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Vertex Reports Full-Year and Fourth Quarter 2013 Financial Results and Provides Financial Guidance for 2014

  Vertex Reports Full-Year and Fourth Quarter 2013 Financial Results and
  Provides Financial Guidance for 2014

    -Full-year 2013 total revenues of $1.21 billion, including net product
revenues of $371.3 million for KALYDECO in cystic fibrosis and $466.3 million
                         for INCIVEK in hepatitis C-

   -Cash, cash equivalents and marketable securities of approximately $1.47
                        billion on December31, 2013-

   -Company expects total 2014 revenues of $570 to $600 million, including
KALYDECO net revenues of $470 to $500 million, and non-GAAP operating expenses
                           of $900 to $950 million-

Business Wire

BOSTON -- January 29, 2014

Vertex Pharmaceuticals Incorporated (Nasdaq: VRTX) today reported consolidated
financial results for the full-year and fourth quarter ended December31,
2013. The company also today provided detailed financial guidance for 2014.

Vertex reported total 2013 revenues of $1.21 billion, including net product
revenues of $371.3 million from KALYDECO^TM(ivacaftor) and $466.3 million
from INCIVEK^® (telaprevir). The 2013 GAAP net loss attributable to Vertex was
$(445.0) million, or $(1.98) per share. The 2013 non-GAAP net loss
attributable to Vertex was $(203.3) million, or $(0.90) per diluted share. The
non-GAAP net loss excludes 2013 gains of $69.8 million related to the Alios
collaboration, primarily attributable to the net effect of the full write-down
of VX-135 and related deconsolidation of Alios (see Note 6), and $174.4
million primarily related to the amendment of the company's collaboration with
Janssen Pharmaceutica NV, and certain charges of $486.0 million. The company
reported approximately $1.47 billion in cash, cash equivalents and marketable
securities as of December31, 2013.

Vertex reported total fourth quarter 2013 revenues of $351.2 million,
including net product revenues of $109.5 million from KALYDECO, $19.3 million
from INCIVEK and the revenues related to the amendment of the company's
collaboration with Janssen. The GAAP net income attributable to Vertex was
$44.3 million, or $0.19 per share, for the fourth quarter of 2013. Non-GAAP
net loss attributable to Vertex for the fourth quarter of 2013 was $(128.4)
million, or $(0.56) per diluted share. The non-GAAP net loss excludes fourth
quarter 2013 gains of $68.2 million attributable to the net effect of the
write-down and the related Alios deconsolidation and $174.4 million primarily
related to the Janssen amendment, and certain charges of $69.9 million,
comprised primarily of restructuring charges and stock-based compensation
expense.

"Data generated throughout the coming year will provide important information
to help define our future as we seek to create a sustainable global company
with multiple transformative medicines," commented Jeffrey Leiden, M.D.,
Ph.D., Chairman, President and Chief Executive Officer of Vertex.
"Importantly, we enter 2014 in a strong financial position to enable continued
investment in our key research and development programs for cystic fibrosis
and other serious diseases. Over the coming months, we expect multiple
important development and regulatory milestones that will help to define the
potential of our approved and investigational CF medicines to treat more
people with this disease."

On January 12, 2014, Vertex reviewed its corporate strategy for 2014 and
provided a comprehensive update on key research and development programs. The
company today provided the following updates:

Cystic Fibrosis

  *VX-661 in Combination with Ivacaftor Granted Breakthrough Therapy
    Designation: Vertex today announced that the U.S. Food and Drug
    Administration (FDA) has granted Breakthrough Therapy designation for the
    combination of VX-661 and ivacaftor to treat people with cystic fibrosis
    (CF) who have two copies of the F508del mutation. According to the FDA,
    Breakthrough Therapy designation is based on preliminary clinical evidence
    and designed to expedite the development and review of medicines that are
    intended to treat a serious condition and may demonstrate substantial
    improvement over available therapy on one or more clinically significant
    endpoints. Vertex has submitted a protocol to the FDA for a 12-week Phase
    2 study to evaluate the safety, efficacy and pharmacokinetics of VX-661 in
    combination with ivacaftor. The company iscurrently finalizing the design
    of thisstudy and expects to begin the study in the first half of 2014.
    The study will enroll people with two copies of the F508del mutation.

