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Vertex Reports Second Quarter 2013 Financial Results and Reviews Recent Progress and Upcoming Milestones in Clinical Development

  Vertex Reports Second Quarter 2013 Financial Results and Reviews Recent
  Progress and Upcoming Milestones in Clinical Development Programs

  -Second quarter 2013 total revenues of $311 million, including net product
 revenues of $99 million for KALYDECO in cystic fibrosis and $156 million for
 INCIVEK in hepatitis C; cash position of approximately $1.43 billion on June
                                  30, 2013-

   -Data from Phase 3 study of ivacaftor monotherapy support submission of
 supplemental New Drug Application (sNDA) planned for second half of 2013 for
                              gating mutations-

Business Wire

CAMBRIDGE, Mass. -- July 29, 2013

Vertex Pharmaceuticals Incorporated (Nasdaq: VRTX) today reported consolidated
financial results for the quarter ended June 30, 2013. Vertex reported total
second quarter 2013 revenues of $311 million, including net product revenues
of $99 million from KALYDECO^TM (ivacaftor) and $156 million from INCIVEK^®
(telaprevir). The GAAP net loss attributable to Vertex was $(57.2) million, or
$(0.26) per share, for the second quarter of 2013, including certain charges
of $51.0 million, comprised primarily of stock-based compensation expense.
Non-GAAP net loss attributable to Vertex for the second quarter of 2013 was
$(6.2) million, or $(0.03) per diluted share. The company reported $1.43
billion in cash, cash equivalents and marketable securities as of June 30,
2013 and has no outstanding convertible debt following the completion of a
call of its outstanding Convertible Senior Subordinated Notes due 2015.

“Entering the second half of 2013, we continue to progress key programs in
cystic fibrosis, hepatitis C and rheumatoid arthritis and have strengthened
our financial position to support continued investment in our business," said
Jeffrey Leiden, M.D., Ph.D., Chairman, President and Chief Executive Officer
of Vertex. "Our progress in the first half of the year was marked by the
initiation of a Phase 3 program in CF for people with the most common form of
the disease, continued progress in bringing KALYDECO to people with CF around
the world and the initiation of all-oral studies for VX-135 in hepatitis C.”

Development Program Updates

Cystic Fibrosis

Vertex's strategy in cystic fibrosis (CF) is to provide benefit to as many CF
patients as possible, and to maximize the benefit for these patients, with our
approved and investigational medicines.

Data from Phase 3 Label-Expansion Study of Ivacaftor Monotherapy in Gating
Mutations Show Statistically Significant Improvements in Lung Function

  *In a separate press release issued today, Vertex announced data from a
    Phase 3 label-expansion study in people with CF who have at least one
    non-G551D cystic fibrosis transmembrane conductance regulator (CFTR)
    gating mutation that showed statistically significant improvements in lung
    function (percent predicted forced expiratory volume in one second;
    FEV[1]). Additional details on these data were provided in the separate
    press release.
  *Based on these data, Vertex plans to submit a supplemental New Drug
    Application (sNDA) in the United States and a Marketing Authorization
    Application (MAA) variation in Europe in the second half of 2013 for the
    use of ivacaftor monotherapy in people with CF ages 6 and older who have
    at least one non-G551D CFTR gating mutation. Approximately 400 people with
    CF ages six and older have a non-G551D gating mutation worldwide.

Continued Progress in Additional Label-Expansion Studies for Ivacaftor
Monotherapy

  *Two additional Phase 3 label-expansion studies are ongoing for ivacaftor
    monotherapy, including a study in people with CF ages 6 and older who have
    at least one copy of the R117H mutation and a study in children with CF
    ages 2 to 5 who have a gating mutation, including the G551D mutation. Data
    from the study in the R117H mutation are expected in the second half of
    2013, and, pending study results, Vertex plans to submit an sNDA in early
    2014 for the use of ivacaftor monotherapy in people with CF ages 6 and
    older who have the R117H mutation. The pharmacokinetic portion of the
    study in children ages 2 to 5 is complete and a dose has been selected for
    the 24-week dosing period, which is now underway. Data from this study are
    expected in mid-2014.

Study of People with CF Who Have Evidence of Residual CFTR Function

  *Enrollment is ongoing in a Phase 2 proof-of-concept study evaluating
    ivacaftor in people with CF who have clinical evidence of residual CFTR
    function. Data from this study are expected in the first half of 2014.

Vertex believes that ivacaftor monotherapy may provide clinical benefit in 10
to 15 percent of the estimated 70,000 CF patients worldwide, pending results
from our clinical studies and regulatory approvals.

Enrollment Ongoing in Phase 3 Registration Program for VX-809 in Combination
with Ivacaftor

  *Two 24-week Phase 3 studies of VX-809 in combination with ivacaftor are
    ongoing in people ages 12 and older with two copies of the most common
    mutation in the CFTR gene, known as F508del. The company expects to
    complete enrollment in these studies in the second half of 2013. Vertex
    plans to submit a New Drug Application in the United States for this
    combination treatment in 2014, pending study results. Worldwide, nearly
    half of people with CF have two copies of the F508del mutation.
  *The pivotal program for VX-809 in combination with ivacaftor also includes
    an evaluation of this combination in people with one copy (heterozygous)
    of the F508del mutation and a pharmacokinetic and safety evaluation of
    this combination in children ages 6 to 11 with two copies of the F508del
    mutation. Enrollment in these additional studies is expected to begin in
    the second half of 2013.

