta thalassemia (“TDT”), life shortening inherited blood disorders, and one that treats
moderate-to-severe acute pain. We are also preparing for the anticipated launch of povetacicept, a potential treatment for IgA
nephropathy (“IgAN”). Our clinical-stage pipeline spans a range of programs targeting CF, SCD, beta thalassemia,
neuropathic pain, type 1 diabetes, IgA nephropathy, primary membranous nephropathy and other autoimmune diseases and
cytopenias, APOL1-mediated kidney disease, autosomal dominant polycystic kidney disease and myotonic dystrophy type 1,
reflecting our commitment to addressing significant unmet medical needs globally.
Financial Highlights
Total Revenues | In the first quarter of 2026, our total revenues increased to $3.0 billion as compared to $2.8 billion in the first quarter of 2025, primarily due to continued performance of our CF therapies and growth from diversification into additional disease areas. |
Cost of Sales | Our cost of sales as a percentage of our net product revenues was 13.2% in each of the first quarters of 2026 and 2025, as a result of a lower overall royalty rate for our CF medicines, offset by changes in product mix. |
Total R&D, AIPR&D and SG&A Expenses | Our total research and development (“R&D”), acquired in-process research and development expenses (“AIPR&D”) and selling, general and administrative (“SG&A”) expenses increased to $1.5 billion in the first quarter of 2026 as compared to $1.4 billion in the first quarter of 2025, primarily due to increased investment to commercialize our new products. |
Cash | Our total cash, cash equivalents and marketable securities increased to $13.0 billion as of March 31, 2026 as compared to $12.3 billion as of December 31, 2025, primarily due to cash flows provided by our operating activities partially offset by repurchases of our common stock. |
Q1 2025
Q1 2026
December 31, 2025
March 31, 2026
Note: Charts above may not add due to rounding.
Business Updates
Marketed Products
Cystic Fibrosis
We 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.
Recent and anticipated progress in activities expanding our CF business is included below:
•The U.S. Food and Drug Administration (the “FDA”) approved label extensions for ALYFTREK and TRIKAFTA,
expanding availability of these medicines to approximately 95% of all people with CF in the United States (the
“U.S.”). With these label extensions, approximately 800 people with CF in the U.S. are newly eligible for a
medicine that treats the underlying cause of CF.
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•We secured reimbursement agreements for ALYFTREK in Scotland, Spain, Sweden, Switzerland, New Zealand,
Israel, and Finland, and we are working to secure access for eligible patients in additional countries.
Sickle Cell Disease and Beta Thalassemia
•In the first quarter of 2026, we recorded $43 million of CASGEVY product revenues.
•We secured a pricing agreement for CASGEVY for eligible patients with SCD or TDT in Germany, and we are
working through final implementation to provide long-term reimbursed access to patients at a sustainable price.
•We completed the regulatory submission in the U.S. for approval of CASGEVY in children with SCD or TDT five
to less than twelve years of age. The FDA awarded a Commissioner’s National Priority Voucher for this pediatric
submission, indicating an accelerated timeline for review once the submission is accepted.
Acute Pain
•Since the launch of JOURNAVX in March 2025, more than 1 million prescriptions have been filled for
JOURNAVX across the hospital and retail settings for a broad range of acute pain conditions. In the first quarter of
2026, more than 350,000 prescriptions were filled, and we recorded $29 million of JOURNAVX product revenues.
•We have reached an agreement with a major pharmacy benefit manager for Medicare Part D coverage for
JOURNAVX effective on May 1. This agreement adds approximately 10 million lives covered under Part D.
Twenty-two states provide coverage for JOURNAVX via Medicaid. In total, approximately 240 million individuals
have reimbursed access to JOURNAVX across a wide range of commercial and government payers.
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
•Following positive results from the ALYFTREK clinical trial in children with CF two to five years of age, we expect
to submit for global regulatory approvals in this age group in the first half of 2026. We continue to enroll and dose
patients in the pivotal clinical trial evaluating ALYFTREK in children with CF one to less than two years of age.