Rheumatoid Arthritis

  *24-Week Results of Phase 2b Study of JAK3 Inhibitor VX-509: Vertex today
    announced top-line 24-week results from a Phase 2b study of the Janus
    kinase 3 (JAK3) inhibitor VX-509 in people with moderate to severe
    rheumatoid arthritis (RA) who continued to receive stable doses of
    methotrexate during the study. As previously announced, the study met its
    12-week primary endpoints of both the proportion of people who achieved at
    least a 20 percent improvement in signs and symptoms of RA, as measured by
    the ACR improvement criteria (ACR20), and the change from baseline in
    Disease Activity Score for 28 joints (DAS28). The top-line data announced
    today showed continued improvements in the signs and symptoms of RA from
    week 12 to 24 as measured by ACR20, ACR50 and ACR70. At week 24, all doses
    of VX-509 showed statistically significant ACR20, ACR50 and ACR70
    responses versus placebo. Across the four VX-509 dose groups, the ACR20,
    ACR50 and ACR70 responses were between 61 and 63 percent, 38 and 47
    percent and 15 and 25percent, respectively, at 24 weeks of treatment. The
    ACR20, ACR50 and ACR70 responses for patients who received placebo were
    17, 7 and 3 percent, respectively, at 24 weeks. Additional details on the
    study design and 12-week results were provided is a press release issued
    on October 18, 2013.

    Safety results through 24 weeks of treatment were similar to results
    observed through 12 weeks. Through 24 weeks, the discontinuation rate due
    to adverse events was 9.1 percent for the pooled VX-509 treatment group
    and 8.5 percent for the placebo group. Overall, adverse event rates
    through 24 weeks were 59.9 percent in the pooled VX-509 treatment groups
    compared to 42.3 percent for those who received placebo. There were two
    deaths in the study, including one death in the VX-509 200 mg QD group in
    a patient with pneumonia and pancytopenia and a previously reported death
    in the VX-509 100 mg BID group in a patient who had cardiac failure.

    In addition to the Phase 2b study in RA, Vertex has completed certain
    drug-drug interaction studies of VX-509 in healthy volunteers. These
    studies demonstrate that dosing with VX-509 inhibits CYP3A4 andindicate
    that dose modification with frequently prescribed medicines (e.g.
    atorvastatin, methylprednisone) or limited concomitant use of certain
    medications (e.g. oral midazolam) with VX-509 may berequired.

    Vertex is pursuing collaborative opportunities to support further global
    development of VX-509.

Full-Year 2013 Financial Results

Total Revenues: Total revenues for 2013 were $1.21 billion, compared with
$1.53 billion in total revenues for 2012. The components of total revenues for
2013 and 2012 were:

                             
                               Twelve Months Ended December 31,
                               2013                2012
Product revenues, net          (in millions)
INCIVEK revenues, net          $   466.3            $  1,161.8
KALYDECO revenues, net         371.3               171.6
Total product revenues, net    $   837.6            $  1,333.5
Royalty revenues
Royalty revenues from INCIVO   130.7                117.6
Other royalty revenues         25.9                23.9
Total royalty revenues         $   156.6            $  141.5
Collaborative revenues         $   217.7           $  52.1
Total revenues                 $   1,212.0         $  1,527.0

A table of the components of total revenues on a quarterly basis for the last
five quarters is provided following the Condensed Consolidated Statements of
Operations Data.

  *Net Product Revenues from INCIVEK
    Vertex's 2013 net product revenues from INCIVEK were $466.3 million,
    compared to $1.16 billion for 2012. The reduced revenues from INCIVEK were
    primarily due to fewer HCV patients receiving treatment with INCIVEK in
    2013 compared to 2012. Vertex expects a continued decline in INCIVEK
    revenues as a result of increased competition.

  *Net Product Revenues from KALYDECO
    Vertex's 2013 net product revenues from KALYDECO were $371.3 million,
    compared to $171.6 million for 2012. The increased revenues, compared to
    2012, resulted primarily from the rapid uptake of KALYDECO by eligible
    patients in Europe in 2013. Nearly all eligible patients with the G551D
    mutation in the United States and Europe have started treatment with
    KALYDECO. In 2014, further growth in KALYDECO revenues is dependent on
    completion of reimbursement discussions in Australia and Canada for
    eligible patients with the G551D mutation and on the potential expansion
    of the KALYDECO label.

  *Royalty Revenues from INCIVO^®
    Vertex recognized $130.7 million in INCIVO royalty revenues in 2013 from
    the company's collaborator Janssen, compared to $117.6 million in INCIVO
    royalty revenues in 2012. In November 2013, Vertex sold its rights to
    future royalties on INCIVO sales by Janssen for a $152.0 million cash
    payment. Beginning in the first quarter of 2014, Vertex will no longer
    receive INCIVO royalties.

Cost of Product Revenues: Cost of product revenues was $89.0 million in 2013,
compared to cost of product revenues of $236.7 million in 2012. The decrease
in cost of product revenues was attributable to lower total product revenues
and certain 2012 charges to account for excess INCIVEK inventory.

