VERTEX PHARMACEUTICALS INC / MA (VRTX)

CIK: 0000875320. SIC: 2834 Pharmaceutical Preparations. Latest 10-K as of: 2026-02-13.

SIC breadcrumb: Manufacturing > Chemicals And Allied Products > SIC 2834 Pharmaceutical Preparations

SEC company page: https://www.sec.gov/edgar/browse/?CIK=875320. Latest filing source: 0000875320-26-000056.

Selected Fundamentals

Financials

Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-02-13. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0000875320.json. Derived margins are computed from the extracted annual SEC facts.

Flow metrics use full-year FY periods from 10-K/10-K/A filings; balance-sheet metrics use FY-end instants. Missing metrics are omitted rather than fabricated.

Financial Charts

Macro Cross-References

• CPIAUCSL - Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
• UNRATE - Unemployment Rate
• FEDFUNDS - Federal Funds Effective Rate
• CES0500000003 - Average Hourly Earnings of All Employees, Total Private
• DFEDTARU - Federal Funds Target Range - Upper Limit
• DFEDTARL - Federal Funds Target Range - Lower Limit
• DGS3MO - Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
• DGS2 - Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
• DGS10 - Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
• DGS30 - Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
• T10Y2Y - 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
• CPILFESL - Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
• CPIUFDSL - Consumer Price Index for All Urban Consumers: Food
• CPIENGSL - Consumer Price Index for All Urban Consumers: Energy
• CUSR0000SAH1 - Consumer Price Index for All Urban Consumers: Shelter
• PCEPI - Personal Consumption Expenditures: Chain-type Price Index
• PCEPILFE - Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
• PPIACO - Producer Price Index by Commodity: All Commodities
• T10YIE - 10-Year Breakeven Inflation Rate
• U6RATE - Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
• PAYEMS - All Employees, Total Nonfarm
• CIVPART - Labor Force Participation Rate
• EMRATIO - Employment-Population Ratio
• UNEMPLOY - Unemployed
• CE16OV - Employment Level
• ICSA - Initial Claims
• JTSJOL - Job Openings: Total Nonfarm
• JTSQUR - Quits: Total Nonfarm
• GDPC1 - Real Gross Domestic Product
• A191RL1Q225SBEA - Real Gross Domestic Product: Percent Change from Preceding Period
• INDPRO - Industrial Production: Total Index
• TCU - Capacity Utilization: Total Index
• HOUST - New Privately-Owned Housing Units Started: Total Units
• PERMIT - New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
• RSAFS - Advance Retail Sales: Retail Trade
• PCE - Personal Consumption Expenditures
• DSPIC96 - Real Disposable Personal Income
• PSAVERT - Personal Saving Rate
• M2SL - M2
• BOPGSTB - U.S. International Trade in Goods and Services: Balance

Latest 10-K MD&A

Extracted between Item 7 and the next Item 7A/8 heading after HTML sanitization. Confidence: high. Filing date: 2026-02-13. Report date: 2025-12-31.

ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF

OPERATIONS

Our discussion and analysis of our financial condition and results of operations for 2025 as compared to 2024 are

discussed below. For a discussion of our financial condition and results of operations for 2024 as compared to 2023, please

refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2024

Annual Report on Form 10-K, except as set forth below.

OVERVIEW

We are a global biotechnology company that invests in scientific innovation to create transformative medicines for

people with serious diseases, with a focus on specialty markets. We have approved medicines for cystic fibrosis (“CF”),

sickle cell disease (“SCD”), transfusion dependent beta thalassemia (“TDT”), and acute pain, and we continue to serially

innovate and advance next-generation clinical and research programs in these areas. Our mid- and late-stage clinical pipeline

includes programs across a range of modalities in additional serious diseases, including IgA nephropathy, APOL1-mediated

kidney disease, neuropathic pain, type 1 diabetes, primary membranous nephropathy, autosomal dominant polycystic kidney

disease, and myotonic dystrophy type 1.

Collectively, our five CF medicines, led by TRIKAFTA/KAFTRIO, are being used to treat nearly three quarters of the

people with CF in the U.S., Europe, Australia, and Canada. ALYFTREK, our newest CF medicine, is approved in the United

States (the “U.S.”), the United Kingdom (the “U.K.”), the European Union (the “E.U.”), Canada, New Zealand, Switzerland,

Australia and Israel.

CASGEVY, our ex-vivo, non-viral CRISPR/Cas9 gene-edited cell therapy, is approved in the U.S., the E.U., the U.K.,

the Kingdom of Saudi Arabia (“Saudi Arabia”), the Kingdom of Bahrain (“Bahrain”), Qatar, the United Arab Emirates (the

“UAE”), Kuwait, Switzerland and Canada for the treatment of people 12 years of age and older with SCD or TDT.

JOURNAVX, our selective non-opioid NaV1.8 pain signal inhibitor, is approved in the U.S. for the treatment of people

with moderate-to-severe acute pain. We are continuing our commercial launch of JOURNAVX for eligible adults.

Financial Highlights

Total Revenues

In 2025, our total revenues increased to $12.0 billion as compared to $11.0 billion in 2024,

primarily due to continued strong demand for TRIKAFTA/KAFTRIO as well as contributions

from our launches of ALYFTREK, JOURNAVX and CASGEVY.

Cost of Sales

Our cost of sales as a percentage of our net product revenues decreased from 13.9% in 2024 to

13.8% in 2025 as a result of a lower overall royalty rate for our CF medicines, partially offset by

changes in our product mix, and investments in network expansion and manufacturing process

improvements.

Total R&D and SG&A

Expenses

Our total research and development (“R&D”) and selling, general and administrative (“SG&A”)

expenses increased to $5.7 billion in 2025 as compared to $5.1 billion in 2024, primarily due to

increased investment to commercialize our new products and to advance our R&D pipeline.

AIPR&D Expenses

In 2025, our acquired in-process research and development expenses (“AIPR&D”) of $133.0

million included various upfront and milestone payments related to our collaboration and in-

licensing arrangements. In 2024, AIPR&D included $4.4 billion resulting from our acquisition of

Alpine Immune Sciences, Inc. (“Alpine”), which was accounted for as an asset acquisition.

