Download 2012 Shareholder Letter (PDF)

2012 WAS A TRANSFORMATIONAL
YEAR FOR VERTEX

In January 2012, our breakthrough medicine, KALYDECO™ (ivacaftor), was approved and launched in the U.S., bringing new hope to people living with a specific type of cystic fibrosis (CF). It is the first medicine to treat the underlying cause of CF for people ages 6 and older with the G551D mutation. KALYDECO was also approved in both Europe and Canada for the same population, and we have worked to bring this medicine to G551D patients as quickly as possible. Our first marketed drug, INCIVEK^®, a direct acting antiviral for the treatment of hepatitis C, was approved in May 2011 and quickly became the market-leading therapy in its category, surpassing $1 billion in sales in 2012.

The successful launches of INCIVEK and KALYDECO give us the financial foundation upon which we have begun to build a global organization. We ended 2012 with approximately $1.3B in cash and have projected total revenues of $1.1B – 1.25B for 2013. Our goal is to deliver many more transformative medicines to patients in the coming years. We have articulated a focused strategy for developing and commercializing new medicines and positioning Vertex for long-term revenue and earnings  growth.

"Since the approval of our first medicine less than two years ago, Vertex has undergone a rapid evolution. We are moving forward with a clear focus on using innovative science to develop transformative medicines for serious diseases in specialty markets."

^{- Jeffrey Leiden, M.D., Ph.D. Chairman, President and CEO
Vertex Pharmaceuticals Incorporated}

CYSTIC FIBROSIS

Cystic fibrosis is a rare, life-shortening genetic disease that affects approximately 70,000 people worldwide. KALYDECO (ivacaftor) is approved for the treatment of a small subset of CF patients who have the G551D mutation and is the first treatment to address the underlying cause of this disease in these people.

IN CYSTIC FIBROSIS AND HEPATITIS C, KALYDECO AND INCIVEK
ARE JUST THE BEGINNING OF WHAT WE HOPE TO
PROVIDE TO PEOPLE WITH THESE DISEASES.

KALYDECO was one of the fastest approvals in the history of the U.S. FDA, and in December 2012, it was the first drug ever to receive Breakthrough Therapy Designation from the FDA. Both of these accomplishments speak to the importance of Vertex’s research efforts for people with CF and our commitment to the continued advancement of CF medicines. Our goal is to expand the number of CF patients who can benefit from KALYDECO and our other investigational CF medicines. We are now conducting multiple Phase 3 label-expansion studies and a proof-of-concept study of ivacaftor monotherapy in people with certain  mutations not studied in prior Phase 3 studies.

OUR VISION: INVEST IN SCIENTIFIC INNOVATION TO CREATE
TRANSFORMATIVE MEDICINES FOR PEOPLE WITH SERIOUS
DISEASES, WITH A FOCUS ON SPECIALTY MARKETS.

While KALYDECO was a major breakthrough for a small subset of people with CF, we are also advancing clinical studies of VX-809 plus ivacaftor for people with two copies of the F508del mutation, which is the most common mutation, present in nearly half of all people with CF. In February 2013, we initiated a Phase 3 combination program of VX-809 plus ivacaftor, which also received Breakthrough Therapy Designation from the FDA in December 2012. VX-661 is another medicine in development for the treatment of CF. A Phase 2 combination study of VX-661 and ivacaftor is ongoing for people with two copies of the F508del mutation. Data from this study are  expected in the first half of 2013.

In addition to ivacaftor, VX-809 and VX-661, our scientists have continued to discover new molecules that may help to enhance benefit and treat more patients with CF. Taken together, our work has the potential to address up to 90% of all patients with CF.

HEPATITIS C

Since its launch in May 2011, more than 60,000 patients in the United States have been treated with INCIVEK for chronic hepatitis C. INCIVEK, dosed in combination with pegylatedinterferon and ribavirin for genotype 1 hepatitis C patients, continues to be the market-leading direct-acting antiviral (DAA). In early 2013, we are seeing significant demand for INCIVEK from motivated patients who don’t want to wait for treatment as well as from patients whose disease is too advanced to delay treatment.