Research and Development (R&D) Expenses: R&D expenses were $918.8 million in
2013, including certain charges of $121.5 million, compared to $806.2 million
in 2012, including certain charges of $87.5 million. The increase in Vertex's
R&D investment is principally due to progression and expansion of clinical
development programs in cystic fibrosis, including initiation of a pivotal
Phase 3 program for the combination of lumacaftor and ivacaftor.

Sales, General and Administrative (SG&A) Expenses: SG&A expenses were $362.3
million in 2013, including certain charges of $53.2 million, compared to
$436.8 million in 2012, including certain charges of $46.4 million. This
decrease in SG&A expenses resulted primarily from reduced HCV marketing and
commercial expenses, partially offset by increased investment to support the
expanded global use of KALYDECO.

GAAP Net Loss Attributable to Vertex: Vertex's 2013 GAAP net loss was $(445.0)
million or $(1.98) per share. Vertex's GAAP net loss for 2012 was $(107.0)
million, or $(0.50) per diluted share.

Non-GAAP Net Income (Loss) Attributable to Vertex: Vertex's 2013 non-GAAP net
loss was $(203.3) million, or $(0.90) per diluted share. The 2013 non-GAAP
loss excludes 2013 gains of $69.8 million, primarily attributable to the net
effect of the full write-down of VX-135 and related deconsolidation of Alios,
and $174.4 million, primarily related to the amendment of the company's
collaboration with Janssen, and certain charges of $486.0 million, primarily
related to the impairment of an intangible hepatitis C asset (VX-222),
restructuring charges and stock-based compensation expense. Vertex's non-GAAP
net income for 2012 was $255.5 million, or $1.18 per diluted share, excluding
$362.6 million in certain charges. The difference in the company's 2013
non-GAAP net loss, compared to 2012 non-GAAP net income, is primarily
attributable to decreased INCIVEK revenues.

Cash Position: As of December31, 2013, Vertex had $1.47 billion in cash, cash
equivalents and marketable securities compared to $1.32 billion in cash, cash
equivalents and marketable securities as of December31, 2012.

Fourth Quarter 2013 Financial Results

Total Revenues: Total revenues for the fourth quarter of 2013 were $351.2
million, compared with $334.0 million in total revenues for the fourth quarter
of 2012. The components of total revenues for the fourth quarter of 2013 and
2012 were:

                             
                               Three Months Ended December 31,
                               2013               2012
Product revenues, net          (in millions)
INCIVEK revenues, net          $   19.3            $   222.8
KALYDECO revenues, net         109.5              58.5
Total product revenues, net    $   128.8           $   281.3
Royalty revenues
Royalty revenues from INCIVO   26.4                36.8
Other royalty revenues         10.5               6.7
Total royalty revenues         $   36.9            $   43.5
Collaborative revenues         $   185.4          $   9.2
Total revenues                 $   351.2          $   334.0

  *Net Product Revenues from INCIVEK
    Vertex's fourth quarter 2013 net product revenues from INCIVEK were $19.3
    million, compared to $222.8 million for the fourth quarter of 2012. The
    reduced revenues from INCIVEK were due to fewer HCV patients receiving
    treatment with INCIVEK in the fourth quarter of 2013 compared to the
    fourth quarter of 2012 and a reduced realized price. Vertex expects a
    continued decline in INCIVEK revenues as a result of increased
    competition.

  *Net Product Revenues from KALYDECO
    Vertex's fourth quarter 2013 net product revenues from KALYDECO were
    $109.5 million, compared to $58.5 million for the fourth quarter of 2012.
    The increased revenues, compared to the fourth 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. In 2014, further growth in KALYDECO
    revenues is dependent on completion of reimbursement discussions in
    Australia and Canada for eligible patients with the G551D mutation and on
    the potential expansion of the KALYDECO label.

  *Royalty Revenues from INCIVO^®
    Vertex recognized $26.4 million in INCIVO royalty revenues for the fourth
    quarter of 2013 from the company's collaborator Janssen, compared to $36.8
    million in INCIVO royalty revenues for the fourth quarter of 2012. In
    November 2013, Vertex sold its rights to future royalties on INCIVO sales
    by Janssen for a $152.0 million cash payment. Beginning in the first
    quarter of 2014, Vertex will no longer receive INCIVO royalties.

Cost of Product Revenues: Cost of product revenues was $13.3 million for the
fourth quarter of 2013, compared to cost of product revenues of $75.6 million
for the fourth quarter of 2012. The decrease in cost of product revenues was
attributable to lower total product revenues and certain 2012 charges to
account for excess INCIVEK inventory.