Cash

Our total cash, cash equivalents and marketable securities increased to $12.3 billion as of

December 31, 2025 as compared to $11.2 billion as of December 31, 2024 primarily due to cash

flows provided by our operating activities partially offset by repurchases of our common stock.

$0.1

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$0.1

2024

2025

December 31, 2025

December 31, 2024

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.

•ALYFTREK is reimbursed for eligible people with CF in the U.S., England, Ireland, Germany, Denmark, Northern

Ireland, Norway, Wales, Italy, Australia, New Zealand and Luxembourg. We are working to secure access for

eligible patients in additional countries.

Sickle Cell Disease and Beta Thalassemia

•In 2025, we recorded $115.8 million of CASGEVY product revenues. This reflects 64 patients receiving infusions

of CASGEVY in 2025, including 30 people infused in the fourth quarter. Globally, in 2025, 147 people with SCD or

TDT had their first cell collection for CASGEVY.

•As of the end of 2025, approximately 90 percent of people with SCD or TDT in the U.S. have reimbursed access to

CASGEVY, which is also reimbursed in the U.K., Italy, Austria, Denmark, Luxembourg, Saudi Arabia, the UAE,

Bahrain, and Kuwait. In January 2026, we secured reimbursed access to CASGEVY for eligible people with SCD in

Scotland, consistent with the reimbursement agreement reached in 2025 for people with TDT.

•We expect to begin global regulatory submissions for approvals for CASGEVY in children 5 to 11 years of age, in

the first half of 2026. The FDA awarded Vertex with a Commissioner’s National Priority Voucher for this pediatric

submission, indicating an accelerated timeline for review once the submission is complete.

Acute Pain

•Since pharmacy availability in March 2025 through year-end 2025, more than 550,000 prescriptions for

JOURNAVX were written and filled across the hospital and retail settings in different acute pain conditions,

consistent with JOURNAVX’s broad label.

•We have secured access for JOURNAVX with all three national pharmacy benefit managers, and, as of January

2026, over 200 million individuals across commercial and government payers have coverage, representing two-

thirds of U.S. covered lives. In addition, 21 states provide coverage via Medicaid.

•More than 100 of the targeted 150 healthcare systems and more than 950 individual hospitals of the 2,000 targeted

institutions have added JOURNAVX to formularies, protocols or order sets.

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Select R&D Pipeline Programs

We continue to advance a diversified pipeline of potentially transformative medicines for serious diseases utilizing a

range of modalities. Recent and anticipated progress in activities supporting these efforts is included below:

Cystic Fibrosis

•We completed the global trial evaluating ALYFTREK in children 2 to 5 years of age. Following positive results

from this clinical trial, we expect to submit for approval with global regulators in this age group in the first half of

2026. We also initiated a pivotal trial of ALYFTREK in children 1 year to less than 2 years of age.

•Following positive results from the clinical trial evaluating TRIKAFTA in children 1 year to less than 2 years of age,

we expect to begin submissions for global regulatory approvals in this age group in the first half of 2026.

IgA Nephropathy

•We are developing povetacicept, a dual inhibitor of B cell activating factor (“BAFF”) and a proliferation-inducing

ligand (“APRIL”) cytokines, for multiple diseases. Povetacicept represents a potentially best-in-class approach to

control B cell activity in immunoglobulin A nephropathy (“IgAN”).

•We completed enrollment in the Phase 3 clinical trial evaluating povetacicept for IgAN and, in the fourth quarter of

2025, we initiated the rolling Biologics Licensing Application (“BLA”) filing for U.S. accelerated approval with

submission of the first module. We expect to release interim analysis data in the first half of 2026 and we expect to

complete the submission in the first half of 2026, if data from the interim analysis are supportive. We are using a

priority review voucher to expedite the review of the povetacicept BLA from ten months to six months.

APOL1-Mediated Kidney Disease

•Inaxaplin is our small molecule for the treatment of APOL1-mediated kidney disease (“AMKD”). We completed

enrollment in the interim analysis cohort of the global Phase 2/3 pivotal clinical trial evaluating inaxaplin in people

with primary AMKD (“AMPLITUDE”). We expect to conduct the pre-planned interim analysis once this cohort has

been treated for 48 weeks and we expect to share data from the interim analysis in late 2026 or early 2027. We

expect to complete full enrollment in AMPLITUDE in the second half of 2026.

Peripheral Neuropathic Pain

•We previously initiated the first Phase 3 clinical trial evaluating suzetrigine for the treatment of people with diabetic

peripheral neuropathy (“DPN”), a common form of peripheral neuropathic pain, and have initiated a second Phase 3

clinical trial evaluating suzetrigine in DPN in the fourth quarter of 2025. We expect to complete enrollment in both

Phase 3 clinical trials by the end of 2026.

Type 1 Diabetes

•Zimislecel is an allogeneic, stem cell-derived, fully differentiated, insulin-producing islet cell replacement therapy,

using standard immunosuppression to protect the implanted cells. We have completed enrollment in the Phase 1/2/3

clinical trial of zimislecel in people with type 1 diabetes (“T1D”). We have temporarily postponed completion of

dosing in this clinical trial, pending an internal manufacturing analysis.

Primary Membranous Nephropathy

•Povetacicept represents a potentially best-in-class approach to control B cell activity in primary membranous

nephropathy (“pMN”), another B cell-mediated disease. We are enrolling and dosing patients in the adaptive Phase

2/3 pivotal clinical trial of povetacicept for the treatment of people with pMN. We expect to complete the Phase 2

portion of the clinical trial and to initiate the Phase 3 portion in mid-2026.

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External Innovation

Recent investments in external innovation include:

•An exclusive global license agreement with WuXi Biologics to develop and commercialize a trispecific T cell

engager for B cell-mediated autoimmune diseases, which is currently in preclinical development.

Our Business Environment

In 2025, our net product revenues were primarily from the sale of our medicines for the treatment of CF. Our CF strategy

involves continuing to develop and obtain approval and reimbursement for treatment regimens that will provide benefits to all

people with CF and increasing the number of people with CF eligible and able to receive our medicines. Outside of CF, we

continue to advance the commercialization of CASGEVY for the treatment of SCD and TDT, and JOURNAVX for the

treatment of acute pain. In addition, we are advancing our pipeline of product candidates for the treatment of serious diseases

outside of CF, SCD, TDT and acute pain.

