Vertex Pharmaceuticals Incorporated
11/04/2025 | Press release | Distributed by Public on 11/04/2025 15:04
Quarterly Report for Quarter Ending SEPTEMBER 30, 2025 (Form 10-Q)
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. Our clinical-stage pipeline includes programs in CF, SCD, beta thalassemia, neuropathic pain, type 1 diabetes, IgA nephropathy, primary membranous nephropathy and other autoimmune renal diseases and cytopenias, APOL1-mediated kidney disease, autosomal dominant polycystic kidney disease and myotonic dystrophy type 1.
In December 2024, the U.S. Food and Drug Administration (the "FDA") approved ALYFTREK (vanzacaftor/tezacaftor/deutivacaftor), our once-daily next-in-class triple combination for the treatment of people with CF 6 years of age and older, and our fifth CF medicine. ALYFTREK is also approved in the United Kingdom (the "U.K."), the European Union ("E.U."), Canada, New Zealand and Switzerland. Collectively, our five medicines, led by TRIKAFTA/KAFTRIO (elexacaftor/tezacaftor/ivacaftor and ivacaftor), are being used to treat more than three quarters of the approximately 94,000 people with CF in the U.S., Europe, Australia, and Canada.
CASGEVY (exagamglogene autotemcel), 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"), Switzerland and Canada for the treatment of people 12 years of age and older with SCD or TDT. We estimate approximately 60,000 people with severe SCD or TDT are or could become eligible for CASGEVY in the U.S., Canada, Europe, and the Middle East.
In January 2025, the FDA approved JOURNAVX, our selective non-opioid NaV1.8 pain signal inhibitor, for the treatment of people with moderate-to-severe acute pain. We have begun our commercial launch of JOURNAVX in the U.S. for eligible adults.
Financial Highlights
| Revenues |
In the third quarter of 2025, our net product revenues increased to $3.1 billion as compared to $2.8 billion in the third quarter of 2024, primarily due to continued strong patient demand for TRIKAFTA/KAFTRIO and early contributions from three ongoing launches.
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| Expenses |
Our total research and development ("R&D"), acquired in-process research and development ("AIPR&D"), and selling, general and administrative ("SG&A") expenses increased to $1.5 billion in the third quarter of 2025 as compared to $1.3 billion in the third quarter of 2024, primarily due to increased commercial investments to support the launch of JOURNAVX, continued investment in support of multiple mid-to-late stage clinical development programs, and higher AIPR&D. Cost of sales was 13.5% and 14.2% in the third quarter of 2025 and 2024, respectively.
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| Cash |
Our total cash, cash equivalents and marketable securities increased to $12.0 billion as of September 30, 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.
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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:
•Medsafe New Zealand and Swissmedic approved ALYFTREK for the treatment of people with CF ages 6 years of age and older who have at least one F508del mutation or another responsive mutation in the cystic fibrosis transmembrane conductance regulator ("CFTR") gene.
•Regulatory submissions for ALYFTREK are under review in Australia.
•Eligible people with CF in England, Ireland, Germany, Denmark and Northern Ireland have reimbursed access to ALYFTREK, and we are working to secure access for eligible patients in additional countries.
Sickle Cell Disease and Beta Thalassemia
•In September, we secured reimbursement for CASGEVY for people with SCD and TDT in Italy. Italy has the largest population of people living with TDT in Europe, with approximately 5,000 people 12 years of age and older with TDT and approximately 2,300 people 12 years of age and older with SCD.
•Globally, since launch through September 30, 2025, approximately 165 people with SCD or TDT have had their first cell collection for CASGEVY, including 50 people in the third quarter of 2025, and 39 people with SCD or TDT have received infusions of CASGEVY, including 10 people infused in the third quarter of 2025.
Acute Pain
•Since JOURNAVX became available at pharmacies in March, through mid-October more than 300,000 prescriptions for JOURNAVX have been written and filled across the hospital and retail settings in different acute pain conditions, consistent with its broad label.
•As of mid-October, across commercial and government payers, more than 170 million individuals have covered access to JOURNAVX, representing more than half of U.S. covered lives. This includes formal coverage with two of the three large national pharmacy benefit managers and unrestricted access within 19 state Medicaid plans. We expect access to JOURNAVX to continue to expand over the remainder of 2025 and into 2026.