Research and Development (R&D) Expenses: R&D expenses were $249.6 million for
the fourth quarter of 2013, including certain charges of $40.1 million,
compared to $213.1 million for the fourth quarter of 2012, including certain
charges of $21.8 million. The increase in Vertex's R&D investment is
principally due to progression and expansion of clinical development programs
in cystic fibrosis, including initiation of a pivotal Phase 3 program for the
combination of lumacaftor and ivacaftor.

Sales, General and Administrative (SG&A) Expenses: SG&A expenses were $75.2
million for the fourth quarter of 2013, including certain charges of $9.7
million, compared to $110.5 million for the fourth quarter of 2012, including
certain charges of $11.4 million. This decrease in SG&A expenses resulted
primarily from reduced HCV marketing and commercial expenses, partially offset
by increased investment to support the expanded global use of KALYDECO.

GAAP Net Income (Loss) Attributable to Vertex: Vertex's fourth quarter 2013
GAAP net income was $44.3 million, or $0.19 per share. Vertex's GAAP net loss
for the fourth quarter of 2012 was $(76.1) million, or $(0.35) per diluted
share.

Non-GAAP Net Income (Loss) Attributable to Vertex: Vertex's fourth quarter
2013 non-GAAP net loss was $(128.4) million, or $(0.56) per diluted share,
excluding fourth quarter 2013 gains of $68.2 million attributable to the net
effect of the full write-down of VX-135 and the related deconsolidation of
Alios, and $174.4 million primarily related to the amendment of the company's
collaboration with Janssen, and certain charges of $69.9 million, comprised
primarily of restructuring charges and stock-based compensation expense.
Vertex's non-GAAP net income for the fourth quarter of 2012 was $9.0 million,
or $0.04 per diluted share, excluding $85.1 million in certain charges. The
difference in the company's fourth quarter 2013 non-GAAP net income (loss),
compared to the fourth quarter of 2012, is primarily attributable to a
decrease in total revenues, specifically decreased INCIVEK revenues due to
fewer HCV patients receiving treatment.

2014 Financial Guidance

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

  *Total Revenues: Vertex expects total 2014 net revenues of $570 to $600
    million. Total revenues include net product revenues for KALYDECO and
    INCIVEK, as well as royalty and collaborative revenues.

       *KALYDECO Net Revenues: Vertex expects KALYDECO net revenues of $470
         to $500 million for 2014.

  *Non-GAAP Operating Expenses: Vertex expects that its 2014 non-GAAP
    operating expenses will be in the range of $900 to $950 million. The
    company's planned 2014 investment includes approximately $40 to $50
    million of expense related to development of an all-oral treatment regimen
    for hepatitis C.

       *Research and Development Expenses: Vertex expects that full-year 2014
         non-GAAP R&D expenses will be in the range of $665 to $695 million.
         The research component of 2014 non-GAAP R&D expenses is expected to
         remain consistent with 2013 at approximately $200 million.
       *Sales, General and Administrative Expenses: Vertex expects that
         full-year 2014 non-GAAP SG&A expenses will be in the range of $235 to
         $255 million.

Vertex's expected non-GAAP operating expense excludes cost of revenues,
stock-based compensation expense, restructuring charges, transition costs
related to the relocation of our corporate headquarters, post-restructuring
HCV collaborative revenues and development costs, and any similar expenses
incurred in 2014.

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 full-year and fourth quarter non-GAAP net
income (loss) for the periods ending December 31, 2013 and 2012 excluding
stock-based compensation expense, restructuring expenses, inventory reserves,
intangible asset impairment charges, net of tax, certain interest expenses
related to the 2015 Notes, transition costs related to the relocation of our
corporate headquarters, post-restructuring HCV collaborative revenues and
development costs, and gains and charges related to changes in fair value of
the company's HCV nucleotide analogue program and ensuing deconsolidation of
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
Fourth Quarter and Twelve Month Results
Condensed Consolidated Statements of Operations Data
(in thousands, except per share amounts)
(unaudited)