•Following positive results from the TRIKAFTA clinical trial in children one to less than two years of age, we have
begun submissions for global regulatory approvals in this age group.
Peripheral Neuropathic Pain
•We expect to complete enrollment in both Phase 3 clinical trials evaluating suzetrigine in diabetic peripheral
neuropathy, a form of peripheral neuropathic pain, by the end of 2026.
IgA Nephropathy and Other B Cell-Mediated Diseases
•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 IgAN.
•Following positive results from the RAINIER Phase 3 clinical trial evaluating povetacicept in adults with IgAN, we
completed in March the submission of the rolling biologics license application (“BLA”) to the FDA for potential
accelerated approval in the U.S. We are using a Priority Review Voucher and therefore expect the FDA review of
this BLA to be expedited to six months from the date of the FDA’s acceptance of the BLA.
•Povetacicept represents a potentially best-in-class approach to control B cell activity in primary membranous
nephropathy (“pMN”), another B cell-mediated disease. We completed enrollment in the Phase 2 portion of the
Phase 2/3 OLYMPUS pivotal trial evaluating povetacicept in people with pMN, and we initiated the Phase 3 portion
of this clinical trial. Enrollment and dosing in this clinical trial are ongoing.
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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 AMPLITUDE Phase 2/3 pivotal clinical trial evaluating
inaxaplin. We expect to conduct the pre-planned interim analysis for potential accelerated approval once this cohort
has been treated for 48 weeks. We expect to share data from the interim analysis in early 2027. We expect to
complete full enrollment in the AMPLITUDE clinical trial in the second half 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 the internal manufacturing
analysis for the Phase 1/2/3 clinical trial of zimislecel in people with type 1 diabetes (“T1D”), and we have resumed
dosing in this clinical trial. Multiple people with T1D have been treated since the resumption of dosing. In 2026, we
expect to provide updated timelines for trial completion.
Our Business Environment
In the first quarter of 2026, our total product revenues came 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, and we are preparing for a potential launch of povetacicept for the treatment
of IgAN. 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,
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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
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
Acquisitions
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 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
Immune Sciences, Inc. (“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.
Collaboration and In-Licensing Arrangements
We 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”) and Entrada Therapeutics, Inc. (“Entrada”).
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 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.
Acquired In-Process Research and Development Expenses
In the first quarter of 2026 and 2025, our AIPR&D included $0.5 million and $19.8 million, 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.
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In January 2025 and June 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 clinical 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 OPERATIONS
Total Revenues
Three Months Ended March 31, | |||||
2026 | 2025 | Change | |||
(in millions, except percentages) | |||||
TRIKAFTA/KAFTRIO | $2,354.7 | $2,535.5 | (7)% | ||
ALYFTREK | 424.4 | 53.9 | 687% | ||
Other CF product revenues (1) | 135.9 | 155.3 | (12)% | ||
Total CF product revenues, net | 2,915.0 | 2,744.7 | 6% | ||
CASGEVY | 42.9 | 14.2 | 202% | ||
JOURNAVX | 29.0 | 1.3 | ** | ||
Product revenues, net | 2,986.9 | 2,760.2 | 8% | ||
Other revenues | — | 10.0 | ** | ||
Total revenues | $2,986.9 | $2,770.2 | 8% | ||
(1) Include KALYDECO, ORKAMBI and SYMDEKO/SYMKEVI. | ** Not meaningful | ||||
Product Revenues, Net
In the first quarter of 2026, our net product revenues increased by $226.7 million, or 8%, as compared to the first quarter
of 2025, primarily due to continued performance of our CF therapies and growth from diversification into additional disease
areas.
Other Revenues
Other revenues were $10.0 million in the first quarter of 2025, related to an upfront payment received from our
collaboration agreement with Zai.