Advancing Multiple First- and Second-Generation Correctors

  *VX-661: At the European Cystic Fibrosis Society (ECFS) conference in June,
    Vertex presented data from a Phase 2 study of VX-661 in combination with
    ivacaftor. Additional details on these data are available in a press
    release issued on June 5, 2013. Vertex is preparing to begin Phase 2
    evaluation of a 4-week regimen of VX-661 in combination with ivacaftor in
    people with one copy of the F508del mutation and one copy of the G551D
    mutation. This is the first proof-of-concept study of a combination of a
    corrector and ivacaftor in people with the G551D mutation. This
    exploratory evaluation is based on in vitro data presented at ECFS by
    Vertex researchers that showed increased chloride transport in human
    bronchial epithelial cells with one copy of the F508del mutation and one
    copy of the G551D mutation after treatment with a corrector and ivacaftor,
    as compared to the use of ivacaftor alone. Vertex’s strategy is to
    evaluate multiple first-generation correctors, including VX-661 and
    VX-983, in combination with ivacaftor to identify regimens that may
    provide benefit to people with the F508del mutation.
  *Second-generation Correctors: Vertex has an active research program
    focused on second-generation correctors that could be used as part of a
    future dual-corrector regimen in combination with ivacaftor in people with
    one or two copies of the F508del mutation. Vertex’s goal is to advance a
    second-generation corrector into clinical development by the end of 2014.
    The proposed use of a dual-corrector combination regimen is supported by
    in vitro data presented at ECFS that showed a combination of two
    correctors and ivacaftor increased chloride transport in human bronchial
    epithelial cells with one or two copies of the F508del mutation, as
    compared to the use of a single corrector in combination with ivacaftor.

Hepatitis C

Vertex’s strategy in hepatitis C is to develop new all-oral treatment regimens
of 12 weeks or less in duration with a goal of providing a high viral cure
rate and improved tolerability over currently available treatment options.
Multiple Phase 2 studies of VX-135 as part of all-oral treatment regimens are
ongoing, including studies of VX-135 in combination with ribavirin in the
United States and Europe and a study of VX-135 in combination with
daclatasvir, an NS5A replication complex inhibitor, in New Zealand. Dosing of
100 mg and 200 mg of VX-135 is complete in the European study and ongoing in
the New Zealand study. Dosing of 100 mg of VX-135 is ongoing in the U.S.
study. Under a previously announced partial clinical hold, Vertex will not
evaluate a 200 mg dose of VX-135 in the United States without authorization
from the FDA. Vertex provided a comprehensive update on the status of these
studies in a press release issued July 25, 2013.

Autoimmune Diseases

Vertex's strategy in autoimmune diseases is to maximize the value of VX-509
across multiple autoimmune diseases globally. The company will evaluate
collaborative opportunities that provide funding and capabilities to broaden
and accelerate global development of VX-509.

Ongoing Phase 2b Study of VX-509 in Rheumatoid Arthritis

  *Enrollment is complete in a 24-week Phase 2b study of VX-509, a selective
    JAK3 inhibitor, in people with moderate to severe rheumatoid arthritis
    (RA) receiving methotrexate. The primary endpoints of this study will be
    measured after 12 weeks of treatment, and data from this study are
    expected in the second half of 2013.

Second Quarter 2013 Financial Results

Total Revenues: Total revenues for the second quarter of 2013 were $310.8
million, compared with $418.3 million in total revenues for the second quarter
of 2012. The components of total revenues for the second quarter and first six
months of 2013 and 2012 were:

                                                     
                                 Three Months Ended      Six Months Ended

                                 June 30,                June 30,
                                 2013       2012        2013       2012
Product Revenues                 (in millions)           (in millions)
INCIVEK revenues, net            $ 155.8    $ 327.7     $ 361.4    $ 684.6
KALYDECO revenues, net           99.0      45.5       160.8     63.9
Total product revenues, net      254.8       373.3       522.2       748.7
Royalty revenues
Royalty revenues from INCIVO     44.1        28.0        83.1        60.9
Other royalty revenues           5.0       5.5        9.5       11.5
Total royalty revenues           49.1        33.5        92.7        72.5
Collaborative revenues           6.8       11.6       24.3      36.0
Total revenues                   $ 310.8   $ 418.3    $ 639.1   $ 857.0
                                                                       

A table of the components of total revenues for the second quarter of 2013,
first quarter of 2013 and second, third and fourth quarters of 2012 is
provided following the Condensed Consolidated Statements of Operations Data.