                     Three Months Ended         Twelve Months Ended
                      December 31,                December 31,
                      2013         2012          2013          2012
Revenues:
Product revenues,     $ 128,822     $ 281,309     $ 837,645      $ 1,333,458
net
Royalty revenues      36,887        43,451        156,592        141,498
Collaborative         185,448      9,234        217,738       52,086      
revenues (Note 1)
Total revenues        351,157       333,994       1,211,975      1,527,042
Costs and expenses:
Cost of product       13,281        75,595        88,979         236,742
revenues (Note 2)
Royalty expenses      8,983         12,120        41,298         43,143
Research and
development           249,609       213,109       918,783        806,185
expenses (R&D)
Sales, general and
administrative        75,188        110,452       362,342        436,796
expenses (SG&A)
Restructuring         27,658        194           40,521         1,844
expense (Note 3)
Intangible asset
impairment charges    250,600      —            663,500       —           
(Note 4) (Note 6)
Total costs and       625,319       411,470       2,115,423      1,524,710
expenses
Income (loss) from    (274,162  )   (77,476   )   (903,448   )   2,332
operations
Other expense, net    (66,091   )   (3,296    )   (72,669    )   (14,713     )
(Note 5)(Note 6)
Income (loss)
before provision      (340,253  )   (80,772   )   (976,117   )   (12,381     )
for (benefit from)
income taxes
Provision for
(benefit from)        (155,704  )   (2,696    )   (288,567   )   38,754      
income taxes (Note
4)
Net loss              (184,549  )   (78,076   )   (687,550   )   (51,135     )
Net loss (income)
attributable to       228,834      1,928        242,522       (55,897     )
noncontrolling
interest
Net income (loss)
attributable to       $ 44,285     $ (76,148 )   $ (445,028 )   $ (107,032  )
Vertex
                                                                 
Net income (loss)
per share
attributable to
Vertex common
shareholders:
Basic                 $ 0.19        $ (0.35   )   $ (1.98    )   $ (0.50     )
Diluted               $ 0.19        $ (0.35   )   $ (1.98    )   $ (0.50     )
                                                                 
Shares used in per
share calculations:
Basic                 231,264       214,607       224,906        211,946
Diluted               235,717       214,607       224,906        211,946
                                                                             


Consolidated Revenues
(in millions)
(unaudited)

                Three Months Ended
                 December 31,   September     June 30,    March 31,   December
                 2013          30,          2013       2013       31,
                                2013                                  2012
Product
revenues, net
INCIVEK          $  19.3        $  85.6       $ 155.8     $ 205.6     $  222.8
revenues, net
KALYDECO         109.5         101.1        99.0       61.8       58.5
revenues, net
Total product    128.8          186.7         254.8       267.4       281.3
revenues, net
Royalty
revenues
Royalty
revenues from    26.4           21.0          44.1        39.0        36.8
INCIVO
Other royalty    10.5          6.0          5.0        4.5        6.7
revenues
Total royalty    36.9           27.0          49.1        43.6        43.5
revenues
Collaborative    185.4         8.0          6.8        17.4       9.2
revenues
Total revenues   $  351.2      $  221.7     $ 310.8    $ 328.4    $  334.0
                                                                         


Reconciliation of GAAP to Non-GAAP Financial Information-Fourth Quarter
(in thousands, except per share amounts)
(unaudited)

Three Months Ended December 31, 2013                                    
                              Adjustments                 
                                Alios         Stock-based    Other
                 GAAP           Transaction  Compensation  Adjustments    Non-GAAP
                                (Note 6)      Expense        (Note 8)
                                                                            
Income (loss)
from             $ (274,162 )   $ 262,475     $   23,240     $ (140,042 )   $ (128,489 )
operations
Other income     (66,091    )   55,204      —             12,283       1,396      
(expense), net
Income (loss)
before
provision for    (340,253   )   317,679       23,240         (127,759   )   (127,093   )
(benefit from)
income taxes
Provision for
(benefit from)   (155,704   )   157,056     —             —            1,352      
income taxes
Net income       (184,549   )   160,623       23,240         (127,759   )   (128,445   )
(loss)
Net loss
(income)
attributable
to               228,834       (228,834  )  —             —             —          
noncontrolling
interest
(Alios)
Net income
(loss)           $ 44,285      $ (68,211 )  $   23,240    $ (127,759 )   $ (128,445 )
attributable
to Vertex
                                                                            
Net income
(loss) per
diluted share
attributable     $ 0.19                                                     $ (0.56    )
to Vertex
common
shareholders
(Note 7)
                                                                                       

Three Months Ended December 31, 2012                                  
                             Adjustments                 
                               Alios         Stock-based    Other
                 GAAP          Transaction  Compensation  Adjustments   Non-GAAP
                               (Note 6)      Expense        (Note 8)
                                                                          
Income (loss)
from             $ (77,476 )   $  5,706      $   27,524     $  55,383     $ 11,137
operations
Other income     (3,296    )   (243      )  —             —           (3,539   )
(expense), net
Income (loss)
before
provision for    (80,772   )   5,463         27,524         55,383        7,598
(benefit from)
income taxes
Provision for
(benefit from)   (2,696    )   1,325       —             —           (1,371   )
income taxes
Net income       (78,076   )   4,138         27,524         55,383        8,969
(loss)
Net loss
(income)
attributable
to               1,928        (1,928    )  —             —            —        
noncontrolling
interest
(Alios)
Net income
(loss)           $ (76,148 )   $  2,210    $   27,524    $  55,383    $ 8,969  
attributable
to Vertex
                                                                          