Revenues by Geographic Location
Our total revenues from the U.S. and from ex-U.S. markets were as follows:
Three Months Ended March 31, | |||||
2026 | 2025 | Change | |||
(in millions, except percentages) | |||||
United States | $1,775.9 | $1,663.5 | 7% | ||
ex-U.S. | 1,211.0 | 1,106.7 | 9% | ||
Total revenues | $2,986.9 | $2,770.2 | 8% | ||
In the first quarter of 2026, our U.S. total revenues increased 7%, as compared to the first quarter of 2025, due to
continued strong patient demand, including from new initiations of ALYFTREK, and higher realized net prices in CF, and
contributions from CASGEVY and JOURNAVX. In the first quarter of 2026, our ex-U.S. total revenues increased 9%, as
compared to the first quarter of 2025, primarily due to strong CF performance across multiple geographies, including
ALYFTREK uptake, increased CASGEVY product revenues, and a favorable impact from foreign exchange.
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Operating Costs and Expenses
Three Months Ended March 31, | |||||
2026 | 2025 | Change | |||
(in millions, except percentages) | |||||
Cost of sales | $392.8 | $363.0 | 8% | ||
Research and development expenses | 961.6 | 979.7 | (2)% | ||
Acquired in-process research and development expenses | 0.5 | 19.8 | ** | ||
Selling, general and administrative expenses | 493.7 | 396.4 | 25% | ||
Intangible asset impairment charge | — | 379.0 | ** | ||
Change in fair value of contingent consideration | 0.2 | 2.2 | ** | ||
Total costs and expenses | $1,848.8 | $2,140.1 | (14)% | ||
** Not meaningful | |||||
Cost of Sales
Our 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. Our cost of sales as a percentage of our net product revenues was 13.2% in each of the first quarters of
2026 and 2025, as a result of a lower overall royalty rate for our CF medicines, offset by changes in product mix.
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
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.
Research and Development Expenses
Three Months Ended March 31, | |||||
2026 | 2025 | Change | |||
(in millions, except percentages) | |||||
Research expenses | $205.0 | $206.1 | (1)% | ||
Development expenses | 756.6 | 773.6 | (2)% | ||
Total research and development expenses | $961.6 | $979.7 | (2)% | ||
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Research Expenses
Three Months Ended March 31, | |||||
2026 | 2025 | Change | |||
(in millions, except percentages) | |||||
Research Expenses: | |||||
Salary and benefits | $55.2 | $53.1 | 4% | ||
Stock-based compensation expense | 21.2 | 22.3 | (5)% | ||
Outsourced services and other direct expenses | 66.6 | 73.1 | (9)% | ||
Infrastructure costs | 62.0 | 57.6 | 8% | ||
Total research expenses | $205.0 | $206.1 | (1)% | ||
Our research expenses include investment in our pipeline, including our cell and genetic therapy capabilities, which has
increased our salary and benefits and infrastructure costs in the first quarter of 2026 as compared to the first quarter of 2025.
We expect to continue to invest in our research programs with a focus on creating transformative medicines for serious
diseases.
Development Expenses
Three Months Ended March 31, | |||||
2026 | 2025 | Change | |||
(in millions, except percentages) | |||||
Development Expenses: | |||||
Salary and benefits | $212.6 | $195.9 | 9% | ||
Stock-based compensation expense | 80.5 | 77.8 | 3% | ||
Outsourced services and other direct expenses | 326.2 | 379.7 | (14)% | ||
Infrastructure costs | 137.3 | 120.2 | 14% | ||
Total development expenses | $756.6 | $773.6 | (2)% | ||
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 programs, including our povetacicept, T1D, peripheral
neuropathic pain and AMKD programs. We expect to continue to invest in these programs, launch new products and advance
our pipeline going forward. Our outsourced services and other direct expenses were lower as compared to the first quarter of
2025 due to the discontinuation of certain clinical programs during 2025.
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. 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-Process Research and Development Expenses
Three Months Ended March 31, | |||||
2026 | 2025 | Change | |||
(in millions, except percentages) | |||||
Acquired in-process research and development expenses | $0.5 | $19.8 | ** | ||
** Not meaningful | |||||
AIPR&D in the first quarters of 2026 and 2025 included various upfront and milestone payments related to our
collaboration and in-licensing arrangements. 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
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future business development transactions, including collaborations, licenses of third-party technologies, and asset
acquisitions.