•Approximately 90 of the targeted 150 large healthcare systems and more than 750 individual hospitals of the 2,000 targeted institutions have added JOURNAVX to formularies, protocols or order sets.
Pipeline
We continue to advance a diversified pipeline of potentially transformative medicines for serious diseases utilizing a range of modalities. Recent and anticipated progress in activities supporting these efforts is included below:
Cystic Fibrosis
•In October, we completed the pivotal clinical trial of TRIKAFTA in children 12 months to less than 24 months of age. The data showed that TRIKAFTA was generally safe and well-tolerated, consistent with the established safety profile. We expect to submit for approval in this age group with global regulators in the first half of 2026.
•We have completed enrollment in a global trial evaluating ALYFTREK in children 2 to 5 years of age. In this pivotal clinical trial, approximately 65 children will receive ALYFTREK for 24 weeks. We expect to share data from this clinical trial in the first half of 2026.
Sickle Cell Disease and Transfusion-Dependent Beta Thalassemia
•We have completed enrollment in two global Phase 3 clinical trials evaluating CASGEVY in children 5 to 11 years of age with SCD or TDT and expect to complete dosing in the fourth quarter of 2025. We expect to share emerging data from these clinical trials in an upcoming medical conference.
Peripheral Neuropathic Pain
•We previously initiated the first Phase 3 clinical trial evaluating suzetrigine for the treatment of people with diabetic peripheral neuropathy, a common form of chronic peripheral neuropathic pain, and we expect to start the second Phase 3 clinical trial in November. 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 the dosing in this clinical trial, pending an internal manufacturing analysis.
IgA Nephropathy, Primary Membranous 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 immunoglobulin A nephropathy ("IgAN") and primary membranous nephropathy ("pMN"), and we believe it has pipeline-in-a-product potential.
•The FDA has granted a rolling review to the Biologics Licensing Application ("BLA") submission for povetacicept for the treatment of IgAN. We have completed enrollment of the interim analysis cohort for potential accelerated approval in the U.S., and we have completed the clinical trials to support the launch of povetacicept for monthly, at-home self-administration with an autoinjector. We expect to submit the first module of the IgAN BLA to the FDA before the end of 2025, and we expect to complete the full BLA submission in the first half of 2026 for potential accelerated approval in the U.S. In addition, we have completed full enrollment of the Phase 3 clinical trial evaluating IgAN.
•We have initiated the Phase 2/3 pivotal clinical trial of povetacicept for the treatment of people with pMN.
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 ("AMPLITUDE"). We expect to conduct the pre-planned interim analysis once this cohort has been treated for 48 weeks, with potential to file for accelerated approval in the U.S. if the results are supportive.
Our Business Environment
In the nine months ended September 30, 2025, our net 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. We continue to progress commercialization of CASGEVY, which has received marketing approvals in the U.S. and across multiple geographies, including countries in Europe and the Middle East, for the treatment of SCD and TDT. In addition, we have begun our commercial launch of JOURNAVX for the treatment of acute pain, which received marketing approval in the U.S. in January 2025. We also continue to advance 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 rapidly follow our first-in-class therapies that achieve proof-of-concept with potential best-in-class candidates to provide durable clinical and commercial success.
In pursuit of new product candidates and therapies in specialty markets, we invest in research and development. We believe that pursuing research in diverse areas allows us to balance the risks inherent in product development and may provide product candidates that will form our pipeline in future years. To supplement our internal research programs, we acquire technologies and programs and collaborate with biopharmaceutical and technology companies, leading academic research institutions, government laboratories, foundations and other organizations, as needed, to advance research in our areas of therapeutic interest and to access technologies needed to execute on our strategy.
Discovery and development of a new pharmaceutical or biological product is a difficult and lengthy process that requires significant financial resources along with extensive technical and regulatory expertise. Across the industry, most potential drug or biological products never progress into development, and most products that 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. Our foreign third-party manufacturers and suppliers may be subject to U.S. legislation, including the BIOSECURE Act, tariffs, sanctions, trade restrictions and other foreign regulatory requirements which could increase costs or reduce the supply of material available to us, or delay the procurement or supply of such material. 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 products from third-party payors, including governmental organizations in the U.S. and ex-U.S. markets. In the U.S., for example, recently enacted changes to the Medicaid program may result in a less favorable coverage environment that may impact our revenues.