Net loss per
diluted share
attributable
to Vertex        $ (0.35   )                                              $ 0.04
common
shareholders
(Note 7)


Reconciliation of GAAP to Non-GAAP Financial Information-Fourth Quarter
(in thousands)
(unaudited)

                                              Three Months Ended December 31,
                                               2013             2012
GAAP total costs and expenses                  $  625,319        $  411,470
Adjustments:
Cost of product revenues (Note 2) and          (22,264     )     (87,715     )
royalty expenses
Stock-based compensation expense               (23,240     )     (27,524     )
Alios transaction (Note 6)                     (262,475    )     (5,706      )
Other Adjustments (Note 8)                     (42,354     )     (194        )
Non-GAAP total costs and expenses              $  274,986        $  290,331
                                                                 
GAAP research and development expenses         $  249,609        $  213,109
Adjustments:
Stock-based compensation expense               (17,075     )     (17,019     )
Alios transaction (Note 6)                     (9,749      )     (4,784      )
Other Adjustments (Note 8)                     (13,254     )     —           
Non-GAAP research and development expenses     $  209,531        $  191,306
                                                                 
GAAP sales, general and administrative         $  75,188         $  110,452
expenses
Adjustments:
Stock-based compensation expense               (6,165      )     (10,505     )
Alios transaction (Note 6)                     (2,126      )     (922        )
Other Adjustments (Note 8)                     (1,442      )     —           
Non-GAAP sales, general and administrative     $  65,455         $  99,025
expenses
                                                                             


Reconciliation of GAAP to Non-GAAP Financial Information-Twelve Months
(in thousands, except per share amounts)
(unaudited)

Twelve Months Ended December 31, 2013                                              
                              Adjustments                            
                                Alios         Stock-based    Debt         Other
                 GAAP           Transaction  Compensation  Conversion  Adjustments   Non-GAAP
                                (Note 6)      Expense        Costs        (Note 8)
                                                                                        
Income (loss)
from             $ (903,448 )   $ 283,823     $   126,853    $   —        $ 296,079     $ (196,693 )
operations
Other income     (72,669    )   55,033      —             3,908       12,283       (1,445     )
(expense), net
Income (loss)
before
provision for    (976,117   )   338,856       126,853        3,908        308,362       (198,138   )
(benefit from)
income taxes
Provision for
(benefit from)   (288,567   )   166,145     —             —           127,586      5,164      
income taxes
Net income       (687,550   )   172,711       126,853        3,908        180,776       (203,302   )
(loss)
Net loss
(income)
attributable
to               242,522       (242,522  )  —             —           —            —          
noncontrolling
interest
(Alios)
Net income
(loss)           $ (445,028 )   $ (69,811 )  $   126,853   $   3,908   $ 180,776    $ (203,302 )
attributable
to Vertex
                                                                                        
Net income
(loss) per
diluted share
attributable     $ (1.98    )                                                           $ (0.90    )
to Vertex
common
shareholders
(Note 7)
                                                                                                   

                                                                       
Twelve Months Ended December 31, 2012
                              Adjustments                 
                                                             Other
                                Alios         Stock-based    Adjustments
                 GAAP           Transaction  Compensation  (Note 8)      Non-GAAP
                                (Note 6)      Expense
                                                             
                                                                           
Income (loss)
from             $ 2,332        $ 20,062      $   113,804    $ 135,033     $ 271,231
operations
Other income     (14,713    )   (18       )  —             —            (14,731   )
(expense), net
Income (loss)
before
provision for    (12,381    )   20,044        113,804        135,033       256,500
(benefit from)
income taxes
Provision for
(benefit from)   38,754        (39,029   )  —             1,239        964       
income taxes
Net income       (51,135    )   59,073        113,804        133,794       255,536
(loss)
Net loss
(income)
attributable
to               (55,897    )   55,897      —             —            —         
noncontrolling
interest
(Alios)
Net income
(loss)           $ (107,032 )   $ 114,970   $   113,804   $ 133,794    $ 255,536 
attributable
to Vertex
                                                                           
Net income
(loss) per
diluted share
attributable     $ (0.50    )                                              $ 1.18
to Vertex
common
shareholders
(Note 7)
                                                                                     


Reconciliation of GAAP to Non-GAAP Financial Information-Twelve Months
(in thousands)
(unaudited)