  *Net Product Revenues from INCIVEK

Vertex's second quarter 2013 net product revenues from INCIVEK were $155.8
million, compared to $327.7 million for the second quarter of 2012. The
reduced revenues from INCIVEK were due to fewer HCV patients initiating
treatment in the second quarter of 2013 compared to the second quarter of
2012.

  *Net Product Revenues from KALYDECO

Vertex's second quarter 2013 net product revenues from KALYDECO were $99.0
million, compared to $45.5 million for the second quarter of 2012. The
increased revenues, compared to the second quarter of 2012, resulted primarily
from the rapid uptake of KALYDECO in eligible patients in Europe following the
conclusion of reimbursement discussions. Nearly all eligible patients with the
G551D mutation in the United States and Europe have started treatment with
KALYDECO.

  *Royalty Revenues from INCIVO^®

Vertex recognized $44.1 million in INCIVO royalty revenues for the second
quarter of 2013 from our collaborator Janssen, compared to $28.0 million in
INCIVO royalty revenues for the second quarter of 2012. The increase in INCIVO
royalties was due to expanded availability of INCIVO in international markets,
most notably in Latin America.

Cost of Product Revenues: Cost of product revenues was $24.7 million for the
second quarter of 2013, compared to cost of product revenues of $104.5 million
for the second quarter of 2012. The cost of product revenues for the second
quarter 2012 included a $78.0 million reserve against the potential for excess
INCIVEK inventory.

Research and Development (R&D) Expenses: R&D expenses were $222.5 million for
the second quarter of 2013, including $31.3 million of Vertex stock-based
compensation expense and Alios expenses related to the accounting for the
collaboration with Vertex, compared to $196.5 million for the second quarter
of 2012, including $23.3 million of Vertex stock-based compensation expense
and Alios expenses related to the accounting for the collaboration with
Vertex. The increase in Vertex's R&D investment is principally due to
progression and expansion of clinical development programs in cystic fibrosis
and hepatitis C, including initiation of a pivotal program for a combination
of VX-809 and ivacaftor.

Sales, General and Administrative (SG&A) Expenses: SG&A expenses were $106.5
million for the second quarter of 2013, including $17.0 million of Vertex
stock-based compensation expense and Alios expenses related to the accounting
for the collaboration with Vertex, compared to $117.5 million for the second
quarter of 2012, including $12.5 million of Vertex stock-based compensation
expense and Alios expenses related to the accounting for the collaboration
with Vertex. This decrease in SG&A expenses resulted primarily from reduced
HCV marketing and commercial expenses.

GAAP Net Loss Attributable to Vertex: Vertex's second quarter 2013 GAAP net
loss was $(57.2) million, or $(0.26) per share, including certain charges of
$51.0 million, comprised primarily of stock-based compensation expense.
Vertex's GAAP net loss for the second quarter of 2012 was $(64.9) million, or
$(0.31) per diluted share, including $164.7 million in certain charges.

Non-GAAP Net Income (Loss) Attributable to Vertex: Vertex's second quarter
2013 non-GAAP net loss was $(6.2) million, or $(0.03) per diluted share.
Vertex's non-GAAP net income for the second quarter of 2012 was $99.8 million,
or $0.46 per diluted share. The decrease in the company's second quarter 2013
non-GAAP net income, compared to the second quarter of 2012, is primarily
attributable to a decrease in total revenues, specifically decreased INCIVEK
revenues due to fewer HCV patients initiating treatment. Total non-GAAP
operating expenses for the second quarter of 2013 were consistent with the
second quarter of 2012.

Cash Position: As of June 30, 2013, Vertex had $1.43 billion in cash, cash
equivalents and marketable securities compared to $1.32 billion in cash, cash
equivalents and marketable securities as of December 31, 2012.

Convertible Debt: As of June 30, 2013, Vertex had no outstanding convertible
debt following the completion of a call of its outstanding Convertible Senior
Subordinated Notes due 2015.

2013 Financial Guidance

This section contains forward-looking guidance about the financial outlook for
Vertex Pharmaceuticals.

Vertex today updated its financial guidance for total 2013 revenues and total
2013 KALYDECO net revenues. The company now expects total 2013 revenues to be
in the range of $1.10 billion to $1.2 billion. The prior range, provided on
January 29, 2013, was for total 2013 revenues to be in the range of $1.10 to
$1.25 billion. The company also now expects total 2013 KALYDECO net revenues
to be in the range of $345 million to $360 million. The prior range, provided
on April 30, 2013, was for total 2013 KALYDECO net revenues to be in the range
of $300 million to $340 million.

The company today reiterated its financial guidance for total 2013 non-GAAP
operating expenses, excluding cost of revenues, stock-based compensation
expense, intangible asset impairment charges and Alios expenses related to the
accounting for the collaboration with Vertex, of $1.09 billion to $1.15
billion, including full-year 2013 non-GAAP R&D expenses of$750 million to
$790 million and full-year 2013 non-GAAP SG&A expenses of$340 million to $360
million.