Our strategy is to combine transformative advances in the understanding of causal human biology and the science of

therapeutics to discover and develop innovative medicines. This approach includes advancing multiple compounds or

therapies from each program, spanning multiple modalities, into early clinical trials to obtain patient data that can inform

selection of the most promising therapies for later-stage development, as well as to inform discovery and development

efforts. We aim to serially innovate in our disease areas of interest and follow our first-in-class therapies with potential best-

in-class candidates to provide durable clinical and commercial success.

In pursuit of new product candidates and therapies in specialty markets, we invest in research and development. We

believe that pursuing research in diverse areas allows us to balance the risks inherent in product development and may

provide product candidates that will form our pipeline in future years. To supplement our internal research programs, we

acquire technologies and programs and collaborate with biopharmaceutical and technology companies, leading academic

research institutions, government laboratories, foundations and other organizations, as needed, to advance research in our

areas of therapeutic interest and to access technologies needed to execute on our strategy.

Discovery and development of a new pharmaceutical or biological product is a difficult and lengthy process that requires

significant financial resources along with extensive technical and regulatory expertise. Across the industry, most potential

drug or biological products never progress into development, and most products that advance into development never receive

marketing approval. Our investments in product candidates are subject to considerable risks. We closely monitor our research

and development activities, and frequently evaluate our pipeline programs in light of new data and scientific, business and

commercial insights, with the objective of balancing risk and potential. This process can result in rapid changes in focus and

priorities as new information becomes available and as we gain additional understanding of our ongoing programs and

potential new programs, as well as those of our competitors. In addition, our product candidates must satisfy rigorous

standards of safety and efficacy before they can be approved for sale by regulatory authorities. Our analysis of data obtained

from nonclinical and clinical activities is subject to confirmation and interpretation by regulatory authorities, which could

delay, limit or prevent regulatory approval.

Our business also requires ensuring appropriate manufacturing and supply of our products. As we advance our product

candidates through clinical development toward commercialization and market and sell our approved products, we build and

maintain our supply chain and quality assurance resources. We rely on a global network of third parties, including some in

China, and our internal capabilities to manufacture and distribute our products for commercial sale and post-approval clinical

trials and to manufacture and distribute our product candidates for clinical trials. In addition to establishing supply chains for

each newly approved product, we adapt our supply chain for existing products to include additional formulations or to

increase scale of production for existing products as needed. The processes for biological and cell and genetic therapies can

be more complex than those required for small molecule drugs and require additional investments in different systems,

equipment, facilities and expertise. We are focused on ensuring the stability of the supply chains for our current products, as

well as for our pipeline programs.

Sales of our products depend, to a large degree, on the extent to which our products are reimbursed by third-party payors,

such as government health programs, commercial insurance and managed health care organizations. Reimbursement for our

products, including our potential pipeline therapies, cannot be assured and may take significant periods of time to obtain. We

dedicate substantial management and other resources to obtain and maintain appropriate levels of reimbursement for our

48

products from third-party payors, including governmental organizations in the U.S. and ex-U.S. markets. In the U.S., we

work with government and commercial payors to obtain and maintain appropriate levels of reimbursement for our medicines.

In ex-U.S. markets, we seek government reimbursement for our medicines on a country-by-country or region-by-region, as

required. This is necessary for each new medicine, as well as for label expansions for our current medicines. We expect to

continue to focus significant resources to expand and maintain reimbursement for our CF medicines, CASGEVY,

JOURNAVX, and, ultimately, our pipeline therapies, in U.S. and ex-U.S. markets.

Strategic Transactions

Acquisitions

As part of our business strategy, we seek to acquire technologies, products, product candidates and other businesses that

are aligned with our corporate and research and development strategies and complement and advance our ongoing research

and development efforts. We have acquired multiple biotechnology companies over the last several years and expect to

continue to identify and evaluate such opportunities. The accounting for these acquisitions can vary significantly based on

whether we conclude the transactions represent business combinations or asset acquisitions. In 2024, we acquired Alpine and

its lead molecule, povetacicept, for approximately $5.0 billion. Povetacicept has shown potential to treat multiple diseases or

conditions and become a pipeline-in-a-product. We accounted for the Alpine transaction as an asset acquisition because

povetacicept represented substantially all of the fair value of the gross assets that we acquired. As a result, $4.4 billion of the

fair value attributed to povetacicept was expensed as AIPR&D in 2024. In 2019 and 2022, we acquired Semma Therapeutics,

Inc. (“Semma”) and ViaCyte, Inc. (“ViaCyte”), respectively, pursuant to which we established and accelerated the

development of our T1D program. We accounted for each of these acquisitions as a business combination.

Please refer to our critical accounting policies, “Acquisitions,” for further information regarding the significant

judgments and estimates related to our acquisitions.

Collaboration and In-Licensing 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”), Entrada Therapeutics, Inc. (“Entrada”), and Moderna, Inc.

Generally, when we in-license a technology or product candidate, we make upfront payments to the collaborator, assume

the costs of the program and/or agree to make contingent payments, which could consist of milestone, royalty and option

payments. Most of these collaboration payments are expensed as AIPR&D, including, a $75.0 million milestone paid to

Entrada in 2024, and, in 2023, total payments of $242.6 million to Entrada and total upfront and milestone payments of

$170.0 million to CRISPR related to T1D. These payments were expensed to AIPR&D because they were primarily

attributable to acquired in-process research and development for which there was no alternative future use. However,

depending on many factors, including the structure of the collaboration, the stage of development of the acquired technology,

the significance of the in-licensed product candidate to the collaborator’s operations and the other activities in which our

collaborators are engaged, the accounting for these transactions can vary significantly. We expect to continue to identify and

evaluate collaboration and licensing opportunities that may be similar to or different from the collaborations and licenses that

we have engaged in previously.

Joint Development and Commercialization Agreement with CRISPR

In 2017, we entered into a joint development and commercialization agreement with CRISPR (the “CRISPR JDCA”),

which we amended and restated in 2021.