Selling, General and Administrative Expenses
Three Months Ended March 31, | |||||
2026 | 2025 | Change | |||
(in millions, except percentages) | |||||
Selling, general and administrative expenses | $493.7 | $396.4 | 25% | ||
Selling, general and administrative expenses increased by 25% in the first quarter of 2026, as compared to the first
quarter of 2025, primarily due to increased internal headcount and commercial investment to support JOURNAVX and
povetacicept in IgAN.
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. 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), Net
Interest Income, Net
Our net interest income of $114.8 million in the first quarter of 2026 was similar to $117.9 million of net interest income
in the first quarter of 2025. Our future net interest income is primarily dependent on the amount of, and prevailing market
interest rates on our outstanding cash, cash equivalents and available-for-sale debt securities.
Other Income (Expense), Net
Other income (expense), net was $0.0 million in the first quarter of 2026 and net expenses of $17.6 million in the first
quarter of 2025. Our other income (expense), net primarily relates to net unrealized and realized losses resulting from
changes in the fair value of certain of our strategic equity investments and net foreign currency exchange losses.
Income Taxes
Our effective tax rate fluctuates from period to period due to the global nature of our operations. The factors that most
significantly impact our effective tax rate include changes in tax laws, excess tax benefits related to stock-based
compensation, 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 U.S. taxes for the first quarter of
2026, but we expect further guidance to be issued. We will review guidance when issued for impacts on future years and
disclose any impacts if needed at that time. These legislative changes could have an impact on our future effective tax rates,
tax liabilities, and cash taxes.
Our effective tax rates of 17.7% and 11.5% in the first quarter of 2026 and 2025, respectively, were lower than the U.S.
statutory rate primarily due to excess tax benefits related to stock-based compensation.
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LIQUIDITY AND CAPITAL RESOURCES
The following table summarizes the components of our financial condition as of March 31, 2026 and December 31,
2025:
As of March 31, 2026 | As of December 31, 2025 | Change | |||
(in millions, except percentages) | |||||
Cash, cash equivalents and marketable securities: | |||||
Cash and cash equivalents | $5,492.9 | $5,084.8 | |||
Marketable securities | 1,753.8 | 1,523.3 | |||
Long-term marketable securities | 5,749.9 | 5,712.3 | |||
Total cash, cash equivalents and marketable securities | $12,996.6 | $12,320.4 | 5% | ||
Working Capital: | |||||
Total current assets | $11,730.3 | $11,201.0 | 5% | ||
Total current liabilities | (3,880.6) | (3,861.2) | 1% | ||
Total working capital | $7,849.7 | $7,339.8 | 7% | ||
Working Capital
As of March 31, 2026, total working capital was $7.8 billion, which represented an increase of $509.9 million, or 7%,
compared to December 31, 2025, primarily due to increased cash, cash equivalents and marketable securities resulting from
our growing portfolio of products, partially offset by tax accruals and payments.
Cash Flows
Three Months Ended March 31, | |||
2026 | 2025 | ||
(in millions) | |||
Net cash provided by (used in): | |||
Operating activities | $1,428.1 | $818.9 | |
Investing activities | $(431.9) | $(55.8) | |
Financing activities | $(538.8) | $(680.4) | |
Operating Activities
Cash provided by operating activities increased to $1.4 billion in the first quarter of 2026, as compared to $818.9 million
in the first quarter of 2025, primarily due to the timing of tax payments and increased accounts receivable during the first
quarter of 2025 resulting from our product launches.
Investing Activities
Cash used in investing activities was $431.9 million in the first quarter of 2026, primarily related to net purchases of
available-for-sale debt securities. Cash used in investing activities was $55.8 million in the first quarter of 2025, primarily
related to purchases of property and equipment.
Financing Activities
Cash used in financing activities were $538.8 million and $680.4 million in the first quarter of 2026 and 2025,
respectively. Our financing activities in each of these periods 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.
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Sources and Uses of Liquidity
We 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 Strategy
We 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 March
31, 2026, 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.
•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 July 2027.
•As of March 31, 2026, we had $3.0 billion remaining available under the share repurchase program that our Board
of Directors authorized 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.