In the U.S., we have worked successfully with third-party payors to promptly obtain appropriate levels of reimbursement for our CF medicines. In addition, we are working with U.S. government and commercial payors with respect to CASGEVY and JOURNAVX. We anticipate broad access with government and commercial payors for CASGEVY in the U.S., and we have entered into multiple agreements with government and commercial health insurance providers to provide such access. For JOURNAVX in the U.S., we have been working with government and commercial payors pre- and post-approval to support rapid and broad access. We plan to continue to engage in discussions with numerous commercial insurers and
managed health care organizations, along with government health programs that are typically managed by authorities in the individual states, to ensure that payors recognize the significant benefits that all our therapies provide and provide patients with appropriate levels of access to our medicines and therapies now and in the future. We cannot, however, predict how changes in the law, including through the Inflation Reduction Act of 2022 and passage of state laws (e.g., transparency laws and prescription drug affordability boards), will affect our ability to negotiate successfully with third-party payors and distribute our products. In addition, federal and state governments in the U.S. continue to consider policies to lower prescription drug costs. The logistics of such initiatives continue to be discussed, and we cannot anticipate how these actions, if enacted, may impact our revenues and our business. Similarly, in ex-U.S. markets, we seek government reimbursement for our medicines on a country-by-country or region-by-region basis, as required. This is necessary for each new medicine, as well as for label expansions for our current medicines. We are working with ex-U.S. payors with respect to CASGEVY, and we are pursuing long-term reimbursement agreements. We have secured reimbursed access for people with SCD or TDT across multiple geographies, including countries in Europe and the Middle East. 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 May 2024, we acquired Alpine Immune Sciences, Inc. ("Alpine") for approximately $5.0 billion in cash. Alpine's lead molecule, 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 the second quarter of 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.
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.
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 due to Entrada in the first quarter of 2024, 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 nine months ended September 30, 2025 and 2024, our AIPR&D included $76.5 million and $4.5 billion, respectively, related to upfront, contingent milestone, or other payments pursuant to our business development transactions, including the asset acquisitions, collaborations, and licenses of third-party technologies described above. Please refer to Note B, "Collaboration, License and Other Arrangements," for further information regarding our asset acquisitions, collaborations and in-license agreements.
Out-licensing Arrangements
We also have out-licensed certain development programs to collaborators who are leading the development or commercialization of these programs, either globally or within certain geographic regions.
In January 2025 and June 2025, we entered into agreements with Zai Lab Limited ("Zai") and Ono Pharmaceuticals Co., Ltd ("Ono"), respectively, for the development and commercialization of povetacicept in various Asian markets. Zai licensed povetacicept in mainland China, Hong Kong SAR, Macau SAR, Taiwan region and Singapore, while Ono licensed povetacicept in Japan and South Korea. Zai and Ono are responsible for povetacicept clinical trials, regulatory submissions, and all commercialization activities, if povetacicept becomes an approved product, in their licensed territories. We are eligible to receive certain regulatory milestone payments and tiered royalties on future net sales of povetacicept in these regions.
RESULTS OF OPERATIONS
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||
| 2025 | 2024 | Change | 2025 | 2024 | Change | ||||||||||||||||||||||||||||||
| (in millions, except percentages and per share amounts) | |||||||||||||||||||||||||||||||||||
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Total revenues
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$ | 3,076.4 | $ | 2,771.9 | 11% | $ | 8,811.3 | $ | 8,108.1 | 9% | |||||||||||||||||||||||||
| Acquired in-process research and development expenses | 54.5 | 15.0 | ** | 76.5 | 4,540.9 | ** | |||||||||||||||||||||||||||||