                                             Twelve Months Ended December 31,
                                              2013              2012
GAAP total costs and expenses                 $  2,115,423       $ 1,524,710
Adjustments:
Cost of product revenues (Note 2) and         (130,277      )    (279,885    )
royalty expenses
Stock-based compensation expense              (126,853      )    (113,804    )
Alios transaction (Note 6)                    (283,823      )    (20,062     )
Other Adjustments (Note 8)                    (468,117      )    (1,844      )
Non-GAAP total costs and expenses             $  1,106,353       $ 1,109,115
                                                                 
GAAP research and development expenses        $  918,783         $ 806,185
Adjustments:
Stock-based compensation expense              (81,204       )    (71,242     )
Alios transaction (Note 6)                    (27,088       )    (16,264     )
Other Adjustments (Note 8)                    (13,254       )    —           
Non-GAAP research and development expenses    $  797,237         $ 718,679
                                                                 
GAAP sales, general and administrative        $  362,342         $ 436,796
expenses
Adjustments:
Stock-based compensation expense              (45,649       )    (42,562     )
Alios transaction (Note 6)                    (6,135        )    (3,798      )
Other Adjustments (Note 8)                    (1,442        )    —           
Non-GAAP sales, general and administrative    $  309,116         $ 390,436
expenses
                                                                             


Condensed Consolidated Balance Sheets Data
(in thousands)
(unaudited)

                                        December 31, 2013  December 31, 2012
Assets
Cash, cash equivalents and marketable    $   1,465,076       $    1,321,215
securities
Restricted cash and cash equivalents     —                   69,983
(Alios) (Note 6)
Accounts receivable, net                 85,517              143,250
Inventories (Note 2)                     14,147              30,464
Other current assets                     23,836              24,673
Restricted cash                          130                 31,934
Property and equipment, net              696,911             433,609
Intangible assets (Note 4)               —                   663,500
Goodwill                                 30,992              30,992
Other non-current assets                 2,432              9,668
Total assets                             $   2,319,041      $    2,759,288
                                                             
Liabilities and Shareholders' Equity
Other liabilities                        $   422,377         $    429,372
Accrued restructuring expense            28,353              23,328
Deferred tax liability (Note 4)          —                   280,367
Deferred revenues                        70,969              123,808
Construction financing lease             440,937             268,031
obligation
Convertible notes (due 2015) (Note 5)    —                   400,000
Noncontrolling interest (Alios) (Note    —                   235,202
6)
Shareholders' equity (Vertex)            1,356,405          999,180
Total liabilities and shareholders'      $   2,319,041      $    2,759,288
equity
                                                             
Common shares outstanding                233,789             217,287
                                                             

Note 1: During the fourth quarter of 2013, the company sold its product
royalty rights relating to INCIVO (telaprevir) to Janssen Pharmaceutica NV.
Under this amendment to the company's collaboration agreement with Janssen,
Janssen made a $152.0 million cash payment to Vertex in the fourth quarter of
2013 and will cease paying royalties to Vertex on INCIVO sales beginning in
2014. As a result of the amendment, Janssen will have sole authority to
execute INCIVO marketing and promotion activities in these regions.

Note 2: In the twelve months ended December31, 2013, the company recorded
within cost of product revenues reserves for excess and obsolete inventories
of $10.4 million. In the three and twelve months ended December31, 2012, the
company recorded within cost of product revenues reserves for excess and
obsolete inventories of $55.2million and $133.2million, respectively.

Note 3: The Company recorded $27.5 million and $39.0 million in restructuring
expenses during the three and twelve months ended December 31, 2013,
respectively, in connection with its 2013 restructuring.

Note 4: As of December31, 2013, there were no intangible assets or deferred
tax liability reflected in the condensed consolidated balance sheet.

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.

In the fourth quarter of 2013, the company determined that the value of the
HCV nucleotide analogue program related to the company's collaboration
agreement with Alios BioPharma, Inc. had become impaired and that the fair
value of the intangible asset was zero as of December 31, 2013. This resulted
in a $250.6 million impairment charge. Accordingly, a benefit for income taxes
of $102.1 million was recorded in the fourth quarter of 2013.

Note 5: 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 6: The company has consolidated the financial statements of its
collaborator Alios from the second quarter of 2011 through December 31, 2013.
The company determined that it would no longer consolidate Alios as of
December 31, 2013. During the period the company consolidated Alios, the
company's interest and obligations with respect to Alios' assets and
liabilities were limited to those accorded to the company in its collaboration
agreement with Alios. Restricted cash and cash equivalents (Alios) as of
December 31, 2012 reflected Alios' cash and cash equivalents, which Vertex did
not have any interest in and which was not available to fund the
collaboration.