There have not been any material changes to our future capital requirements disclosed in our Annual Report on Form 10-
K for the year ended December 31, 2025, which was filed with the Securities and Exchange Commission, or SEC, on
February 13, 2026.
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CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our discussion and analysis of our financial condition and results of operations are based upon our condensed
consolidated financial statements prepared in accordance with generally accepted accounting principles in the U.S. The
preparation of these financial statements requires us to make certain estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated
financial statements and the reported amounts of revenues and expenses during the reported periods. These items are
monitored and analyzed by management for changes in facts and circumstances, and material changes in these estimates
could occur in the future. Changes in estimates are reflected in reported results for the period in which the change occurs. We
base our estimates on historical experience and various other assumptions that we believe to be reasonable under the
circumstances. Actual results may differ from our estimates if past experience or other assumptions do not turn out to be
substantially accurate. During the three months ended March 31, 2026, there were no material changes to our critical
accounting policies as reported in our Annual Report on Form 10-K for the year ended December 31, 2025, which was filed
with the SEC on February 13, 2026.
RECENT ACCOUNTING PRONOUNCEMENTS
For a discussion of recent accounting pronouncements, please refer to Note A, “Basis of Presentation and Accounting
Policies.”
Item 3.Quantitative and Qualitative Disclosures About Market Risk
Information required by this item is incorporated by reference from the discussion in Part II, Item 7A, “Quantitative and
Qualitative Disclosures About Market Risk,” of our Annual Report on Form 10-K for the year ended December 31, 2025,
which was filed with the SEC on February 13, 2026.
Item 4.Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management (under the supervision and with the participation of our chief executive officer and chief financial
officer), after evaluating the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Quarterly
Report on Form 10-Q, has concluded that, based on such evaluation, as of March 31, 2026 our disclosure controls and
procedures were effective and designed to provide reasonable assurance that the information required to be disclosed is
recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. In designing
and evaluating our disclosure controls and procedures, our management recognized that any controls and procedures, no
matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives,
and our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible
controls and procedures.
Changes in Internal Controls Over Financial Reporting
No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the
Securities Exchange Act of 1934, as amended) occurred during the three months ended March 31, 2026 that has materially
affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II. Other Information
Item 1. Legal Proceedings
Other than as described in Part I—Note L, “Commitments and Contingencies,” to our condensed consolidated financial
statements, we are not currently subject to any material legal proceedings.
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Item 1A. Risk Factors
The information presented below supplements the risk factors set forth in Part I, Item 1A. “Risk Factors” of our Annual
Report on Form 10-K for the year ended December 31, 2025, which was filed with the SEC on February 13, 2026. There
have been no material changes from the risk factors previously disclosed in the Annual Report on Form 10-K.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q and, in particular, our Management’s Discussion and Analysis of Financial
Condition and Results of Operations set forth in Part I, Item 2, contain a number of forward-looking statements. Forward-
looking statements are not purely historical and may be accompanied by words such as “anticipates,” “may,” “forecasts,”
“expects,” “intends,” “plans,” “potentially,” “believes,” “seeks,” “estimates,” and other words and terms of similar meaning.