Non-GAAP Financial Measures

In this press release, Vertex's financial results and financial guidance are
provided in accordance with accounting principles generally accepted in the
United States (GAAP) and using certain non-GAAP financial measures. In
particular, Vertex provides its non-GAAP net income (loss) for the periods
ending June 30, 2013 and 2012 excluding stock-based compensation expense,
restructuring expense, inventory reserves, intangible asset impairment
charges, net of tax, certain interest expenses related to the 2015 Notes and
charges related to changes in the fair value of expected future payments under
Vertex's collaboration with Alios. These results are provided as a complement
to results provided in accordance with GAAP because management believes these
non-GAAP financial measures help indicate underlying trends in the company's
business, are important in comparing current results with prior period results
and provide additional information regarding its financial position.
Management also uses these non-GAAP financial measures to establish budgets
and operational goals that are communicated internally and externally, and to
manage the company's business and to evaluate its performance. A
reconciliation of the GAAP financial results to non-GAAP financial results is
included in the attached financial statements.


Vertex Pharmaceuticals Incorporated

Second Quarter and Six Month Results

Condensed Consolidated Statements of Operations Data

(in thousands, except per share amounts)

(unaudited)
                     Three Months Ended         Six Months Ended
                        June 30,                    June 30,
                        2013         2012          2013          2012
Revenues:                                                       
Product revenues,       $ 254,789     $ 373,273     $ 522,170      $ 748,648
net
Royalty revenues        49,120        33,480        92,693         72,461
Collaborative           6,841        11,552       24,255        35,933    
revenues
Total revenues          310,750       418,305       639,118        857,042
Costs and expenses:
Cost of product         24,695        104,549       55,650         130,467
revenues (Note 1)
Royalty expenses        13,236        9,874         25,024         23,167
Research and
development             222,455       196,544       440,550        392,915
expenses (R&D)
Sales, general and
administrative          106,521       117,514       199,400        228,660
expenses (SG&A)
Restructuring           776           594           815            954
expense
Intangible asset
impairment charge       —            —            412,900       —         
(Note 2)
Total costs and         367,683       429,075       1,134,339      776,163
expenses
Income (loss) from      (56,933   )   (10,770   )   (495,221   )   80,879
operations
Other expense, net      (6,578    )   (3,635    )   (11,230    )   (7,376    )
(Note 3)
Income (loss)
before provision        (63,511   )   (14,405   )   (506,451   )   73,503
for (benefit from)
income taxes
Provision for
(benefit from)          (1,799    )   20,063       (132,112   )   20,095    
income taxes (Note
2)
Net income (loss)       (61,712   )   (34,468   )   (374,339   )   53,408
Net loss (income)
attributable to         4,547        (30,463   )   9,158         (26,749   )
noncontrolling
interest (Note 4)
Net income (loss)
attributable to         $ (57,165 )   $ (64,931 )   $ (365,181 )   $ 26,659  
Vertex
                                                                   
Net income (loss)
per share
attributable to
Vertex common
shareholders:
Basic                   $ (0.26   )   $ (0.31   )   $ (1.67    )   $ 0.13
Diluted                 $ (0.26   )   $ (0.31   )   $ (1.67    )   $ 0.12
                                                                   
Shares used in per
share calculations:
Basic                   222,053       211,344       218,795        209,681
Diluted                 222,053       211,344       218,795        212,957
                                                                             


Consolidated Revenues

(in millions)

(unaudited)
                 Three Months Ended
                   June 30,    March 31,   December 31,   September    June
                   2013       2013       2012          31,         30,
                                                          2012         2012
Product
revenues
INCIVEK            $ 155.8    $ 205.6    $  222.8      $  254.3    $ 327.7
revenues, net
KALYDECO           99.0       61.8       58.5          49.2        45.5
revenues, net
Total product      254.8       267.4       281.3          303.5        373.3
revenues, net
Royalty
revenues
Royalty
revenues from      44.1        39.0        36.8           20.0         28.0
INCIVO
Other royalty      5.0        4.5        6.7           5.6         5.5
revenues
Total royalty      49.1        43.6        43.5           25.6         33.5
revenues
Collaborative      6.8        17.4       9.2           6.9         11.6
revenues
Total revenues     $ 310.8    $ 328.4    $  334.0      $  336.0    $ 418.3
                                                                         


Reconciliation of GAAP to Non-GAAP Financial Information-Second Quarter

(in thousands, except per share amounts)

(unaudited)
Three Months
Ended June 30,                                                                                       
2013
                                 Adjustments                                                      
                                                                    Intangible
                                 Alios       Stock-based  Inventory Asset      Debt       Restructuring
                   GAAP          Transaction Compensation Write-off Impairment Conversion Expense         Non-GAAP
                                             Expense                Charge,    Costs
                                                                    Net of Tax
                                                                                                          