Pursuant to the CRISPR JDCA, we lead global development, manufacturing and commercialization of CASGEVY, with

support from CRISPR. We also conduct all research, development, manufacturing and commercialization activities relating

to other product candidates and products under the CRISPR JDCA throughout the world subject to CRISPR’s reserved right

to conduct certain activities.

49

CASGEVY was approved by the FDA in December 2023 for the treatment of SCD. In connection with this approval, we

made a $200.0 million milestone payment to CRISPR in January 2024. We are recording intangible asset amortization

expense to “Cost of sales” related to this intangible asset. Subsequent to receiving marketing approval for CASGEVY, we

continue to lead the research and development activities under the CRISPR JDCA, subject to CRISPR’s reserved right to

conduct certain activities. We are reimbursed by CRISPR for its 40% share of these research and development activities,

subject to certain adjustments, and we record this reimbursement from CRISPR as a credit within “Research and development

expenses.” We also share with CRISPR 40% of the net commercial profits or losses incurred with respect to CASGEVY,

subject to certain adjustments, which is recorded to “Cost of sales.” The net commercial profits or losses equal the sum of the

product revenues, cost of sales and selling, general and administrative expenses that we have recognized related to the

CRISPR JDCA.

Prior to receiving marketing approval from the FDA for CASGEVY in December 2023, we accounted for the CRISPR

JDCA as a cost-sharing arrangement, with costs incurred related to CASGEVY allocated 60% to us and 40% to CRISPR,

subject to certain adjustments. In 2023, we recognized net reimbursements from CRISPR as credits to “Research and

development expenses” and to “Selling, general and administrative expenses,” related to CRISPR’s share of the CRISPR

JDCA’s operating expenses.

Acquired In-Process Research and Development Expenses

In 2025 and 2024, our AIPR&D included $133.0 million and $4.6 billion, respectively, related to upfront, contingent

milestone, or other payments pursuant to our business development transactions, including the asset acquisitions,

collaborations, and licenses of third-party technologies described above. Please refer to Note B, “Collaboration, License and

Other Arrangements,” for further information regarding our asset acquisitions, collaborations, and in-license agreements.

Out-licensing Arrangements

We also have out-licensed certain development programs to collaborators who are leading the development or

commercialization of these programs, either globally or within certain geographic regions.

In 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

2025

% Change

2024

% Change

2023

(in millions, except percentages)

TRIKAFTA/KAFTRIO

$10,312.7

1%

$10,238.6

14%

$8,944.7

ALYFTREK

837.8

**

—

**

—

Other product revenues

820.1

5%

781.5

(15)%

924.5

Product revenues, net

11,970.6

9%

11,020.1

12%

9,869.2

Other revenues

30.7

**

—

**

—

Total revenues

$12,001.3

9%

$11,020.1

12%

$9,869.2

** Not meaningful

Product Revenues, Net

In 2025, our net product revenues increased $950.5 million, or 9%, as compared to 2024, primarily due to continued

strong demand for TRIKAFTA/KAFTRIO as well as contributions from our launches of ALYFTREK, JOURNAVX and

50

CASGEVY. In 2025, “Other product revenues” included $115.8 million from CASGEVY and $59.6 million from

JOURNAVX. In 2024, “Other product revenues” included CASGEVY product revenues of $10.0 million. Our remaining

“Other product revenues” are related to KALYDECO, ORKAMBI, and SYMDEKO/SYMKEVI, our other CF products.

Other Revenues

In 2025, other revenues were $30.7 million, which included $20.6 million and $10.0 million related to upfront payments

received from our agreements with Ono and Zai, respectively.

Revenues by Geographic Location

Our total revenues from the U.S. and from ex-U.S. markets were as follows:

2025

% Change

2024

% Change

2023

(in millions, except percentages)

United States

$7,548.6

13%

$6,684.9

11%

$6,040.4

ex-U.S.

4,452.7

3%

4,335.2

13%

3,828.8

Total revenues

$12,001.3

9%

$11,020.1

12%

$9,869.2

Our U.S. total revenues increased 13% in 2025, as compared to 2024, due to continued strong patient demand, new

patient initiations and higher realized net prices. Our ex-U.S. total revenues increased 3% in 2025, as compared to 2024,

primarily due to solid CF performance across multiple geographies and increased CASGEVY product revenues, partially

offset by a decline in product revenues in Russia, where we are continuing to experience a violation of our intellectual

property rights.

In 2026, we expect our total revenues to increase due to continued growth of our CF product revenues, including from

ALYFTREK globally, and increased contributions from CASGEVY and JOURNAVX.

Operating Costs and Expenses

2025

% Change

2024

% Change

2023

(in millions, except percentages)

Cost of sales

$1,651.3

8%

$1,530.5

21%

$1,262.2

Research and development expenses

3,909.5

8%

3,630.3

15%

3,162.9

Acquired in-process research and development

expenses

133.0

**

4,628.4

**

527.1

Selling, general and administrative expenses

1,753.1

20%

1,464.3

29%

1,136.6

Intangible asset impairment charge

379.0

**

—

**

—

Change in fair value of contingent consideration

2.1

**

(0.5)

**

(51.6)

Total costs and expenses

$7,828.0

(30)%

$11,253.0

86%

$6,037.2

** Not 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. Pursuant to our agreement (the “CFF Agreement”) with the Cystic Fibrosis Foundation (the “CFF”),

our tiered third-party royalties on sales of ALYFTREK, TRIKAFTA/KAFTRIO, SYMDEKO/SYMKEVI, KALYDECO, and

ORKAMBI, calculated as a percentage of net sales, range from the single digits to the sub-teens, with lower royalties on sales

of ALYFTREK and TRIKAFTA/KAFTRIO than for our other products. The royalty burden associated with TRIKAFTA/

KAFTRIO is 9.33% and our position is that the royalty burden associated with ALYFTREK is 4%. On October 10, 2025,

Royalty Pharma plc (“RP”), the third party to whom the CFF assigned its rights (and the CFF, which remains a party to the

CFF Agreement), initiated a confidential arbitration alleging the royalty burden on ALYFTREK is approximately 8%. RP is

seeking a declaratory judgment regarding the royalty burden on ALYFTREK as well as alleged unpaid royalties and other

alleged damages available under the CFF Agreement or applicable law, costs, expenses, attorneys’ fees, and interest. We

51

believe RP’s position is contrary to the plain terms of the CFF Agreement and intend to vigorously defend our position under

the CFF Agreement.