Such statements may relate to:
•our financial performance, including revenues, costs and expenses, taxes, and other gains and losses;
•product development, including our development timelines, timing of data from our ongoing and planned clinical
trials, regulatory authority filings and other submissions for our therapies, including the potential to file for
accelerated approvals, and communications with regulatory authorities;
•our ability to continue to grow our CF business by increasing the number of people with CF eligible and able to
receive our medicines through new approvals, label extensions and reimbursement agreements, treatment of younger
patients, increased survival, and expansion into additional geographies;
•our ability to continue to launch, commercialize and market our products and our ability to obtain label expansions
for existing therapies, including the anticipated launch of povetacicept for the treatment of IgAN;
•our ability to obtain and maintain adequate coverage, pricing, and reimbursement from third-party payors for our
products;
•the data that will be generated by ongoing and planned clinical trials, preclinical and nonclinical studies, and the
ability to use that data to advance compounds, continue development or support regulatory filings, or accelerate
regulatory approval, including our expectations regarding the FDA’s review of the BLA for povetacicept on an
expedited basis of six months from the date of FDA acceptance of the BLA;
•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 ability to use our research programs to identify and develop new product candidates to address serious diseases
and significant unmet medical needs;
•our beliefs regarding the approximate patient populations for the disease areas on which we focus;
•plans for and prospects of our business development activities, including the potential benefits and therapeutic scope
of our collaborations, our ability to integrate and continue operations of acquired businesses, and our ability to
successfully capitalize on these opportunities;
•the establishment, development and maintenance of collaborative relationships, including potential milestone
payments or other obligations, and other potential business development activities, including the identification of
potential collaborative partners or acquisition targets;
•our plans to build and maintain our global supply chains and manufacturing infrastructure and capabilities, including
for biologics, cell and gene therapies;
•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;
•potential fluctuations in foreign currency exchange rates and the effectiveness of our foreign currency management
program;
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•our expectations regarding cash generated by operations, our cash balance and expected generation and net interest
income;
•our expectations regarding our provision for or benefit from income taxes and the utilization of our deferred tax
assets; and
•our liquidity and our expectations regarding the possibility of raising additional capital.
Forward-looking statements are subject to certain risks, uncertainties, or other factors that are difficult to predict and
could cause actual events or results to differ materially from those indicated in any such statements. These risks,
uncertainties, and other factors include, but are not limited to, those described in our “Risk Factors” in Item 1A of our Annual
Report on Form 10-K for the year ended December 31, 2025, which was filed with the SEC on February 13, 2026, 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 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Repurchases of Equity Securities
In May 2025, our Board of Directors authorized a share repurchase program (our “Share Repurchase Program”),
pursuant to which we were authorized to repurchase up to $4.0 billion of our common stock. The Share Repurchase Program
does not have an expiration date and can be discontinued at any time.
The table set forth below shows repurchases of securities by us during the three months ended March 31, 2026 under our
Share Repurchase Program.
Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) | Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (1) | |||
January 1, 2026 to January 31, 2026 | 257,009 | $460.37 | 257,009 | $3,263,144,316 | |||
February 1, 2026 to February 28, 2026 | 210,126 | $474.46 | 210,126 | $3,163,447,298 | |||
March 1, 2026 to March 31, 2026 | 274,000 | $461.53 | 274,000 | $3,036,987,553 | |||
Total | 741,135 | $464.79 | 741,135 | $3,036,987,553 |
(1) Under our Share Repurchase Program, we are authorized to purchase shares from time to time through open market or privately
negotiated transactions. Such purchases may be pursuant to Rule 10b5-1 plans or other means as determined by our management and
in accordance with the requirements of the Securities and Exchange Commission.
Item 5. Other Information
Rule 10b5-1 Trading Plans
Our policy governing transactions in our securities by our directors, officers, and employees permits our officers,
directors and employees to enter into trading plans complying with Rule 10b5-1 under the Securities Exchange Act of 1934,
as amended (each a “Trading Plan”). In the first quarter of 2026, none of our directors or officers adopted or terminated a
Trading Plan.
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Item 6.Exhibits
Exhibit Number | Exhibit Description |
31.1 | Certification of the Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002. |
31.2 | Certification of the Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002. |
32.1 | Certification of the Chief Executive Officer and the Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002. |
101.INS | XBRL Instance - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
101.SCH | XBRL Taxonomy Extension Schema |
101.CAL | XBRL Taxonomy Extension Calculation |
101.LAB | XBRL Taxonomy Extension Labels |
101.PRE | XBRL Taxonomy Extension Presentation |
101.DEF | XBRL Taxonomy Extension Definition |
104 | Cover Page Interactive Data File––the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.
Vertex Pharmaceuticals Incorporated | ||
May 5, 2026 | By: | /s/ Charles F. Wagner, Jr. |
Charles F. Wagner, Jr. | ||
Executive Vice President, Chief Operating & Financial Officer (principal financial officer and duly authorized officer) | ||