Income (loss)
from               $ (56,933 )   7,007       41,263       5,083     —          —          776             $ (2,804 )
operations
Other income       (6,578    )   (183     )  —           —        —         3,908     —              (2,853   )
(expense), net
Income (loss)
before
provision for      (63,511   )   6,824       41,263       5,083     —          3,908      776             (5,657   )
(benefit from)
income taxes
Provision for
(benefit from)     (1,799    )   2,357      —           —        —         —         —              558      
income taxes
Net income         (61,712   )   4,467       41,263       5,083     —          3,908      776             (6,215   )
(loss)
Net loss
(income)
attributable
to                 4,547        (4,547   )  —           —        —         —         —              —        
noncontrolling
interest
(Alios)
Net income
(loss)             $ (57,165 )   (80      )  41,263      5,083    —         3,908     776            $ (6,215 )
attributable
to Vertex
                                                                                                          
Net income
(loss) per
diluted share
attributable       $ (0.26   )                                                                            $ (0.03  )
to Vertex
common
shareholders
(Note 5)

Three Months
Ended June 30,                                                                                       
2012
                                 Adjustments                                                      
                                                                    Intangible
                                 Alios       Stock-based  Inventory Asset      Debt       Restructuring
                   GAAP          Transaction Compensation Write-off Impairment Conversion Expense         Non-GAAP
                                             Expense                Charge,    Costs
                                                                    Net of Tax
                                                                                                          
Income (loss)
from               $ (10,770 )   4,646       31,169       78,000    —          —          594             $ 103,639
operations
Other income       (3,635    )   (179     )  —           —        —         —         —              (3,814    )
(expense), net
Income (loss)
before
provision for      (14,405   )   4,467       31,169       78,000    —          —          594             99,825
(benefit from)
income taxes
Provision for
(benefit from)     20,063       (21,240  )  —           1,239    —         —         —              62        
income taxes
Net income         (34,468   )   25,707      31,169       76,761    —          —          594             99,763
(loss)
Net loss
(income)
attributable
to                 (30,463   )   30,463     —           —        —         —         —              —         
noncontrolling
interest
(Alios)
Net income
(loss)             $ (64,931 )   56,170     31,169      76,761   —         —         594            $ 99,763  
attributable
to Vertex
                                                                                                          
Net income
(loss) per
diluted share
attributable       $ (0.31   )                                                                            $ 0.46
to Vertex
common
shareholders
(Note 5)
                                                                                                                    

                                                
                                                   Three Months Ended June 30,
                                                   2013           2012
GAAP operating costs and expenses                  $  367,683      $ 429,075
Adjustments:
Cost of product revenues (Note 1)                  (24,695     )   (104,549  )
Royalty expenses                                   (13,236     )   (9,874    )
Stock-based compensation expense                   (41,263     )   (31,169   )
Alios transaction                                  (7,007      )   (4,646    )
Intangible asset impairment charge (Note 2)        —               —
Restructuring expense                              (776        )   (594      )
Non-GAAP operating costs and expenses              $  280,706      $ 278,243
                                                                   
GAAP research and development expenses             $  222,455      $ 196,544
Adjustments:
Stock-based compensation expense                   (25,700     )   (19,665   )
Alios transaction (Note 4)                         (5,566      )   (3,658    )
Non-GAAP research and development expenses         $  191,189      $ 173,221
                                                                   
GAAP sales, general, and administrative            $  106,521      $ 117,514
expenses
Adjustments:
Stock-based compensation expense                   (15,563     )   (11,504   )
Alios transaction (Note 4)                         (1,441      )   (988      )
Non-GAAP sales, general, and administrative        $  89,517       $ 105,022
expenses
                                                                             


Reconciliation of GAAP to Non-GAAP Financial Information-Six Month

(in thousands, except per share amounts)

(unaudited)
Six Months
Ended June 30,                                                                                        
2013
                                  Adjustments                                                      
                                                                     Intangible
                                  Alios       Stock-based  Inventory Asset      Debt       Restructuring
                   GAAP           Transaction Compensation Write-off Impairment Conversion Expense         Non-GAAP
                                              Expense                Charge,    Costs
                                                                     Net of Tax
                                                                                                           
Income (loss)
from               $ (495,221 )   12,296      72,416       5,083     412,900    —          815             $ 8,289
operations
Other income       (11,230    )   (175     )  —           —        —         3,908     —              (7,497  )
(expense), net
Income (loss)
before
provision for      (506,451   )   12,121      72,416       5,083     412,900    3,908      815             792
(benefit from)
income taxes
Provision for
(benefit from)     (132,112   )   5,783      —           —        127,586   —         —              1,257   
income taxes
Net income         (374,339   )   6,338       72,416       5,083     285,314    3,908      815             (465    )
(loss)
Net loss
(income)
attributable
to                 9,158         (9,158   )  —           —        —         —         —              —       
noncontrolling
interest
(Alios)
Net income
(loss)             $ (365,181 )   (2,820   )  72,416      5,083    285,314   3,908     815            $ (465  )
attributable
to Vertex
                                                                                                           
Net income
(loss) per
diluted share
attributable       $ (1.67    )                                                                            $ (0.00 )
to Vertex
common
shareholders
(Note 5)