| Intangible asset impairment charge | - | - | ** | 379.0 | - | ** | |||||||||||||||||||||||||||||
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Other operating costs and expenses
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1,835.7 | 1,640.6 | 12% | 5,388.4 | 4,826.1 | 12% | |||||||||||||||||||||||||||||
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Income (loss) from operations
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1,186.2 | 1,116.3 | 6% | 2,967.4 | (1,258.9) | ** | |||||||||||||||||||||||||||||
| Other non-operating income, net | 112.6 | 107.8 | 4% | 344.8 | 370.9 | (7)% | |||||||||||||||||||||||||||||
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Provision for income taxes
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215.9 | 178.7 | 21% | 550.1 | 560.6 | (2)% | |||||||||||||||||||||||||||||
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Net income (loss)
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$ | 1,082.9 | $ | 1,045.4 | 4% | $ | 2,762.1 | $ | (1,448.6) | ** | |||||||||||||||||||||||||
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Net income (loss) per diluted common share
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$ | 4.20 | $ | 4.01 | $ | 10.68 | $ | (5.61) | |||||||||||||||||||||||||||
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Diluted shares used in per share calculations
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257.6 | 261.0 | 258.6 | 258.1 | |||||||||||||||||||||||||||||||
| ** Not meaningful | |||||||||||||||||||||||||||||||||||
Total Revenues
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||
| 2025 | 2024 | Change | 2025 | 2024 | Change | ||||||||||||||||||||||||||||||
| (in millions, except percentages) | |||||||||||||||||||||||||||||||||||
| TRIKAFTA/KAFTRIO | $ | 2,653.6 | $ | 2,585.0 | 3% | $ | 7,740.2 | $ | 7,517.8 | 3% | |||||||||||||||||||||||||
| ALYFTREK | 247.0 | - | ** | 457.7 | - | ** | |||||||||||||||||||||||||||||
| Other product revenues | 175.8 | 186.9 | (6)% | 582.7 | 590.3 | (1)% | |||||||||||||||||||||||||||||
| Product revenues, net | 3,076.4 | 2,771.9 | 11% | 8,780.6 | 8,108.1 | 8% | |||||||||||||||||||||||||||||
| Other revenues | - | - | ** | 30.7 | - | ** | |||||||||||||||||||||||||||||
| Total revenues | $ | 3,076.4 | $ | 2,771.9 | 11% | $ | 8,811.3 | $ | 8,108.1 | 9% | |||||||||||||||||||||||||
| ** Not meaningful | |||||||||||||||||||||||||||||||||||
Product Revenues, Net
In the third quarter and nine months ended September 30, 2025, our net product revenues increased by $304.5 million and $672.5 million, or 11% and 8%, as compared to the third quarter and nine months ended September 30, 2024, respectively, primarily due to continued strong demand for TRIKAFTA/KAFTRIO and early contributions from three
ongoing launches. In the third quarter and nine months ended September 30, 2025, "Other product revenues" included $16.9 million and $61.5 million, respectively, from CASGEVY, and $19.6 million and $32.9 million, respectively, from JOURNAVX. The third quarter and nine months ended September 30, 2024 included $2.0 million related to CASGEVY.
Our net product revenues from the U.S. and from ex-U.S. markets were as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||
| 2025 | 2024 | Change | 2025 | 2024 | Change | ||||||||||||||||||||||||||||||
| (in millions, except percentages) | |||||||||||||||||||||||||||||||||||
| United States | $ | 1,976.3 | $ | 1,713.5 | 15% | $ | 5,457.3 | $ | 4,847.7 | 13% | |||||||||||||||||||||||||
| ex-U.S. | 1,100.1 | 1,058.4 | 4% | 3,323.3 | 3,260.4 | 2% | |||||||||||||||||||||||||||||
| Product revenues, net | $ | 3,076.4 | $ | 2,771.9 | 11% | $ | 8,780.6 | $ | 8,108.1 | 8% | |||||||||||||||||||||||||
In the third quarter and nine months ended September 30, 2025, our net product revenues increased 15% and 13% in the U.S., as compared to the third quarter and nine months ended September 30, 2024, respectively, due to continued strong patient demand, new patient initiations and higher net realized pricing. In the third quarter and nine months ended September 30, 2025, our ex-U.S. net product revenues increased 4% and 2%, respectively, as compared to the third quarter and nine months ended September 30, 2024, primarily due to solid performance across multiple geographies, partially offset by an expected decline in product revenues in Russia, where we are continuing to experience a violation of our intellectual property rights.
Other Revenues
Other revenues were $30.7 million in the nine months ended September 30, 2025, which included $20.6 million and $10.0 million related to upfront payments received from our collaboration agreements with Ono and Zai, respectively, in the first half of 2025.