Our cost of sales as a percentage of our net product revenues was 13.8% and 13.9% in 2025 and 2024, respectively,

primarily due to ALYFTREK sales in 2025, which has the royalty burden lower than TRIKAFTA/KAFTRIO, partially offset

by changes in product mix, and investments in network expansion and manufacturing process improvements.

In 2026, we expect our cost of sales as a percentage of our net product revenues to increase due to a higher proportion of

products outside of CF, which currently have greater manufacturing costs relative to their net product revenue contributions,

and continued investments in efficient manufacturing and delivery processes.

Research and Development Expenses

2025

% Change

2024

% Change

2023

(in millions, except percentages)

Research expenses

$827.9

3%

$804.5

14%

$705.6

Development expenses

3,081.6

9%

2,825.8

15%

2,457.3

Total research and development expenses

$3,909.5

8%

$3,630.3

15%

$3,162.9

Over the past three years, we have incurred approximately $10.7 billion in research and development expenses

associated with product discovery and development. Our research and development expenses include internal and external

costs incurred for research and development of our products and product candidates. We assign external costs of services

provided to us by clinical research organizations and other outsourced research by individual program. Our internal costs

include salary and benefits, stock-based compensation expense, laboratory supplies and other direct expenses and

infrastructure costs, the majority of which are not assigned to individual products or product candidates.

Research Expenses

2025

Change %

2024

Change %

2023

(in millions, except percentages)

Research Expenses:

Salary and benefits

$203.9

(3)%

$210.7

14%

$184.1

Stock-based compensation expense

94.8

(15)%

112.1

21%

92.4

Outsourced services and other direct expenses

286.2

5%

271.4

15%

237.0

Infrastructure costs

243.0

16%

210.3

9%

192.1

Total research expenses

$827.9

3%

$804.5

14%

$705.6

Our research expenses reflect investment in our pipeline and expansion of our cell and genetic therapy capabilities,

which has increased our outsourced services and other direct expenses and infrastructure costs in 2025 as compared to 2024.

Salary and benefits in 2024 included $13.1 million associated with cash-settled unvested Alpine equity awards. Compared to

2024, our total research expenses in 2025 increased $23.4 million, or 3%. We expect to continue to invest in our research

programs with a focus on creating transformative medicines for serious diseases.

52

Development Expenses

2025

Change %

2024

Change %

2023

(in millions, except percentages)

Development Expenses:

Salary and benefits

$744.8

8%

$686.7

16%

$590.9

Stock-based compensation expense

320.6

2%

313.7

20%

262.5

Compensation expense for cash-settled

unvested Alpine equity awards

—

**

151.9

**

—

Outsourced services and other direct expenses

1,493.5

21%

1,239.1

0%

1,238.7

Infrastructure costs

522.7

20%

434.4

19%

365.2

Total development expenses

$3,081.6

9%

$2,825.8

15%

$2,457.3

** Not meaningful

As we have advanced our pipeline of transformative medicines, we have invested in internal headcount and infrastructure

to support multiple mid- and late-stage clinical development programs. These include our povetacicept programs acquired

from Alpine, pain and T1D programs, which together have increased our outsourced services and other direct expenses. In

conjunction with our acquisition of Alpine, we incurred $151.9 million associated with cash-settled unvested Alpine equity

awards within development expenses in 2024. Compared to 2024, our total development expenses in 2025 increased by

$255.8 million, or 9%. In 2026, we expect our development expenses to continue to increase due to our advancing pipeline

programs, including our T1D programs.

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

2025

% Change

2024

% Change

2023

(in millions, except percentages)

Acquired in-process research and development

expenses

$133.0

**

$4,628.4

**

$527.1

** Not meaningful

In 2025, AIPR&D included various upfront and milestone payments related to our collaboration and in-licensing

arrangements. In 2024, AIPR&D included $4.4 billion resulting from our acquisition of Alpine, which was accounted for as

an asset acquisition, and various other upfront and milestone payments. Our AIPR&D has historically fluctuated, and is

expected to continue to fluctuate, from one period to another due to upfront, contingent milestone, and other payments

pursuant to our existing and future business development transactions, including collaborations, licenses of third-party

technologies, and asset acquisitions.

Selling, General and Administrative Expenses

2025

% Change

2024

% Change

2023

(in millions, except percentages)

Selling, general and administrative expenses

$1,753.1

20%

$1,464.3

29%

$1,136.6

Selling, general and administrative expenses increased by 20% in 2025 as compared to 2024, primarily due to increased

commercial investment to support the launch of JOURNAVX. We expect our selling, general and administrative expenses to

continue to increase in 2026 to as we expand the commercialization of JOURNAVX, prepare for our anticipated launch of

povetacicept for the treatment of IgAN, and further investments in infrastructure to scale our organization.

53

Intangible Asset Impairment Charge

In the first quarter of 2025, based on results from a Phase 1/2 clinical trial evaluating our VX-264 clinical program in

patients with T1D, we concluded that VX-264 will not be advancing further in clinical development. Based on this event, we

performed an interim impairment test on the fair value of our VX-264 indefinite-lived in-process research and development

asset that we acquired from Semma Therapeutics, Inc. As a result, we recorded a full intangible asset impairment charge of

$379.0 million associated with VX-264 in the first quarter of 2025.

Non-Operating Income (Expense), Net

Interest Income

Interest income decreased from $598.1 million in 2024 to $490.9 million in 2025, primarily due to decreased market

interest rates. Our future interest income is 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 were expenses of $7.7 million and $86.1 million in 2025 and 2024, respectively. These

amounts primarily related to net unrealized and realized losses resulting from changes in the fair value of certain of our

strategic equity investments and net foreign currency exchange losses.

Income Taxes

Our effective tax rate fluctuates from year to year due to the global nature of our operations. The factors that most

significantly impact our effective tax rate include changes in tax laws, variability in the amount and allocation of our taxable

earnings among multiple jurisdictions, the amount and characterization of our research and development expenses, the levels

of certain deductions and credits, adjustments to the value of our uncertain tax positions, acquisitions and third-party

collaboration and licensing transactions.