Six Months
Ended June 30,                                                                                      
2012
                                Adjustments                                                      
                                                                   Intangible
                                Alios       Stock-based  Inventory Asset      Debt       Restructuring
                   GAAP         Transaction Compensation Write-off Impairment Conversion Expense         Non-GAAP
                                            Expense                Charge,    Costs
                                                                   Net of Tax
                                                                                                         
Income (loss)
from               $ 80,879     9,732       58,796       78,000    —          —          954             $ 228,361
operations
Other income       (7,376   )   (241     )  —                    —         —         —              (7,617    )
(expense), net
Income (loss)
before
provision for      73,503       9,491       58,796       78,000    —          —          954             220,744
(benefit from)
income taxes
Provision for
(benefit from)     20,095      (18,960  )  —           1,239    —         —         —              2,374     
income taxes
Net income         53,408       28,451      58,796       76,761    —          —          954             218,370
(loss)
Net loss
(income)
attributable
to                 (26,749  )   26,749     —                    —         —         —              —         
noncontrolling
interest
(Alios)
Net income
(loss)             $ 26,659    55,200     58,796      76,761   —         —         954            $ 218,370 
attributable
to Vertex
                                                                                                         
Net income
(loss) per
diluted share
attributable       $ 0.12                                                                                $ 1.01
to Vertex
common
shareholders
(Note 5)
                                                                                                                   

                                                
                                                   Six Months Ended June 30,
                                                   2013           2012
GAAP operating costs and expenses                  $ 1,134,339     $ 776,163
Adjustments:
Cost of product revenues (Note 1)                  (55,650     )   (130,467  )
Royalty expenses                                   (25,024     )   (23,167   )
Stock-based compensation expense                   (72,416     )   (58,796   )
Alios transaction                                  (12,296     )   (9,732    )
Intangible asset impairment charge (Note 2)        (412,900    )   —
Restructuring expense                              (815        )   (954      )
Non-GAAP operating costs and expenses              $ 555,238       $ 553,047
                                                                   
GAAP research and development expenses             $ 440,550       $ 392,915
Adjustments:
Stock-based compensation expense                   (44,973     )   (36,826   )
Alios transaction (Note 4)                         (9,614      )   (7,619    )
Non-GAAP research and development expenses         $ 385,963       $ 348,470
                                                                   
GAAP sales, general, and administrative            $ 199,400       $ 228,660
expenses
Adjustments:
Stock-based compensation expense                   (27,443     )   (21,970   )
Alios transaction (Note 4)                         (2,682      )   (2,113    )
Non-GAAP sales, general, and administrative        $ 169,275       $ 204,577
expenses
                                                                             


Condensed Consolidated Balance Sheets Data

(in thousands)

(unaudited)
                                           June 30, 2013  December 31, 2012
Assets
Cash, cash equivalents and marketable        $ 1,430,696     $    1,321,215
securities
Restricted cash and cash equivalents         58,288          69,983
(Alios) (Note 4)
Accounts receivable, net                     164,866         143,250
Inventories (Note 1)                         19,509          30,464
Other current assets                         43,231          24,673
Restricted cash                              122             31,934
Property and equipment, net                  581,738         433,609
Intangible assets (Note 2)                   250,600         663,500
Goodwill                                     30,992          30,992
Other non-current assets                     4,287          9,668
Total assets                                 $ 2,584,329    $    2,759,288
                                                             
Liabilities and Shareholders' Equity
Other liabilities                            $ 387,842       $    429,372
Accrued restructuring expense                22,052          23,328
Deferred tax liability (Note 2)              149,706         280,367
Deferred revenues                            116,966         123,808
Construction financing lease obligation      359,100         268,031
Convertible notes (due 2015) (Note 3)        —               400,000
Noncontrolling interest (Alios) (Note 4)     226,210         235,202
Shareholders' equity (Vertex)                1,322,453      999,180
Total liabilities and shareholders'          $ 2,584,329    $    2,759,288
equity
                                                             
Common shares outstanding                    232,177         217,287
                                                             

Note 1: In the three and six months ended June30, 2013 and 2012, the company
recorded within cost of product revenues reserves for excess and obsolete
inventories of $5.1million and $78.0million, respectively.

Note 2: As of June 30, 2013, the intangible assets and deferred tax liability
reflected in the condensed consolidated balance sheet relate to the company's
collaboration agreement with Alios BioPharma, Inc. (Alios).

In the first quarter of 2013, the company determined that the value of VX-222
had become impaired and that the fair value of VX-222 was zero as of March 31,
2013. This resulted in a $412.9 million impairment charge. In connection with
this impairment charge, the company recorded a credit of $127.6 million in its
provision for income taxes.

Note 3: In the second quarter of 2013, the company elected to redeem $400.0
million in aggregate principal amount of 3.35% convertible senior subordinated
notes due 2015 (“2015 Notes”). In response, the holders of the 2015 Notes
converted their 2015 Notes into approximately 8.2 million shares of the
company's common stock. In accordance with the terms of the 2015 Notes, the
company made additional make-whole interest payments of $6.7 million, payable
in shares of the company's common stock.