Operating Costs and Expenses
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||
| 2025 | 2024 | Change | 2025 | 2024 | Change | ||||||||||||||||||||||||||||||
| (in millions, except percentages) | |||||||||||||||||||||||||||||||||||
| Cost of sales | $ | 414.8 | $ | 392.6 | 6% | $ | 1,185.3 | $ | 1,107.1 | 7% | |||||||||||||||||||||||||
| Research and development expenses | 977.7 | 875.9 | 12% | 2,935.8 | 2,631.6 | 12% | |||||||||||||||||||||||||||||
| Acquired in-process research and development expenses | 54.5 | 15.0 | ** | 76.5 | 4,540.9 | ** | |||||||||||||||||||||||||||||
| Selling, general and administrative expenses | 445.1 | 371.8 | 20% | 1,266.1 | 1,086.7 | 17% | |||||||||||||||||||||||||||||
| Intangible asset impairment charge | - | - | ** | 379.0 | - | ** | |||||||||||||||||||||||||||||
| Change in fair value of contingent consideration | (1.9) | 0.3 | ** | 1.2 | 0.7 | ** | |||||||||||||||||||||||||||||
| Total costs and expenses | $ | 1,890.2 | $ | 1,655.6 | 14% | $ | 5,843.9 | $ | 9,367.0 | (38)% | |||||||||||||||||||||||||
| ** 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 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.
In the third quarter and nine months ended September 30, 2025, our cost of sales increased $22.2 million and $78.2 million, or 6% and 7%, as compared to the third quarter and nine months ended September 30, 2024, respectively, primarily due to increased sales volume and changes in product mix. Our cost of sales as a percentage of our net product revenues was 13.5% and 14.2% in the third quarter of 2025 and 2024, respectively, and 13.5% and 13.7% in the nine months ended September 30, 2025 and 2024, respectively.
Research and Development Expenses
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||
| 2025 | 2024 | Change | 2025 | 2024 | Change | ||||||||||||||||||||||||||||||
| (in millions, except percentages) | |||||||||||||||||||||||||||||||||||
| Research expenses | $ | 210.0 | $ | 193.8 | 8% | $ | 625.4 | $ | 597.2 | 5% | |||||||||||||||||||||||||
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Development expenses
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767.7 | 682.1 | 13% | 2,310.4 | 2,034.4 | 14% | |||||||||||||||||||||||||||||
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Total research and development expenses
|
$ | 977.7 | $ | 875.9 | 12% | $ | 2,935.8 | $ | 2,631.6 | 12% | |||||||||||||||||||||||||
Since January 2023, we have incurred approximately $9.7 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
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||
| 2025 | 2024 | Change | 2025 | 2024 | Change | ||||||||||||||||||||||||||||||
| (in millions, except percentages) | |||||||||||||||||||||||||||||||||||
| Research Expenses: | |||||||||||||||||||||||||||||||||||
| Salary and benefits | $ | 49.6 | $ | 48.3 | 3% | $ | 155.8 | $ | 163.2 | (5)% | |||||||||||||||||||||||||
| Stock-based compensation expense | 28.0 | 29.4 | (5)% | 72.8 | 87.9 | (17)% | |||||||||||||||||||||||||||||
| Outsourced services and other direct expenses | 72.2 | 64.1 | 13% | 216.3 | 195.5 | 11% | |||||||||||||||||||||||||||||
|
Infrastructure costs
|
60.2 | 52.0 | 16% | 180.5 | 150.6 | 20% | |||||||||||||||||||||||||||||
|
Total research expenses
|
$ | 210.0 | $ | 193.8 | 8% | $ | 625.4 | $ | 597.2 | 5% | |||||||||||||||||||||||||
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 the third quarter and nine months ended September 30, 2025 as compared to the third quarter and nine months ended September 30, 2024. Salary and benefits in the nine months ended September 30, 2024 included $13.1 million associated with cash-settled unvested Alpine equity awards. Compared to the third quarter and nine months ended September 30, 2024, our research expenses increased by
$16.2 million, or 8%, and $28.2 million, or 5%, respectively. 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 September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||
| 2025 | 2024 | Change | 2025 | 2024 | Change | ||||||||||||||||||||||||||||||
| (in millions, except percentages) | |||||||||||||||||||||||||||||||||||
| Development Expenses: | |||||||||||||||||||||||||||||||||||
| Salary and benefits | $ | 182.2 | $ | 172.8 | 5% | $ | 565.4 | $ | 510.1 | 11% | |||||||||||||||||||||||||
| Stock-based compensation expense | 88.0 | 81.6 | 8% | 242.9 | 239.6 | 1% | |||||||||||||||||||||||||||||
| Compensation expense for cash-settled unvested Alpine equity awards | - | - | ** | - | 151.9 | ** | |||||||||||||||||||||||||||||
| Outsourced services and other direct expenses | 364.7 | 319.4 | 14% | 1,116.9 | 822.7 | 36% | |||||||||||||||||||||||||||||
|
Infrastructure costs
|
132.8 | 108.3 | 23% | 385.2 | 310.1 | 24% | |||||||||||||||||||||||||||||
|
Total development expenses
|
$ | 767.7 | $ | 682.1 | 13% | $ | 2,310.4 | $ | 2,034.4 | 14% | |||||||||||||||||||||||||
| ** 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, including from our povetacicept programs acquired from Alpine, pain and T1D programs. In conjunction with our acquisition of Alpine, we incurred $151.9 million associated with cash-settled unvested Alpine equity awards within development expenses in the nine months ended September 30, 2024. Compared to the third quarter and nine months ended September 30, 2024, our development expenses increased by $85.6 million, or 13%, and $276.0 million, or 14%, respectively.