The development of new hepatitis C treatment approaches is advancing rapidly and future all-oral regimens that combine DAAs and exclude interferon are widely anticipated. We believe that our nucleotide analogue, VX-135, could play an important role in anchoring such future hepatitis C treatment regimens. In 2012, we announced positive 7-day viral kinetic data that demonstrated short-term tolerability as well as the potency of VX-135, with an approximately 4.5 log10 reduction in viral load. We have initiated the first of several planned Phase 2 studies of 12-week all-oral treatment regimens that include VX-135 with multiple other DAAs. These studies are  expected to provide safety and viral cure rate data in the second half of 2013 that we hope will support the start of pivotal development for VX-135 in 2014.

The market for hepatitis C therapies is large and underpenetrated, providing us with a continued opportunity for INCIVEK and potential long-term opportunity with VX-135.

We are committed to:

• focusing on transformative medicines for serious diseases
• developing medicines for high-value specialty markets
• prioritizing a portfolio of late-stage development assets
• investing in research to create future medicines
• creating sustained revenue and earnings growth

PIPELINE

At Vertex, we believe in the science of possibility. Our early stage research programs continue to deliver interesting new molecules for the treatment of genetic and specialty diseases such as Huntington’s disease, progressive multiple sclerosis and cancer. We continue to make significant efforts to advance new breakthrough medicines.

Vertex’s research efforts have produced more potential medicines than we can currently develop and commercialize on our own. During the last year, the team at Vertex has worked to prioritize our programs and investments for the future. During 2012, we significantly advanced our Phase 2 programs for VX-509 in rheumatoid arthritis (RA) and VX-787 for influenza virus (flu), and we are now exploring potential opportunities for collaborative development for these promising treatments.

A selective JAK3 inhibitor such as VX-509 could be a transformative medicine for many diseases characterized by dysfunction of the immune system. In mid-2012, we initiated a Phase 2b study of VX-509 in people with  moderate to severe RA. This study is ongoing, with data expected in the second half of 2013. We will evaluate collaborative opportunities that would enable us to maximize the value of VX-509 by providing funding and  capabilities to broaden and accelerate the company’s evaluation of VX-509 across multiple additional autoimmune diseases globally.

VX-787 is the first of a new class of medicines in development that are designed to directly inhibit replication of the influenza virus. In March 2013, we announced data from a Phase 2 study that showed treatment with the highest dosing regimen of VX-787 reduced viral shedding by 94% versus placebo, and reduced the duration of flu symptoms by nearly half. We plan to explore collaborative opportunities to support further development of  VX-787.

LOOKING AHEAD

We believe our science, people and focus on patients set us apart. So too does our pipeline. We have significantly advanced our late-stage pipeline and our early-stage programs hold great promise for the future. Thanks to the successful launches of KALYDECO and INCIVEK, we have a strong foundation and are entering 2013 with a focused strategy to continue to use our scientific platform to create additional transformative medicines for people with serious diseases. I look forward to updating you on our progress throughout the year. Thank you for your continued support.

Jeffrey Leiden, M.D., Ph.D.
Chairman, President and Chief Executive Officer
Vertex Pharmaceuticals Incorporated

These materials include forward-looking statements; please refer to the accompanying Safe Harbor statement.

^{Mosaic tiles created by families and friends of Vertex employees, August 2011}

SAFE HARBOR:

This shareholder letter contains forward-looking statements about Vertex, our products and our drug candidates, including statements regarding: ongoing and planned drug development and regulatory activities for our products and drug candidates, our goal to deliver many more transformative medicines to patients in the coming years, our potential future financial performance and our focus on using innovative science to develop transformative medicines for serious disease in speciality markets. While we believe that the forward-looking statements contained in this letter 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. These risks include commercial risks associated with our products, development risks associated with our products and drug candidates, and other risks listed under Risk Factors in our reports on Form 10-K and Form 10-Q filed with the Securities and Exchange Commission and available through our website at www.vrtx.com. We disclaim any obligation to update the information contained in this letter as new information becomes available.