Note 4: The company has consolidated the financial statements of its
collaborator Alios as of June 30, 2013, December 31, 2012, and for the three
and six months ended June 30, 2013 and 2012. The company's interest and
obligations with respect to Alios' assets and liabilities are limited to those
accorded to the company in its collaboration agreement with Alios. Restricted
cash and cash equivalents (Alios) reflects Alios' cash and cash equivalents,
which Vertex does not have any interest in and which will not be used to fund
the collaboration. Each reporting period Vertex estimates the fair value of
the contingent milestone payments and royalties payable by Vertex to Alios.
Any increase in the fair value of these contingent milestone and royalty
payments results in a decrease in net income attributable to Vertex (or an
increase in net loss attributable to Vertex) on a dollar-for-dollar basis.

Note 5: Shares used in non-GAAP net income (loss) per diluted share
attributable to Vertex common shareholders were 222,053,000 and 224,124,000
for the three months ended June30, 2013 and 2012, respectively, and
218,795,000 and 221,694,000 for the six months ended June30, 2013 and 2012,
respectively.

Indication and Important Safety Information for KALYDECO^TM (ivacaftor)

Ivacaftor (150mg tablets) is indicated for the treatment of cystic fibrosis
(CF) in patients age 6 years and older who have a G551D mutation in the CFTR
gene.

Ivacaftor is not for use in people with CF due to other mutations in
theCFTRgene. It is not effective in CF patients with two copies of the
F508del mutation (F508del/F508del) in theCFTRgene. The efficacy and safety
of ivacaftor in children younger than 6 years of age have not been evaluated.

High liver enzymes (transaminases, ALT and AST) have been reported in patients
receiving ivacaftor. It is recommended that ALT and AST be assessed prior to
initiating ivacaftor, every 3 months during the first year of treatment, and
annually thereafter. Patients who develop increased transaminase levels should
be closely monitored until the abnormalities resolve. Dosing should be
interrupted in patients with ALT or AST of greater than 5 times the upper
limit of normal. Following resolution of transaminase elevations, consider the
benefits and risks of resuming ivacaftor dosing. Moderate transaminase
elevations are common in subjects with CF. Overall, the incidence and clinical
features of transaminase elevations in clinical trials was similar between
subjects in the ivacaftor and placebo treatment groups. In the subset of
patients with a medical history of elevated transaminases, increased ALT or
AST have been reported more frequently in patients receiving ivacaftor
compared to placebo.

Use of ivacaftor with medicines that are strong CYP3A inducers such as the
antibiotics rifampin and rifabutin; seizure medications (phenobarbital,
carbamazepine, or phenytoin); and the herbal supplement St. John's Wort
substantially decreases exposure of ivacaftor, which may diminish
effectiveness. Therefore, co-administration is not recommended.

The dose of ivacaftor must be adjusted when concomitantly used with potent and
moderate CYP3A inhibitors. The dose of ivacaftor must be adjusted when used in
patients with moderate or severe hepatic disease.

Ivacaftor can cause serious adverse reactions including abdominal pain and
high liver enzymes in the blood. The most common side effects associated with
ivacaftor include headache; upper respiratory tract infection (the common
cold), including sore throat, nasal or sinus congestion, and runny nose;
stomach (abdominal) pain; diarrhea; rash; and dizziness. These are not all the
possible side effects of ivacaftor. A list of the adverse reactions can be
found in the full product labeling for each country where ivacaftor is
approved. Patients should tell their healthcare providers about any side
effect that bothers them or doesn't go away.

Please see full U.S. Prescribing Information for KALYDECO atwww.KALYDECO.com,
the EU Summary of Product Characteristics for KALYDECO at http://goo.gl/N3Tz4,
and the KALYDECO Canadian Product Monograph at www.vrtx.ca.

Indication and Important Safety Information for INCIVEK (telaprevir)

INCIVEK® (telaprevir) is a prescription medicine used with the medicines
peginterferon alfa and ribavirin to treat chronic (lasting a long time)
hepatitis C genotype 1 infection in adults with stable liver problems, who
have not been treated before or who have failed previous treatment. It is not
known if INCIVEK is safe and effective in children under 18 years of age.

Important Safety Information

INCIVEK® (telaprevir) should always be used in combination with peginterferon
alfa and ribavirin. INCIVEK combination treatment may cause serious side
effects including skin rash and serious skin reactions, anemia (low red blood
cell count) that can be severe, and birth defects or death of an unborn baby.

Skin rashes are common with INCIVEK combination treatment. Sometimes these
skin rashes and other skin reactions can become serious, require treatment in
a hospital, and may lead to death. Patients should call their healthcare
provider right away if they develop any skin changes during treatment with
INCIVEK. Their healthcare provider will decide if they need treatment or if
they need to stop INCIVEK or any of their other medicines. Patients should not
stop taking INCIVEK combination treatment without talking with their
healthcare provider first.

Patients' healthcare providers will do blood tests regularly to check for
anemia. If anemia is severe, the healthcare providers may tell them to stop
taking INCIVEK.