Our stock-based compensation expenses, including those recorded as research and development expenses, have historically fluctuated and is 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 September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||
| 2025 | 2024 | Change | 2025 | 2024 | Change | ||||||||||||||||||||||||||||||
| (in millions, except percentages) | |||||||||||||||||||||||||||||||||||
| Acquired in-process research and development expenses | $ | 54.5 | $ | 15.0 | ** | $ | 76.5 | $ | 4,540.9 | ** | |||||||||||||||||||||||||
| ** Not meaningful | |||||||||||||||||||||||||||||||||||
AIPR&D in the third quarter and nine months ended September 30, 2025 and third quarter ended September 30, 2024 included various upfront and milestone payments. AIPR&D in the nine months ended September 30, 2024 was primarily related to $4.4 billion AIPR&D resulting from our acquisition of Alpine, which was accounted for as an asset acquisition. AIPR&D in the nine months ended September 30, 2024 also included the $75.0 million milestone paid to Entrada during the first quarter of 2024. 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
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||
| 2025 | 2024 | Change | 2025 | 2024 | Change | ||||||||||||||||||||||||||||||
| (in millions, except percentages) | |||||||||||||||||||||||||||||||||||
| Selling, general and administrative expenses | $ | 445.1 | $ | 371.8 | 20% | $ | 1,266.1 | $ | 1,086.7 | 17% | |||||||||||||||||||||||||
Selling, general and administrative expenses increased by 20% and 17% in the third quarter and nine months ended September 30, 2025, respectively, as compared to the third quarter and nine months ended September 30, 2024 primarily due to increased commercial investment to support the launch of JOURNAVX.
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. in 2019. 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.
Contingent Consideration
The fair value of our contingent consideration decreased by $1.9 million and increased by $1.2 million in the third quarter and nine months ended September 30, 2025, respectively, and increased by $0.3 million and $0.7 million in the third quarter and nine months ended September 30, 2024, respectively.
Other Non-Operating Income (Expense), Net
Interest Income
Interest income decreased from $132.2 million in the third quarter of 2024 to $125.7 million in the third quarter of 2025, primarily due to decreased market interest rates partially offset by increased cash, cash equivalents and available-for-sale debt securities. Interest income decreased from $469.9 million in the nine months ended September 30, 2024 to $369.0 million in the nine months ended September 30, 2025, primarily due to decreased market interest rates and decreased cash, cash equivalents and available-for-sale debt securities following our acquisition of Alpine in the second quarter of 2024. Our future interest income is dependent on the amount of, and prevailing market interest rates on our outstanding cash equivalents and available-for-sale debt securities.
Interest Expense
Interest expense was $3.3 million and $10.0 million in the third quarter and nine months ended September 30, 2025, respectively, and $7.5 million and $27.8 million in the third quarter and nine months ended September 30, 2024, respectively. Prior to the third quarter of 2024, the majority of our interest expense related to imputed interest expense associated with our corporate headquarters leases in Boston. Following the amendment of these leases in the third quarter of 2024 that changed their classifications from finance to operating leases, the operating lease costs associated with the leases are recorded entirely within operating expenses in our condensed consolidated statements of income (loss).
Other Income (Expense), Net
Other income (expense), net were expenses of $9.8 million and $16.9 million in the third quarter of 2025 and 2024, respectively, and $14.2 million and $71.2 million in the nine months ended September 30, 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 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, 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. We continue to assess the impact that H.R.1. has on us and will review guidance as it becomes available. These legislative changes could have an impact on our future effective tax rates, tax liabilities, and cash taxes.