In July 2025, the U.S. enacted H.R.1, which includes significant provisions modifying the U.S. tax framework, including

the ability for companies to immediately deduct research and development expenditures for 2025 and provisions for

deducting previously capitalized amounts. H.R.1 does not have a material impact on our 2025 U.S. taxes, but we expect

further guidance to be issued. We will review guidance when issued for impacts on future years and disclose any impacts if

needed at that time. These legislative changes could have an impact on our future effective tax rates, tax liabilities, and cash

taxes.

Our provision for income taxes was $690.0 million in 2025 and $784.1 million in 2024. In 2025, our 14.9% effective tax

rate was lower than the U.S. statutory rate primarily due to research and development tax credits, increased utilization of

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

In 2024, our 315.5% effective tax rate was materially different than the U.S. statutory rate primarily due to the

$4.4 billion of non-deductible AIPR&D resulting from our acquisition of Alpine, which significantly lowered our pre-tax

income. The non-deductible AIPR&D was partially offset by a benefit from a research and development tax credit study that

was completed in 2024 and excess tax benefits related to stock-based compensation.

54

LIQUIDITY AND CAPITAL RESOURCES

The following table summarizes the components of our financial condition as of December 31, 2025 and 2024:

2025

2024

% Change

(in millions, except percentages)

Cash, cash equivalents and marketable securities:

Cash and cash equivalents

$5,084.8

$4,569.6

Marketable securities

1,523.3

1,546.3

Long-term marketable securities

5,712.3

5,107.9

Total cash, cash equivalents and marketable securities

$12,320.4

$11,223.8

10%

Working Capital:

Total current assets

$11,201.0

$9,596.4

17%

Total current liabilities

(3,861.2)

(3,564.6)

8%

Total working capital

$7,339.8

$6,031.8

22%

Working Capital

As of December 31, 2025, total working capital was $7.3 billion, which represented an increase of $1.3 billion, or 22%,

from $6.0 billion as of December 31, 2024, primarily due to increased cash and marketable securities due to product revenue

growth, as well as increased inventories to support our recent commercial launches.

Cash Flows

2025

2024

2023

(in millions)

Net cash provided by (used in):

Operating activities

$3,631.4

$(492.6)

$3,537.3

Investing activities

$(945.4)

$(3,770.0)

$(3,141.7)

Financing activities

$(2,261.3)

$(1,494.9)

$(562.2)

Operating Activities

Cash provided by operating activities was $3.6 billion in 2025, primarily due to income from operations of $4.2 billion

driven by our net product revenues partially offset by purchases of inventory and other changes in operating assets and

liabilities. Cash used in operating activities was $492.6 million in 2024, primarily due to our acquisition of Alpine partially

offset by cash flows provided by other operating activities.

Investing Activities

Cash used in investing activities was $945.4 million in 2025, primarily related to net purchases of available-for-sale debt

securities and purchases of property and equipment. Cash used in investing activities was $3.8 billion in 2024, which

included net purchases of available-for-sale debt securities of $3.0 billion.

Financing Activities

Cash used in financing activities were $2.3 billion and $1.5 billion in 2025 and 2024, respectively. Our financing

activities in each year were primarily related to repurchases of our common stock pursuant to our share repurchase programs

and payments in connection with common stock withheld for employee tax obligations.

55

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

December 31, 2025, the facility was undrawn, and we were in compliance with these covenants.

We may also raise additional capital by borrowing under credit agreements, through public offerings or private

placements of our securities, or securing new collaborative agreements or other methods of financing. We will continue to

manage our capital structure and will consider all financing opportunities, whenever they may occur, that could strengthen

our long-term liquidity profile. There can be no assurance that any such financing opportunities will be available on

acceptable terms, if at all.

Future Capital Requirements

We have significant future capital requirements, including:

•Expected operating expenses to conduct research and development activities, manufacture and commercialize our

existing and future products, and to operate our organization.

•Cash that we pay for income taxes.

•Royalties we pay related to sales of our CF products.

•Facility, operating and finance lease obligations as described below.

•Firm purchase obligations related to our supply and manufacturing processes.

In addition, other potential significant future capital requirements may include:

•We have entered into certain agreements with third parties that include the funding of certain research, development,

manufacturing and commercialization efforts. Certain of our transactions, including collaborations, licensing

arrangements, and asset acquisitions, include the potential for future milestone and royalty payments by us upon the

achievement of pre-established developmental and regulatory targets and/or commercial targets. Other transactions

include the potential for future lease-related expenses and other costs. Our obligation to fund these research and

development and commercialization efforts and to pay these potential milestones, expenses and royalties is

contingent upon continued involvement in the programs and/or the lack of any adverse events that could cause their

discontinuance. We may enter into additional agreements, including acquisitions, collaborations, licensing

arrangements and equity investments, which require additional capital.

•To the extent we borrow amounts under our existing credit agreement, we would be required to repay any

outstanding principal amounts in 2027.

•As of December 31, 2025, we had $3.4 billion remaining authorization available under the share repurchase program

that our Board of Directors approved in May 2025. The program does not have an expiration date and can be

discontinued at any time. We expect to fund the program through a combination of cash on hand and cash generated

by operations.

Additional information on several of our future capital requirements is provided below.

56

Research and Development Costs

We have ongoing clinical trials of product candidates at various stages of clinical development. Our clinical trial costs

are dependent on, among other things, the size, number, and length of our clinical trials. These costs can increase as product

candidates move from earlier-stage clinical trials into later-stage clinical development.

Leases

We account for the majority of our real estate leases and each of our embedded leases with contract manufacturing

organizations as operating leases. These include leases for our corporate headquarters at Fan Pier in Boston, Massachusetts,

which continues through June 2044, and office and laboratory space at the Jeffrey Leiden Center for Biologics, Cell and

Genetic Therapies Campus (the “Leiden Campus”) near our corporate headquarters. As of December 31, 2025, the longest

lease at the Leiden Campus continues through the first quarter of 2042. We also have several embedded leases with contract

manufacturing organizations related to the manufacturing and commercialization of our products with remaining lease terms

up to 7 years as of December 31, 2025.

Our total future minimum lease payments for our leases for each of the next five years and in total are included in Note

L, “Leases.” The total future undiscounted minimum lease payments were $3.2 billion and $178.1 million related to our

operating and finance leases, respectively, as of December 31, 2025.