INCIVEK combined with peginterferon alfa and ribavirin may cause birth defects
or death of an unborn baby. Therefore, a patient should not take INCIVEK
combination treatment if she is pregnant or may become pregnant, or if he is a
man with a sexual partner who is pregnant. Females who can become pregnant and
females whose male partner takes these medicines must have a negative
pregnancy test before starting treatment, every month during treatment, and
for 6 months after treatment ends. Patients must use two forms of effective
birth control during treatment and for 6 months after all treatment has ended.
These two forms of birth control should not contain hormones, as these may not
work during treatment with INCIVEK.

INCIVEK and other medicines can affect each other and can also cause side
effects that can be serious or life-threatening. There are certain medicines
patients cannot take with INCIVEK combination treatment. Patients should tell
their healthcare providers about all the medicines they take, including
prescription and non-prescription medicines, vitamins and herbal supplements.

The most common side effects of INCIVEK combination treatment include itching,
nausea, diarrhea, vomiting, anal or rectal problems (including hemorrhoids,
discomfort, burning or itching around or near the anus), taste changes and
tiredness. There are other possible side effects of INCIVEK, and side effects
associated with peginterferon alfa and ribavirin also apply to INCIVEK
combination treatment. Patients should tell their healthcare provider about
any side effect that bothers them or doesn't go away.

Please see full Prescribing Information including Boxed Warning, and the
Medication Guide for INCIVEK available at www.INCIVEK.com.

About Vertex

Vertex creates new possibilities in medicine. Our team discovers, develops and
commercializes innovative therapies so people with serious diseases can lead
better lives.

Vertex scientists and our collaborators are working on new medicines to cure
or significantly advance the treatment of hepatitis C, cystic fibrosis,
rheumatoid arthritis and other life-threatening diseases.

Founded more than 20 years ago in Cambridge, Mass., we now have ongoing
worldwide research programs and sites in the U.S., U.K. and Canada. Today,
Vertex has more than 2,000 employees around the world, and for three years in
a row, Science magazine has named Vertex one of its Top Employers in the life
sciences.

Special Note Regarding Forward-looking Statements

This press release contains forward-looking statements as defined in the
Private Securities Litigation Reform Act of 1995, including, without
limitation, Dr. Leiden's statements in the second paragraph of the press
release, the information provided in the section captioned "2013 Financial
Guidance" and statements regarding (i) Vertex’s strategies in cystic fibrosis,
HCV and autoimmune diseases; (ii) the timing of initiation or completion of
enrollment and/or receipt of clinical data for clinical trials; (iii) the
timingof potential regulatory filings, including potential sNDAs and New Drug
Application filings in the U.S. and an MAA variation filing in Europe;
(iv)the percentage of patients that Vertex may be able to treat with
ivacaftor monotherapy; (v)ongoing and planned studies involving VX-135; (vi)
the goal of advancing a second-generation corrector into clinical development
by the end of 2014 and (vii) the evaluation of collaborative opportunities
that could providing funding and capabilities to broaden and accelerate global
development of VX-509. While Vertex believes the forward-looking statements
contained in this press release are accurate, there are a number of factors
that could cause actual events or results to differ materially from those
indicated by such forward-looking statements. Those risks and uncertainties
include, among other things, that the company's expectations regarding its
2013 revenues and/or operating expenses may be incorrect (including because
one or more of the company's assumptions underlying its revenue or expense
expectations may not be realized), that the outcomes of Vertex's ongoing and
planned clinical studies may not be favorable, that the initiation of planned
studies may be delayed or prevented, and other risks listed under Risk Factors
in Vertex's annual report and quarterly reports filed with the Securities and
Exchange Commission and available through the company's website at
www.vrtx.com. Vertex disclaims any obligation to update the information
contained in this press release as new information becomes available.

Conference Call and Webcast

Vertex will host a conference call and webcast today, July 29, 2013at5:00
p.m. ETto review financial results and recent developments. The conference
call will be webcast live, and a link to the webcast may be accessed from the
‘Vertex Events' page of Vertex's website atwww.vrtx.com.

To listen to the live call on the telephone, dial 1-866-501-1537 (United
StatesandCanada) or 1-720-545-0001 (International). To ensure a timely
connection, it is recommended that users register at least 15 minutes prior to
the scheduled webcast.

The conference ID number for the live call and replay is 13583425.

The call will be available for replay via telephone commencingJuly 29,
2013at8:00 p.m. ETrunning through5:00 p.m. ETon August 5, 2013. The
replay phone number forthe United StatesandCanadais 1-855-859-2056. The
international replay number is 1-404-537-3406.

Following the live webcast, an archived version will be available on Vertex's
website until5:00 p.m. ETonAugust 5, 2013. Vertex is also providing a
podcast MP3 file available for download on the Vertex website atwww.vrtx.com.

(VRTX-GEN)

Contact:

Vertex Contacts:
Investors:
Michael Partridge, 617-341-6108
or
Kelly Lewis, 617-961-7530
or
Media:
Zach Barber, 617-341-6470
mediainfo@vrtx.com
 
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