We recorded provisions for income taxes of $215.9 million and $178.7 million in the third quarter of 2025 and 2024, respectively, and $550.1 million and $560.6 million in the nine months ended September 30, 2025 and 2024, respectively.
Our effective tax rate of 16.6% in the nine months ended September 30, 2025 was lower than the U.S. statutory rate primarily due to a benefit from a research and development tax credit study that was completed in the third quarter of 2025, excess tax benefits related to stock-based compensation, and increased utilization of foreign tax credits, partially offset by changes in uncertain tax positions. Our effective tax rate of (63.1)% in the nine months ended September 30, 2024 was materially different than the U.S. statutory rate primarily due to the $4.4 billion of AIPR&D resulting from our acquisition of Alpine, which drove our pre-tax loss in the nine months ended September 30, 2024.
LIQUIDITY AND CAPITAL RESOURCES
The following table summarizes the components of our financial condition as of September 30, 2025 and December 31, 2024:
| As of September 30, 2025 | As of December 31, 2024 | Change | |||||||||||||||
| (in millions, except percentages) | |||||||||||||||||
| Cash, cash equivalents and marketable securities: | |||||||||||||||||
| Cash and cash equivalents | $ | 4,939.6 | $ | 4,569.6 | |||||||||||||
| Marketable securities | 1,347.4 | 1,546.3 | |||||||||||||||
| Long-term marketable securities | 5,722.8 | 5,107.9 | |||||||||||||||
| Total cash, cash equivalents and marketable securities | $ | 12,009.8 | $ | 11,223.8 | 7% | ||||||||||||
| Working Capital: | |||||||||||||||||
| Total current assets | $ | 10,569.6 | $ | 9,596.4 | 10% | ||||||||||||
| Total current liabilities | (4,475.3) | (3,564.6) | 26% | ||||||||||||||
| Total working capital | $ | 6,094.3 | $ | 6,031.8 | 1% | ||||||||||||
Working Capital
As of September 30, 2025, total working capital was $6.1 billion, which represented an increase of $62.5 million, or 1%, compared to December 31, 2024. Our working capital was similar to December 31, 2024 primarily due to increased accounts receivable and inventories resulting from our growing portfolio of products, partially offset by product revenue accruals from the same products.
Cash Flows
| Nine Months Ended September 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| (in millions) | |||||||||||
| Net cash provided by (used in): | |||||||||||
| Operating activities | $ | 3,133.4 | $ | (1,077.2) | |||||||
| Investing activities | $ | (657.3) | $ | (2,948.1) | |||||||
| Financing activities | $ | (2,184.1) | $ | (1,103.6) | |||||||
Operating Activities
Cash provided by operating activities was $3.1 billion in the nine months ended September 30, 2025 primarily due to income from operations of $3.0 billion driven by our net product revenues. Cash used by operations was $1.1 billion in the nine months ended September 30, 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 $657.3 million in the nine months ended September 30, 2025, primarily related to net purchases of available-for-sale debt securities and purchases of property and equipment. Cash used in investing activities
was $2.9 billion in the nine months ended September 30, 2024, which included net purchases of available-for-sale debt securities of $2.3 billion.
Financing Activities
Cash used in financing activities were $2.2 billion and $1.1 billion in the nine months ended September 30, 2025 and 2024, 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.
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 September 30, 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.
•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 September 30, 2025, we had $3.5 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.
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, 2024, which was filed with the Securities and Exchange Commission, or SEC, on February 13, 2025.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements prepared in accordance with generally accepted accounting principles in the U.S. The preparation of these financial statements requires us to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reported periods. These items are monitored and analyzed by management for changes in facts and circumstances, and material changes in these estimates could occur in the future. Changes in estimates are reflected in reported results for the period in which the change occurs. We base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from our estimates if past experience or other assumptions do not turn out to be substantially accurate. During the nine months ended September 30, 2025, 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, 2024, which was filed with the SEC on February 13, 2025.
RECENT ACCOUNTING PRONOUNCEMENTS
For a discussion of recent accounting pronouncements, please refer to Note A, "Basis of Presentation and Accounting Policies."
Vertex Pharmaceuticals Incorporated published this content on November 04, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on November 04, 2025 at 21:04 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]