The net effect of the impairment charge, the tax benefit, and the related
deconsolidation was a gain of approximately $68.2 million attributable to
Vertex in 2013. The gain of $68.2 million is approximately the difference
between (i) losses we recorded in 2011 and 2012 based on estimated increases
in the fair value of potential milestone and royalty payments payable by us to
Alios and (ii) the upfront and milestone payments that we made to Alios
pursuant to the Alios collaboration.

Note 7: Shares used in non-GAAP net income (loss) per diluted share
attributable to Vertex common shareholders were 231,264,000 and 217,291,000
for the three months ended December31, 2013 and 2012, respectively, and
224,906,000 and 215,263,000 for the twelve months ended December31, 2013 and
2012, respectively.

Note 8: In the three and twelve months ended December 31, 2013, "Other
Adjustments" consists of (i) gains of $174.4 million related to
post-restructuring HCV collaborative revenues and development costs,(ii) an
intangible asset impairment charge, net of tax, related to VX-222, of $0.0 and
$285.3 million, respectively, (iii) restructuring expenses of $27.7 and $40.5
million, respectively, (iv) $19.0 million of transition costs related to the
relocation of our corporate headquarters and (v) inventory reserves of $0.0
and $10.4 million, respectively.

In the three and twelve months ended December 31, 2012, "Other Adjustments"
consists of (i) inventory reserves, net of tax, of $55.2 and $132.0 million,
respectively and (ii) restructuring expenses of $0.2 and $1.8 million,
respectively.

INDICATION AND IMPORTANT SAFETY INFORMATION FOR KALYDECO™ (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 the CFTR
gene. It is not effective in patients with CF with 2 copies of the F508del
mutation (F508del/F508del) in the CFTR gene. The efficacy and safety of
ivacaftor in children younger than 6 years of age have not been evaluated.

Elevated 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.

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 used concomitantly 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 product labeling for each country where ivacaftor is approved.
Patients should tell their healthcare providers about any side effect that
bothers them or does not go away.

Please see full U.S. Prescribing Information for KALYDECO at www.KALYDECO.com,
the EU Summary of Product Characteristics for KALYDECO at http://goo.gl/N3Tz4,
the Canadian Product Monograph for KALYDECO at www.vrtx.ca and the Australian
Consumer Medical Information and Product Information for KALYDECO (ivacaftor)
at http://bit.ly/18wlMld.

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 or itching 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 over-the-counter 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 is a global biotechnology company that aims to discover, develop and
commercialize innovative medicines 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 cystic fibrosis,
hepatitis C, rheumatoid arthritis and other life-threatening diseases. In
addition to our clinical development programs, Vertex has more than a dozen
ongoing preclinical programs aimed at other serious and life-threatening
diseases.

Founded in 1989 in Cambridge, Mass., Vertex today has research and development
sites and commercial offices in the United States, Europe, Canada and
Australia. For four years in a row, Science magazine has named Vertex one of
its Top Employers in the life sciences. For additional information and the
latest updates from the company, please visit www.vrtx.com.

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 fourth paragraph of the press
release, the information provided in the section captioned "2014 Financial
Guidance," and the information provided regarding (i) Vertex's plans regarding
the design and initiation of a Phase 2 study of VX-661 in combination with
ivacaftor; (ii) the suggestion that use of VX-509 with certain other medicines
may require dose modification or limited concomitant use; (iii) Vertex
pursuing collaborative opportunities to support further global development of
VX-509; and (iv) Vertex's expectations regarding 2014 revenues, including
KALYDECO and INCIVEK revenues. While Vertex believes the forward-looking
statements contained in this press release are accurate, these forward-looking
statements represent the company's beliefs only as of the date of this press
release and 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 2014 revenues and financial results
and its 2014 non-GAAP 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 data from the company's development
programs may not support registration or further development of its compounds
due to safety, efficacy or other reasons, 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

The company will host a conference call and webcast today at 5:00 p.m. ET. To
access this call, dial (866) 501-1537 (U.S.) or +1 (720) 545-0001
(International). The call will also be available as a live and archived
webcast on Vertex's website at www.vrtx.com in the "Investors" section under
"Events and Presentations." To ensure a timely connection, it is recommended
that users register at least 15 minutes prior to the scheduled webcast.

(VRTX-GEN)

Contact:

Vertex Pharmaceuticals Incorporated
Investors:
Michael Partridge, 617-341-6108
or
Kelly Lewis, 617-961-7530
or
Media:
Zach Barber, 617-341-6992
mediainfo@vrtx.com
 
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