In addition to the items described above, we have a strategic agreement with Lonza to support the manufacture of T1D

cell therapy product candidates, pursuant to which we have partnered with Lonza to build a 130,000 square foot dedicated

new facility operated by Lonza in New Hampshire. Lease payments will begin in the first quarter of 2026 and continue

through the tenth anniversary of the facility’s regulatory approval for commercial production. We may enter into additional

lease agreements to support future product development and commercialization efforts, which would require additional

capital.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial

statements prepared in accordance with generally accepted accounting principles in the U.S. The preparation of these

financial statements requires us to make certain estimates and assumptions that affect the reported amounts of assets and

liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the

reported amounts of revenues and expenses during the reported periods. These items are monitored and analyzed by

management for changes in facts and circumstances, and material changes in these estimates could occur in the future.

Changes in estimates are reflected in reported results for the period in which the change occurs. We base our estimates on

historical experience and various other assumptions that we believe to be reasonable under the circumstances. Actual results

may differ from our estimates if past experience or other assumptions do not turn out to be substantially accurate.

We believe that our application of the following accounting policies, each of which requires significant judgments and

estimates on the part of management, are the most critical to aid in fully understanding and evaluating our reported financial

results:

•revenue recognition;

•acquisitions, including intangible assets;

•pre-launch inventories; and

•income taxes.

Our accounting policies, including the ones discussed below, are more fully described in Note A, “Nature of Business

and Accounting Policies.”

57

Revenue Recognition

Product Revenues, Net

We generate product revenues from sales in the U.S. and in international markets. We sell our products principally to a

limited number of specialty pharmacy and specialty distributors as well as certain major wholesalers in the U.S., which

account for the largest portion of our total revenues. Our customers in the U.S. subsequently resell our products to patients,

health care providers, retail pharmacies, hospitals, or authorized treatment centers (“ATCs”) for CASGEVY. We contract

with government agencies so that our products will be eligible for purchase by, or partial or full reimbursement from, such

third-party payors. We make international sales primarily through distributor arrangements and to retail pharmacies, as well

as to hospitals and clinics, many of which are government-owned or supported customers. In certain markets, we may not

utilize a specialty distributor or specialty pharmacy to distribute CASGEVY. In these markets, we sell CASGEVY directly to

ATCs. We recognize net product revenues from sales of our products when our customers obtain control of our products,

which typically occurs upon delivery to customers for our small molecule products, including our CF products and

JOURNAVX, and upon infusion of our gene-therapy products, including CASGEVY. Revenues from our product sales are

recorded at the net sales price, or transaction price, which requires us to make several significant estimates regarding the net

sales price.

We are required to make estimates for our product revenues related to government, commercial, and private payor

rebates, chargebacks, discounts and fees, collectively rebates. The values of the rebates provided to third-party payors per

course of treatment vary significantly and are based on government-mandated discounts and our arrangements with other

third-party payors. Our most significant estimate relates to determining amounts due pursuant to the Medicaid Drug Rebate

Program, including estimating the level of expected utilization of the rebates based on the amount of product sold to eligible

patients. We track available information regarding changes, if any, to the payor mix for our products, to our contractual terms

with third-party payors and to applicable governmental programs and regulations and levels of our products in the

distribution channel. We adjust our estimated rebates based upon new information as it becomes available, including

information regarding actual rebates for our products. Claims by third-party payors for rebates are submitted to us

significantly after the related sales, potentially resulting in adjustments in the period in which the new information becomes

known.

The following table summarizes activity related to our product revenue accruals for rebates for 2025, 2024 and 2023:

(in millions)

Balance at December 31, 2022

$1,291.4

Provision related to 2023 sales

3,481.4

Adjustments related to prior year(s) sales

(6.5)

Credits/payments made

(3,064.7)

Balance at December 31, 2023

$1,701.6

Provision related to 2024 sales

3,673.0

Adjustments related to prior year(s) sales

(42.1)

Credits/payments made

(3,725.4)

Balance at December 31, 2024

$1,607.1

Provision related to 2025 sales

3,780.4

Adjustments related to prior year(s) sales

(90.4)

Credits/payments made

(3,519.5)

Balance at December 31, 2025

$1,777.6

We have also entered into annual contracts with government-owned and supported customers in international markets

that limit the amount of annual reimbursement we can receive for our products. Upon exceeding the annual reimbursement

amount provided by the customer’s contract with us, products are provided free of charge, which is a material right. If we

estimate that the annual reimbursement amount under a contract will be exceeded for an annual period, we defer a portion of

the consideration received, which includes upfront payments and fees, for shipments made up to the annual reimbursement

limit as “Other current liabilities.” Once the annual reimbursement limit has been reached, we recognize the deferred amount

58

as revenue when we deliver the free products. To estimate the portion of the consideration received to be recognized as

revenue and the portion of the amount to be deferred, we rely on our forecast of the number of units we will distribute during

the applicable annual period in each international market in which our contracts with government-owned and supported

customers limit the amount of annual reimbursement we can receive. Our forecasts are based on, among other things, our

historical experience.

The preceding estimates and judgments materially affect our recognition of net product revenues. Changes in our

estimates of net product revenues could have a material effect on net product revenues recorded in the period in which we

determine that change occurs.

Acquisitions

As part of our business strategy, we seek to acquire products, product candidates and other technologies and businesses

that are aligned with our corporate and research and development strategies and complement and advance our ongoing

research and development efforts.

We are required to make several significant judgments and estimates to determine the accounting treatment for each

acquisition transaction. If we determine that substantially all the fair value associated with an acquisition is concentrated in a

single asset, or the acquisition does not constitute a business, we account for it as an asset acquisition. For example, we

accounted for our $5.0 billion acquisition of Alpine in 2024 as an asset acquisition because povetacicept, Alpine’s lead

molecule, represented substantially all of the fair value of the gross assets that we acquired. As a result, $4.4 billion of the fair

value attributed to povetacicept was expensed to AIPR&D in 2024. If the fair value that we acquired in an acquisition is

distributed among more than one asset, and the acquisition constitutes a business, we account for it as a business

combination.

For an asset acquisition involving rights to intellectual property related to in-process research and development that is not

yet associated with a product that has achieved regulatory approval, we generally expense our upfront payment to AIPR&D,

because there is no alternative future use for the asset that was acquired.

For business combinations, we are required to make several significant judgments and estimates to calculate and allocate

the purchase price, including the fair value of contingent consideration liabilities, to the assets that we have acquired and the

liabilities that we have assumed on our consolidated balance sheet. The most significant judgment and estimate we have

made for our business combinations relates to the fair value of the in-process research and development assets.

In-process Research and Development Intangible Assets

As of December 31, 2025 and 2024, we had $224.6 million and $603.6 million, respectively, of in-process research and

development assets on our consolidated balance sheet within “Other intangible assets, net.” During 2025, we recorded a

$379.0 million impairment of one of these assets, which was classified as an “Intangible asset impairment charge.” As of

December 31, 2025, our remaining indefinite-lived in-process research and development assets were associated with our T1D

program.

We characterize in-process research and development assets on our consolidated balance sheets as indefinite-lived

intangible assets until the completion or abandonment of the associated research and development efforts. We test our in-

process research and development intangible assets for impairment on an annual basis, and more frequently if indicators are

present or changes in circumstances suggest that impairment may exist. When we determine that an indefinite-lived

intangible asset has become impaired or we abandon the associated research and development project, we write down the

carrying value to its fair value and record an impairment charge in the period in which the impairment occurs.

For example, in 2025, based on results from a Phase 1/2 clinical trial evaluating our VX-264 clinical program in patients

with T1D, we concluded that VX-264 will not be advancing further in clinical development. Based on this event, we

performed an interim impairment test on the fair value of our VX-264 indefinite-lived in-process research and development

asset that we acquired from Semma Therapeutics, Inc. in 2019. We recorded the $379.0 million impairment charge based on

the results of this impairment test.

We use significant judgment to determine the fair value of our in-process research and development assets and have

utilized either the multi-period excess earnings or the relief from royalty methods of the income approach. Each method

requires us to estimate the probability of technical and regulatory success, revenue projections and growth rates, and

59

appropriate discount and tax rates. The multi-period excess earnings method also requires us to estimate development and

commercial costs. The relief from royalty method also requires us to estimate the after-tax royalty savings expected from

ownership of the asset that we acquired. In 2025, we used the multi-period earnings method to record the impairment

described above.

If one of our product candidates achieves regulatory approval, the in-process research and development intangible assets

associated with the product candidate become finite-lived intangible assets as described below.

Finite-lived Intangible Assets

As of December 31, 2025 and 2024, we had $199.6 million and $222.3 million, respectively, of finite-lived intangible

assets on our consolidated balance sheet within “Other intangible assets, net.” These finite-lived intangible assets primarily

relate to $208.0 million of CASGEVY regulatory approval milestones recorded in 2023.

We amortize our finite-lived intangible assets related to our marketed products, which represent the majority of our

finite-lived intangible assets, using the straight-line method within “Cost of sales” over the remaining estimated life of the

assets beginning in the period in which regulatory approval is achieved or the assets are acquired and continuing through the

period that we no longer have either exclusive rights to market the products associated with the assets or in-license rights to

the intellectual property underlying the assets. We test finite-lived intangible assets for impairment if indicators are present or

changes in circumstances suggest that the carrying value of an asset may not be recoverable. If we determine that the carrying

value of a finite-lived intangible asset may not be recoverable, we compare the carrying value of the asset to the undiscounted

cash flows that we expect the asset to generate. When we determine that a finite-lived intangible asset has become impaired,

we write down the carrying value of the asset to its fair value and record an impairment charge in the period in which the

impairment occurs.

Pre-Launch Inventories

We capitalize inventories prior to regulatory approval when we consider the related product candidate to have a high

likelihood of regulatory approval and expect to recover the related costs. In making this determination, we evaluate, among

other factors, the status of regulatory submissions and communications with regulatory authorities, information regarding the

product candidate’s safety and efficacy, and the outlook for commercial sales, including the existence of any competition. As

an example, during the first quarter of 2024, following positive results related to our Phase 3 trials for JOURNAVX, we

began capitalizing inventories produced in preparation for our planned product launch. In January 2025, we received approval

from the FDA to market JOURNAVX in the U.S. Prior to making this determination, we expensed inventoriable and related

costs associated with JOURNAVX as “Research and development expenses.”

Income Taxes

We utilize the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and

liabilities are determined based on the difference between the financial statement carrying amounts and tax basis of assets and

liabilities using enacted tax rates in effect for years in which the temporary differences are expected to reverse. If our estimate

of the tax effect of reversing temporary differences is (i) not reflective of actual outcomes, (ii) modified to reflect new

developments or interpretations of the tax law, or (iii) revised to incorporate new accounting principles, or changes in the

expected timing or manner of the reversal, our results of operations could be materially impacted.

We provide a valuation allowance when it is more likely than not that deferred tax assets will not be realized. On a

periodic basis, we reassess our valuation allowances on our deferred tax assets, weighing positive and negative evidence to

assess the recoverability of the deferred tax assets. Judgment is required in making these assessments to maintain or adjust

our valuation allowances and, to the extent our future expectations change we would have to assess the recoverability of these

deferred tax assets at that time. As of December 31, 2025, we maintained a valuation allowance of $326.2 million related

primarily to U.S. state tax attributes.

We record liabilities related to uncertain tax positions by prescribing a minimum recognition threshold and measurement

attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax

return. We adjust our liability to reflect any subsequent changes in the relevant facts and circumstances surrounding the

uncertain positions. We are subject to tax laws and audits in multiple jurisdictions and judgment is required in making this

assessment. Consequently, we regularly re-evaluate uncertain tax positions and consider various factors, including changes in

60

tax law, the measurement of tax positions taken or expected to be taken in tax returns, and changes in facts or circumstances

related to a tax position. As of December 31, 2025, our liability for uncertain tax positions was $852.1 million.

RECENT ACCOUNTING PRONOUNCEMENTS

Refer to Note A, “Nature of Business and Accounting Policies,” in the accompanying notes to the consolidated financial

statements for a discussion of recent accounting pronouncements and new accounting pronouncements adopted during 2025.